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.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

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

Number of registrant’s common shares outstanding as of November ~~1, 2021: 228,354,214~~4, 2022: 228,752,610

This Form 10-Q includes references to certain trademarks or service marks. The AC Hotels by Marriott®, Aloft Hotels®, Courtyard by Marriott®, Fairfield by Marriott®, Marriott® Hotels, Residence Inn by Marriott®, SpringHill Suites by Marriott® and TownePlace Suites by Marriott® trademarks are the property of Marriott International, Inc. or one of its affiliates. The Embassy Suites by Hilton®, Hampton ~~by Hilton®, Hampton Inn by Hilton®, Hampton Inn & Suites~~ by Hilton®, Hilton Garden Inn®, Home2 Suites by Hilton® and Homewood Suites by Hilton® trademarks are the property of Hilton Worldwide Holdings Inc. or one or more of its affiliates. The Hyatt®, Hyatt House® and Hyatt Place® trademarks are the property of Hyatt Hotels Corporation or one or more of its affiliates. For convenience, the applicable trademark or service mark symbol has been omitted but will be deemed to be included wherever the above referenced terms are used.


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
	2021			2020			2021			2020			2022			2021			2022			2021
Revenues:
Room	$	260,415		$	140,116		$	640,062		$	434,923		$	315,940		$	260,415		$	866,286		$	640,062
Food and beverage		6,315			2,235			14,186			14,386			11,870			6,315			32,353			14,186
Other		10,434			6,475			29,033			18,605			13,340			10,434			40,657			29,033
Total revenue		277,164			148,826			683,281			467,914			341,150			277,164			939,296			683,281

Expenses:
Hotel operating expense:
Operating		61,954			33,124			153,290			120,860			81,320			61,954			221,715			153,290
Hotel administrative		23,126			16,625			62,408			54,079			27,516			23,126			78,711			62,408
Sales and marketing		23,015			13,728			58,283			47,517			28,533			23,015			78,494			58,283
Utilities		11,410			9,967			31,322			25,465			13,383			11,410			34,226			31,322
Repair and maintenance		12,600			8,842			34,711			26,983			15,632			12,600			43,468			34,711
Franchise fees		12,274			6,603			30,058			20,516			14,949			12,274			41,015			30,058
Management fees		9,574			4,873			23,031			15,425			11,734			9,574			31,955			23,031
Total hotel operating expense		153,953			93,762			393,103			310,845			193,067			153,953			529,584			393,103
Property taxes, insurance and other		17,927			20,523			54,936			58,820			19,052			17,927			56,510			54,936
General and administrative		13,261			6,726			29,815			22,274			10,271			13,261			30,216			29,815
Loss on impairment of depreciable real estate assets		0			0			10,754			4,382			-			-			-			10,754
Depreciation and amortization		44,217			50,171			139,313			149,590			45,135			44,217			135,781			139,313
Total expense		229,358			171,182			627,921			545,911			267,525			229,358			752,091			627,921

Gain on sale of real estate		44			0			3,664			8,785			1,785			44			1,785			3,664

Operating income (loss)		47,850			(22,356	)		59,024			(69,212	)
Operating income														75,410			47,850			188,990			59,024

Interest and other expense, net		(15,977	)		(18,531	)		(53,108	)		(52,483	)		(14,933	)		(15,977	)		(44,785	)		(53,108	)

Income (loss) before income taxes		31,873			(40,887	)		5,916			(121,695	)
Income before income taxes														60,477			31,873			144,205			5,916

Income tax expense		(114	)		(61	)		(309	)		(265	)		(1,331	)		(114	)		(1,712	)		(309	)

Net income (loss)	$	31,759		$	(40,948	)	$	5,607		$	(121,960	)
Net income													$	59,146		$	31,759		$	142,493		$	5,607

Other comprehensive income (loss):
Other comprehensive income:
Interest rate derivatives		3,426			2,739			18,152			(43,622	)		16,024			3,426			53,862			18,152

Comprehensive income (loss)	$	35,185		$	(38,209	)	$	23,759		$	(165,582	)
Comprehensive income													$	75,170		$	35,185		$	196,355		$	23,759

Basic and diluted net income (loss) per common share	$	0.14		$	(0.18	)	$	0.02		$	(0.55	)
Basic and diluted net income per common share													$	0.26		$	0.14		$	0.62		$	0.02

Weighted average common shares outstanding - basic and diluted		228,436			223,293			225,664			223,620			228,991			228,436			228,992			225,664

Three Months Ended September 30, 2021 and 2020

Three Months Ended September 30, 2022 and 2021															Three Months Ended September 30, 2022 and 2021
	Common Stock					Accumulated Other			Distributions							Common Stock						Accumulated Other			Distributions
	Number of Shares		Amount			Comprehensive Income (Loss)			Greater Than Net Income			Total				Number of Shares			Amount			Comprehensive Income (Loss)			Greater Than Net Income			Total

Balance at June 30, 2022																	228,886		$	4,579,590		$	22,330		$	(1,380,294	)	$	3,221,626
Share based compensation, net																	45			996			-			-			996
Equity issuance costs																	-			(12	)		-			-			(12	)
Common shares repurchased																	(97	)		(1,376	)		-			-			(1,376	)
Interest rate derivatives																	-			-			16,024			-			16,024
Net income																	-			-			-			59,146			59,146
Distributions declared to shareholders ($0.19 per share)																	-			-			-			(43,408	)		(43,408	)
Balance at September 30, 2022																	228,834		$	4,579,198		$	38,354		$	(1,364,556	)	$	3,252,996

Balance at June 30, 2021		228,341	$	4,569,332		$	(28,076	)	$	(1,446,933	)	$	3,094,323				228,341		$	4,569,332		$	(28,076	)	$	(1,446,933	)	$	3,094,323
Share based compensation, net		13		915			-			-			915				13			915			-			-			915
Issuance of common shares, net		-		(30	)		-			-			(30	)			-			(30	)		-			-			(30	)
Interest rate derivatives		-		-			3,426			-			3,426				-			-			3,426			-			3,426
Net income		-		-			-			31,759			31,759				-			-			-			31,759			31,759
Distributions declared to shareholders ($0.01 per share)		-		-			-			(2,279	)		(2,279	)
Distributions declared to shareholders ($0.01 per share)																	-			-			-			(2,279	)		(2,279	)
Balance at September 30, 2021		228,354	$	4,570,217		$	(24,650	)	$	(1,417,453	)	$	3,128,114				228,354		$	4,570,217		$	(24,650	)	$	(1,417,453	)	$	3,128,114

Balance at June 30, 2020		223,224	$	4,488,034		$	(51,059	)	$	(1,324,016	)	$	3,112,959

Nine Months Ended September 30, 2022 and 2021															Nine Months Ended September 30, 2022 and 2021
																Common Stock						Accumulated Other			Distributions
																Number of Shares			Amount			Comprehensive Income (Loss)			Greater Than Net Income			Total

Balance at December 31, 2021																	228,256		$	4,569,352		$	(15,508	)	$	(1,406,523	)	$	3,147,321
Share based compensation, net																	685			11,585			-			-			11,585
Equity issuance costs																	-			(218	)		-			-			(218	)
Common shares repurchased																	(107	)		(1,521	)		-			-			(1,521	)
Interest rate derivatives																	-			-			53,862			-			53,862
Net income																	-			-			-			142,493			142,493
Distributions declared to shareholders ($0.44 per share)																	-			-			-			(100,526	)		(100,526	)
Balance at September 30, 2022																	228,834		$	4,579,198		$	38,354		$	(1,364,556	)	$	3,252,996

