XML 22 R12.htm IDEA: XBRL DOCUMENT v3.23.2
DEBT
 6 Months Ended
Jun. 30, 2023
Debt Disclosure [Abstract]  
DEBT DEBT
 
Debt, net of debt issuance costs, is as follows (in thousands):
June 30, 2023December 31, 2022
Revolving debt$145,000 $140,000 
Term loans910,000 910,000 
Convertible notes287,500 287,500 
Mortgage loans124,436 125,624 
 1,466,936 1,463,124 
Unamortized debt issuance costs(16,082)(11,328)
    Debt, net of debt issuance costs$1,450,854 $1,451,796 

The weighted-average interest rate, after giving effect to our interest rate derivatives, for all borrowings was 5.52% at June 30, 2023 and 5.04% at December 31, 2022. There are currently no defaults under any of the Company's loan agreements.

We have entered into interest rate swaps to fix the interest rates on a portion of our variable interest rate indebtedness. In March 2023, subsidiaries of the GIC Joint Venture that are the borrowers under the GIC Joint Venture Term Loan entered into two $100.0 million interest rate swaps to fix one-month term SOFR until January 2026. The interest rate swaps became effective on July 1, 2023 and have a termination date of January 13, 2026. See "Note 7 - Derivative Financial Instruments and Hedging" to the Condensed Consolidated Financial Statements for additional information.
Our total fixed-rate and variable-rate debt, after consideration of our interest rate derivative agreements that are currently effective, is as follows (in thousands):
 
June 30, 2023PercentageDecember 31, 2022Percentage
Fixed-rate debt (1)
$757,378 52%$758,433 52%
Variable-rate debt709,558 48%704,691 48%
$1,466,936 $1,463,124 

(1) At June 30, 2023, debt related to our wholly-owned properties and our pro rata share of joint venture debt has a fixed-rate debt ratio of approximately 65% of our total pro rata indebtedness when taking into consideration interest rate swaps entered into during the six months ended June 30, 2023. At July 21, 2023, debt related to our wholly-owned properties and our pro rata share of joint venture debt has a fixed-rate debt ratio of approximately 74% of our total pro rata indebtedness when taking into consideration interest rate swaps, including those which became effective on July 1, 2023.

Information about the fair value of our fixed-rate debt that is not recorded at fair value is as follows (in thousands):
 
June 30, 2023December 31, 2022 
Carrying
Value		Fair ValueCarrying
Value		Fair ValueValuation Technique
Convertible notes$287,500 $245,616 $287,500 $247,126 Level 1 - Market approach
Mortgage loans69,878 60,539 70,933 61,447 Level 2 - Market approach
$357,378 $306,155 $358,433 $308,573 
 
Detailed information about our gross debt at June 30, 2023 and December 31, 2022 is as follows (dollars in thousands):

Principal Balance Outstanding
LenderInterest RateMaturity DateNumber of
Encumbered  Properties		June 30, 2023December 31, 2022
OPERATING PARTNERSHIP DEBT:
2018 Senior Credit Facility
Bank of America, N.A.
$400 Million Revolver (1)(2)
7.15% Variable
June 21, 2027n/a$20,000 $15,000 
$200 Million Term Loan (1)(2)
7.10% Variable
June 21, 2026n/a200,000 200,000 
Total Senior Credit and Term Loan Facility220,000 215,000 
Term Loans
KeyBank National Association Term Loan (1)
7.04% Variable
February 14, 2025n/a225,000 225,000 
Convertible Notes
1.50% Fixed
February 15, 2026n/a287,500 287,500 
Secured Mortgage Indebtedness
MetaBank
4.44% Fixed
July 1, 20273 43,215 43,917 
Bank of the Cascades (3)
7.14% Variable
December 19, 20241 7,558 7,691 
4.30% Fixed
December 19, 20247,558 7,691 
Total Mortgage Loans4 58,331 59,299 
790,831 786,799 
JOINT VENTURE DEBT:
Brickell Joint Venture Mortgage Loan
City National Bank of Florida
8.22% Variable
June 30, 20252 47,000 47,000 
GIC Joint Venture Credit Facility and Term Loans
Bank of America, N.A.
$125 Million Revolver (4)
7.34% Variable
October 8, 2023n/a125,000 125,000 
$75 Million Term Loan (4)
7.29% Variable
October 8, 2023n/a75,000 75,000 
Bank of America, N.A. (5)
7.95% Variable
January 13, 2026n/a410,000 410,000 
Wells Fargo
4.99% Fixed
June 6, 2028112,909 13,032 
PACE loan
6.10% Fixed
July 31, 204016,196 6,293 
Total GIC Joint Venture Credit Facility and Term Loans2629,105 629,325 
Total Joint Venture Debt4 $676,105 $676,325 
Total Debt8 $1,466,936 $1,463,124 

