UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q 

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

For the quarterly period ended September 30, 2020

OR

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

For the transition period from                   to                  

Commission File Number 333-220497 (Rangers Sub I, LLC)

Commission File Number 333-39595-01 (FelCor Lodging Limited Partnership)

RANGERS SUB I, LLC

FELCOR LODGING LIMITED PARTNERSHIP

(Exact Name of Registrant as Specified in Its Charter)

Maryland (Rangers Sub I, LLC)	30-1001580
Delaware (FelCor Lodging Limited Partnership)	75-2544994
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

c/o RLJ Lodging Trust
3 Bethesda Metro Center, Suite 1000
Bethesda,	Maryland	20814
(Address of Principal Executive Offices)		(Zip Code)

(301) 280-7777

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Class	Trading Symbol	Name of Exchange on Which Registered
Not applicable (1)
(1) Neither Rangers Sub I, LLC nor FelCor Lodging Limited Partnership has securities registered pursuant to Section 12(b) of the Act.

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.

Rangers Sub I, LLC (refer to the Note below)                             o Yes  ý No 

FelCor Lodging Limited Partnership (refer to the Note below)                     o Yes  ý No 

Note: As voluntary filers not subject to the filing requirements of the Securities Exchange Act of 1934, the registrants have filed all reports pursuant to Section 13 or 15(d) for the preceding 12 months as if they were subject to such filing requirements.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).  

Rangers Sub I, LLC                                      ý Yes  o No 

FelCor Lodging Limited Partnership                                  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.

Rangers Sub I, LLC:

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	ý	Smaller reporting company	☐
		Emerging growth company	☐
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

FelCor Lodging Limited Partnership:

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	ý	Smaller reporting company	☐
		Emerging growth company	☐
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).   

Rangers Sub I, LLC                                     ☐ Yes ý No 

FelCor Lodging Limited Partnership                                 ☐ Yes  ý No 

As of November 5, 2020, RLJ Lodging Trust, L.P. owns 100% of the percentage interests of Rangers Sub I, LLC. As of November 5, 2020, FelCor Holdings Trust, a wholly-owned subsidiary of RLJ Lodging Trust, L.P., owns 99% of the percentage interests of FelCor Lodging Limited Partnership, and Rangers General Partner, LLC, a wholly-owned subsidiary of RLJ Lodging Trust, L.P., owns 1% of the percentage interests of FelCor Lodging Limited Partnership.

EXPLANATORY NOTE

On August 31, 2017 (the "Acquisition Date"), RLJ Lodging Trust ("RLJ"), RLJ Lodging Trust, L.P. ("RLJ LP"), Rangers Sub I, LLC, a wholly owned subsidiary of RLJ LP ("Rangers"), and Rangers Sub II, LP, a wholly owned subsidiary of RLJ LP ("Partnership Merger Sub") consummated the transactions contemplated by the Agreement and Plan of Merger (the "Merger Agreement") dated as of April 23, 2017 with FelCor Lodging Trust Incorporated ("FelCor") and FelCor Lodging Limited Partnership ("FelCor LP"), pursuant to which Partnership Merger Sub merged with and into FelCor LP, with FelCor LP surviving as a wholly owned subsidiary of RLJ LP (the "Partnership Merger"), and, immediately thereafter, FelCor merged with and into Rangers, with Rangers surviving as a wholly owned subsidiary of RLJ LP (the "REIT Merger" and, together with the Partnership Merger, the "Mergers").

Where it is important to distinguish between the entities, we either refer specifically to Rangers or to FelCor LP. Otherwise, we use the terms "we" or "our" to refer to Rangers and FelCor LP, collectively (including their consolidated subsidiaries).

This quarterly report on Form 10-Q for the quarter ended September 30, 2020 combines the filings for Rangers and FelCor LP. Rangers indirectly owns a 99% partnership interest in FelCor LP. Through FelCor LP, Rangers owns hotel properties and conducts other business.

We believe combining the periodic reports for Rangers and FelCor LP into a single combined report results in the following benefits:

•presents the business as a whole (the same way management views and operates the business);

•eliminates duplicative disclosure and provides a more streamlined presentation (a substantial portion of our disclosure applies to both Rangers and FelCor LP); and

•saves time and cost by preparing combined reports instead of separate reports.

Rangers consolidates FelCor LP for financial reporting purposes. Rangers has no assets other than its indirect investment in FelCor LP and no liabilities separate from FelCor LP. Therefore, the reported assets and liabilities for Rangers and FelCor LP are substantially identical.

RLJ LP owns 100% of Rangers. Rangers indirectly owns 99% of FelCor LP. A wholly-owned subsidiary of RLJ LP owns the remaining 1% of FelCor LP, which is a noncontrolling interest that is reflected within the equity section of the consolidated balance sheets and in the consolidated statements of equity. Apart from the different equity treatment, the consolidated financial statements for Rangers and FelCor LP are nearly identical, except that net income (loss) attributable to the 1% noncontrolling interest in FelCor LP is deducted from Rangers' net income (loss) in order to arrive at net income (loss) attributable to Rangers.

We present the sections in this report combined unless separate disclosure is required for clarity.

i

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Rangers Sub I, LLC
	Consolidated Financial Statements (unaudited)
	Balance Sheets	1
	Statements of Operations and Comprehensive (Loss) Income	2
	Statements of Changes in Equity	3
	Statements of Cash Flows	5
	FelCor Lodging Limited Partnership
	Consolidated Financial Statements (unaudited)
	Balance Sheets	6
	Statements of Operations and Comprehensive (Loss) Income	7
	Statements of Partners' Capital	8
	Statements of Cash Flows	10
	Notes to the Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	30
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	32
Signatures		33

ii

PART I. FINANCIAL INFORMATION

Item 1.         Financial Statements

Rangers Sub I, LLC

Consolidated Balance Sheets

(Amounts in thousands)

(unaudited)

	September 30, 2020		December 31, 2019
Assets
Investment in hotel properties, net	$	1,912,564	$	1,946,826
Investment in unconsolidated joint ventures	7,056		15,171
Cash and cash equivalents	64,740		19,572
Restricted cash reserves	6,072		4,147
Related party rent receivable	—		49,181
Advance to Lessee - related party	506		—
Lease right-of-use assets	77,361		80,635
Prepaid expense and other assets	4,840		7,543
Total assets	$	2,073,139	$	2,123,075
Liabilities and Equity
Debt, net	$	707,834	$	713,727
Related party debt	85,000		85,000
Accounts payable and other liabilities	37,705		32,676
Lease liabilities	46,994		48,200
Related party rent payable	2,855		—
Accrued interest	9,586		2,463
Related party accrued interest	119		190
Total liabilities	890,093		882,256
Commitments and Contingencies (Note 9)
Equity
Member's equity:
Member's equity	1,159,674		1,119,913
Retained earnings	3,287		99,996
Total member's equity	1,162,961		1,219,909
Noncontrolling interest:
Noncontrolling interest in consolidated joint ventures	8,338		8,588
Noncontrolling interest in FelCor LP	11,747		12,322
Total noncontrolling interest	20,085		20,910
Total equity	1,183,046		1,240,819
Total liabilities and equity	$	2,073,139	$	2,123,075

The accompanying notes are an integral part of these consolidated financial statements.

1

Rangers Sub I, LLC

Consolidated Statements of Operations and Comprehensive (Loss) Income

(Amounts in thousands)

(unaudited)

	For the three months ended September 30,				For the nine months ended September 30,
	2020		2019		2020		2019
Revenues
Operating revenues
Related party lease revenue	$	468	$	46,392	$	20,904	$	152,534
Total revenues	468		46,392		20,904		152,534
Expenses
Operating expenses
Depreciation and amortization	18,882		17,696		56,166		54,284
Property tax, insurance and other	9,806		10,327		29,325		31,416
General and administrative	(1,555)		278		(571)		961
Transaction costs	(154)		105		(144)		215
Total operating expenses	26,979		28,406		84,776		86,876
Other income	—		8		1		59
Interest income	6		79		119		239
Interest expense	(7,718)		(8,201)		(23,526)		(23,706)
Related party interest expense	(688)		(1,138)		(2,401)		(3,475)
Loss on sale of hotel properties, net	—		(91)		(42)		(21,474)
(Loss) income before equity in (loss) income from unconsolidated joint ventures	(34,911)		8,643		(89,721)		17,301
Equity in (loss) income from unconsolidated joint ventures	(7,806)		30		(8,215)		565
Net (loss) income and comprehensive (loss) income	(42,717)		8,673		(97,936)		17,866
Net loss (income) attributable to noncontrolling interests:
Noncontrolling interest in consolidated joint ventures	99		(82)		250		(78)
Noncontrolling interest in FelCor LP	426		(85)		977		(164)
Preferred distributions - consolidated joint venture	—		—		—		(186)
Redemption of preferred equity - consolidated joint venture	—		—		—		(1,153)
Net (loss) income and comprehensive (loss) income attributable to Rangers	$	(42,192)	$	8,506	$	(96,709)	$	16,285

The accompanying notes are an integral part of these consolidated financial statements.

2

Rangers Sub I, LLC

Consolidated Statements of Changes in Equity

(Amounts in thousands)

(unaudited)

	Member's Equity				Noncontrolling Interest
	Equity		Retained Earnings		FelCor LP		Consolidated Joint  Ventures		Total  Equity
Balance at December 31, 2019	$	1,119,913	$	99,996	$	12,322	$	8,588	$	1,240,819
Net loss and comprehensive loss	—		(96,709)		(977)		(250)		(97,936)
Contributions	115,108		—		1,163		—		116,271
Distributions	(75,347)		—		(761)		—		(76,108)
Balance at September 30, 2020	$	1,159,674	$	3,287	$	11,747	$	8,338	$	1,183,046

	Member's Equity				Noncontrolling Interest
	Equity		Retained Earnings		FelCor LP		Consolidated Joint Ventures		Total Equity
Balance at June 30, 2020	$	1,148,756	$	45,479	$	12,062	$	8,437	$	1,214,734
Net loss and comprehensive loss	—		(42,192)		(426)		(99)		(42,717)
Contributions	12,131		—		123		—		12,254
Distributions	(1,213)		—		(12)		—		(1,225)
Balance at September 30, 2020	$	1,159,674	$	3,287	$	11,747	$	8,338	$	1,183,046

The accompanying notes are an integral part of these consolidated financial statements.