Balance at December 31, 2020																	223,212		$	4,488,419		$	(42,802	)	$	(1,416,270	)	$	3,029,347
Share based compensation, net		7		591			-			-			591				465			6,762			-			-			6,762
Issuance of common shares, net		-		(337	)		-			-			(337	)			4,677			75,036			-			-			75,036
Interest rate derivatives		-		-			2,739			-			2,739				-			-			18,152			-			18,152
Net loss		-		-			-			(40,948	)		(40,948	)
Balance at September 30, 2020		223,231	$	4,488,288		$	(48,320	)	$	(1,364,964	)	$	3,075,004
Net income																	-			-			-			5,607			5,607
Distributions declared to shareholders ($0.03 per share)																	-			-			-			(6,790	)		(6,790	)
Balance at September 30, 2021																	228,354		$	4,570,217		$	(24,650	)	$	(1,417,453	)	$	3,128,114


	Nine Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2022			2021
Cash flows from operating activities:
Net income (loss)	$	5,607		$	(121,960	)
Adjustments to reconcile net loss to cash provided by operating activities:
Net income							$	142,493		$	5,607
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		139,313			149,590			135,781			139,313
Loss on impairment of depreciable real estate assets		10,754			4,382			-			10,754
Gain on sale of real estate		(3,664	)		(8,785	)		(1,785	)		(3,664	)
Other non-cash expenses, net		8,208			6,055			6,582			8,208
Changes in operating assets and liabilities:
Increase in due from third party managers, net		(30,383	)		(3,037	)		(25,058	)		(30,383	)
Increase in other assets, net		(755	)		(1,627	)		(4,069	)		(755	)
Increase in accounts payable and other liabilities		17,282			1,581			19,257			17,282
Net cash provided by operating activities		146,362			26,199			273,201			146,362

Cash flows from investing activities:
Acquisition of hotel properties, net		(197,228	)		(88,687	)		-			(197,228	)
Refunds (payments) for potential acquisitions, net		(2,645	)		585
Disbursements for potential acquisitions, net								(1,602	)		(2,645	)
Capital improvements		(9,138	)		(44,383	)		(34,921	)		(9,138	)
Net proceeds from sale of real estate		231,008			44,385			8,293			231,008
Net cash provided by (used in) investing activities		21,997			(88,100	)		(28,230	)		21,997

Cash flows from financing activities:
Net proceeds related to issuance of common shares		75,036			(247	)
Net proceeds (disbursements) related to issuance of common shares								(218	)		75,036
Repurchases of common shares		-			(14,336	)		(1,521	)		-
Repurchases of common shares to satisfy employee withholding requirements		(1,650	)		(1,748	)		(4,415	)		(1,650	)
Distributions paid to common shareholders		(4,510	)		(67,324	)		(86,792	)		(4,510	)
Net proceeds from (payments on) revolving credit facility		(105,800	)		78,800
Net payments on revolving credit facility								(76,000	)		(105,800	)
Proceeds from term loans and senior notes		-			50,000			125,000			-
Proceeds from mortgage debt and other loans		-			81,520
Payments of mortgage debt and other loans		(66,349	)		(41,523	)		(166,243	)		(66,349	)
Payments of finance lease settlement		(24,000	)		-
Principal payments on finance leases								(108	)		(24,000	)
Financing costs		(1,576	)		(2,283	)		(10,229	)		(1,576	)
Net cash provided by (used in) financing activities		(128,849	)		82,859
Net cash used in financing activities								(220,526	)		(128,849	)

Net change in cash, cash equivalents and restricted cash		39,510			20,958			24,445			39,510

Cash, cash equivalents and restricted cash, beginning of period		34,368			34,661			39,949			34,368

Cash, cash equivalents and restricted cash, end of period	$	73,878		$	55,619		$	64,394		$	73,878

Supplemental cash flow information:
Interest paid	$	49,735		$	46,737		$	42,651		$	49,735

Supplemental disclosure of noncash investing and financing activities:
Notes payable originated from acquisitions	$	56,000		$	20,551		$	-		$	56,000
Accrued distribution to common shareholders	$	2,279		$	-		$	15,981		$	2,279

Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents, beginning of period	$	5,556		$	-		$	3,282		$	5,556
Restricted cash-furniture, fixtures and other escrows, beginning of period		28,812			34,661			36,667			28,812
Cash, cash equivalents and restricted cash, beginning of period	$	34,368		$	34,661		$	39,949		$	34,368

Cash and cash equivalents, end of period	$	39,432		$	27,435		$	25,573		$	39,432
Restricted cash-furniture, fixtures and other escrows, end of period		34,446			28,184			38,821			34,446
Cash, cash equivalents and restricted cash, end of period	$	73,878		$	55,619		$	64,394		$	73,878

~~During~~In 2021, the year ended December 31, 2020, the Company acquired 4 hotels, including 4 hotels during the nine months ended September 30, 2020. The following table sets forth the location, brand, manager, date acquired, number of rooms and gross purchase price, excluding transaction costs, for each hotel. All dollar amounts are in thousands.

~~The Company utilized $25.0 million of its available cash and entered into a~~ ~~one-year~~ note payable with the developer secured by the hotels for $21.7 million to fund the purchase price of the Cape Canaveral, Florida hotels. The note payable bore interest, which was payable monthly, at a floating annual rate equal to the London Inter-Bank Offered Rate for a one-month term (“one-month LIBOR”) plus a margin of 2.0% for the first six months of the loan term and 3.0% for the second six months of the loan term. In July 2020, the principal amount of the note was reduced by approximately $1.1 million representing a credit from the developer for shared construction savings, and the note was repaid in full on April 12, 2021. The Company used borrowings under its $425 million revolving credit facility (as defined below) to purchase the ~~Tempe, Arizona and~~ Madison, Wisconsin and Memphis, Tennessee hotels, ~~and~~ used available cash to purchase the Portland, Maine and Greenville, South Carolina hotels and used a mix of available cash and borrowings under its $425 million revolving credit facility to purchase the Fort Worth, Texas and Portland, Oregon hotels. The acquisitions of these hotel properties were accounted for as acquisitions of asset groups, whereby costs incurred to effect the acquisitions (which were not significant) were capitalized as part of the cost of the assets acquired. For the 4four hotels acquired during the nine months ended September 30, 2021, the amount of revenue and operating income included in the Company’s consolidated statement of operations from the date of acquisition through September 30, 2021 was approximately ~~$5.8~~$5.8 million and ~~$0.7~~$0.7 million, respectively. For the 4 hotels acquired during the nine months ended September 30, 2020, the amount of revenue and operating loss included in the Company’s consolidated statement of operations from the date of acquisition through September 30, 2020 was approximately $1.5 million and $(0.9) million, respectively.

On August 16, 2021, the Company purchased the fee interest in the land at the Seattle, Washington Residence Inn, previously held under a finance ground lease. The Company utilized ~~$24.0~~$24.0 million of its available cash and entered into a one-year note payable to the seller for ~~$56.0~~$56.0 million to fund the purchase price of ~~$80.0~~$80.0 million. The note payable ~~bears~~bore interest, which iswas payable monthly, at a fixed annual rate of ~~4.0%~~4.0%. On June 16, 2022, the note was repaid in full. The land purchase was accounted for as a retirement of the finance lease, with the difference of ~~$16.6~~$16.6 million between the carrying amount of the net right-of-use asset of ~~$94.5~~$94.5 million and the finance lease liability of ~~$111.1~~$111.1 million applied as an adjustment to the carrying amount of the acquired land.