(1) The 2018 Senior Credit Facility and Term Loans are supported by a borrowing base of 53 unencumbered hotel properties and a pledge of the equity securities of the entities that own and operate the 53 unencumbered hotels.
(2) The maturity dates for the $400 million Revolver and the $200 Million Term Loan each individually can be extended to June 21, 2028 at the Company’s option, subject to certain conditions.
(3) The Bank of Cascades mortgage loan is comprised of two promissory notes that are secured by the same collateral and have cross-default provisions.
(4) The $125 Million Revolver and the $75 Million Term Loan are secured by pledges of the equity in the entities and affiliated entities that own 11 lodging properties. Each individually can be extended for a single consecutive ###-month period through October 2024 at the option of the GIC Joint Venture, subject to certain conditions.
(5) The GIC Joint Venture's $410 million term loan with Bank of America, N.A. is secured by pledges of the equity in the entities and affiliated entities that own 27 lodging properties.
2018 Senior Credit Facility

On December 6, 2018, the Operating Partnership, as borrower, the Company, as parent guarantor, and each party executing the loan documentation as a subsidiary guarantor, entered into a $600.0 million senior credit facility (the “2018 Senior Credit Facility”) with a syndicate of lenders. The 2018 Senior Credit Facility is comprised of a $400.0 million revolver (the "$400 Million Revolver") and a $200.0 million term loan facility (the “$200 Million Term Loan”). The 2018 Senior Credit Facility has a $50.0 million sub-limit for the issuance of letters of credit and an accordion feature which allows the Company to increase the total commitments by an aggregate of up to $300.0 million, subject to certain conditions. On July 21, 2022, the interest rate on the 2018 Senior Credit Facility was transitioned from LIBOR to the Secured Overnight Financing Rate (“SOFR”).

At June 30, 2023, our $200 million Term Loan was fully funded, and our $400 Million Revolver had $20.0 million in outstanding borrowings. Borrowings under the 2018 Senior Credit Facility are limited by the value of the Unencumbered Assets, detailed below.

Amendment to the 2018 Senior Credit Facility

In June 2023, the Company entered into an amendment to the 2018 Senior Credit Facility (the “Credit Facility Amendment”). The Credit Facility Amendment extends the maturity date of the $400 million Revolver to June 2027, which may be extended by the Company for up to two consecutive six-month periods, subject to certain conditions. The Credit Facility Amendment extends the maturity date of the $200 million Term Loan to June 2026, which may be extended by the Company for up to two consecutive twelve-month periods, subject to certain conditions.

The interest rate on the $400 million Revolver is based on the higher of the following:

i.    a pricing grid ranging from 140 basis points to 240 basis points plus Adjusted Daily SOFR or Adjusted Term SOFR, depending on the Company's leverage ratio (as defined in the loan documents); and

ii.    a pricing grid ranging from 40 basis points to 140 basis points over the Base Rate, depending on the Company's leverage ratio (as defined in the loan documents).