3

Rangers Sub I, LLC

Consolidated Statements of Changes in Equity

(Amounts in thousands)

(unaudited)

	Member's Equity				Noncontrolling Interest
	Equity		Retained Earnings		FelCor LP		Consolidated Joint  Ventures		Preferred Equity in a Consolidated Joint Venture		Total  Equity
Balance at December 31, 2018	$	1,334,154	$	76,695	$	14,250	$	6,059	$	44,430	$	1,475,588
Net income and comprehensive income	—		16,285		164		78		1,339		17,866
Contributions	134,581		—		1,360		—		—		135,941
Distributions	(340,898)		—		(3,443)		—		—		(344,341)
Preferred distributions - consolidated joint venture	—		—		—		—		(186)		(186)
Redemption of preferred equity - consolidated joint venture	—		—		—		—		(45,583)		(45,583)
Contributions from consolidated joint venture partners	—		—		—		2,281		—		2,281
Balance at September 30, 2019	$	1,127,837	$	92,980	$	12,331	$	8,418	$	—	$	1,241,566

	Member's Equity				Noncontrolling Interest
	Equity		Retained Earnings		FelCor LP		Consolidated Joint  Ventures		Preferred Equity in a Consolidated Joint Venture		Total  Equity
Balance at June 30, 2019	$	1,113,358	$	84,474	$	12,099	$	8,336	$	—	$	1,218,267
Net income and comprehensive income	—		8,506		85		82		—		8,673
Contributions	20,610		—		208		—		—		20,818
Distributions	(6,131)		—		(61)		—		—		(6,192)
Balance at September 30, 2019	$	1,127,837	$	92,980	$	12,331	$	8,418	$	—	$	1,241,566

The accompanying notes are an integral part of these consolidated financial statements.

4

Rangers Sub I, LLC

Consolidated Statements of Cash Flows

(Amounts in thousands)

(unaudited)

	For the nine months ended September 30,
	2020		2019
Cash flows from operating activities
Net (loss) income	$	(97,936)	$	17,866
Adjustments to reconcile net (loss) income to cash flow provided by operating activities:
Loss on sale of hotel properties, net	42		21,474
Depreciation and amortization	56,166		54,284
Amortization of deferred financing costs	148		99
Other amortization	(2,062)		(1,950)
Equity in loss (income) from unconsolidated joint ventures	8,215		(565)
Distributions of income from unconsolidated joint ventures	—		1,295
Changes in assets and liabilities:
Related party rent receivable	49,181		(54,879)
Advance to Lessee - related party	(506)		—
Prepaid expense and other assets	2,284		1,383
Related party prepaid interest	—		180
Related party rent payable	2,855		—
Accounts payable and other liabilities	6,967		4,723
Accrued interest	7,123		7,125
Related party accrued interest	(71)		190
Net cash flow provided by operating activities	32,406		51,225
Cash flows from investing activities
Proceeds from the sale of hotel properties, net	(42)		145,159
Improvements and additions to hotel properties	(23,328)		(42,663)
Contributions to unconsolidated joint ventures	(100)		(603)
Net cash flow (used in) provided by investing activities	(23,470)		101,893
Cash flows from financing activities
Proceeds from borrowings	—		96,000
Repayments of borrowings	(2,006)		(1,925)
Contributions from members	116,271		135,941
Distributions to members	(76,108)		(344,341)
Payments of deferred financing costs	—		(990)
Preferred distributions - consolidated joint venture	—		(312)
Redemption of preferred equity - consolidated joint venture	—		(45,583)
Contributions from consolidated joint venture partners	—		2,281
Net cash flow provided by (used in) financing activities	38,157		(158,929)
Net change in cash, cash equivalents, and restricted cash reserves	47,093		(5,811)
Cash, cash equivalents, and restricted cash reserves, beginning of year	23,719		24,562
Cash, cash equivalents, and restricted cash reserves, end of period	$	70,812	$	18,751

The accompanying notes are an integral part of these consolidated financial statements.

5

FelCor Lodging Limited Partnership

Consolidated Balance Sheets

(Amounts in thousands)

(unaudited)

	September 30, 2020		December 31, 2019
Assets
Investment in hotel properties, net	$	1,912,564	$	1,946,826
Investment in unconsolidated joint ventures	7,056		15,171
Cash and cash equivalents	64,740		19,572
Restricted cash reserves	6,072		4,147
Related party rent receivable	—		49,181
Advance to Lessee - related party	506		—
Lease right-of-use assets	77,361		80,635
Prepaid expense and other assets	4,840		7,543
Total assets	$	2,073,139	$	2,123,075
Liabilities and Partners' Capital
Debt, net	$	707,834	$	713,727
Related party debt	85,000		85,000
Accounts payable and other liabilities	37,705		32,676
Lease liabilities	46,994		48,200
Related party rent payable	2,855		—
Accrued interest	9,586		2,463
Related party accrued interest	119		190
Total liabilities	890,093		882,256
Commitments and Contingencies (Note 9)
Partners' Capital
Partners’ capital:
Partners’ capital	1,171,389		1,131,226
Retained earnings	3,319		101,005
Total partners’ capital, excluding noncontrolling interest	1,174,708		1,232,231
Noncontrolling interest in consolidated joint ventures	8,338		8,588
Total partners' capital	1,183,046		1,240,819
Total liabilities and partners' capital	$	2,073,139	$	2,123,075

The accompanying notes are an integral part of these consolidated financial statements.

6

FelCor Lodging Limited Partnership

Consolidated Statements of Operations and Comprehensive (Loss) Income

(Amounts in thousands)

(unaudited)

	For the three months ended September 30,				For the nine months ended September 30,
	2020		2019		2020		2019
Revenues
Operating revenues
Related party lease revenue	$	468	$	46,392	$	20,904	$	152,534
Total revenues	468		46,392		20,904		152,534
Expenses
Operating expenses
Depreciation and amortization	18,882		17,696		56,166		54,284
Property tax, insurance and other	9,806		10,327		29,325		31,416
General and administrative	(1,555)		278		(571)		961
Transaction costs	(154)		105		(144)		215
Total operating expenses	26,979		28,406		84,776		86,876
Other income	—		8		1		59
Interest income	6		79		119		239
Interest expense	(7,718)		(8,201)		(23,526)		(23,706)
Related party interest expense	(688)		(1,138)		(2,401)		(3,475)
Loss on sale of hotel properties, net	—		(91)		(42)		(21,474)
(Loss) income before equity in (loss) income from unconsolidated joint ventures	(34,911)		8,643		(89,721)		17,301
Equity in (loss) income from unconsolidated joint ventures	(7,806)		30		(8,215)		565
Net (loss) income and comprehensive (loss) income	(42,717)		8,673		(97,936)		17,866
Net loss (income) attributable to noncontrolling interests:
Noncontrolling interest in consolidated joint ventures	99		(82)		250		(78)
Preferred distributions - consolidated joint venture	—		—		—		(186)
Redemption of preferred capital - consolidated joint venture	—		—		—		(1,153)
Net (loss) income and comprehensive (loss) income attributable to FelCor LP	$	(42,618)	$	8,591	$	(97,686)	$	16,449

The accompanying notes are an integral part of these consolidated financial statements.

7

FelCor Lodging Limited Partnership

Consolidated Statements of Partners' Capital

(Amounts in thousands)

(unaudited)

	Partners' Capital				Noncontrolling Interest
	Capital		Retained Earnings		Consolidated Joint  Ventures		Total  Partners' Capital
Balance at December 31, 2019	$	1,131,226	$	101,005	$	8,588	$	1,240,819
Net loss and comprehensive loss	—		(97,686)		(250)		(97,936)
Contributions	116,271		—		—		116,271
Distributions	(76,108)		—		—		(76,108)
Balance at September 30, 2020	$	1,171,389	$	3,319	$	8,338	$	1,183,046

	Partners' Capital				Noncontrolling Interest
	Capital		Retained Earnings		Consolidated Joint Ventures		Total Partners' Capital
Balance at June 30, 2020	$	1,160,360	$	45,937	$	8,437	$	1,214,734
Net loss and comprehensive loss	—		(42,618)		(99)		(42,717)
Contributions	12,254		—		—		12,254
Distributions	(1,225)		—		—		(1,225)
Balance at September 30, 2020	$	1,171,389	$	3,319	$	8,338	$	1,183,046

The accompanying notes are an integral part of these consolidated financial statements.

8

FelCor Lodging Limited Partnership

Consolidated Statements of Partners' Capital

(Amounts in thousands)

(unaudited)

	Partners' Capital				Noncontrolling Interest
	Capital		Retained Earnings		Consolidated Joint  Ventures		Preferred Capital in a Consolidated Joint Venture		Total  Partners' Capital
Balance at December 31, 2018	$	1,347,630	$	77,469	$	6,059	$	44,430	$	1,475,588
Net income and comprehensive income	—		16,449		78		1,339		17,866
Contributions	135,941		—		—		—		135,941
Distributions	(344,341)		—		—		—		(344,341)
Preferred distributions - consolidated joint venture	—		—		—		(186)		(186)
Redemption of preferred equity - consolidated joint venture	—		—		—		(45,583)		(45,583)
Contributions from consolidated joint venture partners	—		—		2,281		—		2,281
Balance at September 30, 2019	$	1,139,230	$	93,918	$	8,418	$	—	$	1,241,566

	Partners' Capital				Noncontrolling Interest
	Capital		Retained Earnings		Consolidated Joint Ventures		Preferred Capital in a Consolidated Joint Venture		Total Partners' Capital
Balance at June 30, 2019	$	1,124,604	$	85,327	$	8,336	$	—	$	1,218,267
Net income and comprehensive income	—		8,591		82		—		8,673
Contributions	20,818		—		—		—		20,818
Distributions	(6,192)		—		—		—		(6,192)
Balance at September 30, 2019	$	1,139,230	$	93,918	$	8,418	$	—	$	1,241,566

The accompanying notes are an integral part of these consolidated financial statements.

