10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________________________________________________

FORM 10-Q

____________________________________________________________________________________

ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                to                               

Commission File Number:  001-35074

SUMMIT HOTEL PROPERTIES, INC.

(Exact name of registrant as specified in its charter)

_____________________________________________________________________________________

Maryland	27-2962512
(State or other jurisdiction	(I.R.S. Employer Identification No.)
of incorporation or organization)

13215 Bee Cave Parkway, Suite B-300

Austin, TX  78738

(Address of principal executive offices, including zip code)

(512) 538-2300

(Registrant’s telephone number, including area code)

________________________________________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes  o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405) of this chapter during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ý Yes  o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	x	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	o
(Do not check if a smaller reporting company)		Emerging growth company	o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes  ý No

 As of July 20, 2018, the number of outstanding shares of common stock of Summit Hotel Properties, Inc. was 104,744,101.

TABLE OF CONTENTS

		Page
PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets — June 30, 2018 (Unaudited) and December 31, 2017	1
	Condensed Consolidated Statements of Operations (Unaudited) — Three and Six Months Ended June 30, 2018 and 2017	2
	Condensed Consolidated Statements of Comprehensive Income (Unaudited) — Three and Six Months Ended June 30, 2018 and 2017	3
	Condensed Consolidated Statements of Changes in Equity (Unaudited) — Six Months Ended June 30, 2018 and 2017	4
	Condensed Consolidated Statements of Cash Flows (Unaudited) — Six Months Ended June 30, 2018 and 2017	5
	Notes to the Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	48
Item 4.	Controls and Procedures	48
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 3.	Defaults Upon Senior Securities	49
Item 4.	Mine Safety Disclosures	49
Item 5.	Other Information	49
Item 6.	Exhibits	50

i

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Summit Hotel Properties, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share amounts)

	June 30, 2018		December 31, 2017
	(Unaudited)
ASSETS
Investment in hotel properties, net	$	2,014,587	$	2,059,492
Investment in hotel properties under development	—		23,793
Land held for development	2,942		2,942
Assets held for sale, net	37,878		1,193
Investment in real estate loans, net	28,945		12,356
Cash and cash equivalents	48,885		36,545
Restricted cash	32,479		29,462
Trade receivables, net	20,916		16,985
Prepaid expenses and other	7,371		9,454
Deferred charges, net	4,782		5,221
Other assets	17,483		12,431
Total assets	$	2,216,268	$	2,209,874
LIABILITIES AND EQUITY
Liabilities:
Debt, net of debt issuance costs	$	950,497	$	868,236
Accounts payable	6,224		7,774
Accrued expenses and other	61,491		56,488
Total liabilities	1,018,212		932,498
Commitments and contingencies (Note 8)
Equity:
Preferred stock, $0.01 par value per share, 100,000,000 shares authorized:
7.125% Series C - 3,400,000 shares issued and outstanding at December 31, 2017 (aggregate liquidation preference of $85,522 at December 31, 2017)	—		34
6.45% Series D - 3,000,000 shares issued and outstanding at June 30, 2018 and December 31, 2017 (aggregate liquidation preference of $75,403 and $75,417 at June 30, 2018 and December 31, 2017, respectively)	30		30
6.25% Series E - 6,400,000 shares issued and outstanding at June 30, 2018 and December 31, 2017 (aggregate liquidation preference of $160,833 and $160,861 at June 30, 2018 and December 31, 2017, respectively)	64		64
Common stock, $0.01 par value per share, 500,000,000 shares authorized, 104,744,101 and 104,287,128 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively	1,047		1,043
Additional paid-in capital	1,182,398		1,262,679
Accumulated other comprehensive income	5,545		1,451
Retained earnings	6,310		9,201
Total stockholders’ equity	1,195,394		1,274,502
Non-controlling interests in operating partnership	2,662		2,874
Total equity	1,198,056		1,277,376
Total liabilities and equity	$	2,216,268	$	2,209,874

See Notes to the Condensed Consolidated Financial Statements

1

Summit Hotel Properties, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(in thousands, except per share amounts)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Revenues:
Room	$	140,650		$	120,514		$	270,222		$	230,864
Food and beverage	6,517			5,294			12,846			10,253
Other	5,055			3,248			9,353			5,928
Total revenues	152,222			129,056			292,421			247,045
Expenses:
Room	31,113			26,455			60,118			51,459
Food and beverage	5,107			3,909			10,106			7,833
Other hotel operating expenses	41,578			35,259			81,036			68,437
Property taxes, insurance and other	11,032			8,813			22,030			17,182
Management fees	5,388			5,063			10,740			9,792
Depreciation and amortization	24,954			19,732			50,200			38,458
Corporate general and administrative	5,620			5,310			12,227			10,448
Hotel property acquisition costs	—			—			—			354
Total expenses	124,792			104,541			246,457			203,963
Operating income	27,430			24,515			45,964			43,082
Other income (expense):
Interest expense	(10,402		)	(6,927		)	(19,731		)	(13,718		)
Gain on disposal of assets, net	17,331			16,350			17,288			35,806
Other income, net	3,470			568			4,259			2,963
Total other income	10,399			9,991			1,816			25,051
Income from continuing operations before income taxes	37,829			34,506			47,780			68,133
Income tax expense (Note 10)	(152		)	(423		)	(412		)	(844		)
Net income	37,677			34,083			47,368			67,289
Non-controlling interest in Operating Partnership	(101		)	(114		)	(104		)	(234		)
Net income attributable to Summit Hotel Properties, Inc.	37,576			33,969			47,264			67,055
Preferred dividends	(3,709		)	(4,200		)	(9,252		)	(8,400		)
Premium on redemption of preferred stock	—			—			(3,277		)	—
Net income attributable to common stockholders	$	33,867		$	29,769		$	34,735		$	58,655
Earnings per share:
Basic	$	0.33		$	0.30		$	0.33		$	0.61
Diluted	$	0.32		$	0.30		$	0.33		$	0.61
Weighted average common shares outstanding:
Basic	103,643			98,184			103,572			95,488
Diluted	103,883			98,706			103,892			95,983

See Notes to the Condensed Consolidated Financial Statements

2

Summit Hotel Properties, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(in thousands)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Net income	$	37,677		$	34,083		$	47,368		$	67,289
Other comprehensive income, net of tax:
Changes in fair value of derivative financial instruments	362			174			4,106			523
Comprehensive income	38,039			34,257			51,474			67,812
Comprehensive income attributable to non-controlling interests:
Less - Comprehensive income attributable to non-controlling interest in Operating Partnership	(101		)	(115		)	(116		)	(236		)
Comprehensive income attributable to Summit Hotel Properties, Inc.	37,938			34,142			51,358			67,576
Preferred dividends	(3,709		)	(4,200		)	(9,252		)	(8,400		)
Premium on redemption of preferred stock	—			—			(3,277		)	—
Comprehensive income attributable to common stockholders	$	34,229		$	29,942		$	38,829		$	59,176

See Notes to the Condensed Consolidated Financial Statements

3

Summit Hotel Properties, Inc.

Condensed Consolidated Statements of Changes in Equity

For the Six Months Ended June 30, 2018 and 2017

(Unaudited)

(in thousands, except share amounts)

	Shares  of Preferred Stock		Preferred Stock			Shares of Common Stock		Common Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings (Deficit) and Distributions			Total Stockholders’ Equity			Non-controlling Interests in Operating Partnership			Total Equity
Balance at December 31, 2017	12,800,000		$	128		104,287,128		$	1,043		$	1,262,679		$	1,451		$	9,201		$	1,274,502		$	2,874		$	1,277,376
Redemption of preferred stock	(3,400,000	)	(34		)	—		—			(81,689		)	—			(3,277		)	(85,000		)	—			(85,000		)
Common stock redemption of common units	—		—			25,839		—			227			—			—			227			(227		)	—
Dividends	—		—			—		—			—			—			(46,878		)	(46,878		)	(113		)	(46,991		)
Equity-based compensation	—		—			618,984		6			4,030			—			—			4,036			12			4,048
Shares acquired for employee withholding requirements	—		—			(187,850	)	(2		)	(2,722		)	—			—			(2,724		)	—			(2,724		)
Other	—		—			—		—			(127		)	—			—			(127		)	—			(127		)
Other comprehensive income	—		—			—		—			—			4,094			—			4,094			12			4,106
Net income	—		—			—		—			—			—			47,264			47,264			104			47,368
Balance at June 30, 2018	9,400,000		$	94		104,744,101		$	1,047		$	1,182,398		$	5,545		$	6,310		$	1,195,394		$	2,662		$	1,198,056
Balance at December 31, 2016	9,400,000		$	94		93,525,469		$	935		$	1,011,412		$	(977	)	$	(1,422	)	$	1,010,042		$	3,428		$	1,013,470
Net proceeds from sale of common stock	—		—			10,350,000		104			163,566			—			—			163,670			—			163,670
Common stock redemption of common units	—		—			30,657		—			268			—			—			268			(268		)	—
Dividends	—		—			—		—			—			—			(41,315		)	(41,315		)	(126		)	(41,441		)
Equity-based compensation	—		—			391,792		4			2,978			—			—			2,982			12			2,994
Shares acquired for employee withholding requirements	—		—			(59,111	)	(1		)	(960		)	—			—			(961		)	—			(961		)
Other comprehensive income	—		—			—		—			—			521			—			521			2			523
Net income	—		—			—		—			—			—			67,055			67,055			234			67,289
Balance at June 30, 2017	9,400,000		$	94		104,238,807		$	1,042		$	1,177,264		$	(456	)	$	24,318		$	1,202,262		$	3,282		$	1,205,544

See Notes to the Condensed Consolidated Financial Statements

4

Summit Hotel Properties, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

	For the Six Months Ended June 30,
	2018			2017
OPERATING ACTIVITIES
Net income	$	47,368		$	67,289
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	50,200			38,458
Amortization of deferred financing costs	998			1,014
Equity-based compensation	4,048			2,994
Realization of deferred gain	—			(15,000		)
Gain on disposal of assets, net	(17,288		)	(20,806		)
Other	(408		)	8
Changes in operating assets and liabilities:
Trade receivables, net	(4,057		)	(6,132		)
Prepaid expenses and other	1,545			595
Accounts payable	(33		)	(156		)
Accrued expenses and other	2,041			1,829
NET CASH PROVIDED BY OPERATING ACTIVITIES	84,414			70,093
INVESTING ACTIVITIES
Acquisitions of hotel properties	—			(367,135		)
Investment in hotel properties under development	(10,828		)	(9,865		)
Improvements to hotel properties	(30,648		)	(13,953		)
Proceeds from asset dispositions, net of closing costs	41,735			93,272
Funding of real estate loans	(15,245		)	—
Proceeds from collection of real estate loans	—			22,506
Increase in escrow deposits for acquisitions	—			(2,340		)
NET CASH USED IN INVESTING ACTIVITIES	(14,986		)	(277,515		)
FINANCING ACTIVITIES
Proceeds from issuance of debt	420,000			260,000
Principal payments on debt	(337,297		)	(178,178		)
Proceeds from equity offerings, net of issuance costs	—			163,834
Redemption of preferred stock	(85,000		)	—
Dividends paid	(47,265		)	(41,270		)
Financing fees on debt and other issuance costs	(1,785		)	(199		)
Repurchase of common shares for withholding requirements	(2,724		)	(961		)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES	(54,071		)	203,226
Net change in cash, cash equivalents and restricted cash	15,357			(4,196		)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Beginning of period	66,007			59,575
End of period	$	81,364		$	55,379
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments for interest	$	18,638		$	12,743
Accrued acquisition costs and improvements to hotel properties	$	5,765		$	3,897
Capitalized interest	$	446		$	73
Cash payments for income taxes, net of refunds	$	622		$	463

See Notes to the Condensed Consolidated Financial Statements

5

SUMMIT HOTEL PROPERTIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 - DESCRIPTION OF BUSINESS

Summit Hotel Properties, Inc. (the “Company”) is a self-managed hotel investment company that was organized on June 30, 2010, as a Maryland corporation. The Company holds both general and limited partnership interests in Summit Hotel OP, LP (the “Operating Partnership”), a Delaware limited partnership also organized on June 30, 2010. On February 14, 2011, the Company closed on its initial public offering ("IPO") and completed certain formation transactions, including the merger of Summit Hotel Properties, LLC with and into the Operating Partnership. Unless the context otherwise requires, “we,” “us,” and “our” refer to the Company and its consolidated subsidiaries.

We focus on owning primarily premium-branded, select-service hotels. At June 30, 2018, our portfolio consisted of 80 hotels with a total of 11,978 guestrooms located in 26 states. We have elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes commencing with our short taxable year ended December 31, 2011. To qualify as a REIT, we cannot operate or manage our hotels. Accordingly, all of our hotels are leased to subsidiaries (“TRS Lessees”) of our taxable REIT subsidiary (“TRS”). We indirectly own 100% of the outstanding equity interests in all of our TRS Lessees.

NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements of the Company consolidate the accounts of the Company and all entities that are controlled by the Company’s ownership of a majority voting interest in such entities, as well as variable interest entities for which the Company is the primary beneficiary. All significant intercompany balances and transactions have been eliminated in the Condensed Consolidated Financial Statements.

We prepare our Condensed Consolidated Financial Statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Act of 1934 (the “Exchange Act”). Accordingly, the Condensed Consolidated Financial Statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation in accordance with GAAP have been included. Results for the three and six months ended June 30, 2018 may not be indicative of the results that may be expected for the full year of 2018. For further information, please read the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2017.

Segment Disclosure

Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. We have determined that we have one reportable segment for activities related to investing in real estate. Our investments in real estate are geographically diversified and the chief operating decision makers evaluate operating performance on an individual asset level. As each of our assets has similar economic characteristics, the assets have been aggregated into one reportable segment.

6

Investment in Hotel Properties

The Company allocates the purchase price of acquired hotel properties based on the fair value of the acquired land, land improvements, building, furniture, fixtures and equipment, identifiable intangible assets or liabilities, other assets and assumed liabilities. Intangible assets may include certain value associated with the on-going operations of the hotel business being acquired as part of the hotel property acquisition.  Acquired intangible assets that derive their values from real property or an interest in real property, are inseparable from that real property or interest in real property, and do not produce or contribute to the production of income other than consideration for the use or occupancy of space, are recorded as a component of the related real estate asset in our Condensed Consolidated Financial Statements.  Identifiable intangible assets or liabilities may also arise from assumed contractual arrangements as part of the acquisition of the hotel property, including terms that are above or below market compared to an estimated fair market value of the agreement on the acquisition date. We determine the acquisition-date fair values of all assets and assumed liabilities using methods similar to those used by independent appraisers, including using a discounted cash flow analysis that uses appropriate discount or capitalization rates and available market information.  Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. 

If substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset or group of similar identifiable assets, the asset or asset group is not considered a business. When we conclude that an acquisition meets this threshold, acquisition costs will be capitalized as part of our allocation of the purchase price of the acquired hotel properties.

Our hotel properties and related assets are recorded at cost, less accumulated depreciation. We capitalize hotel development costs and the costs of significant additions and improvements that materially upgrade, increase the value or extend the useful life of the property. These costs may include hotel development, refurbishment, renovation, and remodeling expenditures, as well as certain indirect internal costs related to construction projects. If an asset requires a period of time in which to carry out the activities necessary to bring it to the condition necessary for its intended use, the interest cost incurred during that period as a result of expenditures for the asset is capitalized as part of the cost of the asset. We expense the cost of repairs and maintenance as incurred.

We generally depreciate our hotel properties and related assets using the straight-line method over their estimated useful lives as follows:

Classification	Estimated Useful Lives
Buildings and improvements	6 to 40 years
Furniture, fixtures and equipment	2 to 15 years

We periodically re-evaluate asset lives based on current assessments of remaining utilization, which may result in changes in estimated useful lives. Such changes are accounted for prospectively and will increase or decrease future depreciation expense.

When depreciable property and equipment is retired or disposed, the related costs and accumulated depreciation are removed from the balance sheet and any gain or loss is reflected in current operations.

On a limited basis, we provide financing to developers of hotel properties for development projects. We evaluate these arrangements to determine if we participate in residual profits of the hotel property through the loan provisions or other agreements. Where we conclude that these arrangements are more appropriately treated as an investment in the hotel property, we reflect the loan as an investment in hotel properties under development in our Condensed Consolidated Balance Sheets. If classified as hotel properties under development, no interest income is recognized on the loan and interest expense is capitalized as part of our investment in the hotel property during the construction period.

We monitor events and changes in circumstances for indicators that the carrying value of a hotel property or land held for development may be impaired. Additionally, we perform at least annual reviews to monitor the factors that could trigger an impairment.  Factors that we consider for an impairment analysis include, among others: i) significant underperformance relative to historical or anticipated operating results, ii) significant changes in the manner of use of a property or the strategy of our overall business, including changes in the estimated holding periods for hotel properties and land parcels, iii) a significant increase in competition, iv) a significant adverse change in legal factors or regulations, and v) significant negative industry or economic trends. When such factors are identified, we prepare an estimate of the undiscounted future cash flows of the specific property and determine if the carrying amount of the asset is recoverable. If an impairment is identified, we estimate the fair value of the property based on discounted cash flows or sales price if the property is under contract and an adjustment is made to reduce the carrying value of the property to its estimated fair value.

7

Intangible Assets

We amortize intangible assets with determined finite useful lives using the straight-line method.  We do not amortize intangible assets with indefinite useful lives, but we evaluate these assets for impairment annually or at interim periods if events or circumstances indicate that the asset may be impaired.

Assets Held for Sale

We periodically review our hotel properties and our land held for development based on established criteria such as age, type of franchise, adverse economic and competitive conditions, and strategic fit to identify properties that we believe are either non-strategic or no longer complement our business. Based on our review, we periodically market properties for sale that no longer meet our investment criteria.

We classify assets as Assets Held for Sale in the period in which certain criteria are met, including when the sale of the asset within one year is probable.  Assets classified as Assets Held for Sale are no longer depreciated and are carried at the lower of carrying amount or fair value less selling costs.

Variable Interest Entities

We consolidate variable interest entities (each a “VIE”) if we determine that we are the primary beneficiary of the entity.  When evaluating the accounting for a VIE, we consider the purpose for which the VIE was created, the importance of each of the activities in which it is engaged and our decision-making role, if any, in those activities that significantly determine the entity’s economic performance relative to other economic interest holders.  We determine our rights, if any, to receive benefits or the obligation to absorb losses that could potentially be significant to the VIE by considering the economic interest in the entity, regardless of form, which may include debt, equity, management and servicing fees, or other contractual arrangements.  We consider other relevant factors including each entity’s capital structure, contractual rights to earnings or obligations for losses, subordination of our interests relative to those of other investors, contingent payments, and other contractual arrangements that may be economically significant.

Additionally, we have in the past and may in the future enter into purchase and sale transactions in accordance with Section 1031 of the Internal Revenue Code of 1986, as amended (“IRC”), for the exchange of like-kind property to defer taxable gains on the sale of real estate properties (“1031 Exchange”).  For reverse transactions under a 1031 Exchange in which we purchase a new property prior to selling the property to be matched in the like-kind exchange (we refer to a new property being acquired by us in the 1031 Exchange prior to the sale of the related property as a “Parked Asset”), legal title to the Parked Asset is held by a qualified intermediary engaged to execute the 1031 Exchange until the sale transaction and the 1031 Exchange is completed.  We retain essentially all of the legal and economic benefits and obligations related to a Parked Asset prior to completion of a 1031 Exchange.   As such, a Parked Asset is included in our Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations as a consolidated VIE until legal title is transferred to us upon completion of the 1031 Exchange. 

Cash and Cash Equivalents

We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. At times, cash on deposit may exceed the federally insured limit. We maintain our cash with high credit quality financial institutions.

Restricted Cash

Restricted cash consists of certain funds maintained in escrow for property taxes, insurance, and certain capital expenditures. Funds may be disbursed from the account upon proof of expenditures and approval from the lender or other party requiring the restricted cash reserves.

On January 1, 2018, we adopted ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. As a result, we report changes in cash, cash equivalents and restricted cash on our Condensed Consolidated Statement of Cash Flows.

8

Trade Receivables and Credit Policies

We grant credit to qualified customers, generally without collateral, in the form of trade accounts receivable. Trade receivables result from the rental of hotel guestrooms and the sales of food, beverage, and banquet services and are payable under normal trade terms. Trade receivables also include credit and debit card transactions that are in the process of being settled. Trade receivables are stated at the amount billed to the customer and do not accrue interest.

We regularly review the collectability of our trade receivables. A provision for losses is determined on the basis of previous loss experience and current economic conditions. 

Deferred Charges, net

Initial franchise application fees are capitalized and amortized over the term of the franchise agreement using the straight-line method.

Deferred Financing Fees

Debt issuance costs are presented as a direct deduction from the carrying value of the debt liability on the Condensed Consolidated Balance Sheets. Debt issuance costs are amortized as a component of interest expense over the term of the related debt using the straight-line method, which approximates the interest method.

Non-controlling Interests

Non-controlling interests represent the portion of equity in a consolidated entity held by owners other than the consolidating parent. Non-controlling interests are reported in the Condensed Consolidated Balance Sheets within equity, separately from stockholders’ equity. Revenue, expenses and net income attributable to both the Company and the non-controlling interests are reported in the Condensed Consolidated Statements of Operations.

Our Condensed Consolidated Financial Statements include non-controlling interests related to common units of limited partnership interests (“Common Units”) in the Operating Partnership held by unaffiliated third parties.

Revenue Recognition

On January 1, 2018, we adopted ASU No. 2014-09, Revenue from Contracts with Customers. In accordance with ASU No. 2014-09, we recognize revenue when guestrooms are occupied, services have been rendered or fees have been earned. Revenues are recorded net of any sales and other taxes collected from customers and discounts. Cash received prior to guest arrival is recorded as an advance from the customer and is recognized as revenue at the time of occupancy.

Sales and Other Taxes

We have operations in states and municipalities that impose sales or other taxes on certain sales. We collect these taxes from our customers and remit the entire amount to the various governmental units. The taxes collected and remitted are excluded from revenues and are included in accrued expenses until remitted.

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Equity-Based Compensation

Our 2011 Equity Incentive Plan, which was amended and restated effective June 15, 2015 (as amended, the “Equity Plan”), provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, and other stock-based awards. We account for the stock options granted upon completion of our IPO at fair value using the Black-Scholes option-pricing model and we account for all other awards of equity, including time-based and performance-based stock awards, using the grant date fair value of those equity awards. Restricted stock awards with performance-based vesting conditions are market-based awards tied to total stockholder return and are valued using a Monte Carlo simulation model in accordance with ASC Topic 718, Compensation — Stock Compensation. We expense the fair value of awards under the Equity Plan ratably over the vesting period and market-based awards are not adjusted for performance. The amount of stock-based compensation expense may be subject to adjustment in future periods due to a change in forfeiture assumptions or modification of previously granted awards.

On January 1, 2018, we adopted ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. As such, we account for certain changes to share-based payment awards using modification accounting, which may result in incremental stock-based compensation expense based on the remeasurement of the award on the modification date.

Derivative Financial Instruments and Hedging

All derivative financial instruments are recorded at fair value as a net asset or liability in our Condensed Consolidated Balance Sheets. We use interest rate derivatives to hedge our risks on variable-rate debt. Interest rate derivatives could include swaps, caps and floors. We assess the effectiveness of each hedging relationship by comparing changes in fair value or cash flows of the derivative financial instrument with the changes in fair value or cash flows of the designated hedged item or transaction.

During 2017, we adopted ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. Accordingly, beginning in 2017, the change in the fair value of the hedging instruments is recorded in Other comprehensive income. Amounts deferred in Other comprehensive income will be reclassified to Interest expense in our Condensed Consolidated Statements of Operations in the period in which the hedged item affects earnings.

Income Taxes

We have elected to be taxed as a REIT under certain provisions of the IRC. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute annually to our stockholders at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains, which does not necessarily equal net income as calculated in accordance with GAAP. As a REIT, we generally will not be subject to federal income tax (other than taxes paid by our TRS at regular corporate income tax rates) to the extent we distribute 100% of our REIT taxable income to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate income tax rates and generally will be unable to re-elect REIT status until the fifth calendar year after the year in which we failed to qualify as a REIT, unless we satisfy certain relief provisions.

Substantially all of our assets are held by and all of our operations are conducted through our Operating Partnership. Partnerships are not subject to U.S. federal income taxes as revenues and expenses pass through to and are taxed on the owners. Generally, the states and cities where partnerships operate follow the U.S. federal income tax treatment. However, there are a limited number of local and state jurisdictions that tax the taxable income of the Operating Partnership.  Accordingly, we provide for income taxes in these jurisdictions for the Operating Partnership.

Taxable income related to our TRS is subject to federal, state and local income taxes at applicable tax rates. Our consolidated income tax provision includes the income tax provision related to the operations of the TRS as well as state and local income taxes related to the Operating Partnership.

Where required, we account for federal and state income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for: i) the future tax consequences attributable to differences between carrying amounts of existing assets and liabilities based on GAAP and the respective carrying amounts for tax purposes, and ii) operating losses and tax-credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date of the change in tax rates. However, deferred tax assets are recognized only to the extent that it is more likely than not they will be realized based on consideration of available evidence, including future reversals of taxable temporary differences, future projected taxable income and tax planning strategies.

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We perform a review of any uncertain tax positions and if necessary will record expected future tax consequences of uncertain tax positions in the financial statements.

Fair Value Measurement

Fair value measures are classified into a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1:	Observable inputs such as quoted prices in active markets.
Level 2:	Directly or indirectly observable inputs, other than quoted prices in active markets.
Level 3:	Unobservable inputs in which there is little or no market information, which require a reporting entity to develop its own assumptions.

Assets and liabilities measured at fair value are based on one or more of the following valuation techniques:

Market approach:	Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
Cost approach:	Amount required to replace the service capacity of an asset (replacement cost).
Income approach:	Techniques used to convert future amounts to a single amount based on market expectations (including present-value, option-pricing, and excess-earnings models).

Our estimates of fair value were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts. We classify assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement.

On January 1, 2018, we adopted ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): 

Recognition and Measurement of Financial Assets and Financial Liabilities. Accordingly, we have elected a measurement alternative for equity investments, such as our purchase options, that do not have readily determinable fair values. Under the alternative, our purchase options are measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer, if any.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain amounts reported in the Condensed Consolidated Statements of Operations in previous periods have been disaggregated and reclassified to conform to the current period presentation. Revenues have been disaggregated into Rooms, Food and beverage, and Other. Direct and Indirect expense has been reclassified into Room, Food and beverage, and Other hotel operating expenses. Property taxes, insurance and other, and Management expenses are also separately reported.

We have also reclassified certain intangible assets related to our acquisitions of hotel properties from Other assets to Investment in hotel properties, net, on the Condensed Consolidated Balance Sheet. See "Note 3 - Investment in Hotel Properties, net" for further details.

These reclassifications, made at June 30, 2018 and for the three and six months then ended, had no net effect on the previously reported financial position or results of operations.

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New Accounting Standards

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): 

Recognition and Measurement of Financial Assets and Financial Liabilities, which enhances the reporting requirements for the measurement of financial instruments and requires equity securities to be measured at fair value with changes in the fair value recognized through net income for the period. We adopted ASU No. 2016-01 for our fiscal year commencing on January 1, 2018. The adoption of ASU No. 2016-01 did not have a material effect on our consolidated financial position or our results of operations.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which changes lessee accounting to reflect the financial liability and right-of-use assets that are inherent to leasing an asset on the balance sheet. ASU No. 2016-02 is effective for our fiscal year commencing on January 1, 2019, but early adoption is permitted. We anticipate that we will adopt ASU No. 2016-02 for our fiscal year commencing on January 1, 2019. We expect to apply the modified retrospective approach such that we will account for leases that commenced before the effective date of ASU No. 2016-02 in accordance with previous GAAP unless the lease is modified, except we will recognize right-of-use assets and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. We are currently in the process of analyzing our leases. As such, we do not expect the adoption of ASU No. 2016-02 to have a material impact on our consolidated financial statements except for recognition of the right-of-use assets and related lease liability accounts on the consolidated balance sheet.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses the Statement of Cash Flow classification and presentation of certain cash transactions. We adopted ASU No. 2016-15 for our fiscal year commencing on January 1, 2018. The effect of this amendment has been applied retrospectively. The adoption of ASU No. 2016-15 did not have a material effect on our consolidated financial position or our results of operations.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which clarifies how companies should present restricted cash and restricted cash equivalents in the statement of cash flows. This guidance requires companies to show the changes in the total of cash, cash equivalents and restricted cash in the statement of cash flows. We retrospectively adopted ASU No. 2016-18 for our fiscal year commencing on January 1, 2018. The adoption of ASU No. 2016-18 did not have a material effect on our consolidated financial position or our results of operations.

In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in accordance with ASC No. 718, Compensation - Stock Compensation. We adopted ASC No. 2017-09 for our fiscal year commencing on January 1, 2018. This guidance is to be applied prospectively to an award modified on or after the adoption date. We applied the requirements of ASU No. 2017-09 to the modification of certain stock awards as described in "Note 9 - Equity-Based Compensation".

In February 2018, the FASB issued ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which clarifies how an entity should measure certain equity securities. ASU 2018-03 is effective for our fiscal year commencing on January 1, 2019, but we have early adopted ASU No. 2018-03 for our fiscal year commencing on January 1, 2018. The adoption of ASU No 2018-03 did not have a material effect on our consolidated financial position or results of operations.

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NOTE 3 - INVESTMENT IN HOTEL PROPERTIES, NET

Investment in Hotel Properties, net

Investment in hotel properties, net at June 30, 2018 and December 31, 2017 is as follows (in thousands):

	June 30, 2018			December 31, 2017
Land	$	265,699		$	272,932
Hotel buildings and improvements	1,850,655			1,868,273
Intangible assets	22,764			22,764
Construction in progress	15,410			12,464
Furniture, fixtures and equipment	180,446			174,126
	2,334,974			2,350,559
Less - accumulated depreciation and amortization	(320,387		)	(291,067		)
	$	2,014,587		$	2,059,492

Recently Developed Properties

We completed the development and commenced operations of the new 168-guestroom Hyatt House Across From Orlando Universal Resort™ on June 27, 2018. The total construction cost for this hotel was $32.7 million, excluding land that we acquired in a prior-year transaction. The carrying amount for this hotel includes internal capitalized costs of $1.6 million. Total costs of $37.1 million, including the carrying amount of the land, were reclassified as Investment in Hotel Properties, net upon completion during the three months ended June 30, 2018.

Intangible Assets

Intangible assets included in Investment in hotel properties, net and intangible liabilities included in Accrued expenses and other in our Condensed Consolidated Balance Sheets include the following (in thousands):

	June 30, 2018			December 31, 2017
Intangible assets:
Air rights (1)	$	10,754		$	10,754
Favorable leases (2)	10,569			10,569
In-place lease agreements	1,361			1,361
Other	80			80
	22,764			22,764
Less accumulated amortization	(1,411		)	(1,001		)
Intangible assets, net	$	21,353		$	21,763
Intangible liabilities:
Unfavorable leases (2)	$	5,002		$	5,002
Less accumulated amortization	(333		)	(285		)
Intangible liabilities, net	$	4,669		$	4,717

(1) In conjunction with the acquisition of the Courtyard by Marriott - Charlotte, NC, the Company acquired certain air rights related to the hotel property.

(2) Intangible assets and liabilities are recorded on contracts assumed as part of the acquisition of certain hotels. Above-market and below-market contract values are based on the present value of the difference between contractual amounts to be paid pursuant to the contracts assumed and our estimate of the fair market contract rates for corresponding contracts measured over a period equal to the remaining non-cancelable term of the contracts assumed. Intangible assets and liabilities are amortized over the remaining non-cancelable term of the related contracts.

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Asset Sales

On June 29, 2018, we sold the Holiday Inn Express & Suites in Sandy, UT and the Hampton Inn in Provo, UT, for an aggregate selling price of $19.0 million. On June 29, 2018 we also sold the Holiday Inn in Duluth, GA and the Hilton Garden Inn in Duluth, GA for an aggregate selling price of $24.9 million. The sales of these four properties resulted in the realization of an aggregate net gain of $17.4 million during the three and six months ended June 30, 2018. We provided seller financing of $3.6 million, on the sale of the Holiday Inn in Duluth, GA and the Hilton Garden Inn in Duluth, GA, under two three-and-a-half-year second mortgage notes with a blended interest rate of 7.38%.

On March 30, 2017, we completed the sale of the Hyatt Place in Atlanta, GA for $14.5 million and repaid a related mortgage loan totaling $6.5 million. The sale of this property resulted in the realization of a net gain of $4.8 million during the six months ended June 30, 2017.

On June 2, 2017, we completed the sale of the Courtyard by Marriott in El Paso, TX for $11.2 million. The sale of this property resulted in the realization of a net gain of $0.4 million during the three and six months ended June 30, 2017.

Dispositions to Affiliates of Hospitality Investors Trust, Inc. (formerly American Realty Capital Hospitality Trust, Inc.)

