UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~_____________________________~~FORM 10-Q

~~FORM~~ ~~10-Q~~

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

For the quarterly period ended March 31, ~~2020~~2021

☐ 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 001-32514

DIAMONDROCK HOSPITALITY CO~~MPANY~~COMPANY

(Exact Name of Registrant as Specified in Its Charter)

Maryland

20-1180098

(State of Incorporation)

(I.R.S. Employer Identification No.)

2 Bethesda Metro Center, Suite 1400,

Bethesda,

Maryland

20814

(Address of Principal Executive Offices)

(Zip Code)

(~~240~~) (240) 744-1150

(Registrant’s telephone number, including area code)

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



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value per share	DRH	New York Stock Exchange
8.250% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share	DRH Pr A	New York Stock Exchange

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. ☑ Yes ☐ No

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). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting companyo

☐

Emerging growth companyo

☐

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 pursuant to Section 13(a) of the Exchange Act. ☐

Table of Contents

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

The registrant had ~~199,243,338~~210,251,765 shares of its $0.01 par value common stock outstanding as of May ~~11, 2020.~~

7, 2021.

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INDEX




			Page No.
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited):

Consolidated Balance Sheets as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020			1

Consolidated Statements of Operations for the Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020			2

Consolidated Statements of Equity for the Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020			3

Consolidated Statements of Cash Flows for the Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020			4

Notes to the Consolidated Financial Statements			6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			21

Item 3. Quantitative and Qualitative Disclosures about Market Risk			34

Item 4. Controls and Procedures			34

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			35

Item 1A. Risk Factors			35

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			3635

Item 3. Defaults Upon Senior Securities			3735

Item 4. Mine Safety Disclosures			3735

Item 5. Other Information			3735

Item 6. Exhibits			3836

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PART I. FINANCIAL INFORMATION


~~Item I.~~	~~Financial Statements~~

Item I.Financial Statements

DIAMONDROCK HOSPITALITY COMPANY

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)


	March 31, 2021		December 31, 2020
ASSETS	(unaudited)
Property and equipment, net	$	2,677,156	$	2,817,356
Right-of-use assets	96,376		96,673

Restricted cash	24,120		23,050
Due from hotel managers	72,172		69,495
Prepaid and other assets	24,400		28,403
Cash and cash equivalents	99,827		111,796
Total assets	$	2,994,051	$	3,146,773
LIABILITIES AND EQUITY
Liabilities:
Mortgage and other debt, net of unamortized debt issuance costs	$	591,544	$	595,149
Unsecured term loans, net of unamortized debt issuance costs	398,126		398,550
Senior unsecured credit facility	100,000		55,000
Total debt	1,089,670		1,048,699

Lease liabilities	105,583		104,973
Deferred rent	57,492		56,344
Due to hotel managers	81,821		95,548
Unfavorable contract liabilities, net	64,381		64,796
Accounts payable and accrued expenses	39,052		46,542

Deferred income related to key money, net	10,847		10,946
Total liabilities	1,448,846		1,427,848
Equity:
Preferred stock, $0.01 par value; 10,000,000 shares authorized:
8.250% Series A Cumulative Redeemable Preferred Stock (liquidation preference $25.00 per share), 4,760,000 shares issued and outstanding at March 31, 2021 and December 31, 2020	48		48
Common stock, $0.01 par value; 400,000,000 shares authorized; 210,243,765 and 210,073,514 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	2,103		2,101
Additional paid-in capital	2,285,509		2,285,491
Accumulated deficit	(749,832)		(576,531)
Total stockholders’ equity	1,537,828		1,711,109
Noncontrolling interests	7,377		7,816
Total equity	1,545,205		1,718,925
Total liabilities and equity	$	2,994,051	$	3,146,773

March 31, 2020 December 31, 2019
ASSETS (unaudited)
Property and equipment, net $ 3,047,009
$ 3,026,769
Right-of-use assets 97,538
98,145
Restricted cash 47,072
57,268
Due from hotel managers 72,396
91,207
Prepaid and other assets 19,201
29,853
Cash and cash equivalents 387,825
122,524
Total assets $ 3,671,041
$ 3,425,766
LIABILITIES AND EQUITY
Liabilities:
Mortgage and other debt, net of unamortized debt issuance costs $ 613,067
$ 616,329
Unsecured term loans, net of unamortized debt issuance costs 398,841
398,770
Senior unsecured credit facility 400,000

75,000
Total debt 1,411,908

1,090,099

Deferred income related to key money, net 11,243
11,342
Unfavorable contract liabilities, net 66,856
67,422
Deferred rent 53,050
52,012
Lease liabilities 102,923
103,625
Due to hotel managers 69,514
72,445
Distributions declared and unpaid 143
25,815
Accounts payable and accrued expenses 78,807
81,944
Total liabilities 1,794,444
1,504,704
Equity:
Preferred stock, $0.01 par value; 10,000,000 shares authorized; no shares issued and outstanding —
—
Common stock, $0.01 par value; 400,000,000 shares authorized; 199,243,338 and 200,207,795 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively 1,992
2,002
Additional paid-in capital 2,079,534
2,089,349
Accumulated deficit (213,420 ) (178,861 )
Total stockholders’ equity 1,868,106
1,912,490
Noncontrolling interests 8,491
8,572
Total equity 1,876,597
1,921,062
Total liabilities and equity $ 3,671,041
$ 3,425,766

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

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DIAMONDROCK HOSPITALITY COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)


	Three Months Ended March 31,							Three Months Ended March 31,

	2020			2019				2021		2020
Revenues:							Revenues:
Rooms	$	111,801		$	136,653		Rooms	$	50,412	$	111,801
Food and beverage	43,905			50,465			Food and beverage	13,925		43,905
Other	14,289			15,257			Other	8,600		14,289
Total revenues	169,995			202,375			Total revenues	72,937		169,995
Operating Expenses:							Operating Expenses:
Rooms	35,653			38,819			Rooms	13,828		35,653
Food and beverage	31,087			33,150			Food and beverage	11,561		31,087
Management fees	3,477			5,340			Management fees	1,119		3,477
Franchise fees	5,796			5,859			Franchise fees	2,447		5,796
Other hotel expenses	77,843			75,479			Other hotel expenses	48,935		77,843
Depreciation and amortization	30,100			28,996			Depreciation and amortization	26,962		30,100
Impairment losses							Impairment losses	122,552		0

Corporate expenses	5,557			7,064			Corporate expenses	7,159		5,557
Business interruption insurance income	—			(8,822		)

Total operating expenses, net	189,513			185,885			Total operating expenses, net	234,563		189,513
Interest and other expense (income), net	399			(303		)
Interest and other (income) expense, net							Interest and other (income) expense, net	(156)		399
Interest expense	21,218			11,662			Interest expense	8,484		21,218

Total other expenses, net	21,617			11,359			Total other expenses, net	8,328		21,617
(Loss) income before income taxes	(41,135		)	5,131
Income tax benefit	6,443			3,849
Net (loss) income	(34,692		)	8,980
Less: Net loss (income) attributable to noncontrolling interests	133			(35		)
Net (loss) income attributable to common stockholders	$	(34,559	)	$	8,945
(Loss) earnings per share:
Net (loss) income per share available to common stockholders—basic	$	(0.17	)	$	0.04
Net (loss) income per share available to common stockholders—diluted	$	(0.17	)	$	0.04
Loss before income taxes							Loss before income taxes	(169,954)		(41,135)
Income tax (expense) benefit							Income tax (expense) benefit	(1,613)		6,443
Net loss							Net loss	(171,567)		(34,692)
Less: Net loss attributable to noncontrolling interests							Less: Net loss attributable to noncontrolling interests	720		133
Net loss attributable to the Company							Net loss attributable to the Company	(170,847)		(34,559)
Distributions to preferred stockholders							Distributions to preferred stockholders	(2,454)		0
Net loss attributable to common stockholders							Net loss attributable to common stockholders	$	(173,301)	$	(34,559)
Loss per share:							Loss per share:
Net loss per share available to common stockholders—basic							Net loss per share available to common stockholders—basic	$	(0.82)	$	(0.17)
Net loss per share available to common stockholders—diluted							Net loss per share available to common stockholders—diluted	$	(0.82)	$	(0.17)

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

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DIAMONDROCK HOSPITALITY COMPANY

CONSOLIDATED STATEMENTS OF EQUITY

(in thousands, except share and per share amounts)

(unaudited)


	Preferred Stock			Common Stock
	Shares	Par Value		Shares	Par Value		Additional Paid-In Capital		Accumulated Deficit		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
Balance at December 31, 2020	4,760,000	$	48	210,073,514	$	2,101	$	2,285,491	$	(576,531)	$	1,711,109	$	7,816	$	1,718,925

Distributions on preferred stock ($0.5156 per preferred share)	—	—		—	—		—		(2,454)		(2,454)		—		(2,454)
Share-based compensation	—	—		170,251	2		18		—		20		281		301


Net loss	—	—		—	—		—		(170,847)		(170,847)		(720)		(171,567)
Balance at March 31, 2021	4,760,000	$	48	210,243,765	$	2,103	$	2,285,509	$	(749,832)	$	1,537,828	$	7,377	$	1,545,205

Common Stock

Shares
Par Value
Additional Paid-In Capital
Accumulated Deficit
Total Stockholders' Equity
Noncontrolling Interests
Total Equity
Balance at December 31, 2019 200,207,795

$ 2,002

$ 2,089,349

$ (178,861 )
$ 1,912,490

$ 8,572

$ 1,921,062
Share-based compensation 154,981

1

189

—

190

238

428
Redemption of Operating Partnership units —
—
(15 ) —
(15 ) (186 ) (201 )
Common stock repurchased and retired (1,119,438 )
(11 )
(9,989 )
—

(10,000 )
—

(10,000 )
Net loss —

—

—

(34,559 )
(34,559 )
(133 )
(34,692 )
Balance at March 31, 2020 199,243,338

$ 1,992

$ 2,079,534

$ (213,420 )
$ 1,868,106

$ 8,491

$ 1,876,597


	Preferred Stock			Common Stock
	Shares	Par Value		Shares	Par Value		Additional Paid-In Capital		Accumulated Deficit		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
Balance at December 31, 2019	0	0		200,207,795	$	2,002	$	2,089,349	$	(178,861)	$	1,912,490	$	8,572	$	1,921,062


Share-based compensation	—	—		154,981	1		189		—		190		238		428
Redemption of Operating Partnership units	—	—		—	—		(15)		—		(15)		(186)		(201)
Common stock repurchased and retired	—	—		(1,119,438)	(11)		(9,989)		—		(10,000)		—		(10,000)
Net loss	—	—		—	—		—		(34,559)		(34,559)		(133)		(34,692)
Balance at March 31, 2020	0	$	0	199,243,338	$	1,992	$	2,079,534	$	(213,420)	$	1,868,106	$	8,491	$	1,876,597

Common Stock
Shares Par Value Additional Paid-In Capital Accumulated Deficit Total Stockholders' Equity Noncontrolling Interests Total Equity
Balance at December 31, 2018 204,536,485
$ 2,045
$ 2,126,472
$ (245,620 ) $ 1,882,897
$ 7,696
$ 1,890,593
Cumulative effect of ASC 842 adoption —
—
—
(15,286 ) (15,286 ) —
(15,286 )
Distributions on common stock/units ($0.125 per share) —
—
113
(25,483 ) (25,370 ) (134 ) (25,504 )
Share-based compensation 55,916
1
1,073
—
1,074
83
1,157
Common stock repurchased and retired (3,143,922 ) (31 ) (29,967 ) —
(29,998 ) —
(29,998 )
Net income —

8,945
8,945
35
8,980
Balance at March 31, 2019 201,448,479
$ 2,015
$ 2,097,691
$ (277,444 ) $ 1,822,262
$ 7,680
$ 1,829,942

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

~~Table of Contents~~

~~DIAMONDROCK HOSPITALITY COMPANY~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(in thousands)~~

~~(unaudited)~~

Three Months Ended March 31,
2020 2019

Cash flows from operating activities:
Net (loss) income $ (34,692 ) $ 8,980
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization 30,100
28,996
Corporate asset depreciation as corporate expenses 58
55
Non-cash lease expense and other amortization 1,750
1,715
Non-cash interest rate swap fair value adjustment 11,312
572
Amortization of debt issuance costs 453
482
Amortization of deferred income related to key money (99 ) (99 )
Share-based compensation 1,561
1,454
Changes in assets and liabilities:
Prepaid expenses and other assets (207 ) (5,445 )
Due to/from hotel managers 15,821
(6,850 )
Accounts payable and accrued expenses (15,794 ) (7,998 )
Net cash provided by operating activities 10,263
21,862
Cash flows from investing activities:
Capital expenditures for operating hotels (19,617 ) (21,081 )
Capital expenditures for Frenchman's Reef (29,156 ) (9,208 )
Acquisition of interest in the land underlying the Shorebreak Hotel (1,585 ) —
Proceeds from property insurance 10,663
—
Net cash used in investing activities (39,695 ) (30,289 )
Cash flows from financing activities:
Scheduled mortgage debt principal payments (3,457 ) (3,389 )
Draws on senior unsecured credit facility 400,000
60,000
Repayments of senior unsecured credit facility (75,000 ) —
Distributions on common stock and units (25,557 ) (26,110 )
Repurchase of common stock (10,000 ) (29,998 )
Redemption of Operating Partnership units (201 ) —
Shares redeemed to satisfy tax withholdings on vested share-based compensation (1,248 ) (296 )
Net cash provided by financing activities 284,537
207
Net increase (decrease) in cash, cash equivalents, and restricted cash 255,105
(8,220 )
Cash, cash equivalents, and restricted cash at beginning of period 179,792
91,598
Cash, cash equivalents, and restricted cash at end of period $ 434,897
$ 83,378

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

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DIAMONDROCK HOSPITALITY COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Three Months Ended March 31,
	2021		2020

Cash flows from operating activities:
Net loss	$	(171,567)	$	(34,692)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	26,962		30,100
Corporate asset depreciation as corporate expenses	56		58

Non-cash lease expense and other amortization	1,672		1,750


Non-cash interest rate swap fair value adjustment	2,731		11,312
Amortization of debt issuance costs	611		453
Impairment losses	122,552		0