9

FelCor Lodging Limited Partnership

Consolidated Statements of Cash Flows

(Amounts in thousands)

(unaudited)

	For the nine months ended September 30,
	2020		2019
Cash flows from operating activities
Net (loss) income	$	(97,936)	$	17,866
Adjustments to reconcile net (loss) income to cash flow provided by operating activities:
Loss on sale of hotel properties, net	42		21,474
Depreciation and amortization	56,166		54,284
Amortization of deferred financing costs	148		99
Other amortization	(2,062)		(1,950)
Equity in loss (income) from unconsolidated joint ventures	8,215		(565)
Distributions of income from unconsolidated joint ventures	—		1,295
Changes in assets and liabilities:
Related party rent receivable	49,181		(54,879)
Advance to Lessee - related party	(506)		—
Prepaid expense and other assets	2,284		1,383
Related party prepaid interest	—		180
Related party rent payable	2,855		—
Accounts payable and other liabilities	6,967		4,723
Accrued interest	7,123		7,125
Related party accrued interest	(71)		190
Net cash flow provided by operating activities	32,406		51,225
Cash flows from investing activities
Proceeds from the sale of hotel properties, net	(42)		145,159
Improvements and additions to hotel properties	(23,328)		(42,663)
Contributions to unconsolidated joint ventures	(100)		(603)
Net cash flow (used in) provided by investing activities	(23,470)		101,893
Cash flows from financing activities
Proceeds from borrowings	—		96,000
Repayments of borrowings	(2,006)		(1,925)
Contributions from partners	116,271		135,941
Distributions to partners	(76,108)		(344,341)
Payments of deferred financing costs	—		(990)
Preferred distributions - consolidated joint venture	—		(312)
Redemption of preferred capital - consolidated joint venture	—		(45,583)
Contributions from consolidated joint venture partners	—		2,281
Net cash flow provided by (used in) financing activities	38,157		(158,929)
Net change in cash, cash equivalents, and restricted cash reserves	47,093		(5,811)
Cash, cash equivalents, and restricted cash reserves, beginning of year	23,719		24,562
Cash, cash equivalents, and restricted cash reserves, end of period	$	70,812	$	18,751

The accompanying notes are an integral part of these consolidated financial statements.

10

Rangers Sub I, LLC and FelCor Lodging Limited Partnership

Notes to the Consolidated Financial Statements

(unaudited)

1.              General

Organization

Rangers Sub I, LLC ("Rangers") is a Maryland limited liability company and a wholly-owned subsidiary of RLJ Lodging Trust, L.P. ("RLJ LP"). Rangers owns an indirect 99% partnership interest in FelCor Lodging Limited Partnership ("FelCor LP"). Rangers General Partner, LLC, also a wholly-owned subsidiary of RLJ LP, owns the remaining 1% partnership interest and is the sole general partner of FelCor LP. Rangers and FelCor LP are collectively referred to as the "Company." Substantially all of the Company’s assets and liabilities are held by, and all of its operations are conducted through FelCor LP. The Company owns primarily premium-branded, compact full-service hotels located in major markets and resort locations.

As of September 30, 2020, the Company owned 28 hotel properties with approximately 8,100 rooms, located in 13 states.  The Company, through wholly-owned subsidiaries, owned a 100% interest in 25 hotel properties, a 95% controlling interest in The Knickerbocker, and 50% interests in entities owning two hotel properties. The Company consolidates its real estate interests in the 26 hotel properties in which it holds a controlling financial interest, and the Company records the real estate interests in the two hotels in which it holds an indirect 50% interest using the equity method of accounting. The Company leases 27 of its 28 hotel properties to subsidiaries of RLJ LP.

Liquidity and Management's Plans

The Company's hotel property-owning subsidiaries (the “Lessors”) lease the hotel properties to property-operating lessees owned by TRS subsidiaries of RLJ (the “Lessees”). The Company receives related party lease revenue from these lease agreements, including percentage rent. The percentage rent amounts are calculated based on a percentage of room revenues, food and beverage revenues and other revenues at the hotel properties. In response to the near elimination of travel and hotel demand resulting from the spread of the novel strain of coronavirus (COVID-19) and the related government mandates, the Company had previously announced RLJ's suspension of operations at 13 of the Company's hotel properties. As government mandated stay-in-place restrictions were lifted, RLJ, for itself and on behalf of the Company, developed a framework to open the suspended hotel properties. RLJ had reopened eight of the Company's hotel properties as of September 30, 2020 and subsequent to the end of the quarter has reopened an additional two of the Company's hotel properties. RLJ continues to evaluate reopening the remaining three suspended hotel properties based on market conditions. The remaining suspended hotel properties are located within the central business districts of New York City and San Francisco. In the event stay-in-place restrictions are reinstated, RLJ would consider temporarily suspending hotel operations where demand is inadequate.

The ongoing effects of the COVID-19 pandemic on the hotel properties' operations continue to have a material adverse impact on the Company's financial results and liquidity, and such adverse impact may continue well beyond the containment of such outbreak. Since the extent to which the COVID-19 pandemic impacts our operations will depend on future developments that are highly uncertain, the Company cannot estimate the impact on its business, financial condition or near- or longer-term financial or operational results with reasonable certainty. In addition, as a result of the COVID-19 pandemic, the Lessees negotiated for and were granted an abatement on base rent of $17.5 million for the three months ended June 30, 2020, as well as an abatement on base rent of $17.5 million for the three months ended September 30, 2020. The Lessees have received a total abatement on base rent of $35.0 million during the nine months ended September 30, 2020. The Company owes the Lessees $2.9 million for reimbursement of rent as of September 30, 2020, which is included in related party rent payable on the consolidated balance sheet.

During the nine months ended September 30, 2020, RLJ LP contributed $50.0 million to the Company to ensure that the Company can service its debt and maintain its operations. In addition, given the impact on lodging demand, the Company has taken various actions to help mitigate the effects of the COVID-19 pandemic on its operating results and to preserve liquidity. Measures the Company has taken include:

•Capital Investment Reduction:  The Company reduced its 2020 capital expenditure program by deferring all capital investments, other than completing projects that are substantially underway and nearing completion.

•Return on Investment ("ROI") Project Suspensions:  The Company suspended most of the 2020 ROI projects.

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2.              Summary of Significant Accounting Policies

The combined Annual Report on Form 10-K for the year ended December 31, 2019 of Rangers and FelCor LP contains a discussion of the Company's significant accounting policies. Other than noted below, there have been no significant changes to the Company's significant accounting policies since December 31, 2019.

Basis of Presentation and Principles of Consolidation

The unaudited consolidated financial statements and related notes have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ("GAAP") and in conformity with the rules and regulations of the Securities and Exchange Commission ("SEC") applicable to financial information. The unaudited financial statements include all adjustments that are necessary, in the opinion of management, to fairly state the consolidated balance sheets, statements of operations and comprehensive (loss) income, statements of changes in equity (partners' capital) and statements of cash flows.

The unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto as of and for the year ended December 31, 2019, included in the combined Annual Report on Form 10-K of Rangers and FelCor LP filed with the SEC on February 26, 2020.

The consolidated financial statements include the accounts of Rangers, FelCor LP and its wholly-owned subsidiaries, and joint ventures in which the Company has a majority voting interest and control. For the controlled subsidiaries that are not wholly-owned, the third-party ownership interest represents a noncontrolling interest, which is presented separately in the consolidated financial statements. The Company also records the real estate interests in two joint ventures in which it holds an indirect 50% interest using the equity method of accounting. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and the amounts of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Given the additional and unforeseen effects from the COVID-19 pandemic, these estimates have become more challenging, and actual results could differ from those estimates.

Leases

On April 10, 2020, the Financial Accounting Standards Board (the "FASB") issued a Staff Q&A to respond to some frequently asked questions about accounting for lease concessions related to the effects of the COVID-19 pandemic. Consequently, for concessions related to the effects of the COVID-19 pandemic, an entity will not have to analyze each contract to determine whether enforceable rights and obligations for concessions exist in the contract and can elect to apply or not apply the lease modification guidance to those contracts. Entities may make the elections for any lessor-provided concessions related to the effects of the COVID-19 pandemic (e.g., deferrals of lease payments, cash payments made to the lessee, reduced future lease payments) as long as the concession does not result in a substantial increase in the rights of the lessor or the obligations of the lessee.

As a result of the impact of the COVID-19 pandemic on the Lessees, the Company made the determination to abate base rent of $17.5 million for the three months ended June 30, 2020, as well as to abate base rent of $17.5 million for the three months ended September 30, 2020. The Lessees have received a total abatement on base rent of $35.0 million during the nine months ended September 30, 2020. The Company owes the Lessees $2.9 million for reimbursement of rent as of September 30, 2020, which is included in related party rent payable on the consolidated balance sheet. The Company has elected to not evaluate whether these rent abatements are lease modifications. The Company has elected to not apply the lease modification guidance to the rent abatements, and, as such, the Company has recognized the rent abatements as negative variable lease revenue of $17.5 million during the three months ended June 30, 2020 and $17.5 million during the three months ended September 30, 2020. The Company will continue to evaluate the impact of lease concessions and/or abatements and the appropriate accounting.

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Recently Issued Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which modifies the measurement approach for credit losses on financial assets measured on an amortized cost basis from an "incurred loss" method to an "expected loss" method. In November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses. The Company adopted this new standard on January 1, 2020. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The guidance modifies the disclosure requirements for fair value measurements by removing or modifying some of the disclosures, while also adding new disclosures. The Company adopted this new standard on January 1, 2020. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The guidance provides optional expedients for applying GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued at the end of 2021 because of reference rate reform. The guidance is effective immediately and expires on December 31, 2022. Based on the Company's assessment, the adoption of this standard is not expected to have a material impact on the Company's consolidated financial statements.

3.              Investment in Hotel Properties

Investment in hotel properties consisted of the following (in thousands):

	September 30, 2020		December 31, 2019
Land and improvements	$	501,392	$	500,618
Buildings and improvements	1,476,035		1,461,525
Furniture, fixtures and equipment	141,601		135,400
	2,119,028		2,097,543
Accumulated depreciation	(206,464)		(150,717)
Investment in hotel properties, net	$	1,912,564	$	1,946,826

For the three and nine months ended September 30, 2020, the Company recognized depreciation expense related to its investment in hotel properties of approximately $18.7 million and $55.7 million, respectively. For the three and nine months ended September 30, 2019, the Company recognized depreciation expense related to its investment in hotel properties of approximately $17.6 million and $53.9 million, respectively.

4.              Investment in Unconsolidated Joint Ventures

As of September 30, 2020 and December 31, 2019, the Company owned 50% interests in joint ventures that owned two hotel properties. During the three months ended September 30, 2020, one of the unconsolidated joint ventures determined the property ground lease will likely terminate no later than October 31, 2021 and the property will revert to the ground lessor at that time. As a result, the Company recorded an impairment loss of $6.5 million to write down the Company's investment in this joint venture. The impairment loss is included in equity in (loss) income from unconsolidated joint ventures in the accompanying consolidated statements of operations and comprehensive (loss) income.

The Company accounts for the investments in these unconsolidated joint ventures under the equity method of accounting. The Company makes adjustments to the equity in income from unconsolidated joint ventures related to the difference between the Company's basis in the investment in the unconsolidated joint ventures as compared to the historical basis of the assets and liabilities of the joint ventures. As of September 30, 2020 and December 31, 2019, the unconsolidated entities' debt consisted entirely of non-recourse mortgage debt.