As of September 30, ~~2021,~~2022, the Company had outstanding contracts for the potential purchase of 5three hotels for a total expected purchase price of approximately ~~$242.6~~$163.6 million. Of these ~~five~~three hotels, 4two are existing, and the Company ~~expects to complete~~completed the purchase of the two existing hotels on October 25, 2022. See Note 9 for additional information concerning these ~~hotels in the fourth quarter~~two acquisitions. The remaining hotel purchase contract as of ~~2021; and 1~~September 30, 2022 is for a hotel is under development ~~and~~that is currently planned to be completed and opened for business in ~~2023,~~early 2024, at which time the Company expects to complete the purchase of this hotel. Although the Company is working towards acquiring ~~these hotels, in each case~~this hotel, there are a number of conditions to closing that have not yet been satisfied and there can be no assurance that ~~closings~~closing on ~~these hotels~~this hotel will occur under the outstanding purchase ~~contracts.~~contract. If the ~~sellers meet~~seller meets all of the conditions to closing, the Company is obligated to specifically perform under ~~these contracts.~~ this contract and acquire the hotel. The following table summarizes the location, brand, date of purchase contract, expected number of rooms, refundable (if the seller does not meet its obligations under the contract) deposits paid, and gross purchase price for each of the contracts outstanding at September 30, ~~2021.~~2022. All dollar amounts are in thousands.

4. Debt

~~In June 2020, the Company entered into~~ a purchase contract with an unrelated party for the sale of its 140-room Memphis, Tennessee Homewood Suites for a gross sales price of approximately $9.0 million. As a result, the Company recognized an impairment loss of approximately $4.4 million in the second quarter of 2020, representing the difference between the carrying value of the hotel and the contracted sales price, net of estimated selling costs, which is a Level 1 input under the fair value hierarchy. The Company completed the sale of the hotel in March 2021 and used the net proceeds from the sale to pay down borrowings on the Company’s revolving credit facility.Summary

~~4. Debt~~

~~Summary~~

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company’s debt consisted of the following (in thousands):


	September 30, 2022		December 31, 2021
Revolving credit facility (1)	$	-	$	76,000
Term loans and senior notes, net (1)		986,904		865,189
Mortgage debt, net		331,415		497,569
Debt, net	$	1,318,319	$	1,438,758

September 30,
2021

December 31,
2020

Revolving credit facility

$
-

$
105,800

Term loans and senior notes, net

864,705

864,225

Mortgage debt, net

501,916

512,546

Debt, net

$
1,366,621

$
1,482,571

(1)

On July 25, 2022, the Company entered into an amendment and restatement of its $850 million credit facility (defined below), which among other things increased the borrowing capacity to $1.2 billion and extended the maturity dates. See the $1.2 Billion Credit Facility section below for details.

The aggregate amounts of principal payable under the Company’s total debt obligations as of September 30, ~~2021~~2022 (including the ~~revolving credit facility,~~Revolving Credit Facility (if any) (as defined below), term loans, senior notes and mortgage debt), for the remainder of this fiscal year, each of the next ~~five~~four fiscal years and thereafter are as follows (in thousands):

2021 (October - December)	$	4,375
2022		165,831

2022 (October - December)				$	2,587
2023		296,213			96,214
2024		338,597			113,597
2025		245,140			245,140
2026					74,649
Thereafter		322,265			794,616
		1,372,421			1,326,803
Unamortized fair value adjustment of assumed debt		1,070			843
Unamortized debt issuance costs		(6,870	)		(9,327	)
Total	$	1,366,621		$	1,318,319

The Company uses interest rate swaps to manage its interest rate risk on a portion of its variable-rate debt. Throughout the terms of these interest rate swaps, the Company pays a fixed rate of interest and receives a floating rate of interest equal to the ~~London Inter-Bank Offered Rate~~ annual SOFR

Index

for a one-month term (“one-month ~~LIBOR”~~SOFR”)plus a 0.10% SOFR spread adjustment. The swaps are designed to effectively fix the interest payments on variable-rate debt instruments. See Note 5 for more information on the interest rate swap agreements. The Company’s total fixed-rate

~~Index~~

and variable-rate debt, after giving effect to its interest rate swaps in effect at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, is set forth below. All dollar amounts are in thousands.


	September 30, 2022			Percentage			December 31, 2021			Percentage
Fixed-rate debt (1)	$	1,151,803			87	%	$	1,318,046			91	%
Variable-rate debt		175,000			13	%		126,000			9	%
Total	$	1,326,803					$	1,444,046
Weighted-average interest rate of debt		3.72	%					3.38	%

September 30,
2021

Percentage

December 31,
2020

Percentage

Fixed-rate debt (1)

$
1,322,421

96
%

$
1,287,219

86
%
Variable-rate debt

50,000

4
%

201,351

14
%
Total

$
1,372,421

$
1,488,570

Weighted-average interest rate of debt

3.47
%

3.86
%

(1)

Fixed-rate debt includes the portion of variable-rate debt where the interest payments have been effectively fixed by interest rate swaps as of the respective balance sheet date. See Note 5 for more information on the interest rate swap agreements.

~~(1)~~

~~Fixed-rate debt includes the portion of variable-rate debt where the interest payments have been effectively fixed by interest rate swaps as of the respective balance sheet date. See Note~~ 5 ~~for more information on the interest rate swap agreements.~~

Credit Facilities

$1.2 Billion Credit Facility

Prior to July 2022, the Company utilized an unsecured credit facility comprised of (i) a $425 million revolving credit facility with an initial maturity date of July 27, 2022 (the "$425 million revolving credit facility") and (ii) a $425 million term loan facility consisting of two term loans: a $200 million term loan with a maturity date of July 27, 2023, and a $225 million term loan with a maturity date of January 31, 2024, both funded in July 2018 (collectively, the “$850 million credit facility”).On July 25, 2022, the Company entered into an amendment and restatement of its $850 million credit facility, which among other things, increased the borrowing capacity to $1.2 billion, extended the maturity dates, transitioned the reference rate from LIBOR to SOFR, reduced the margin rate for calculating interest rates and modified certain of the financial maintenance covenants (the “$1.2 billion credit facility”). The $1.2 billion credit facility is comprised of (i) a $650 million revolving credit facility with an initial maturity date of July 25, 2026 (the "Revolving Credit Facility"), (ii) a $275 million term loan with a maturity date of July 25, 2027, funded at closing, and (iii) a $300 million term loan with a maturity date of January 31, 2028 (including a $150 million delayed draw option until 180 days from closing), of which $200 million was funded at closing (the "$575 million term loan facility"). At closing, the Company repaid the outstanding $425 million term loans and $50 million outstanding under the $425 million revolving credit facility under the $850 million credit facility with proceeds from the $1.2 billion credit facility.

Subject to certain conditions, including covenant compliance and additional fees, the Revolving Credit Facility maturity date may be extended up to one year. The credit agreement for the $1.2 billion credit facility contains mandatory prepayment requirements, customary affirmative and negative covenants (as described below), restrictions on certain investments and events of default, which are similar to the terms of the previous credit agreement for the $850 million credit facility. The Company may make voluntary prepayments, in whole or in part, at any time. Interest payments on the $1.2 billion credit facility are due monthly, and the interest rate, subject to certain exceptions, is equal to the one-month SOFR plus a 0.10% SOFR spread adjustment plus a margin ranging from 1.35% to 2.25%, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement. The Company is also required to pay quarterly an unused facility fee at an annual rate of 0.20% or 0.25% on the unused portion of the Revolving Credit Facility, based on the amount of borrowings outstanding during the quarter.