Amortization of deferred income related to key money	(99)		(99)
Share-based compensation	1,783		1,561
Changes in assets and liabilities:
Prepaid expenses and other assets	4,299		(207)
Due to/from hotel managers	(15,188)		15,821
Accounts payable and accrued expenses	(8,756)		(15,794)
Net cash (used in) provided by operating activities	(34,944)		10,263
Cash flows from investing activities:
Capital expenditures for operating hotels	(9,479)		(19,617)
Capital expenditures for Frenchman's Reef reconstruction	(2,477)		(29,156)
Acquisition of interest in the land underlying the Kimpton Shorebreak Resort	0		(1,585)



Proceeds from property insurance	0		10,663

Net cash used in investing activities	(11,956)		(39,695)
Cash flows from financing activities:
Scheduled mortgage debt principal payments	(3,797)		(3,457)






Draws on senior unsecured credit facility	45,000		400,000
Repayments of senior unsecured credit facility	0		(75,000)

Payment of debt financing costs	(1,149)		0

Distributions on common stock and units	(117)		(25,557)
Distributions on preferred stock	(2,454)		0
Repurchase of common stock	0		(10,000)
Redemption of Operating Partnership units	0		(201)
Shares redeemed to satisfy tax withholdings on vested share-based compensation	(1,482)		(1,248)
Net cash provided by financing activities	36,001		284,537
Net (decrease) increase in cash, cash equivalents, and restricted cash	(10,899)		255,105
Cash, cash equivalents, and restricted cash at beginning of period	134,846		179,792
Cash, cash equivalents, and restricted cash at end of period	$	123,947	$	434,897

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

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DIAMONDROCK HOSPITALITY COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)

(in thousands)

(unaudited)

Supplemental Disclosure of Cash Flow Information:


	Three Months Ended March 31,
	2021		2020
Cash paid for interest	$	10,476	$	10,036
Cash refunded for income taxes, net	$	(330)	$	(306)
Capitalized interest	$	0	$	1,006


Non-cash investing and financing activities:
Unpaid dividends and distributions declared	$	21	$	143
Accrued capital expenditures	$	2,526	$	3,896

Three Months Ended March 31,
2020 2019
Cash paid for interest $ 10,036
$ 10,122
Cash (refunded) paid for income taxes, net $ (306 ) $ 20
Capitalized interest $ 1,006
$ 152
Non-cash cumulative effect of ASC 842 accounting standard adoption $ —
$ 15,286
Non-cash Investing and Financing Activities:
Unpaid dividends and distributions declared $ 143
$ 25,734

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets to the amount shown within the consolidated statements of cash flows:


	March 31, 2021		December 31, 2020
Cash and cash equivalents	$	99,827	$	111,796
Restricted cash	24,120		23,050
Total cash, cash equivalents and restricted cash	$	123,947	$	134,846

March 31, 2020 December 31, 2019
Cash and cash equivalents $ 387,825
$ 122,524
Restricted cash (1) 47,072
57,268
Total cash, cash equivalents and restricted cash $ 434,897
$ 179,792

~~_____________________________~~


~~(1)~~	~~Restricted cash primarily consists of reserves for replacement of furniture and fixtures held by our hotel managers and cash held in escrow pursuant to lender requirements.~~

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

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DIAMONDROCK HOSPITALITY COMPANY

Notes to the Consolidated Financial Statements

(Unaudited)


1.	~~Organization~~

1. Organization

DiamondRock Hospitality Company (the “Company” or “we”) is a lodging-focused real estate company that owns a portfolio of premium hotels and resorts. Our hotels are concentrated in key gateway cities and in destination resort locations, and the majority of our hotels are operated under a brand owned by one of the leading global lodging brand companies (Marriott International, Inc. ~~(“Marriott”)~~ or Hilton ~~Worldwide (“Hilton”))~~Worldwide). We are an owner, as opposed to an operator, of the hotels in our portfolio. As an owner, we receive all of the operating profits or losses generated by our hotels after we pay fees to the hotel managers and hotel brands, which are based on the revenues and profitability of the hotels.

As of March 31, ~~2020~~,2021, we owned 31 hotels with ~~10,102~~10,103 guest rooms, located in the following markets: Atlanta, Georgia; Boston, Massachusetts (2); Burlington, Vermont; Charleston, South Carolina; Chicago, Illinois (2); Denver, Colorado (2); Fort Lauderdale, Florida; Fort Worth, Texas; Huntington Beach, California; Key West, Florida (2); New York, New York (4); Phoenix, Arizona; Salt Lake City, Utah; San Diego, California; San Francisco, California (2); Sedona, Arizona (2); Sonoma, California; South Lake Tahoe, California; Washington, D.C. (2); St. Thomas, U.S. Virgin Islands; and Vail, Colorado. ~~Our hotel~~Subsequent to March 31, 2021, we sold the Frenchman's Reef & Morning Star Marriott Beach Resort (“Frenchman's Reef”) located in St. Thomas, U.S. Virgin ~~Islands,~~Islands. See Note 3 for further discussion of the sale. Frenchman's Reef ~~& Morning Star Beach Resort (“Frenchman's Reef”) is~~has been closed since September 2017 as a result of damage caused by Hurricane ~~Irma in September 2017.~~Irma.

We conduct our business through a traditional umbrella partnership real estate investment trust, or UPREIT, in which our hotel properties are owned by our operating partnership, DiamondRock Hospitality Limited Partnership, or subsidiaries of our operating partnership. The Company is the sole general partner of our operating partnership and owns 99.6% of the limited partnership units (“common OP units”) of our operating partnership. The remaining 0.4% of the common OP units are held by third ~~parties.~~parties and executive officers of the Company. See Note 5 for additional disclosures related to common OP units.

Impact of COVID-19 Pandemic ~~and Management's Response~~

In March 2020, the World Health Organization declared the novel coronavirus, or COVID-19, a global pandemic. ~~Since then, the~~The virus ~~has continued to~~ spread throughout the United States and globally. As a result of the pandemic, government mandates and health official recommendations, the overall demand for lodging has materially decreased. We ~~have~~ suspended operations at 20 of our 30 previously operating hotels ~~and~~for a portion of 2020. For the three months ended March 31, 2021, 4 of our 30 previously operating hotels ~~that remain open are operating at historically low occupancy levels. As~~were closed for all or a ~~result,~~portion of the quarter.

We have taken aggressive steps to mitigate the COVID-19 pandemic's operational and financial impacts on our business, as described in our consolidated financial statements contained within our Annual Report on Form 10-K filed on March 1, 2021. The COVID-19 pandemic has had a ~~negative~~material adverse impact on ~~the~~our operations and financial results ~~of the Company~~ for the ~~quarter~~three months ended March 31, ~~2020.~~2021. The severity and duration of the COVID-19 pandemic cannot be reasonably estimated at this time, but we expect it will continue to ~~ultimately~~ have a material adverse impact on our results of operations, financial position and cash flow in ~~2020.~~2021.

~~We have taken aggressive steps~~Demand at our leisure-focused hotels has improved in ~~order to mitigate~~ the ~~ongoing operational~~latter part of 2020 and ~~financial impacts on our business. We have fully drawn down on our $400 million senior unsecured credit facility, suspended our quarterly dividend commencing with~~ the first quarter ~~dividend that would have been paid in April 2020, canceled~~of 2021. Demand at our other hotels, however, remains at historically low levels. Several markets throughout the country experienced a resurgence of COVID-19 case counts during the recent winter months and reimplemented or ~~deferred~~strengthened closures, quarantines, and social distancing requirements. The availability and effectiveness of COVID-19 vaccines, as well as other public health and geopolitical factors, are likely to impact the timing, pace, and extent of a significant portion of our capital expenditures planned for 2020, paused the reconstruction of Frenchman's Reef and reduced corporate expenses through decreases in executive compensation, employee headcount and other expenses. Additionally, in coordination with our hotel operators, we have developed and implemented action plans to significantly reduce operating costs at each of our hotels.lodging demand recovery.

As of March 31, ~~2020,~~2021, the Company had unrestricted cash of ~~$387.8 million. We have evaluated the current business environment~~$99.8 million and ~~its effect~~$300.0 million of borrowing capacity on our results of operations, the actions we have taken and the other options available to us and have determined that we have sufficient liquidity in the event of a prolonged decline in hotel demand without issuing additional equity, obtaining debt financing or selling properties.

Although we are in compliance with the financial covenants of our debt as of March 31, 2020, we have determined that it is probable the continuing effect of the COVID-19 pandemic on our hotel operating results will lead to our inability to satisfy certain financial covenants under the credit agreements for our senior unsecured credit ~~facility and unsecured term loans beginning with the quarter ending June 30, 2020. If we were to violate a covenant, the lenders have the right to declare us in default and require repayment~~facility.

2.Summary of the outstanding amounts under the credit agreements. We are in negotiations with our lenders to obtain a waiver of the financial covenants prior to any violation. However, because any required waiver would be granted at the sole discretion of the lenders, and such waivers may not be granted, there is substantial doubt about the Company’s ability to continue as a going concern, within one year from the date of these financial statements, without additional equity or debt financing or property sales. As of May 11, 2020, we have a term sheet for an amendment to our credit agreements that provides for covenantSignificant Accounting Policies

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waivers for the subsequent four quarters through March 31, 2021 and certain other modifications to the covenants thereafter. We expect the amendment to be approved by a majority of our lenders and executed prior to any covenant violation, although we can provide no assurances that such amendment will be executed. If we are successful in obtaining the waivers, the substantial doubt about the Company's ability to continue as a going concern without additional equity or debt financing or property sales will be removed.

~~The consolidated financial statements do not include any adjustments that would be required if the Company were not to continue as a going concern.~~


2.	~~Summary of Significant Accounting Policies~~

Basis of Presentation

Our financial statements include all of the accounts of the Company and its subsidiaries in accordance with U.S. GAAP. All intercompany accounts and transactions have been eliminated in consolidation. If the Company determines that it has an

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interest in a variable interest entity within the meaning of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation, the Company will consolidate the entity when it is determined to be the primary beneficiary of the entity. Our operating partnership meets the criteria of a variable interest entity. The Company is the primary beneficiary and, accordingly, we consolidate our operating partnership.

In our opinion, the accompanying unaudited consolidated financial statements reflect all adjustments necessary to present fairly our financial position as of March 31, ~~2020~~,2021, the results of our operations for the three months ended March 31, ~~2020~~2021 and ~~2019~~,2020, the statements of equity for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, and the cash flows for the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020. Interim results are not necessarily indicative of full-year performance because of the impact of seasonal and short-term variations. We believe the disclosures made are adequate to prevent the information presented from being misleading. However, the unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, ~~2019,~~2020, included in our Annual Report on Form 10-K filed on ~~February 28, 2020.~~March 1, 2021.

Use of Estimates

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

Risks and Uncertainties

The state of the overall economy can significantly impact hotel operational performance and thus, impact our financial position. Should any of our hotels experience a significant decline in operational performance, it may affect our ability to make distributions to our stockholders and service debt or meet other financial obligations.

Currently, one of the most significant risks and uncertainties is the potential ~~adverse effect~~length and severity of the ongoing COVID-19 pandemic. The COVID-19 pandemic has reduced travel and adversely affected the hospitality industry in general. We believe that the actual and threatened spread of COVID-19 globally or in the regions in which we operate, or the future widespread outbreak of infectious or contagious disease, has impeded and will continue to ~~reduce~~impede national and international travel in ~~general.~~general compared to pre-pandemic levels. The extent to which our business will continue to be affected by COVID-19 will largely depend on future developments, which we cannot predict with a high degree of confidence, and its impact on customer travel, including the duration of the outbreak, the continued spread and treatment of COVID-19, new information and developments that may emerge concerning the severity of COVID-19 and the actions of governments and individuals to contain COVID-19 or ~~treat~~mitigate its impact, as well as the effect of any relaxation of current restrictions, among others. To the extent that travel activity in the U.S. continues to be materially and adversely affected by COVID-19, the overall business and financial results of the hospitality industry, as well as the business and financial results of the Company, would similarly continue to be materially and adversely impacted. See Note 1 for additional disclosures related to COVID-19 and its impact on ~~our~~the Company.

Going Concern

Under the accounting guidance related to the presentation of financial statements, when preparing financial statements for each annual and interim reporting period, management has the responsibility to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within 12 months after the date that the financial statements are issued. In making our evaluation, we considered our financial position and liquidity sources, including forecasted future cash flows and our ability to meet contractual obligations that are due or may become due over the next 12 months. We determined that there is not substantial doubt about our ability to continue as a going concern over the next 12 months as of May 7, 2021.

Fair Value Measurements

In evaluating fair value, U.S. GAAP outlines a valuation framework and creates a fair value hierarchy that distinguishes between market assumptions based on market data (observable inputs) and a reporting entity’s own assumptions about market data (unobservable inputs). The hierarchy ranks the observability of inputs used to determine fair value, which are then classified and disclosed in one of the three categories. The three levels are as follows:

•Level 1 - Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities

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•Level 2 - Inputs include quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets in markets that are not active and model-derived valuations whose inputs are observable

•Level 3 - Model-derived valuations with unobservable inputs

Property and Equipment

Investment purchases of hotel properties, land, land improvements, building and furniture, fixtures and equipment and identifiable intangible assets that are not businesses are accounted for as asset acquisitions and recorded at relative fair value based upon total accumulated cost of the acquisition. Direct acquisition-related costs are capitalized as a component of the acquired

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assets. Property and equipment purchased after the hotel acquisition date is recorded at cost. Replacements and improvements are capitalized, while repairs and maintenance are expensed as incurred. Upon the sale or retirement of a fixed asset, the cost and related accumulated depreciation are removed from the Company’s accounts and any resulting gain or loss is included in the statements of operations.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 5 to 40 years for buildings, land improvements, and building improvements and 1 to 10 years for furniture, fixtures and equipment. Leasehold improvements are amortized over the shorter of the lease term or the useful lives of the related assets.

We review our investments in hotel properties for impairment whenever events or changes in circumstances indicate that the carrying ~~value~~amount of the hotel properties may not be recoverable. Events or circumstances that may cause a review include, but are not limited to, adverse changes in the demand for lodging at the properties, current or projected losses from operations, and an expectation that the property is more likely than not to be sold significantly before the end of its useful life. Management performs an analysis to determine if the estimated undiscounted future cash flows from operations and the proceeds from the ultimate disposition of a hotel, less costs to sell, exceed its carrying ~~value.~~amount. If the estimated undiscounted future cash flows are less than the carrying amount of the asset, an adjustment to reduce the carrying amount to the related hotel’s estimated fair market value is recorded and an impairment loss is recognized. As ~~a result of the COVID-19 pandemic,~~discussed in Note 3, we ~~reviewed each of our hotel properties for~~recorded impairment losses on The Lexington Hotel and Frenchman's Reef as of March 31, 2020 and concluded the carrying value of each of the hotel properties is recoverable. Due to the continuing effects of the pandemic, however, estimated future cash flows could further decline and result in the recognition of an impairment charge on one or more of our hotel properties in future periods.2021.