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The following table summarizes the components of the Company's investments in unconsolidated joint ventures (in thousands):

	September 30, 2020		December 31, 2019
Equity basis of the joint venture investments	$	(6,585)	$	(4,236)
Cost of the joint venture investments in excess of the joint venture book value	13,641		19,407
Investment in unconsolidated joint ventures	$	7,056	$	15,171

The following table summarizes the components of the Company's equity in (loss) income from unconsolidated joint ventures (in thousands):

	For the three months ended September 30,				For the nine months ended September 30,
	2020		2019		2020		2019
Operating (loss) income	$	(993)	$	310	$	(843)	$	1,404
Depreciation of cost in excess of book value	(280)		(280)		(839)		(839)
Impairment loss	(6,533)		—		(6,533)		—
Equity in (loss) income from unconsolidated joint ventures	$	(7,806)	$	30	$	(8,215)	$	565

5.            Sale of Hotel Properties

During the nine months ended September 30, 2019, the Company sold two hotel properties in one transaction for a total sale price of approximately $147.4 million. In connection with this transaction, the Company recorded a $21.4 million loss on sale, which is included in loss on sale of hotel properties, net in the accompanying consolidated statement of operations and comprehensive (loss) income. The loss on sale included approximately $0.7 million in lease termination fees as a result of early termination of the TRS Leases with the Lessees at these hotel properties.

The following table discloses the hotel properties that were sold during the nine months ended September 30, 2019:

Hotel Property Name	Location	Sale Date	Rooms
Embassy Suites Myrtle Beach - Oceanfront Resort	Myrtle Beach, SC	June 27, 2019	255
Hilton Myrtle Beach Resort	Myrtle Beach, SC	June 27, 2019	385
		Total	640

6.              Debt

The Company's debt consisted of the following (in thousands):

					Outstanding Borrowings at
	Number of Assets Encumbered	Interest Rate	Maturity Date		September 30, 2020		December 31, 2019
Senior Notes (1)(2)(3)	—	6.00%	June 2025		$	496,940	$	500,484
Mortgage loan (4)	3	4.95%	October 2022		87,410		89,299
Mortgage loan (5)	1	4.94%	October 2022		28,177		28,785
Mortgage loan (1)(6)	3	1.75%	April 2024	(7)	96,000		96,000
	7				708,527		714,568
Deferred financing costs, net					(693)		(841)
Debt, net					$	707,834	$	713,727

(1)Requires payments of interest only through maturity.

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(2)The Senior Notes (as defined below) include $22.1 million and $25.6 million at September 30, 2020 and December 31, 2019, respectively, related to fair value adjustments that RLJ pushed down to the Company's consolidated financial statements as a result of the Mergers.

(3)The Company has the option to redeem the Senior Notes at a price of 103.0% of face value.

(4)Includes $1.0 million and $1.4 million at September 30, 2020 and December 31, 2019, respectively, related to fair value adjustments on the mortgage loans that RLJ pushed down to the Company's consolidated financial statements as a result of the Mergers.

(5)Includes $0.3 million and $0.4 million at September 30, 2020 and December 31, 2019, respectively, related to a fair value adjustment on the mortgage loan that RLJ pushed down to the Company's consolidated financial statements as a result of the Mergers.

(6)The hotels encumbered by the mortgage loan are cross-collateralized.

(7)The mortgage loan provides two one year extension options.

The 6.000% Senior Notes due 2025 (the "Senior Notes") are subject to a maximum unsecured leverage maintenance covenant, which is based on asset value that is calculated at historical cost. In addition, the Senior Notes are subject to various incurrence covenants that limit the ability of the Company to incur additional debt if these covenants are violated. As of September 30, 2020, the Company was in compliance with all maintenance and incurrence covenants associated with the Senior Notes.

Certain mortgage agreements are subject to various maintenance covenants requiring the Company to maintain a minimum debt yield or debt service coverage ratio ("DSCR"). Failure to meet the debt yield or DSCR thresholds is not an event of default, but instead triggers a cash trap event. During the cash trap event, the lender or servicer of the mortgage loan controls cash outflows until the loan is covenant compliant. In addition, certain mortgage loans have other requirements including continued operation and maintenance of the hotel property. While operations at certain hotel properties securing the mortgage loans had been temporarily suspended, the business operations remained that of a hotel, not another form of business, and the hotel properties were maintained. At September 30, 2020, two mortgage loans failed to meet the DSCR threshold and were in cash trap events. The Company was in compliance with all other maintenance covenants associated with the other mortgage loan at September 30, 2020.

During the three and nine months ended September 30, 2020, the Company recognized $7.7 million and $23.5 million of interest expense, respectively. During three and nine months ended September 30, 2019, the Company recognized $8.2 million and $23.7 million of interest expense, respectively.  

7.              Related Party Debt

In November 2018, the Company's consolidated joint venture entered into an $85.0 million related party mortgage loan with RLJ LP, which is included in related party debt in the accompanying consolidated balance sheets. The related party mortgage loan has an interest rate of LIBOR + 3.00% and a maturity date of November 9, 2023. The related party mortgage loan requires payments of interest only through maturity. The hotel property owned by the Company's consolidated joint venture is encumbered by the related party mortgage loan.

During the three and nine months ended September 30, 2020, the Company recognized $0.7 million and $2.4 million of interest expense, respectively, related to its related party loan with RLJ LP. During the three and nine months ended September 30, 2019, the Company recognized $1.1 million and $3.5 million of interest expense, respectively, related to its related party loan with RLJ LP.

8.              Fair Value

Fair Value Measurement

Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market.  The fair value hierarchy has three levels of inputs, both observable and unobservable:

•Level 1 — Inputs include quoted market prices in an active market for identical assets or liabilities.

•Level 2 — Inputs are market data, other than Level 1, that are observable either directly or indirectly.  Level 2 inputs include quoted market prices for similar assets or liabilities, quoted market prices in an inactive market, and other observable information that can be corroborated by market data.

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•Level 3 — Inputs are unobservable and corroborated by little or no market data.

Fair Value of Financial Instruments

The Company used the following market assumptions and/or estimation methods:

•Cash and cash equivalents, restricted cash reserves, accounts payable and other liabilities — The carrying amounts reported in the consolidated balance sheets for these financial instruments approximate fair value because of their short term maturities.

•Debt — The Senior Notes had an estimated fair value of approximately $467.8 million and $497.8 million at September 30, 2020 and December 31, 2019, respectively. The Company estimated the fair value of the Senior Notes by using publicly available trading prices, which are Level 2 inputs in the fair value hierarchy. The mortgage loans had an estimated fair value of approximately $205.4 million and $216.5 million at September 30, 2020 and December 31, 2019, respectively. The Company estimated the fair value of the mortgage loans by using a discounted cash flow model and incorporating various inputs and assumptions for the effective borrowing rates for debt with similar terms and the loan to estimated fair value of the collateral, which are Level 3 inputs in the fair value hierarchy. The total estimated fair value of the Company's debt was $673.2 million and $714.3 million at September 30, 2020 and December 31, 2019, respectively. The total carrying value of the Company's debt was $707.8 million and $713.7 million at September 30, 2020 and December 31, 2019, respectively.

•Related Party Debt — The Company's related party mortgage loan with RLJ LP had an estimated fair value of approximately $83.5 million and $86.9 million at September 30, 2020 and December 31, 2019, respectively. The Company estimated the fair value of the mortgage loan by using a discounted cash flow model and incorporating various inputs and assumptions for the effective borrowing rates for debt with similar terms and the loan to estimated fair value of the collateral, which are Level 3 inputs in the fair value hierarchy. The total carrying value of the Company's related party debt was $85.0 million at both September 30, 2020 and December 31, 2019.

9.       Commitments and Contingencies

Operating Leases - Lessors

As a lessor, the Company will receive lease revenue from the Lessees under its lease contracts. The lease contracts contain a specific base rent amount or a percentage rent amount, which is calculated based on a percentage of room revenues, food and beverage revenues, and other revenues at the hotel properties. The lease contracts will expire in 2021 (one hotel), 2022 (24 hotels) and thereafter (one hotel).

As a result of the COVID-19 pandemic, the Lessees negotiated for and were granted an abatement on base rent of $17.5 million for the three months ended June 30, 2020, as well as an abatement on base rent of $17.5 million for the three months ended September 30, 2020. The Lessees have received a total abatement on base rent of $35.0 million during the nine months ended September 30, 2020. The Company has recognized the rent abatements as negative variable lease revenue of $17.5 million during the three months ended June 30, 2020 and $17.5 million during the three months ended September 30, 2020. The Company owes the Lessees $2.9 million for reimbursement of rent as of September 30, 2020, which is included in related party rent payable on the consolidated balance sheet.

The lease revenue recognized during the three and nine months ended September 30, 2020 and 2019 consisted of the following:

	For the three months ended September 30,				For the nine months ended September 30,
	2020		2019		2020		2019
Lease revenue relating to lease payments (1)	$	364	$	13,745	$	18,568	$	43,050
Lease revenue relating to percentage rent lease payments	104		32,647		2,336		109,484
Total related party lease revenue	$	468	$	46,392	$	20,904	$	152,534

(1) Reflects the impact of base rent abatement of $17.5 million and $35.0 million for the three and nine months ended September 30,

2020, respectively.

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The future lease payments to the Company under the noncancelable operating leases were as follows (in thousands):

	September 30, 2020
2020	$	17,475
2021	54,478
2022	51,750
2023	—
2024	—
Thereafter	—
Total	$	123,703

Restricted Cash Reserves

The Company is obligated to maintain cash reserve funds for future capital expenditures at the hotels (including the periodic replacement or refurbishment of furniture, fixtures and equipment ("FF&E")) as determined pursuant to the management agreements, franchise agreements and/or mortgage loan documents. The management agreements, franchise agreements and/or mortgage loan documents require the Company to reserve cash ranging typically from 4.0% to 5.0% of the individual hotel’s revenues and maintain the reserves in restricted cash reserve escrows. Any unexpended amounts will remain the property of the Company upon termination of the management agreements, franchise agreements or mortgage loan documents. As of September 30, 2020 and December 31, 2019, approximately $6.1 million and $4.1 million, respectively, was available in the restricted cash reserves for future capital expenditures, real estate taxes and insurance.

Litigation

Other than the legal proceeding mentioned below, neither the Company nor any of its subsidiaries is currently involved in any regulatory or legal proceedings that management believes will have a material and adverse effect on the Company's financial position, results of operations or cash flows.

Prior to the Mergers, an affiliate of InterContinental Hotels Group PLC ("IHG"), which previously managed three of the Company’s hotels, notified the Company that National Retirement Fund ("NRF") had assessed an employee withdrawal liability, with required quarterly payments including interest, in connection with the termination of IHG’s management of those hotels. In October 2020, the Company entered into an agreement with IHG and NRF resolving this dispute.