A summary of the 2022 debt refinancing is set forth below. All dollar amounts are in thousands.

2022 Refinancing

Prior to Refinancing

Capacity

Maturity Date

Interest Rate

Capacity

Maturity Date

Interest Rate (1)

Revolving credit facility

650,000

7/25/2026

SOFR + 0.10% + 1.40% - 2.25%

425,000

7/27/2022

LIBOR + 1.40% - 2.25%

Term loan

275,000

7/25/2027

SOFR + 0.10% + 1.35% - 2.20%

200,000

7/27/2023

LIBOR + 1.35% - 2.20%

Term loan

300,000

1/31/2028

SOFR + 0.10% + 1.35% - 2.20%

225,000

1/31/2024

LIBOR + 1.35% - 2.20%

Total

1,225,000

850,000

(1)

Interest rates on all of the unsecured credit facilities increased to 0.15% above the highest rate shown for each loan during the Extended Covenant Waiver Period (as defined below) from March 1, 2021 through July 28, 2021.

Index

$225 Million Term Loan Facility

The Company also has an unsecured term loan facility that is comprised of (i) a $50 million term loan with a maturity date of August 2, 2023, which was funded on August 2, 2018, and (ii) a $175 million term loan with a maturity date of August 2, 2025, of which $100 million was funded on August 2, 2018, and the remaining $75 million was funded on January 29, 2019 (the “$225 million term loan facility”). The Company may make voluntary prepayments, in whole or in part, at any time, subject to certain conditions. Interest payments on the $225 million term loan facility are due monthly and the interest rate, subject to certain exceptions, is equal to an annual rate of the one-month SOFR plus a 0.10% SOFR spread adjustment plus a margin ranging from 1.35% to 2.50%, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement. In July 2022, this term loan was amended to align the financial covenants with the $1.2 billion credit facility and to replace the reference rate with SOFR.

2017 $85 Million Term Loan Facility

On July 25, 2017, the Company entered into an unsecured term loan facility with a maturity date of July 25, 2024, consisting of one term loan (the “2017 $85 million term loan facility”), that was funded at closing. The Company may make voluntary prepayments, in whole or in part, at any time, subject to certain conditions. Interest payments on the 2017 $85 million term loan facility are due monthly, and the interest rate, subject to certain exceptions, is equal to an annual rate of the one-month SOFR plus a 0.10% SOFR spread adjustment plus a margin ranging from 1.30% to 2.10%, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement. In July 2022, this term loan was amended to align the financial covenants with the $1.2 billion credit facility and to replace the reference rate with SOFR.

2019 $85 Million Term Loan Facility

On December 31, 2019, the Company entered into an unsecured term loan facility with a maturity date of December 31, 2029, consisting of one term loan funded at closing (the “2019 $85 million term loan facility”). Net proceeds from the 2019 $85 million term loan facility were used to pay down borrowings under the Company’s $425 million revolving credit facility. The Company may make voluntary prepayments, in whole or in part, subject to certain conditions. Interest payments on the 2019 $85 million term loan facility are due monthly, and the interest rate, subject to certain exceptions, is equal to an annual rate of the one-month SOFR plus a 0.10% SOFR spread adjustment plus a margin ranging from 1.70% to 2.55%, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement. In July 2022, this term loan was amended to align the financial covenants with the $1.2 billion credit facility and to replace the reference rate with SOFR.

$50 Million Senior Notes Facility

On March 16, 2020, the Company entered into an unsecured senior notes facility with a maturity date of March 31, 2030, consisting of senior notes totaling $50 million funded at closing (the “$50 million senior notes facility”). Net proceeds from the $50 million senior notes facility were available to provide funding for general corporate purposes. The Company may make voluntary prepayments, in whole or in part, at any time, subject to certain conditions, including make-whole provisions. Interest payments on the $50 million senior notes facility are due quarterly, and the interest rate, subject to certain exceptions, ranges from an annual rate of 3.60% to 4.35% depending on the Company’s leverage ratio, as calculated under the terms of the note agreement. In July 2022, this notes facility was amended to align the financial covenants with the $1.2 billion credit facility.

$75 Million Senior Notes Facility

On June 2, 2022, the Company entered into an unsecured senior notes facility with a maturity date of June 2, 2029, consisting of senior notes totaling $75 million funded at closing (the “$75 million senior notes facility”, and collectively with the $850 million credit facility and, after the amendments in July 2022, the $1.2 billion credit facility, the $225 million term loan facility, the 2017 $85 million term loan facility, the 2019 $85 million term loan facility and the $50 million senior notes facility, the “unsecured credit facilities”). Net proceeds from the $75 million senior notes facility were available to provide funding for general corporate purposes, including the repayment of borrowings under the Company’s $425 million revolving credit facility and repayment of mortgage debt. The Company may make voluntary prepayments, in whole or in part, at any time, subject to certain conditions, including make-whole provisions. Interest payments on the $75 million senior notes facility are due quarterly, and the interest rate, subject to certain exceptions, ranges from an annual rate of 4.88% to 5.63% depending on the Company’s leverage ratio, as calculated under the terms of the note agreement. In July 2022, this notes facility was amended to align the financial covenants with the $1.2 billion credit facility.

Index

As of September 30, 2022 and December 31, 2021, the details of the Company’s unsecured credit facilities were as set forth in the table below. All dollar amounts are in thousands.

September 30, 2022

December 31, 2021

Origination
Date

Maturity
Date

Outstanding Balance

Interest Rate (1)

Outstanding Balance

Interest Rate (2)

Revolving credit facility (3) (4)

7/25/2022

7/25/2026

SOFR + 0.10% + 1.40% - 2.25%

76,000

LIBOR + 1.40% - 2.25%

Term loans and senior notes

$275 million term loan (4)

7/25/2022

7/25/2027

275,000

SOFR + 0.10% + 1.35% - 2.20%

n/a

$200 million term loan (4)

7/27/2018

repaid 7/25/22

n/a

200,000

LIBOR + 1.35% - 2.20%

$300 million term loan (4)

7/25/2022

1/31/2028

200,000

SOFR + 0.10% + 1.35% - 2.20%

n/a

$225 million term loan (4)

7/27/2018

repaid 7/25/22

n/a

225,000

LIBOR + 1.35% - 2.20%

$50 million term loan

8/2/2018

8/2/2023

50,000

SOFR + 0.10% + 1.35% - 2.20%

50,000

LIBOR + 1.35% - 2.20%

$175 million term loan

8/2/2018

8/2/2025

175,000

SOFR + 0.10% + 1.65% - 2.50%

175,000

LIBOR + 1.65% - 2.50%

2017 $85 million term loan

7/25/2017

7/25/2024

85,000

SOFR + 0.10% + 1.30% - 2.10%

85,000

LIBOR + 1.30% - 2.10%

2019 $85 million term loan

12/31/2019

12/31/2029

85,000

SOFR + 0.10% + 1.70% - 2.55%

85,000

LIBOR + 1.70% - 2.55%

$50 million senior notes

3/16/2020

3/31/2030

50,000

3.60% - 4.35%

50,000

3.60% - 4.35%

$75 million senior notes

6/2/2022

6/2/2029

75,000

4.88% - 5.63%

n/a

Term loans and senior notes at stated
value

995,000

870,000

Unamortized debt issuance costs

(8,096

)

(4,811

)

Term loans and senior notes, net

986,904

865,189

Credit facilities, net (3)

986,904

941,189

Weighted-average interest rate (5)

3.64

2.97

(1)

In July 2022, the Company amended each of its unsecured credit facilities to replace LIBOR with SOFR as the reference rate plus a 0.10% SOFR spread adjustment.