We will classify a hotel as held for sale in the period that we have made the decision to dispose of the hotel, a binding agreement to purchase the property has been signed under which the buyer has committed a significant amount of nonrefundable cash and no significant financing or other contingencies exist which could cause the transaction to not be completed in a timely manner. If these criteria are met, we will record an impairment loss if the fair value less costs to sell is lower than the carrying amount of the hotel and related assets and will cease recording depreciation expense. We will classify the assets and related liabilities as held for sale on the balance sheet.

Cash and Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Revenue Recognition

Revenues from hotel operations ~~of the hotels~~ are recognized when the goods or services are provided. Revenues consist of room sales,

food and beverage sales, and other hotel department revenues, such as telephone, parking, gift shop sales and resort fees. Rooms revenue is recognized over the length of stay that the hotel room is occupied by the customer. Food and beverage revenue is recognized at the point in time in which the goods and/or services are rendered to the customer, such as for restaurant dining services or banquet services. Other revenues are recognized at the point in time or over the time period that goods or services are provided to the customer. Certain ancillary services are provided by third parties and we assess whether we are the principal or agent in these arrangements. If we are the agent, revenue is recognized based upon the commission earned from the third party. If we are the principal, we recognize revenue based upon the gross sales price.

Advance deposits are recorded as liabilities when a customer or group of customers provides a deposit for a future stay or

banquet event at our hotels. Advance deposits are converted to revenue when the services are provided to the customer or when a customer with a noncancelable reservation fails to arrive for part or all of the reservation. Conversely, advance deposits are generally refundable upon guest cancellation of the related reservation within an established period of time prior to the reservation.

~~Earnings (Loss) Per Share~~

Basic earnings (loss) per share is calculated by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the period plus other potentially dilutive securities such as stock grants or shares issuable in the event of conversion of common OP units. No adjustment is made for shares that are anti-dilutive during a period.

~~Share-based Compensation~~

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period during which an employee is required to provide service in exchange for the award. No compensation cost is recognized for equity instruments for which employees do not render the requisite service.

Income Taxes

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We account for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in earnings during the period in which the new rate is enacted. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of all available evidence, including the future reversals of existing taxable temporary differences, future projected taxable income and tax planning strategies. Valuation allowances are provided if, based upon the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. As of March 31, 2021 and December 31, 2020, we had a valuation allowance of $27.0 million and $25.6 million, respectively, on our deferred tax assets.

We have elected to be treated as a real estate investment trust (“REIT”) under the provisions of the Internal Revenue Code of 1986, as amended, which requires that we distribute at least 90% of our taxable income annually to our stockholders and comply with certain other requirements. In addition to paying federal and state taxes on any retained income, we may be subject to taxes on “built-in gains” on sales of certain assets. Our taxable REIT subsidiaries will generally be subject to federal, state, local and/or foreign income taxes.

In order for the income from our hotel property investments to constitute “rents from real properties” for purposes of the gross income tests required for REIT qualification, the income we earn cannot be derived from the operation of any of our hotels. Therefore, we lease each of our hotel properties to a wholly owned subsidiary of Bloodstone TRS, Inc., our existing taxable REIT subsidiary, ~~(“TRS”),~~or TRS, except for Frenchman’s Reef, which is owned by a Virgin Islands corporation, ~~that~~which we have elected to be treated as a TRS, and Cavallo Point, The Lodge at the Golden Gate (“Cavallo Point”), which is leased to a wholly owned subsidiary of the Company, which we have elected to be treated as a TRS.

We had 0 accruals for tax uncertainties as of March 31, ~~2020~~2021 and December 31, ~~2019.~~

~~Fair Value Measurements~~

2020.

•
~~Level 1 - Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities~~

•~~Level 2 - Inputs include quoted prices in active markets for similar assets and liabilities, quoted prices for identical~~

~~or similar assets in markets that are not active and model-derived valuations whose inputs are observable~~

•~~Level 3 - Model-derived valuations with unobservable inputs~~

Intangible Assets and Liabilities

Intangible assets and liabilities are recorded on non-market contracts assumed as part of the acquisition of certain hotels. We review the terms of agreements assumed in conjunction with the purchase of a hotel to determine if the terms are favorable or unfavorable compared to an estimated market agreement at the acquisition date. Favorable contract assets or unfavorable contract liabilities are recorded at the acquisition date and amortized using the straight-line method over the term of the agreement. We do not amortize intangible assets with indefinite useful lives, but we review these assets for impairment annually or at interim periods if events or circumstances indicate that the asset may be impaired.

Earnings (Loss) Per Share

Basic earnings (loss) per share ("EPS") is calculated by dividing net income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted EPS is calculated by dividing net income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the period plus other potentially dilutive securities such as stock grants. No adjustment is made for shares that are anti-dilutive during a period.

Share-based Compensation

We account for share-based employee compensation using the fair value based method of accounting. We record the cost of awards with service or market conditions based on the grant-date fair value of the award. That cost is recognized over the period during which an employee is required to provide service in exchange for the award. No compensation cost is recognized for equity instruments for which employees do not render the requisite service.

Comprehensive Income

We do not have any comprehensive income other than net income. If we have any comprehensive income in future periods, such that a statement of comprehensive income would be necessary, such statement will be reported as one statement with the consolidated statement of operations.

Derivative Instruments

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In the normal course of business, we are exposed to the effects of interest rate changes. We may enter into derivative instruments, including interest rate swaps and caps, to manage or hedge interest rate risk. Derivative instruments are recorded at fair value on the balance sheet date. We have not elected hedge accounting treatment for the changes in the fair value of derivatives. Changes in the fair value of derivatives are recorded each period and are included in interest expense in the consolidated statements of operations.

Noncontrolling Interests

The noncontrolling interest is the portion of equity in our consolidated operating partnership not attributable, directly or indirectly, to the Company. Such noncontrolling interests are reported on the consolidated balance sheets within equity, separately from the Company’s equity. On the consolidated statements of operations, revenues, expenses and net income or loss from our less-than-wholly-owned operating partnership are reported within the consolidated amounts, including both the amounts attributable to the Company and noncontrolling interests. Income or loss is allocated to noncontrolling interests based on their weighted average ownership percentage for the applicable period. Consolidated statements of equity include beginning balances, activity for the period and ending balances for stockholders’ equity, noncontrolling interests and total equity.

Restricted Cash

Restricted cash primarily consists of reserves for replacement of furniture and fixtures generally held by our hotel managers and cash held in escrow pursuant to lender requirements.

Debt Issuance Costs

Financing costs are recorded at cost as a component of the debt carrying amount and consist of loan fees and other costs incurred in connection with the issuance of debt. Amortization of debt issuance costs is computed using a method that approximates the effective interest method over the remaining life of the debt and is included in interest expense in the accompanying consolidated statements of operations. Debt issuance costs related to our ~~senior unsecured credit facility~~Revolving Credit Facility (defined in Note 8) are included within prepaid and other assets on the accompanying consolidated balance sheets. These debt issuance costs are amortized ratably over the term of the ~~credit facility,~~Revolving Credit Facility, regardless of whether there are any outstanding borrowings, and the amortization is included in interest expense in the accompanying consolidated statements of operations.

Due to/from Hotel Managers

The due from hotel managers consists of hotel level accounts receivable, periodic hotel operating distributions receivable from managers and prepaid and other assets held by the hotel managers on our behalf. The due to hotel managers represents liabilities incurred by the hotel on behalf of us in conjunction with the operation of our hotels which are legal obligations of the Company.

Key Money

Key money received in conjunction with entering into hotel management or franchise agreements or completing specific capital projects is deferred and amortized over the term of the hotel management agreement, the term of the franchise agreement, or other systematic and rational period, if appropriate. ~~Deferred key~~Key money is classified as deferred income in the accompanying consolidated balance sheets and amortized as an offset to management fees or franchise fees.

Leases

We determine if an arrangement is a lease or contains an embedded lease at inception. For agreements with both lease and nonlease components (e.g., common-area maintenance costs), we do not separate the nonlease components from the lease components, but account for these components as one. We determine the lease classification (operating or finance) at lease inception.

Right-of-use assets and lease liabilities are recognized based on the present value of the future lease payments over the lease term at the commencement date. The discount rate used to determine the present value of the lease payments is our incremental borrowing rate as of the lease commencement date, as the implicit rate is not readily determinable. The right-of-use assets also include any initial direct costs and any lease payments made at or before the commencement date, and is reduced for any unrestricted incentives received at or before the commencement date.

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Options to extend or terminate the lease are included in the recognition of our right-of-use assets and lease liabilities when it is reasonably certain that we will exercise the option. Variable payments that are based on an index or a rate are included in the

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recognition of our right-of-use assets and lease liabilities using the index or rate at lease commencement; however, changes to these lease payments due to rate or index updates are recorded as rent expense in the period incurred. Contingent rentals based on a percentage of sales in excess of stipulated amounts are not included in the measurement of the lease liability and right-of-use asset but will be recognized as variable lease expense when they are incurred. Leases that contain provisions that increase the fixed minimum lease payments based on previously incurred variable lease payments related to performance will be remeasured, as these payments now represent an increase in the fixed minimum payments for the remainder of the lease term. However, leases with provisions that increase minimum lease payments based on changes in a reference index or rate (e.g. Consumer Price Index) will not be remeasured as such changes do not constitute a resolution of a contingency.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of our cash and cash equivalents. We maintain cash and cash equivalents with various financial institutions. We perform periodic evaluations of the relative credit standing of these financial institutions and limit the amount of credit exposure with any one institution.

Segment Reporting

Each one of our hotels is an operating segment. We evaluate each of our properties on an individual basis to assess performance, the level of capital expenditures, and acquisition or disposition transactions. Our evaluation of individual properties is not focused on property type (e.g. urban, suburban, or resort), brand, geographic location, or industry classification.

We aggregate our operating segments using the criteria established by U.S. GAAP, including the similarities of our product offering, types of customers and method of providing service. All of our properties react similarly to economic stimulus, such as business investment, changes in Gross Domestic Product, and changes in travel patterns. As such, all our operating segments meet the aggregation criteria, resulting in a single reportable segment represented by our consolidated financial results.

~~Accounting for Impact~~

3.Property and Equipment

Property and equipment as of ~~Natural Disasters~~

~~Assets destroyed or damaged as a result of natural disasters or other involuntary events are written off or reduced in carrying value to their salvage value. When recovery of all or a portion~~March 31, 2021 and December 31, 2020 consists of the ~~amount~~following (in thousands):


	March 31, 2021		December 31, 2020
Land	$	583,349	$	618,210
Land improvements	7,994		7,994
Buildings and site improvements	2,602,661		2,724,277
Furniture, fixtures and equipment	472,685		539,729
Construction in progress	20,660		37,481
	3,687,349		3,927,691
Less: accumulated depreciation	(1,010,193)		(1,110,335)
	$	2,677,156	$	2,817,356

As of ~~property damage loss or other covered expenses through insurance proceeds is demonstrated~~March 31, 2021 and December 31, 2020, we had accrued capital expenditures of $2.5 million and $3.9 million, respectively.

On March 24, 2021, we entered into an agreement to sell The Lexington Hotel to an unaffiliated third party for a contractual purchase price of $185.0 million. We anticipate the sale will close before the end of the third quarter of 2021. No assurance can be given, however, that we will successfully complete the sale. The hotel remains classified as held and used as of March 31, 2021, based on our assessment of the criteria for a hotel to be probable, a receivable is recorded and offsets the loss or expense up to the amount of the total loss or expense. No gain is recorded until all contingencies related to the insurance claim have been resolved. Income resulting from business interruption insurance is not recognized until all contingencies related to the insurance recoveries are resolved.

~~Frenchman's Reef has been closed since September 2017, when the hotel was significantly damaged by Hurricane Irma. For~~classified as held for sale (see Note 2). During the three months ended March 31, ~~2019,~~2021, we evaluated the recoverability of the carrying amount of The Lexington Hotel as a result of our assessment in the first quarter of 2021 that it is more likely than not that the hotel will be sold significantly before the end

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of its previously estimated useful life. As a result, we recorded an impairment loss of $111.7 million to adjust the hotel's carrying amount to its estimated fair value. See Note 9 for further discussion about the determination of the hotel's fair value.

On April 30, 2021, we sold a wholly owned subsidiary of the Company that owns Frenchman's Reef to an unaffiliated third party pursuant to a share purchase agreement (the “Purchase Agreement”) dated April 27, 2021. Pursuant to the Purchase Agreement, the Company received $35.0 million in cash upon closing, as well as a participation right in the future profits of the hotel once certain return metrics are achieved. Although we expect the profit participation could be meaningful, there can be no assurance that the property will satisfy such return metrics. The Purchase Agreement is a recognized ~~$8.8~~subsequent event in accordance with FASB ASC 855, Subsequent Events. As a result, we recorded an impairment loss of $10.8 million ~~of business interruption insurance income related to Frenchman's Reef. We settled our insurance claim for Hurricane Irma in December 2019 and~~ for the three months ended March 31, ~~2020, we did not recognize any business interruption insurance income.~~


3.	~~Property and Equipment~~

~~Property~~2021 to adjust the hotel's carrying amount to the contractual consideration. The hotel was classified as held and ~~equipment~~used as of ~~March 31, 2020~~ ~~and~~ ~~December 31, 2019~~ ~~consists of the following (in thousands):~~

March 31, 2020 December 31, 2019
Land $ 618,210
$ 617,695
Land improvements 7,994
7,994
Buildings and site improvements 2,759,936
2,751,590
Furniture, fixtures and equipment 538,974
534,802
Construction in progress 163,828
126,464
4,088,942
4,038,545
Less: accumulated depreciation (1,041,933 ) (1,011,776 )
$ 3,047,009
$ 3,026,769

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On March 2, 2020, we acquired the remaining 4.5% interest in the land underlying the Shorebreak Hotel located in Huntington Beach, California, for a purchase price of $1.6 million. We now own 100% of the interest in the land underlying the hotel.

As of March 31, ~~2020 and December 31, 2019, we had accrued capital expenditures~~2021, based on our assessment of ~~$14.1 million and $13.1 million, respectively.~~the criteria for a hotel to be classified as held for sale (see Note 2).