10.       Equity

Rangers Ownership Interests/FelCor LP Partnership Interests

As of September 30, 2020, RLJ LP owned 100% of the ownership interests and was the sole managing member of Rangers. In addition, Rangers owned, through indirect interests, 99.0% of the partnership interests in FelCor LP. Rangers consolidates FelCor LP for financial reporting purposes as a result of its controlling financial interest. Rangers General Partner, LLC's 1.0% partnership interest in FelCor LP is recognized as a noncontrolling interest in FelCor LP on the consolidated balance sheets of Rangers.

Noncontrolling Interest in Consolidated Joint Ventures

The Company consolidates the joint venture that owns The Knickerbocker, which has a third-party partner that owns a noncontrolling 5% ownership interest in the joint venture. The third-party ownership interest is included in the noncontrolling interest in consolidated joint ventures on the consolidated balance sheets.

11.       Supplemental Information to the Statements of Cash Flows

The following supplemental information to the Statements of Cash Flows is for both Rangers and FelCor LP (in thousands):

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	For the nine months ended September 30,
	2020		2019
Reconciliation of cash, cash equivalents, and restricted cash reserves
Cash and cash equivalents	$	64,740	$	12,695
Restricted cash reserves	6,072		6,056
Cash, cash equivalents, and restricted cash reserves	$	70,812	$	18,751
Interest paid	$	20,291	$	20,518
Interest paid to a related party	$	2,472	$	3,105
Income taxes paid	$	114	$	—
Operating cash flow lease payments for operating leases	$	4,254	$	6,332
Supplemental investing and financing transactions
In conjunction with the sale of hotel properties, the Company recorded the following:
Sale of hotel properties	$	—	$	147,377
Transaction costs	(42)		(1,682)
Operating prorations	—		(536)
Proceeds from the sale of hotel properties, net	$	(42)	$	145,159
Supplemental non-cash transactions
Accrued capital expenditures	$	3,414	$	3,662

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

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report, as well as the information contained in the combined Annual Report on Form 10-K for the year ended December 31, 2019 of Rangers Sub I, LLC ("Rangers") and FelCor Lodging Limited Partnership ("FelCor LP"), filed with the SEC on February 26, 2020 (the "Annual Report"), which is accessible on the SEC’s website at www.sec.gov.

Statement Regarding Forward-Looking Information

The following information contains certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally are identified by the use of the words "believe," "project," "expect," "anticipate," "estimate," "plan," "may," "will," "will continue," "intend," "should," or similar expressions.  Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, beliefs and expectations, such forward-looking statements are not predictions of future events or guarantees of future performance and our actual results could differ materially from those set forth in the forward-looking statements. 

Currently, one of the most significant factors that could cause actual outcomes to differ materially from our forward-looking statements is the continued adverse effect of the current pandemic of the novel coronavirus, or COVID-19, on the financial condition, results of operations, cash flows and performance of the Company, the real estate market and the global economy and financial markets. The extent to which the COVID-19 pandemic impacts us will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the pandemic and its impact on the demand for travel and on levels of consumer confidence, the actions governments, businesses and individuals take in response to the pandemic, including limiting or banning travel, the impact of the COVID-19 pandemic and actions taken in response to the pandemic on global and regional economies, travel and economic activity, and the pace of recovery when the COVID-19 pandemic subsides, among others. Moreover, investors are cautioned to interpret many of the risks identified under

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the section entitled “Risk Factors” in our Form 10-K for the year ended December 31, 2019 as being heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic.

Additional factors that might cause such a difference include the following: increased direct competition, changes in government regulations or accounting rules, changes in local, national and global real estate conditions, declines in the lodging industry, seasonality of the lodging industry, risks related to natural disasters, such as earthquakes and hurricanes, hostilities, including future terrorist attacks or fear of hostilities that affect travel and epidemics and/or pandemics, including COVID-19, ramp up of the future economic recovery and re-opening of hotels, our ability to obtain lines of credit or permanent financing on satisfactory terms, changes in interest rates, duration and access to capital through debt offerings, our ability to identify suitable acquisitions, our ability to close on identified acquisitions and integrate those businesses and inaccuracies of our accounting estimates.  Given these uncertainties, undue reliance should not be placed on such statements.

Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. We caution investors not to place undue reliance on these forward-looking statements and urge investors to carefully review the disclosures we make concerning risks and uncertainties in the sections entitled "Forward-Looking Statements," "Risk Factors," and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report, as well as the risks, uncertainties and other factors discussed in this Quarterly Report on Form 10-Q and identified in other documents filed by us with the SEC.

Overview

Rangers is a Maryland limited liability company that, through FelCor LP, owns hotel properties and conducts other business. Substantially all of Rangers' assets and liabilities are held by, and all of its operations are conducted through, FelCor LP. 100% of the ownership interests of Rangers are held by RLJ LP, which is the operating partnership of RLJ, one of the largest U.S. publicly traded lodging REITs in terms of both number of hotels and number of rooms. Rangers indirectly owns a 99% partnership interest in FelCor LP. Rangers GP, a wholly-owned subsidiary of RLJ LP, owns the remaining 1% partnership interest and is the sole general partner of FelCor LP.

Our hotel properties are concentrated in markets that we believe exhibit multiple demand generators and attractive long-term growth prospects. We believe premium-branded, compact full-service hotels with these characteristics generate high levels of Revenue per Available Room ("RevPAR"), strong operating margins and attractive returns.

As of September 30, 2020, we owned 28 hotel properties with approximately 8,100 rooms, located in 13 states.  We owned, through wholly-owned subsidiaries, a 100% interest in 25 hotel properties, a 95% interest in The Knickerbocker, and 50% interests in entities owning two hotel properties. We consolidate the real estate interests in the 26 hotel properties in which we hold a controlling financial interest, and we record the real estate interests in the two hotels in which we hold an indirect 50% interest using the equity method of accounting. The Company leases 27 of its 28 hotel properties to subsidiaries of RLJ LP.

COVID-19

The global outbreak of a novel strain of coronavirus (COVID-19) and the public health measures that have been undertaken in response have had, and will likely continue to have, a material adverse impact on the global economy and all aspects of our business.

Significant events affecting travel, including the COVID-19 pandemic, typically have an impact on booking patterns, with the full extent of the impact generally determined by the duration of the event and its impact on travel decisions. Our hotel property-owning subsidiaries (the “Lessors”) lease our hotel properties to property-operating lessees owned by TRS subsidiaries of RLJ (the “Lessees”). We receive related party lease revenue from these lease agreements, including percentage rent. The percentage rent amounts are calculated based on a percentage of room revenues, food and beverage revenues and other revenues at the hotel properties. The effects of the COVID-19 pandemic, including related government restrictions, border closings, quarantining, “shelter-in-place” orders and “social distancing,” have essentially halted all non-essential travel and also resulted in a dramatic increase in national unemployment and possible lasting changes in consumer behavior that will create headwinds for our hotel properties even after the current government restrictions are lifted. In addition, the Lessees negotiated for and were granted a base rent abatement of $17.5 million for the three months ended June 30, 2020, as well as an abatement on base rent of $17.5 million for the three months ended September 30, 2020. The Lessees have received a total abatement on base rent of $35.0 million during the nine months ended September 30, 2020. Given the current environment, we are continuing to evaluate whether future lease abatements may be granted. Since we cannot estimate when the COVID-19

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pandemic and the responsive measures to combat it will end, we cannot estimate the ultimate operational and financial impact of COVID-19 on our business. The effects of the COVID-19 pandemic have significantly and negatively impacted our revenue during the three and nine months ended September 30, 2020. Given that the majority of expenses associated with our business relate to depreciation, insurance, property taxes and interest, we are very limited in our ability to reduce our expenses. The effects of the COVID-19 pandemic, combined with macroeconomic trends such as the current economic recession, reduced consumer spending, including on travel, and significantly increased unemployment, lead us to believe that the ongoing effects of the COVID-19 pandemic on our operations will continue to have a material adverse impact on our financial results and liquidity, and such adverse impact may continue well beyond the containment of such outbreak.

During the nine months ended September 30, 2020, we received a contribution of $50.0 million from RLJ LP to ensure that we can service our debt and maintain our operations. In addition, we have taken various actions to mitigate the effects of the COVID-19 pandemic by strengthening our balance sheet and liquidity position, including the following:

•Capital Investment Reduction: We reduced our 2020 capital expenditure program by deferring all capital investments, other than completing projects that are substantially underway and are nearing completion. Near-term, we will take appropriate steps to protect and preserve the hotel properties.

•Return On Investment ("ROI") Project Suspensions:  We reviewed all 2020 ROI initiatives and suspended most of these projects.

For more information, see "Part II - Item 1A. Risk Factors" included elsewhere in this Quarterly Report on Form 10-Q.

Our Customers

Our Lessors receive lease revenue from the Lessees under lease contracts. The lease contracts contain a specific base rent amount or a percentage rent amount, which is calculated based on a percentage of room revenues, food and beverage revenues, and other revenues at the hotel properties.

Substantially all of our hotel properties consist of premium-branded, compact full-service hotels. As a result of this property profile, the majority of our hotel properties' customers are transient in nature. Transient business typically represents individual business or leisure travelers. As a result, macroeconomic factors that impact both business travel and leisure travel have an effect on our business. Group business is typically defined as a minimum of 10 guestrooms booked together as part of the same piece of business. Group business may or may not use the meeting space at any given hotel. A number of our hotels are affiliated with brands marketed toward extended-stay customers. Extended-stay customers are generally defined as those staying five nights or longer.

Our Revenues and Expenses

Our revenues are derived from lease revenue received under lease contracts with related parties, which contain a specific base rent amount or a percentage rent amount, which is calculated based on a percentage of room revenue, food and beverage revenue, and other revenue at the hotel properties.

Our expenses consist of the depreciation on our investment in hotel properties and property taxes, insurance, and other property-related costs of our hotel properties.

Key Indicators of Financial Performance

We use financial information to evaluate the amount of rental income we receive from the Lessees under our lease agreements. We earn a base rent amount or a percentage rent amount, which is calculated based on a percentage of room revenues, food and beverage revenues, and other revenues at the hotel properties. Industry standard statistical information and comparative data, such as Average Daily Rate ("ADR"), occupancy, and RevPAR, are used to measure the operating performance of our hotel properties, including its impact on the amount of rental income recognized from base rent or percentage rent. We also use financial information to evaluate the significance of the property taxes, insurance, and other property-related costs at our hotel properties.