The interest rate on the $200 million Term Loan pursuant to the Credit Facility Amendment is based on the higher of the following:

i.    a pricing grid ranging from 135 basis points to 235 basis points plus Adjusted Daily SOFR or Adjusted Term SOFR, depending on the Company's leverage ratio (as defined in the loan documents); and

ii.    a pricing grid ranging from 35 basis points to 135 basis points over the Base Rate, depending on the Company's leverage ratio (as defined in the loan documents).

Term SOFR will be available for one, three and six-month interest periods. The Base Rate is a fluctuating rate of interest per annum equal to the highest of (a) the Federal Funds Rate plus 0.50%, (b) the rate of interest in effect for such day as publicly announced by Bank of America as its “prime rate,” (c) SOFR published on such day on the Federal Reserve Bank of New York’s website (or any successor source) plus 1.00% and (d) 1.00%. For purposes of the 2018 Senior Credit Facility, SOFR is subject to a floor of zero basis points.

We are also required to pay an unused fee (“Unused Fee”) on the undrawn portion of the $400 million Revolver. The Unused Fee shall be calculated on a daily basis on the unused amount of the $400 million Revolver multiplied by (i) 0.25% per annum in the event that Revolver usage is greater than 50%, and (ii) 0.20% per annum in the event that Revolver usage is equal to or less than 50%. The Unused Fee is payable quarterly in arrears and on the final maturity date of the $400 million Revolver.

The Credit Facility Amendment requires the borrower and certain subsidiaries to pledge to the secured parties all of the equity interests in the entities that own all 53 properties included in the unencumbered asset pool supporting the facility (“Unencumbered Properties”), as well as the equity interests in the TRS Lessees related to such Unencumbered Properties until the borrower meets certain conditions for their release.
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 $225.0 million term loan (the “2018 Term Loan”), as amended, with a syndicate of lenders listed in the loan documents, which is fully drawn as of June 30, 2023. The 2018 Term Loan has an accordion feature that allows us to increase the total commitments by $150.0 million prior to the amended and extended maturity date of February 14, 2025, subject to certain conditions.

We pay interest on advances at varying rates, based upon, at our option, either (i) daily, 1-, 3-, or 6-month SOFR (subject to a floor of 25 basis points), plus a SOFR adjustment equal to 10 basis points and an applicable margin between 135 and 215 basis points, depending upon our leverage ratio (as defined in the loan documents). We are required to pay other fees, including arrangement and administrative fees.

Financial and Other Covenants. We are required to comply with various financial and other covenants to draw and maintain borrowings under the 2018 Term Loan. At June 30, 2023, we were in compliance with all financial covenants.

Unencumbered Assets. The 2018 Term Loan Amendments require the borrower and certain subsidiaries to pledge to the secured parties all of the equity interests in the entities that own the Unencumbered Properties, as well as the equity interests in the TRS Lessees related to such Unencumbered Properties until the borrower meets certain conditions for the release of such pledges. During the period that the pledges are in place, as well as at all other times during the term of the facility, borrowings under the 2018 Term Loan are limited by the value of the Unencumbered Assets.

Convertible Senior Notes and Capped Call Options

On January 7, 2021, we entered into an underwriting agreement (the “Convertible Notes Offering”) pursuant to which the Company agreed to offer and sell $287.5 million aggregate principal amount of 1.50% convertible senior notes due in 2026 (the “Convertible Notes"). The net proceeds from the Convertible Notes Offering, after deducting underwriting discounts and commissions and offering expenses payable by the Company (including net proceeds from the full exercise by the underwriters of their over-allotment option to purchase additional Convertible Notes), were approximately $280.0 million before consideration of the Capped Call Transactions (as described below). These proceeds were used to pay the cost of the Capped Call Transactions and to partially repay outstanding obligations under the 2018 Senior Credit Facility and another term loan.