4. Leases

We are subject to operating leases, the most significant of which are ground leases. We are the lessee to ground leases under ~~eight~~8 of our hotels and ~~one~~1 parking garage as of March 31, ~~2020.~~2021. The lease liabilities for our operating leases assume the exercise of all available extension options, as we believe they are reasonably certain to be exercised. As of March 31, ~~2020,~~2021, our operating leases have a weighted-average remaining lease term of 6766 years and a weighted-average discount rate of 5.77%.

The components of operating lease expense, which is included in other hotel expenses in our consolidated statements of operations, and cash paid for amounts included in the measurement of lease liabilities, are as follows (in thousands):


	Three Months Ended March 31,
	2021		2020
Operating lease cost	$	2,760	$	2,808
Variable lease payments	$	41	$	237
Cash paid for amounts included in the measurement of operating lease liabilities	$	866	$	807

Three Months Ended March 31,
2020 2019
Operating lease cost $ 2,808
$ 2,751
Variable lease payments $ 237
$ 337
Cash paid for amounts included in the measurement of operating lease liabilities

$ 807
$ 788

Maturities of lease liabilities are as follows (in thousands):


Year Ending December 31,	As of March 31, 2021
2021 (excluding the three months ended March 31, 2021)	$	2,630
2022	3,940
2023	3,997
2024	3,976
2025	4,036
Thereafter	755,089
Total lease payments	773,668
Less imputed interest	(668,085)
Total lease liabilities	$	105,583

Year Ending December 31, As of March 31, 2020
2020 (excluding the three months ended March 31, 2020) $ 2,402
2021 3,496
2022 3,940
2023 3,997
2024 3,976
Thereafter 759,124
Total lease payments 776,935
Less imputed interest (674,012 )
Total lease liabilities $ 102,923

The Salt Lake City Marriott Downtown at City Creek is subject to a ground lease. On April 1, 2021, we completed a transaction to extend the lease term by 50 years to December 31, 2106. In consideration for the extension, we transferred our 21.25% interest in the land to the majority ground lessors and provided a cash payment of $2.8 million.

We are authorized to issue up to 400 million shares of common stock, $0.01 par value per share. Each outstanding share of common stock entitles the holder to 1 vote on all matters submitted to a vote of stockholders. Holders of our common stock are entitled to receive dividends out of assets legally available for the payment of dividends when authorized by our board of directors.

We have an “at-the-market” equity offering program (the “ATM Program”), pursuant to which we may issue and sell shares of our common stock from time to time, having an aggregate offering price of up to $200 million. ~~We did not sell any~~NaN shares ~~of common stock~~were sold under the ATM Program during the three months ended March 31, ~~2020, and the full amount remains~~2021. As of May 7, 2021, shares of common stock having an aggregate offering price of up to $112.1 million remained available for sale under the ATM Program.

Our board of directors has approved a share repurchase program (the “Share Repurchase Program”) authorizing us to repurchase shares of our common stock having an aggregate price of up to $250 million. Repurchases under the Share Repurchase Program are made in open market or privately negotiated transactions as permitted by federal securities laws and other legal requirements. This authority may be exercised from time to time and in such amounts as market conditions warrant, and subject to regulatory considerations. The timing, manner, price and actual number of shares repurchased will depend on a variety of factors, including stock price, corporate and regulatory requirements, market conditions, and other corporate liquidity requirements and priorities. The Share Repurchase Program may be suspended or terminated at any time without prior notice. During the three months ended March 31, 2020, we repurchased 1,119,438 shares of our common stock at an average price of $8.91 per share for a total purchase price of $10.0 million. These shares were all repurchased prior to March 4, 2020. We retired all repurchased shares

~~on their respective settlement dates. We have suspended share repurchases and anticipate the suspension will remain in effect for the remainder of 2020.~~

We are authorized to issue up to ~~10 million~~10,000,000 shares of preferred stock, $0.01 par value per share. Our board of directors is required to set for each class or series of preferred stock the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications, and terms or conditions of redemption.

As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, there were 04,760,000 shares of ~~preferred stock outstanding.~~Series A Preferred Stock issued and outstanding with a liquidation preference each of $25.00 per share. On or after August 31, 2025, the Series A Preferred Stock will be redeemable at the Company's option, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus accrued and unpaid dividends up to, but not including, the redemption date.

Operating Partnership Units

In connection with our acquisition of Cavallo Point in December 2018, we issued 796,684 common OP units to third parties, otherwise unaffiliated with the Company, at $11.76 per unit. Each common OP unit is redeemable at the option of the holder. Holders of common OP units have certain redemption rights, which enable them to cause our operating partnership to redeem their units in exchange for cash per unit equal to the market price of our common stock, at the time of redemption, or, at our option, for shares of our common stock on a 1-for-one basis, subject to adjustment upon the occurrence of stock splits, mergers, consolidations or similar pro-rata share transactions. ~~As of March 31, 2020, there were 773,736 common OP units held by unaffiliated third parties.~~

Long-Term Incentive Partnership units (“LTIP units”), which are also referred to as profits interest units, may be issued to eligible participants under the 2016 Plan (as defined in Note 6 below) for the performance of services to or for the benefit of our operating partnership. LTIP units are a class of partnership unit in our operating partnership and will receive, whether vested or not, the same per-unit distributions as the outstanding common OP units, which equal per-share dividends on shares of our common stock. Initially, LTIP units have a capital account balance of zero, do not receive an allocation of operating income (loss), and do not have full parity with common OP units with respect to liquidating distributions. If such parity is reached, vested LTIP units ~~may be~~are converted ~~at any time,~~ into an equal number of common OP units, and thereafter will possess all of the rights and interests of common OP units, including the right to exchange the common OP units for cash per unit equal to the market price of our common stock, at the time of redemption, or, at our option, for shares of our common stock on a 1-for-one basis, subject to adjustment upon the occurrence of stock splits, mergers, consolidations or similar pro-rata share transactions. See Note 6 for additional disclosures related to LTIP units.

There were 963,612 and 855,191 common OP units held by unaffiliated third parties and executive officers of the Company as of March 31, 2021 and December 31, 2020, respectively. There were 135,388 and 243,809 LTIP units outstanding as of March 31, 2021 and December 31, 2020, respectively. All vested LTIP units have reached economic parity with common OP units and have been converted into common OP units.

Dividends and Distributions

~~We have paid the following dividends to holders of our common stock and distributions to holders of common OP units and LTIP units during 2020:~~

Payment Date Record Date
Dividend
per Share
January 13, 2020 January 2, 2020 $ 0.125

Our board of directors suspended the quarterly common dividend commencing with the first quarter dividend that would have been paid in April 2020. The resumption in quarterly common dividends will be determined by our board of directors after considering our projected taxable income, obligations under our financing agreements, expected capital requirements, and risks affecting our business.

We ~~expect~~have paid the following dividends to ~~pay a dividend in January 2021 sufficient to cover 100%~~holders of our ~~taxable income, if any, for the year ending December 31, 2020.~~Series A Preferred Stock during 2021:

Payment Date

Record Date

Dividend
per Share

March 31, 2021

March 18, 2021

0.515625

6. Stock Incentive Plans

We are authorized to issue up to 6,082,664 shares of our common stock under our 2016 Equity Incentive Plan (the “2016 Plan”), of which we have issued or committed to issue ~~2,883,223~~4,396,976 shares as of March 31, ~~2020.~~2021. In addition to these shares,

additional shares of common stock may be issued from time to time in connection with the performance stock unit awards as further described below.

Restricted Stock Awards

Restricted stock awards issued to our officers and employees generally vest over a ~~three-year~~three-year period from the date of the grant based on continued employment. We measure compensation expense for the restricted stock awards based upon the fair market value of our common stock at the date of grant. Compensation expense is recognized on a straight-line basis over the vesting period and is included in corporate expenses in the accompanying consolidated statements of operations. A summary of our restricted stock awards from January 1, ~~2020~~2021 to March 31, ~~2020~~2021 is as follows:


	Number of Shares	Weighted- Average Grant Date Fair Value
Unvested balance at January 1, 2021	557,273	$	9.83
Granted	1,114,894	9.40
Vested	(236,288)	9.93

Unvested balance at March 31, 2021	1,435,879	$	9.48

Number of
Shares

Weighted-
Average Grant
Date Fair
Value
Unvested balance at January 1, 2020 472,999
$ 10.40
Granted 331,942
9.58
Vested (229,664 ) 10.55
Forfeited (11,983 ) 10.01
Unvested balance at March 31, 2020 563,294
$ 9.87

In March 2021, our board of directors granted 691,490 restricted shares of common stock as special retention awards (the “Special Retention Awards”) for certain executives, including our named executive officers. The Special Retention Awards generally vest over a five-year period from the date of their grant based on continued employment. Vesting occurs on the following schedule:

•0% for the first three years,

•25% on the third anniversary of the grant,

•25% on the fourth anniversary of the grant, and

•50% on the fifth anniversary of the grant.

The ~~remaining~~total unvested share awards as of March 31, 2021 are expected to vest as follows: 8,202 shares during ~~2020, 243,872~~2021, 424,416 shares during ~~2021, 138,689~~2022, 458,585 shares during ~~2022~~2023, 285,103 shares during 2024, 129,788 shares during 2025 and ~~172,531~~129,785 shares during ~~2023.~~2026. As of March 31, ~~2020,~~2021, the unrecognized compensation cost related to restricted stock awards was ~~$5.2~~$13.0 million and the weighted-average period over which the unrecognized compensation expense will be recorded is approximately 2944 months. We recorded $0.8 million and $0.7 million of compensation expense related to restricted stock awards for the three months ended March 31, 2021 and 2020, ~~and 2019.~~respectively.

Performance Stock Units

Performance stock units (“PSUs”) are restricted stock units that vest three years from the date of grant. Each executive officer is granted a target number of PSUs (the “PSU Target Award”). The actual number of shares of common stock issued to each executive officer is based on the Company's achievement of certain performance targets. Under this framework, 50% of the PSUs are based on relative total stockholder return and 50% on hotel market share improvement. The achievement of certain levels of total stockholder return relative to the total stockholder return of a peer group of publicly-traded lodging REITs is measured over a three-year performance period. There is no payout of shares of our common stock if our total stockholder return falls below the 30th percentile of the total stockholder returns of the peer group. The maximum number of shares of common stock issued to an executive officer is equal to 150% of the PSU Target Award and is earned if our total stockholder return is equal to or greater than the 75th percentile of the total stockholder returns of the peer group. The number of PSUs earned is limited to 100% of the PSU Target Award if the Company's total stockholder return is negative for the three-year performance period. The improvement in market share for each of our hotels is measured over a three-year performance period based on a report prepared for each hotel by STR Global, a well-recognized ~~and universally accepted~~ benchmarking service for the hospitality industry. There is no payout of shares of our common stock if the percentage of our hotels with market share improvements is less than 30%. The maximum number of shares of common stock issued to an executive officer is equal to 150% of the PSU Target Award and is earned if the percentage of our hotels with market share improvements is greater than or equal to 75%. For the PSUs granted on March 2, 2021, the improvement in market share for each of our hotels will be measured over a two-year performance period starting on January 1, 2022, which is when we anticipate most major hotels will be open within our competitive sets.

We measure compensation expense for the PSUs based upon the fair market value of the award at the grant date. Compensation expense is recognized on a straight-line basis over the three-year performance period and is included in corporate expenses in the accompanying consolidated statements of operations. The grant date fair value of the portion of the PSUs based on our relative total stockholder return is determined using a Monte Carlo simulation performed by a third-party valuation firm. The grant date fair value of the portion of the PSUs based on hotel market share improvement is the closing price of our common stock on the grant date.

On ~~February 25, 2020,~~March 2, 2021, our board of directors granted ~~352,035~~347,981 PSUs to our executive officers. The grant date fair value of the portion of the PSUs based on our relative total stockholder return was ~~$8.52~~$9.28 using the assumptions of volatility of ~~21.4%~~68.8% and a risk-free rate of ~~1.16%~~0.26%. The grant date fair value of the portion of the PSUs based on hotel market share was ~~$9.58,~~$9.40, which was the closing stock price of our common stock on such date.

A summary of our PSUs from January 1, ~~2020~~2021 to March 31, ~~2020~~2021 is as follows:


	Number of Target Units	Weighted- Average Grant Date Fair Value
Unvested balance at January 1, 2021	912,186	$	9.63
Granted	347,981	9.34

Vested (1)	(290,927)	9.90

Unvested balance at March 31, 2021	969,240	$	9.45

______________________

(1)The number of shares of common stock earned for the PSUs vested in 2021 was equal to 100.0% of the PSU Target Award.

Number of
Target Units

Weighted-
Average Grant
Date Fair
Value
Unvested balance at January 1, 2020 796,532
$ 11.16
Granted 352,035
9.02
Additional units from dividends 9,556
10.42
Vested (1) (245,937 ) 11.00
Unvested balance at March 31, 2020 912,186
$ 9.63

~~______________________~~

~~The remaining unvested PSUs~~March 31, 2021 are expected to vest as follows: ~~290,927 units during 2021,~~ 269,224 units during 2022, 352,035 units during 2023 and ~~352,035~~347,981 units during ~~2023.~~2024. The number of shares earned upon vesting is subject to the attainment of the performance goals described above. As of March 31, ~~2020,~~2021, the unrecognized compensation cost related to the PSUs was ~~$5.5~~$6.0 million and is expected to be recognized on a straight-line basis over a weighted average period of 28 months. We recorded $0.7 million ~~and $0.6 million~~ of compensation expense related to the PSUs for each of the three months ended March 31, ~~2020~~2021 and ~~2019, respectively.~~2020.

In 2019, instead of granting restricted stock for the time-based portion of the annual long-term incentive award, we granted LTIP units to our executive officers. In 2020, executive officers could elect to be granted restricted stock or LTIP units for the time-based portion of the annual long-term incentive award. LTIP units are designed to offer executives a long-term incentive comparable to restricted stock, while allowing them to enjoy a more favorable income tax treatment. Each LTIP unit awarded is deemed equivalent to an award of one share of common stock reserved under the 2016 Plan. At the time of award, LTIP units do not have full economic parity with common OP units, but can achieve such parity over time upon the occurrence of specified events in accordance with partnership tax rules.

On February 25, 2020, our board of directors granted 80,898 LTIP units to certain of our executive officers. Other executive officers of the Company elected to receive restricted stock in lieu of LTIP units. The grant date fair value of the LTIP unit was the closing price of our common stock on the grant date.