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We use a variety of operating, financial and other information to evaluate the operating performance of our business. These key indicators include financial information that is prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In addition, we use other information that may not be financial in nature, including industry standard statistical information and comparative data. We use this information to measure the operating performance of our individual hotels, groups of hotels and/or business as a whole. We also use these metrics to evaluate the hotel properties in our portfolio to determine each hotel's contribution to cash flow and its potential to provide attractive long-term total returns. The key indicators included:

•ADR

•Occupancy

•RevPAR

ADR, Occupancy and RevPAR are commonly used measures within the lodging industry to evaluate operating performance. RevPAR is an important statistic for monitoring the operating performance at the individual hotel property level and across our entire business. We evaluate the individual hotel RevPAR performance on an absolute basis with comparisons to budget and prior periods, as well as on a regional and company-wide basis. ADR and RevPAR include only room revenue.

Critical Accounting Policies

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period. It is possible that the actual amounts may differ significantly from these estimates and assumptions. We evaluate our estimates, assumptions and judgments on an ongoing basis, based on information that is available to us, our business and industry experience, and various other matters that we believe are reasonable and appropriate for consideration under the circumstances. Our Annual Report on Form 10-K for the year ended December 31, 2019 contains a discussion of our critical accounting policies. There have been no significant changes to our critical accounting policies since December 31, 2019.

Results of Operations

At both September 30, 2020 and September 30, 2019, we owned 28 hotel properties.  Based on when a hotel property is acquired, sold, or closed for renovation, the operating results for certain hotel properties are not comparable for the three and nine months ended September 30, 2020 and 2019.  The non-comparable hotel properties include two dispositions that were completed in 2019.

COVID-19

Beginning in March 2020, RLJ's hotel properties experienced a significant decline in occupancy and RevPAR due to the COVID-19 pandemic. We believe the ongoing effects of the COVID-19 pandemic on our operations continue to have a material adverse impact on our financial results and liquidity, and such adverse impact may continue well beyond the containment of such outbreak. Our hotel property-owning Lessors lease the hotel properties to the property-operating Lessees. We receive related party lease revenue from these lease agreements, including percentage rent. The percentage rent amounts are calculated based on a percentage of room revenues, food and beverage revenues and other revenues at the hotel properties. The economic downturn resulting from the COVID-19 pandemic has significantly impacted our business and the overall lodging industry. Certain of the hotel properties have temporarily suspended all operations and, while other hotel properties are operating in a limited capacity, as a result of these operational changes, the results of operations for the three and nine months ended September 30, 2020 will not be comparable to the same periods in 2019.

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Comparison of the three months ended September 30, 2020 to the three months ended September 30, 2019

	For the three months ended September 30,
	2020		2019		$ Change		% Change
	(amounts in thousands)
Revenues
Operating revenues
Related party lease revenue	$	468	$	46,392	$	(45,924)	(99.0)	%
Total revenues	468		46,392		(45,924)		(99.0)	%
Expenses
Operating expenses
Depreciation and amortization	18,882		17,696		1,186		6.7	%
Property tax, insurance and other	9,806		10,327		(521)		(5.0)	%
General and administrative	(1,555)		278		(1,833)		—	%
Transaction costs	(154)		105		(259)		—	%
Total operating expenses	26,979		28,406		(1,427)		(5.0)	%
Other income	—		8		(8)		(100.0)	%
Interest income	6		79		(73)		(92.4)	%
Interest expense	(7,718)		(8,201)		483		(5.9)	%
Related party interest expense	(688)		(1,138)		450		(39.5)	%
Loss on sale of hotel properties, net	—		(91)		91		(100.0)	%
(Loss) income before equity in (loss) income from unconsolidated joint ventures	(34,911)		8,643		(43,554)		—	%
Equity in (loss) income from unconsolidated joint ventures	(7,806)		30		(7,836)		—	%
Net (loss) income and comprehensive (loss) income	(42,717)		8,673		(51,390)		—	%
Net loss (income) attributable to noncontrolling interests:
Noncontrolling interest in consolidated joint ventures	99		(82)		181		—	%
Noncontrolling interest in FelCor LP	426		(85)		511		—	%
Net (loss) income and comprehensive (loss) income attributable to Rangers	$	(42,192)	$	8,506	$	(50,698)	—	%

Revenues

    Related Party Lease Revenue

Related party lease revenue for the three months ended September 30, 2020 decreased $45.9 million, or 99.0%, to $0.5 million from $46.4 million for the three months ended September 30, 2019. The decrease was partially attributable to a decrease in percentage lease revenue as a result of lower room revenues, food and beverage revenues and other revenues of the Lessees primarily due to the impact of the COVID-19 pandemic. The percentage rent amounts are calculated based on a percentage of room revenues, food and beverage revenues and other revenues at the hotel properties. Additionally, as a result of the COVID-19 pandemic, the Lessees negotiated for and were granted an abatement on base rent of $17.5 million for the three months ended September 30, 2020, which caused the remainder of the decrease.

Depreciation and Amortization

Depreciation and amortization expense for the three months ended September 30, 2020 increased $1.2 million, or 6.7%, to $18.9 million from $17.7 million for the three months ended September 30, 2019. The increase was primarily due to capital expenditures made during and since the three months ended September 30, 2019.

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Property Tax, Insurance and Other

Property tax, insurance and other expense for the three months ended September 30, 2020 decreased $0.5 million, or 5.0%, to $9.8 million from $10.3 million for the three months ended September 30, 2019. The decrease was primarily attributable to a decrease in ground lease expense as a result of lower percentage rents incurred due to the COVID-19 pandemic. This decrease was partially offset by an increase in expense resulting from an increase in property insurance premiums during the three months ended September 30, 2020.

General and Administrative

General and administrative expense for the three months ended September 30, 2020 decreased $1.8 million from $0.3 million for the three months ended September 30, 2019. The decrease was primarily due to the reversal of an excess accrued liability related to the settlement of the National Retirement Fund matter of $1.8 million.

Interest Expense

Interest expense for the three months ended September 30, 2020 decreased $0.5 million, or 5.9%, to $7.7 million from $8.2 million for the three months ended September 30, 2019. The decrease in interest expense was due to the lower average debt balance during the three months ended September 30, 2020 due to scheduled mortgage loan principal payments, as well as a lower average interest rate on our variable rate debt due to decreases in the London Interbank Offered Rate ("LIBOR").

Related Party Interest Expense

Related party interest expense for the three months ended September 30, 2020 decreased $0.5 million, or 39.5%, to $0.7 million from $1.1 million for the three months ended September 30, 2019. The decrease in related party interest expense was due to decreases in LIBOR. The related party mortgage loan has an interest rate of LIBOR + 3.00%. In November 2018, our consolidated joint venture entered into an $85.0 million related party mortgage loan with RLJ LP. The hotel property owned by our consolidated joint venture is encumbered by the related party mortgage loan.

Equity in (Loss) Income from Unconsolidated Joint Ventures

Equity in (loss) income from unconsolidated joint ventures decreased $7.8 million from breakeven for the three months ended September 30, 2019 to a loss of $7.8 million for the three months ended September 30, 2020. The decrease was primarily attributable to the impact of the COVID-19 pandemic and an impairment loss of $6.5 million related to one of our unconsolidated joint ventures during the three months ended September 30, 2020. The impairment loss is related to the write down of our investment in this joint venture due to the joint venture's determination during the three months ended September 30, 2020 that the property ground lease will likely terminate no later than October 31, 2021. The property will revert to the ground lessor at that time.

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Comparison of the nine months ended September 30, 2020 to the nine months ended September 30, 2019

	For the nine months ended September 30,
	2020		2019		$ Change		% Change
	(amounts in thousands)
Revenues
Operating revenues
Related party lease revenue	$	20,904	$	152,534	$	(131,630)	(86.3)	%
Total revenues	20,904		152,534		(131,630)		(86.3)	%
Expenses
Operating expenses
Depreciation and amortization	56,166		54,284		1,882		3.5	%
Property tax, insurance and other	29,325		31,416		(2,091)		(6.7)	%
General and administrative	(571)		961		(1,532)		—	%
Transaction costs	(144)		215		(359)		—	%
Total operating expenses	84,776		86,876		(2,100)		(2.4)	%
Other income	1		59		(58)		(98.3)	%
Interest income	119		239		(120)		(50.2)	%
Interest expense	(23,526)		(23,706)		180		(0.8)	%
Related party interest expense	(2,401)		(3,475)		1,074		(30.9)	%
Loss on sale of hotel properties, net	(42)		(21,474)		21,432		(99.8)	%
(Loss) income before equity in (loss) income from unconsolidated joint ventures	(89,721)		17,301		(107,022)		—	%
Equity in (loss) income from unconsolidated joint ventures	(8,215)		565		(8,780)		—	%
Net (loss) income and comprehensive (loss) income	(97,936)		17,866		(115,802)		—	%
Net loss (income) attributable to noncontrolling interests:
Noncontrolling interest in consolidated joint ventures	250		(78)		328		—	%
Noncontrolling interest in FelCor LP	977		(164)		1,141		—	%
Preferred distributions - consolidated joint venture	—		(186)		186		(100.0)	%
Redemption of preferred equity - consolidated joint venture	—		(1,153)		1,153		(100.0)	%
Net (loss) income and comprehensive (loss) income attributable to Rangers	$	(96,709)	$	16,285	$	(112,994)	—	%

Revenues

Related Party Lease Revenue

Related party lease revenue for the nine months ended September 30, 2020 decreased $131.6 million, or 86.3%, to $20.9 million from $152.5 million for the nine months ended September 30, 2019. The decrease was the result of a $6.2 million decrease in related party lease revenue attributable to the non-comparable properties and a $125.4 million decrease in related party lease revenue attributable to the comparable properties. The decrease in related party lease revenue from the comparable properties was partially attributable to a decrease in percentage lease revenue as a result of lower room revenues, food and beverage revenues and other revenues of the Lessees primarily due to the impact of the COVID-19 pandemic. The percentage rent amounts are calculated based on a percentage of room revenues, food and beverage revenues and other revenues at the hotel properties. Additionally, as a result of the COVID-19 pandemic, the Lessees negotiated for and were granted an abatement on base rent of $17.5 million for the three months ended June 30, 2020, as well as an abatement on base rent of $17.5 million for the three months ended September 30, 2020, which caused the remainder of the decrease.

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Depreciation and Amortization

Depreciation and amortization expense for the nine months ended September 30, 2020 increased $1.9 million, or 3.5%, to $56.2 million from $54.3 million for the nine months ended September 30, 2019. The increase was the result of a $4.5 million increase in depreciation and amortization expense attributable to the comparable properties primarily due to capital expenditures made during and since the nine months ended September 30, 2019. This increase was partially offset by a $2.6 million decrease in depreciation and amortization expense attributable to the non-comparable properties.