On June 8, 2015, we entered into multiple sales agreements with affiliates of Hospitality Investors Trust, Inc. (“HIT”) for the sale of a portfolio of hotels to HIT. The agreements were modified on various occasions between 2015 and 2017 such that we sold 23 hotels containing 2,448 guestrooms to HIT in three tranches over that time period for a combined price of approximately $325.1 million (collectively, the “HIT Sale”) as follows (dollars in thousands):

Tranche	Closing Date	Hotels Sold	Sales Price
1	October 2015	10	$	150,000
2	February 2016	6	108,300
3	April 2017	7	66,800
		23	$	325,100

In connection with the HIT Sale, the Operating Partnership entered into a loan agreement with HIT, as borrower, which provided for a loan by us to HIT in the amount of $27.5 million (the “Loan”).  The proceeds of the Loan were required to be applied by HIT as follows: (i) $20.0 million was applied toward the payment of a portion of the $108.3 million purchase price for six hotels acquired in the second tranche; and (ii) the remaining $7.5 million was applied by HIT to fund the escrow deposit required for the purchase of hotels in the third tranche. We deferred $20.0 million of gain from the sale of the hotels in the second tranche as a result of the Loan structure. We recognized the deferred gain as principal payments on the Loan were received, and we recognized the final $15.0 million of gain when the Loan was paid in full on March 31, 2017.

Hotel Property Acquisitions

We did not acquire any hotel properties during the six months ended June 30, 2018. A summary of the hotel properties acquired during the six months ended June 30, 2017 is as follows (in thousands):

Date Acquired	Franchise/Brand	Location	Purchase Price
March 1, 2017	Homewood Suites	Aliso Viejo (Laguna Beach), CA	$	38,000
March 30, 2017	Hyatt Place	Phoenix (Mesa), AZ	22,200
May 23, 2017	Courtyard by Marriott	Fort Lauderdale, FL	85,000
June 9, 2017	Courtyard by Marriott	Charlotte, NC	56,250
June 21, 2017	Courtyard by Marriott	Fort Worth, TX	40,000
June 21, 2017	Courtyard by Marriott	Kansas City, MO	24,500
June 21, 2017	Courtyard by Marriott	Pittsburgh, PA	42,000
June 21, 2017	Hampton Inn & Suites	Baltimore, MD	18,000
June 21, 2017	Residence Inn by Marriott	Baltimore, MD	38,500
			$	364,450	(1)

(1)    The net assets acquired totaled $367.4 million due to the purchase at settlement of $0.8 million of net working capital assets and capitalized transaction costs of $2.1 million

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The allocation of the aggregate purchase prices to the fair value of assets and liabilities acquired for the above acquisitions is as follows (in thousands):

	For the Six Months Ended June 30, 2017
Land	$	61,616
Hotel buildings and improvements	274,961
Intangible assets	15,710
Furniture, fixtures and equipment	14,314
Other assets	1,775
Total assets acquired	368,376
Less - other liabilities assumed	(990		)
Net assets acquired	$	367,386

All hotel purchases completed in 2017 were deemed to be the acquisition of assets. Therefore, acquisition costs related to these transactions have been capitalized as part of the recorded amount of the acquired assets.

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The results of operations of acquired hotel properties are included in the Condensed Consolidated Statements of Operations beginning on their respective acquisition dates. The following unaudited pro forma information includes operating results for 80 hotels owned as of June 30, 2018 as if all such hotels had been owned by us since January 1, 2017. For hotel properties acquired by us during the three and six months ended June 30, 2017, the pro forma information for the three and six months ended June 30, 2017 includes both the financial results from the prior owner from January 1, 2017 through the date of acquisition by us (the “Pre-acquisition Period”) and the financial results generated by us from the date of acquisition through June 30, 2017. For properties acquired by us after June 30, 2017, the pro forma information for the three and six months ended June 30, 2017 reflects the financial results from the prior owner for the entire three and six month period. For all properties acquired by us during the year ended December 31, 2017, the pro forma information for the three and six months ended June 30, 2018 relate entirely to the financial results generated by us. The financial results for the Pre-acquisition Period were provided by the prior owner of such Acquired Hotel prior to purchase by us and such information has not been audited or reviewed by our auditors or adjusted by us. For hotels sold by us between January 1, 2017 and June 30, 2018 (the "Disposed Hotels"), the unaudited pro forma information excludes the financial results, including gains on disposal of assets, of each of the Disposed Hotels for the period of ownership by us from January 1, 2017 through the date that the Disposed Hotels were sold by us. The unaudited pro forma information is included to enable comparison of results for the current reporting period to results for the comparable period of the prior year and is not indicative of what actual results of operations would have been had the hotel acquisitions and dispositions taken place on or before January 1, 2017. The pro forma amounts exclude the gain or loss on the sale of hotel properties during the three and six months ended June 30, 2017 and 2018, respectively. This information does not purport to be indicative of or represent results of operations for future periods.

The unaudited condensed pro forma financial information for the 80 hotel properties owned at June 30, 2018 for the three and six months ended June 30, 2018 and 2017 is as follows (in thousands, except per share):

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2018		2017		2018		2017
Revenues	$	148,501	$	144,912	$	285,145	$	278,044
Income from hotel operations	$	56,877	$	56,769	$	106,148	$	106,232
Net income (1)	$	19,640	$	25,656	$	28,971	$	47,072
Net income attributable to common stockholders, net of amount allocated to participating securities (1) (2)	$	15,765	$	21,249	$	16,256	$	38,279
Basic and diluted net income per share attributable to common stockholders (1) (2)	$	0.15	$	0.22	$	0.16	$	0.40

(1) Pro forma amounts include depreciation expense, property tax expense, interest expense, income tax expense, and other corporate expenses totaling $49.0 million and $39.1 million for the three months ended June 30, 2018 and 2017, respectively, and $97.8 million and $76.0 million for the six months ended June 30, 2018 and 2017, respectively.

(2) Pro forma amounts for the three and six months ended June 30, 2018 include the effect of the premium on redemption of preferred stock of $3.3 million.

Assets Held for Sale

Assets held for sale at June 30, 2018 and December 31, 2017 include the following (in thousands):

	June 30, 2018		December 31, 2017
Land	$	7,410	$	1,193
Hotel buildings and improvements	28,558		—
Furniture, fixtures and equipment	1,745		—
Construction in progress	15		—
Franchise fees and other	150		—
	$	37,878	$	1,193

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Assets Held for Sale at June 30, 2018 and December 31, 2017 included land parcels in Spokane, WA and Flagstaff, AZ. Assets Held for Sale at June 30, 2018 also include four hotels under contract for sale that are expected to close during the three months ended September 30, 2018 as follow:

Property	Guestrooms
Sale 1:
Hilton Garden Inn - Smyrna, TN	112
Hampton Inn & Suites - Smyrna, TN	83
Hyatt Place Phoenix North - Phoenix, AZ	127
	322
Sale 2:
Hyatt Place - Fort Myers, FL	148
	470

NOTE 4 - DEBT

At June 30, 2018, our indebtedness was comprised of borrowings under our $450.0 million senior unsecured revolving credit and term loan facility (described below), the 2017 Term Loan (as defined below), the 2018 Term Loan (as defined below), and indebtedness secured by first priority mortgage liens on various hotel properties. At December 31, 2017, our indebtedness was comprised of borrowings under our $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. The weighted average interest rate, after giving effect to our interest rate derivatives, for all borrowings was 4.20% at June 30, 2018 and 3.89% at December 31, 2017.

Debt, net of debt issuance costs, is as follows (in thousands):

	June 30, 2018			December 31, 2017
Revolving debt	$	45,000		$	15,000
Term loans	600,000			515,000
Mortgage loans	310,813			343,109
	955,813			873,109
Unamortized debt issuance costs	(5,316		)	(4,873		)
Debt, net of debt issuance costs	$	950,497		$	868,236

We have entered into five interest rate swaps to partially fix the interest rate on a portion of our variable interest rate unsecured indebtedness and term loans. See "Note 5- Derivative Financial Instruments and Hedging" to the Condensed Consolidated Financial Statements for additional information. Our total fixed-rate and variable-rate debt, after considering our interest rate derivative agreements that are currently effective, is as follows (in thousands):

	June 30, 2018		Percentage	December 31, 2017		Percentage
Fixed-rate debt	$	554,461	58%	$	386,313	44%
Variable-rate debt	401,352		42%	486,796		56%
	$	955,813		$	873,109

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

	June 30, 2018				December 31, 2017
	Carrying Value		Fair Value		Carrying Value		Fair Value		Valuation Technique
Fixed-rate debt	$	279,461	$	276,635	$	311,313	$	310,535	Level 2 - Market approach

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At June 30, 2018 and December 31, 2017, we had $275.0 million and $75.0 million, respectively, 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 5 — Derivative Financial Instruments and Hedging."

$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 revolving credit and term loan 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 June 30, 2018, the maximum amount of borrowing provided by the 2016 Unsecured Credit Facility was$450.0 million, of which we had borrowed $150.0 million under the $150 Million Term Loan and $45.0 million under the $300 Million Revolver and we had $255.0 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 margin of 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 of between 0.50% and 1.25%, depending upon the Company’s leverage ratio.  The interest rate at June 30, 2018 was 3.89%.

Financial and Other Covenants. We are required to comply with a series of financial and other covenants to borrow under this credit facility. At June 30, 2018, we were in compliance with all required covenants.

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 June 30, 2018, the Company had 51 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% which results in a fixed interest rate of 3.79% on $75.0 million 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 an unsecured term loan (the “2015 Term Loan”), with an original principal amount of $125.0 million, that was later increased to $140.0 million, upon exercise of an accordion feature.

On February 15, 2018, we repaid the $140.0 million outstanding balance with funds received from the 2018 Term Loan (as discussed below).

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, and a syndicate of lenders listed in the loan documentation.

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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. The interest rate at June 30, 2018 was 3.84%.

Financial and Other Covenants.  We are required to comply with a series of financial and other covenants in order to draw and maintain borrowings under the 2017 Term Loan. At June 30, 2018 we were 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 the assets that qualify as unencumbered assets.  At June 30, 2018, the Unencumbered Properties also supported the 2017 Term Loan.

2018 Term Loan

On February 15, 2018, 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 new $225.0 million unsecured term loan (the “2018 Term Loan”) with KeyBank National Association, as administrative agent, and a syndicate of lenders listed in the loan documentation. The 2018 Term Loan has an accordion feature that allows us to increase the total commitments by $150.0 million prior to the maturity date of February 14, 2025, subject to certain conditions.  At closing, we drew $140.0 million of the $225.0 million available under the 2018 Term Loan and used the proceeds to pay off and replace the 2015 Term Loan. On May 16, 2018, we drew the remaining $85.0 million available under the 2018 Term Loan and used the proceeds to pay down the $300 Million Revolver.

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 1.80% and 2.55%, 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 0.80% and 1.55%, depending upon our leverage ratio.  We are required to pay other fees, including customary arrangement and administrative fees. The interest rate at June 30, 2018 was 4.14%.

Financial and Other Covenants.  In addition, we are required to comply with a series of financial and other covenants in order to draw and maintain borrowings under the 2018 Term Loan. At June 30, 2018 we were in compliance with all financial covenants.

Unencumbered Assets.  The 2018 Term Loan is unsecured.  However, borrowings under the term loan are limited by the value of the assets that qualify as unencumbered assets.  At June 30, 2018, the Unencumbered Properties also supported the 2018 Term Loan.

Metabank Loan

On June 30, 2017, we entered into a $47.6 million secured, non-recourse loan with MetaBank (the "MetaBank Loan"). As of December 31, 2017, we had drawn the entire $47.6 million balance available under the 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.

Mortgage and Term Loans

On April 2, 2018, we repaid four mortgage loans with Western Alliance Bank totaling $23.9 million that had a blended interest rate of 5.39%. There were no prepayment penalties associated with the repayment of these loans. The properties that secured the mortgage loans are now unencumbered and have been added to our unencumbered pool to support our 2016 Unsecured Credit Facility, 2017 Term Loan and 2018 Term Loan.

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At June 30, 2018, we had $910.8 million in secured mortgage loans and unsecured term loans outstanding (including the $150 Million Term Loan, the 2017 Term Loan, the 2018 Term Loan and the Metabank Loan described above).  Term loans totaling $310.8 million, including the Metabank Loan, are secured primarily by first mortgage liens on certain hotel properties.    

NOTE 5 - DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING

Information about our derivative financial instruments at June 30, 2018 and December 31, 2017 is as follows (dollars in thousands): 

			Notional Amount					Fair Value
Contract date	Effective Date	Expiration Date	June 30, 2018			December 31, 2017		June 30, 2018			December 31, 2017
September 5, 2013	January 2, 2014	October 1, 2018	$	75,000	(1)	$	75,000	$	14		$	(190	)
October 2, 2017	January 29, 2018	January 31, 2023	100,000		(2)	100,000		3,231			722
October 2, 2017	January 29, 2018	January 31, 2023	100,000		(2)	100,000		3,299			787
June 11, 2018	September 28, 2018	September 30, 2024	75,000		(3)	—		(347		)	—
June 11, 2018	December 31, 2018	December 31, 2025	125,000		(4)	—		(772		)	—
			$	475,000		$	275,000	$	5,425		$	1,319

(1) Interest rate swap is related to a portion of our 2016 Unsecured Credit Facility and converts LIBOR from a floating rate to an average annual fixed rate of 2.04%.

(2) Interest rate swap partially fixes the interest rate on a portion of our variable interest rate unsecured indebtedness and converts LIBOR from a floating rate to an average annual fixed rate of 1.98%.

(3) Interest rate swap partially fixes the interest rate on a portion of our variable interest rate unsecured indebtedness and converts LIBOR from a floating rate to an average annual fixed rate of 2.87%.

(4) Interest rate swap partially fixes the interest rate on a portion of our variable interest rate unsecured indebtedness and converts LIBOR from a floating rate to an average annual fixed rate of 2.93%.

Our interest rate swaps have been designated as cash flow hedges and are valued using a market approach, which is a Level 2 valuation technique. At June 30, 2018, three of our interest rate swaps were in an asset position and two were in a liability position. At December 31, 2017, two of our interest rate swaps were in an asset position and one was in a liability position. We are not required to post any collateral related to these agreements and are not in breach of any financial provisions of the agreements.

During 2017, we adopted ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. Accordingly, beginning in 2017, changes in the fair value of the hedging instruments are recorded in Other comprehensive income. Amounts deferred in Other comprehensive income are reclassified to Interest expense in our Condensed Consolidated Statements of Operations in the period in which the hedged item affects earnings. In the next twelve months, we estimate that $0.4 million will be reclassified from Other comprehensive income and recorded as a reduction to Interest expense.

The table below details the location in the financial statements of the gain or loss recognized on derivative financial instruments designated as cash flow hedges (in thousands):

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Gain(loss) recognized in Accumulated other comprehensive income on derivative financial instruments	$	309		$	(22	)	$	3,846		$	90
Loss reclassified from Accumulated other comprehensive income to Interest expense	$	(53	)	$	(196	)	$	(260	)	$	(433	)

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NOTE 6 - EQUITY

Common Stock

The Company is authorized to issue up to 500,000,000 shares of common stock, $0.01 par value per share.  Each outstanding share of our common stock entitles the holder to one vote on all matters submitted to a vote of stockholders, including the election of directors and, except as may be provided with respect to any other class or series of stock, the holders of such shares possess the exclusive voting power.

On May 9, 2017, the Company and the Operating Partnership entered into an underwriting agreement (the “Underwriting Agreement”) with Raymond James & Associates, Inc. and Deutsche Bank Securities Inc., as the representatives of the several underwriters named therein, relating to the issuance and sale of 9,000,000 shares of the Company’s common stock, $0.01 par value per share, at a public offering price of $16.50 per share, less an underwriting discount of $0.66 per share. Pursuant to the terms of the Underwriting Agreement, the Company granted the underwriters a 30-day option to purchase up to an additional 1,350,000 shares of common stock on the same terms, which the underwriters exercised in full on May 10, 2017. The closing of the offering occurred on May 15, 2017 for net proceeds of $163.8 million, after the underwriting discount and offering-related expenses of $7.0 million.

On May 25, 2017, the Company and the Operating Partnership entered into separate sales agreements (collectively, the “Sales Agreements”) with each of Robert W. Baird & Co. Incorporated, Raymond James & Associates, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Deutsche Bank Securities Inc., RBC Capital Markets, LLC, KeyBanc Capital Markets Inc., Canaccord Genuity Inc., Jefferies LLC, BB&T Capital Markets, a division of BB&T Securities, LLC, and BTIG, LLC (collectively, the “Sales Agents”), pursuant to which the Company may sell the Company’s shares of common stock, $0.01 par value per share, having an aggregate offering price of up to $200.0 million (the “Shares”), from time to time through the Sales Agents, each acting as a sales agent or principal (the "2017 ATM Program"). At the same time, the Company terminated each of the sales agreements entered into in connection with its prior at-the-market offering program, which was established in August 2016 and under which 6,151,514 shares of the Company’s common stock were sold through May 25, 2017 for net proceeds of approximately $89.1 million. To date, we have not sold any shares of our common stock under the 2017 ATM Program. During the six months ended June 30, 2018, we incurred costs totaling $0.1 million related to the 2017 ATM Program.

Pursuant to the Sales Agreements, the Shares may be offered and sold through any Sales Agent in transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made directly on the New York Stock Exchange or sales made to or through a market maker other than on an exchange or, with the prior consent of the Company, in privately negotiated transactions. Each Sales Agent will be entitled to compensation of up to 2.0% of the gross proceeds of the Shares sold through such Sales Agent from time to time under the related Sales Agreement. The Company has no obligation to sell any of the Shares under the Sales Agreements and may at any time suspend solicitations and offers under, or terminate, any of the Sales Agreements.

Changes in common stock during the six months ended June 30, 2018 and 2017 were as follows:

	For the Six Months Ended June 30,
	2018		2017
Beginning common shares outstanding	104,287,128		93,525,469
Stock Offering	—		10,350,000
Grants under the Equity Plan	583,373		366,679
Common Unit redemptions	25,839		30,657
Annual grants to independent directors	34,130		23,896
Common stock issued for director fees	2,299		2,454
Forfeitures	(818	)	(1,237	)
Shares retained for employee tax withholding requirements	(187,850	)	(59,111	)
Ending common shares outstanding	104,744,101		104,238,807

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Preferred Stock

The Company is authorized to issue up to 100,000,000 shares of preferred stock, $0.01 par value per share, of which 90,600,000 is currently undesignated, 3,000,000 shares have been designated as 6.45% Series D Cumulative Redeemable Preferred Stock (the "Series D preferred shares") and 6,400,000 shares have been designated as 6.25% Series E Cumulative Redeemable Preferred Stock (the "Series E preferred shares").

On March 20, 2018, the Company paid $85.3 million to redeem all 3,400,000 of its outstanding Series C preferred shares at a redemption price of $25 per share plus accrued and unpaid dividends.

The Company's outstanding shares of preferred stock (collectively, “Preferred Shares”) rank senior to our common stock and on parity with each other with respect to the payment of dividends and distributions of assets in the event of a liquidation, dissolution, or winding up. The Preferred Shares do not have any maturity date and are not subject to mandatory redemption or sinking fund requirements. The Company may not redeem the Series D or Series E preferred shares prior to June 28, 2021 and November 13, 2022, respectively, except in limited circumstances relating to the Company’s continuing qualification as a REIT or in connection with certain changes in control. After those dates, the Company may, at its option, redeem the applicable Preferred Shares, in whole or from time to time in part, by payment of $25 per share, plus any accumulated, accrued and unpaid distributions up to, but not including, the date of redemption. If the Company does not exercise its rights to redeem the Preferred Shares upon certain changes in control, the holders of the Preferred Shares have the right to convert some or all of their shares into a number of the Company’s common shares based on a defined formula, subject to a share cap, or alternative consideration. The share cap on each Series D preferred share is 3.9216 shares of common stock and each Series E preferred share is 3.1686 shares of common stock, all subject to certain adjustments.

The Company pays dividends at an annual rate of $1.6125 for each Series D preferred share and $1.5625 for each Series E preferred share. Dividend payments are made quarterly in arrears on or about the last day of February, May, August and November of each year.

Non-controlling Interests in Operating Partnership

Pursuant to the limited partnership agreement of our Operating Partnership, beginning on February 14, 2012, the unaffiliated third parties who hold Common Units in our Operating Partnership have the right to cause us to redeem their Common Units in exchange for cash based upon the fair value of an equivalent number of our shares of common stock at the time of redemption; however, the Company has the option to redeem Common Units with shares of our common stock on a one-for-one basis. The number of shares of our common stock issuable upon redemption of Common Units may be adjusted upon the occurrence of certain events such as share dividend payments, share subdivisions or combinations.

 At June 30, 2018 and December 31, 2017, unaffiliated third parties owned 297,552 and 323,391 Common Units of the Operating Partnership, respectively, representing less than a 1% limited partnership interest in the Operating Partnership for each period.

We classify outstanding Common Units held by unaffiliated third parties as non-controlling interests in the Operating Partnership, a component of equity in the Company’s Condensed Consolidated Balance Sheets. The portion of net income allocated to these Common Units is reported on the Company’s Condensed Consolidated Statement of Operations as net income attributable to non-controlling interests of the Operating Partnership.

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NOTE 7 - FAIR VALUE MEASUREMENT

The following table presents information about our financial instruments measured at fair value on a recurring basis at June 30, 2018 and December 31, 2017. In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, we classify assets and liabilities based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Disclosures concerning financial instruments measured at fair value are as follows (in thousands):

	Fair Value Measurements at June 30, 2018 using
	Level 1		Level 2		Level 3		Total
Assets:
Interest rate swaps	$	—	$	6,544	$	—	$	6,544
Purchase options related to real estate loans	—		—		6,120		6,120
Liabilities:
Interest rate swaps	—		1,119		—		1,119

	Fair Value Measurements at December 31, 2017 using
	Level 1		Level 2		Level 3		Total
Assets:
Interest rate swaps	$	—	$	1,509	$	—	$	1,509
Purchase options related to real estate loans	—		—		6,078		6,078
Liabilities:
Interest rate swaps	—		190		—		190

We are a mezzanine lender on three construction loans to fund up to an aggregate of $29.6 million for the development of three hotel properties. The three real estate loans closed in the fourth quarter of 2017 and each has a stated interest rate of 8% and an initial term of approximately three years.  As of June 30, 2018, we have funded the full amount of $29.6 million. We have separate options related to each loan (each the "Initial Option") to purchase a 90% interest in each joint venture that owns the respective hotel upon completion of construction. We also have the right to purchase the remaining interests in each joint venture at future dates, generally five years after we exercise our Initial Option. We have recorded the aggregate estimated fair value of the Initial Options totaling $6.1 million in Other assets and as a discount to the related real estate loans. The discount will be amortized as a component of interest income over the term of the real estate loans using the straight-line method, which approximates the interest method. We recorded amortization of the discount of $0.5 million during the three months ended June 30, 2018 and $1.0 million during the six months ended June 30, 2018.

Our purchase options do not have readily determinable fair values. The fair value of each purchase option was estimated using a binomial lattice model. The estimated fair values of the purchase options were based on unobservable inputs for which there is little or no market information available and required us to develop our own assumptions as follows (dollar amounts in thousands):

	Real Estate Loan 1			Real Estate Loan 2			Real Estate Loan 3
Exercise price	$	15,143		$	17,377		$	5,503
First option exercise date	12/31/2018			3/31/2019			5/31/2019
Last option exercise date	11/1/2020			12/5/2020			12/1/2020
Expected volatility	32.0		%	38.0		%	37.0		%
Risk free rate	1.7		%	1.8		%	1.9		%
Expected annualized equity dividend yield	6.8		%	9.9		%	6.5		%

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NOTE 8 - COMMITMENTS AND CONTINGENCIES

Restricted Cash

The Company maintains reserve funds for property taxes, insurance, capital expenditures and replacement or refurbishment of furniture, fixtures and equipment at some of our hotel properties in accordance with management, franchise or mortgage loan agreements. These agreements generally require us to reserve cash ranging from 3% to 5% of the revenues of the individual hotel in restricted cash escrow accounts. Any unused restricted cash balances revert to us upon the termination of the underlying agreement or may be released to us from the restricted cash escrow accounts upon proof of expenditures and approval from the lender or other party requiring the restricted cash reserves. At June 30, 2018 and December 31, 2017, approximately $32.5 million and $29.5 million, respectively, was available in restricted cash reserve funds for property taxes, insurance, capital expenditures and replacement or refurbishment of furniture, fixtures and equipment at our hotel properties.

Ground Leases

At June 30, 2018 and December 31, 2017, we had two prepaid ground leases for two hotel properties in Portland, OR which expire in June 2084. These ground leases had prepaid balances of approximately $3.2 million at both June 30, 2018 and December 31, 2017.  We have one option to extend these leases for an additional 14 years. We lease land for one hotel property in Houston (Galleria Area), TX under the terms of an operating ground lease agreement with an initial termination date of April 20, 2053 and one option to extend for an additional 10 years.  We lease land for one hotel property in Austin, TX with an initial lease termination date of May 31, 2050.  We lease land for one hotel property in Baltimore (Hunt Valley), MD with a lease termination date of December 31, 2019 and twelve remaining options to extend for five additional years per extension. At December 31, 2017, we had an additional ground lease for one hotel property in Duluth, GA. The hotel property was sold on June 29, 2018 and the ground lease was transferred to the buyer. See "Note 3 - Investment in Hotel Properties, net" to the Condensed Consolidated Financial Statements for additional information.

Total rent expense for ground leases for each of the three months ended June 30, 2018 and 2017 was $0.4 million. Total rent expense for ground leases for each of the six months ended June 30, 2018 and 2017 was $0.9 million.

In addition, we lease land for one hotel property in Garden City, NY under a PILOT (payment in lieu of taxes) lease. We pay a reduced amount of property tax each year of the lease as rent. The lease expires on December 31, 2019. Upon expiration of the lease, we expect to exercise our right to acquire a fee simple interest in the hotel for nominal consideration.

Franchise Agreements

All of our hotel properties operate under franchise agreements with major hotel franchisors. The terms of our franchise agreements generally range from 10 to 20 years with various extension provisions. Each franchisor receives franchise fees ranging from 2% to 6% of each hotel property’s gross revenue, and some agreements require that we pay marketing fees of up to 4% of gross revenue. We also pay fees to our franchisors for services such as reservation and information systems. During the three months ended June 30, 2018 and 2017, we expensed fees related to our franchise agreements of $13.0 million and $10.2 million, respectively.  During the six months ended June 30, 2018 and 2017, we expensed fees related to our franchise agreements of $24.4 million and $19.4 million, respectively.

Management Agreements

Our hotel properties operate pursuant to management agreements with various professional third-party management companies. The terms of our management agreements generally range from less than one to 25 years with various extension provisions. Each management company receives a base management fee, generally a percentage of total hotel property revenues. In some cases there are also monthly fees for certain services, such as accounting and revenue management. Generally there are also incentive fees based on attaining certain financial thresholds. Management fee expenses for the three months ended June 30, 2018 and 2017 were $5.4 million and $5.1 million, respectively. Management fee expenses for the six months ended June 30, 2018 and 2017 were $10.7 million and $9.8 million, respectively.

Litigation

We are involved from time to time in litigation arising in the ordinary course of business. We are not currently aware of any actions against us that we believe would have a material effect on our financial condition or results of operations.

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NOTE 9 - EQUITY-BASED COMPENSATION

Our currently outstanding equity-based awards were issued under the Equity Plan which provides for the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, and other equity-based awards or incentive awards.

Stock options granted may be either incentive stock options or non-qualified stock options. Vesting terms may vary with each grant, and stock option terms are generally five to ten years. We have outstanding equity-based awards in the form of stock options and restricted stock awards. All of our outstanding equity-based awards are classified as equity awards.

The Company's former Chief Financial Officer retired on March 31, 2018. In connection with his retirement, the Company recorded $1.0 million of additional stock-based compensation expense during the six months ended June 30, 2018 related to the modification of certain stock award agreements.

Stock Options Granted Under our Equity Plan

As of June 30, 2018, we had 235,000 outstanding and exercisable stock options with a weighted average exercise price of $9.75 per share, weighted average contractual term of 2.7 years and an aggregate intrinsic value of $1.1 million.

Time-Based Restricted Stock Awards Made Pursuant to Our Equity Plan

On March 7, 2018, we granted time-based restricted stock awards for 23,363 shares of common stock to certain of our non-executive employees. The awards vest over a four-year period based on continued service (20% on March 9, 2019, 2020 and 2021, and 40% on March 9, 2022). 

On March 7, 2018, we granted time-based restricted stock awards for 162,202 shares of common stock to our executive officers. The awards vest 25% on March 9, 2019, 25% on March 9, 2020 and 50% on March 9, 2021, based on continuous service through the vesting dates or in certain circumstances upon a change in control.

On March 6, 2017, we granted time-based restricted stock awards for 16,079 shares of common stock to certain of our non-executive employees. The awards vest over a four-year period based on continued service (20% on March 9, 2018, 2019 and 2020, and 40% on March 9, 2021). 

On March 6, 2017, we granted time-based restricted stock awards for 120,024 shares of common stock to our executive officers. On April 18, 2017, we granted a time-based restricted stock award for 20,215 shares of common stock to an executive officer. The awards vest 25% on March 9, 2018, 25% on March 9, 2019 and 50% on March 9, 2020, based on continuous service through the vesting dates or in certain circumstances upon a change in control.

The holders of these awards have the right to vote the related shares of common stock and receive all dividends declared and paid whether or not vested. The fair value of time-based restricted stock awards granted is calculated based on the market value of our common stock on the date of grant.

The following table summarizes time-based restricted stock award activity under our Equity Plan for the six months ended June 30, 2018:

	Number  of Shares		Weighted Average Grant Date  Fair Value		Aggregate Current Value
			(per share)		(in thousands)
Non-vested at December 31, 2017	391,477		$	13.52	$	5,962
Granted	185,565		13.15
Vested	(205,619	)	13.41
Forfeited	(818	)	12.84
Non-vested at June 30, 2018	370,605		$	13.40	$	5,303

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Performance-Based Restricted Stock Awards Made Pursuant to Our Equity Plan

On March 7, 2018, we granted performance-based restricted stock awards for 243,303 shares of common stock to our executive officers. Our performance-based restricted stock awards are market-based awards and are accounted for based on the fair value of our common stock on the grant date. The fair value of the performance-based restricted stock awards granted was estimated using a Monte Carlo simulation valuation model. These awards generally vest based on our percentile ranking within the SNL U.S. REIT Hotel Index at the end of the period beginning on March 7, 2018 and ending on the earlier of March 7, 2021 or upon a change in control.  The awards require continued service during the measurement period and are subject to the other conditions described in the Equity Plan or award document.

On March 6, 2017, we granted performance-based restricted stock awards for 180,039 shares of common stock to our executive officers. On April 18, 2017, we granted a performance-based restricted stock award for 30,322 shares of common stock to an executive officer. Our performance-based restricted stock awards are market-based awards and are accounted for based on the fair value of our common stock on the grant date. The fair value of the performance-based restricted stock awards granted was estimated using a Monte Carlo simulation valuation model. These awards generally vest based on our percentile ranking within the SNL U.S. REIT Hotel Index at the end of the period beginning on March 6, 2017 and ending on the earlier of March 6, 2020 or upon a change in control.  The awards require continued service during the measurement period and are subject to the other conditions described in the Equity Plan or award document.

The number of shares the executive officers may earn under these awards range from zero shares to twice the number of shares granted based on our percentile ranking within the index at the end of the measurement period. In addition, a portion of the performance-based shares may be earned based on the Company's absolute total shareholder return calculated during the performance period. The holders of these grants have the right to vote the granted shares of common stock and any dividends declared will be accumulated and will be subject to the same vesting conditions as the awards.  Further, if additional shares are earned based on our percentile ranking within the index, dividend payments will be issued as if the additional shares had been held throughout the measurement period.

The following table summarizes performance-based restricted stock activity under the Equity Plan for the six months ended June 30, 2018:

	Number  of Shares		Weighted Average Grant Date  Fair Value (1)		Aggregate Current Value
			(per share)		(in thousands)
Non-vested at December 31, 2017	619,429		$	16.16	$	9,434
Granted	397,808		15.69
Vested	(309,010	)	18.78
Non-vested at June 30, 2018	708,227		$	14.75	$	10,135

(1) The amounts included in this column represent the expected future value of the performance-based restricted stock awards calculated using the Monte Carlo simulation valuation model.

Director Stock Awards Made Pursuant to Our Equity Plan

Our non-employee directors have the option to receive shares of our common stock in lieu of cash for their director fees. During the six months ended June 30, 2018, we issued 2,299 shares of common stock for director fees and we made an annual grant of 34,130 shares of common stock to our independent directors. The fair value of director stock awards is calculated based on the market value of our common stock on the date of grant.

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Equity-Based Compensation Expense

Equity-based compensation expense included in Corporate general and administrative expenses in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2018 and 2017 was as follows (in thousands):

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2018		2017		2018		2017
Time-based restricted stock	$	516	$	590	$	1,352	$	1,066
Performance-based restricted stock	785		850		2,159		1,484
Director stock	520		424		537		444
	$	1,821	$	1,864	$	4,048	$	2,994

We recognize equity-based compensation expense ratably over the vesting periods. The amount of expense may be subject to adjustment in future periods due to a change in the forfeiture assumptions.