A summary of our LTIP units from January 1, ~~2020~~2021 to March 31, ~~2020~~2021 is as follows:

Number of Units
Weighted-
Average Grant
Date Fair
Value
Unvested balance at January 1, 2020 244,366
$ 10.65
Granted 80,898
9.58
Vested (1) (81,455 ) 10.65
Unvested balance at March 31, 2020 243,809
$ 10.29


	Number of Units	Weighted- Average Grant Date Fair Value
Unvested balance at January 1, 2021	243,809	$	10.29

Vested (1)	(108,421)	10.38

Unvested balance at March 31, 2021	135,388	$	10.22

______________________

(1)As of March 31, 2021, all vested LTIP units have achieved economic parity with common OP units and have been converted to common OP units.

The ~~remaining~~total unvested LTIP units as of March 31, 2021 are expected to vest as follows: ~~108,421 units during 2021,~~ 108,422 units during 2022 and 26,966 units during 2023. As of March 31, ~~2020,~~2021, of the 325,264 LTIP units ~~outstanding, 81,455~~granted, 189,876 LTIP units have vested.

As of March 31, ~~2020,~~2021, the unrecognized compensation cost related to LTIP unit awards was ~~$2.4~~$1.3 million and the weighted-average period over which the unrecognized compensation expense will be recorded is approximately 2719 months. We recorded ~~$0.2~~$0.3 million and ~~$0.1~~$0.2 million of compensation expense related to LTIP unit awards for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively.

7. Earnings (Loss) Per Share

Basic ~~earnings (loss) per share~~EPS is calculated by dividing net income (loss) available to common stockholders by the weighted-average number of common shares outstanding. Diluted ~~earnings (loss) per share~~EPS is calculated by dividing net income (loss) available to common stockholders that has been adjusted for dilutive securities, by the weighted-average number of common shares outstanding including dilutive securities.

Unvested share-based awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of ~~earnings per share~~EPS pursuant to the two-class method. Accordingly, distributed and undistributed earnings attributable to unvested share-based compensation (participating securities) have been excluded, as applicable, from net income or loss available to common stockholders used in the basic and diluted ~~earnings per share~~EPS calculations.

The following is a reconciliation of the calculation of basic and diluted ~~earnings (loss) per share~~EPS (in thousands, except share and per share data):


	Three Months Ended March 31,
	2021		2020
Numerator:
Net loss attributable to common stockholders	(173,301)		$	(34,559)
Dividends declared on unvested share-based compensation	0		0
Net loss available to common stockholders	$	(173,301)	$	(34,559)
Denominator:
Weighted-average number of common shares outstanding—basic	211,671,581		201,207,835
Effect of dilutive securities:
Unvested restricted common stock	0		0

Shares related to unvested PSUs	0		0
Weighted-average number of common shares outstanding—diluted	211,671,581		201,207,835
Earnings (loss) per share:
Net loss per share available to common stockholders—basic	$	(0.82)	$	(0.17)
Net loss per share available to common stockholders—diluted	$	(0.82)	$	(0.17)

~~Table of Contents~~

Three Months Ended March 31,
2020 2019
Numerator:
Net (loss) income attributable to common stockholders $ (34,559 ) $ 8,945
Dividends declared on unvested share-based compensation —
(35 )
Net (loss) income available to common stockholders $ (34,559 ) $ 8,910
Denominator:
Weighted-average number of common shares outstanding—basic 201,207,835
202,817,124
Effect of dilutive securities:
Unvested restricted common stock —
49,761
Shares related to unvested PSUs —
670,944
Weighted-average number of common shares outstanding—diluted 201,207,835
203,537,829
Earnings (loss) per share:

Net (loss) income per share available to common stockholders—basic $ (0.17 ) $ 0.04
Net (loss) income per share available to common stockholders—diluted $ (0.17 ) $ 0.04

For the three months ended March 31, 2021 and 2020, 757,591 and 168,270 of unvested restricted common shares and 695,654 and 375,602 of unvested PSUs were excluded from diluted weighted-average common shares outstanding, as their effect would be anti-dilutive.

The common OP units held by the noncontrolling interest holders have been excluded from the denominator of the diluted earnings (loss) per share calculation as there would be no effect on the amounts since the common OP units' share of income or loss would also be added or subtracted to derive net income (loss) available to common stockholders.

The following table sets forth information regarding the Company’s debt as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 (dollars in thousands):

Table of Contents


			Principal Balance as of
Loan	Interest Rate as of March 31, 2021	Maturity Date	March 31, 2021		December 31, 2020
Salt Lake City Marriott Downtown at City Creek mortgage loan	LIBOR + 3.25% (1)	January 2022 (2)	$	46,800	$	47,250
Westin Washington, D.C. City Center mortgage loan	3.99%	January 2023	57,691		58,282
The Lodge at Sonoma Renaissance Resort & Spa mortgage loan	3.96%	April 2023	26,144		26,268
Westin San Diego Downtown mortgage loan	3.94%	April 2023	59,844		60,261
Courtyard New York Manhattan/Midtown East mortgage loan	4.40%	August 2024	79,117		79,535
Worthington Renaissance Fort Worth Hotel mortgage loan	3.66%	May 2025	78,770		79,214
JW Marriott Denver at Cherry Creek mortgage loan	4.33%	July 2025	59,732		60,052
Westin Boston Waterfront mortgage loan	4.36%	November 2025	185,808		186,840
Unamortized debt issuance costs			(2,362)		(2,553)
Total mortgage and other debt, net of unamortized debt issuance costs			591,544		595,149



Unsecured term loan	LIBOR + 2.40% (3)	October 2023	50,000		50,000
Unsecured term loan	LIBOR + 2.40% (4)	July 2024	350,000		350,000
Unamortized debt issuance costs			(1,874)		(1,450)
Unsecured term loans, net of unamortized debt issuance costs			398,126		398,550

Senior unsecured credit facility	LIBOR + 2.55% (5)	July 2023 (6)	100,000		55,000

Total debt, net of unamortized debt issuance costs			$	1,089,670	$	1,048,699
Weighted-Average Interest Rate	3.87%

_______________________

Principal Balance as of
Loan Interest Rate as of March 31, 2020 Maturity Date March 31, 2020 December 31, 2019
Salt Lake City Marriott Downtown mortgage loan 4.25% November 2020 (1) $ 52,968
$ 53,273
Westin Washington D.C. City Center mortgage loan 3.99% January 2023 59,988
60,550
The Lodge at Sonoma, a Renaissance Resort & Spa mortgage loan 3.96% April 2023 26,846
26,963
Westin San Diego mortgage loan 3.94% April 2023 61,456
61,851
Courtyard Manhattan / Midtown East mortgage loan 4.40% August 2024 80,716
81,107
Renaissance Worthington mortgage loan 3.66% May 2025 80,483
80,904
JW Marriott Denver at Cherry Creek mortgage loan 4.33% July 2025 60,954
61,253
Boston Westin mortgage loan 4.36% November 2025 189,759
190,725
New Market Tax Credit loan (2) 5.17% December 2020 2,943
2,943
Unamortized debt issuance costs (3,046 ) (3,240 )
Total mortgage and other debt, net of unamortized debt issuance costs 613,067
616,329

Unsecured term loan LIBOR + 1.35% (3) October 2023 50,000
50,000
Unsecured term loan LIBOR + 1.35% (4) July 2024 350,000
350,000
Unamortized debt issuance costs (1,159 ) (1,230 )
Unsecured term loans, net of unamortized debt issuance costs 398,841
398,770

Senior unsecured credit facility LIBOR + 1.40% July 2023 (5) 400,000
75,000

Total debt, net of unamortized debt issuance costs $ 1,411,908
$ 1,090,099
Weighted-Average Interest Rate 3.24%

~~_______________________~~(1)LIBOR is subject to a floor of 1.0%.

(2)The loan may be extended for an additional year upon satisfaction of certain conditions.

(3) We are party to an interest rate swap agreement that fixes LIBOR at 2.41% through October 2023.

(4) We are party to an interest rate swap agreement that fixes LIBOR at 1.70% through July 2024 for $175 million of the loan. LIBOR is subject to a floor of 0.25%.

(5) LIBOR is subject to a floor of 0.25%.

(6) The credit facility may be extended for an additional year upon the payment of applicable fees and the satisfaction of certain customary conditions.

Mortgage and Other Debt

We have incurred limited recourse, property specific mortgage debt secured by certain of our hotels. In the event of default, the lender may only foreclose on the secured assets; however, in the event of fraud, misapplication of funds or other customary recourse provisions, the lender may seek payment from us. As of March 31, ~~2020~~,2021, 8 of our 31 hotels were secured by mortgage debt.

Our mortgage debt contains certain property specific covenants and restrictions, including minimum debt service coverage ratios or debt yields that trigger “cash trap” provisions, as well as restrictions on incurring additional debt without lender consent. Such cash trap provisions are triggered when the hotel’s operating results fall below a certain debt service coverage ratio or debt yield. When these cash trap provisions are triggered, all of the excess cash flow generated by the hotel is deposited directly into cash management accounts for the benefit of our lenders until a specified debt service coverage ratio or debt yield

maintained for a certain period of time. Such provisions do not provide the lender the right to accelerate repayment of the underlying debt. As of March 31, ~~2020,~~2021, the debt service coverage ~~ratio~~ratios or debt yields for ~~the Courtyard Manhattan Midtown East and the debt yield for the JW Marriott Denver at Cherry Creek~~all of our mortgage loans with cash trap provisions were below the minimum thresholds such that the cash trap provision onof each ~~of the loans were~~respective loan was triggered. We do not expect that ~~the~~such cash ~~trap provisions on the remaining loans~~traps will ~~be triggered during 2020 as a result of the continuing negative impact of the COVID-19 pandemic on~~affect our ~~hotel operations. There are no cash balances held in cash trap reserves as of March 31, 2020.~~ability to satisfy our short-term liquidity requirements.

Senior Unsecured Credit Facility and Unsecured Term Loans

We are party to credit agreements (the “Credit Agreements”) that provide for a $400 million senior unsecured credit facility (the “Revolving Credit Facility”), which matures in July ~~2023.~~2023, a $350 million unsecured term loan maturing in July 2024 (the “Facility Term Loan”) and a $50 million unsecured term loan maturing in October 2023 (the “2023 Term Loan”). The maturity date for the Revolving Credit Facility may be extended for an additional year upon the payment of applicable fees and the satisfaction of certain customary conditions. The interest rate on the Revolving Credit Facility is based upon LIBOR, plus an applicable margin based upon the Company’s leverage ~~ratio, as follows:~~



~~Leverage Ratio~~	~~Applicable Margin~~
~~Less than 30%~~	~~1.40~~	%
~~Greater than or equal to 30% but less than 35%~~	~~1.45~~	%
~~Greater than or equal to 35% but less than 40%~~	~~1.50~~	%
~~Greater than or equal to 40% but less than 45%~~	~~1.55~~	%
~~Greater than or equal to 45% but less than 50%~~	~~1.70~~	%
~~Greater than or equal to 50% but less than 55%~~	~~1.90~~	%
~~Greater than or equal to 55%~~	~~2.05~~	%

ratio. In addition to the interest payable on amounts outstanding under the Revolving Credit Facility, we are required to pay an amount equal to 0.20% of the unused portion of the Revolving Credit Facility if the average usage is greater than 50% or 0.30% of the unused portion of the Revolving Credit Facility if the average usage is less than or equal to 50%. As of March 31, ~~2020,~~2021, we had ~~$400~~$100.0 million in borrowings outstanding under the Revolving Credit ~~Facility and the Company's leverage ratio was 34.5%. Accordingly, interest on our borrowings under the Revolving Credit Facility will be based on LIBOR plus 145 basis points for the following quarter.~~ Facility.

We incurred interest and unused fees on the ~~applicable facility~~Revolving Credit Facility of $0.7 million for each of the three months ended March 31, ~~2020~~2021 and ~~2019.~~

We are party to 2 five-year unsecured term loans totaling $400 million. The interest rate on each of the unsecured term loans is based on LIBOR plus an applicable margin based upon the Company’s leverage ratio, as follows:



~~Leverage Ratio~~	~~Applicable Margin~~
~~Less than 30%~~	~~1.35~~	%
~~Greater than or equal to 30% but less than 35%~~	~~1.40~~	%
~~Greater than or equal to 35% but less than 40%~~	~~1.45~~	%
~~Greater than or equal to 40% but less than 45%~~	~~1.50~~	%
~~Greater than or equal to 45% but less than 50%~~	~~1.65~~	%
~~Greater than or equal to 50% but less than 55%~~	~~1.85~~	%
~~Greater than or equal to 55%~~	~~2.00~~	%

As of March 31, 2020, the Company's leverage ratio was 34.5%. Accordingly, interest on our borrowings under the unsecured term loans will be based on LIBOR plus 140 basis points for the following quarter.2020. We incurred interest on the unsecured term loans of ~~$3.2~~$3.6 million and ~~$3.4~~$3.2 million for the three months ended March 31, 2021 and 2020, respectively.

On June 9, 2020, we entered into amendments to the Credit Agreements (the “Amended Credit Agreements”). The Amended Credit Agreements waive the quarterly tested financial covenants from June 9, 2020 through the first quarter of 2021, unless we elect to terminate the waiver on an earlier date (such period between June 9, 2020 and ~~2019, respectively.~~

~~The Revolving Credit Facility~~the earlier of such date of termination and ~~unsecured term loan agreements contain various corporate financial covenants. A summary~~the end of the ~~most restrictive covenants is as follows:~~first quarter of 2021, the “Covenant Relief Period”).

Actual at
Covenant March 31, 2020
Maximum leverage ratio (1) 60% 34.5%
Minimum fixed charge coverage ratio (2) 1.50x 2.92x
Secured recourse indebtedness Less than 45% of Total Asset Value 20.9%
Unencumbered leverage ratio 60.0% 50.3%
Unencumbered implied debt service coverage ratio 1.2x 1.49x

~~_____________________________~~

~~Although~~During the Covenant Relief Period and until the date we ~~were in~~have demonstrated compliance with the financial covenants for the fiscal quarter following the end of the Covenant Relief Period (the “Restriction Period”), (i) the Amended Credit Agreements require that the net cash proceeds from certain incurrences of indebtedness, equity issuances and asset dispositions will, subject to various exceptions, be applied as a mandatory prepayment of the amounts outstanding under the Amended Credit Agreements, (ii) the Amended Credit Agreements impose an additional covenant that we and our subsidiaries maintain minimum liquidity, defined as unrestricted cash plus available capacity on the Revolving Credit Facility, of at least $100.0 million, and (iii) the Amended Credit Agreements impose additional negative covenants that will limit our ability to incur additional indebtedness, pay dividends and distributions (except to the extent required to maintain REIT status), repurchase shares, make prepayments of other indebtedness, make capital expenditures, conduct asset dispositions or transfers and make investments, in each case subject to various exceptions. During the Restriction Period, acquisitions of encumbered hotels are permitted, subject to a $300 million limitation, and acquisitions of unencumbered hotels are permitted subject to a partial repayment of the outstanding balance on the Revolving Credit Facility or funded with junior capital.