(2)

(3)

Excludes unamortized debt issuance costs related to the Revolving Credit Facility totaling approximately $5.1 million as of September 30, 2022 and related to the $425 million revolving credit facility totaling approximately $1.0 million as of December 31, 2021, which are included in other assets, net in the Company’s consolidated balance sheets.

(4)

On July 25, 2022, the Company entered into an amendment and restatement of its $850 million credit facility, which among other things increased the borrowing capacity to $1.2 billion and extended the maturity dates. See the $1.2 Billion Credit Facility section above for details.

(5)

Interest rate represents the weighted-average effective annual interest rate at the balance sheet date which includes the effect of interest rate swaps in effect on $695.0 million and $770.0 million of the outstanding variable-rate debt as of September 30, 2022 and December 31, 2021, respectively. See Note 5 for more information on the interest rate swap agreements. The one-month SOFR at September 30, 2022 was 3.04%. As of December 31, 2021, the Company's interest rate swap agreements were based on the one-month LIBOR of 0.10%.

Index

Credit Facilities ~~Amendments~~Covenants

The credit agreements governing the unsecured credit facilities (collectively, the “credit agreements”) contain mandatory prepayment requirements, customary affirmative and negative covenants, restrictions on certain investments and events of default. After giving effect to the July 2022 amendments, the credit agreements contain the following financial and restrictive covenants (capitalized terms not defined below are defined in the credit agreements):

•

A ratio of Consolidated Total Indebtedness to Consolidated EBITDA (“Maximum Consolidated Leverage Ratio”) of not more than 7.25 to 1.00;

•

A ratio of Consolidated Secured Indebtedness to Consolidated Total Assets (“Maximum Secured Leverage Ratio”) of not more than 45%;

•

A minimum Consolidated Tangible Net Worth of approximately $3.4 billion plus an amount equal to 75% of the Net Cash Proceeds from issuances and sales of Equity Interests occurring after the Closing Date, July 25, 2022, subject to adjustment;

•

A ratio of Adjusted Consolidated EBITDA to Consolidated Fixed Charges ("Minimum Fixed Charge Coverage Ratio") of not less than 1.50 to 1.00 for the trailing four full quarters;

•

A ratio of Unencumbered Adjusted NOI to Consolidated Implied Interest Expense for Consolidated Unsecured Indebtedness ("Minimum Unsecured Interest Coverage Ratio") of not less than 2.00 to 1.00 for the trailing four full quarters;

•

A ratio of Consolidated Unsecured Indebtedness to Unencumbered Asset Value (“Maximum Unsecured Leverage Ratio”) of not more than 60% (subject to a higher level in certain circumstances); and

•

A ratio of Consolidated Secured Recourse Indebtedness to Consolidated Total Assets (“Maximum Secured Recourse Indebtedness”) of not more than 10%.

The Company was in compliance with the applicable covenants at September 30, 2022.

Prior Amendments to Credit Agreements

As a result of COVID-19 and the associated disruption to the Company’s operating results, the Company first entered into amendments in June 2020 that suspended the testing of the Company’s ~~existing~~ financial maintenance covenants under the unsecured credit ~~facilities. These amendments~~facilities and imposed certain restrictions regarding the ~~Company’s~~Company's investing and financing ~~activities that~~activities. Further amendments were applicable during a specified waiver period, including, but not limited to, limitations on the acquisition of property, payment of distributions to shareholders, capital expenditures and use of proceeds from the sale of property or common shares of the Company, that applied during such testing suspension period. On March 1, 2021, as a result of the continued disruption from COVID-19 and the related uncertainty with respect to the Company’s future operating results, the Company entered into ~~further amendments to each of the unsecured credit facilities~~in March 2021 (the “March 2021 amendments”) ~~to extend~~, extending the majority of the covenant ~~waiver period for all but two of the Company’s existing financial maintenance covenants~~waivers until the date that the compliance certificate was required to be delivered for the fiscal quarter ~~ending~~ended June 30, 2022 (unless the Company elected an earlier date) (the “Extended Covenant Waiver Period”). The testing for the Minimum Fixed Charge Coverage Ratio and the Minimum Unsecured Interest Coverage Ratio was suspended until the compliance certificate was required to be delivered for the fiscal quarter ending March ~~31, 2022 (unless the Company elected an earlier date).~~

~~In addition to the~~2021 amendments imposed several modifications and restrictions ~~imposed~~ during the Extended Covenant Waiver Period, including continued cash distribution restrictions, except for the ~~amendments modified~~payment of cash dividends of $0.01 per common share per quarter or to the extent required to maintain REIT status, modification of the previous operating restrictions to less restrictive levels, changes to the calculation of the ~~existing~~ financial maintenance covenants ~~for the first three quarterly calculations subsequent to the end of the Extended Covenant Waiver Period to annualize calculated amounts based on the period beginning with the first fiscal quarter~~ upon exiting the Extended Covenant Waiver Period, ~~through~~and an increase in the ~~most recently ended fiscal quarter. The March 2021 amendments also modified certain~~LIBOR floor and establishment of ~~the existing financial maintenance covenants to less restrictive levels upon exiting the Extended Covenant Waiver Period as follows (capitalized terms are~~a Base Rate (as defined in the credit agreements): floor under the $425 million revolving credit facility.

●

Maximum Consolidated Leverage Ratio of 8.50 to 1.00 for the first two fiscal quarters, 8.00 to 1.00 for two fiscal quarters, 7.50 to 1.00 for one fiscal quarter and then a ratio of 6.50 to 1.00 thereafter;

●

~~Minimum Fixed Charge Coverage Ratio of 1.05 to 1.00 for the first fiscal quarter, 1.25 to 1.00 for one fiscal quarter and then a ratio of 1.50 to 1.00 thereafter~~;

●

Minimum Unsecured Interest Coverage Ratio of no less than 1.25 to 1.00 for one fiscal quarter, 1.50 to 1.00 for one fiscal quarter, 1.75 to 1.00 for one fiscal quarter and a ratio of 2.00 to 1.00 thereafter~~; and~~

●

~~Maximum Unsecured Leverage Ratio of 65% for two fiscal quarters and 60% thereafter.~~

~~Except as otherwise set forth in the amendments, the terms of the credit agreements remain in effect.~~

In July 2021, the Company notified its lenders under its unsecured credit facilities that it had elected to exit the Extended Covenant Waiver Period early, effective on July 29, 2021 pursuant to the terms of each of its unsecured credit facilities. The unsecured credit facilities do not provide the Company the ability to re-enter the Extended Covenant Waiver Period once it has elected to exit. Upon exiting the Extended Covenant Waiver Period, the Company iswas no longer subject to the restrictions ~~described above~~ regarding its investing and financing activities that were applicable during the Extended Covenant Waiver Period, including, but not limited to, limitations on the acquisition of property, payment of distributions to shareholders (except for the payment of cash dividends of $0.01 per common share per quarter or to the extent required to maintain REIT status), capital expenditures and use of proceeds from the sale of property or common shares of the Company. Those restrictions, including the restriction on payment of distributions to shareholders, were still in place throughout the second quarter of 2021.

As of September 30, 2021, the Company met the applicable financial maintenance covenants based on the annualized results of the six months ended September 30, 2021 at the levels required for the second fiscal quarter tested upon exiting the Extended Covenant Waiver Period. The unsecured credit facilities do not provide the Company the ability to re-enter the Extended Covenant Waiver Period once it has elected to exit.