The Convertible Notes bear interest at a rate of 1.50% per year, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2021. The Convertible Notes will mature on February 15, 2026 (the “Maturity Date”), unless earlier converted, purchased, or redeemed. Prior to August 15, 2025, the Convertible Notes will be convertible only upon certain circumstances and during certain periods. On or after August 15, 2025 and through the Maturity Date, holders may convert any of their Convertible Notes into shares of the Company’s common stock, at the applicable conversion rate, unless the Convertible Notes have been previously purchased or redeemed by the Company. The Company recorded coupon interest expense of $1.1 million for each of the three months ended June 30, 2023 and 2022 and $2.2 million and $2.1 million for the six months ended June 30, 2023 and 2022, respectively. The Company incurred debt issuance costs related to the Convertible Notes Offering of $7.6 million of which $0.4 million was amortized for each of the three months ended June 30, 2023 and 2022 and $0.7 million was amortized for each of the six months ended June 30, 2023 and 2022. Including the amortization of the debt issuance costs, the effective interest rate on the Convertible Notes was approximately 2.00% for the three and six months ended June 30, 2023 and 2022. The unamortized discount related to the Convertible Notes was $3.9 million and $4.7 million at June 30, 2023 and December 31, 2022, respectively.


The initial conversion rate of the Convertible Notes is 83.4028 shares of common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of $11.99 per share of common stock based on the 37.5% base conversion premium on the reference price of $8.72 per share. In no event will the conversion rate exceed 114.6788 shares of common stock per $1,000 principal amount of Convertible Notes, subject to certain adjustments defined in the Convertible Notes Offering. Commensurate with the declaration of dividends on our common stock and Common Units on April 27, 2023, the conversion rate of the Convertible Notes was adjusted to 85.3563 shares of common stock per $1,000 principal amount of Convertible Notes.
On January 7, 2021, in connection with the pricing of the Convertible Notes, and on January 8, 2021, in connection with the full exercise by the Underwriters of their option to purchase additional Convertible Notes pursuant to the Underwriting Agreement, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain of the underwriters or their respective affiliates and another financial institution (the “Capped Call Counterparties”). The Capped Call Transactions initially cover, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes, the number of shares of common stock underlying the Convertible Notes. The Capped Call Transactions are generally expected to reduce the potential dilution to holders of shares of common stock upon conversion of the Convertible Notes or offset the potential cash payments that the Company could be required to make in excess of the principal amount of any converted Convertible Notes upon conversion thereof, with such reduction or offset subject to a cap.

The effective strike price of the Capped Call Transactions was initially $15.26, which represented a premium of 75.0% over the last reported sale price of our common stock on the New York Stock Exchange on January 7, 2021 and is subject to certain adjustments under the terms of the Capped Call transactions. The current strike price is $14.91 due to the adjustments related to the dividends paid during the six months ended June 30, 2023 and the year ended December 31, 2022.

Mortgage Loans

At June 30, 2023 and December 31, 2022, we had mortgage loans totaling $124.4 million and $125.6 million, respectively, that are secured primarily by first mortgage liens on eight lodging properties.

Metabank Loan

On June 30, 2017, Summit Meta 2017, LLC (“SM-17”), a subsidiary of our Operating Partnership, entered into a $47.6 million secured, non-recourse loan with MetaBank (the "MetaBank Loan"). The MetaBank Loan provides for a fixed interest rate of 4.44%, amortizes over 25 years, and matures on July 1, 2027. The MetaBank Loan is secured by three lodging properties and is subject to a prepayment penalty if prepaid prior to April 1, 2027. In or around December 2021, MetaBank sold the MetaBank Loan to Bayside MB CRE Loans, LLC (“Bayside”). On October 25, 2022, SM-17 received a letter from Bayside’s counsel alleging various events of default under the MetaBank Loan, primarily related to certain non-monetary covenants. SM-17 engaged legal counsel which sent a written response to Bayside disputing that any events of default have occurred. On April 18, 2023, SM-17 received a second letter from Bayside's counsel reasserting their allegations of default. SM-17 continues to dispute that any events of default have occurred.