Following the end of the Covenant Relief Period, the Amended Credit Agreements modify certain financial covenants until January 1, 2022 or unless we elect to terminate the period on an earlier date (the “Ratio Adjustment Period”), as follows:

•Maximum Leverage Ratio is increased from 60% to 65%;

•Unencumbered Leverage Ratio is increased from 60% to 65%; and

•Unencumbered Implied Debt Service Coverage Ratio may not be less than 1.00 to 1.00 for the first two testing periods in the Ratio Adjustment Period, not less than 1.10 to 1.00 for the third testing period in the Ratio Adjustment Period and not less than 1.20 to 1.00 for all testing periods thereafter.

During the Covenant Relief Period and until the earlier of (i) January 1, 2022 and (ii) the date on which we have demonstrated compliance with the financial covenants, without giving effect to the modifications imposed during the Ratio Adjustment Period for two consecutive quarters following the Covenant Relief Period, the equity interests of certain of our subsidiaries that own unencumbered properties are required to be pledged to secure the obligations owing under the Amended Credit Agreements.

During the Covenant Relief Period and the Ratio Adjustment Period, the Amended Credit Agreements also set the applicable interest rate to LIBOR plus a margin of 2.40% for the Revolving Credit Facility and ~~unsecured term loan agreements as~~LIBOR plus a margin of ~~March 31,~~2.35% for the Facility Term Loan and 2023 Term Loan. The Amended Credit Agreements also add a LIBOR floor of 0.25% to the

variable interest rate calculation. On August 14, 2020, we ~~have determined~~entered into an additional amendment to the Amended Credit Agreements that ~~it is probable~~permits us to pay preferred dividends up to $17.5 million annually.

On January 20, 2021, we entered into third amendments to the ~~continuing effect~~Amended Credit Agreements that provide for the following modifications:

•Extends the Covenant Relief Period through the fourth quarter of 2021, unless we elect to terminate the ~~COVID-19 pandemic~~period on ~~our hotel operating results will lead~~an earlier date;

•Extends the Ratio Adjustment Period until April 1, 2023, unless we elect to ~~our inability to satisfy~~terminate the period on an earlier date, and further modifies certain financial covenants, ~~beginning with~~as follows:

◦Maximum Leverage Ratio is increased from 60% to 65%;

◦Unencumbered Leverage Ratio is increased from 60% to 65%; and

◦Unencumbered Implied Debt Service Coverage Ratio may not be less than 1.00 to 1.00

•Increases the ~~quarter ending June 30, 2020. See Note 1~~applicable interest rate as follows: (i) for all revolving loans outstanding, LIBOR plus a ~~description~~margin of 2.55% per annum, and (ii) for all term loans outstanding, LIBOR plus a margin of 2.40% per annum;

•Increases the ~~Company's recent actions in seeking waivers prior~~minimum liquidity covenant to ~~the violations of such covenants.~~$125.0 million; and

•Increases our ability to pay dividends on preferred stock up to $25.0 million annually.

9. Fair Value Measurements and Interest Rate Swaps

The fair value of certain financial assets and liabilities and other financial instruments as of March 31, ~~2020~~2021 and December 31, ~~2019~~,2020, in thousands, is as follows:

March 31, 2020 December 31, 2019

Carrying
Amount (1)
Fair Value
Carrying
Amount (1)
Fair Value
Debt $ 1,411,908
$ 1,414,122
$ 1,090,099
$ 1,110,353
Interest rate swap liabilities $ 13,858
$ 13,858
$ 2,545
$ 2,545

(1)The carrying amount of debt is net of unamortized debt issuance costs.

The fair value of our debt is a Level 2 measurement under the fair value hierarchy (see Note 2). We estimate the fair value of our debt by discounting the future cash flows of each instrument at estimated market rates.

The Company's interest rate derivatives, which are not designated or accounted for as cash flow hedges, consisted of the following as of March 31, 2021 and December 31, 2020, in thousands:

The fair values of the interest rate swap agreements are included in accounts payable and accrued expenses on the accompanying consolidated balance sheets as of March 31, 2021 and December 31, 2020. The fair value of our interest rate swaps is a Level 2 measurement under the fair value hierarchy. We estimate the fair value of the interest rate swap based on the interest rate yield curve and implied market volatility as inputs and adjusted for the counterparty's credit risk. We concluded the inputs for the credit risk valuation adjustment are Level 3 inputs, however these inputs are not significant to the fair value measurement in its entirety.

The carrying ~~value~~amount of our other financial instruments approximate fair value due to the short-term nature of these financial instruments.

~~Interest Rate Swaps~~

~~The Company's interest rate derivatives, which are not designated or accounted for as cash flow hedges, consisted of the following as of March 31, 2020 and December 31, 2019, in thousands:~~

Fair Value of Assets (Liabilities)
Hedged Debt Type Rate Fixed Index Effective Date Maturity Date Notional Amount March 31, 2020 December 31, 2019
$50 million term loan Swap 2.41 % 1-Month LIBOR January 7, 2019 October 18, 2023 $ 50,000
$ (3,741 ) $ (1,597 )
$350 million term loan Swap 1.70 % 1-Month LIBOR July 25, 2019 July 25, 2024 $ 175,000
(10,117 ) (948 )
$ (13,858 ) $ (2,545 )

The following table presents the fair value of assets that are measured on a non-recurring basis (in thousands):


	Fair Value Measurements as of March 31, 2021
	Total		Level 1		Level 2		Level 3
Hotel properties	$	220,000	$	0	$	220,000	$	0

During the three months ended March 31, 2021, we adjusted the carrying amount of The Lexington Hotel to its fair value of $185.0 million and recorded a related impairment loss of $111.7 million. Further, during the three months ended March 31, 2021, we adjusted the carrying amount of Frenchman's Reef to its fair value of $35.0 million and recorded a related impairment loss of $10.8 million. The fair values ~~of the interest rate swap agreements are included in accounts payable and accrued expenses~~were determined based on the ~~accompanying consolidated balance sheets as of March 31, 2020~~contractual sales prices pursuant to executed purchase and ~~December 31, 2019.~~sale agreements. Contractual sales prices are considered observable inputs other than quoted prices (Level 2 measurements) in the fair value hierarchy.

10. Commitments and Contingencies

We are subject to various claims, lawsuits and legal proceedings, including routine litigation arising in the ordinary course of business, regarding the operation of our hotels and Company matters. While it is not possible to ascertain the ultimate outcome of such matters, management believes that the aggregate amount of such liabilities, if any, in excess of amounts covered by insurance will not have a material adverse impact on our financial condition or results of operations. The outcome of claims, lawsuits and legal proceedings brought against the Company, however, is subject to significant uncertainties.

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

This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions. These forward-looking statements are generally identifiable by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions, whether in the negative or affirmative. Forward-looking statements are based on management’s current expectations and assumptions and are not guarantees of future performance. Factors that may cause actual results to differ materially from current expectations include, but are not limited to, the risks discussed herein and the risk factors discussed from time to time in our periodic filings with the Securities and Exchange Commission, including in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 as updated by our Quarterly Reports on Form ~~10-Q.~~10-Q and Current Reports on Form 8-K. Accordingly, there is no assurance that the Company’s expectations will be realized. Except as otherwise required by the federal securities laws, the Company disclaims any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this report to reflect events, circumstances or changes in expectations after the date of this report.

Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:

•negative ~~changes~~developments in the economy, including, but not limited to, ~~a reversal of current~~ job loss or growth trends, ana continued increase in unemployment or a decrease in corporate earnings and investment;

•increased competition in the lodging industry and from alternative lodging channels or third party internet intermediaries in the markets in which we own properties;

•failure to effectively execute our long-term business strategy and successfully identify and complete ~~acquisitions;~~acquisitions and dispositions (including the proposed sale of The Lexington Hotel);

•risks and uncertainties affecting hotel ~~renovations~~management, operations and ~~management~~renovations (including, without limitation, construction delays, increased construction costs, disruption in hotel operations and the risks associated with our management and franchise agreements);

•risks associated with the availability and terms of financing and the use of debt to fund acquisitions and renovations or refinance existing indebtedness, including the impact of higher interest rates on the cost and/or availability of financing;

•risks associated with our level of indebtedness and our ability to ~~obtain covenant waivers on~~satisfy our ~~credit agreements for~~obligations under our ~~senior unsecured credit facility and unsecured term loans;~~debt agreements;

•risks associated with the lodging industry overall, including, without limitation, ~~an increase in alternative lodging channels,~~ decreases in the frequency of ~~business~~ travel and increases in operating costs;

•risks and uncertainties associated with our obligations under our management agreements;

•risks associated with ~~natural disasters;~~

•risks associated with natural disasters and other unforeseen catastrophic events, including the emergence of a pandemic or other widespread health emergency;

•the adverse impact of COVID-19 on the U.S., regional and global economies, travel, the hospitality industry, and ~~the~~on our financial condition and results of operations ~~of the Company~~ and ~~its~~our hotels;

•costs of compliance with government regulations, including, without limitation, the Americans with Disabilities Act;

•potential liability for uninsured losses and environmental contamination;

•risks associated with security breaches through cyber-attacks or otherwise, as well as other significant disruptions of our and our hotel managers’ information technologies and systems, which support our operations and those of our hotel managers;

•risks associated with our potential failure to qualify as a REIT (as defined below) under the Internal Revenue Code of 1986, as ~~amended;~~amended (the “Code”);

•possible adverse changes in tax and environmental laws; and

•risks associated with our dependence on key personnel whose continued service is not guaranteed.

DiamondRock Hospitality Company is a lodging-focused Maryland corporation operating as a real estate investment trust (“REIT”). As of March 31, ~~2020,~~2021, we owned a portfolio of 31 premium hotels and resorts that contain ~~10,102~~10,103 guest rooms located in 21 different markets in North America and the U.S. Virgin Islands. ~~Our hotel in~~Subsequent to March 31, 2021, we sold the ~~U.S. Virgin Islands,~~ Frenchman's Reef & Morning Star Marriott Beach Resort (“Frenchman's Reef”)~~, remains~~ located in St. Thomas, U.S. Virgin Islands. See

Note 3 to the accompanying consolidated financial statements for further discussion of the sale. Frenchman's Reef has been closed ~~due to~~since September 2017 as a result of damage ~~incurred from~~caused by Hurricane ~~Irma in September 2017.~~Irma.

As an owner, rather than an operator, of lodging properties, we receive all of the operating profits or losses generated by our hotels after the payment of fees due to hotel managers and hotel brands, which are calculated based on the revenues and profitability of each hotel.

Our strategy is to apply aggressive asset management, ~~conservative leverage,~~prudent financial strategy, and disciplined capital allocation to high quality lodging properties in North American urban and resort markets with superior growth prospects and high barriers-to-entry. Our goal is to deliver long-term stockholder returns that exceed those generated by our peers through a combination of dividends and enduring capital appreciation.

Our primary business is to acquire, own, asset manage and renovate premium hotel properties in the United States. Our portfolio is concentrated in key gateway cities and destination resort locations. Each of our hotels is managed by a third party—either an independent operator or a brand operator, such as Marriott International, Inc. ~~(“Marriott”).~~

We critically evaluate each of our hotels to ensure that we own a portfolio of hotels that conforms to our vision, supports our mission and corresponds with our strategy. On a regular basis, we analyze our portfolio to identify opportunities to invest capital in certain projects or market non-core assets for sale in order to increase our portfolio quality. We are committed to a conservative capital structure with prudent leverage. We regularly assess the availability and affordability of capital in order to maximize stockholder value and minimize enterprise risk. In addition, we are committed to following sound corporate governance practices and to being open and transparent in our communications with our stockholders.

Key Indicators of Financial Condition and Operating Performance

We use a variety of operating and other information to evaluate the financial condition and operating performance of our business. These key indicators include financial information that is prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), as well as other financial information that is not prepared in accordance with U.S. GAAP. In addition, we use other information that may not be financial in nature, including statistical information and comparative data. We use this information to measure the performance of individual hotels, groups of hotels and/or our business as a whole. We periodically compare historical information to our internal budgets as well as industry-wide information. These key indicators include:

•Occupancy percentage;

•Average Daily Rate (or ADR);

•Revenue per Available Room (or RevPAR);

•Earnings Before Interest, Income Taxes, Depreciation and Amortization (or EBITDA), Earnings Before Interest, Income Taxes, Depreciation and Amortization for real estate (or EBITDAre), and Adjusted EBITDA; and

•re~~), and Adjusted EBITDA; and~~

Occupancy, ADR and RevPAR are commonly used measures within the hotel industry to evaluate operating performance. RevPAR, which is calculated as the product of ADR and occupancy percentage, is an important statistic for monitoring operating performance at the individual hotel level and across our business as a whole. We evaluate individual hotel RevPAR performance on an absolute basis with comparisons to budget and prior periods, as well as on a company-wide and regional basis. ADR and RevPAR include only room revenue. Room revenue comprised approximately ~~66%~~69% of our total revenues for the three months ended March 31, ~~2020~~2021 and is dictated by demand, as measured by occupancy percentage, pricing, as measured by ADR, and our available supply of hotel rooms.

Our ADR, occupancy percentage and RevPAR performance may be impacted by macroeconomic factors such as U.S. economic conditions generally, regional and local employment growth, personal income and corporate earnings, office vacancy rates and business relocation decisions, airport and other business and leisure travel, increased use of lodging alternatives, new hotel construction and the pricing strategies of our competitors. In addition, our ADR, occupancy percentage and RevPAR performance is dependent on the continued success of our hotels' global brands.

We also use EBITDA, EBITDAre, Adjusted EBITDA, FFO and Adjusted FFO as measures of the financial performance of our business. See “Non-GAAP Financial Measures.”