1215

Index

~~$850 Million Credit Facility~~Mortgage Debt

The Company utilizes an unsecured “$850 million credit facility” comprised of (i) a $425 million revolving credit facility with an initial maturity date of July 27, 2022 (the “Revolving Credit Facility”) and (ii) a $425 million term loan facility consisting of 2 term loans: a $200 million term loan with a maturity date of July 27, 2023, and a $225 million term loan with a maturity date of January 31, 2024 (the “$425 million term loan facility”). Subject to certain conditions including covenant compliance and additional fees, the $425 million revolving credit facility maturity date may be extended up to one year if certain criteria are met at the time of extension. The Company may make voluntary prepayments in whole or in part, at any time. Interest payments on the $850 million credit facility are due monthly and the interest rate, subject to certain exceptions, is equal to an annual rate of the one-month LIBOR plus a margin ranging from 1.35% to 2.25%, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement. As of September 30, 2021, the Company had availability of $425 million under the revolving credit facility. The Company is also required to pay quarterly an unused facility fee at an annual rate of 0.20% or 0.25% on the unused portion of the $425 million revolving credit facility, based on the amount of borrowings outstanding during the quarter.

~~$225 Million Term Loan Facility~~

The Company has an unsecured $225 million term loan facility that is comprised of (i) a $50 million term loan with a maturity date of August 2, 2023, and (ii) a $175 million term loan with a maturity date of August 2, 2025. The credit agreement contains requirements and covenants similar to the Company’s $850 million credit facility. The Company may make voluntary prepayments in whole or in part, at any time, subject to certain conditions. Interest payments on the $225 million term loan facility are due monthly and the interest rate, subject to certain exceptions, is equal to an annual rate of the one-month LIBOR plus a margin ranging from 1.35% to 2.50%, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement.

~~2017 $85 Million Term Loan Facility~~

On July 25, 2017, the Company entered into an unsecured $85 million term loan facility with a maturity date of July 25, 2024, consisting of 1 term loan that was funded at closing (the “2017 $85 million term loan facility”). The credit agreement, as amended and restated in August 2018, contains requirements and covenants similar to the Company’s $850 million credit facility. The Company may make voluntary prepayments in whole or in part, at any time, subject to certain conditions. Interest payments on the 2017 $85 million term loan facility are due monthly, and the interest rate, subject to certain exceptions, is equal to an annual rate of the one-month LIBOR plus a margin ranging from 1.30% to 2.10%, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement, for the remainder of the term.

~~2019 $85 Million Term Loan Facility~~

On December 31, 2019, the Company entered into an unsecured $85 million term loan facility with a maturity date of December 31, 2029, consisting of 1 term loan funded at closing (the “2019 $85 million term loan facility”). Net proceeds from the 2019 $85 million term loan facility were used to pay down borrowings on the Company’s revolving credit facility. The credit agreement contains requirements and covenants similar to the Company’s $850 million credit facility. The Company may make voluntary prepayments in whole or in part, subject to certain conditions. Interest payments on the 2019 $85 million term loan facility are due monthly and the interest rate, subject to certain exceptions, is equal to an annual rate of the one-month LIBOR plus a margin ranging from 1.70% to 2.55%, depending upon the Company’s leverage ratio, as calculated under the terms of the credit agreement.

~~$50 Million Senior Notes Facility~~

On March 16, 2020, the Company entered into an unsecured $50 million senior notes facility with a maturity date of March 31, 2030, consisting of senior notes totaling $50 million funded at closing (the “$50 million senior notes facility” and, collectively with the $850 million credit facility, the $225 million term loan facility, the 2017 $85 million term loan facility and the 2019 $85 million term loan facility, each as amended, the “unsecured credit facilities”). Net proceeds from the $50 million senior notes facility were available to provide funding for general corporate purposes. The note agreement contains requirements and covenants similar to the Company’s $850 million credit facility. The Company may make voluntary prepayments in whole or in part, at any time, subject to certain conditions, including make-whole provisions. Interest payments on the $50 million senior notes facility are due quarterly and the interest rate, subject to certain exceptions, ranges from an annual rate of 3.60% to 4.35% depending on the Company’s leverage ratio, as calculated under the terms of the facility.

~~Index~~

~~As of September 30, 2021 and December 31, 2020, the details of the Company’s unsecured credit facilities were as set forth below. All dollar amounts are in thousands.~~

Outstanding Balance

Interest Rate (1)

Maturity
Date

September 30,
2021

December 31,
2020

Revolving credit facility (2)

LIBOR + 1.40% - 2.25%

7/27/2022 (4)

$
-

$
105,800

Term loans and senior notes

$200 million term loan

LIBOR + 1.35% - 2.20%

7/27/2023

200,000

200,000

$225 million term loan

LIBOR + 1.35% - 2.20%

1/31/2024

225,000

225,000

$50 million term loan

LIBOR + 1.35% - 2.20%

8/2/2023

50,000

50,000

$175 million term loan

LIBOR + 1.65% - 2.50%

8/2/2025

175,000

175,000

2017 $85 million term loan

LIBOR + 1.30% - 2.10%

7/25/2024

85,000

85,000

2019 $85 million term loan

LIBOR + 1.70% - 2.55%

12/31/2029

85,000

85,000

$50 million senior notes

3.60% - 4.35%

3/31/2030

50,000

50,000

Term loans and senior notes at stated
value

870,000

870,000

Unamortized debt issuance costs

(5,295
)

(5,775
)
Term loans and senior notes, net

864,705

864,225

Credit facilities, net (2)

$
864,705

$
970,025

Weighted-average interest rate (3)

3.07
%

3.64
%

~~(1)~~

Interest rates on all of the unsecured credit facilities increased to 0.15% above the highest rate shown for each loan during the Extended Covenant Waiver Period from March 1, 2021 through July 28, 2021.

~~(2)~~

~~Excludes unamortized debt issuance costs related to the revolving credit facility totaling approximately $1.4 million and $2.1 million as of~~ ~~September 30, 2021~~ ~~and~~ ~~December 31, 2020, respectively, which are included in other assets, net in the Company's consolidated balance sheets.~~

~~(3)~~

Interest rate represents the weighted-average effective annual interest rate at the balance sheet date which includes the effect of interest rate swaps in effect on $770.0 million and $745.0 million of the outstanding variable-rate debt as of ~~September 30, 2021~~ ~~and~~ ~~December 31, 2020, respectively. See Note 5 for more information on the interest rate swap agreements. The one-month LIBOR at~~ ~~September 30, 2021~~ ~~and~~ ~~December 31, 2020~~ ~~was 0.08% and 0.14%, respectively.~~

~~(4) Subject~~ to certain conditions including covenant compliance and additional fees, the $425 million revolving credit facility maturity date may be extended up to one year, to July 27, 2023, if certain criteria are met at the time of extension.

~~Mortgage Debt~~

~~As of September 30, 2021,~~2022, the Company had approximately ~~$502.4~~$331.8 million in outstanding mortgage debt secured by 2819 properties with maturity dates ranging from ~~August 2022~~February 2023 to May 2038, stated interest rates ranging from ~~3.40%~~3.40% to ~~5.00%~~4.46% and effective interest rates ranging from ~~3.40%~~3.40% to ~~4.97%~~4.68%. The loans generally provide for monthly payments of principal and interest on an amortized basis and defeasance or prepayment penalties if prepaid. As a result of the effects of the COVID-19 pandemic on certain hotels, the associated lenders granted temporary deferrals of principal and interest payments during 2020, however all payments resumed as of December 31, 2020. The following table sets forth the hotel properties securing each loan, the interest rate, loan assumption or origination date, maturity date, the principal amount assumed or originated, and the outstanding balance prior to any fair value adjustments or debt issuance costs as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 for each of the Company’s mortgage debt obligations. All dollar amounts are in thousands.