Property Tax, Insurance and Other

Property tax, insurance and other expense for the nine months ended September 30, 2020 decreased $2.1 million, or 6.7%, to $29.3 million from $31.4 million for the nine months ended September 30, 2019.  The decrease was attributable to a $1.0 million decrease in property tax, insurance and other expense attributable to the non-comparable properties and a $1.1 million decrease in property tax, insurance and other expense attributable to the comparable properties. The decrease in property tax, insurance and other expense attributable to the comparable properties was primarily attributable to a decrease in ground lease expense as a result of lower percentage rents incurred due to the COVID-19 pandemic, which was partially offset by an increase in expense due to an increase in property insurance premiums.

General and Administrative

General and administrative expense for the nine months ended September 30, 2020 decreased $1.5 million from $1.0 million for the nine months ended September 30, 2019. The overall decrease was primarily attributable to the reversal of an excess accrued liability related to the settlement of the National Retirement Fund matter of $1.8 million, and a net decrease in other general and administrative expenses of $0.2 million. These decreases were partially offset by an increase in expenses outside of the normal course of operations of $0.5 million.

Interest Expense

Interest expense for the nine months ended September 30, 2020 decreased $0.2 million, or 0.8%, to $23.5 million from $23.7 million for the nine months ended September 30, 2019. The decrease in interest expense was due to debt balance reductions during the nine months ended September 30, 2020 as a result of scheduled mortgage loan principal payments, as well as a lower average interest rate on our variable rate debt due to decreases in LIBOR. These decreases were partially offset by an increase due to a higher average debt balance during the nine months ended September 30, 2020 resulting from entering into a new $96.0 million mortgage loan in April 2019.

Related Party Interest Expense

Related party interest expense for the nine months ended September 30, 2020 decreased $1.1 million, or 30.9%, to $2.4 million from $3.5 million for the nine months ended September 30, 2019. The decrease in related party interest expense was due to decreases in LIBOR. The related party mortgage loan has an interest rate of LIBOR + 3.00%. In November 2018, our consolidated joint venture entered into an $85.0 million related party mortgage loan with RLJ LP. The hotel property owned by our consolidated joint venture is encumbered by the related party mortgage loan.

Equity in (Loss) Income from Unconsolidated Joint Ventures

Equity in (loss) income from unconsolidated joint ventures for the nine months ended September 30, 2020 decreased $8.8 million to a loss of $8.2 million from income of $0.6 million for the nine months ended September 30, 2019. The decrease was primarily attributable to the impact of the COVID-19 pandemic and an impairment loss of $6.5 million related to one of our unconsolidated joint ventures during the nine months ended September 30, 2020. The impairment loss is related to the write down of our investment in this joint venture due to the joint venture's determination that the property ground lease will likely terminate no later than October 31, 2021. The property will revert to the ground lessor at that time.

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Liquidity and Capital Resources

Our short-term liquidity requirements consist primarily of the funds necessary to pay for operating expenses and other expenditures directly associated with our hotel properties, including:

•recurring maintenance and capital expenditures necessary to maintain our hotel properties in accordance with brand standards;

•interest expense and scheduled principal payments on outstanding indebtedness; and

•corporate and other general and administrative expenses.

Our long-term liquidity requirements consist primarily of the funds necessary to pay for renovations and other capital expenditures that need to be made periodically with respect to our hotel properties, and scheduled debt payments, at maturity or otherwise.

Due to the COVID-19 pandemic and the effects of government and health official mandates to avoid nonessential travel, we previously announced that RLJ had suspended operations at 13 of our hotel properties. As government mandated stay-in-place restrictions have been lifted, RLJ, for itself and on our behalf, developed a framework to open hotels in a socially and financially responsible way. RLJ had reopened eight of the 13 suspended hotel properties as of September 30, 2020 and subsequent to the end of the quarter has reopened an additional two of our hotel properties. Significant events affecting travel, including the COVID-19 pandemic, typically have an impact on booking patterns, with the full extent of the impact generally determined by the duration of the event and its impact on travel decisions. Our hotel property-owning Lessors lease our hotel properties to property-operating Lessees. We receive related party lease revenue from these lease agreements, including percentage rent. The percentage rent amounts are calculated based on a percentage of room revenues, food and beverage revenues and other revenues at the hotel properties. As a result, we believe the ongoing effects of the COVID-19 pandemic on our operations continue to have a material adverse impact on our financial results and liquidity, and such adverse impact may continue well beyond the containment of such outbreak. In addition, as a result of the COVID-19 pandemic, the Lessees negotiated for and were granted an abatement on base rent of $17.5 million for the three months ended June 30, 2020, as well as an abatement on base rent of $17.5 million for the three months ended September 30, 2020. The Lessees have received a total abatement on base rent of $35.0 million during the nine months ended September 30, 2020.

We can make no assurances that the assumptions used to estimate our liquidity requirements will remain accurate because the magnitude, duration and speed of the COVID-19 pandemic are uncertain. These uncertainties make it difficult to predict the impact on our business, financial condition or near- or longer-term financial or operational results with certainty.

During the nine months ended September 30, 2020, we received a contribution of $50.0 million from RLJ LP to ensure that we can service our debt and maintain our operations. In addition, we have taken further actions to improve our liquidity position, including capital expenditure reductions and suspending ROI initiatives.

Based on these actions and our assumptions regarding the impact of the COVID-19 pandemic, we expect to have sufficient liquidity to satisfy our obligations over an extended period of time.

Sources and Uses of Cash

As of September 30, 2020, we had $70.8 million of cash, cash equivalents and restricted cash reserves as compared to $23.7 million at December 31, 2019.

Cash flows from Operating Activities

The net cash flow provided by operating activities totaled $32.4 million and $51.2 million for the nine months ended September 30, 2020 and 2019, respectively. Our cash flows provided by operating activities generally consist of the cash received from the hotel property lease agreements between the Lessors and the Lessees, which is partially offset by the cash paid for corporate expenses and other working capital changes. Refer to the "Results of Operations" section for further discussion of our operating results for the nine months ended September 30, 2020 and 2019.

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Cash flows from Investing Activities

The net cash flow used in investing activities totaled $23.5 million for the nine months ended September 30, 2020 primarily due to $23.3 million in routine capital improvements and additions to our hotel properties.

The net cash flow provided by investing activities totaled $101.9 million for the nine months ended September 30, 2019 primarily due to $145.2 million of net cash proceeds from the sale of two hotel properties, partially offset by $42.7 million in routine capital improvements and additions to our hotel properties.

Cash flows from Financing Activities

The net cash flow provided by financing activities totaled $38.2 million for the nine months ended September 30, 2020 primarily due to $116.3 million in contributions from members (partners). The net cash flow provided by financing activities was partially offset by $76.1 million in distributions to members (partners) and $2.0 million in scheduled mortgage loans principal payments.

The net cash flow used in financing activities totaled $158.9 million for the nine months ended September 30, 2019 primarily due to $344.3 million in distributions to members (partners), a payment of $45.6 million to redeem the preferred equity in a consolidated joint venture, $1.9 million in scheduled mortgage loans principal payments and $1.0 million in deferred financing cost payments. The net cash flow used in financing activities was partially offset by $135.9 million in contributions from members (partners), $96.0 million in new mortgage borrowings and $2.3 million in contributions from consolidated joint venture partners.

Capital Expenditures and Reserve Funds

We maintain each of our hotel properties in good repair and condition and in conformity with applicable laws and regulations, franchise agreements and management agreements. Generally, the cost of routine improvements and alterations are paid out of furniture, fixtures, and equipment ("FF&E") reserves, which are funded by a portion of each hotel property’s gross revenues. Routine capital expenditures are administered by us with the assistance of the property management companies. However, we have approval rights over the capital expenditures as part of the annual budget process for each of our hotel properties.

From time to time, certain of our hotel properties may undergo renovations as a result of our decision to upgrade portions of the hotels, such as guestrooms, public space, meeting space, and/or restaurants, in order to better compete with other hotels and alternative lodging options in our markets. In addition, upon acquisition of a hotel we often are required to complete a property improvement plan in order to bring the hotel up to the respective franchisor’s standards. If permitted by the terms of the management agreement, funding for a renovation will first come from the FF&E reserves. To the extent that the FF&E reserves are not available or sufficient to cover the cost of the renovation, we will fund all or the remaining portion of the renovation with cash and cash equivalents on hand and/or other sources of available liquidity.

With respect to some of our hotel properties that are operated under franchise agreements with major national hotel brands and for some of our hotel properties subject to first mortgage liens, we are obligated to maintain FF&E reserve accounts for future capital expenditures at these hotels. The amount funded into each of these reserve accounts is generally determined pursuant to the management agreements, franchise agreements and/or mortgage loan documents for each of the respective hotels, and typically ranges between 4.0% and 5.0% of the respective hotel’s total gross revenue. As of September 30, 2020, approximately $2.5 million was held in FF&E reserve accounts for future capital expenditures.

Off-Balance Sheet Arrangements

As of September 30, 2020, we owned 50% interests in joint ventures that owned two hotel properties. RLJ LP owns more than 50% of the operating lessee for one of these hotels and the other hotel is operated without a lease. None of our officers or employees holds an ownership interest in any of these joint ventures or entities.

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One of the 50% unconsolidated joint ventures that owns a hotel property has $20.0 million of non-recourse mortgage debt, of which our pro rata portion was $10.0 million, none of which is reflected as a liability on our consolidated balance sheet. Our liabilities with regard to the non-recourse debt and the liabilities of our subsidiaries that are members or partners in joint ventures are generally limited to guaranties of the borrowing entity’s obligations to pay for the lender’s losses caused by misconduct, fraud or misappropriation of funds by the venture and other typical exceptions from the non-recourse provisions in the mortgages, such as for environmental liabilities. In addition, this joint venture is subject to two ground leases with terms expiring in 2044 and 2094.

The other 50% unconsolidated joint venture that owns a hotel property is subject to a ground lease with an initial term expiring in 2021. During the three months ended September 30, 2020, this unconsolidated joint venture determined that the property ground lease will likely terminate no later than October 31, 2021 and the property will revert to the ground lessor at that time.

FelCor LP's Summarized Condensed Consolidating Financial Information

FelCor LP is the issuer of the Senior Notes. Certain of FelCor LP's 100%-owned subsidiaries (FCH/PSH, L.P.; FelCor/CMB Buckhead Hotel, L.L.C.; FelCor/CMB Marlborough Hotel, L.L.C.; FelCor/CMB Orsouth Holdings, L.P.; FelCor/CMB SSF Holdings, L.P.; FelCor/CSS Holdings, L.P.; FelCor Dallas Love Field Owner, L.L.C.; FelCor Milpitas Owner, L.L.C.; FelCor TRS Borrower 4, L.L.C.; FelCor Hotel Asset Company, L.L.C.; FelCor St. Pete (SPE), L.L.C.; FelCor Esmeralda (SPE), L.L.C.; FelCor S-4 Hotels (SPE), L.L.C.; Madison 237 Hotel, L.L.C.; Myrtle Beach Owner, L.L.C.; and Royalton 44 Hotel, L.L.C., collectively the “Subsidiary Guarantors”), together with Rangers, guaranty, fully and unconditionally, except where subject to customary release provisions as described below, and jointly and severally, the Senior Notes.