Impact of COVID-19 Pandemic

In March 2020, the World Health Organization declared the novel coronavirus, or COVID-19, a global pandemic. The virus spread throughout the United States and globally. As a result of the pandemic, government mandates and health official recommendations, the overall demand for lodging has ~~reduced travel and adversely affected the hospitality industry in general.~~materially decreased. We have seen a significant reduction in or elimination of lodging demand generators, including city-wide conferences, sporting and entertainment events, corporate and leisure travel, and overall domestic airlift capacity. Consumer spending decreased in March 2020 and we expect further decreases into the second quarter of 2020.

~~In response to COVID-19, we have taken the following aggressive actions at the property and corporate levels:~~

We have ~~developed~~taken aggressive steps to mitigate the COVID-19 pandemic's operational and ~~implemented action plans with~~financial impacts on our ~~hotel operators to significantly reduce operating costs at each of~~business, as described in our ~~hotels.~~

The ~~timing of re-opening~~situation surrounding the COVID-19 pandemic remains fluid. Market demand for lodging at our hotels ~~will depend primarily on~~is closely correlated with reported infection levels near our hotel locations, consumer confidence, and guidance from health officials and federal, state, and local ~~government guidance, health official recommendations and market demand. We currently anticipate phased re-openings will start~~governments. Demand at our leisure-focused hotels ~~this summer. We expect~~has improved in the latter part of 2020 and the first quarter of 2021. Demand at our other hotels, however, remains at historically low levels. Several markets throughout the country experienced a resurgence of COVID-19 case counts during the recent winter months and reimplemented or strengthened closures, quarantines, and social distancing requirements. The availability and effectiveness of COVID-19 vaccines, as well as other public health and geopolitical factors, are likely to impact the timing, pace, and extent of a lodging demand ~~will first return for the leisure segment, followed by business transient, and lastly by the group segment.~~recovery. As demand ~~slowly~~ returns, we will continue to aggressively asset manage our hotels. We ~~expect~~continue to carefully assess staffing needs, cleanliness and safety protocols, business mix, and other initiatives. We expect that the COVID-19 pandemic will decrease the pipeline of supply of new hotel rooms within the markets we operate, which will further stabilize RevPAR and profitability.

~~See also “Risk Factors”~~As of March 31, 2021, the Company had liquidity of $436.9 million, which includes unrestricted corporate cash of $99.8 million, $300.0 million of borrowing capacity on our senior unsecured credit facility, and unrestricted cash held at our hotels, which is included in ~~Part II, Item 1A of this report.~~due from hotel managers on our accompanying consolidated balance sheets.

The following ~~table sets~~tables set forth certain operating information for the three months ended March 31, ~~2020~~2021 for each of our hotels. The table indicates the operating status of each ~~hotel.~~hotel and the occupancy percentage, ADR and RevPAR for each hotel for the portion of the three months ended March 31, 2021 that it was open.

Westin Boston Waterfront (1)

Hilton Boston Downtown/Faneuil Hall (1)

Vail Marriott Mountain Resort (1)

Hilton Burlington Lake Champlain (1)

Hotel Palomar Phoenix (1)

JW Marriott Denver Cherry Creek (1)

Barbary Beach House Key West (1)

The Lodge at Sonoma Renaissance Resort & Spa (1)

Courtyard Denver Downtown (1)

Cavallo Point, The Lodge at the Golden Gate (1)

Havana Cabana Key West (1)

Hotel Emblem San Francisco (1)

The Landing Lake Tahoe Resort & Spa (1)

Orchards Inn Sedona (1)

Chicago Marriott Downtown Magnificent Mile

The Lexington Hotel (1)

Hilton Garden Inn New York/Times Square Central (1)

Courtyard New York Manhattan/Fifth Avenue (1)

Property ⁽¹⁾
Location
Status of Operation⁽²⁾

Number of
Rooms
Occupancy (%) ADR ($) RevPAR($)
% Change
from 2019 RevPAR
Chicago Marriott Downtown Chicago, Illinois
Open ⁽³⁾
1,200
43.0 % $ 164.30
$ 70.59
(13.7 )%
Westin Boston Waterfront Hotel Boston, Massachusetts Closed 3/25 793
59.9 % 196.54
117.65
(11.1 )%
Lexington Hotel New York New York, New York Closed 3/29 725
61.5 % 183.27
112.67
(26.9 )%
Salt Lake City Marriott Downtown Salt Lake City, Utah Open 510
51.3 % 170.97
87.70
(14.6 )%
Renaissance Worthington Fort Worth, Texas Open 504
57.6 % 195.06
112.30
(24.8 )%
Westin San Diego San Diego, California Open 436
66.8 % 188.39
125.88
(14.5 )%
Westin Fort Lauderdale Beach Resort Fort Lauderdale, Florida Open 433
80.6 % 276.24
222.56
(8.3 )%
Westin Washington, D.C. City Center Washington, D.C. Open 410
60.3 % 193.00
116.33
(25.4 )%
Hilton Boston Downtown Boston, Massachusetts Closed 3/23 403
65.7 % 192.00
126.06
(23.7 )%
Vail Marriott Mountain Resort & Spa Vail, Colorado Closed 3/20 344
63.5 % 465.29
295.40
(18.6 )%
Marriott Atlanta Alpharetta Atlanta, Georgia Open 318
51.4 % 173.72
89.35
(28.5 )%
Courtyard Manhattan/Midtown East New York, New York Open 321
76.7 % 167.45
128.39
(26.6 )%
The Gwen Chicago Chicago, Illinois Closed 3/31 311
61.0 % 192.82
117.59
(11.6 )%
Hilton Garden Inn Times Square Central New York, New York Closed 3/29 282
77.0 % 154.35
118.80
(33.1 )%
Bethesda Marriott Suites Bethesda, Maryland Open 272
47.4 % 171.19
81.17
(27.8 )%
Hilton Burlington Burlington, Vermont Closed 3/31 258
39.4 % 133.84
52.78
(42.9 )%
Hotel Palomar Phoenix Phoenix, Arizona Closed 3/31 242
71.4 % 230.87
164.76
(19.9 )%
JW Marriott Denver at Cherry Creek Denver, Colorado Closed 3/22 199
56.4 % 231.22
130.42
16.3 %
Courtyard Manhattan/Fifth Avenue New York, New York Closed 3/27 189
61.6 % 205.95
126.83
(22.8 )%
Sheraton Suites Key West Key West, Florida Closed 3/23 184
81.8 % 328.93
269.09
(7.7 )%
The Lodge at Sonoma, a Renaissance Resort & Spa Sonoma, California Closed 3/21 182
45.9 % 229.83
105.52
(26.5 )%
Courtyard Denver Downtown Denver, Colorado Closed 3/20 177
46.4 % 170.21
78.96
(37.3 )%
Renaissance Charleston Charleston, South Carolina
Open ⁽⁴⁾
166
65.7 % 235.80
154.89
(21.9 )%
Shorebreak Hotel Huntington Beach, California Open 157
60.8 % 229.09
139.20
(21.9 )%
Cavallo Point, The Lodge at the Golden Gate Sausalito, California Closed 3/17 142
46.4 % 444.90
206.44
(25.6 )%
Havana Cabana Key West Key West, Florida Closed 3/23 106
80.8 % 286.60
231.60
(3.9 )%
Hotel Emblem San Francisco, California Closed 3/23 96
67.1 % 256.36
172.02
21.1 %
L'Auberge de Sedona Sedona, Arizona Open 88
64.0 % 553.74
354.18
(23.5 )%
The Landing Resort & Spa South Lake Tahoe, California Closed 3/23 82
47.3 % 281.05
132.92
(9.1 )%
Orchards Inn Sedona Sedona, Arizona Closed 3/31 70
55.3 % 214.66
118.75
(37.0 )%
TOTAL/WEIGHTED AVERAGE 9,600
59.1 % $ 216.42
$ 127.98
(19.2 )%

(1)Operations were suspended for a portion of the three months ended March 31, 2020.

(2)Frenchman's Reef closed on September 6, 2017 due to Hurricane Irma and remains closed. Accordingly, there is no operating information for the three months ended March 31, 2021.

(3) On January 3, 2021, we suspended operations at the Chicago Marriott Downtown Magnificent Mile due to lack of travel demand. We reopened the hotel on April 15, 2021.

(4) The hotel reopened on May 3, 2021.

Results of Operations

~~Comparison of the Three Months Ended March 31, 2020 to the Three Months Ended March 31, 2019~~

The comparability of our results of operations for the three months ended March 31, ~~2020~~2021 to the three months ended March 31, ~~2019~~2020 has been significantly impacted by the effects of ~~the~~ the COVID-19 pandemic. We expect the comparability of our results of operations in future periods ~~of 2020~~ will be similarly impacted.

Comparison of the Three Months Ended March 31, 2021 to the Three Months Ended March 31, 2020

In response to the COVID-19 pandemic, operations were suspended at four of our hotels for all or a portion of the three months ended March 31, 2021. Operations were suspended at 18 of our hotels for a portion of the three months ended March 31, 2020.

Revenue. Revenue consists primarily of the room, food and beverage and other operating revenues from our hotels, as follows (dollars in millions):

Three Months Ended March 31,
2020 2019 % Change
Rooms $ 111.8
$ 136.7
(18.2 )%
Food and beverage 43.9
50.5
(13.1 )%
Other 14.3
15.2
(5.9 )%
Total revenues $ 170.0
$ 202.4
(16.0 )%


	Three Months Ended March 31,
	2021		2020		% Change
Rooms	$	50.4	$	111.8	(54.9)	%
Food and beverage	13.9		43.9		(68.3)	%
Other	8.6		14.3		(39.9)	%
Total revenues	$	72.9	$	170.0	(57.1)	%

Our total revenues decreased ~~$32.4~~$97.1 million from ~~$202.4 million for the three months ended~~ ~~March 31, 2019~~ to $170.0 million for the three months ended March 31, 2020 to $72.9 million for the three months ended March 31, 2021.

The following are key hotel operating statistics for the three months ended March 31, ~~2020~~2021 and 2020.


	Three Months Ended March 31,
	2021			2020			% Change
Occupancy %	26.9		%	59.1		%	(32.2)	%
ADR	$	216.85		$	216.46		0.2	%
RevPAR	$	58.34		$	127.98		(54.4)	%


Hotels Open Throughout the Three Months Ended March 31, 2021
Property	Location	Number of Rooms	Occupancy (%)		ADR ($)		RevPAR($)		% Change from 2020 RevPAR
Westin Boston Waterfront (1)	Boston, Massachusetts	793	15.0	%	$	119.58	$	17.91	(84.8)	%
Salt Lake City Marriott Downtown at City Creek	Salt Lake City, Utah	510	30.5	%	108.20		33.00		(62.4)	%
Worthington Renaissance Fort Worth Hotel	Fort Worth, Texas	504	34.9	%	136.41		47.54		(57.7)	%
Westin San Diego Downtown	San Diego, California	436	22.0	%	141.50		31.06		(75.3)	%
Westin Fort Lauderdale Beach Resort	Fort Lauderdale, Florida	433	55.9	%	255.18		142.74		(35.9)	%
Westin Washington, D.C. City Center	Washington, D.C.	410	8.8	%	150.94		13.23		(88.6)	%
Hilton Boston Downtown/Faneuil Hall (1)	Boston, Massachusetts	403	21.2	%	106.46		22.60		(82.1)	%
Vail Marriott Mountain Resort (1)	Vail, Colorado	344	73.6	%	373.06		274.74		(7.0)	%
Courtyard New York Manhattan/Midtown East	New York, New York	321	67.0	%	126.21		84.54		(34.2)	%


	Three Months Ended March 31,
	2021		2020		% Change
Rooms departmental expenses	$	13.8	$	35.7	(61.3)	%
Food and beverage departmental expenses	11.6		31.1		(62.7)
Other departmental expenses	2.0		3.9		(48.7)
General and administrative	9.9		25.0		(60.4)
Utilities	4.1		4.8		(14.6)
Repairs and maintenance	5.8		8.3		(30.1)
Sales and marketing	5.8		14.1		(58.9)
Franchise fees	2.4		5.8		(58.6)
Base management fees	1.1		3.5		(68.6)

Property taxes	14.1		14.6		(3.4)
Other fixed charges	3.8		4.4		(13.6)
Severance costs	0.1		—		100.0
Professional fees and pre-opening costs related to Frenchman's Reef	0.6		(0.3)		N/A
Lease expense	2.8		3.0		(6.7)

Total hotel operating expenses	$	77.9	$	153.9	(49.4)	%



	March 31, 2020			December 31, 2019
ASSETS	(unaudited)
Property and equipment, net	$	3,047,009		$	3,026,769
Right-of-use assets	97,538			98,145
Restricted cash	47,072			57,268
Due from hotel managers	72,396			91,207
Prepaid and other assets	19,201			29,853
Cash and cash equivalents	387,825			122,524
Total assets	$	3,671,041		$	3,425,766
LIABILITIES AND EQUITY
Liabilities:
Mortgage and other debt, net of unamortized debt issuance costs	$	613,067		$	616,329
Unsecured term loans, net of unamortized debt issuance costs	398,841			398,770
Senior unsecured credit facility	400,000			75,000
Total debt	1,411,908			1,090,099

Deferred income related to key money, net	11,243			11,342
Unfavorable contract liabilities, net	66,856			67,422
Deferred rent	53,050			52,012
Lease liabilities	102,923			103,625
Due to hotel managers	69,514			72,445
Distributions declared and unpaid	143			25,815
Accounts payable and accrued expenses	78,807			81,944
Total liabilities	1,794,444			1,504,704
Equity:
Preferred stock, $0.01 par value; 10,000,000 shares authorized; no shares issued and outstanding	—			—
Common stock, $0.01 par value; 400,000,000 shares authorized; 199,243,338 and 200,207,795 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively	1,992			2,002
Additional paid-in capital	2,079,534			2,089,349
Accumulated deficit	(213,420		)	(178,861		)
Total stockholders’ equity	1,868,106			1,912,490
Noncontrolling interests	8,491			8,572
Total equity	1,876,597			1,921,062
Total liabilities and equity	$	3,671,041		$	3,425,766



Year Ending December 31,	As of March 31, 2020
2020 (excluding the three months ended March 31, 2020)	$	2,402
2021	3,496
2022	3,940
2023	3,997
2024	3,976
Thereafter	759,124
Total lease payments	776,935
Less imputed interest	(674,012		)
Total lease liabilities	$	102,923



	Number of Shares		Weighted- Average Grant Date Fair Value
Unvested balance at January 1, 2020	472,999		$	10.40
Granted	331,942		9.58
Vested	(229,664	)	10.55
Forfeited	(11,983	)	10.01
Unvested balance at March 31, 2020	563,294		$	9.87