Unrecognized equity-based compensation expense for all non-vested awards pursuant to our Equity Plan was $9.2 million at June 30, 2018 and will be recorded as follows (in thousands):

	Total		2018		2019		2020		2021		2022
Time-based restricted stock	$	3,822	$	1,035	$	1,615	$	956	$	203	$	13
Performance-based restricted stock	5,361		1,568		2,320		1,287		186		—
	$	9,183	$	2,603	$	3,935	$	2,243	$	389	$	13

NOTE 10 - INCOME TAXES

On December 22, 2017, H.R. 1, originally known as the Tax Cuts and Jobs Act (the “TCJA”), was enacted. The TCJA made many significant changes to the U.S. federal income tax laws applicable to businesses and their owners, including REITs and their stockholders. Pursuant to this legislation, as of January 1, 2018, (1) the federal income tax rate applicable to corporations is reduced to 21%, (2) the highest marginal individual income tax rate is reduced to 37% (through taxable years ending in 2025), (3) the corporate alternative minimum tax is repealed, and (4) the backup withholding rate for U.S. stockholders is reduced to 24%. In addition, individuals, estates and trusts may deduct up to 20% of certain pass-through income, including ordinary REIT dividends that are not “capital gain dividends” or “qualified dividend income,” subject to certain limitations. For taxpayers qualifying for the full deduction, the effective maximum tax rate on ordinary REIT dividends would be 29.6% (through taxable years ending in 2025). The maximum rate of withholding with respect to our distributions to non-U.S. stockholders that are treated as attributable to gains from the sale or exchange of U.S. real property interests is also reduced from 35% to 21%. The deduction of net interest expense is limited for all businesses; provided that certain businesses, including real estate businesses, may elect not to be subject to such limitations and instead to depreciate their real property related assets over longer depreciable lives. The reduced corporate tax rate will apply to our TRS and any other TRS that we form.

The reduced 21% federal income tax rate applicable to corporations will apply to taxable earnings reported for the full 2018 fiscal year. Accordingly, the Company remeasured its net deferred tax assets as of December 31, 2017 using the lower federal tax rate that will apply when these amounts are expected to reverse.

Income taxes for the interim periods presented have been included in our Condensed Consolidated Financial Statements on the basis of an estimated annual effective tax rate. Our effective tax rate is affected by the mix of earnings and losses by taxing jurisdictions. Our earnings, other than from our TRS, are not generally subject to federal and state corporate income taxes due to our REIT election, provided that we distribute 100% of our taxable income to our shareholders. However, there are a limited number of local and state jurisdictions that tax the taxable income of the Operating Partnership. Accordingly, we provide for income taxes in these jurisdictions for the Operating Partnership.

We recorded an income tax expense related to net income from continuing operations of $0.2 million and $0.4 million for the three months ended June 30, 2018 and 2017, respectively, and $0.4 million and $0.8 million for the six months ended June 30, 2018 and 2017, respectively.

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We had no unrecognized tax benefits at June 30, 2018. We expect no significant changes in unrecognized tax benefits within the next year.

NOTE 11 - EARNINGS PER SHARE

We apply the two-class method of computing earnings per share, which requires the calculation of separate earnings per share amounts for our non-vested time-based restricted stock awards with non-forfeitable dividends and for our common stock. Our non-vested time-based restricted stock awards with non-forfeitable rights to dividends are considered securities which participate in undistributed earnings with common stock. Under the two-class computation method, net losses are not allocated to participating securities unless the holder of the security has a contractual obligation to share in the losses. Our non-vested time-based restricted stock awards with non-forfeitable dividends do not have such an obligation so they are not allocated losses.

Below is a summary of the components used to calculate basic and diluted earnings per share (in thousands, except per share):

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Numerator:
Net income	$	37,677		$	34,083		$	47,368		$	67,289
Less: Preferred dividends	(3,709		)	(4,200		)	(9,252		)	(8,400		)
Premium on redemption of preferred stock	—			—			(3,277		)	—
Allocation to participating securities	(120		)	(126		)	(137		)	(240		)
Attributable to non-controlling interest	(101		)	(114		)	(104		)	(234		)
Net income attributable to common stockholders, net of amount allocated to participating securities	$	33,747		$	29,643		$	34,598		$	58,415
Denominator:
Weighted average common shares outstanding - basic	103,643			98,184			103,572			95,488
Dilutive effect of equity-based compensation awards	240			522			320			495
Weighted average common shares outstanding - diluted	103,883			98,706			103,892			95,983
Earnings per share:
Basic	$	0.33		$	0.30		$	0.33		$	0.61
Diluted	$	0.32		$	0.30		$	0.33		$	0.61

All outstanding stock options were included in the computation of diluted earnings per share for the three and six months ended June 30, 2018 and 2017 due to their dilutive effect. The Common Units held by the non-controlling interest holders have been excluded from the denominator of the diluted earnings per share as there would be no effect on the amounts since the limited partners' share of income would also be added to derive net income attributable to common stockholders. We had unvested performance-based restricted stock awards of 453,664 shares and 619,429 shares for the three months ended June 30, 2018 and 2017, respectively, and 453,664 shares and 619,429 shares for the six months ended June 30, 2018 and 2017, respectively, which were excluded from the denominator of the diluted earnings per share as the awards had not achieved the requisite performance conditions for vesting at each period end.

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NOTE 12 - SUBSEQUENT EVENTS

Asset Sales

On July 24, 2018, we completed the sale of three hotel properties, the Hilton Garden Inn - Smyrna, TN, the Hampton Inn & Suites - Smyrna, TN, and the Hyatt Place Phoenix North - Phoenix, AZ, for an aggregate sales price of $46.5 million.

Dividends

On July 30, 2018, our Board of Directors declared cash dividends of $0.18 per share of common stock, $0.403125 per share of 6.45% Series D Cumulative Redeemable Preferred Stock, and $0.390625 per share of 6.25% Series E Cumulative Redeemable Preferred Stock. These dividends are payable August 31, 2018 to stockholders of record on August 16, 2018.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our audited Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the year ended December 31, 2017 and our unaudited interim Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Unless stated otherwise or the context otherwise requires, references in this report to “we,” “our,” “us,” “our company” or “the company” mean Summit Hotel Properties, Inc. and its consolidated subsidiaries.

Cautionary Statement about Forward-Looking Statements

This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “forecast,” “project,” “potential,” “continue,” “likely,” “will,” “would” or similar expressions. Forward-looking statements in this report include, among others, statements about our business strategy, including acquisition and development strategies, industry trends, estimated revenues and expenses, ability to realize deferred tax assets and expected liquidity needs and sources (including capital expenditures and the ability to obtain financing or raise capital). You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control and which could materially affect actual results, performances or achievements. Factors that may cause actual results to differ materially from current expectations include, but are not limited to:

• financing risks, including the risk of leverage and the corresponding risk of default on our existing indebtedness and potential inability to refinance or extend the maturities of our existing indebtedness as well as the risk of default by borrowers to which we lend or provide seller financing;

• global, national, regional and local economic and geopolitical conditions;

• levels of spending for business and leisure travel, as well as consumer confidence;

• supply and demand factors in our markets or sub-markets;

• adverse changes in, or declining rates of growth with respect to, occupancy, average daily rate (“ADR”) and revenue per available room (“RevPAR”) and other hotel operating metrics;

• hostilities, including future terrorist attacks, or fear of hostilities that affect travel;

• financial condition of, and our relationships with, third-party property managers and franchisors;

• the degree and nature of our competition;

• increased interest rates;

• increased operating costs;

• increased renovation costs, which may cause actual renovation costs to exceed our current estimates;

• changes in zoning laws and increases in real property taxes;

• risks associated with hotel acquisitions, including the ability to ramp up and stabilize newly acquired hotels with limited or no operating history or that require substantial amounts of capital improvements for us to earn stabilized economic returns consistent with our expectations at the time of acquisition, and risks associated with dispositions of hotel properties, including our ability to successfully complete the sale of hotel properties under contract to be sold, including the risk that the purchaser may not have access to the capital needed to complete the purchase;

• the nature of our structure and transactions such that our federal and state taxes are complex and there is risk of successful challenges to our tax positions by the Internal Revenue Service ("IRS") or other federal and state taxing authorities;

• the recognition of taxable gains from the sale of hotel properties as a result of the inability to complete certain like-kind exchanges in accordance with Section 1031 of the Internal Revenue Code of 1986, as amended (the "IRC");

• availability of and our ability to retain qualified personnel;

• our failure to maintain our qualification as a real estate investment trust ("REIT") under the IRC;

• changes in our business or investment strategy;

• availability, terms and deployment of capital;

• general volatility of the capital markets and the market price of our common stock;

• environmental uncertainties and risks related to natural disasters;

• our ability to recover fully under our existing insurance policies for insurable losses and our ability to maintain adequate or full replacement cost “all-risk” property insurance policies on our properties on commercially reasonable terms;

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• the effect of a data breach or significant disruption of hotel operator information technology networks as a result of cyber attacks beyond insurance coverages or indemnities from service providers;

• current and future changes to the IRC; and

• the other factors discussed under the heading "Risk Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2017.

Accordingly, there is no assurance that our expectations will be realized. Except as otherwise required by the federal securities laws, we disclaim any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Overview

Summit Hotel Properties, Inc. is a self-managed hotel investment company that was organized in June 2010 and completed its initial public offering in February 2011. We focus on owning primarily premium-branded, select-service hotels. At June 30, 2018, our portfolio consisted of 80 hotels with a total of 11,978 guestrooms located in 26 states. We own our hotels in fee simple, except for six hotels, five of which are subject to ground leases and one of which is subject to a PILOT (payment in lieu of taxes) lease. Our hotels are typically located in markets with multiple demand generators such as corporate offices and headquarters, retail centers, airports, state capitols, convention centers, and leisure attractions.

The vast majority of our hotels operate under premium franchise brands owned byMarriott® International, Inc. (“Marriott”), Hilton® Worldwide (“Hilton”), Hyatt® Hotels Corporation (“Hyatt”) and InterContinental® Hotels Group (“IHG”).

We have elected to be taxed as a REIT for federal income tax purposes commencing with our short taxable year ended December 31, 2011.  To qualify as a REIT, we cannot operate or manage our hotels.  Accordingly, all of our hotels are leased to wholly-owned subsidiaries (our “TRS lessees”) of Summit Hotel TRS, Inc., our taxable REIT subsidiary.  All of our hotels are operated pursuant to hotel management agreements between our TRS lessees and professional third-party hotel management companies that are not affiliated with us as follows:

Management Company	Number of Properties	Number of Guestrooms
Interstate Management Company, LLC and its affiliate Noble Management Group, LLC	34	4,882
OTO Development, LLC	13	1,796
Select Hotel Group, LLC	10	1,449
Affiliates of Marriott, including Courtyard Management Corporation, SpringHill SMC Corporation and Residence Inn by Marriott, Inc.	7	1,176
White Lodging Services Corporation	4	791
Stonebridge Realty Advisors, Inc.	4	605
American Liberty Hospitality, Inc.	2	372
Aimbridge Hospitality (formerly Pillar Hotels and Resorts, LLC)	2	199
Kana Hotels, Inc.	2	195
Fillmore Hospitality	1	261
Intercontinental Hotel Group Resources, Inc., an affiliate of IHG	1	252
Total	80	11,978

Our typical hotel management agreement requires us to pay a base fee to our hotel manager calculated as a percentage of hotel revenues.  In addition, our hotel management agreements generally provide that the hotel manager can earn an incentive fee for revenue or Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") over certain thresholds or based on a return over our required preferred return.  Our TRS lessees may employ other hotel managers in the future.  We do not, and will not, have any ownership or economic interest in any of the hotel management companies engaged by our TRS lessees.

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Our revenues are derived from hotel operations and consist of room revenue, food and beverage revenue and other hotel operations revenue. Revenues from our other hotel operations consist of ancillary revenues related to meeting rooms and other guest services provided at certain of our hotel properties.

Industry Trends and Outlook

Room-night demand in the U.S. lodging industry is generally correlated to macroeconomic trends. Key drivers of demand include growth in gross domestic product, corporate profits, capital investments and employment. Volatility in the economy and lodging demand and risks arising from global and domestic political or economic conditions may cause economic growth to slow or stall. Also, increasing supply in the industry, and specifically in our markets or sub-markets, may reduce RevPAR growth expectations.

According to the PricewaterhouseCoopers, LLP industry report, "Hospitality Directions: May 2018," RevPAR growth in the U.S. for Upscale hotels (the Smith Travel Research segment in which the majority of our hotel properties are included) is forecasted to be 1.9% for 2018. We continue to have a positive outlook on national macroeconomic conditions and their potential effects on RevPAR growth. We are encouraged by the relative strength of leisure demand and some of the more recent positive indicators suggesting improved business travel conditions. However, the industry and the Upscale chain scale in particular, experienced a deceleration in RevPAR growth in 2017, based in part on slower corporate demand growth and accelerating supply growth. These trends may continue throughout 2018 as room starts are forecasted to increase and industry demand growth is expected to moderate.

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Our Hotel Property Portfolio

At June 30, 2018, ourportfolio consisted of 80 hotels with a total of 11,978 guestrooms.According to current chain scales as defined by STR, Inc., one of our hotel properties with 165 guestrooms is categorized as an Upper-upscale hotel, 64 of our hotel properties with 9,831 guestrooms are categorized as Upscale hotels and 15 of our hotel properties with 1,982 guestrooms are categorized as Upper-midscale hotels. Information about our hotel properties as of June 30, 2018 is as follows:

Franchise/Brand	Number of Hotel Properties	Number of Guestrooms
Marriott
AC Hotel by Marriott	1	255
Courtyard by Marriott	15	2,760
Fairfield Inn & Suites by Marriott	1	140
Four Points by Sheraton	1	101
Marriott	1	165
Residence Inn by Marriott	9	1,294
SpringHill Suites by Marriott	6	874
Total Marriott	34	5,589
Hilton
DoubleTree by Hilton	1	210
Hampton Inn	2	240
Hampton Inn & Suites	8	1,127
Hilton Garden Inn	8	1,074
Homewood Suites	2	251
Total Hilton	21	2,902
Hyatt
Hyatt House	3	466
Hyatt Place	16	2,310
Total Hyatt	19	2,776
IHG
Holiday Inn Express	1	66
Holiday Inn Express & Suites	2	345
Hotel Indigo	1	115
Staybridge Suites	1	121
Total IHG	5	647
Carlson
Country Inn & Suites by Carlson	1	64
Total	80	11,978

Hotel Property Portfolio Activity

We continuously consider ways in which to refine our portfolio of properties to drive growth and create value.  In the normal course of business, we evaluate opportunities to acquire additional properties that meet our investment criteria and opportunities to recycle capital through the disposition of properties.  As such, the composition and size of our portfolio of properties may change materially over time.  Significant changes to our portfolio of properties would have a material effect on our Condensed Consolidated Financial Statements.

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Asset Sales

On June 29, 2018, we sold the Holiday Inn Express & Suites in Sandy, UT and the Hampton Inn in Provo, UT, for an aggregate selling price of $19.0 million. On June 29, 2018 we also sold the Holiday Inn in Duluth, GA and the Hilton Garden Inn in Duluth, GA for an aggregate selling price of $24.9 million. The sales of these four properties resulted in the realization of an aggregate net gain of $17.4 million during the three and six months ended June 30, 2018. We provided seller financing of $3.6 million, on the sale of the Holiday Inn in Duluth, GA and the Hilton Garden Inn in Duluth, GA, under two three-and-a-half-year second mortgage notes with a blended interest rate of 7.38%.

On July 24, 2018, subsequent to the three months ended June 30, 2018, we completed the sale of three hotel properties, the Hilton Garden Inn in Smyrna, TN, the Hampton Inn & Suites in Smyrna, TN, and the Hyatt Place in Phoenix, AZ for an aggregate sales price of $46.5 million.

On March 30, 2017, we completed the sale of the Hyatt Place in Atlanta, GA for $14.5 million and repaid a related mortgage loan totaling $6.5 million. The sale of this property resulted in the realization of a net gain of $4.8 million during the six months ended June 30, 2017.

On June 2, 2017, we completed the sale of the Courtyard by Marriott in El Paso, TX for $11.2 million. The sale of this property resulted in the realization of a net gain of $0.4 million during the three and six months ended June 30, 2017.

Dispositions to Affiliates of Hospitality Investors Trust, Inc. (formerly American Realty Capital Hospitality Trust, Inc.)

On June 8, 2015, we entered into multiple sales agreements with affiliates of Hospitality Investors Trust, Inc. (“HIT”) for the sale of a portfolio of hotels to HIT. The agreements were modified on various occasions between 2015 and 2017 such that we sold 23 hotels containing 2,448 guestrooms to HIT in three tranches over that time period for a combined price of approximately $325.1 million (collectively, the “HIT Sale”), as follows (dollars in thousands):

Tranche	Closing Date	Hotels Sold	Sales Price
1	October 2015	10	$	150,000
2	February 2016	6	108,300
3	April 2017	7	66,800
		23	$	325,100

In connection with the HIT Sale, Summit Hotel OP, LP (the "Operating Partnership") entered into a loan agreement with HIT, as borrower, which provided for a loan by us to HIT in the amount of $27.5 million (the “Loan”).  The proceeds of the Loan were required to be applied by HIT as follows: (i) $20.0 million was applied toward the payment of a portion of the $108.3 million purchase price for six hotels acquired in the second tranche; and (ii) the remaining $7.5 million was applied by HIT to fund the escrow deposit required for the purchase of hotels in the third tranche. We deferred $20.0 million of gain from the sale of the hotels in the second tranche as a result of the Loan structure. We recognized the deferred gain as principal payments on the Loan were received, and we recognized the final $15.0 million of gain when the Loan was paid in full on March 31, 2017.    

.

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Hotel Property Acquisitions

We did not acquire any hotel properties during the six months ended June 30, 2018. A summary of the hotel properties acquired during the six months ended June 30, 2017 is as follows (dollars in thousands):

Date Acquired	Franchise/Brand	Location	Guestrooms	Purchase Price
March 1, 2017	Homewood Suites	Aliso Viejo (Laguna Beach), CA	129	$	38,000
March 30, 2017	Hyatt Place	Phoenix (Mesa), AZ	152	22,200
May 23, 2017	Courtyard by Marriott	Fort Lauderdale, FL	261	85,000
June 9, 2017	Courtyard by Marriott	Charlotte, NC	181	56,250
June 21, 2017	Courtyard by Marriott	Fort Worth, TX	203	40,000
June 21, 2017	Courtyard by Marriott	Kansas City, MO	123	24,500
June 21, 2017	Courtyard by Marriott	Pittsburgh, PA	182	42,000
June 21, 2017	Hampton Inn & Suites	Baltimore, MD	116	18,000
June 21, 2017	Residence Inn by Marriott	Baltimore, MD	188	38,500
			1,535	$	364,450	(1)

(1) The net assets acquired totaled $367.4 million due to the purchase at settlement of $0.8 million of net working capital assets

and capitalized transaction costs of $2.1 million.

    The acquisitions closed during the six months ended June 30, 2017 were funded by advances on our $300 Million Revolver, cash generated from the sale of properties, and operating cash flows.

Recently Developed Properties

We completed the development and commenced operations of the new 168-guestroom Hyatt House Across From Orlando Universal Resort™ on June 27, 2018. The total construction cost for this hotel was $32.7 million, excluding land that we acquired in a prior-year transaction. The carrying amount for this hotel includes internal capitalized costs of $1.6 million. Total costs of $37.1 million, including the carrying amount of the land, were reclassified as Investment in Hotel Properties, net upon completion during the three months ended June 30, 2018.

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Results of Operations

The comparisons that follow should be reviewed in conjunction with the unaudited interim Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.

Comparison of the Three Months Ended June 30, 2018 with the Three Months Ended June 30, 2017

The following table contains key operating metrics for our total portfolio and our same-store portfolio for the three months ended June 30, 2018 compared with the three months ended June 30, 2017 (dollars in thousands, except ADR and RevPAR).  We define same-store hotels as properties that we owned or leased as of June 30, 2018 and that we have owned or leased at all times since January 1, 2017.

	For the Three Months Ended June 30,												Quarter-over-Quarter				Quarter-over-Quarter
	2018						2017						Dollar Change				Percentage/Basis Point Change
	Total  Portfolio (80 hotels)			Same-Store Portfolio (65 hotels)			Total  Portfolio (81 hotels)			Same-Store Portfolio (65 hotels)			Total  Portfolio (80/81 hotels)		Same-Store Portfolio (65 hotels)		Total  Portfolio (80/81 hotels)			Same-Store Portfolio (65 hotels)
Revenues:
Room	$	140,650		$	107,759		$	120,514		$	106,734		$	20,136	$	1,025	16.7	%		1.0	%
Food and beverage	6,517			4,721			5,294			4,674			1,223		47		23.1	%		1.0	%
Other	5,055			3,214			3,248			2,894			1,807		320		55.6	%		11.1	%
Total	$	152,222		$	115,694		$	129,056		$	114,302		$	23,166	$	1,392	18.0	%		1.2	%
Expenses:
Room	$	31,113		$	24,364		$	26,455		$	23,364		$	4,658	$	1,000	17.6	%		4.3	%
Food and beverage	5,107			3,529			3,909			3,352			1,198		177		30.6	%		5.3	%
Other hotel operating expenses	41,578			31,091			35,259			30,475			6,319		616		17.9	%		2.0	%
Total	$	77,798		$	58,984		$	65,623		$	57,191		$	12,175	$	1,793	18.6	%		3.1	%
Operational Statistics:
Occupancy	81.5		%	81.8		%	82.4		%	82.7		%	n/a		n/a		(93	)	bps	(90	)	bps
ADR	$	154.84		$	154.58		$	148.13		$	151.59		$	6.71	$	2.99	4.5	%		2.0	%
RevPAR	$	126.20		$	126.41		$	122.10		$	125.31		$	4.10	$	1.10	3.4	%		0.9	%

Revenue. The $23.2 million increase in total portfolio revenues for the three months ended June 30, 2018 compared to the same period of 2017 is the result of incremental revenues of $26.2 million generated as a result of the acquisition of fourteen hotels in 2017 (the “2017 Acquisitions”) and an increase in same-store revenues of $1.4 million, partially offset by a decline in revenues of $4.4 million related to properties sold after March 31, 2017.

The 3.4% increase in RevPAR for the total portfolio for the three months ended June 30, 2018 compared to the same period of 2017 is the result of an increase in same-store RevPAR of 0.9%, the purchase of higher RevPAR hotel properties with the 2017 Acquisitions, which produced an aggregate RevPAR of $132.06 for the three months ended June 30, 2018, and the sale of lower RevPAR hotels since June 30, 2017, which produced an aggregate RevPAR of $91.02 for the three months ended June 30, 2017.

Expenses. The $12.2 million increase in total portfolio expenses for thethree months ended June 30, 2018 compared to the same period of 2017 is the result of incremental expenses of $13.1 million due to the 2017 Acquisitions and an increase in same-store expenses of $1.8 million, partially offset by a decline in expenses of $2.7 million related to properties sold after March 31, 2017. The increase in total portfolio and same-store expenses for the three months ended June 30, 2018 compared to the same period of 2017 were primarily driven by increased labor costs. We anticipate that labor costs are likely to continue to grow particularly in certain markets with more supply growth or lower unemployment rates.

Property taxes, insurance and other. The increase in property taxes, insurance and other of $2.2 million for the three months ended June 30, 2018 compared to the same period of 2017 is primarily due to an increase in property taxes related to the 2017 Acquisitions.

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Management fees. The increase in management fees of $0.3 million for the three months ended June 30, 2018 compared to the same period of 2017 is primarily due to the increase in revenue from the 2017 Acquisitions.

Depreciation and amortization. Depreciation and amortization expenses increased $5.2 million, or 26.5%, in the three months ended June 30, 2018, primarily due to incremental depreciation expense associated with the 2017 Acquisitions.

Corporate, general and administrative. Corporate general and administrative expenses increased by $0.3 million, or 5.8%, during the three months ended June 30, 2018 compared with the three months ended June 30, 2017, primarily due to increases in incentive compensation costs.

Gain on disposal of assets, net. Gain on disposal of assets, net increased $1.0 million, or 6.0%, for the three months ended June 30, 2018 compared to the same period of 2017 primarily due to the sale of four hotels during the three months ended June 30, 2018 for a net gain of $17.4 million compared to the sale of eight hotels during the three months ended June 30, 2017 for a net gain of $16.4 million.

Other income, net. Other income, net increased by $2.9 million during the three months ended June 30, 2018 compared with the three months ended June 30, 2017. In April 2018, we reached a settlement related to a third-party-caused industrial disaster that occurred in a prior period and affected several of our coastal properties. As a result, we received a net recovery of $2.0 million during the three months ended June 30, 2018 that we recorded as Other income.

Comparison of the Six Months Ended June 30, 2018 with the Six Months Ended June 30, 2017

The following table contains key operating metrics for our total portfolio and our same-store portfolio for the six months ended June 30, 2018 compared with the six months ended June 30, 2017 (dollars in thousands, except ADR and RevPAR).  We define same-store hotels as properties that we owned or leased as of June 30, 2018 and that we have owned or leased at all times since January 1, 2017.

	For the Six Months Ended June 30,												Quarter-over-Quarter				Quarter-over-Quarter
	2018						2017						Dollar Change				Percentage/Basis Point Change
	Total  Portfolio (80 hotels)			Same-Store Portfolio (65 hotels)			Total  Portfolio (81 hotels)			Same-Store Portfolio (65 hotels)			Total  Portfolio (80/81 hotels)		Same-Store Portfolio (65 hotels)		Total  Portfolio (80/81 hotels)			Same-Store Portfolio (65 hotels)
Revenues:
Room	$	270,222		$	205,669		$	230,864		$	204,577		$	39,358	$	1,092	17.0	%		0.5	%
Food and beverage	12,846			9,175			10,253			9,147			2,593		28		25.3	%		0.3	%
Other	9,353			6,065			5,928			5,398			3,425		667		57.8	%		12.4	%
Total	$	292,421		$	220,909		$	247,045		$	219,122		$	45,376	$	1,787	18.4	%		0.8	%
Expenses:
Room	$	60,118		$	47,059		$	51,459		$	45,191		$	8,659	$	1,868	16.8	%		4.1	%
Food and beverage	10,106			7,009			7,833			6,812			2,273		197		29.0	%		2.9	%
Other hotel operating expenses	81,036			60,365			68,437			59,288			12,599		1,077		18.4	%		1.8	%
Total	$	151,260		$	114,433		$	127,729		$	111,291		$	23,531	$	3,142	18.4	%		2.8	%
Operational Statistics:
Occupancy	78.9		%	79.0		%	79.6		%	79.8		%	n/a		n/a		(73	)	bps	(79	)	bps
ADR	$	154.54		$	153.68		$	146.59		$	151.41		$	7.95	$	2.27	5.4	%		1.5	%
RevPAR	$	121.92		$	121.35		$	116.72		$	120.75		$	5.20	$	0.60	4.5	%		0.5	%

Revenue. The $45.4 million increase in total portfolio revenues for the six months ended June 30, 2018 compared to the same period of 2017 is the result of incremental revenues of $56.9 million generated as a result of the 2017 Acquisitions and an increase in same-store revenues of $1.8 million, partially offset by a decline in revenues of $13.3 million related to properties sold after December 31, 2016.

The 4.5% increase in RevPAR for the total portfolio for the six months ended June 30, 2018 compared to the same period of 2017 is the result of an increase in same-store RevPAR of 0.5%, the purchase of higher RevPAR hotel properties with the 2017 Acquisitions, which produced an aggregate RevPAR of $130.49 for the six months ended June 30, 2018, and the sale

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of lower RevPAR hotels since June 30, 2017, which produced an aggregate RevPAR of $89.33 for the six months ended June 30, 2017.

Expenses. The $23.5 million increase in total portfolio expenses for thesix months ended June 30, 2018 compared to the same period of 2017 is the result of incremental expenses of $28.6 million due to the 2017 Acquisitions and an increase in same-store expenses of $3.1 million, partially offset by a decline in expenses of $8.2 million related to properties sold after December 31, 2016. The increase in total portfolio and same-store expenses for the six months ended June 30, 2018 compared to the same period of 2017 were primarily driven by increased labor costs. We anticipate that labor costs are likely to continue to grow particularly in certain markets with more supply growth or lower unemployment rates.

Property taxes, insurance and other. The increase in property taxes, insurance and other of $4.8 million for the six months ended June 30, 2018 compared to the same period of 2017 is primarily due to an increase in property taxes related to the 2017 Acquisitions.

Management fees. The increase in management fees of $0.9 million for the six months ended June 30, 2018 compared to the same period of 2017 is primarily due to the increase in revenue from the 2017 Acquisitions.

Depreciation and amortization. Depreciation and amortization expenses increased $11.7 million, or 30.5%, in the six months ended June 30, 2018, primarily due to incremental depreciation expense associated with the 2017 Acquisitions.

Corporate, general and administrative. Corporate general and administrative expenses increased by $1.8 million, or 17.0%, during the six months ended June 30, 2018 compared with the six months ended June 30, 2017, primarily due to increases in stock-based compensation and incentive compensation costs. The increase in stock-based compensation expense related primarily to the modification of grants to our former CFO who retired on March 31, 2018.

Gain on disposal of assets, net. Gain on disposal of assets, net decreased $18.5 million, or 51.7%, for the six months ended June 30, 2018 compared to the same period of 2017 primarily due to the sale of four hotels during the six months ended June 30, 2018 for a net gain of $17.4 million compared to the sale of nine hotels during the six months ended June 30, 2017 for a net gain of $21.1 million and the recognition of the remaining $15.0 million of deferred gain during the six months ended June 30, 2017 related to the repayment of the HIT Loan.

Other income, net. Other income, net increased by $1.3 million during the six months ended June 30, 2018 compared with the six months ended June 30, 2017. In April 2018, we reached a settlement agreement related to a third-party-caused industrial disaster that occurred in a prior period and affected several of our coastal properties. As a result, we received a net recovery of $2.0 million during the six months ended June 30, 2018 that we recorded as Other income. This net recovery was slightly offset by declines in interest income and other miscellaneous income.

Non-GAAP Financial Measures

We disclose certain “non-GAAP financial measures,” which are measures of our historical financial performance. Non-GAAP financial measures are financial measures not prescribed by Generally Accepted Accounting Principles. These measures are as follows: (i) Funds From Operations (“FFO”) and Adjusted Funds from Operations ("AFFO"), (ii) Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA"), Earnings before Interest, Taxes, Depreciation and Amortization for Real Estate ("EBITDAre") and Adjusted EBITDAre (as described below). We caution investors that amounts presented in accordance with our definitions of non-GAAP financial measures may not be comparable to similar measures disclosed by other companies, since not all companies calculate these non-GAAP financial measures in the same manner. Our non-GAAP financial measures should be considered along with, but not as alternatives to, net income (loss) as a measure of our operating performance. Our non-GAAP financial measures may include funds that may not be available for our discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, debt service obligations and other commitments and uncertainties. Although we believe that our non-GAAP financial measures can enhance the understanding of our financial condition and results of operations, these non-GAAP financial measures are not necessarily better indicators of any trend as compared to a comparable measure prescribed by Generally Accepted Accounting Principles ("GAAP") such as net income (loss).

FFO and AFFO

As defined by the National Association of Real Estate Investment Trusts, (“Nareit”), FFO represents net income or loss (computed in accordance with GAAP), excluding preferred dividends, gains (or losses) from sales of real property, impairment losses on real estate assets, items classified by GAAP as extraordinary, the cumulative effect of changes in

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accounting principles, plus depreciation and amortization related to real estate assets, and adjustments for unconsolidated partnerships and joint ventures. AFFO represents FFO excluding amortization of deferred financing costs, franchise fees, equity-based compensation expense, debt transaction costs, premiums on redemption of preferred shares, losses from net casualties, non-cash interest income and non-cash income tax related adjustments to our deferred tax asset. Unless otherwise indicated, we present FFO and AFFO applicable to our common shares and common units. We present FFO and AFFO because we consider FFO and AFFO an important supplemental measure of our operational performance and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO and AFFO when reporting their results. FFO and AFFO are intended to exclude GAAP historical cost depreciation and amortization, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO and AFFO exclude depreciation and amortization related to real estate assets, gains and losses from real property dispositions and impairment losses on real estate assets, FFO and AFFO provide performance measures that, when compared year over year, reflect the effect to operations from trends in occupancy, guestroom rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income. Our computation of FFO differs slightly from the computation of Nareit-defined FFO related to the reporting of corporate depreciation and amortization expense. Our computation of FFO may also differ from the methodology for calculating FFO used by other equity REITs and, accordingly, may not be comparable to such other REITs. FFO and AFFO should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) as an indicator of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions.  Where indicated in this Quarterly Report on Form 10-Q, FFO is based on our computation of FFO and not the computation of Nareit-defined FFO unless otherwise noted.

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The following is a reconciliation of our GAAP net income to FFO and AFFO for the three and six months ended June 30, 2018 and 2017 (in thousands, except per share/unit amounts): 

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Net income	$	37,677		$	34,083		$	47,368		$	67,289
Preferred dividends	(3,709		)	(4,200		)	(9,252		)	(8,400		)
Premium on redemption of preferred stock	—			—			(3,277		)	—
Net income applicable to common shares and common units	33,968			29,883			34,839			58,889
Real estate-related depreciation	24,835			19,642			49,958			38,282
Amortization of lease-related intangible assets, net	181			—			362			—
Gain on disposal of assets, net	(17,331		)	(16,350		)	(17,288		)	(35,806		)
FFO applicable to common shares and common units	41,653			33,175			67,871			61,365
Amortization of deferred financing costs	504			496			998			1,014
Amortization of franchise fees	119			90			242			176
Equity-based compensation	1,821			1,864			4,048			2,994
Hotel property acquisition costs	—			—			—			354
Debt transaction costs	129			3			217			157
Premium on redemption of preferred stock	—			—			3,277			—
Non-cash interest income	(502		)	—			(1,011		)	—
Casualty (recoveries) losses, net	(2,286		)	165			(2,068		)	(101		)
AFFO applicable to common shares and common units	$	41,438		$	35,793		$	73,574		$	65,959
Weighted average diluted common shares/common units (1)	104,273			99,079			104,360			96,366
FFO per common share/common unit	$	0.40		$	0.33		$	0.65		$	0.64
AFFO per common share/common unit	$	0.40		$	0.36		$	0.71		$	0.68

(1) Includes common units in the Operating Partnership held by limited partners (other than us and our subsidiaries) because the common units are redeemable for cash or, at our election, shares of our common stock.