The guaranties by the Subsidiary Guarantors may be automatically and unconditionally released upon (i) the sale or other disposition of all of the capital stock of the Subsidiary Guarantor or the sale or disposition of all or substantially all of the assets of the Subsidiary Guarantor, if, in each case, as a result of such sale or disposition, such Subsidiary Guarantor ceases to be a subsidiary of FelCor LP, (ii) the consolidation or merger of any such Subsidiary Guarantor with any person other than FelCor LP, or a subsidiary of FelCor LP, if, as a result of such consolidation or merger, such Subsidiary Guarantor ceases to be a subsidiary of the Operating Partnership, (iii) a legal defeasance or covenant defeasance of the indenture, (iv) the unconditional and complete release of such Subsidiary Guarantor in accordance with the modification and waiver provisions of the indenture, or (v) the designation of a restricted subsidiary that is a Subsidiary Guarantor as an unrestricted subsidiary under and in compliance with the indenture.

Pursuant to amended Rule 3-10 of Regulation S-X, the following aggregate summarized financial information is provided for FelCor LP and the Subsidiary Guarantors. The aggregate summarized financial information does not include the investments in non-guarantor subsidiaries nor the earnings from non-guarantor subsidiaries and therefore is not necessarily indicative of the results of operations or financial position had FelCor LP and the Subsidiary Guarantors operated as independent entities. Intercompany transactions have been eliminated. The aggregate summarized balance sheet information as of September 30, 2020 and December 31, 2019 and aggregate summarized statement of operations and comprehensive loss information for the nine months ended September 30, 2020 is as follows (in thousands):

	September 30, 2020		December 31, 2019
Investment in hotel properties, net	$	564,876	$	571,769
Related party rent receivable	—		16,577
Note receivable from non-guarantor subsidiary	32,709		32,709
Interest receivable from non-guarantor subsidiary	2,070		1,471
Deferred rent asset - related party	315		—
Other assets	128,015		92,254
Total assets	$	727,985	$	714,780
Debt, net	$	521,702	$	525,195
Related party rent payable	3,404		—
Deferred rent liability - related party	35		—
Other liabilities	61,238		55,161
Total liabilities	$	586,379	$	580,356

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	For the nine months ended September 30, 2020
Related party lease revenue	$	8,052
Total operating expenses	(34,074)
Interest income	43
Interest income on note receivable from non-guarantor subsidiary	599
Interest expense	(18,321)
Loss on sale of hotel properties, net	(12)
Loss before equity in loss from unconsolidated joint ventures	(43,713)
Equity in loss from unconsolidated joint ventures	(8,215)
Net loss and comprehensive loss attributable to FelCor LP	$	(51,928)

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Market risk includes the risks that arise from changes in interest rates, equity prices and other market changes that affect market sensitive instruments. Our primary market risk exposure is to changes in interest rates on our variable rate debt. As of September 30, 2020, we had approximately $96.0 million of total variable rate debt outstanding (or 12.5% of total indebtedness) with a weighted-average interest rate of 1.75% per annum. As of September 30, 2020, if market interest rates on our variable rate debt were to increase by 1.00%, or 100 basis points, interest expense would decrease future earnings and cash flows by approximately $1.0 million annually. As of September 30, 2020, we also had approximately $85.0 million of total variable rate related party debt outstanding (or 11.0% of total indebtedness) with a weighted-average interest rate of 3.15% per annum. As of September 30, 2020, if market interest rates on our variable rate related party debt were to increase by 1.00%, or 100 basis points, related party interest expense would decrease future earnings and cash flows by approximately $0.9 million annually.

Our interest rate risk objectives are to limit the impact of interest rate fluctuations on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, we manage our exposure to fluctuations in market interest rates through the use of fixed rate debt instruments to the extent that reasonably favorable rates are obtainable. From time to time, we may enter into derivative financial instruments such as interest rate swaps to mitigate our interest rate risk or to effectively lock the interest rate on a portion of our variable rate debt. We do not enter into derivative or interest rate transactions for speculative purposes.

The following table provides information about our financial instruments that are sensitive to changes in interest rates. For debt obligations outstanding as of September 30, 2020, the following table presents the principal repayments and related weighted-average interest rates by contractual maturity dates (in thousands):

	2020			2021			2022			2023			2024			Thereafter			Total
Fixed rate debt (1)	$	454		$	2,824		$	110,997		$	—		$	—		$	474,888		$	589,163
Weighted-average interest rate	4.95		%	4.95		%	4.95		%	—		%	—		%	6.00		%	5.80		%
Variable rate debt (2)	$	—		$	—		$	—		$	—		$	96,000		$	—		$	96,000
Weighted-average interest rate	—		%	—		%	—		%	—		%	1.75		%	—		%	1.75		%
Variable rate debt - related party debt	$	—		$	—		$	—		$	85,000		$	—		$	—		$	85,000
Weighted-average interest rate	—		%	—		%	—		%	3.15		%	—		%	—		%	3.15		%
Total	$	454		$	2,824		$	110,997		$	85,000		$	96,000		$	474,888		$	770,163

(1)Excludes a total of $23.4 million related to fair value adjustments on the debt that RLJ pushed down to our consolidated financial statements as a result of the Mergers.

(2)Excludes $0.7 million of net deferred financing costs on the mortgage loan.

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Our ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during future periods, prevailing interest rates and our hedging strategies at that time.

Changes in market interest rates on our fixed rate debt impact the fair value of our debt, but such changes have no impact to our consolidated financial statements. As of September 30, 2020, the estimated fair value of our fixed rate debt was $582.4 million, which is based on having the same debt service requirements that could have been borrowed at the date presented, at prevailing current market interest rates. If interest rates were to rise by 1.00%, or 100 basis points, and our fixed rate debt balance remains constant, we expect the fair value of our debt to decrease by approximately $2.2 million.

Item 4.            Controls and Procedures.

Rangers

Evaluation of Disclosure Controls and Procedures

In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), Rangers' management, under the supervision and participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, Rangers' Chief Executive Officer and Chief Financial Officer concluded that Rangers' disclosure controls and procedures were effective as of September 30, 2020.

Changes in Internal Control over Financial Reporting

There have been no changes in Rangers' internal control over financial reporting (as defined in Rule 13a-15 and 15d-15 of the Exchange Act) during the period ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

FelCor LP

Evaluation of Disclosure Controls and Procedures

In accordance with Rule 13a-15(b) of the Exchange Act, the management of Rangers GP, the sole general partner of FelCor LP, under the supervision and participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, Rangers GP's Chief Executive Officer and Chief Financial Officer concluded that FelCor LP's disclosure controls and procedures were effective as of September 30, 2020.

Changes in Internal Control over Financial Reporting

There have been no changes in FelCor LP's internal control over financial reporting (as defined in Rule 13a-15 and 15d-15 of the Exchange Act) during the period ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

PART II.  OTHER INFORMATION

Item 1.                     Legal Proceedings

The nature of the operations of our hotel properties exposes our hotel properties and the Company to the risk of claims and litigation in the normal course of their business. Other than routine litigation arising out of the ordinary course of business and the pension trust litigation matter noted in Note 9, Commitments and Contingencies, the Company is not presently subject to any material litigation nor, to the Company's knowledge, is any material litigation threatened against the Company.

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Item 1A.            Risk Factors

For a discussion of our potential risks and uncertainties, please refer to the "Risk Factors" sections in our Annual Report, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the "Q1 Quarterly Report") and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 (the "Q2 Quarterly Report"), each of which is accessible on the SEC’s website at www.sec.gov. Except for the additional risk factors set forth in our Q1 Quarterly Report and in our Q2 Quarterly Report, there have been no material changes to the risk factors previously disclosed in our Annual Report.

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.

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Item 6.                     Exhibits

The exhibits required to be filed by Item 601 of Regulation S-K are noted below:

Exhibit Index

Exhibit Number	Description of Exhibit
3.1	Third Amended and Restated Agreement of Limited Partnership of FelCor Limited Partnership, dated as of August 31, 2017 (incorporated by reference to Exhibit 3.1 to FelCor LP’s Current Report on Form 8-K filed on September 1, 2017)
3.2	Certificate of Amendment to the Certificate of Limited Partnership of FelCor Limited Partnership, dated September 1, 2017 (incorporated by reference to Exhibit 3.2 to FelCor LP’s Current Report on Form 8-K filed on September 1, 2017)
3.3	Articles of Organization of Rangers Sub I, LLC (incorporated by reference to Exhibit 3.1 to Rangers’ and FelCor LP’s Current Report on Form 8-K filed on September 7, 2017)
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Rangers.
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Rangers.
31.3*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for FelCor LP.
31.4*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for FelCor LP.
32.1*	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Rangers.
32.2*	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for FelCor LP.
101.INS	Inline XBRL Instance Document	Submitted electronically with this report
101.SCH	Inline XBRL Taxonomy Extension Schema Document	Submitted electronically with this report
101.CAL	Inline XBRL Taxonomy Calculation Linkbase Document	Submitted electronically with this report
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	Submitted electronically with this report
101.LAB	Inline XBRL Taxonomy Label Linkbase Document	Submitted electronically with this report
101.PRE	Inline XBRL Taxonomy Presentation Linkbase Document	Submitted electronically with this report

 *Filed herewith

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SIGNATURES

Pursuant to the requirements 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.

	RANGERS SUB I, LLC
Dated: November 5, 2020	/s/ LESLIE D. HALE
	Leslie D. Hale
	President and Chief Executive Officer
Dated: November 5, 2020	/s/ SEAN M. MAHONEY
	Sean M. Mahoney
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)
Dated: November 5, 2020	/s/ CHRISTOPHER A. GORMSEN
	Christopher A. Gormsen
	Senior Vice President and Chief Accounting Officer
	(Principal Accounting Officer)

	FELCOR LODGING LIMITED PARTNERSHIP
	By: Rangers General Partner, LLC, its General Partner
Dated: November 5, 2020	/s/ LESLIE D. HALE
	Leslie D. Hale
	President and Chief Executive Officer
Dated: November 5, 2020	/s/ SEAN M. MAHONEY
	Sean M. Mahoney
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)
Dated: November 5, 2020	/s/ CHRISTOPHER A. GORMSEN
	Christopher A. Gormsen
	Senior Vice President and Chief Accounting Officer
	(Principal Accounting Officer)

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