Commercial Mortgage-backed Securities Mortgage Loans

In August 2022 and December 2022, we entered into agreements to fully defease four commercial mortgage-backed securities ("CMBS") mortgage loans that were outstanding at June 30, 2022. The aggregate outstanding balances of the loans at the defeasance dates totaled $87.3 million. The loans were defeased by placing into trust an amount sufficient to cover future principal and interest payments. The defeasance resulted in the 11 lodging properties that collateralized the CMBS mortgage loans becoming unencumbered.

GIC Joint Venture Credit Facility

On October 8, 2019, Summit JV MR 1, LLC (the “Borrower”), as borrower, and Summit Hospitality JV, LP (the “Parent” or "GIC Joint Venture"), as parent of the Borrower, and each party executing the credit facility documentation as a subsidiary guarantor, entered into a $200.0 million credit facility (the “GIC Joint Venture Credit Facility”) with Bank of America, N.A., as administrative agent and sole initial lender, and BofA Securities, Inc., as sole lead arranger and sole bookrunner. The Operating Partnership and the Company are not borrowers or guarantors of the GIC Joint Venture Credit Facility. The GIC Joint Venture Credit Facility is guaranteed by all of the Borrower’s existing and future subsidiaries, subject to certain exceptions.

The GIC Joint Venture Credit Facility is comprised of a $125.0 million revolving credit facility (the “$125 Million Revolver”) and a $75.0 million term loan (the “$75 Million Term Loan”). The GIC Joint Venture Credit Facility has an accordion feature which allows us to increase the total commitments by up to $300.0 million, for aggregate potential borrowings of up to $500.0 million. At June 30, 2023, we had $125.0 million outstanding under the $125 Million Revolver.

The $125 Million Revolver and the $75 Million Term Loan will mature on October 8, 2023. Each individually can be extended for a one twelve-month period at the option of the GIC Joint Venture, subject to certain conditions.
Amendment to $200 million GIC Joint Venture Credit Facility

On February 15, 2023, the Borrower entered into the Fifth Amendment to Credit Agreement (the "Fifth Amendment") to, among other things, convert the reference rate used in interest rate calculations from LIBOR to adjusted term or daily SOFR (using a 10-basis point credit spread adjustment), with Borrower's option to borrow base rate advances, term SOFR advances or daily SOFR advances.

Revolving advances using adjusted term SOFR and adjusted daily SOFR have an interest rate margin of 2.15%, and term loan advances using adjusted term SOFR and adjusted daily SOFR have an interest rate margin of 2.1%. Both adjusted daily SOFR and adjusted term SOFR have a floor of zero percent.

The GIC Joint Venture Credit Facility is secured primarily by a first priority pledge of the Borrower's equity interests in the subsidiaries that own the 11-lodging property borrowing base assets, and the related TRS entities, which wholly own the TRS Lessees that lease each of the borrowing base assets.

GIC Joint Venture Term Loan

In connection with the NCI Transaction, on January 13, 2022, Summit JV MR 2, LLC, Summit JV MR 3, LLC and Summit NCI NOLA BR 184, LLC (each of which is a subsidiary of the GIC Joint Venture, and are collectively, the “Term Loan Borrower”), the GIC Joint Venture, as parent guarantor, and each party executing the credit facility documentation as a subsidiary guarantor, entered into a $410.0 million senior secured term loan facility (the “GIC Joint Venture Term Loan”) with Bank of America, N.A., as administrative agent and initial lender, Wells Fargo Bank, National Association, as syndication agent and an initial lender, and BofA Securities, Inc. and Wells Fargo Securities, LLC, as joint lead arrangers and joint bookrunners.

