Debt

Revolving Credit Facility and Term Loans

The Company entered into a credit agreement on November 20, 2012 that provides for (i) an unsecured revolving credit facility of up to $300.0 million with a scheduled maturity date of November 20, 2016 with a one-year extension option (the “Revolver”), and (ii) an unsecured term loan of $275.0 million with a scheduled maturity date of November 20, 2017 (the “2012 Five-Year Term Loan”). The credit agreement amends and restates in its entirety the Company’s prior unsecured revolving credit facility, which was originally entered into as of June 20, 2011. In addition, on November 20, 2012 the Company also entered into an unsecured term loan of $125.0 million with a scheduled maturity date of November 20, 2019 (the “Seven-Year Term Loan”). On August 27, 2013, the Company amended the Seven-Year Term Loan to increase the borrowings on the Seven-Year Term Loan to $225.0 million.

The Company also entered into an unsecured $350.0 million term loan on August 27, 2013 with a scheduled maturity date of August 27, 2018 (the "2013 Five-Year Term Loan", and collectively with the 2012 Five-Year Term Loan and the Seven-Year Term Loan, the "Term Loans").

The credit agreements for these loans require that a group of no less than 20 of the Company’s hotel properties remain unencumbered by outstanding indebtedness. The credit agreements contain certain financial covenants relating to the Company’s maximum leverage ratio, minimum fixed charge coverage ratio, minimum tangible net worth and maximum secured indebtedness. If an event of default exists, the Company is not permitted to make distributions to shareholders, other than those required to qualify for and maintain REIT status. As of September 30, 2013, the Company was in compliance with all financial covenants.

The Company incurred $8.0 million in fees related to the Revolver and Term Loans that were deferred and are being amortized over their respective terms.

Borrowings under the Revolver and Term Loans bear interest at variable rates equal to the London InterBank Offered Rate (“LIBOR”) plus an applicable margin. The margin ranges from 1.65% to 3.00%, depending on the Company’s leverage ratio, as calculated under the terms of each facility. The Company incurs an unused facility fee on the Revolver of between 0.25% and 0.35%, based on the amount by which the maximum borrowing amount exceeds the total principal balance of outstanding borrowings. The unused facility fee for the three and nine months ended September 30, 2013 was $0.3 million and $0.8 million, respectively.

Under the terms of the credit agreement for the Revolver, one or more standby letters of credit, up to a maximum aggregate outstanding balance of $30.0 million, may be issued on behalf of the Company by the lenders under the Revolver. The Company will incur a fee of 0.125% of the value of each standby letter of credit that is issued on its behalf. Any outstanding standby letters of credit would reduce the available borrowings on the Revolver by a corresponding amount. No standby letters of credit were outstanding at September 30, 2013. The Company also may borrow up to a maximum aggregate outstanding balance of $40.0 million of swingline loans. Any outstanding swingline loans reduce the available borrowings under the Revolver by a corresponding amount. No swingline loans were outstanding at September 30, 2013.

As of and for the three and nine months ended September 30, 2013, details of the Revolver and Term Loans are as follows (in thousands):



	Outstanding borrowings at		Interest rate at	Interest expense for the
	September 30, 2013		September 30, 2013 (1)	three months ended September 30, 2013		nine months ended September 30, 2013
Revolver (2)	$	—	n/a	$	268	$	885
2012 Five-Year Term Loan	275,000		1.88%	1,329		4,137
Seven-Year Term Loan (3)	225,000		4.04%	1,073		2,596
2013 Five-Year Term Loan (4)	350,000		3.25%	914		914
Total	$	850,000		$	3,584	$	8,532


1.	Interest rate at September 30, 2013 gives effect to interest rate hedges and LIBOR floors, as applicable.


2.	Includes the unused facility fee of $0.3 million and $0.8 million for the three and nine months ended September 30, 2013, respectively.


3.	Includes interest expense related to an interest rate hedge of $0.2 million for both the three and nine months ended September 30, 2013.


4.	Includes interest expense related to an interest rate hedge of $0.3 million for both the three and nine months ended September 30, 2013.

Prior Credit Facility

The Company entered into an unsecured revolving credit facility on June 20, 2011, that provided for maximum borrowings of up to $300.0 million. The credit facility required that a group of no less than 15 of the Company’s hotel properties remain unencumbered by outstanding indebtedness. The credit facility contained certain financial covenants relating to the Company’s maximum leverage ratio, minimum fixed charge coverage ratio, minimum tangible net worth and maximum secured indebtedness. If an event of default existed, the Company was not permitted to make distributions to shareholders, other than those required to qualify for and maintain REIT status. As of September 30, 2012, the Company was in compliance with all financial covenants. On November 20, 2012, the unsecured revolving credit facility agreement was amended and restated in its entirety with the Revolver and 2012 Five-Year Term Loan as discussed above.

The Company incurred $3.0 million in fees related to the credit facility that were deferred and were being amortized over the term of the credit facility. On November 20, 2012, when the unsecured revolving credit facility agreement was amended and restated in its entirety, approximately $1.7 million of the fees unamortized at the time of the amendment and restatement were transferred to the Revolver and will be amortized over the term of that credit facility.