Location	Brand	Interest Rate (1)			Loan Assumption or Origination Date	Maturity Date	Principal Assumed or Originated		Outstanding balance as of September 30, 2022			Outstanding balance as of December 31, 2021
Seattle, WA	(2)		4.00	%	8/16/2021	(4)	$	56,000	$	-		$	56,000
Grapevine, TX	Hilton Garden Inn		4.89	%	8/29/2012	(5)		11,810		-			9,075
Collegeville/Philadelphia, PA	Courtyard		4.89	%	8/30/2012	(5)		12,650		-			9,720
Hattiesburg, MS	Courtyard		5.00	%	3/1/2014	(5)		5,732		-			4,550
Kirkland, WA	Courtyard		5.00	%	3/1/2014	(5)		12,145		-			9,640
Rancho Bernardo/San Diego, CA	Courtyard		5.00	%	3/1/2014	(5)		15,060		-			11,954
Seattle, WA	Residence Inn		4.96	%	3/1/2014	(5)		28,269		-			22,412
Anchorage, AK	Embassy Suites		4.97	%	9/13/2012	(6)		23,230		-			17,959
Somerset, NJ	Courtyard		4.73	%	3/1/2014	(6)		8,750		-			6,903
Tukwila, WA	Homewood Suites		4.73	%	3/1/2014	(6)		9,431		-			7,440
Huntsville, AL	Homewood Suites		4.12	%	3/1/2014	2/6/2023		8,306		6,264			6,473
Prattville, AL	Courtyard		4.12	%	3/1/2014	2/6/2023		6,596		4,975			5,141
San Diego, CA	Residence Inn		3.97	%	3/1/2014	3/6/2023		18,600		13,987			14,456
Miami, FL	Homewood Suites		4.02	%	3/1/2014	4/1/2023		16,677		12,582			13,000
New Orleans, LA	Homewood Suites		4.36	%	7/17/2014	8/11/2024		27,000		21,370			21,981
Westford, MA	Residence Inn		4.28	%	3/18/2015	4/11/2025		10,000		8,099			8,320
Denver, CO	Hilton Garden Inn		4.46	%	9/1/2016	6/11/2025		34,118		28,659			29,415
Oceanside, CA	Courtyard		4.28	%	9/1/2016	10/1/2025		13,655		12,095			12,318
Omaha, NE	Hilton Garden Inn		4.28	%	9/1/2016	10/1/2025		22,681		20,090			20,460
Boise, ID	Hampton		4.37	%	5/26/2016	6/11/2026		24,000		21,318			21,680
Burbank, CA	Courtyard		3.55	%	11/3/2016	12/1/2026		25,564		21,522			22,098
San Diego, CA	Courtyard		3.55	%	11/3/2016	12/1/2026		25,473		21,445			22,019
San Diego, CA	Hampton		3.55	%	11/3/2016	12/1/2026		18,963		15,964			16,392
Burbank, CA	SpringHill Suites		3.94	%	3/9/2018	4/1/2028		28,470		25,256			25,845
Santa Ana, CA	Courtyard		3.94	%	3/9/2018	4/1/2028		15,530		13,777			14,098
Richmond, VA	Courtyard		3.40	%	2/12/2020	3/11/2030		14,950		14,222			14,447
Richmond, VA	Residence Inn		3.40	%	2/12/2020	3/11/2030		14,950		14,222			14,447
Portland, ME (3)	Residence Inn		3.43	%	3/2/2020	3/1/2032		33,500		30,500			33,500
San Jose, CA	Homewood Suites		4.22	%	12/22/2017	5/1/2038		30,000		25,456			26,303
							$	572,110		331,803			498,046
Unamortized fair value adjustment of assumed debt										843			1,010
Unamortized debt issuance costs										(1,231	)		(1,487	)
Total									$	331,415		$	497,569

~~Index~~

Location

Brand

Interest
Rate (1)

Loan
Assumption
or
Origination
Date

Maturity
Date

Principal
Assumed
or
Originated

Outstanding
balance
as of
September 30,
2021

Outstanding
balance
as of
December 31,
2020

Cape Canaveral, FL

Hampton

(2
)

4/30/2020

(3)

$
10,852

$
-

$
10,275

Cape Canaveral, FL

Home2 Suites

(2
)

4/30/2020

(3)

10,852

-

10,275

Colorado Springs, CO

Hampton

6.25
%

9/1/2016

(4)

7,923

-

7,317

Franklin, TN

Courtyard

6.25
%

9/1/2016

(4)

14,679

-

13,563

Franklin, TN

Residence Inn

6.25
%

9/1/2016

(4)

14,679

-

13,563

Seattle, WA

(5)

4.00
%

8/16/2021

8/16/2022

56,000

56,000

-

Grapevine, TX

Hilton Garden Inn

4.89
%

8/29/2012

9/1/2022

11,810

9,167

9,434

Collegeville/Philadelphia, PA

Courtyard

4.89
%

8/30/2012

9/1/2022

12,650

9,818

10,105

Hattiesburg, MS

Courtyard

5.00
%

3/1/2014

9/1/2022

5,732

4,596

4,729

Kirkland, WA

Courtyard

5.00
%

3/1/2014

9/1/2022

12,145

9,737

10,018

Rancho Bernardo/San Diego, CA

Courtyard

5.00
%

3/1/2014

9/1/2022

15,060

12,074

12,422

Seattle, WA

Residence Inn

4.96
%

3/1/2014

9/1/2022

28,269

22,638

23,294

Anchorage, AK

Embassy Suites

4.97
%

9/13/2012

10/1/2022

23,230

18,139

18,660

Somerset, NJ

Courtyard

4.73
%

3/1/2014

10/6/2022

8,750

6,973

7,179

Tukwila, WA

Homewood Suites

4.73
%

3/1/2014

10/6/2022

9,431

7,516

7,737

Huntsville, AL

Homewood Suites

4.12
%

3/1/2014

2/6/2023

8,306

6,542

6,742

Prattville, AL

Courtyard

4.12
%

3/1/2014

2/6/2023

6,596

5,195

5,354

San Diego, CA

Residence Inn

3.97
%

3/1/2014

3/6/2023

18,600

14,610

15,061

Miami, FL

Homewood Suites

4.02
%

3/1/2014

4/1/2023

16,677

13,136

13,537

New Orleans, LA

Homewood Suites

4.36
%

7/17/2014

8/11/2024

27,000

22,181

22,766

Westford, MA

Residence Inn

4.28
%

3/18/2015

4/11/2025

10,000

8,393

8,605

Denver, CO

Hilton Garden Inn

4.46
%

9/1/2016

6/11/2025

34,118

29,663

30,387

Oceanside, CA

Courtyard

4.28
%

9/1/2016

10/1/2025

13,655

12,391

12,605

Omaha, NE

Hilton Garden Inn

4.28
%

9/1/2016

10/1/2025

22,682

20,581

20,936

Boise, ID

Hampton

4.37
%

5/26/2016

6/11/2026

24,000

21,799

22,146

Burbank, CA

Courtyard

3.55
%

11/3/2016

12/1/2026

25,564

22,482

23,315

San Diego, CA

Courtyard

3.55
%

11/3/2016

12/1/2026

25,473

22,402

23,232

San Diego, CA

Hampton

3.55
%

11/3/2016

12/1/2026

18,963

16,677

17,295

Burbank, CA

SpringHill Suites

3.94
%

3/9/2018

4/1/2028

28,470

26,264

27,078

Santa Ana, CA

Courtyard

3.94
%

3/9/2018

4/1/2028

15,530

14,326

14,770

Richmond, VA

Courtyard

3.40
%

2/12/2020

3/11/2030

14,950

14,521

14,739

Richmond, VA

Residence Inn

3.40
%

2/12/2020

3/11/2030

14,950

14,521

14,739

Portland, ME

Residence Inn

3.43
%

3/2/2020

4/1/2030

33,500

33,500

33,500

San Jose, CA

Homewood Suites

4.22
%

12/22/2017

5/1/2038

30,000

26,579

27,392

$
631,096

502,421

512,770

Unamortized fair value adjustment of
assumed debt

1,070

1,624

Unamortized debt issuance costs

(1,575
)