Neither the Operating Partnership nor the Company are borrowers or guarantors of the GIC Joint Venture Term Loan. The GIC Joint Venture Term Loan is guaranteed by the GIC Joint Venture and all of the Term Loan Borrower's existing and future subsidiaries, subject to certain exceptions.

The GIC Joint Venture Term Loan provides for a $410.0 million term loan and has an accordion feature which permits an increase in the total commitments by up to $190.0 million, for aggregate potential borrowings of up to $600.0 million. The GIC Joint Venture Term Loan will mature on January 13, 2026 and can be extended for one twelve-month period at the option of the GIC Joint Venture, subject to certain conditions.

As of June 30, 2023, we had $410.0 million outstanding on the GIC Joint Venture Term Loan bearing interest at a floating rate of SOFR plus 2.75%.

The GIC Joint Venture Term Loan is secured primarily by a first priority pledge of the Term Loan Borrower's equity interests in the subsidiaries that hold a direct or indirect interest in the 27 lodging properties and two parking facilities purchased in the NCI Transaction that constitute borrowing base assets. The GIC Joint Venture Term Loan contains terms, conditions, and covenants for typical for similar credit facilities.

PACE Loan

As part of the NCI Transaction, a subsidiary of the GIC Joint Venture assumed a Property Assessed Clean Energy ("PACE") loan of approximately $6.5 million. The loan bears fixed interest at 6.10%, has an amortization period of 20 years, and matures on July 31, 2040. The PACE loan is secured by an assessment lien imposed by the County of Tarrant, TX for the benefit of the lender. As of June 30, 2023, we had $6.2 million outstanding on the PACE loan.
Brickell Mortgage Loan

In June 2022, the Company entered into a joint venture (the "Brickell Joint Venture") with C-F Brickell, LLC, a Delaware limited liability company ("C-F Brickell") that was the developer of the AC/Element Hotel, to facilitate the exercise of the Initial Purchase Option to acquire a 90% equity interest in the Brickell Joint Venture, which owned a 100% interest in the AC/Element Hotel. On June 10, 2022, the Brickell Joint Venture entered into a $47.0 million mortgage loan and non-recourse guaranty with City National Bank of Florida (the "City National Bank Loan") to finance the AC/Element Hotel. The City National Bank Loan provided for an interest rate equal to one-month LIBOR plus 300 basis points through June 30, 2023. Effective July 1, 2023, the interest rate for the City National Bank Loan was converted to one-month SOFR plus 300 basis points.

Payment terms include an interest-only period through June 30, 2024 and the loan will amortize based on a 25-year schedule from July 1, 2024 through the maturity date of June 30, 2025. The City National Bank Loan is prepayable at any time without penalty.

Financial Guarantee

During the six months ended June 30, 2023, we issued a $3.0 million letter of credit to the senior lender of a glamping project for which we provided the Onera Mezzanine Loan as additional support on behalf of the developer. We recorded the non-contingent portion of financial guarantee as a liability of $0.2 million on the transaction date, which is the premium receivable for the guarantee payable to us by the borrower. The liability is being amortized using the straight-line method into interest income over the term of the letter of credit and is recorded in Accrued expenses and other in our Condensed Consolidated Balance Sheet at June 30, 2023.

Currently, payment under the contingent portion of the guarantee is not probable nor reasonably estimable. Therefore, no liability for the contingent portion of the guarantee is recorded at June 30, 2023.

Property and Casualty Insurance Premium Financing
During the six months ended June 30, 2023, we financed our property and casualty insurance premium totaling $10.9 million through our insurance broker. The financing arrangement requires monthly payments of $1.0 million over an 11-month period at an annual financing rate of 4.89%. The outstanding principal amount of the financing may be prepaid at any time prior to the end of the financing period. The balance of the financing is $6.0 million at June 30, 2023 and is recorded in Accrued expenses and other in our Condensed Consolidated Balance Sheet.