EBITDA, EBITDAre and Adjusted EBITDAre

EBITDA

EBITDA represents net income or loss, excluding: (i) interest, (ii) income tax expense and (iii) depreciation and amortization. We believe EBITDA is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results. Our management team also uses EBITDA as one measure in determining the value of acquisitions and dispositions.

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EBITDAre and Adjusted EBITDAre

In September 2017, Nareit proposed a standardized performance measure, called EBITDAre, which is based on EBITDA and is expected to provide additional relevant information about REITs as real estate companies in support of growing interest among generalist investors. The conclusion was reached that, while dedicated REIT investors have long been accustomed to utilizing the industry’s supplemental measures such as FFO and net operating income (“NOI”) to evaluate the investment quality of REITs as real estate companies, it would be helpful to generalist investors for REITs as real estate companies to also present EBITDAre as a more widely known and understood supplemental measure of performance. EBITDAre is intended to be a supplemental non-GAAP performance measure that is independent of a company’s capital structure and will provide a uniform basis to measure the enterprise value of a company compared to other REITs.

Nareit recommended that companies report EBITDAre in all financial reports for periods beginning after December 31, 2017. We have adopted Nareit’s presentation of EBITDAre for this Quarterly Report on Form 10-Q for the three and six months ended June 30, 2018.

EBITDAre, as defined by Nareit, is calculated as EBITDA, excluding: (i) loss and gains on disposition of property and (ii) asset impairments, if any. We believe EBITDAre is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results.

We make additional adjustments to EBITDAre when evaluating our performance because we believe that the exclusion of certain additional non-recurring or unusual items described below provides useful supplemental information to investors regarding our ongoing operating performance. We believe that the presentation of Adjusted EBITDAre, when combined with the primary GAAP presentation of net income, is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results.

The following is a reconciliation of our GAAP net income to EBITDA, EBITDAre and Adjusted EBITDAre for the three and six months ended June 30, 2018 and 2017 (in thousands):

	For the  Three Months Ended June 30,						For the  Six Months Ended June 30,
	2018			2017			2018			2017
Net income	$	37,677		$	34,083		$	47,368		$	67,289
Depreciation and amortization	24,954			19,732			50,200			38,458
Amortization of lease-related intangible assets, net	181			—			362			—
Interest expense	10,402			6,927			19,731			13,718
Interest income	(42		)	(65		)	(69		)	(69		)
Income tax expense	152			423			412			844
EBITDA	73,324			61,100			118,004			120,240
Gain on disposal of assets, net	(17,331		)	(16,350		)	(17,288		)	(35,806		)
EBITDAre	55,993			44,750			100,716			84,434
Equity-based compensation	1,821			1,864			4,048			2,994
Hotel property acquisition costs	—			—			—			354
Debt transaction costs	129			3			217			157
Non-cash interest income	(502		)	—			(1,011		)	—
Casualty (recoveries) losses, net	(2,286		)	165			(2,068		)	(101		)
Adjusted EBITDAre	$	55,155		$	46,782		$	101,902		$	87,838

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Liquidity and Capital Resources

Liquidity Requirements

Our short-term liquidity requirements consist primarily of operating expenses and other expenditures directly associated with our hotel properties, recurring maintenance and capital expenditures necessary to maintain our hotel properties in accordance with internal and brand standards, capital expenditures to improve our hotel properties, hotel development costs, acquisitions, interest expense, settlement of interest rate swaps, scheduled principal payments on outstanding indebtedness, restricted cash funding obligations, mezzanine loan funding commitments, and distributions to our stockholders. Our long-term liquidity requirements consist primarily of the costs of acquiring additional hotel properties, renovations and other non-recurring capital expenditures that periodically are made with respect to our hotel properties and scheduled debt payments, including maturing loans.

To satisfy the requirements for qualification as a REIT, we must meet a number of organizational and operational requirements, including that we distribute annually at least 90% of our REIT taxable income to our stockholders, determined without regard to the deduction for dividends paid and excluding any net capital gains. We intend to distribute a sufficient amount of our taxable income to maintain our status as a REIT and to avoid tax on undistributed income. Therefore, if sufficient funds are not available to us from hotel dispositions, our 2016 Unsecured Credit Facility and additional mortgage and other loans, we will need to raise capital to grow our business and invest in additional hotel properties.

We expect to satisfy our liquidity requirements with cash provided by operations, working capital, short-term borrowings under our 2016 Unsecured Credit Facility, borrowings of term debt, repayment of notes receivable, the strategic sale of hotels and the release of restricted cash upon satisfaction of certain requirements. In addition, we may fund the purchase price of hotel acquisitions, hotel development costs, and cost of required capital improvements by borrowing under our 2016 Unsecured Credit Facility, assuming mortgage debt from the seller on acquired hotels, issuing securities (including common units issued by our Operating Partnership), or incurring mortgage or other types of debt. Further, we may seek to meet our liquidity requirements by raising capital through public or private offerings of our equity or debt securities. However, certain factors may have an adverse effect on our ability to access these capital sources, including our degree of leverage, the value of our unencumbered hotel properties, borrowing restrictions imposed by lenders, volatility in the equity and debt capital markets and other market conditions. We will continue to analyze which sources of capital are most advantageous to us at any particular point in time, but financing may not be consistently available to us on terms that are attractive, or at all. We believe that our cash provided by operations, working capital, borrowings available under our various credit facilities and other sources of funds available to us will be sufficient to meet our ongoing liquidity requirements for at least the next 12 months.

On February 15, 2018, 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 new $225.0 million unsecured term loan (the “2018 Term Loan”).  The 2018 Term Loan has an accordion feature that allows us to increase the total commitments by $150.0 million prior to the maturity date of February 14, 2025, subject to certain conditions, and a delayed draw feature that allows us to delay principal advances until May 16, 2018, at no additional cost.  At closing, we drew $140.0 million of the $225.0 million available under the 2018 Term Loan and used the proceeds to pay off and replace the 2015 Term Loan (as defined in "Note 4 - Debt" to the Condensed Consolidated Financial Statements). On May 16, 2018, we drew the remaining $85.0 million available under the 2018 Term Loan and used the proceeds to pay down The $300 Million Revolver. See "Note 4 - Debt" to the Condensed Consolidated Financial Statements for additional information.

At June 30, 2018, we have scheduled debt principal amortization payments during the next 12 months totaling $7.0 million and debt maturities during the next 12 months totaling $106.2 million. Although we believe we will have the capacity to satisfy these debt maturities and pay these scheduled principal debt payments or that we will be able to fund them using draws under our $300 Million Revolver, there can be no assurances that our credit facility will be available to repay such amortizing debt as draws under our credit facility are subject to meeting certain financial covenants. At June 30, 2018, we were in compliance with all of our covenants under the 2016 Unsecured Credit Facility.

On April 2, 2018, we repaid four mortgage loans with Western Alliance Bank totaling $23.9 million. There were no prepayment penalties associated with the repayment of these loans.

We anticipate investing capital into our hotel properties pursuant to property improvement plans required by our franchisors and our own internal quality standards. We expect capital expenditures through the remainder of 2018 to be in the range of $25.0 million to $35.0 million.  Actual amounts may differ from our expectations.  We may also make renovations and incur other non-recurring capital expenditures in 2018 at hotel properties that we acquire in the future. For the six months ended June 30, 2018, we invested $30.6 million of capital into our hotels.

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We are a mezzanine lender on three construction loans to fund up to an aggregate of $29.6 million for the development of three hotel properties. The three real estate loans closed in the fourth quarter of 2017 and each has a stated interest rate of 8.0% and an initial term of approximately three years.  As of June 30, 2018, we have funded the full amount of $29.6 million.

Cash Flows

	For the Six Months Ended June 30,
	2018			2017			Change
	(in thousands)
Net cash provided by operating activities	$	84,414		$	70,093		$	14,321
Net cash used in investing activities	(14,986		)	(277,515		)	262,529
Net cash (used in) provided by financing activities	(54,071		)	203,226			(257,297		)
Net change in cash, cash equivalents and restricted cash	$	15,357		$	(4,196	)	$	19,553

The increase in net cash provided by operating activities of $14.3 million for the six months ended June 30, 2018 compared with the six months ended June 30, 2017 primarily resulted from an increase in net income, after adjusting for non-cash items, of $11.0 million and changes in net working capital of $3.3 million due to timing.

The decrease in net cash used in investing activities of $262.5 million for the six months ended June 30, 2018 compared with the six months ended June 30, 2017 is primarily due to a reduction in acquisitions of hotel properties of $367.1 million, partially offset by a decrease in receipts of principal payments on real estate loans of $22.5 million, a decrease in proceeds from asset dispositions of $51.5 million, an increase in the funding of real estate loans of $15.2 million, an increase in capital expenditures of $16.7 million and an increase in hotel development costs of $1.0 million.

The decrease in net cash from financing activities of $257.3 million for the six months ended June 30, 2018 compared with the six months ended June 30, 2017 is primarily due to the redemption of preferred shares of $85.0 million during the six months ended June 30, 2018, a decrease in proceeds from common stock offerings of $163.8 million and an increase in dividends of $6.0 million, partially offset by an increase in net borrowings of $0.9 million.

Outstanding Indebtedness

At June 30, 2018, we had $310.8 million in outstanding indebtedness secured by first priority mortgage liens on 29 hotel properties. We also had borrowed $195.0 million on our 2016 Unsecured Credit Facility, which included borrowings of $150.0 million on our $150 Million Term Loan and $45.0 million on our $300 Million Revolver (each as defined in "Note 4 - Debt" to the Condensed Consolidated Financial Statements). We also had $225.0 million drawn on our 2017 Term Loan (as defined in "Note 4 - Debt" to the Condensed Consolidated Financial Statements), and $225.0 million on our 2018 Term Loan (as defined above), each of which were supported at June 30, 2018 by a borrowing base of 51 unencumbered hotel properties. At June 30, 2018, the maximum amount of borrowing permitted under the 2016 Unsecured Credit Facility was $450.0 million, of which we had borrowed $195.0 million and $255.0 million was available to borrow. See "Note 4 - Debt" to the Condensed Consolidated Financial Statements for additional information.

At July 20, 2018, we had borrowed $185.0 million on our 2016 Unsecured Credit Facility, which included borrowings of $150.0 million on our $150 Million Term Loan and $35.0 million on our $300 Million Revolver. Additionally, we had $225.0 million outstanding on our 2017 Term Loan and $225.0 million outstanding on our 2018 Term Loan. Each of the credit facilities were supported by the 51 hotel properties included in the credit facility borrowing base. 

On February 15, 2018, our Operating Partnership, as borrower, the Company, as parent guarantor, and each party executing term loan documentation as a subsidiary guarantor, entered into the 2018 Term Loan.  The 2018 Term Loan has an accordion feature that allows us to increase the total commitments by $150.0 million prior to the maturity date of February 14, 2025, subject to certain conditions, and a delayed draw feature that allows us to delay principal advances until May 16, 2018, at no additional cost.  At closing, we drew $140.0 million of the $225.0 million available under the 2018 Term Loan and used the proceeds to pay off and replace the 2015 Term Loan (as defined in "Note 4 - Debt" to the Condensed Consolidated Financial Statements). On May 16, 2018, we drew the remaining $85.0 million available under the 2018 Term Loan and used the proceeds to pay down the $300 Million Revolver.    

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We intend to secure or assume term loan financing or use our $300 Million Revolver, together with other sources of financing, for use in funding future acquisitions, hotel development costs, and capital improvements. We may not succeed in obtaining new financing on favorable terms, or at all, and we cannot predict the size or terms of future financings. Our failure to obtain new financing could adversely affect our ability to grow our business.

We intend to maintain a prudent capital structure and, while the ratio will vary from time to time, we generally intend to limit our ratio of indebtedness to EBITDA to no more than 6.5x. For purposes of calculating this ratio, we exclude preferred stock from indebtedness.

We have obtained financing through debt instruments having staggered maturities and intend to continue to do so in the future. Our debt includes, and may include in the future, debt secured by first priority mortgage liens on certain hotel properties and unsecured debt. We believe that we will have adequate liquidity to meet the requirements for scheduled maturities and principal repayments. However, we can provide no assurance that we will be able to refinance our indebtedness as it becomes due and, if refinanced, whether such refinancing will be available on favorable terms.

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A summary of our gross debt at June 30, 2018 is as follows (dollars in thousands):

Lender	Interest Rate			Amortization Period (Years)	Maturity Date	Number of Encumbered  Properties			Principal Amount Outstanding
$450 Million Senior Unsecured Credit Facility
Deutsche Bank AG New York Branch
$300 Million Revolver	3.89% Variable			n/a	March 31, 2020	n/a			$	45,000
$150 Million Term Loan	3.82% Variable	(1	)	n/a	March 31, 2021	n/a			150,000
Total Senior Unsecured Credit Facility									195,000
Unsecured Term Loan
KeyBank National Association, as Administrative Agent
Term Loan	3.84% Variable			n/a	November 25, 2022	n/a			225,000
KeyBank National Association, as Administrative Agent
Term Loan	4.14% Variable			n/a	February, 14, 2025	n/a			225,000
Secured Mortgage Indebtedness
Voya (formerly ING Life Insurance and Annuity)	5.18% Fixed			20	March 1, 2019	2	(2	)	39,333
	5.18% Fixed			20	March 1, 2019	3	(2	)	31,531
	5.18% Fixed			20	March 1, 2019	2	(2	)	22,736
	5.18% Fixed			20	March 1, 2019	1	(2	)	15,406
MetaBank	4.44% Fixed			25	July 1, 2027	3			47,640
KeyBank National Association	4.46% Fixed			30	February 1, 2023	4			26,644
	4.52% Fixed			30	April 1, 2023	3			20,662
	4.30% Fixed			30	April 1, 2023	4			19,995
	4.95% Fixed			30	August 1, 2023	2			35,754
Western Alliance Bank (formerly GE Capital Financial, Inc.)	5.39% Fixed			25	April 1, 2020	—			—		(4	)
	5.39% Fixed			25	April 1, 2020	—			—		(4	)
Bank of the Cascades	4.09% Variable			25	December 19, 2024	1	(3	)	8,890
	4.30% Fixed			25	December 19, 2024	—	(3	)	8,890
Compass Bank	4.49% Variable			25	May 6, 2020	3			22,462
Western Alliance Bank (formerly General Electric Capital Corp.)	5.39% Fixed			25	April 1, 2020	—			—		(4	)
	5.39% Fixed			25	April 1, 2020	—			—		(4	)
U.S. Bank, NA	6.13% Fixed			25	November 11, 2021	1			10,870
Total Mortgage Loans									310,813
Total Debt						29			$	955,813

(1) Our interest rate swap fixed a portion of the interest rate on this loan. See "Note 5 - Derivative Financial Instruments and Hedging" to the Condensed Consolidated Financial Statements.

(2) The four Voya mortgage loans are cross-defaulted and cross-collateralized. The four loans were modified on April 27, 2018 resulting in reallocation of principal balances between the loans and release of the mortgage on one property.

(3) The Bank of Cascades mortgage loans are secured by the same collateral and cross-defaulted.

(4) The four Western Alliance Bank loans were paid in full on April 2, 2018.

Equity Transactions

On January 1, 2018, the performance-based restricted stock awards granted on March 3, 2015 vested.  Based on our percentile ranking within the SNL U.S. REIT Hotel Index for the measurement period, the executive officers earned twice the number of shares granted. The executive officers were also entitled to dividends as if the additional shares had been outstanding throughout the measurement period. As a result of this vesting, we issued a total of 309,010 shares to our executive officers and paid dividends totaling $0.5 million.

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On March 20, 2018, the Company paid $85.3 million to redeem all 3,400,000 shares of its outstanding Series C preferred stock at a redemption price of $25 per share plus accrued and unpaid dividends.

The Company's former Chief Financial Officer retired on March 31, 2018. In connection with his retirement, the Company recorded $1.0 million of additional stock-based compensation expense during the six months ended June 30, 2018 related to the modification of certain stock award agreements.

Capital Expenditures

During the six months ended June 30, 2018, we funded $30.6 million in capital expenditures.  We anticipate spending an estimated $25.0 million to $35.0 million on capital expenditures in the remainder of 2018. We also incurred $10.8 million of hotel development costs related to the construction of the newly opened 168-guestroom Hyatt House Across From Orlando Universal Resort™ in Orlando, FL. We expect to fund these expenditures through a combination of cash provided by operations, working capital, borrowings under our $300 Million Revolver, or other potential sources of capital, to the extent available to us.

Contractual Obligations

The following table outlines the timing of required payments related to our long-term debt and other contractual obligations at June 30, 2018 (dollars in thousands):

	Payments Due By Period
	Total		Less than One Year		One to Three Years		Four to Five Years		More than Five Years
Debt obligations (1)	$	955,813	$	113,161	$	235,591	$	224,643	$	382,418
Currently projected interest (2)	205,175		39,056		73,327		52,907		39,885
Operating lease obligations (3)	86,801		1,807		3,751		3,279		77,964
Purchase obligations (4)	13,826		13,826		—		—		—
Total	$	1,261,615	$	167,850	$	312,669	$	280,829	$	500,267

(1) Amounts shown include amortization of principal and debt maturities.

(2) Interest payments on our variable rate debt have been estimated using the interest rates in effect at June 30, 2018, after giving effect to our interest rate swaps.

(3) Amounts consist primarily of non-cancelable ground lease and corporate office lease obligations.

(4) This amount represents purchase orders and executed contracts for development or renovation projects at our hotel properties.

Critical Accounting Policies

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): 

Recognition and Measurement of Financial Assets and Financial Liabilities, which enhances the reporting requirements for the measurement of financial instruments and requires equity securities to be measured at fair value with changes in the fair value recognized through net income for the period. We adopted ASU No. 2016-01 for our fiscal year commencing on January 1, 2018. The adoption of ASU No. 2016-01 did not have a material effect on our consolidated financial position or our results of operations.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which changes lessee accounting to reflect the financial liability and right-of-use assets that are inherent to leasing an asset on the balance sheet. ASU No. 2016-02 is effective for our fiscal year commencing on January 1, 2019, but early adoption is permitted. We anticipate that we will adopt ASU No. 2016-02 for our fiscal year commencing on January 1, 2019. We expect to apply the modified retrospective approach such that we will account for leases that commenced before the effective date of ASU No. 2016-02 in accordance with previous GAAP unless the lease is modified, except we will recognize right-of-use assets and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. We are currently in the process of analyzing our leases. As such, we do not expect the adoption of ASU No. 2016-02 to have a material impact on our consolidated financial statements except for recognition of the right-of-use assets and related lease liability accounts on the consolidated balance sheet.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses the Statement of Cash Flow classification and presentation of certain cash

46

transactions. We adopted ASU No. 2016-15 for our fiscal year commencing on January 1, 2018. The effect of this amendment has been applied retrospectively. The adoption of ASU No. 2016-15 did not have a material effect on our consolidated financial position or our results of operations.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which clarifies how companies should present restricted cash and restricted cash equivalents in the statement of cash flows. This guidance requires companies to show the changes in the total of cash, cash equivalents and restricted cash in the statement of cash flows. We retrospectively adopted ASU No. 2016-18 for our fiscal year commencing on January 1, 2018. The adoption of ASU No. 2016-18 did not have a material effect on our consolidated financial position or our results of operations.

In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in accordance with ASC No. 718, Compensation - Stock Compensation. We adopted ASC No. 2017-09 for our fiscal year commencing on January 1, 2018. This guidance is to be applied prospectively to an award modified on or after the adoption date. We applied the requirements of ASU No. 2017-09 to the modification of certain stock awards as described in "Note 9 - Equity-Based Compensation".

For other critical accounting policies, see "Note 2 - Summary of Significant Accounting Policies" to the Condensed Consolidated Financial Statements.

47

Item 3.Quantitative and Qualitative Disclosures about Market Risk.

Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market-sensitive instruments. In pursuing our business strategies, the primary market risk to which we are exposed is interest rate risk. Our primary interest rate exposure is to 30-day LIBOR. We primarily use derivative financial instruments to manage interest rate risk.

AtJune 30, 2018, we were party to five interest rate derivative agreements pursuant to which we receive variable-rate payments in exchange for making fixed-rate payments (dollars in thousands): 

			Notional Amount
Contract date	Effective Date	Expiration Date	June 30, 2018
September 5, 2013	January 2, 2014	October 1, 2018	$	75,000
October 2, 2017	January 29, 2018	January 31, 2023	100,000
October 2, 2017	January 29, 2018	January 31, 2023	100,000
June 11, 2018	September 28, 2018	September 30, 2024	75,000
June 11, 2018	December 31, 2018	December 31, 2025	125,000
			$	475,000

The termination value of the two derivatives in a liability position was $1.3 million at June 30, 2018.

At June 30, 2018, considering our interest rate derivative agreements that are currently effective, $554.5 million, or 58.0%, of our debt had fixed interest rates and $401.4 million, or 42.0%, had variable interest rates.  At December 31, 2017, after giving effect to our interest rate derivative agreements, $386.3 million, or 44.2%, of our debt had fixed interest rates and $486.8 million, or 55.8%, had variable interest rates. Assuming no increase in the level of our variable rate debt outstanding at June 30, 2018 and after consideration of expiring and newly effective interest rate swaps during the remainder of 2018, if interest rates increased by 1.0%, then our interest cost would increase by approximately $2.8 million per year.

As our fixed-rate debts mature, they will become subject to interest rate risk. In addition, as our variable-rate debts mature, lenders may impose interest rate floors on new financing arrangements because of the low interest rates experienced during the past few years. At June 30, 2018, we have scheduled debt principal amortization payments during the next 12 months totaling $7.0 million and debt maturities during the next 12 months totaling $106.2 million.

Item 4.Controls and Procedures.

Controls and Procedures

Disclosure Controls and Procedures

Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of June 30, 2018. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of June 30, 2018, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the three month period covered by this Quarterly Report on Form 10-Q, which were identified in connection with management’s evaluation required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

48

PART II — OTHER INFORMATION

Item 1.Legal Proceedings.

We are involved from time to time in litigation arising in the ordinary course of business; however, there are currently no pending legal actions that we believe would have a material adverse effect on our financial position or results of operations.

Item 1A.Risk Factors.

There have been no material changes from the risk factors disclosed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2017.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

None.    

Item 3.Defaults Upon Senior Securities.

None.

Item 4.Mine Safety Disclosures.

Not applicable.

Item 5.Other Information.

None.

49

Item 6.Exhibits.

The following exhibits are filed as part of this report:

Exhibit
Number	Description of Exhibit
31.1†	Certification of Chief Executive Officer of Summit Hotel Properties, Inc. pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2†	Certification of Chief Financial Officer of Summit Hotel Properties, Inc. pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1††	Certification of Chief Executive Officer of Summit Hotel Properties, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2††	Certification of Chief Financial Officer of Summit Hotel Properties, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document (1)
101.SCH	XBRL Taxonomy Extension Schema Document (1)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document (1)
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document (1)
101.PRE	XBRL Taxonomy Presentation Linkbase Document (1)

† - Filed herewith

†† - Furnished herewith

(1) - Submitted electronically herewith

50

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SUMMIT HOTEL PROPERTIES, INC. (registrant)
Date: August 1, 2018	By:	/s/ Jonathan P. Stanner
		Jonathan P. Stanner Executive Vice President, Chief Financial Officer and Treasurer (principal financial officer)

51

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Daniel P. Hansen, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Summit Hotel Properties, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statement for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by the report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 1, 2018	/s/ Daniel P. Hansen
	Daniel P. Hansen
	Chairman of the Board of Directors,
	President and Chief Executive Officer
	(principal executive officer)

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Jonathan P. Stanner, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Summit Hotel Properties, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statement for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by the report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 1, 2018		/s/ Jonathan P. Stanner
	Jonathan P. Stanner
	Executive Vice President, Chief Financial Officer and Treasurer
	(principal financial officer)

EX-32.1

Exhibit 32.1

Certification Pursuant To

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of The Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Summit Hotel Properties, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel P. Hansen, Chairman of the Board of Directors, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 1, 2018	/s/ Daniel P. Hansen
	Daniel P. Hansen Chairman of the Board of Directors, President and Chief Executive Officer (principal executive officer)

EX-32.2

Exhibit 32.2

Certification Pursuant To

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of The Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Summit Hotel Properties, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jonathan P. Stanner, Executive Vice President, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 1, 2018		/s/ Jonathan P. Stanner
	Jonathan P. Stanner Executive Vice President, Chief Financial Officer and Treasurer  (principal financial officer)

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Jul. 20, 2018
Document and Entity Information
Entity Registrant Name	Summit Hotel Properties, Inc.
Entity Central Index Key	0001497645
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		104,744,101

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
ASSETS
Investment in hotel properties, net	$ 2,014,587	$ 2,059,492
Investment in hotel properties under development	0	23,793
Land held for development	2,942	2,942
Assets held for sale, net	37,878	1,193
Investment in real estate loans, net	28,945	12,356
Cash and cash equivalents	48,885	36,545
Restricted cash	32,479	29,462
Trade receivables, net	20,916	16,985
Prepaid expenses and other	7,371	9,454
Deferred charges, net	4,782	5,221
Other assets	17,483	12,431
Total assets	2,216,268	2,209,874
Liabilities:
Debt, net of debt issuance costs	950,497	868,236
Accounts payable	6,224	7,774
Accrued expenses and other	61,491	56,488
Total liabilities	1,018,212	932,498
Commitments and contingencies (Note 8)
Preferred stock, $0.01 par value per share, 100,000,000 shares authorized:
Common stock, $0.01 par value per share, 500,000,000 shares authorized, 104,744,101 and 104,287,128 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively	1,047	1,043
Additional paid-in capital	1,182,398	1,262,679
Accumulated other comprehensive income	5,545	1,451
Retained earnings	6,310	9,201
Total stockholders’ equity	1,195,394	1,274,502
Non-controlling interests in operating partnership	2,662	2,874
Total equity	1,198,056	1,277,376
Total liabilities and equity	2,216,268	2,209,874
7.125% Series C Preferred Stock
Preferred stock, $0.01 par value per share, 100,000,000 shares authorized:
Preferred stock	0	34
6.45% Series D Preferred Stock
Preferred stock, $0.01 par value per share, 100,000,000 shares authorized:
Preferred stock	30	30
6.25% Series E Preferred Stock
Preferred stock, $0.01 par value per share, 100,000,000 shares authorized:
Preferred stock	$ 64	$ 64

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	100,000,000	100,000,000
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	104,744,101	104,287,128
Common stock, shares outstanding	104,744,101	104,287,128
7.125% Series C Preferred Stock
Preferred stock, shares issued		3,400,000
Preferred stock, shares outstanding		3,400,000
Preferred stock, aggregate liquidation preference (in dollars)		$ 85,522
Preferred stock, dividend rate		7.125%
6.45% Series D Preferred Stock
Preferred stock, shares authorized	3,000,000
Preferred stock, shares issued	3,000,000	3,000,000
Preferred stock, shares outstanding	3,000,000	3,000,000
Preferred stock, aggregate liquidation preference (in dollars)	$ 75,403	$ 75,417
Preferred stock, dividend rate	6.45%	6.45%
6.25% Series E Preferred Stock
Preferred stock, shares authorized	6,400,000
Preferred stock, shares issued	6,400,000	6,400,000
Preferred stock, shares outstanding	6,400,000	6,400,000
Preferred stock, aggregate liquidation preference (in dollars)	$ 160,833	$ 160,861
Preferred stock, dividend rate	6.25%	6.25%

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Revenues:
Room	$ 140,650	$ 120,514	$ 270,222	$ 230,864
Food and beverage	6,517	5,294	12,846	10,253
Other	5,055	3,248	9,353	5,928
Total revenues	152,222	129,056	292,421	247,045
Expenses:
Room	31,113	26,455	60,118	51,459
Food and beverage	5,107	3,909	10,106	7,833
Other hotel operating expenses	41,578	35,259	81,036	68,437
Property taxes, insurance and other	11,032	8,813	22,030	17,182
Management fees	5,388	5,063	10,740	9,792
Depreciation and amortization	24,954	19,732	50,200	38,458
Corporate general and administrative	5,620	5,310	12,227	10,448
Hotel property acquisition costs	0	0	0	354
Total expenses	124,792	104,541	246,457	203,963
Operating income	27,430	24,515	45,964	43,082
Other income (expense):
Interest expense	(10,402)	(6,927)	(19,731)	(13,718)
Gain on disposal of assets, net	17,331	16,350	17,288	35,806
Other income, net	3,470	568	4,259	2,963
Total other income	10,399	9,991	1,816	25,051
Income from continuing operations before income taxes	37,829	34,506	47,780	68,133
Income tax expense (Note 10)	(152)	(423)	(412)	(844)
Net income	37,677	34,083	47,368	67,289
Non-controlling interest in Operating Partnership	(101)	(114)	(104)	(234)
Net income attributable to Summit Hotel Properties, Inc.	37,576	33,969	47,264	67,055
Preferred dividends	(3,709)	(4,200)	(9,252)	(8,400)
Premium on redemption of preferred stock	0	0	(3,277)	0
Net income attributable to common stockholders	$ 33,867	$ 29,769	$ 34,735	$ 58,655
Earnings per share:
Basic (in dollars per share)	$ 0.33	$ 0.30	$ 0.33	$ 0.61
Diluted (in dollars per share)	$ 0.32	$ 0.30	$ 0.33	$ 0.61
Weighted average common shares outstanding:
Basic (in Shares)	103,643	98,184	103,572	95,488
Diluted (in Shares)	103,883	98,706	103,892	95,983

XML

Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Statement of Comprehensive Income [Abstract]
Net income	$ 37,677	$ 34,083	$ 47,368	$ 67,289
Other comprehensive income, net of tax:
Changes in fair value of derivative financial instruments	362	174	4,106	523
Comprehensive income	38,039	34,257	51,474	67,812
Comprehensive income attributable to non-controlling interests:
Less - Comprehensive income attributable to non-controlling interest in Operating Partnership	(101)	(115)	(116)	(236)
Comprehensive income attributable to Summit Hotel Properties, Inc.	37,938	34,142	51,358	67,576
Preferred dividends	(3,709)	(4,200)	(9,252)	(8,400)
Premium on redemption of preferred stock	0	0	(3,277)	0
Comprehensive income attributable to common stockholders	$ 34,229	$ 29,942	$ 38,829	$ 59,176

XML

Condensed Consolidated Statements of Changes in Equity (Unaudited) - USD ($) $ in Thousands	Total	Preferred Stock	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income (Loss)	Retained Earnings (Deficit) and Distributions	Total Stockholders’ Equity	Non-controlling Interests in Operating Partnership
Balance at beginning of year at Dec. 31, 2016	$ 1,013,470	$ 94	$ 935	$ 1,011,412	$ (977)	$ (1,422)	$ 1,010,042	$ 3,428
Balance (in shares) at Dec. 31, 2016		9,400,000	93,525,469
Changes in equity
Net proceeds from sale of common stock	$ 163,670		$ 104	163,566			163,670
Net proceeds from sale of common stock (in shares)	10,350,000		10,350,000
Common stock redemption of common units				268			268	(268)
Common stock redemption of common units (in shares)	30,657		30,657
Dividends	$ (41,441)					(41,315)	(41,315)	(126)
Equity-based compensation	2,994		$ 4	2,978			2,982	12
Equity-based compensation (in shares)			391,792
Shares acquired for employee withholding requirements	$ (961)		$ (1)	(960)			(961)
Shares acquired for employee withholding requirements (in shares)	(59,111)		(59,111)
Other comprehensive income	$ 523				521		521	2
Net income	67,289					67,055	67,055	234
Balance at end of year at Jun. 30, 2017	1,205,544	$ 94	$ 1,042	1,177,264	(456)	24,318	1,202,262	3,282
Balance (in shares) at Jun. 30, 2017		9,400,000	104,238,807
Balance at beginning of year at Dec. 31, 2017	$ 1,277,376	$ 128	$ 1,043	1,262,679	1,451	9,201	1,274,502	2,874
Balance (in shares) at Dec. 31, 2017		12,800,000	104,287,128
Changes in equity
Net proceeds from sale of common stock (in shares)	0
Redemption of preferred stock	$ (85,000)	$ (34)		(81,689)		(3,277)	(85,000)
Redemption of preferred stock (in shares)		(3,400,000)
Common stock redemption of common units				227			227	(227)
Common stock redemption of common units (in shares)	25,839		25,839
Dividends	$ (46,991)					(46,878)	(46,878)	(113)
Equity-based compensation	4,048		$ 6	4,030			4,036	12
Equity-based compensation (in shares)			618,984
Shares acquired for employee withholding requirements	$ (2,724)		$ (2)	(2,722)			(2,724)
Shares acquired for employee withholding requirements (in shares)	(187,850)		(187,850)
Other	$ (127)			(127)			(127)
Other comprehensive income	4,106				4,094		4,094	12
Net income	47,368					47,264	47,264	104
Balance at end of year at Jun. 30, 2018	$ 1,198,056	$ 94	$ 1,047	$ 1,182,398	$ 5,545	$ 6,310	$ 1,195,394	$ 2,662
Balance (in shares) at Jun. 30, 2018		9,400,000	104,744,101

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
OPERATING ACTIVITIES
Net income	$ 47,368	$ 67,289
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	50,200	38,458
Amortization of deferred financing costs	998	1,014
Equity-based compensation	4,048	2,994
Realization of deferred gain	0	(15,000)
Gain on disposal of assets, net	(17,288)	(20,806)
Other	(408)	8
Changes in operating assets and liabilities:
Trade receivables, net	(4,057)	(6,132)
Prepaid expenses and other	1,545	595
Accounts payable	(33)	(156)
Accrued expenses and other	2,041	1,829
NET CASH PROVIDED BY OPERATING ACTIVITIES	84,414	70,093
INVESTING ACTIVITIES
Acquisitions of hotel properties	0	(367,135)
Investment in hotel properties under development	(10,828)	(9,865)
Improvements to hotel properties	(30,648)	(13,953)
Proceeds from asset dispositions, net of closing costs	41,735	93,272
Funding of real estate loans	(15,245)	0
Proceeds from collection of real estate loans	0	22,506
Increase in escrow deposits for acquisitions	0	(2,340)
NET CASH USED IN INVESTING ACTIVITIES	(14,986)	(277,515)
FINANCING ACTIVITIES
Proceeds from issuance of debt	420,000	260,000
Principal payments on debt	(337,297)	(178,178)
Proceeds from equity offerings, net of issuance costs	0	163,834
Redemption of preferred stock	(85,000)	0
Dividends paid	(47,265)	(41,270)
Financing fees on debt and other issuance costs	(1,785)	(199)
Repurchase of common shares for withholding requirements	(2,724)	(961)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES	(54,071)	203,226
Net change in cash, cash equivalents and restricted cash	15,357	(4,196)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Beginning of period	66,007	59,575
End of period	81,364	55,379
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments for interest	18,638	12,743
Accrued acquisition costs and improvements to hotel properties	5,765	3,897
Capitalized interest	446	73
Cash payments for income taxes, net of refunds	$ 622	$ 463

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DESCRIPTION OF BUSINESS

6 Months Ended

Jun. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

DESCRIPTION OF BUSINESS

DESCRIPTION OF BUSINESS

Summit Hotel Properties, Inc. (the “Company”) is a self-managed hotel investment company that was organized on June 30, 2010, as a Maryland corporation. The Company holds both general and limited partnership interests in Summit Hotel OP, LP (the “Operating Partnership”), a Delaware limited partnership also organized on June 30, 2010. On February 14, 2011, the Company closed on its initial public offering ("IPO") and completed certain formation transactions, including the merger of Summit Hotel Properties, LLC with and into the Operating Partnership. Unless the context otherwise requires, “we,” “us,” and “our” refer to the Company and its consolidated subsidiaries.