~~(1)~~	~~The number of shares of common stock earned for the PSUs vested in 2020 was equal to 123.07% of the PSU Target Award.~~


~~(1)~~	~~As of March 31, 2020, none of the vested LTIP units have been converted to common OP units.~~



			Principal Balance as of
Loan	Interest Rate as of March 31, 2020	Maturity Date	March 31, 2020			December 31, 2019
Salt Lake City Marriott Downtown mortgage loan	4.25%	November 2020 (1)	$	52,968		$	53,273
Westin Washington D.C. City Center mortgage loan	3.99%	January 2023	59,988			60,550
The Lodge at Sonoma, a Renaissance Resort & Spa mortgage loan	3.96%	April 2023	26,846			26,963
Westin San Diego mortgage loan	3.94%	April 2023	61,456			61,851
Courtyard Manhattan / Midtown East mortgage loan	4.40%	August 2024	80,716			81,107
Renaissance Worthington mortgage loan	3.66%	May 2025	80,483			80,904
JW Marriott Denver at Cherry Creek mortgage loan	4.33%	July 2025	60,954			61,253
Boston Westin mortgage loan	4.36%	November 2025	189,759			190,725
New Market Tax Credit loan (2)	5.17%	December 2020	2,943			2,943
Unamortized debt issuance costs			(3,046		)	(3,240		)
Total mortgage and other debt, net of unamortized debt issuance costs			613,067			616,329

Unsecured term loan	LIBOR + 1.35% (3)	October 2023	50,000			50,000
Unsecured term loan	LIBOR + 1.35% (4)	July 2024	350,000			350,000
Unamortized debt issuance costs			(1,159		)	(1,230		)
Unsecured term loans, net of unamortized debt issuance costs			398,841			398,770

Senior unsecured credit facility	LIBOR + 1.40%	July 2023 (5)	400,000			75,000

Total debt, net of unamortized debt issuance costs			$	1,411,908		$	1,090,099
Weighted-Average Interest Rate	3.24%


~~(1)~~	~~We have agreed to a term sheet to extend the maturity of the mortgage loan secured by the Salt Lake City Marriott Downtown to January 2022, subject to due diligence and other customary conditions.~~


~~(2)~~	~~Assumed in connection with the acquisition of the Hotel Palomar Phoenix on March 1, 2018.~~


~~(3)~~	~~We entered into an interest rate swap agreement on January 7, 2019 to fix LIBOR at 2.41% through October 2023.~~


~~(4)~~	~~We entered into an interest rate swap agreement on July 25, 2019 to fix LIBOR at 1.70% through July 2024 for $175 million of the loan.~~


~~(4)~~	~~The credit facility may be extended for an additional year upon the payment of applicable fees and the satisfaction of certain customary conditions.~~



		Actual at
	Covenant	March 31, 2020
Maximum leverage ratio (1)	60%	34.5%
Minimum fixed charge coverage ratio (2)	1.50x	2.92x
Secured recourse indebtedness	Less than 45% of Total Asset Value	20.9%
Unencumbered leverage ratio	60.0%	50.3%
Unencumbered implied debt service coverage ratio	1.2x	1.49x


~~(1)~~	Leverage ratio is net indebtedness, as defined in the Credit Agreement, divided by total asset value, defined in the credit agreement as the value of our owned hotels based on hotel net operating income divided by a defined capitalization rate.


~~(2)~~	Fixed charge coverage ratio is Adjusted EBITDA, generally defined in the Credit Agreement as EBITDA less FF&E reserves, for the most recently ending 12 months, to fixed charges, which is defined in the Credit Agreement as interest expense, all regularly scheduled principal payments and payments on capitalized lease obligations, for the same most recently ending 12-month period.



	March 31, 2020				December 31, 2019
	Carrying Amount (1)		Fair Value		Carrying Amount (1)		Fair Value
Debt	$	1,411,908	$	1,414,122	$	1,090,099	$	1,110,353
Interest rate swap liabilities	$	13,858	$	13,858	$	2,545	$	2,545


~~(1)~~	~~The carrying amount of debt is net of unamortized debt issuance costs.~~


									Fair Value of Assets (Liabilities)
Hedged Debt	Type	Rate Fixed		Index	Effective Date	Maturity Date	Notional Amount		March 31, 2021		December 31, 2020
$50 million term loan	Swap	2.41	%	1-Month LIBOR	January 7, 2019	October 18, 2023	$	50,000	$	(2,768)	$	(3,231)
$350 million term loan	Swap	1.70	%	1-Month LIBOR	July 25, 2019	July 25, 2024	$	175,000	(7,118)		(9,386)
									$	(9,886)	$	(12,617)


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


Atlanta Marriott Alpharetta	Atlanta, Georgia			318	22.9	%	94.37		21.61		(75.8)	%
The Gwen Hotel (1)	Chicago, Illinois			311	23.5	%	191.04		44.84		(61.9)	%
Bethesda Marriott Suites	Bethesda, Maryland			272	18.5	%	105.58		19.49		(76.0)	%
Hilton Burlington Lake Champlain (1)	Burlington, Vermont			258	32.7	%	114.95		37.63		(28.7)	%
Hotel Palomar Phoenix (1)	Phoenix, Arizona			242	49.8	%	147.96		73.63		(55.3)	%
JW Marriott Denver Cherry Creek (1)	Denver, Colorado			199	39.4	%	200.92		79.12		(39.3)	%
Barbary Beach House Key West (1)	Key West, Florida			184	83.2	%	347.09		288.93		7.4	%
The Lodge at Sonoma Renaissance Resort & Spa (1)	Sonoma, California			182	27.7	%	216.11		59.82		(43.3)	%
Courtyard Denver Downtown (1)	Denver, Colorado			177	35.7	%	94.11		33.60		(57.4)	%
Renaissance Charleston Historic District Hotel	Charleston, South Carolina			167	56.8	%	214.87		122.12		(21.2)	%
Kimpton Shorebreak Resort	Huntington Beach, California			157	43.4	%	229.94		99.69		(28.4)	%
Cavallo Point, The Lodge at the Golden Gate (1)	Sausalito, California			142	19.3	%	547.30		105.82		(48.7)	%
Havana Cabana Key West (1)	Key West, Florida			106	90.8	%	261.53		237.49		2.5	%
Hotel Emblem San Francisco (1)	San Francisco, California			96	15.2	%	128.42		19.52		(88.7)	%
L'Auberge de Sedona	Sedona, Arizona			88	80.8	%	716.68		578.77		63.4	%
The Landing Lake Tahoe Resort & Spa (1)	South Lake Tahoe, California			82	49.5	%	338.05		167.37		25.9	%
Orchards Inn Sedona (1)	Sedona, Arizona			70	62.2	%	253.24		157.61		32.7	%
TOTAL/WEIGHTED AVERAGE FOR OPEN HOTELS				7,205	35.8	%	216.93		77.68		(44.3)	%

Hotels Closed for a Portion of the Three Months Ended March 31, 2021
Property (2)	Location	Date of Closure	Date of Reopening	Number of Rooms	Occupancy (%)		ADR ($)		RevPAR ($)		% Change from 2020 RevPAR
Chicago Marriott Downtown Magnificent Mile	Chicago, Illinois	4/10/2020 1/3/2021	9/1/2020 (3)	1,200	0.2	%	$	148.58	$	0.35	(99.5)	%
The Lexington Hotel (1)	New York, New York	3/29/2020	-	725	—	%	—		—		(100.0)	%
Hilton Garden Inn New York/Times Square Central (1)	New York, New York	3/29/2020	(4)	282	—	%	—		—		(100.0)	%
Courtyard New York Manhattan/Fifth Avenue (1)	New York, New York	3/27/2020	-	189	—	%	—		—		(100.0)	%
TOTAL/WEIGHTED AVERAGE FOR CLOSED HOTELS				2,396	0.1	%	148.58		0.17		(99.8)	%

TOTAL/WEIGHTED AVERAGE				9,601	26.9	%	$	216.85	$	58.34	(54.4)	%



Property ⁽¹⁾	Location	Status of Operation⁽²⁾	Number of Rooms	Occupancy (%)		ADR ($)		RevPAR($)		% Change from 2019 RevPAR
Chicago Marriott Downtown	Chicago, Illinois	Open ⁽³⁾	1,200	43.0	%	$	164.30	$	70.59	(13.7	)%
Westin Boston Waterfront Hotel	Boston, Massachusetts	Closed 3/25	793	59.9	%	196.54		117.65		(11.1	)%
Lexington Hotel New York	New York, New York	Closed 3/29	725	61.5	%	183.27		112.67		(26.9	)%
Salt Lake City Marriott Downtown	Salt Lake City, Utah	Open	510	51.3	%	170.97		87.70		(14.6	)%
Renaissance Worthington	Fort Worth, Texas	Open	504	57.6	%	195.06		112.30		(24.8	)%
Westin San Diego	San Diego, California	Open	436	66.8	%	188.39		125.88		(14.5	)%
Westin Fort Lauderdale Beach Resort	Fort Lauderdale, Florida	Open	433	80.6	%	276.24		222.56		(8.3	)%
Westin Washington, D.C. City Center	Washington, D.C.	Open	410	60.3	%	193.00		116.33		(25.4	)%
Hilton Boston Downtown	Boston, Massachusetts	Closed 3/23	403	65.7	%	192.00		126.06		(23.7	)%
Vail Marriott Mountain Resort & Spa	Vail, Colorado	Closed 3/20	344	63.5	%	465.29		295.40		(18.6	)%
Marriott Atlanta Alpharetta	Atlanta, Georgia	Open	318	51.4	%	173.72		89.35		(28.5	)%
Courtyard Manhattan/Midtown East	New York, New York	Open	321	76.7	%	167.45		128.39		(26.6	)%
The Gwen Chicago	Chicago, Illinois	Closed 3/31	311	61.0	%	192.82		117.59		(11.6	)%
Hilton Garden Inn Times Square Central	New York, New York	Closed 3/29	282	77.0	%	154.35		118.80		(33.1	)%
Bethesda Marriott Suites	Bethesda, Maryland	Open	272	47.4	%	171.19		81.17		(27.8	)%
Hilton Burlington	Burlington, Vermont	Closed 3/31	258	39.4	%	133.84		52.78		(42.9	)%
Hotel Palomar Phoenix	Phoenix, Arizona	Closed 3/31	242	71.4	%	230.87		164.76		(19.9	)%
JW Marriott Denver at Cherry Creek	Denver, Colorado	Closed 3/22	199	56.4	%	231.22		130.42		16.3	%
Courtyard Manhattan/Fifth Avenue	New York, New York	Closed 3/27	189	61.6	%	205.95		126.83		(22.8	)%
Sheraton Suites Key West	Key West, Florida	Closed 3/23	184	81.8	%	328.93		269.09		(7.7	)%
The Lodge at Sonoma, a Renaissance Resort & Spa	Sonoma, California	Closed 3/21	182	45.9	%	229.83		105.52		(26.5	)%
Courtyard Denver Downtown	Denver, Colorado	Closed 3/20	177	46.4	%	170.21		78.96		(37.3	)%
Renaissance Charleston	Charleston, South Carolina	Open ⁽⁴⁾	166	65.7	%	235.80		154.89		(21.9	)%
Shorebreak Hotel	Huntington Beach, California	Open	157	60.8	%	229.09		139.20		(21.9	)%
Cavallo Point, The Lodge at the Golden Gate	Sausalito, California	Closed 3/17	142	46.4	%	444.90		206.44		(25.6	)%
Havana Cabana Key West	Key West, Florida	Closed 3/23	106	80.8	%	286.60		231.60		(3.9	)%
Hotel Emblem	San Francisco, California	Closed 3/23	96	67.1	%	256.36		172.02		21.1	%
L'Auberge de Sedona	Sedona, Arizona	Open	88	64.0	%	553.74		354.18		(23.5	)%
The Landing Resort & Spa	South Lake Tahoe, California	Closed 3/23	82	47.3	%	281.05		132.92		(9.1	)%
Orchards Inn Sedona	Sedona, Arizona	Closed 3/31	70	55.3	%	214.66		118.75		(37.0	)%
TOTAL/WEIGHTED AVERAGE			9,600	59.1	%	$	216.42	$	127.98	(19.2	)%


~~(1)~~	~~Frenchman's Reef closed on September 6, 2017 due to Hurricane Irma and remains closed. Accordingly, there is no operating information for the three months ended March 31, 2020.~~


~~(2)~~	~~As of March 31, 2020. All hotels that have suspended operations remain closed as of May 11, 2020.~~


~~(3)~~	~~The hotel suspended operations on April 10, 2020.~~


•	~~Gains or Losses from Early Extinguishment of Debt~~: We exclude the effect of gains or losses recorded on the early extinguishment of debt because these gains or losses result from transaction activity related to the Company’s capital structure that we believe are not indicative of the ongoing operating performance of the Company or our hotels.


•	~~Hotel Acquisition Costs: We exclude hotel acquisition costs expensed during the period because we believe these transaction costs are not reflective of the ongoing performance of the Company or our hotels.~~


•	~~Severance Costs~~: We exclude corporate severance costs, or reversals thereof, incurred with the termination of corporate-level employees and severance costs incurred at our hotels related to lease terminations or structured severance programs because we believe these costs do not reflect the ongoing performance of the Company or our hotels.


•	~~Hotel Manager Transition Items: We exclude the transition items associated with a change in hotel manager because we believe these items do not reflect the ongoing performance of the Company or our hotels.~~



			(1)			Represents pre-opening costs and professional fees related to the ~~re-opening~~reopening of Frenchman's Reef, as well as legal ~~and professional fees~~ and other costs incurred at Frenchman's Reef as a result of Hurricane Irma that are not covered by insurance.
			(2)			Three months ended March 31, ~~2020~~2021 consists of ~~manager transition~~severance costs incurred with the elimination of ~~$0.8 million related to~~positions at our hotels, which are classified within other hotel expenses on the ~~L'Auberge de Sedona, Orchards Inn Sedona and the Westin Boston Waterfront Hotel and a downward adjustment~~consolidated statement of ~~$0.6 million of estimated termination fees related to the pending termination of the franchise agreement for Sheraton Suites Key West. Three months ended March 31, 2019 consists of $0.3 million of pre-opening costs related to the re-opening of the Hotel Emblem.~~ operations.


~~Item 3.~~	~~Quantitative and Qualitative Disclosures about Market Risk~~


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