Borrowings under the credit facility bore interest at variable rates equal to LIBOR plus an applicable margin. The margin ranged from 2.25% to 3.25%, depending on the Company’s leverage ratio, as calculated under the terms of the credit facility. The Company incurred an unused facility fee of between 0.30% and 0.40%, based on the amount by which the maximum

borrowing amount exceeded the total principal balance of outstanding borrowings.

The Company incurred interest expense on the credit facility for the three and nine months ended September 30, 2012 of approximately $0.6 million and $1.2 million, respectively. For the three and nine months ended September 30, 2012, the Company incurred an unused commitment fee of approximately $0.2 million and $0.7 million, respectively.

Mortgage Loans

As of September 30, 2013 and December 31, 2012, the Company was subject to the following mortgage loans (in thousands):



						Principal balance at,
Lender	Number of assets encumbered	Interest rate at September 30, 2013 (1)		Maturity Date		September 30, 2013		December 31, 2012
Wells Fargo	1	4.60%	(2)	Oct 2014	(3)	$	68,500	$	68,500
Wells Fargo	1	3.78%	(2)	Oct 2014	(3)	17,500		17,500
Wells Fargo	1	3.78%	(2)	Oct 2014	(3)	21,000		21,000
Wells Fargo	1	3.78%	(2)	Oct 2014	(3)	11,000		11,000
Wells Fargo	1	3.78%	(2)	Oct 2014	(3)	24,000		24,000
Capmark Financial Group	1	6.12%		April 2015		4,102		4,202
Capmark Financial Group	1	5.55%		May 2015		11,013		11,298
Capmark Financial Group	1	5.55%		June 2015		4,777		4,901
Barclay's Bank	1	5.55%		June 2015		2,497		2,561
Barclay's Bank	1	5.55%		June 2015		4,098		4,203
Barclay's Bank	1	5.55%		June 2015		9,552		9,798
Barclay's Bank	1	5.55%		June 2015		8,526		8,745
Barclay's Bank	1	5.55%		June 2015		7,644		7,839
Barclay's Bank	1	5.60%		June 2015		5,301		5,434
Barclay's Bank	1	5.60%		June 2015		8,212		8,422
Barclay's Bank	1	5.55%		June 2015		5,006		5,134
Barclay's Bank	1	5.55%		June 2015		33,189		34,042
Barclay's Bank	1	5.60%		June 2015		6,305		6,466
Barclay's Bank	1	5.55%		June 2015		5,617		5,762
Barclay's Bank	1	5.55%		June 2015		6,455		6,621
Barclay's Bank	1	5.60%		June 2015		8,226		8,437
Barclay's Bank	1	5.55%		June 2015		6,450		6,614
Barclay's Bank	1	5.55%		June 2015		7,099		7,280
Barclay's Bank	1	5.55%		June 2015		6,455		6,621
Barclay's Bank	1	5.55%		June 2015		7,368		7,558
Barclay's Bank	1	5.55%		June 2015		9,247		9,484
Capmark Financial Group	1	5.50%		July 2015		6,506		6,673
Barclay's Bank	1	5.44%		Sept 2015		10,611		10,883
PNC Bank (4)	7	2.53%	(2)	May 2016	(5)	85,000		85,000
Wells Fargo (6)	2	4.19%	(2)	Sept 2016	(7)	82,000		—
Wells Fargo	1	4.19%	(2)	Sept 2016	(7)	33,000		—
Wells Fargo	1	4.19%	(2)	Sept 2016	(7)	35,000		—
Merrill Lynch				July 2016	(8)	—		9,180
Merrill Lynch				July 2016	(8)	—		7,684
Merrill Lynch				July 2016	(8)	—		9,194
Wachovia Securities				July 2016	(8)	—		487,296
Wachovia Securities				July 2016	(8)	—		6,582
Wells Fargo / Morgan Stanley				July 2016	(8)	—		34,823
Wells Fargo / Morgan Stanley				July 2016	(8)	—		6,753
Wells Fargo / Morgan Stanley				July 2016	(8)	—		9,616
Merrill Lynch				July 2016	(9)	—		5,531
VFC Partners 20 LLC				Sept 2016	(10)	—		5,014
	39					$	561,256	$	997,651


1.	Interest rate at September 30, 2013 gives effect to interest rate hedges and LIBOR floors, as applicable.


2.	Requires payments of interest only until the commencement of the extension period(s).


3.	Maturity date may be extended for up to two additional one-year terms at the Company’s option.


4.	The seven hotels encumbered by the PNC Bank loan are cross-collateralized.


5.	Maturity date may be extended for one one-year term at the Company’s option.


6.	The two hotels encumbered by the Wells Fargo loan are cross-collateralized.


7.	Maturity date may be extended for four one-year terms at the Company’s option.


8.	The loans were paid off in August 2013 in conjunction with the amendment to the Company's Seven-Year Term Loan and entering into the 2013 Five-Year Term Loan.


9.	Loan was extinguished in August 2013 in conjunction with the foreclosure of the collateral.


10.	Loan was extinguished in May 2013 in conjunction with the transfer of title pursuant to a deed in lieu of foreclosure arrangement.

Some mortgage agreements are subject to customary financial covenants. The Company was in compliance with these

covenants at September 30, 2013 and December 31, 2012.