We focus on owning primarily premium-branded, select-service hotels. At June 30, 2018, our portfolio consisted of 80 hotels with a total of 11,978 guestrooms located in 26 states. We have elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes commencing with our short taxable year ended December 31, 2011. To qualify as a REIT, we cannot operate or manage our hotels. Accordingly, all of our hotels are leased to subsidiaries (“TRS Lessees”) of our taxable REIT subsidiary (“TRS”). We indirectly own 100% of the outstanding equity interests in all of our TRS Lessees.

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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements of the Company consolidate the accounts of the Company and all entities that are controlled by the Company’s ownership of a majority voting interest in such entities, as well as variable interest entities for which the Company is the primary beneficiary. All significant intercompany balances and transactions have been eliminated in the Condensed Consolidated Financial Statements.

We prepare our Condensed Consolidated Financial Statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Act of 1934 (the “Exchange Act”). Accordingly, the Condensed Consolidated Financial Statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation in accordance with GAAP have been included. Results for the three and six months ended June 30, 2018 may not be indicative of the results that may be expected for the full year of 2018. For further information, please read the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2017.

Segment Disclosure

Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. We have determined that we have one reportable segment for activities related to investing in real estate. Our investments in real estate are geographically diversified and the chief operating decision makers evaluate operating performance on an individual asset level. As each of our assets has similar economic characteristics, the assets have been aggregated into one reportable segment.

Investment in Hotel Properties

The Company allocates the purchase price of acquired hotel properties based on the fair value of the acquired land, land improvements, building, furniture, fixtures and equipment, identifiable intangible assets or liabilities, other assets and assumed liabilities. Intangible assets may include certain value associated with the on-going operations of the hotel business being acquired as part of the hotel property acquisition.  Acquired intangible assets that derive their values from real property or an interest in real property, are inseparable from that real property or interest in real property, and do not produce or contribute to the production of income other than consideration for the use or occupancy of space, are recorded as a component of the related real estate asset in our Condensed Consolidated Financial Statements.  Identifiable intangible assets or liabilities may also arise from assumed contractual arrangements as part of the acquisition of the hotel property, including terms that are above or below market compared to an estimated fair market value of the agreement on the acquisition date. We determine the acquisition-date fair values of all assets and assumed liabilities using methods similar to those used by independent appraisers, including using a discounted cash flow analysis that uses appropriate discount or capitalization rates and available market information.  Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. 

If substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset or group of similar identifiable assets, the asset or asset group is not considered a business. When we conclude that an acquisition meets this threshold, acquisition costs will be capitalized as part of our allocation of the purchase price of the acquired hotel properties.

Our hotel properties and related assets are recorded at cost, less accumulated depreciation. We capitalize hotel development costs and the costs of significant additions and improvements that materially upgrade, increase the value or extend the useful life of the property. These costs may include hotel development, refurbishment, renovation, and remodeling expenditures, as well as certain indirect internal costs related to construction projects. If an asset requires a period of time in which to carry out the activities necessary to bring it to the condition necessary for its intended use, the interest cost incurred during that period as a result of expenditures for the asset is capitalized as part of the cost of the asset. We expense the cost of repairs and maintenance as incurred.

We generally depreciate our hotel properties and related assets using the straight-line method over their estimated useful lives as follows:

Classification	Estimated Useful Lives
Buildings and improvements	6 to 40 years
Furniture, fixtures and equipment	2 to 15 years

We periodically re-evaluate asset lives based on current assessments of remaining utilization, which may result in changes in estimated useful lives. Such changes are accounted for prospectively and will increase or decrease future depreciation expense.

When depreciable property and equipment is retired or disposed, the related costs and accumulated depreciation are removed from the balance sheet and any gain or loss is reflected in current operations.

On a limited basis, we provide financing to developers of hotel properties for development projects. We evaluate these arrangements to determine if we participate in residual profits of the hotel property through the loan provisions or other agreements. Where we conclude that these arrangements are more appropriately treated as an investment in the hotel property, we reflect the loan as an investment in hotel properties under development in our Condensed Consolidated Balance Sheets. If classified as hotel properties under development, no interest income is recognized on the loan and interest expense is capitalized as part of our investment in the hotel property during the construction period.

We monitor events and changes in circumstances for indicators that the carrying value of a hotel property or land held for development may be impaired. Additionally, we perform at least annual reviews to monitor the factors that could trigger an impairment.  Factors that we consider for an impairment analysis include, among others: i) significant underperformance relative to historical or anticipated operating results, ii) significant changes in the manner of use of a property or the strategy of our overall business, including changes in the estimated holding periods for hotel properties and land parcels, iii) a significant increase in competition, iv) a significant adverse change in legal factors or regulations, and v) significant negative industry or economic trends. When such factors are identified, we prepare an estimate of the undiscounted future cash flows of the specific property and determine if the carrying amount of the asset is recoverable. If an impairment is identified, we estimate the fair value of the property based on discounted cash flows or sales price if the property is under contract and an adjustment is made to reduce the carrying value of the property to its estimated fair value.

Intangible Assets

We amortize intangible assets with determined finite useful lives using the straight-line method.  We do not amortize intangible assets with indefinite useful lives, but we evaluate these assets for impairment annually or at interim periods if events or circumstances indicate that the asset may be impaired.

Assets Held for Sale

We periodically review our hotel properties and our land held for development based on established criteria such as age, type of franchise, adverse economic and competitive conditions, and strategic fit to identify properties that we believe are either non-strategic or no longer complement our business. Based on our review, we periodically market properties for sale that no longer meet our investment criteria.

We classify assets as Assets Held for Sale in the period in which certain criteria are met, including when the sale of the asset within one year is probable.  Assets classified as Assets Held for Sale are no longer depreciated and are carried at the lower of carrying amount or fair value less selling costs.

Variable Interest Entities

We consolidate variable interest entities (each a “VIE”) if we determine that we are the primary beneficiary of the entity.  When evaluating the accounting for a VIE, we consider the purpose for which the VIE was created, the importance of each of the activities in which it is engaged and our decision-making role, if any, in those activities that significantly determine the entity’s economic performance relative to other economic interest holders.  We determine our rights, if any, to receive benefits or the obligation to absorb losses that could potentially be significant to the VIE by considering the economic interest in the entity, regardless of form, which may include debt, equity, management and servicing fees, or other contractual arrangements.  We consider other relevant factors including each entity’s capital structure, contractual rights to earnings or obligations for losses, subordination of our interests relative to those of other investors, contingent payments, and other contractual arrangements that may be economically significant.

Additionally, we have in the past and may in the future enter into purchase and sale transactions in accordance with Section 1031 of the Internal Revenue Code of 1986, as amended (“IRC”), for the exchange of like-kind property to defer taxable gains on the sale of real estate properties (“1031 Exchange”).  For reverse transactions under a 1031 Exchange in which we purchase a new property prior to selling the property to be matched in the like-kind exchange (we refer to a new property being acquired by us in the 1031 Exchange prior to the sale of the related property as a “Parked Asset”), legal title to the Parked Asset is held by a qualified intermediary engaged to execute the 1031 Exchange until the sale transaction and the 1031 Exchange is completed.  We retain essentially all of the legal and economic benefits and obligations related to a Parked Asset prior to completion of a 1031 Exchange.   As such, a Parked Asset is included in our Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations as a consolidated VIE until legal title is transferred to us upon completion of the 1031 Exchange. 

Cash and Cash Equivalents

We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. At times, cash on deposit may exceed the federally insured limit. We maintain our cash with high credit quality financial institutions.

Restricted Cash

Restricted cash consists of certain funds maintained in escrow for property taxes, insurance, and certain capital expenditures. Funds may be disbursed from the account upon proof of expenditures and approval from the lender or other party requiring the restricted cash reserves.

On January 1, 2018, we adopted ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. As a result, we report changes in cash, cash equivalents and restricted cash on our Condensed Consolidated Statement of Cash Flows.

Trade Receivables and Credit Policies

We grant credit to qualified customers, generally without collateral, in the form of trade accounts receivable. Trade receivables result from the rental of hotel guestrooms and the sales of food, beverage, and banquet services and are payable under normal trade terms. Trade receivables also include credit and debit card transactions that are in the process of being settled. Trade receivables are stated at the amount billed to the customer and do not accrue interest.

We regularly review the collectability of our trade receivables. A provision for losses is determined on the basis of previous loss experience and current economic conditions. 

Deferred Charges, net

Initial franchise application fees are capitalized and amortized over the term of the franchise agreement using the straight-line method.

Deferred Financing Fees

Debt issuance costs are presented as a direct deduction from the carrying value of the debt liability on the Condensed Consolidated Balance Sheets. Debt issuance costs are amortized as a component of interest expense over the term of the related debt using the straight-line method, which approximates the interest method.

Non-controlling Interests

Non-controlling interests represent the portion of equity in a consolidated entity held by owners other than the consolidating parent. Non-controlling interests are reported in the Condensed Consolidated Balance Sheets within equity, separately from stockholders’ equity. Revenue, expenses and net income attributable to both the Company and the non-controlling interests are reported in the Condensed Consolidated Statements of Operations.

Our Condensed Consolidated Financial Statements include non-controlling interests related to common units of limited partnership interests (“Common Units”) in the Operating Partnership held by unaffiliated third parties.

Revenue Recognition

On January 1, 2018, we adopted ASU No. 2014-09, Revenue from Contracts with Customers. In accordance with ASU No. 2014-09, we recognize revenue when guestrooms are occupied, services have been rendered or fees have been earned. Revenues are recorded net of any sales and other taxes collected from customers and discounts. Cash received prior to guest arrival is recorded as an advance from the customer and is recognized as revenue at the time of occupancy.

Sales and Other Taxes

We have operations in states and municipalities that impose sales or other taxes on certain sales. We collect these taxes from our customers and remit the entire amount to the various governmental units. The taxes collected and remitted are excluded from revenues and are included in accrued expenses until remitted.

Equity-Based Compensation

Our 2011 Equity Incentive Plan, which was amended and restated effective June 15, 2015 (as amended, the “Equity Plan”), provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, and other stock-based awards. We account for the stock options granted upon completion of our IPO at fair value using the Black-Scholes option-pricing model and we account for all other awards of equity, including time-based and performance-based stock awards, using the grant date fair value of those equity awards. Restricted stock awards with performance-based vesting conditions are market-based awards tied to total stockholder return and are valued using a Monte Carlo simulation model in accordance with ASC Topic 718, Compensation — Stock Compensation. We expense the fair value of awards under the Equity Plan ratably over the vesting period and market-based awards are not adjusted for performance. The amount of stock-based compensation expense may be subject to adjustment in future periods due to a change in forfeiture assumptions or modification of previously granted awards.

On January 1, 2018, we adopted ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. As such, we account for certain changes to share-based payment awards using modification accounting, which may result in incremental stock-based compensation expense based on the remeasurement of the award on the modification date.

Derivative Financial Instruments and Hedging

All derivative financial instruments are recorded at fair value as a net asset or liability in our Condensed Consolidated Balance Sheets. We use interest rate derivatives to hedge our risks on variable-rate debt. Interest rate derivatives could include swaps, caps and floors. We assess the effectiveness of each hedging relationship by comparing changes in fair value or cash flows of the derivative financial instrument with the changes in fair value or cash flows of the designated hedged item or transaction.

During 2017, we adopted ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. Accordingly, beginning in 2017, the change in the fair value of the hedging instruments is recorded in Other comprehensive income. Amounts deferred in Other comprehensive income will be reclassified to Interest expense in our Condensed Consolidated Statements of Operations in the period in which the hedged item affects earnings.

Income Taxes

We have elected to be taxed as a REIT under certain provisions of the IRC. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute annually to our stockholders at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains, which does not necessarily equal net income as calculated in accordance with GAAP. As a REIT, we generally will not be subject to federal income tax (other than taxes paid by our TRS at regular corporate income tax rates) to the extent we distribute 100% of our REIT taxable income to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate income tax rates and generally will be unable to re-elect REIT status until the fifth calendar year after the year in which we failed to qualify as a REIT, unless we satisfy certain relief provisions.

Substantially all of our assets are held by and all of our operations are conducted through our Operating Partnership. Partnerships are not subject to U.S. federal income taxes as revenues and expenses pass through to and are taxed on the owners. Generally, the states and cities where partnerships operate follow the U.S. federal income tax treatment. However, there are a limited number of local and state jurisdictions that tax the taxable income of the Operating Partnership.  Accordingly, we provide for income taxes in these jurisdictions for the Operating Partnership.

Taxable income related to our TRS is subject to federal, state and local income taxes at applicable tax rates. Our consolidated income tax provision includes the income tax provision related to the operations of the TRS as well as state and local income taxes related to the Operating Partnership.

Where required, we account for federal and state income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for: i) the future tax consequences attributable to differences between carrying amounts of existing assets and liabilities based on GAAP and the respective carrying amounts for tax purposes, and ii) operating losses and tax-credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date of the change in tax rates. However, deferred tax assets are recognized only to the extent that it is more likely than not they will be realized based on consideration of available evidence, including future reversals of taxable temporary differences, future projected taxable income and tax planning strategies.

We perform a review of any uncertain tax positions and if necessary will record expected future tax consequences of uncertain tax positions in the financial statements.

Fair Value Measurement

Fair value measures are classified into a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1:	Observable inputs such as quoted prices in active markets.
Level 2:	Directly or indirectly observable inputs, other than quoted prices in active markets.
Level 3:	Unobservable inputs in which there is little or no market information, which require a reporting entity to develop its own assumptions.

Assets and liabilities measured at fair value are based on one or more of the following valuation techniques:

Market approach:	Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
Cost approach:	Amount required to replace the service capacity of an asset (replacement cost).
Income approach:	Techniques used to convert future amounts to a single amount based on market expectations (including present-value, option-pricing, and excess-earnings models).

Our estimates of fair value were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts. We classify assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement.

On January 1, 2018, we adopted ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): 

Recognition and Measurement of Financial Assets and Financial Liabilities. Accordingly, we have elected a measurement alternative for equity investments, such as our purchase options, that do not have readily determinable fair values. Under the alternative, our purchase options are measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer, if any.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain amounts reported in the Condensed Consolidated Statements of Operations in previous periods have been disaggregated and reclassified to conform to the current period presentation. Revenues have been disaggregated into Rooms, Food and beverage, and Other. Direct and Indirect expense has been reclassified into Room, Food and beverage, and Other hotel operating expenses. Property taxes, insurance and other, and Management expenses are also separately reported.

We have also reclassified certain intangible assets related to our acquisitions of hotel properties from Other assets to Investment in hotel properties, net, on the Condensed Consolidated Balance Sheet. See "Note 3 - Investment in Hotel Properties, net" for further details.

These reclassifications, made at June 30, 2018 and for the three and six months then ended, had no net effect on the previously reported financial position or results of operations.

New Accounting Standards

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): 

Recognition and Measurement of Financial Assets and Financial Liabilities, which enhances the reporting requirements for the measurement of financial instruments and requires equity securities to be measured at fair value with changes in the fair value recognized through net income for the period. We adopted ASU No. 2016-01 for our fiscal year commencing on January 1, 2018. The adoption of ASU No. 2016-01 did not have a material effect on our consolidated financial position or our results of operations.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which changes lessee accounting to reflect the financial liability and right-of-use assets that are inherent to leasing an asset on the balance sheet. ASU No. 2016-02 is effective for our fiscal year commencing on January 1, 2019, but early adoption is permitted. We anticipate that we will adopt ASU No. 2016-02 for our fiscal year commencing on January 1, 2019. We expect to apply the modified retrospective approach such that we will account for leases that commenced before the effective date of ASU No. 2016-02 in accordance with previous GAAP unless the lease is modified, except we will recognize right-of-use assets and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. We are currently in the process of analyzing our leases. As such, we do not expect the adoption of ASU No. 2016-02 to have a material impact on our consolidated financial statements except for recognition of the right-of-use assets and related lease liability accounts on the consolidated balance sheet.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses the Statement of Cash Flow classification and presentation of certain cash transactions. We adopted ASU No. 2016-15 for our fiscal year commencing on January 1, 2018. The effect of this amendment has been applied retrospectively. The adoption of ASU No. 2016-15 did not have a material effect on our consolidated financial position or our results of operations.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which clarifies how companies should present restricted cash and restricted cash equivalents in the statement of cash flows. This guidance requires companies to show the changes in the total of cash, cash equivalents and restricted cash in the statement of cash flows. We retrospectively adopted ASU No. 2016-18 for our fiscal year commencing on January 1, 2018. The adoption of ASU No. 2016-18 did not have a material effect on our consolidated financial position or our results of operations.

In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in accordance with ASC No. 718, Compensation - Stock Compensation. We adopted ASC No. 2017-09 for our fiscal year commencing on January 1, 2018. This guidance is to be applied prospectively to an award modified on or after the adoption date. We applied the requirements of ASU No. 2017-09 to the modification of certain stock awards as described in "Note 9 - Equity-Based Compensation".

In February 2018, the FASB issued ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which clarifies how an entity should measure certain equity securities. ASU 2018-03 is effective for our fiscal year commencing on January 1, 2019, but we have early adopted ASU No. 2018-03 for our fiscal year commencing on January 1, 2018. The adoption of ASU No 2018-03 did not have a material effect on our consolidated financial position or results of operations.

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INVESTMENT IN HOTEL PROPERTIES, NET

6 Months Ended

Jun. 30, 2018

Business Combinations [Abstract]

INVESTMENT IN HOTEL PROPERTIES, NET

INVESTMENT IN HOTEL PROPERTIES, NET

Investment in Hotel Properties, net

Investment in hotel properties, net at June 30, 2018 and December 31, 2017 is as follows (in thousands):

	June 30, 2018			December 31, 2017
Land	$	265,699		$	272,932
Hotel buildings and improvements	1,850,655			1,868,273
Intangible assets	22,764			22,764
Construction in progress	15,410			12,464
Furniture, fixtures and equipment	180,446			174,126
	2,334,974			2,350,559
Less - accumulated depreciation and amortization	(320,387		)	(291,067		)
	$	2,014,587		$	2,059,492

Recently Developed Properties

We completed the development and commenced operations of the new 168-guestroom Hyatt House Across From Orlando Universal Resort™ on June 27, 2018. The total construction cost for this hotel was $32.7 million, excluding land that we acquired in a prior-year transaction. The carrying amount for this hotel includes internal capitalized costs of $1.6 million. Total costs of $37.1 million, including the carrying amount of the land, were reclassified as Investment in Hotel Properties, net upon completion during the three months ended June 30, 2018.

Intangible Assets

Intangible assets included in Investment in hotel properties, net and intangible liabilities included in Accrued expenses and other in our Condensed Consolidated Balance Sheets include the following (in thousands):

	June 30, 2018			December 31, 2017
Intangible assets:
Air rights (1)	$	10,754		$	10,754
Favorable leases (2)	10,569			10,569
In-place lease agreements	1,361			1,361
Other	80			80
	22,764			22,764
Less accumulated amortization	(1,411		)	(1,001		)
Intangible assets, net	$	21,353		$	21,763
Intangible liabilities:
Unfavorable leases (2)	$	5,002		$	5,002
Less accumulated amortization	(333		)	(285		)
Intangible liabilities, net	$	4,669		$	4,717

(1) In conjunction with the acquisition of the Courtyard by Marriott - Charlotte, NC, the Company acquired certain air rights related to the hotel property.

(2) Intangible assets and liabilities are recorded on contracts assumed as part of the acquisition of certain hotels. Above-market and below-market contract values are based on the present value of the difference between contractual amounts to be paid pursuant to the contracts assumed and our estimate of the fair market contract rates for corresponding contracts measured over a period equal to the remaining non-cancelable term of the contracts assumed. Intangible assets and liabilities are amortized over the remaining non-cancelable term of the related contracts.

Asset Sales

On June 29, 2018, we sold the Holiday Inn Express & Suites in Sandy, UT and the Hampton Inn in Provo, UT, for an aggregate selling price of $19.0 million. On June 29, 2018 we also sold the Holiday Inn in Duluth, GA and the Hilton Garden Inn in Duluth, GA for an aggregate selling price of $24.9 million. The sales of these four properties resulted in the realization of an aggregate net gain of $17.4 million during the three and six months ended June 30, 2018. We provided seller financing of $3.6 million, on the sale of the Holiday Inn in Duluth, GA and the Hilton Garden Inn in Duluth, GA, under two three-and-a-half-year second mortgage notes with a blended interest rate of 7.38%.

On March 30, 2017, we completed the sale of the Hyatt Place in Atlanta, GA for $14.5 million and repaid a related mortgage loan totaling $6.5 million. The sale of this property resulted in the realization of a net gain of $4.8 million during the six months ended June 30, 2017.

On June 2, 2017, we completed the sale of the Courtyard by Marriott in El Paso, TX for $11.2 million. The sale of this property resulted in the realization of a net gain of $0.4 million during the three and six months ended June 30, 2017.

Dispositions to Affiliates of Hospitality Investors Trust, Inc. (formerly American Realty Capital Hospitality Trust, Inc.)

On June 8, 2015, we entered into multiple sales agreements with affiliates of Hospitality Investors Trust, Inc. (“HIT”) for the sale of a portfolio of hotels to HIT. The agreements were modified on various occasions between 2015 and 2017 such that we sold 23 hotels containing 2,448 guestrooms to HIT in three tranches over that time period for a combined price of approximately $325.1 million (collectively, the “HIT Sale”) as follows (dollars in thousands):

Tranche	Closing Date	Hotels Sold	Sales Price
1	October 2015	10	$	150,000
2	February 2016	6	108,300
3	April 2017	7	66,800
		23	$	325,100

In connection with the HIT Sale, the Operating Partnership entered into a loan agreement with HIT, as borrower, which provided for a loan by us to HIT in the amount of $27.5 million (the “Loan”).  The proceeds of the Loan were required to be applied by HIT as follows: (i) $20.0 million was applied toward the payment of a portion of the $108.3 million purchase price for six hotels acquired in the second tranche; and (ii) the remaining $7.5 million was applied by HIT to fund the escrow deposit required for the purchase of hotels in the third tranche. We deferred $20.0 million of gain from the sale of the hotels in the second tranche as a result of the Loan structure. We recognized the deferred gain as principal payments on the Loan were received, and we recognized the final $15.0 million of gain when the Loan was paid in full on March 31, 2017.

Hotel Property Acquisitions

We did not acquire any hotel properties during the six months ended June 30, 2018. A summary of the hotel properties acquired during the six months ended June 30, 2017 is as follows (in thousands):

Date Acquired	Franchise/Brand	Location	Purchase Price
March 1, 2017	Homewood Suites	Aliso Viejo (Laguna Beach), CA	$	38,000
March 30, 2017	Hyatt Place	Phoenix (Mesa), AZ	22,200
May 23, 2017	Courtyard by Marriott	Fort Lauderdale, FL	85,000
June 9, 2017	Courtyard by Marriott	Charlotte, NC	56,250
June 21, 2017	Courtyard by Marriott	Fort Worth, TX	40,000
June 21, 2017	Courtyard by Marriott	Kansas City, MO	24,500
June 21, 2017	Courtyard by Marriott	Pittsburgh, PA	42,000
June 21, 2017	Hampton Inn & Suites	Baltimore, MD	18,000
June 21, 2017	Residence Inn by Marriott	Baltimore, MD	38,500
			$	364,450	(1)

(1)    The net assets acquired totaled $367.4 million due to the purchase at settlement of $0.8 million of net working capital assets and capitalized transaction costs of $2.1 million

The allocation of the aggregate purchase prices to the fair value of assets and liabilities acquired for the above acquisitions is as follows (in thousands):

	For the Six Months Ended June 30, 2017
Land	$	61,616
Hotel buildings and improvements	274,961
Intangible assets	15,710
Furniture, fixtures and equipment	14,314
Other assets	1,775
Total assets acquired	368,376
Less - other liabilities assumed	(990		)
Net assets acquired	$	367,386

All hotel purchases completed in 2017 were deemed to be the acquisition of assets. Therefore, acquisition costs related to these transactions have been capitalized as part of the recorded amount of the acquired assets.

The results of operations of acquired hotel properties are included in the Condensed Consolidated Statements of Operations beginning on their respective acquisition dates. The following unaudited pro forma information includes operating results for 80 hotels owned as of June 30, 2018 as if all such hotels had been owned by us since January 1, 2017. For hotel properties acquired by us during the three and six months ended June 30, 2017, the pro forma information for the three and six months ended June 30, 2017 includes both the financial results from the prior owner from January 1, 2017 through the date of acquisition by us (the “Pre-acquisition Period”) and the financial results generated by us from the date of acquisition through June 30, 2017. For properties acquired by us after June 30, 2017, the pro forma information for the three and six months ended June 30, 2017 reflects the financial results from the prior owner for the entire three and six month period. For all properties acquired by us during the year ended December 31, 2017, the pro forma information for the three and six months ended June 30, 2018 relate entirely to the financial results generated by us. The financial results for the Pre-acquisition Period were provided by the prior owner of such Acquired Hotel prior to purchase by us and such information has not been audited or reviewed by our auditors or adjusted by us. For hotels sold by us between January 1, 2017 and June 30, 2018 (the "Disposed Hotels"), the unaudited pro forma information excludes the financial results, including gains on disposal of assets, of each of the Disposed Hotels for the period of ownership by us from January 1, 2017 through the date that the Disposed Hotels were sold by us. The unaudited pro forma information is included to enable comparison of results for the current reporting period to results for the comparable period of the prior year and is not indicative of what actual results of operations would have been had the hotel acquisitions and dispositions taken place on or before January 1, 2017. The pro forma amounts exclude the gain or loss on the sale of hotel properties during the three and six months ended June 30, 2017 and 2018, respectively. This information does not purport to be indicative of or represent results of operations for future periods.

The unaudited condensed pro forma financial information for the 80 hotel properties owned at June 30, 2018 for the three and six months ended June 30, 2018 and 2017 is as follows (in thousands, except per share):

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2018		2017		2018		2017
Revenues	$	148,501	$	144,912	$	285,145	$	278,044
Income from hotel operations	$	56,877	$	56,769	$	106,148	$	106,232
Net income (1)	$	19,640	$	25,656	$	28,971	$	47,072
Net income attributable to common stockholders, net of amount allocated to participating securities (1) (2)	$	15,765	$	21,249	$	16,256	$	38,279
Basic and diluted net income per share attributable to common stockholders (1) (2)	$	0.15	$	0.22	$	0.16	$	0.40

(1) Pro forma amounts include depreciation expense, property tax expense, interest expense, income tax expense, and other corporate expenses totaling $49.0 million and $39.1 million for the three months ended June 30, 2018 and 2017, respectively, and $97.8 million and $76.0 million for the six months ended June 30, 2018 and 2017, respectively.

(2) Pro forma amounts for the three and six months ended June 30, 2018 include the effect of the premium on redemption of preferred stock of $3.3 million.

Assets Held for Sale

Assets held for sale at June 30, 2018 and December 31, 2017 include the following (in thousands):

	June 30, 2018		December 31, 2017
Land	$	7,410	$	1,193
Hotel buildings and improvements	28,558		—
Furniture, fixtures and equipment	1,745		—
Construction in progress	15		—
Franchise fees and other	150		—
	$	37,878	$	1,193

Assets Held for Sale at June 30, 2018 and December 31, 2017 included land parcels in Spokane, WA and Flagstaff, AZ. Assets Held for Sale at June 30, 2018 also include four hotels under contract for sale that are expected to close during the three months ended September 30, 2018 as follow:

Property	Guestrooms
Sale 1:
Hilton Garden Inn - Smyrna, TN	112
Hampton Inn & Suites - Smyrna, TN	83
Hyatt Place Phoenix North - Phoenix, AZ	127
	322
Sale 2:
Hyatt Place - Fort Myers, FL	148
	470

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DEBT

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

DEBT

DEBT

At June 30, 2018, our indebtedness was comprised of borrowings under our $450.0 million senior unsecured revolving credit and term loan facility (described below), the 2017 Term Loan (as defined below), the 2018 Term Loan (as defined below), and indebtedness secured by first priority mortgage liens on various hotel properties. At December 31, 2017, our indebtedness was comprised of borrowings under our $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. The weighted average interest rate, after giving effect to our interest rate derivatives, for all borrowings was 4.20% at June 30, 2018 and 3.89% at December 31, 2017.

Debt, net of debt issuance costs, is as follows (in thousands):

	June 30, 2018			December 31, 2017
Revolving debt	$	45,000		$	15,000
Term loans	600,000			515,000
Mortgage loans	310,813			343,109
	955,813			873,109
Unamortized debt issuance costs	(5,316		)	(4,873		)
Debt, net of debt issuance costs	$	950,497		$	868,236

We have entered into five interest rate swaps to partially fix the interest rate on a portion of our variable interest rate unsecured indebtedness and term loans. See "Note 5- Derivative Financial Instruments and Hedging" to the Condensed Consolidated Financial Statements for additional information. Our total fixed-rate and variable-rate debt, after considering our interest rate derivative agreements that are currently effective, is as follows (in thousands):

	June 30, 2018		Percentage	December 31, 2017		Percentage
Fixed-rate debt	$	554,461	58%	$	386,313	44%
Variable-rate debt	401,352		42%	486,796		56%
	$	955,813		$	873,109

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

	June 30, 2018				December 31, 2017
	Carrying Value		Fair Value		Carrying Value		Fair Value		Valuation Technique
Fixed-rate debt	$	279,461	$	276,635	$	311,313	$	310,535	Level 2 - Market approach

At June 30, 2018 and December 31, 2017, we had $275.0 million and $75.0 million, respectively, 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 5 — Derivative Financial Instruments and Hedging."

$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 revolving credit and term loan 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 June 30, 2018, the maximum amount of borrowing provided by the 2016 Unsecured Credit Facility was$450.0 million, of which we had borrowed $150.0 million under the $150 Million Term Loan and $45.0 million under the $300 Million Revolver and we had $255.0 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 margin of 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 of between 0.50% and 1.25%, depending upon the Company’s leverage ratio.  The interest rate at June 30, 2018 was 3.89%.

Financial and Other Covenants. We are required to comply with a series of financial and other covenants to borrow under this credit facility. At June 30, 2018, we were in compliance with all required covenants.

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 June 30, 2018, the Company had 51 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% which results in a fixed interest rate of 3.79% on $75.0 million 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 an unsecured term loan (the “2015 Term Loan”), with an original principal amount of $125.0 million, that was later increased to $140.0 million, upon exercise of an accordion feature.

On February 15, 2018, we repaid the $140.0 million outstanding balance with funds received from the 2018 Term Loan (as discussed below).

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, and a syndicate of lenders listed in the loan documentation.

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. The interest rate at June 30, 2018 was 3.84%.

Financial and Other Covenants.  We are required to comply with a series of financial and other covenants in order to draw and maintain borrowings under the 2017 Term Loan. At June 30, 2018 we were 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 the assets that qualify as unencumbered assets.  At June 30, 2018, the Unencumbered Properties also supported the 2017 Term Loan.

2018 Term Loan

On February 15, 2018, 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 new $225.0 million unsecured term loan (the “2018 Term Loan”) with KeyBank National Association, as administrative agent, and a syndicate of lenders listed in the loan documentation. The 2018 Term Loan has an accordion feature that allows us to increase the total commitments by $150.0 million prior to the maturity date of February 14, 2025, subject to certain conditions.  At closing, we drew $140.0 million of the $225.0 million available under the 2018 Term Loan and used the proceeds to pay off and replace the 2015 Term Loan. On May 16, 2018, we drew the remaining $85.0 million available under the 2018 Term Loan and used the proceeds to pay down the $300 Million Revolver.

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 1.80% and 2.55%, 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 0.80% and 1.55%, depending upon our leverage ratio.  We are required to pay other fees, including customary arrangement and administrative fees. The interest rate at June 30, 2018 was 4.14%.

Financial and Other Covenants.  In addition, we are required to comply with a series of financial and other covenants in order to draw and maintain borrowings under the 2018 Term Loan. At June 30, 2018 we were in compliance with all financial covenants.

Unencumbered Assets.  The 2018 Term Loan is unsecured.  However, borrowings under the term loan are limited by the value of the assets that qualify as unencumbered assets.  At June 30, 2018, the Unencumbered Properties also supported the 2018 Term Loan.

Metabank Loan

On June 30, 2017, we entered into a $47.6 million secured, non-recourse loan with MetaBank (the "MetaBank Loan"). As of December 31, 2017, we had drawn the entire $47.6 million balance available under the 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.

Mortgage and Term Loans

On April 2, 2018, we repaid four mortgage loans with Western Alliance Bank totaling $23.9 million that had a blended interest rate of 5.39%. There were no prepayment penalties associated with the repayment of these loans. The properties that secured the mortgage loans are now unencumbered and have been added to our unencumbered pool to support our 2016 Unsecured Credit Facility, 2017 Term Loan and 2018 Term Loan.

At June 30, 2018, we had $910.8 million in secured mortgage loans and unsecured term loans outstanding (including the $150 Million Term Loan, the 2017 Term Loan, the 2018 Term Loan and the Metabank Loan described above).  Term loans totaling $310.8 million, including the Metabank Loan, are secured primarily by first mortgage liens on certain hotel properties.

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DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING

6 Months Ended

Jun. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING

Information about our derivative financial instruments at June 30, 2018 and December 31, 2017 is as follows (dollars in thousands): 

			Notional Amount					Fair Value
Contract date	Effective Date	Expiration Date	June 30, 2018			December 31, 2017		June 30, 2018			December 31, 2017
September 5, 2013	January 2, 2014	October 1, 2018	$	75,000	(1)	$	75,000	$	14		$	(190	)
October 2, 2017	January 29, 2018	January 31, 2023	100,000		(2)	100,000		3,231			722
October 2, 2017	January 29, 2018	January 31, 2023	100,000		(2)	100,000		3,299			787
June 11, 2018	September 28, 2018	September 30, 2024	75,000		(3)	—		(347		)	—
June 11, 2018	December 31, 2018	December 31, 2025	125,000		(4)	—		(772		)	—
			$	475,000		$	275,000	$	5,425		$	1,319

(1) Interest rate swap is related to a portion of our 2016 Unsecured Credit Facility and converts LIBOR from a floating rate to an average annual fixed rate of 2.04%.

(2) Interest rate swap partially fixes the interest rate on a portion of our variable interest rate unsecured indebtedness and converts LIBOR from a floating rate to an average annual fixed rate of 1.98%.

(3) Interest rate swap partially fixes the interest rate on a portion of our variable interest rate unsecured indebtedness and converts LIBOR from a floating rate to an average annual fixed rate of 2.87%.

(4) Interest rate swap partially fixes the interest rate on a portion of our variable interest rate unsecured indebtedness and converts LIBOR from a floating rate to an average annual fixed rate of 2.93%.

Our interest rate swaps have been designated as cash flow hedges and are valued using a market approach, which is a Level 2 valuation technique. At June 30, 2018, three of our interest rate swaps were in an asset position and two were in a liability position. At December 31, 2017, two of our interest rate swaps were in an asset position and one was in a liability position. We are not required to post any collateral related to these agreements and are not in breach of any financial provisions of the agreements.

During 2017, we adopted ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. Accordingly, beginning in 2017, changes in the fair value of the hedging instruments are recorded in Other comprehensive income. Amounts deferred in Other comprehensive income are reclassified to Interest expense in our Condensed Consolidated Statements of Operations in the period in which the hedged item affects earnings. In the next twelve months, we estimate that $0.4 million will be reclassified from Other comprehensive income and recorded as a reduction to Interest expense.

The table below details the location in the financial statements of the gain or loss recognized on derivative financial instruments designated as cash flow hedges (in thousands):

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Gain(loss) recognized in Accumulated other comprehensive income on derivative financial instruments	$	309		$	(22	)	$	3,846		$	90
Loss reclassified from Accumulated other comprehensive income to Interest expense	$	(53	)	$	(196	)	$	(260	)	$	(433	)

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EQUITY

6 Months Ended

Jun. 30, 2018

Equity [Abstract]

EQUITY

EQUITY

Common Stock

The Company is authorized to issue up to 500,000,000 shares of common stock, $0.01 par value per share.  Each outstanding share of our common stock entitles the holder to one vote on all matters submitted to a vote of stockholders, including the election of directors and, except as may be provided with respect to any other class or series of stock, the holders of such shares possess the exclusive voting power.

On May 9, 2017, the Company and the Operating Partnership entered into an underwriting agreement (the “Underwriting Agreement”) with Raymond James & Associates, Inc. and Deutsche Bank Securities Inc., as the representatives of the several underwriters named therein, relating to the issuance and sale of 9,000,000 shares of the Company’s common stock, $0.01 par value per share, at a public offering price of $16.50 per share, less an underwriting discount of $0.66 per share. Pursuant to the terms of the Underwriting Agreement, the Company granted the underwriters a 30-day option to purchase up to an additional 1,350,000 shares of common stock on the same terms, which the underwriters exercised in full on May 10, 2017. The closing of the offering occurred on May 15, 2017 for net proceeds of $163.8 million, after the underwriting discount and offering-related expenses of $7.0 million.

On May 25, 2017, the Company and the Operating Partnership entered into separate sales agreements (collectively, the “Sales Agreements”) with each of Robert W. Baird & Co. Incorporated, Raymond James & Associates, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Deutsche Bank Securities Inc., RBC Capital Markets, LLC, KeyBanc Capital Markets Inc., Canaccord Genuity Inc., Jefferies LLC, BB&T Capital Markets, a division of BB&T Securities, LLC, and BTIG, LLC (collectively, the “Sales Agents”), pursuant to which the Company may sell the Company’s shares of common stock, $0.01 par value per share, having an aggregate offering price of up to $200.0 million (the “Shares”), from time to time through the Sales Agents, each acting as a sales agent or principal (the "2017 ATM Program"). At the same time, the Company terminated each of the sales agreements entered into in connection with its prior at-the-market offering program, which was established in August 2016 and under which 6,151,514 shares of the Company’s common stock were sold through May 25, 2017 for net proceeds of approximately $89.1 million. To date, we have not sold any shares of our common stock under the 2017 ATM Program. During the six months ended June 30, 2018, we incurred costs totaling $0.1 million related to the 2017 ATM Program.

Pursuant to the Sales Agreements, the Shares may be offered and sold through any Sales Agent in transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made directly on the New York Stock Exchange or sales made to or through a market maker other than on an exchange or, with the prior consent of the Company, in privately negotiated transactions. Each Sales Agent will be entitled to compensation of up to 2.0% of the gross proceeds of the Shares sold through such Sales Agent from time to time under the related Sales Agreement. The Company has no obligation to sell any of the Shares under the Sales Agreements and may at any time suspend solicitations and offers under, or terminate, any of the Sales Agreements.

Changes in common stock during the six months ended June 30, 2018 and 2017 were as follows:

	For the Six Months Ended June 30,
	2018		2017
Beginning common shares outstanding	104,287,128		93,525,469
Stock Offering	—		10,350,000
Grants under the Equity Plan	583,373		366,679
Common Unit redemptions	25,839		30,657
Annual grants to independent directors	34,130		23,896
Common stock issued for director fees	2,299		2,454
Forfeitures	(818	)	(1,237	)
Shares retained for employee tax withholding requirements	(187,850	)	(59,111	)
Ending common shares outstanding	104,744,101		104,238,807

Preferred Stock

The Company is authorized to issue up to 100,000,000 shares of preferred stock, $0.01 par value per share, of which 90,600,000 is currently undesignated, 3,000,000 shares have been designated as 6.45% Series D Cumulative Redeemable Preferred Stock (the "Series D preferred shares") and 6,400,000 shares have been designated as 6.25% Series E Cumulative Redeemable Preferred Stock (the "Series E preferred shares").

On March 20, 2018, the Company paid $85.3 million to redeem all 3,400,000 of its outstanding Series C preferred shares at a redemption price of $25 per share plus accrued and unpaid dividends.

The Company's outstanding shares of preferred stock (collectively, “Preferred Shares”) rank senior to our common stock and on parity with each other with respect to the payment of dividends and distributions of assets in the event of a liquidation, dissolution, or winding up. The Preferred Shares do not have any maturity date and are not subject to mandatory redemption or sinking fund requirements. The Company may not redeem the Series D or Series E preferred shares prior to June 28, 2021 and November 13, 2022, respectively, except in limited circumstances relating to the Company’s continuing qualification as a REIT or in connection with certain changes in control. After those dates, the Company may, at its option, redeem the applicable Preferred Shares, in whole or from time to time in part, by payment of $25 per share, plus any accumulated, accrued and unpaid distributions up to, but not including, the date of redemption. If the Company does not exercise its rights to redeem the Preferred Shares upon certain changes in control, the holders of the Preferred Shares have the right to convert some or all of their shares into a number of the Company’s common shares based on a defined formula, subject to a share cap, or alternative consideration. The share cap on each Series D preferred share is 3.9216 shares of common stock and each Series E preferred share is 3.1686 shares of common stock, all subject to certain adjustments.

The Company pays dividends at an annual rate of $1.6125 for each Series D preferred share and $1.5625 for each Series E preferred share. Dividend payments are made quarterly in arrears on or about the last day of February, May, August and November of each year.

Non-controlling Interests in Operating Partnership

Pursuant to the limited partnership agreement of our Operating Partnership, beginning on February 14, 2012, the unaffiliated third parties who hold Common Units in our Operating Partnership have the right to cause us to redeem their Common Units in exchange for cash based upon the fair value of an equivalent number of our shares of common stock at the time of redemption; however, the Company has the option to redeem Common Units with shares of our common stock on a one-for-one basis. The number of shares of our common stock issuable upon redemption of Common Units may be adjusted upon the occurrence of certain events such as share dividend payments, share subdivisions or combinations.

 At June 30, 2018 and December 31, 2017, unaffiliated third parties owned 297,552 and 323,391 Common Units of the Operating Partnership, respectively, representing less than a 1% limited partnership interest in the Operating Partnership for each period.

We classify outstanding Common Units held by unaffiliated third parties as non-controlling interests in the Operating Partnership, a component of equity in the Company’s Condensed Consolidated Balance Sheets. The portion of net income allocated to these Common Units is reported on the Company’s Condensed Consolidated Statement of Operations as net income attributable to non-controlling interests of the Operating Partnership.

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FAIR VALUE MEASUREMENT

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENT

FAIR VALUE MEASUREMENT

The following table presents information about our financial instruments measured at fair value on a recurring basis at June 30, 2018 and December 31, 2017. In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, we classify assets and liabilities based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Disclosures concerning financial instruments measured at fair value are as follows (in thousands):

	Fair Value Measurements at June 30, 2018 using
	Level 1		Level 2		Level 3		Total
Assets:
Interest rate swaps	$	—	$	6,544	$	—	$	6,544
Purchase options related to real estate loans	—		—		6,120		6,120
Liabilities:
Interest rate swaps	—		1,119		—		1,119

	Fair Value Measurements at December 31, 2017 using
	Level 1		Level 2		Level 3		Total
Assets:
Interest rate swaps	$	—	$	1,509	$	—	$	1,509
Purchase options related to real estate loans	—		—		6,078		6,078
Liabilities:
Interest rate swaps	—		190		—		190

We are a mezzanine lender on three construction loans to fund up to an aggregate of $29.6 million for the development of three hotel properties. The three real estate loans closed in the fourth quarter of 2017 and each has a stated interest rate of 8% and an initial term of approximately three years.  As of June 30, 2018, we have funded the full amount of $29.6 million. We have separate options related to each loan (each the "Initial Option") to purchase a 90% interest in each joint venture that owns the respective hotel upon completion of construction. We also have the right to purchase the remaining interests in each joint venture at future dates, generally five years after we exercise our Initial Option. We have recorded the aggregate estimated fair value of the Initial Options totaling $6.1 million in Other assets and as a discount to the related real estate loans. The discount will be amortized as a component of interest income over the term of the real estate loans using the straight-line method, which approximates the interest method. We recorded amortization of the discount of $0.5 million during the three months ended June 30, 2018 and $1.0 million during the six months ended June 30, 2018.

Our purchase options do not have readily determinable fair values. The fair value of each purchase option was estimated using a binomial lattice model. The estimated fair values of the purchase options were based on unobservable inputs for which there is little or no market information available and required us to develop our own assumptions as follows (dollar amounts in thousands):

	Real Estate Loan 1			Real Estate Loan 2			Real Estate Loan 3
Exercise price	$	15,143		$	17,377		$	5,503
First option exercise date	12/31/2018			3/31/2019			5/31/2019
Last option exercise date	11/1/2020			12/5/2020			12/1/2020
Expected volatility	32.0		%	38.0		%	37.0		%
Risk free rate	1.7		%	1.8		%	1.9		%
Expected annualized equity dividend yield	6.8		%	9.9		%	6.5		%

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Restricted Cash

The Company maintains reserve funds for property taxes, insurance, capital expenditures and replacement or refurbishment of furniture, fixtures and equipment at some of our hotel properties in accordance with management, franchise or mortgage loan agreements. These agreements generally require us to reserve cash ranging from 3% to 5% of the revenues of the individual hotel in restricted cash escrow accounts. Any unused restricted cash balances revert to us upon the termination of the underlying agreement or may be released to us from the restricted cash escrow accounts upon proof of expenditures and approval from the lender or other party requiring the restricted cash reserves. At June 30, 2018 and December 31, 2017, approximately $32.5 million and $29.5 million, respectively, was available in restricted cash reserve funds for property taxes, insurance, capital expenditures and replacement or refurbishment of furniture, fixtures and equipment at our hotel properties.

Ground Leases

At June 30, 2018 and December 31, 2017, we had two prepaid ground leases for two hotel properties in Portland, OR which expire in June 2084. These ground leases had prepaid balances of approximately $3.2 million at both June 30, 2018 and December 31, 2017.  We have one option to extend these leases for an additional 14 years. We lease land for one hotel property in Houston (Galleria Area), TX under the terms of an operating ground lease agreement with an initial termination date of April 20, 2053 and one option to extend for an additional 10 years.  We lease land for one hotel property in Austin, TX with an initial lease termination date of May 31, 2050.  We lease land for one hotel property in Baltimore (Hunt Valley), MD with a lease termination date of December 31, 2019 and twelve remaining options to extend for five additional years per extension. At December 31, 2017, we had an additional ground lease for one hotel property in Duluth, GA. The hotel property was sold on June 29, 2018 and the ground lease was transferred to the buyer. See "Note 3 - Investment in Hotel Properties, net" to the Condensed Consolidated Financial Statements for additional information.

Total rent expense for ground leases for each of the three months ended June 30, 2018 and 2017 was $0.4 million. Total rent expense for ground leases for each of the six months ended June 30, 2018 and 2017 was $0.9 million.

In addition, we lease land for one hotel property in Garden City, NY under a PILOT (payment in lieu of taxes) lease. We pay a reduced amount of property tax each year of the lease as rent. The lease expires on December 31, 2019. Upon expiration of the lease, we expect to exercise our right to acquire a fee simple interest in the hotel for nominal consideration.

Franchise Agreements

All of our hotel properties operate under franchise agreements with major hotel franchisors. The terms of our franchise agreements generally range from 10 to 20 years with various extension provisions. Each franchisor receives franchise fees ranging from 2% to 6% of each hotel property’s gross revenue, and some agreements require that we pay marketing fees of up to 4% of gross revenue. We also pay fees to our franchisors for services such as reservation and information systems. During the three months ended June 30, 2018 and 2017, we expensed fees related to our franchise agreements of $13.0 million and $10.2 million, respectively.  During the six months ended June 30, 2018 and 2017, we expensed fees related to our franchise agreements of $24.4 million and $19.4 million, respectively.

Management Agreements

Our hotel properties operate pursuant to management agreements with various professional third-party management companies. The terms of our management agreements generally range from less than one to 25 years with various extension provisions. Each management company receives a base management fee, generally a percentage of total hotel property revenues. In some cases there are also monthly fees for certain services, such as accounting and revenue management. Generally there are also incentive fees based on attaining certain financial thresholds. Management fee expenses for the three months ended June 30, 2018 and 2017 were $5.4 million and $5.1 million, respectively. Management fee expenses for the six months ended June 30, 2018 and 2017 were $10.7 million and $9.8 million, respectively.

Litigation

We are involved from time to time in litigation arising in the ordinary course of business. We are not currently aware of any actions against us that we believe would have a material effect on our financial condition or results of operations.

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EQUITY-BASED COMPENSATION

6 Months Ended

Jun. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

EQUITY-BASED COMPENSATION

EQUITY-BASED COMPENSATION

Our currently outstanding equity-based awards were issued under the Equity Plan which provides for the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, and other equity-based awards or incentive awards.

Stock options granted may be either incentive stock options or non-qualified stock options. Vesting terms may vary with each grant, and stock option terms are generally five to ten years. We have outstanding equity-based awards in the form of stock options and restricted stock awards. All of our outstanding equity-based awards are classified as equity awards.

The Company's former Chief Financial Officer retired on March 31, 2018. In connection with his retirement, the Company recorded $1.0 million of additional stock-based compensation expense during the six months ended June 30, 2018 related to the modification of certain stock award agreements.

Stock Options Granted Under our Equity Plan

As of June 30, 2018, we had 235,000 outstanding and exercisable stock options with a weighted average exercise price of $9.75 per share, weighted average contractual term of 2.7 years and an aggregate intrinsic value of $1.1 million.

Time-Based Restricted Stock Awards Made Pursuant to Our Equity Plan

On March 7, 2018, we granted time-based restricted stock awards for 23,363 shares of common stock to certain of our non-executive employees. The awards vest over a four-year period based on continued service (20% on March 9, 2019, 2020 and 2021, and 40% on March 9, 2022). 

On March 7, 2018, we granted time-based restricted stock awards for 162,202 shares of common stock to our executive officers. The awards vest 25% on March 9, 2019, 25% on March 9, 2020 and 50% on March 9, 2021, based on continuous service through the vesting dates or in certain circumstances upon a change in control.

On March 6, 2017, we granted time-based restricted stock awards for 16,079 shares of common stock to certain of our non-executive employees. The awards vest over a four-year period based on continued service (20% on March 9, 2018, 2019 and 2020, and 40% on March 9, 2021). 

On March 6, 2017, we granted time-based restricted stock awards for 120,024 shares of common stock to our executive officers. On April 18, 2017, we granted a time-based restricted stock award for 20,215 shares of common stock to an executive officer. The awards vest 25% on March 9, 2018, 25% on March 9, 2019 and 50% on March 9, 2020, based on continuous service through the vesting dates or in certain circumstances upon a change in control.

The holders of these awards have the right to vote the related shares of common stock and receive all dividends declared and paid whether or not vested. The fair value of time-based restricted stock awards granted is calculated based on the market value of our common stock on the date of grant.

The following table summarizes time-based restricted stock award activity under our Equity Plan for the six months ended June 30, 2018:

	Number  of Shares		Weighted Average Grant Date  Fair Value		Aggregate Current Value
			(per share)		(in thousands)
Non-vested at December 31, 2017	391,477		$	13.52	$	5,962
Granted	185,565		13.15
Vested	(205,619	)	13.41
Forfeited	(818	)	12.84
Non-vested at June 30, 2018	370,605		$	13.40	$	5,303

Performance-Based Restricted Stock Awards Made Pursuant to Our Equity Plan

On March 7, 2018, we granted performance-based restricted stock awards for 243,303 shares of common stock to our executive officers. Our performance-based restricted stock awards are market-based awards and are accounted for based on the fair value of our common stock on the grant date. The fair value of the performance-based restricted stock awards granted was estimated using a Monte Carlo simulation valuation model. These awards generally vest based on our percentile ranking within the SNL U.S. REIT Hotel Index at the end of the period beginning on March 7, 2018 and ending on the earlier of March 7, 2021 or upon a change in control.  The awards require continued service during the measurement period and are subject to the other conditions described in the Equity Plan or award document.

On March 6, 2017, we granted performance-based restricted stock awards for 180,039 shares of common stock to our executive officers. On April 18, 2017, we granted a performance-based restricted stock award for 30,322 shares of common stock to an executive officer. Our performance-based restricted stock awards are market-based awards and are accounted for based on the fair value of our common stock on the grant date. The fair value of the performance-based restricted stock awards granted was estimated using a Monte Carlo simulation valuation model. These awards generally vest based on our percentile ranking within the SNL U.S. REIT Hotel Index at the end of the period beginning on March 6, 2017 and ending on the earlier of March 6, 2020 or upon a change in control.  The awards require continued service during the measurement period and are subject to the other conditions described in the Equity Plan or award document.

The number of shares the executive officers may earn under these awards range from zero shares to twice the number of shares granted based on our percentile ranking within the index at the end of the measurement period. In addition, a portion of the performance-based shares may be earned based on the Company's absolute total shareholder return calculated during the performance period. The holders of these grants have the right to vote the granted shares of common stock and any dividends declared will be accumulated and will be subject to the same vesting conditions as the awards.  Further, if additional shares are earned based on our percentile ranking within the index, dividend payments will be issued as if the additional shares had been held throughout the measurement period.

The following table summarizes performance-based restricted stock activity under the Equity Plan for the six months ended June 30, 2018:

	Number  of Shares		Weighted Average Grant Date  Fair Value (1)		Aggregate Current Value
			(per share)		(in thousands)
Non-vested at December 31, 2017	619,429		$	16.16	$	9,434
Granted	397,808		15.69
Vested	(309,010	)	18.78
Non-vested at June 30, 2018	708,227		$	14.75	$	10,135

(1) The amounts included in this column represent the expected future value of the performance-based restricted stock awards calculated using the Monte Carlo simulation valuation model.

Director Stock Awards Made Pursuant to Our Equity Plan

Our non-employee directors have the option to receive shares of our common stock in lieu of cash for their director fees. During the six months ended June 30, 2018, we issued 2,299 shares of common stock for director fees and we made an annual grant of 34,130 shares of common stock to our independent directors. The fair value of director stock awards is calculated based on the market value of our common stock on the date of grant.

Equity-Based Compensation Expense

Equity-based compensation expense included in Corporate general and administrative expenses in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2018 and 2017 was as follows (in thousands):

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2018		2017		2018		2017
Time-based restricted stock	$	516	$	590	$	1,352	$	1,066
Performance-based restricted stock	785		850		2,159		1,484
Director stock	520		424		537		444
	$	1,821	$	1,864	$	4,048	$	2,994

We recognize equity-based compensation expense ratably over the vesting periods. The amount of expense may be subject to adjustment in future periods due to a change in the forfeiture assumptions.

Unrecognized equity-based compensation expense for all non-vested awards pursuant to our Equity Plan was $9.2 million at June 30, 2018 and will be recorded as follows (in thousands):

	Total		2018		2019		2020		2021		2022
Time-based restricted stock	$	3,822	$	1,035	$	1,615	$	956	$	203	$	13
Performance-based restricted stock	5,361		1,568		2,320		1,287		186		—
	$	9,183	$	2,603	$	3,935	$	2,243	$	389	$	13

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INCOME TAXES

6 Months Ended

Jun. 30, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

On December 22, 2017, H.R. 1, originally known as the Tax Cuts and Jobs Act (the “TCJA”), was enacted. The TCJA made many significant changes to the U.S. federal income tax laws applicable to businesses and their owners, including REITs and their stockholders. Pursuant to this legislation, as of January 1, 2018, (1) the federal income tax rate applicable to corporations is reduced to 21%, (2) the highest marginal individual income tax rate is reduced to 37% (through taxable years ending in 2025), (3) the corporate alternative minimum tax is repealed, and (4) the backup withholding rate for U.S. stockholders is reduced to 24%. In addition, individuals, estates and trusts may deduct up to 20% of certain pass-through income, including ordinary REIT dividends that are not “capital gain dividends” or “qualified dividend income,” subject to certain limitations. For taxpayers qualifying for the full deduction, the effective maximum tax rate on ordinary REIT dividends would be 29.6% (through taxable years ending in 2025). The maximum rate of withholding with respect to our distributions to non-U.S. stockholders that are treated as attributable to gains from the sale or exchange of U.S. real property interests is also reduced from 35% to 21%. The deduction of net interest expense is limited for all businesses; provided that certain businesses, including real estate businesses, may elect not to be subject to such limitations and instead to depreciate their real property related assets over longer depreciable lives. The reduced corporate tax rate will apply to our TRS and any other TRS that we form.

The reduced 21% federal income tax rate applicable to corporations will apply to taxable earnings reported for the full 2018 fiscal year. Accordingly, the Company remeasured its net deferred tax assets as of December 31, 2017 using the lower federal tax rate that will apply when these amounts are expected to reverse.

Income taxes for the interim periods presented have been included in our Condensed Consolidated Financial Statements on the basis of an estimated annual effective tax rate. Our effective tax rate is affected by the mix of earnings and losses by taxing jurisdictions. Our earnings, other than from our TRS, are not generally subject to federal and state corporate income taxes due to our REIT election, provided that we distribute 100% of our taxable income to our shareholders. However, there are a limited number of local and state jurisdictions that tax the taxable income of the Operating Partnership. Accordingly, we provide for income taxes in these jurisdictions for the Operating Partnership.

We recorded an income tax expense related to net income from continuing operations of $0.2 million and $0.4 million for the three months ended June 30, 2018 and 2017, respectively, and $0.4 million and $0.8 million for the six months ended June 30, 2018 and 2017, respectively.

We had no unrecognized tax benefits at June 30, 2018. We expect no significant changes in unrecognized tax benefits within the next year.

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EARNINGS PER SHARE

6 Months Ended

Jun. 30, 2018

Earnings Per Share [Abstract]

EARNINGS PER SHARE

EARNINGS PER SHARE

We apply the two-class method of computing earnings per share, which requires the calculation of separate earnings per share amounts for our non-vested time-based restricted stock awards with non-forfeitable dividends and for our common stock. Our non-vested time-based restricted stock awards with non-forfeitable rights to dividends are considered securities which participate in undistributed earnings with common stock. Under the two-class computation method, net losses are not allocated to participating securities unless the holder of the security has a contractual obligation to share in the losses. Our non-vested time-based restricted stock awards with non-forfeitable dividends do not have such an obligation so they are not allocated losses.

Below is a summary of the components used to calculate basic and diluted earnings per share (in thousands, except per share):

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Numerator:
Net income	$	37,677		$	34,083		$	47,368		$	67,289
Less: Preferred dividends	(3,709		)	(4,200		)	(9,252		)	(8,400		)
Premium on redemption of preferred stock	—			—			(3,277		)	—
Allocation to participating securities	(120		)	(126		)	(137		)	(240		)
Attributable to non-controlling interest	(101		)	(114		)	(104		)	(234		)
Net income attributable to common stockholders, net of amount allocated to participating securities	$	33,747		$	29,643		$	34,598		$	58,415
Denominator:
Weighted average common shares outstanding - basic	103,643			98,184			103,572			95,488
Dilutive effect of equity-based compensation awards	240			522			320			495
Weighted average common shares outstanding - diluted	103,883			98,706			103,892			95,983
Earnings per share:
Basic	$	0.33		$	0.30		$	0.33		$	0.61
Diluted	$	0.32		$	0.30		$	0.33		$	0.61

All outstanding stock options were included in the computation of diluted earnings per share for the three and six months ended June 30, 2018 and 2017 due to their dilutive effect. The Common Units held by the non-controlling interest holders have been excluded from the denominator of the diluted earnings per share as there would be no effect on the amounts since the limited partners' share of income would also be added to derive net income attributable to common stockholders. We had unvested performance-based restricted stock awards of 453,664 shares and 619,429 shares for the three months ended June 30, 2018 and 2017, respectively, and 453,664 shares and 619,429 shares for the six months ended June 30, 2018 and 2017, respectively, which were excluded from the denominator of the diluted earnings per share as the awards had not achieved the requisite performance conditions for vesting at each period end.

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2018

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

Asset Sales

On July 24, 2018, we completed the sale of three hotel properties, the Hilton Garden Inn - Smyrna, TN, the Hampton Inn & Suites - Smyrna, TN, and the Hyatt Place Phoenix North - Phoenix, AZ, for an aggregate sales price of $46.5 million.

Dividends

On July 30, 2018, our Board of Directors declared cash dividends of $0.18 per share of common stock, $0.403125 per share of 6.45% Series D Cumulative Redeemable Preferred Stock, and $0.390625 per share of 6.25% Series E Cumulative Redeemable Preferred Stock. These dividends are payable August 31, 2018 to stockholders of record on August 16, 2018.

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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements of the Company consolidate the accounts of the Company and all entities that are controlled by the Company’s ownership of a majority voting interest in such entities, as well as variable interest entities for which the Company is the primary beneficiary. All significant intercompany balances and transactions have been eliminated in the Condensed Consolidated Financial Statements.

We prepare our Condensed Consolidated Financial Statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Act of 1934 (the “Exchange Act”). Accordingly, the Condensed Consolidated Financial Statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation in accordance with GAAP have been included. Results for the three and six months ended June 30, 2018 may not be indicative of the results that may be expected for the full year of 2018. For further information, please read the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2017.

Segment Disclosure

Segment Disclosure

Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. We have determined that we have one reportable segment for activities related to investing in real estate. Our investments in real estate are geographically diversified and the chief operating decision makers evaluate operating performance on an individual asset level. As each of our assets has similar economic characteristics, the assets have been aggregated into one reportable segment.

Investment in Hotel Properties

Investment in Hotel Properties

The Company allocates the purchase price of acquired hotel properties based on the fair value of the acquired land, land improvements, building, furniture, fixtures and equipment, identifiable intangible assets or liabilities, other assets and assumed liabilities. Intangible assets may include certain value associated with the on-going operations of the hotel business being acquired as part of the hotel property acquisition.  Acquired intangible assets that derive their values from real property or an interest in real property, are inseparable from that real property or interest in real property, and do not produce or contribute to the production of income other than consideration for the use or occupancy of space, are recorded as a component of the related real estate asset in our Condensed Consolidated Financial Statements.  Identifiable intangible assets or liabilities may also arise from assumed contractual arrangements as part of the acquisition of the hotel property, including terms that are above or below market compared to an estimated fair market value of the agreement on the acquisition date. We determine the acquisition-date fair values of all assets and assumed liabilities using methods similar to those used by independent appraisers, including using a discounted cash flow analysis that uses appropriate discount or capitalization rates and available market information.  Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. 

If substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset or group of similar identifiable assets, the asset or asset group is not considered a business. When we conclude that an acquisition meets this threshold, acquisition costs will be capitalized as part of our allocation of the purchase price of the acquired hotel properties.

Our hotel properties and related assets are recorded at cost, less accumulated depreciation. We capitalize hotel development costs and the costs of significant additions and improvements that materially upgrade, increase the value or extend the useful life of the property. These costs may include hotel development, refurbishment, renovation, and remodeling expenditures, as well as certain indirect internal costs related to construction projects. If an asset requires a period of time in which to carry out the activities necessary to bring it to the condition necessary for its intended use, the interest cost incurred during that period as a result of expenditures for the asset is capitalized as part of the cost of the asset. We expense the cost of repairs and maintenance as incurred.

We generally depreciate our hotel properties and related assets using the straight-line method over their estimated useful lives as follows:

Classification	Estimated Useful Lives
Buildings and improvements	6 to 40 years
Furniture, fixtures and equipment	2 to 15 years

We periodically re-evaluate asset lives based on current assessments of remaining utilization, which may result in changes in estimated useful lives. Such changes are accounted for prospectively and will increase or decrease future depreciation expense.

When depreciable property and equipment is retired or disposed, the related costs and accumulated depreciation are removed from the balance sheet and any gain or loss is reflected in current operations.

On a limited basis, we provide financing to developers of hotel properties for development projects. We evaluate these arrangements to determine if we participate in residual profits of the hotel property through the loan provisions or other agreements. Where we conclude that these arrangements are more appropriately treated as an investment in the hotel property, we reflect the loan as an investment in hotel properties under development in our Condensed Consolidated Balance Sheets. If classified as hotel properties under development, no interest income is recognized on the loan and interest expense is capitalized as part of our investment in the hotel property during the construction period.

We monitor events and changes in circumstances for indicators that the carrying value of a hotel property or land held for development may be impaired. Additionally, we perform at least annual reviews to monitor the factors that could trigger an impairment.  Factors that we consider for an impairment analysis include, among others: i) significant underperformance relative to historical or anticipated operating results, ii) significant changes in the manner of use of a property or the strategy of our overall business, including changes in the estimated holding periods for hotel properties and land parcels, iii) a significant increase in competition, iv) a significant adverse change in legal factors or regulations, and v) significant negative industry or economic trends. When such factors are identified, we prepare an estimate of the undiscounted future cash flows of the specific property and determine if the carrying amount of the asset is recoverable. If an impairment is identified, we estimate the fair value of the property based on discounted cash flows or sales price if the property is under contract and an adjustment is made to reduce the carrying value of the property to its estimated fair value.

Intangible Assets

Intangible Assets

We amortize intangible assets with determined finite useful lives using the straight-line method.  We do not amortize intangible assets with indefinite useful lives, but we evaluate these assets for impairment annually or at interim periods if events or circumstances indicate that the asset may be impaired.

Assets Held for Sale

Assets Held for Sale

We periodically review our hotel properties and our land held for development based on established criteria such as age, type of franchise, adverse economic and competitive conditions, and strategic fit to identify properties that we believe are either non-strategic or no longer complement our business. Based on our review, we periodically market properties for sale that no longer meet our investment criteria.

We classify assets as Assets Held for Sale in the period in which certain criteria are met, including when the sale of the asset within one year is probable.  Assets classified as Assets Held for Sale are no longer depreciated and are carried at the lower of carrying amount or fair value less selling costs.

Variable Interest Entities

Variable Interest Entities

We consolidate variable interest entities (each a “VIE”) if we determine that we are the primary beneficiary of the entity.  When evaluating the accounting for a VIE, we consider the purpose for which the VIE was created, the importance of each of the activities in which it is engaged and our decision-making role, if any, in those activities that significantly determine the entity’s economic performance relative to other economic interest holders.  We determine our rights, if any, to receive benefits or the obligation to absorb losses that could potentially be significant to the VIE by considering the economic interest in the entity, regardless of form, which may include debt, equity, management and servicing fees, or other contractual arrangements.  We consider other relevant factors including each entity’s capital structure, contractual rights to earnings or obligations for losses, subordination of our interests relative to those of other investors, contingent payments, and other contractual arrangements that may be economically significant.

Additionally, we have in the past and may in the future enter into purchase and sale transactions in accordance with Section 1031 of the Internal Revenue Code of 1986, as amended (“IRC”), for the exchange of like-kind property to defer taxable gains on the sale of real estate properties (“1031 Exchange”).  For reverse transactions under a 1031 Exchange in which we purchase a new property prior to selling the property to be matched in the like-kind exchange (we refer to a new property being acquired by us in the 1031 Exchange prior to the sale of the related property as a “Parked Asset”), legal title to the Parked Asset is held by a qualified intermediary engaged to execute the 1031 Exchange until the sale transaction and the 1031 Exchange is completed.  We retain essentially all of the legal and economic benefits and obligations related to a Parked Asset prior to completion of a 1031 Exchange.   As such, a Parked Asset is included in our Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations as a consolidated VIE until legal title is transferred to us upon completion of the 1031 Exchange. 

Cash and Cash Equivalents

Cash and Cash Equivalents

We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. At times, cash on deposit may exceed the federally insured limit. We maintain our cash with high credit quality financial institutions.

Restricted Cash

Restricted Cash

Restricted cash consists of certain funds maintained in escrow for property taxes, insurance, and certain capital expenditures. Funds may be disbursed from the account upon proof of expenditures and approval from the lender or other party requiring the restricted cash reserves.

Trade Receivables and Credit Policies

Trade Receivables and Credit Policies

We grant credit to qualified customers, generally without collateral, in the form of trade accounts receivable. Trade receivables result from the rental of hotel guestrooms and the sales of food, beverage, and banquet services and are payable under normal trade terms. Trade receivables also include credit and debit card transactions that are in the process of being settled. Trade receivables are stated at the amount billed to the customer and do not accrue interest.

We regularly review the collectability of our trade receivables. A provision for losses is determined on the basis of previous loss experience and current economic conditions. 

Deferred Charges, net

Deferred Charges, net

Initial franchise application fees are capitalized and amortized over the term of the franchise agreement using the straight-line method.

Deferred Financing Fees

Deferred Financing Fees

Debt issuance costs are presented as a direct deduction from the carrying value of the debt liability on the Condensed Consolidated Balance Sheets. Debt issuance costs are amortized as a component of interest expense over the term of the related debt using the straight-line method, which approximates the interest method.

Non-controlling Interests

Non-controlling Interests

Non-controlling interests represent the portion of equity in a consolidated entity held by owners other than the consolidating parent. Non-controlling interests are reported in the Condensed Consolidated Balance Sheets within equity, separately from stockholders’ equity. Revenue, expenses and net income attributable to both the Company and the non-controlling interests are reported in the Condensed Consolidated Statements of Operations.

Our Condensed Consolidated Financial Statements include non-controlling interests related to common units of limited partnership interests (“Common Units”) in the Operating Partnership held by unaffiliated third parties.

Revenue Recognition

Revenue Recognition

On January 1, 2018, we adopted ASU No. 2014-09, Revenue from Contracts with Customers. In accordance with ASU No. 2014-09, we recognize revenue when guestrooms are occupied, services have been rendered or fees have been earned. Revenues are recorded net of any sales and other taxes collected from customers and discounts. Cash received prior to guest arrival is recorded as an advance from the customer and is recognized as revenue at the time of occupancy.

Sales and Other Taxes

Sales and Other Taxes

We have operations in states and municipalities that impose sales or other taxes on certain sales. We collect these taxes from our customers and remit the entire amount to the various governmental units. The taxes collected and remitted are excluded from revenues and are included in accrued expenses until remitted.

Equity-Based Compensation

Equity-Based Compensation

Our 2011 Equity Incentive Plan, which was amended and restated effective June 15, 2015 (as amended, the “Equity Plan”), provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, and other stock-based awards. We account for the stock options granted upon completion of our IPO at fair value using the Black-Scholes option-pricing model and we account for all other awards of equity, including time-based and performance-based stock awards, using the grant date fair value of those equity awards. Restricted stock awards with performance-based vesting conditions are market-based awards tied to total stockholder return and are valued using a Monte Carlo simulation model in accordance with ASC Topic 718, Compensation — Stock Compensation. We expense the fair value of awards under the Equity Plan ratably over the vesting period and market-based awards are not adjusted for performance. The amount of stock-based compensation expense may be subject to adjustment in future periods due to a change in forfeiture assumptions or modification of previously granted awards.

On January 1, 2018, we adopted ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. As such, we account for certain changes to share-based payment awards using modification accounting, which may result in incremental stock-based compensation expense based on the remeasurement of the award on the modification date.

Derivative Financial Instruments and Hedging

Derivative Financial Instruments and Hedging

All derivative financial instruments are recorded at fair value as a net asset or liability in our Condensed Consolidated Balance Sheets. We use interest rate derivatives to hedge our risks on variable-rate debt. Interest rate derivatives could include swaps, caps and floors. We assess the effectiveness of each hedging relationship by comparing changes in fair value or cash flows of the derivative financial instrument with the changes in fair value or cash flows of the designated hedged item or transaction.

During 2017, we adopted ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. Accordingly, beginning in 2017, the change in the fair value of the hedging instruments is recorded in Other comprehensive income. Amounts deferred in Other comprehensive income will be reclassified to Interest expense in our Condensed Consolidated Statements of Operations in the period in which the hedged item affects earnings.

Income Taxes

Income Taxes

We have elected to be taxed as a REIT under certain provisions of the IRC. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute annually to our stockholders at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains, which does not necessarily equal net income as calculated in accordance with GAAP. As a REIT, we generally will not be subject to federal income tax (other than taxes paid by our TRS at regular corporate income tax rates) to the extent we distribute 100% of our REIT taxable income to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate income tax rates and generally will be unable to re-elect REIT status until the fifth calendar year after the year in which we failed to qualify as a REIT, unless we satisfy certain relief provisions.

Substantially all of our assets are held by and all of our operations are conducted through our Operating Partnership. Partnerships are not subject to U.S. federal income taxes as revenues and expenses pass through to and are taxed on the owners. Generally, the states and cities where partnerships operate follow the U.S. federal income tax treatment. However, there are a limited number of local and state jurisdictions that tax the taxable income of the Operating Partnership.  Accordingly, we provide for income taxes in these jurisdictions for the Operating Partnership.

Taxable income related to our TRS is subject to federal, state and local income taxes at applicable tax rates. Our consolidated income tax provision includes the income tax provision related to the operations of the TRS as well as state and local income taxes related to the Operating Partnership.

Where required, we account for federal and state income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for: i) the future tax consequences attributable to differences between carrying amounts of existing assets and liabilities based on GAAP and the respective carrying amounts for tax purposes, and ii) operating losses and tax-credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date of the change in tax rates. However, deferred tax assets are recognized only to the extent that it is more likely than not they will be realized based on consideration of available evidence, including future reversals of taxable temporary differences, future projected taxable income and tax planning strategies.

We perform a review of any uncertain tax positions and if necessary will record expected future tax consequences of uncertain tax positions in the financial statements.

Fair Value Measurement

Fair Value Measurement

Fair value measures are classified into a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1:	Observable inputs such as quoted prices in active markets.
Level 2:	Directly or indirectly observable inputs, other than quoted prices in active markets.
Level 3:	Unobservable inputs in which there is little or no market information, which require a reporting entity to develop its own assumptions.

Assets and liabilities measured at fair value are based on one or more of the following valuation techniques:

Market approach:	Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
Cost approach:	Amount required to replace the service capacity of an asset (replacement cost).
Income approach:	Techniques used to convert future amounts to a single amount based on market expectations (including present-value, option-pricing, and excess-earnings models).

Our estimates of fair value were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts. We classify assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement.

On January 1, 2018, we adopted ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): 

Recognition and Measurement of Financial Assets and Financial Liabilities. Accordingly, we have elected a measurement alternative for equity investments, such as our purchase options, that do not have readily determinable fair values. Under the alternative, our purchase options are measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer, if any.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Reclassifications

Certain amounts reported in the Condensed Consolidated Statements of Operations in previous periods have been disaggregated and reclassified to conform to the current period presentation. Revenues have been disaggregated into Rooms, Food and beverage, and Other. Direct and Indirect expense has been reclassified into Room, Food and beverage, and Other hotel operating expenses. Property taxes, insurance and other, and Management expenses are also separately reported.

We have also reclassified certain intangible assets related to our acquisitions of hotel properties from Other assets to Investment in hotel properties, net, on the Condensed Consolidated Balance Sheet. See "Note 3 - Investment in Hotel Properties, net" for further details.

These reclassifications, made at June 30, 2018 and for the three and six months then ended, had no net effect on the previously reported financial position or results of operations.

New Accounting Standards

New Accounting Standards

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): 

Recognition and Measurement of Financial Assets and Financial Liabilities, which enhances the reporting requirements for the measurement of financial instruments and requires equity securities to be measured at fair value with changes in the fair value recognized through net income for the period. We adopted ASU No. 2016-01 for our fiscal year commencing on January 1, 2018. The adoption of ASU No. 2016-01 did not have a material effect on our consolidated financial position or our results of operations.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which changes lessee accounting to reflect the financial liability and right-of-use assets that are inherent to leasing an asset on the balance sheet. ASU No. 2016-02 is effective for our fiscal year commencing on January 1, 2019, but early adoption is permitted. We anticipate that we will adopt ASU No. 2016-02 for our fiscal year commencing on January 1, 2019. We expect to apply the modified retrospective approach such that we will account for leases that commenced before the effective date of ASU No. 2016-02 in accordance with previous GAAP unless the lease is modified, except we will recognize right-of-use assets and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. We are currently in the process of analyzing our leases. As such, we do not expect the adoption of ASU No. 2016-02 to have a material impact on our consolidated financial statements except for recognition of the right-of-use assets and related lease liability accounts on the consolidated balance sheet.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses the Statement of Cash Flow classification and presentation of certain cash transactions. We adopted ASU No. 2016-15 for our fiscal year commencing on January 1, 2018. The effect of this amendment has been applied retrospectively. The adoption of ASU No. 2016-15 did not have a material effect on our consolidated financial position or our results of operations.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which clarifies how companies should present restricted cash and restricted cash equivalents in the statement of cash flows. This guidance requires companies to show the changes in the total of cash, cash equivalents and restricted cash in the statement of cash flows. We retrospectively adopted ASU No. 2016-18 for our fiscal year commencing on January 1, 2018. The adoption of ASU No. 2016-18 did not have a material effect on our consolidated financial position or our results of operations.

In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in accordance with ASC No. 718, Compensation - Stock Compensation. We adopted ASC No. 2017-09 for our fiscal year commencing on January 1, 2018. This guidance is to be applied prospectively to an award modified on or after the adoption date. We applied the requirements of ASU No. 2017-09 to the modification of certain stock awards as described in "Note 9 - Equity-Based Compensation".

In February 2018, the FASB issued ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which clarifies how an entity should measure certain equity securities. ASU 2018-03 is effective for our fiscal year commencing on January 1, 2019, but we have early adopted ASU No. 2018-03 for our fiscal year commencing on January 1, 2018. The adoption of ASU No 2018-03 did not have a material effect on our consolidated financial position or results of operations.

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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Schedule of estimated useful lives of hotel properties

We generally depreciate our hotel properties and related assets using the straight-line method over their estimated useful lives as follows:

Classification	Estimated Useful Lives
Buildings and improvements	6 to 40 years
Furniture, fixtures and equipment	2 to 15 years

Fair value measurements hierarchy

Fair value measures are classified into a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1:	Observable inputs such as quoted prices in active markets.
Level 2:	Directly or indirectly observable inputs, other than quoted prices in active markets.
Level 3:	Unobservable inputs in which there is little or no market information, which require a reporting entity to develop its own assumptions.

Fair value valuation techniques

Assets and liabilities measured at fair value are based on one or more of the following valuation techniques:

Market approach:	Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
Cost approach:	Amount required to replace the service capacity of an asset (replacement cost).
Income approach:	Techniques used to convert future amounts to a single amount based on market expectations (including present-value, option-pricing, and excess-earnings models).

The estimated fair values of the purchase options were based on unobservable inputs for which there is little or no market information available and required us to develop our own assumptions as follows (dollar amounts in thousands):

	Real Estate Loan 1			Real Estate Loan 2			Real Estate Loan 3
Exercise price	$	15,143		$	17,377		$	5,503
First option exercise date	12/31/2018			3/31/2019			5/31/2019
Last option exercise date	11/1/2020			12/5/2020			12/1/2020
Expected volatility	32.0		%	38.0		%	37.0		%
Risk free rate	1.7		%	1.8		%	1.9		%
Expected annualized equity dividend yield	6.8		%	9.9		%	6.5		%

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INVESTMENT IN HOTEL PROPERTIES, NET (Tables)

6 Months Ended

Jun. 30, 2018

Business Combinations [Abstract]

Schedule of investment in hotel properties, net

Investment in hotel properties, net at June 30, 2018 and December 31, 2017 is as follows (in thousands):

	June 30, 2018			December 31, 2017
Land	$	265,699		$	272,932
Hotel buildings and improvements	1,850,655			1,868,273
Intangible assets	22,764			22,764
Construction in progress	15,410			12,464
Furniture, fixtures and equipment	180,446			174,126
	2,334,974			2,350,559
Less - accumulated depreciation and amortization	(320,387		)	(291,067		)
	$	2,014,587		$	2,059,492

Schedule of intangible assets and intangible liabilities

Intangible assets included in Investment in hotel properties, net and intangible liabilities included in Accrued expenses and other in our Condensed Consolidated Balance Sheets include the following (in thousands):

	June 30, 2018			December 31, 2017
Intangible assets:
Air rights (1)	$	10,754		$	10,754
Favorable leases (2)	10,569			10,569
In-place lease agreements	1,361			1,361
Other	80			80
	22,764			22,764
Less accumulated amortization	(1,411		)	(1,001		)
Intangible assets, net	$	21,353		$	21,763
Intangible liabilities:
Unfavorable leases (2)	$	5,002		$	5,002
Less accumulated amortization	(333		)	(285		)
Intangible liabilities, net	$	4,669		$	4,717

(1) In conjunction with the acquisition of the Courtyard by Marriott - Charlotte, NC, the Company acquired certain air rights related to the hotel property.

(2) Intangible assets and liabilities are recorded on contracts assumed as part of the acquisition of certain hotels. Above-market and below-market contract values are based on the present value of the difference between contractual amounts to be paid pursuant to the contracts assumed and our estimate of the fair market contract rates for corresponding contracts measured over a period equal to the remaining non-cancelable term of the contracts assumed. Intangible assets and liabilities are amortized over the remaining non-cancelable term of the related contracts.

Schedule of sale of hotels

The agreements were modified on various occasions between 2015 and 2017 such that we sold 23 hotels containing 2,448 guestrooms to HIT in three tranches over that time period for a combined price of approximately $325.1 million (collectively, the “HIT Sale”) as follows (dollars in thousands):

Tranche	Closing Date	Hotels Sold	Sales Price
1	October 2015	10	$	150,000
2	February 2016	6	108,300
3	April 2017	7	66,800
		23	$	325,100

Assets Held for Sale at June 30, 2018 also include four hotels under contract for sale that are expected to close during the three months ended September 30, 2018 as follow:

Property	Guestrooms
Sale 1:
Hilton Garden Inn - Smyrna, TN	112
Hampton Inn & Suites - Smyrna, TN	83
Hyatt Place Phoenix North - Phoenix, AZ	127
	322
Sale 2:
Hyatt Place - Fort Myers, FL	148
	470

Schedule of hotel property acquisitions

A summary of the hotel properties acquired during the six months ended June 30, 2017 is as follows (in thousands):

Date Acquired	Franchise/Brand	Location	Purchase Price
March 1, 2017	Homewood Suites	Aliso Viejo (Laguna Beach), CA	$	38,000
March 30, 2017	Hyatt Place	Phoenix (Mesa), AZ	22,200
May 23, 2017	Courtyard by Marriott	Fort Lauderdale, FL	85,000
June 9, 2017	Courtyard by Marriott	Charlotte, NC	56,250
June 21, 2017	Courtyard by Marriott	Fort Worth, TX	40,000
June 21, 2017	Courtyard by Marriott	Kansas City, MO	24,500
June 21, 2017	Courtyard by Marriott	Pittsburgh, PA	42,000
June 21, 2017	Hampton Inn & Suites	Baltimore, MD	18,000
June 21, 2017	Residence Inn by Marriott	Baltimore, MD	38,500
			$	364,450	(1)

(1)    The net assets acquired totaled $367.4 million due to the purchase at settlement of $0.8 million of net working capital assets and capitalized transaction costs of $2.1 million

Schedule of allocation of the aggregate purchase prices to the fair value of assets acquired and liabilities assumed

The allocation of the aggregate purchase prices to the fair value of assets and liabilities acquired for the above acquisitions is as follows (in thousands):

	For the Six Months Ended June 30, 2017
Land	$	61,616
Hotel buildings and improvements	274,961
Intangible assets	15,710
Furniture, fixtures and equipment	14,314
Other assets	1,775
Total assets acquired	368,376
Less - other liabilities assumed	(990		)
Net assets acquired	$	367,386

Schedule of unaudited condensed pro forma financial information

The unaudited condensed pro forma financial information for the 80 hotel properties owned at June 30, 2018 for the three and six months ended June 30, 2018 and 2017 is as follows (in thousands, except per share):

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2018		2017		2018		2017
Revenues	$	148,501	$	144,912	$	285,145	$	278,044
Income from hotel operations	$	56,877	$	56,769	$	106,148	$	106,232
Net income (1)	$	19,640	$	25,656	$	28,971	$	47,072
Net income attributable to common stockholders, net of amount allocated to participating securities (1) (2)	$	15,765	$	21,249	$	16,256	$	38,279
Basic and diluted net income per share attributable to common stockholders (1) (2)	$	0.15	$	0.22	$	0.16	$	0.40

(1) Pro forma amounts include depreciation expense, property tax expense, interest expense, income tax expense, and other corporate expenses totaling $49.0 million and $39.1 million for the three months ended June 30, 2018 and 2017, respectively, and $97.8 million and $76.0 million for the six months ended June 30, 2018 and 2017, respectively.

(2) Pro forma amounts for the three and six months ended June 30, 2018 include the effect of the premium on redemption of preferred stock of $3.3 million.

Disclosure of assets held for sale

Assets held for sale at June 30, 2018 and December 31, 2017 include the following (in thousands):

	June 30, 2018		December 31, 2017
Land	$	7,410	$	1,193
Hotel buildings and improvements	28,558		—
Furniture, fixtures and equipment	1,745		—
Construction in progress	15		—
Franchise fees and other	150		—
	$	37,878	$	1,193

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DEBT (Tables)

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Schedule of outstanding indebtedness

Debt, net of debt issuance costs, is as follows (in thousands):

	June 30, 2018			December 31, 2017
Revolving debt	$	45,000		$	15,000
Term loans	600,000			515,000
Mortgage loans	310,813			343,109
	955,813			873,109
Unamortized debt issuance costs	(5,316		)	(4,873		)
Debt, net of debt issuance costs	$	950,497		$	868,236

Schedule of fixed-rate and variable-rate debt, after giving effect to interest rate derivative

Our total fixed-rate and variable-rate debt, after considering our interest rate derivative agreements that are currently effective, is as follows (in thousands):

	June 30, 2018		Percentage	December 31, 2017		Percentage
Fixed-rate debt	$	554,461	58%	$	386,313	44%
Variable-rate debt	401,352		42%	486,796		56%
	$	955,813		$	873,109

Schedule of the fair value of fixed-rate that is debt not recorded at fair value

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

	June 30, 2018				December 31, 2017
	Carrying Value		Fair Value		Carrying Value		Fair Value		Valuation Technique
Fixed-rate debt	$	279,461	$	276,635	$	311,313	$	310,535	Level 2 - Market approach

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DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING (Tables)

6 Months Ended

Jun. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of derivative financial instruments

Information about our derivative financial instruments at June 30, 2018 and December 31, 2017 is as follows (dollars in thousands): 

			Notional Amount					Fair Value
Contract date	Effective Date	Expiration Date	June 30, 2018			December 31, 2017		June 30, 2018			December 31, 2017
September 5, 2013	January 2, 2014	October 1, 2018	$	75,000	(1)	$	75,000	$	14		$	(190	)
October 2, 2017	January 29, 2018	January 31, 2023	100,000		(2)	100,000		3,231			722
October 2, 2017	January 29, 2018	January 31, 2023	100,000		(2)	100,000		3,299			787
June 11, 2018	September 28, 2018	September 30, 2024	75,000		(3)	—		(347		)	—
June 11, 2018	December 31, 2018	December 31, 2025	125,000		(4)	—		(772		)	—
			$	475,000		$	275,000	$	5,425		$	1,319

(1) Interest rate swap is related to a portion of our 2016 Unsecured Credit Facility and converts LIBOR from a floating rate to an average annual fixed rate of 2.04%.

(2) Interest rate swap partially fixes the interest rate on a portion of our variable interest rate unsecured indebtedness and converts LIBOR from a floating rate to an average annual fixed rate of 1.98%.

(3) Interest rate swap partially fixes the interest rate on a portion of our variable interest rate unsecured indebtedness and converts LIBOR from a floating rate to an average annual fixed rate of 2.87%.

(4) Interest rate swap partially fixes the interest rate on a portion of our variable interest rate unsecured indebtedness and converts LIBOR from a floating rate to an average annual fixed rate of 2.93%.

Schedule of the location in the financial statements of the gain or loss recognized on derivative financial instruments designated as cash flow hedges

The table below details the location in the financial statements of the gain or loss recognized on derivative financial instruments designated as cash flow hedges (in thousands):

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Gain(loss) recognized in Accumulated other comprehensive income on derivative financial instruments	$	309		$	(22	)	$	3,846		$	90
Loss reclassified from Accumulated other comprehensive income to Interest expense	$	(53	)	$	(196	)	$	(260	)	$	(433	)

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EQUITY (Tables)

6 Months Ended

Jun. 30, 2018

Equity [Abstract]

Schedule of common stock activity

Changes in common stock during the six months ended June 30, 2018 and 2017 were as follows:

	For the Six Months Ended June 30,
	2018		2017
Beginning common shares outstanding	104,287,128		93,525,469
Stock Offering	—		10,350,000
Grants under the Equity Plan	583,373		366,679
Common Unit redemptions	25,839		30,657
Annual grants to independent directors	34,130		23,896
Common stock issued for director fees	2,299		2,454
Forfeitures	(818	)	(1,237	)
Shares retained for employee tax withholding requirements	(187,850	)	(59,111	)
Ending common shares outstanding	104,744,101		104,238,807

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FAIR VALUE MEASUREMENT (Tables)

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Schedule of disclosures concerning financial instruments measured at fair value

Disclosures concerning financial instruments measured at fair value are as follows (in thousands):

	Fair Value Measurements at June 30, 2018 using
	Level 1		Level 2		Level 3		Total
Assets:
Interest rate swaps	$	—	$	6,544	$	—	$	6,544
Purchase options related to real estate loans	—		—		6,120		6,120
Liabilities:
Interest rate swaps	—		1,119		—		1,119

	Fair Value Measurements at December 31, 2017 using
	Level 1		Level 2		Level 3		Total
Assets:
Interest rate swaps	$	—	$	1,509	$	—	$	1,509
Purchase options related to real estate loans	—		—		6,078		6,078
Liabilities:
Interest rate swaps	—		190		—		190

Fair value valuation techniques

Assets and liabilities measured at fair value are based on one or more of the following valuation techniques:

Market approach:	Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
Cost approach:	Amount required to replace the service capacity of an asset (replacement cost).
Income approach:	Techniques used to convert future amounts to a single amount based on market expectations (including present-value, option-pricing, and excess-earnings models).

The estimated fair values of the purchase options were based on unobservable inputs for which there is little or no market information available and required us to develop our own assumptions as follows (dollar amounts in thousands):

	Real Estate Loan 1			Real Estate Loan 2			Real Estate Loan 3
Exercise price	$	15,143		$	17,377		$	5,503
First option exercise date	12/31/2018			3/31/2019			5/31/2019
Last option exercise date	11/1/2020			12/5/2020			12/1/2020
Expected volatility	32.0		%	38.0		%	37.0		%
Risk free rate	1.7		%	1.8		%	1.9		%
Expected annualized equity dividend yield	6.8		%	9.9		%	6.5		%

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EQUITY-BASED COMPENSATION (Tables)

6 Months Ended

Jun. 30, 2018

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule of equity-based compensation expense

Equity-based compensation expense included in Corporate general and administrative expenses in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2018 and 2017 was as follows (in thousands):

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2018		2017		2018		2017
Time-based restricted stock	$	516	$	590	$	1,352	$	1,066
Performance-based restricted stock	785		850		2,159		1,484
Director stock	520		424		537		444
	$	1,821	$	1,864	$	4,048	$	2,994

Schedule of unrecognized equity-based compensation expense for all non-vested awards

Unrecognized equity-based compensation expense for all non-vested awards pursuant to our Equity Plan was $9.2 million at June 30, 2018 and will be recorded as follows (in thousands):

	Total		2018		2019		2020		2021		2022
Time-based restricted stock	$	3,822	$	1,035	$	1,615	$	956	$	203	$	13
Performance-based restricted stock	5,361		1,568		2,320		1,287		186		—
	$	9,183	$	2,603	$	3,935	$	2,243	$	389	$	13

Restricted Stock Awards | Time-Based

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule of restricted stock awards

The following table summarizes time-based restricted stock award activity under our Equity Plan for the six months ended June 30, 2018:

	Number  of Shares		Weighted Average Grant Date  Fair Value		Aggregate Current Value
			(per share)		(in thousands)
Non-vested at December 31, 2017	391,477		$	13.52	$	5,962
Granted	185,565		13.15
Vested	(205,619	)	13.41
Forfeited	(818	)	12.84
Non-vested at June 30, 2018	370,605		$	13.40	$	5,303

Restricted Stock Awards | Performance-Based

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule of restricted stock awards

The following table summarizes performance-based restricted stock activity under the Equity Plan for the six months ended June 30, 2018:

	Number  of Shares		Weighted Average Grant Date  Fair Value (1)		Aggregate Current Value
			(per share)		(in thousands)
Non-vested at December 31, 2017	619,429		$	16.16	$	9,434
Granted	397,808		15.69
Vested	(309,010	)	18.78
Non-vested at June 30, 2018	708,227		$	14.75	$	10,135

(1) The amounts included in this column represent the expected future value of the performance-based restricted stock awards calculated using the Monte Carlo simulation valuation model.

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EARNINGS PER SHARE (Tables)

6 Months Ended

Jun. 30, 2018

Earnings Per Share [Abstract]

Summary of the components used to calculate basic and diluted earnings per share

Below is a summary of the components used to calculate basic and diluted earnings per share (in thousands, except per share):

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Numerator:
Net income	$	37,677		$	34,083		$	47,368		$	67,289
Less: Preferred dividends	(3,709		)	(4,200		)	(9,252		)	(8,400		)
Premium on redemption of preferred stock	—			—			(3,277		)	—
Allocation to participating securities	(120		)	(126		)	(137		)	(240		)
Attributable to non-controlling interest	(101		)	(114		)	(104		)	(234		)
Net income attributable to common stockholders, net of amount allocated to participating securities	$	33,747		$	29,643		$	34,598		$	58,415
Denominator:
Weighted average common shares outstanding - basic	103,643			98,184			103,572			95,488
Dilutive effect of equity-based compensation awards	240			522			320			495
Weighted average common shares outstanding - diluted	103,883			98,706			103,892			95,983
Earnings per share:
Basic	$	0.33		$	0.30		$	0.33		$	0.61
Diluted	$	0.32		$	0.30		$	0.33		$	0.61

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DESCRIPTION OF BUSINESS (Details)	Jun. 30, 2018 hotel Room State
Properties
Number of hotels	80
Number of states in which hotel properties are located | State	26
Hotels
Properties
Number of hotels	80
Number of guestrooms | Room	11,978
Operating partnership | TRS Lessees
Properties
Ownership interest in joint venture	100.00%

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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details)	6 Months Ended
	Jun. 30, 2018 Segment
Segment Disclosure
Number of reportable segments	1

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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - Schedule of estimated useful lives of hotel properties (Details)	6 Months Ended
	Jun. 30, 2018
Buildings and improvements | Minimum
Property, Plant and Equipment [Abstract]
Estimated Useful Lives	6 years
Buildings and improvements | Maximum
Property, Plant and Equipment [Abstract]
Estimated Useful Lives	40 years
Furniture, fixtures and equipment | Minimum
Property, Plant and Equipment [Abstract]
Estimated Useful Lives	2 years
Furniture, fixtures and equipment | Maximum
Property, Plant and Equipment [Abstract]
Estimated Useful Lives	15 years

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INVESTMENT IN HOTEL PROPERTIES, NET - Schedule of investment in hotel properties (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Investment in Hotel Properties
Investment in hotel properties at cost	$ 2,334,974	$ 2,350,559
Less - accumulated depreciation and amortization	(320,387)	(291,067)
Investment in hotel properties, net	2,014,587	2,059,492
Land
Investment in Hotel Properties
Investment in hotel properties at cost	265,699	272,932
Hotel buildings and improvements
Investment in Hotel Properties
Investment in hotel properties at cost	1,850,655	1,868,273
Intangible assets
Investment in Hotel Properties
Investment in hotel properties at cost	22,764	22,764
Construction in progress
Investment in Hotel Properties
Investment in hotel properties at cost	15,410	12,464
Furniture, fixtures and equipment
Investment in Hotel Properties
Investment in hotel properties at cost	$ 180,446	$ 174,126

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INVESTMENT IN HOTEL PROPERTIES, NET - Narrative (Details) $ in Thousands			3 Months Ended	6 Months Ended		18 Months Ended	22 Months Ended
	Jun. 29, 2018 USD ($)	Mar. 30, 2017 USD ($)	Jun. 30, 2018 USD ($) hotel	Jun. 30, 2018 USD ($) hotel	Jun. 30, 2017 USD ($)	Jun. 27, 2018 USD ($) Room	Mar. 31, 2017 USD ($)	Jun. 02, 2017 USD ($)	Apr. 30, 2017 USD ($) hotel Room	Feb. 29, 2016 USD ($) hotel	Feb. 11, 2016 USD ($) hotel
Business Acquisition [Line Items]
Number of hotels | hotel			80	80
Assets held-for-sale
Business Acquisition [Line Items]
Number of hotels | hotel			4	4
Hyatt House | Orlando, FL
Business Acquisition [Line Items]
Number of guestrooms | Room						168
Construction costs, excluding land acquired						$ 32,700
Capitalized construction costs						1,600
Total construction costs						$ 37,100
Disposed of by Sale
Business Acquisition [Line Items]
Number of guestrooms | Room									2,448
Aggregate sales price									$ 325,100
Number of hotels | hotel									23
Disposed of by Sale | Four properties disposed on June 29, 2018
Business Acquisition [Line Items]
Net gain on sale of properties			$ 17,400	$ 17,400
Number of hotels | hotel			4	4
Disposed of by Sale | Portfolio of Hotels to HIT
Business Acquisition [Line Items]
Net gain on sale of properties							$ 15,000
Note receivable											$ 27,500
Disposed of by Sale | Portfolio of Hotels to HIT, Tranche Two
Business Acquisition [Line Items]
Aggregate sales price										$ 108,300	108,300
Receivable portion applied toward sale of hotel properties transaction by borrower											$ 20,000
Number of hotels | hotel										6	6
Deferred gain on sale of property											$ 20,000
Disposed of by Sale | Portfolio of Hotels to HIT, Tranche Three
Business Acquisition [Line Items]
Aggregate sales price									$ 66,800
Number of hotels | hotel									7
Earnest money deposits											$ 7,500
Disposed of by Sale | Holiday Inn Express & Suites, and Hampton Inn | Sandy, UT and Provo, UT
Business Acquisition [Line Items]
Aggregate sales price	$ 19,000
Disposed of by Sale | Holiday Inn and Hilton Garden Inn | Duluth, GA
Business Acquisition [Line Items]
Aggregate sales price	24,900
Note receivable	$ 3,600
Number of second mortgage notes	2
Second mortgage notes term	3 years 6 months
Mortgage notes interest rate	7.38%
Disposed of by Sale | Hyatt Place | Atlanta, GA
Business Acquisition [Line Items]
Aggregate sales price		$ 14,500
Net gain on sale of properties					$ 4,800
Repayment of mortgage loan		$ 6,500
Disposed of by Sale | Courtyard by Marriott | El Paso, TX
Business Acquisition [Line Items]
Aggregate sales price								$ 11,200
Net gain on sale of properties					$ 400

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INVESTMENT IN HOTEL PROPERTIES, NET - Schedule of intangible assets and liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Intangible assets:
Intangible assets, gross	$ 22,764	$ 22,764
Less accumulated amortization	(1,411)	(1,001)
Intangible assets, net	21,353	21,763
Intangible liabilities:
Unfavorable leases	5,002	5,002
Less accumulated amortization	(333)	(285)
Intangible liabilities, net	4,669	4,717
Favorable leases
Intangible assets:
Intangible assets, gross	10,569	10,569
In-place lease agreements
Intangible assets:
Intangible assets, gross	1,361	1,361
Air rights
Intangible assets:
Intangible assets, gross	10,754	10,754
Other
Intangible assets:
Intangible assets, gross	$ 80	$ 80

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INVESTMENT IN HOTEL PROPERTIES, NET - Schedule of sale of hotels (Details) $ in Thousands	Jun. 30, 2018 hotel Room	Apr. 30, 2017 USD ($) hotel Room	Feb. 29, 2016 USD ($) hotel	Feb. 11, 2016 USD ($) hotel	Oct. 31, 2015 USD ($) hotel
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of hotels | hotel	80
Disposed of by Sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of hotels | hotel		23
Number of guestrooms		2,448
Aggregate sales price | $		$ 325,100
Portfolio of Hotels to HIT, Tranche One | Disposed of by Sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of hotels | hotel					10
Aggregate sales price | $					$ 150,000
Portfolio of Hotels to HIT, Tranche Two | Disposed of by Sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of hotels | hotel			6	6
Aggregate sales price | $			$ 108,300	$ 108,300
Portfolio of Hotels to HIT, Tranche Three | Disposed of by Sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of hotels | hotel		7
Aggregate sales price | $		$ 66,800
Properties Held For Sale 1 | Disposed of by Sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of guestrooms	322
Properties Held For Sale 2 | Disposed of by Sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of guestrooms	470
Smyrna, TN | Hilton Garden Inn | Disposed of by Sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of guestrooms	112
Smyrna, TN | Hampton Inn & Suites | Disposed of by Sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of guestrooms	83
Phoenix, AZ | Hyatt Place | Disposed of by Sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of guestrooms	127
Fort Myers, FL | Hyatt Place | Disposed of by Sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of guestrooms	148

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INVESTMENT IN HOTEL PROPERTIES, NET - Summary of hotel properties acquired (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2017 USD ($)
Business Acquisition [Line Items]
Purchase Price	$ 364,450
Net assets acquired	367,386
Settlement amount of net working capital assets	800
Other assets and capitalized transaction costs	2,100
Homewood Suites | Aliso Viejo (Laguna Beach), CA
Business Acquisition [Line Items]
Purchase Price	38,000
Hyatt Place | Phoenix (Mesa), AZ
Business Acquisition [Line Items]
Purchase Price	22,200
Courtyard by Marriott | Fort Lauderdale, FL
Business Acquisition [Line Items]
Purchase Price	85,000
Courtyard by Marriott | Charlotte, NC
Business Acquisition [Line Items]
Purchase Price	56,250
Courtyard by Marriott | Fort Worth, TX
Business Acquisition [Line Items]
Purchase Price	40,000
Courtyard by Marriott | Kansas City, MO
Business Acquisition [Line Items]
Purchase Price	24,500
Courtyard by Marriott | Pittsburgh, PA
Business Acquisition [Line Items]
Purchase Price	42,000
Hampton Inn & Suites | Baltimore, MD
Business Acquisition [Line Items]
Purchase Price	18,000
Residence Inn by Marriott | Baltimore, MD
Business Acquisition [Line Items]
Purchase Price	$ 38,500

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INVESTMENT IN HOTEL PROPERTIES, NET - Allocation of aggregate purchase prices (Details) $ in Thousands	Jun. 30, 2017 USD ($)
Allocation of the aggregate purchase prices to the fair value of assets and liabilities acquired
Land	$ 61,616
Hotel buildings and improvements	274,961
Intangible assets	15,710
Furniture, fixtures and equipment	14,314
Other assets	1,775
Total assets acquired	368,376
Less - other liabilities assumed	(990)
Net assets acquired	$ 367,386

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INVESTMENT IN HOTEL PROPERTIES, NET - Pro forma financial information (Details) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018 USD ($) hotel $ / shares	Jun. 30, 2017 USD ($) $ / shares	Jun. 30, 2018 USD ($) hotel $ / shares	Jun. 30, 2017 USD ($) $ / shares
Business Combinations [Abstract]
Number of hotels owed | hotel	80		80
Revenues	$ 148,501	$ 144,912	$ 285,145	$ 278,044
Income from hotel operations	56,877	56,769	106,148	106,232
Net income	19,640	25,656	28,971	47,072
Net income attributable to common stockholders, net of amount allocated to participating securities	$ 15,765	$ 21,249	$ 16,256	$ 38,279
Basic net income per share attributable to common shareholders (in dollars per share) | $ / shares	$ 0.15	$ 0.22	$ 0.16	$ 0.40
Diluted net income per share attributable to common shareholders (in dollars per share) | $ / shares	$ 0.15	$ 0.22	$ 0.16	$ 0.40
Real estate tax expense, depreciation expense, interest expense, and other corporate expenses	$ 49,000	$ 39,100	$ 97,800	$ 76,000
Premium on redemption of preferred stock			$ 3,300

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INVESTMENT IN HOTEL PROPERTIES, NET - Schedule of assets held for sale (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Assets held for sale, net	$ 37,878	$ 1,193
Assets held-for-sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Assets held for sale, net	37,878	1,193
Land | Assets held-for-sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Assets held for sale, net	7,410	1,193
Hotel buildings and improvements | Assets held-for-sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Assets held for sale, net	28,558	0
Furniture, fixtures and equipment | Assets held-for-sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Assets held for sale, net	1,745	0
Construction in progress | Assets held-for-sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Assets held for sale, net	15	0
Franchise fees and other | Assets held-for-sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Assets held for sale, net	$ 150	$ 0

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DEBT - Schedule of debt (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Debt Instrument [Line Items]
Debt, gross	$ 955,813	$ 873,109
Unamortized debt issuance costs	(5,316)	(4,873)
Debt, net of debt issuance costs	950,497	868,236
Unsecured debt | Revolving debt
Debt Instrument [Line Items]
Debt, gross	45,000	15,000
Unsecured debt | Term loans
Debt Instrument [Line Items]
Debt, gross	600,000	515,000
Mortgage loans
Debt Instrument [Line Items]
Debt, gross	$ 310,813	$ 343,109

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DEBT - Fixed-rate and variable-rate debt (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Debt
Fixed-rate debt	$ 554,461	$ 386,313
Fixed rate debt, percentage	58.00%	44.00%
Variable-rate debt	$ 401,352	$ 486,796
Variable-rate debt, percentage	42.00%	56.00%
Debt, gross	$ 955,813	$ 873,109
Carrying Value
Debt
Fixed-rate debt	279,461	311,313
Level 2 | Fair Value
Debt
Fixed-rate debt	$ 276,635	$ 310,535

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DEBT - Narrative (Details)					6 Months Ended			12 Months Ended
	May 16, 2018 USD ($)	Apr. 02, 2018 USD ($) Loan	Feb. 15, 2018 USD ($)	Sep. 26, 2017 USD ($)	Jun. 30, 2018 USD ($) Property	Dec. 31, 2017 USD ($)	Jun. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)	Jan. 15, 2016 USD ($)	Apr. 08, 2015 USD ($)	Apr. 07, 2015 USD ($)	Sep. 05, 2013 USD ($)
Debt Instrument [Line Items]
Weighted average interest rate for all borrowings, after giving effect to interest rate derivatives (as a percent)					4.20%			3.89%
Number of properties that served as collateral for loans | Property					51
Principal payments on debt					$ 337,297,000		$ 178,178,000
Long-term debt					950,497,000	$ 868,236,000		$ 868,236,000
Secured and unsecured debt | Total term loans
Debt Instrument [Line Items]
Long-term debt					910,800,000
Secured debt | Total term loans
Debt Instrument [Line Items]
Long-term debt					310,800,000
Secured debt | Non-recourse Loan | Metabank
Debt Instrument [Line Items]
Debt instrument, face amount							$ 47,600,000.0
Amount drawn on secured debt						$ 47,600,000
Fixed interest rate						4.44%		4.44%
Debt instrument, interest only payments term								18 months
Debt instrument, amortization period after interest only payments period								25 years
Unsecured debt | $450 Million Senior Unsecured Credit Facility
Debt Instrument [Line Items]
Debt instrument, face amount					450,000,000.0	$ 450,000,000.0		$ 450,000,000.0
Maximum borrowing capacity					450,000,000.0				$ 450,000,000.0
Maximum increase in borrowing capacity available through accordion feature option					150,000,000.0
Unsecured debt | $300 Million Revolving Credit Facility
Debt Instrument [Line Items]
Debt instrument, face amount									300,000,000.0
Amount available for borrowing					255,000,000
Long-term debt					$ 45,000,000
Unsecured debt | $150 Million Term Loan
Debt Instrument [Line Items]
Debt instrument, face amount									$ 150,000,000
Fixed interest rate					3.79%
Long-term debt					$ 150,000,000
Unsecured debt | 2015 Term Loan
Debt Instrument [Line Items]
Debt instrument, face amount										$ 140,000,000.0	$ 125,000,000.0
Principal payments on debt			$ 140,000,000
Unsecured debt | 2017 Term Loan
Debt Instrument [Line Items]
Debt instrument, face amount				$ 225,000,000.0
Maximum increase in borrowing capacity available through accordion feature option				$ 175,000,000.0
Debt instrument, effective interest rate					3.84%
Unsecured debt | 2018 Term Loan
Debt Instrument [Line Items]
Debt instrument, face amount			225,000,000.0
Maximum increase in borrowing capacity available through accordion feature option			150,000,000.0
Debt instrument, effective interest rate					4.14%
Amount drawn on unsecured debt	$ 85,000,000		$ 140,000,000
Mortgage loans | Western Alliance Bank
Debt Instrument [Line Items]
Debt instrument, effective interest rate		5.39%
Principal payments on debt		$ 23,900,000
Number of debt instrument | Loan		4
Option One | Minimum | LIBOR | Unsecured debt | 2017 Term Loan
Debt Instrument [Line Items]
Debt basis spread on variable rate				1.45%
Option One | Minimum | LIBOR | Unsecured debt | 2018 Term Loan
Debt Instrument [Line Items]
Debt basis spread on variable rate			1.80%
Option One | Maximum | LIBOR | Unsecured debt | 2017 Term Loan
Debt Instrument [Line Items]
Debt basis spread on variable rate				2.20%
Option One | Maximum | LIBOR | Unsecured debt | 2018 Term Loan
Debt Instrument [Line Items]
Debt basis spread on variable rate			2.55%
Option Two | LIBOR | Unsecured debt | 2017 Term Loan
Debt Instrument [Line Items]
Debt basis spread on variable rate				1.00%
Option Two | LIBOR | Unsecured debt | 2018 Term Loan
Debt Instrument [Line Items]
Debt basis spread on variable rate			1.00%
Option Two | Federal Funds Rate | Unsecured debt | 2017 Term Loan
Debt Instrument [Line Items]
Debt basis spread on variable rate				0.50%
Option Two | Federal Funds Rate | Unsecured debt | 2018 Term Loan
Debt Instrument [Line Items]
Debt basis spread on variable rate			0.50%
Option Two | Minimum | Base rate | Unsecured debt | 2017 Term Loan
Debt Instrument [Line Items]
Debt basis spread on variable rate				0.45%
Option Two | Minimum | Base rate | Unsecured debt | 2018 Term Loan
Debt Instrument [Line Items]
Debt basis spread on variable rate			0.80%
Option Two | Maximum | Base rate | Unsecured debt | 2017 Term Loan
Debt Instrument [Line Items]
Debt basis spread on variable rate				1.20%
Option Two | Maximum | Base rate | Unsecured debt | 2018 Term Loan
Debt Instrument [Line Items]
Debt basis spread on variable rate			1.55%
Designated as hedges | Interest rate swaps
Debt Instrument [Line Items]
Notional Amount					$ 475,000,000	275,000,000		275,000,000
Designated as hedges | Cash flow hedges | Interest rate swaps
Debt Instrument [Line Items]
Notional Amount												$ 75,000,000.0
Designated as hedges | Cash flow hedges | Interest rate swaps | LIBOR
Debt Instrument [Line Items]
Fixed interest rate					2.04%
Revolving Credit Facility
Debt Instrument [Line Items]
Debt instrument, effective interest rate					3.89%
Revolving Credit Facility | Option One | Minimum | LIBOR
Debt Instrument [Line Items]
Debt basis spread on variable rate					1.50%
Revolving Credit Facility | Option One | Maximum | LIBOR
Debt Instrument [Line Items]
Debt basis spread on variable rate					2.25%
Revolving Credit Facility | Option Two | LIBOR
Debt Instrument [Line Items]
Debt basis spread on variable rate					1.00%
Revolving Credit Facility | Option Two | Federal Funds Rate
Debt Instrument [Line Items]
Debt basis spread on variable rate					0.50%
Revolving Credit Facility | Option Two | Minimum
Debt Instrument [Line Items]
Debt instrument, base rate margin					0.50%
Revolving Credit Facility | Option Two | Maximum
Debt Instrument [Line Items]
Debt instrument, base rate margin					1.25%
Fair Value
Debt Instrument [Line Items]
Debt with variable interest rates that had been converted to fixed interest rates					$ 275,000,000	$ 75,000,000		$ 75,000,000

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DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING - Schedule of derivative financial instruments (Details) - Designated as hedges - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Interest rate swaps
Derivative financial instruments and hedging
Notional Amount	$ 475,000	$ 275,000
Fair Value	5,425	1,319
Interest Rate Swap Expiring October 1, 2018
Derivative financial instruments and hedging
Notional Amount	75,000	75,000
Fair Value	$ 14	(190)
Derivative average fixed interest rate	2.04%
Interest Rate Swap Expiring January 31, 2023
Derivative financial instruments and hedging
Derivative average fixed interest rate	1.98%
Interest Rate Swap Expiring January 31, 2023 One
Derivative financial instruments and hedging
Notional Amount	$ 100,000	100,000
Fair Value	3,231	722
Interest Rate Swap Expiring January 31, 2023 Two
Derivative financial instruments and hedging
Notional Amount	100,000	100,000
Fair Value	3,299	787
Interest Rate Swap Expiring September 30, 2024
Derivative financial instruments and hedging
Notional Amount	75,000	0
Fair Value	$ (347)	0
Derivative average fixed interest rate	2.87%
Interest Rate Swap Expiring December 31, 2025
Derivative financial instruments and hedging
Notional Amount	$ 125,000	0
Fair Value	$ (772)	$ 0
Derivative average fixed interest rate	2.93%

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DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING - Narrative (Details) $ in Thousands	Jun. 30, 2018 USD ($) Instrument	Dec. 31, 2017 USD ($) Instrument
Derivative [Line Items]
Fixed-rate debt	$ 554,461	$ 386,313
Fixed rate debt, percentage	58.00%	44.00%
Variable-rate debt	$ 401,352	$ 486,796
Variable-rate debt, percentage	42.00%	56.00%
Interest rate swaps
Derivative [Line Items]
Reclassification from other comprehensive income in next 12 months	$ 400
Designated as hedges | Interest rate swaps
Derivative [Line Items]
Number of derivatives in an asset position | Instrument	3	2
Number of derivatives in a liability position | Instrument	2	1

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DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING - Schedule of gain or loss recognized on derivative financial instruments (Details) - Cash flow hedges - Interest rate swaps - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Derivative instruments, gain (loss) recognized
Gain(loss) recognized in Accumulated other comprehensive income on derivative financial instruments	$ 309	$ (22)	$ 3,846	$ 90
Interest expense
Derivative instruments, gain (loss) recognized
Loss reclassified from Accumulated other comprehensive income to Interest expense	$ (53)	$ (196)	$ (260)	$ (433)

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EQUITY - Changes in common stock (Details) - shares	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Changes in Common Stock [Roll Forward]
Beginning common shares outstanding	104,287,128	93,525,469
Stock Offering	0	10,350,000
Grants under the Equity Plan	583,373	366,679
Common Unit redemptions	25,839	30,657
Common stock issued for director fees	2,299	2,454
Forfeitures	(818)	(1,237)
Shares retained for employee tax withholding requirements	(187,850)	(59,111)
Ending common shares outstanding	104,744,101	104,238,807
Directors
Changes in Common Stock [Roll Forward]
Grants under the Equity Plan	34,130	23,896

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EQUITY - Narrative (Details)				6 Months Ended		10 Months Ended	12 Months Ended
	Mar. 20, 2018 USD ($) $ / shares shares	May 15, 2017 USD ($)	May 09, 2017 $ / shares shares	Jun. 30, 2018 USD ($) $ / shares shares	Jun. 30, 2017 USD ($) shares	May 25, 2017 USD ($) $ / shares shares	Dec. 31, 2017 $ / shares shares
Class of Stock [Line Items]
Common stock, shares authorized | shares				500,000,000			500,000,000
Common stock, par value (in dollars per share)				$ 0.01			$ 0.01
Shares issued during stock offering (in shares) | shares				0	10,350,000
Net proceeds from public shares offering | $					$ 163,670,000
Payments of stock issuance costs | $				$ 100,000
Compensation entitled as percentage of gross proceeds of shares sold under sales agreements				2.00%
Preferred stock, shares authorized | shares				100,000,000			100,000,000
Preferred stock, par value (in dollars per share)				$ 0.01			$ 0.01
Undesignated preferred stock
Class of Stock [Line Items]
Preferred stock, shares authorized | shares				90,600,000
9.25% Series A Preferred Stock
Class of Stock [Line Items]
Preferred stock, liquidation preference (in dollars per share)				$ 25
7.875% Series B Preferred Stock
Class of Stock [Line Items]
Preferred stock, liquidation preference (in dollars per share)				25
7.125% Series C Preferred Stock
Class of Stock [Line Items]
Preferred stock, dividend rate							7.125%
Payments for repurchase of redeemable preferred shares | $	$ 85,300,000
Preferred stock, shares outstanding | shares	3,400,000						3,400,000
Preferred stock, redemption price (in dollars per share)	$ 25
Preferred stock, liquidation preference (in dollars per share)				$ 25
6.45% Series D Preferred Stock
Class of Stock [Line Items]
Preferred stock, shares authorized | shares				3,000,000
Preferred stock, dividend rate				6.45%			6.45%
Preferred stock, shares outstanding | shares				3,000,000			3,000,000
Preferred stock, liquidation preference (in dollars per share)				$ 25
Annual dividend rate per share (in dollars per share)				$ 1.6125
6.45% Series D Preferred Stock | Maximum
Class of Stock [Line Items]
Ratio for conversion				3.9216
6.25% Series E Preferred Stock
Class of Stock [Line Items]
Preferred stock, shares authorized | shares				6,400,000
Preferred stock, dividend rate				6.25%			6.25%
Preferred stock, shares outstanding | shares				6,400,000			6,400,000
Preferred stock, liquidation preference (in dollars per share)				$ 25
Annual dividend rate per share (in dollars per share)				$ 1.5625
6.25% Series E Preferred Stock | Maximum
Class of Stock [Line Items]
Ratio for conversion				3.1686
Operating partnership | Non-controlling Interests in Operating Partnership
Class of Stock [Line Items]
Number of common units of operating partnership owned by unaffiliated third parties (in shares) | shares				297,552			323,391
Percentage of limited partnership interest in operating partnership (less than)				1.00%			1.00%
Underwriting Agreement
Class of Stock [Line Items]
Common stock, par value (in dollars per share)			$ 0.01
Shares issued during stock offering (in shares) | shares			9,000,000
Public offering price (in dollars per share)			$ 16.50
Underwriting discount (in dollars per share)			$ 0.66
Number of days option for underwriters to purchase common stock on same terms			30 days
Number of additional shares for underwriters to purchase | shares			1,350,000
Net proceeds from public shares offering | $		$ 163,800,000
Underwriting discount and offering-related expenses | $		$ 7,000,000
2017 ATM Program
Class of Stock [Line Items]
Common stock, par value (in dollars per share)						$ 0.01
Common stock, shares authorized, amount | $						$ 200,000,000
2016 ATM Program
Class of Stock [Line Items]
Shares issued during stock offering (in shares) | shares						6,151,514
Net proceeds from public shares offering | $						$ 89,100,000
Unaffiliated Third Parties | Operating partnership
Class of Stock [Line Items]
Limited partner capital account units conversion ratio				1

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FAIR VALUE MEASUREMENT - Schedule of Financial Instruments Measured at Fair Value (Details) - Recurring basis - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Assets:
Purchase options related to real estate loans	$ 6,120	$ 6,078
Level 1
Assets:
Purchase options related to real estate loans	0	0
Level 2
Assets:
Purchase options related to real estate loans	0	0
Level 3
Assets:
Purchase options related to real estate loans	6,120	6,078
Interest rate swaps
Assets:
Derivative asset	6,544	1,509
Liabilities:
Derivative liabilities	1,119	190
Interest rate swaps | Level 1
Assets:
Derivative asset	0	0
Liabilities:
Derivative liabilities	0	0
Interest rate swaps | Level 2
Assets:
Derivative asset	6,544	1,509
Liabilities:
Derivative liabilities	1,119	190
Interest rate swaps | Level 3
Assets:
Derivative asset	0	0
Liabilities:
Derivative liabilities	$ 0	$ 0

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FAIR VALUE MEASUREMENT - Narrative (Details) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2018 USD ($) hotel	Jun. 30, 2018 USD ($) Loan hotel
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Number of hotels | hotel	80	80
Mezzanine Loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Number of construction loans | Loan		3
Net amount of loan receivable	$ 29.6	$ 29.6
Number of hotels | hotel	3	3
Interest rate		8.00%
Loans initial term		3 years
Funded amount of loan receivable	$ 29.6	$ 29.6
Interest in hotel upon completion to purchase	90.00%	90.00%
Period of time after initial option exercise to purchase remaining interests		5 years
Amortization of discount	$ 0.5	$ 1.0
Other Assets
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Purchase options related to real estate loans	$ 6.1	$ 6.1

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FAIR VALUE MEASUREMENT - Schedule of Unobservable Inputs for Fair Values of Purchase Options (Details) - Recurring basis - Level 3 $ / shares in Thousands	6 Months Ended
	Jun. 30, 2018 $ / shares
Real Estate Loan 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Exercise price	$ 15,143
Expected volatility	32.00%
Risk free rate	1.70%
Expected annualized equity dividend yield	6.80%
Real Estate Loan 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Exercise price	$ 17,377
Expected volatility	38.00%
Risk free rate	1.80%
Expected annualized equity dividend yield	9.90%
Real Estate Loan 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Exercise price	$ 5,503
Expected volatility	37.00%
Risk free rate	1.90%
Expected annualized equity dividend yield	6.50%

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COMMITMENTS AND CONTINGENCIES - Restricted Cash (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Loss Contingencies [Line Items]
Restricted cash	$ 32,479	$ 29,462
Minimum
Loss Contingencies [Line Items]
Restricted cash reserve as percentage of hotel revenues	3.00%
Maximum
Loss Contingencies [Line Items]
Restricted cash reserve as percentage of hotel revenues	5.00%

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COMMITMENTS AND CONTINGENCIES - Ground Leases (Details) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018 USD ($) Property contract	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($) Property contract option	Jun. 30, 2017 USD ($)	Dec. 31, 2017 USD ($) Property contract
Commitments and contingencies
Total rent expense | $	$ 0.4	$ 0.4	$ 0.9	$ 0.9
Ground Leases | Portland, OR
Commitments and contingencies
Number of hotel properties for which land is leased	2		2		2
Number of Prepaid Land Lease | contract	2		2		2
Remaining prepaid balance of land lease | $	$ 3.2		$ 3.2		$ 3.2
Number of options to extend lease | option			1
Lease renewal period			14 years
Ground Leases | Houston (Galleria Area), TX
Commitments and contingencies
Number of hotel properties for which land is leased	1		1
Number of options to extend lease | option			1
Lease renewal period			10 years
Ground Leases | Austin, TX
Commitments and contingencies
Number of hotel properties for which land is leased	1		1
Ground Leases | Baltimore, MD
Commitments and contingencies
Number of hotel properties for which land is leased	1		1
Number of options to extend lease | option			12
Lease renewal period			5 years
Ground Leases | Duluth, GA
Commitments and contingencies
Number of hotel properties for which land is leased					1
Ground Leases | Long Island (Garden City), NY
Commitments and contingencies
Number of hotel properties for which land is leased	1		1

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COMMITMENTS AND CONTINGENCIES - Franchise and Management Agreements (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Franchise agreements
Commitments and contingencies
Fees related to the agreement	$ 13.0	$ 10.2	$ 24.4	$ 19.4
Franchise agreements | Minimum
Commitments and contingencies
Agreement term			10 years
Franchise fees received by each franchisor as a percentage of each hotel property's gross revenue			2.00%
Franchise agreements | Maximum
Commitments and contingencies
Agreement term			20 years
Franchise fees received by each franchisor as a percentage of each hotel property's gross revenue			6.00%
Marketing fees payable as a percentage of gross revenue			4.00%
Management agreements
Commitments and contingencies
Fees related to the agreement	$ 5.4	$ 5.1	$ 10.7	$ 9.8
Management agreements | Minimum
Commitments and contingencies
Agreement term			1 year
Management agreements | Maximum
Commitments and contingencies
Agreement term			25 years

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EQUITY-BASED COMPENSATION - Stock options (Details) $ / shares in Units, $ in Millions	6 Months Ended
	Jun. 30, 2018 USD ($) $ / shares shares
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of outstanding shares (in shares) | shares	235,000
Number of exercisable shares (in shares) | shares	235,000
Weighted average exercise price, outstanding (in dollars per share) | $ / shares	$ 9.75
Weighted average exercise price, exercisable (in dollars per share) | $ / shares	$ 9.75
Weighted average remaining contractual terms, exercisable	2 years 8 months
Aggregate intrinsic value, outstanding | $	$ 1.1
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options term	5 years
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options term	10 years
Chief Financial Officer
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based compensation expense | $	$ 1.0

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EQUITY-BASED COMPENSATION - Time-Based Restricted Stock Awards (Details) - Restricted Stock Awards - Time-Based - USD ($) $ / shares in Units, $ in Thousands				6 Months Ended
	Mar. 07, 2018	Apr. 18, 2017	Mar. 06, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Number of Shares
Non-vested at the beginning of period (in shares)				391,477
Granted (in shares)				185,565
Vested (in shares)				(205,619)
Forfeited (in shares)				(818)
Non-vested at the end of period (in shares)				370,605
Weighted Average Grant Date Fair Value
Non-vested at the beginning of period (in dollars per share)				$ 13.52
Granted (in dollars per share)				13.15
Vested (in dollars per share)				13.41
Forfeited (in dollars per share)				12.84
Non-vested at the end of period (in dollars per share)				$ 13.40
Aggregate Current Value
Non-vested outstanding				$ 5,303		$ 5,962
Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	4 years		4 years
Number of Shares
Granted (in shares)	23,363		16,079
Employees | Period one
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	20.00%		20.00%
Employees | Period two
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	20.00%		20.00%
Employees | Period three
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	20.00%		20.00%
Employees | Period four
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	40.00%		40.00%
Executive officers
Number of Shares
Granted (in shares)	162,202	20,215	120,024
Executive officers | Period one
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	25.00%				25.00%
Executive officers | Period two
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	25.00%				25.00%
Executive officers | Period three
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	50.00%				50.00%

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EQUITY-BASED COMPENSATION - Performance-Based Restricted Stock Awards (Details) - Restricted Stock Awards - USD ($) $ / shares in Units, $ in Thousands				6 Months Ended
	Mar. 07, 2018	Apr. 18, 2017	Mar. 06, 2017	Jun. 30, 2018	Dec. 31, 2017
Performance-Based
Number of Shares
Non-vested at the beginning of period (in shares)				619,429
Granted (in shares)				397,808
Vested (in shares)				(309,010)
Non-vested at the end of period (in shares)				708,227
Weighted Average Grant Date Fair Value
Non-vested at the beginning of period (in dollars per share)				$ 16.16
Granted (in dollars per share)				15.69
Vested (in dollars per share)				18.78
Non-vested at the end of period (in dollars per share)				$ 14.75
Aggregate Current Value
Non-vested outstanding				$ 10,135	$ 9,434
Executive officers | Performance-Based
Number of Shares
Granted (in shares)	243,303	30,322	180,039
Maximum | Executive officers
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares may earn, as multiple of shares granted				200.00%
Minimum | Executive officers
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares may earn, as multiple of shares granted				0.00%

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EQUITY-BASED COMPENSATION - Additional (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock issued for director fees (in shares)			2,299	2,454
Compensation expense to be recognized
Unrecognized compensation costs related to non-vested awards	$ 9,183		$ 9,183
2018	2,603		2,603
2019	3,935		3,935
2020	2,243		2,243
2021	389		389
2022	13		13
Restricted Stock Awards | Time-Based
Compensation expense to be recognized
Unrecognized compensation costs related to non-vested awards	3,822		3,822
2018	1,035		1,035
2019	1,615		1,615
2020	956		956
2021	203		203
2022	13		13
Restricted Stock Awards | Performance-Based
Compensation expense to be recognized
Unrecognized compensation costs related to non-vested awards	5,361		5,361
2018	1,568		1,568
2019	2,320		2,320
2020	1,287		1,287
2021	186		186
2022	0		0
Corporate general and administrative
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based compensation expense	1,821	$ 1,864	4,048	$ 2,994
Corporate general and administrative | Restricted Stock Awards | Time-Based
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based compensation expense	516	590	1,352	1,066
Corporate general and administrative | Restricted Stock Awards | Performance-Based
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based compensation expense	785	850	2,159	1,484
Corporate general and administrative | Stock awards | Directors
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based compensation expense	$ 520	$ 424	$ 537	$ 444
Common Stock | Directors
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock issued for director fees (in shares)			2,299
Common Stock | Independent directors
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock issued for director fees (in shares)			34,130

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INCOME TAXES (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Income Tax Disclosure [Abstract]
Percentage of taxable income distributed to shareholders			100.00%
Income tax expense	$ (152,000)	$ (423,000)	$ (412,000)	$ (844,000)
Unrecognized tax benefits	$ 0		$ 0

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EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Numerator:
Net income	$ 37,677	$ 34,083	$ 47,368	$ 67,289
Less: Preferred dividends	(3,709)	(4,200)	(9,252)	(8,400)
Premium on redemption of preferred stock	0	0	(3,277)	0
Allocation to participating securities	(120)	(126)	(137)	(240)
Attributable to non-controlling interest	(101)	(114)	(104)	(234)
Net income attributable to common stockholders	$ 33,747	$ 29,643	$ 34,598	$ 58,415
Denominator:
Weighted average common shares outstanding - basic (in shares)	103,643,000	98,184,000	103,572,000	95,488,000
Dilutive effect of equity-based compensation awards (in shares)	240,000	522,000	320,000	495,000
Weighted average common shares outstanding - diluted (in shares)	103,883,000	98,706,000	103,892,000	95,983,000
Basic (in dollars per share)	$ 0.33	$ 0.30	$ 0.33	$ 0.61
Diluted (in dollars per share)	$ 0.32	$ 0.30	$ 0.33	$ 0.61
Restricted Stock Awards
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of diluted earnings per share (in shares)	453,664	619,429	453,664	619,429

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SUBSEQUENT EVENTS (Details) $ / shares in Units, $ in Thousands		6 Months Ended	12 Months Ended
	Jul. 30, 2018 $ / shares	Jun. 30, 2018 hotel	Dec. 31, 2017	Jul. 24, 2018 USD ($) hotel	Apr. 30, 2017 USD ($) hotel
Subsequent events
Number of hotels | hotel		80
6.45% Series D Preferred Stock
Subsequent events
Preferred stock, dividend rate		6.45%	6.45%
6.25% Series E Preferred Stock
Subsequent events
Preferred stock, dividend rate		6.25%	6.25%
Subsequent Event
Subsequent events
Cash dividends declared, common stock (in dollars per share) | $ / shares	$ 0.18
Subsequent Event | 6.45% Series D Preferred Stock
Subsequent events
Cash dividends declared, preferred stock (in dollars per share) | $ / shares	0.403125
Subsequent Event | 6.25% Series E Preferred Stock
Subsequent events
Cash dividends declared, preferred stock (in dollars per share) | $ / shares	$ 0.390625
Disposed of by Sale
Subsequent events
Number of hotels | hotel					23
Aggregate sales price | $					$ 325,100
Disposed of by Sale | Subsequent Event
Subsequent events
Number of hotels | hotel				3
Aggregate sales price | $				$ 46,500