(1,848
)
Total

$
501,916

$
512,546

(1)

Interest rates are the rates per the loan agreement. For loans assumed, the Company adjusted the interest rates per the loan agreement to market rates and is amortizing the adjustments to interest expense over the life of the loan.

(2)

On August 16, 2021, the Company acquired the fee interest in the land at the Seattle, Washington Residence Inn, previously held under a finance ground lease, for a purchase price of $80.0 million, consisting of a $24.0 million cash payment and a one-year note payable to the seller for $56.0 million.

(3)

Loan was amended effective March 1, 2022, in conjunction with a $3.0 million prepayment of loan principal. In addition, the maturity date of the loan was extended by two years to March 1, 2032.

(4)

Loan was repaid in full on June 16, 2022.

(5)

Loans were repaid in full on June 30, 2022.

(6)

Loans were repaid in full on August 1, 2022.

~~(1)~~

~~(2)~~

Interest rate was variable based on one-month LIBOR plus 3.00%. As of April 12, 2021, the date the loan was fully repaid, the interest rate was 3.11%. In July 2020, the principal amount of the note was reduced by approximately $1.1 million representing a credit from the developer for shared construction savings.

~~(3)~~

~~Loan was repaid in full on April 12, 2021.~~

~~(4)~~

~~Loan was repaid in full on June 4, 2021.~~

~~(5)~~

On August 16, 2021, the Company acquired the fee interest in the land at the Seattle, Washington Residence Inn, previously held under a finance ground lease, for a purchase price of $80.0 million, consisting of a $24.0 million cash payment and a ~~one-year~~ ~~note payable to the seller for $56.0 million.~~

~~Index~~

5. Fair Value of Financial Instruments

Except as described below, the carrying value of the Company’s financial instruments approximates fair value due to the short-term nature of these financial instruments.

Debt

The Company estimates the fair value of its debt by discounting the future cash flows of each instrument at estimated market rates consistent with the maturity of a debt obligation with similar credit terms and credit characteristics, which are Level 3 inputs

Index

under the fair value hierarchy. Market rates take into consideration general market conditions and maturity. As of September 30, ~~2021, the carrying value and estimated fair value of the Company’s debt were approximately $1.4 billion and $1.3 billion, respectively. As of December 31, 2020,~~2022, both the carrying value and estimated fair value of the Company’s debt were approximately ~~$1.5~~$1.3 billion. As of December 31, 2021, both the carrying value and estimated fair value of the Company’s debt were approximately $1.4 billion. Both the carrying value and estimated fair value of the Company’s debt (as discussed above) are net of unamortized debt issuance costs related to term loans, senior notes and mortgage debt for each specific year.

Derivative Instruments

Currently, the Company uses interest rate swaps to manage its interest rate risk on variable-rate debt. Throughout the terms of these interest rate swaps, the Company pays a fixed rate of interest and receives a floating rate of interest equal to the one-month ~~LIBOR.~~SOFR plus a 0.10% SOFR spread adjustment. The swaps are designed to effectively fix the interest payments on variable-rate debt instruments. As discussed in Note 1, the Company entered into amendments of its swap agreements during July 2022, to replace LIBOR with SOFR. These swap instruments are recorded at fair value and, if in an asset position, are included in other assets, net, and, if in a liability position, are included in accounts payable and other liabilities in the Company’s consolidated balance sheets. The fair values of the Company’s interest rate swap agreements are determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts, which is considered a Level 2 measurement under the fair value hierarchy. The variable cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The following table sets forth information for each of the Company’s interest rate swap agreements outstanding as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. All dollar amounts are in thousands.


								Fair Value Asset (Liability)
Notional Amount at September 30, 2022		Origination Date	Effective Date	Maturity Date	Swap Fixed Interest Rate as of September 30, 2022(1)		Swap Fixed Interest Rate as of December 31, 2022(1)	September 30, 2022		December 31, 2021
Active interest rate swaps designated as cash flow hedges at September 30, 2022:
$	100,000	4/7/2016	9/30/2016	3/31/2023	1.30%		1.33%	$	1,357	$	(955	)
	75,000	5/31/2017	7/31/2017	6/30/2024	1.95%		1.96%		2,960		(1,902	)
	10,000	8/10/2017	8/10/2017	6/30/2024	2.02%		2.01%		380		(268	)
	50,000	6/1/2018	1/31/2019	6/30/2025	2.88%		2.89%		1,589		(3,123	)
	50,000	7/2/2019	7/5/2019	7/18/2024	1.64%		1.65%		2,274		(894	)
	50,000	8/21/2019	8/23/2019	8/18/2024	1.31%		1.32%		2,688		(457	)
	50,000	8/21/2019	8/23/2019	8/30/2024	1.32%		1.32%		2,719		(455	)
	85,000	12/31/2019	12/31/2019	12/31/2029	1.87%		1.86%		10,200		(3,277	)
	25,000	12/6/2018	1/31/2020	6/30/2025	2.74%		2.75%		884		(1,442	)
	50,000	12/7/2018	5/18/2020	1/31/2024	2.71%		2.72%		1,040		(1,965	)
	75,000	8/21/2019	5/18/2020	5/18/2025	1.26%		1.27%		5,395		(458	)
	75,000	8/21/2019	5/18/2021	5/18/2026	1.29%		1.30%		6,868		(391	)
	695,000								38,354		(15,587	)

Matured interest rate swap at September 30, 2022:
$	75,000	7/31/2020	8/18/2020	8/18/2022		-	0.13%		-		79
								$	38,354	$	(15,508	)

(1)

The fixed interest rate associated with each interest rate swap was amended in July 2022 as part of the swap amendments to replace LIBOR with SOFR as the reference rate.

Fair Value Asset (Liability)

Notional Amount at
September 30, 2021

Origination
Date

Effective
Date

Maturity
Date

Swap Fixed
Interest
Rate

September 30,
2021

December 31,
2020

Active interest rate swaps designated as cash flow hedges at September 30, 2021:

100,000

4/7/2016

9/30/2016

3/31/2023

1.33%

$
(1,690
)

$
(2,681
)

75,000

5/31/2017

7/31/2017

6/30/2024

1.96%

(3,022
)

(4,639
)

10,000

8/10/2017

8/10/2017

6/30/2024

2.01%

(416
)

(636
)

50,000

6/1/2018

1/31/2019

6/30/2025

2.89%

(4,065
)

(5,911
)

50,000

7/2/2019

7/5/2019

7/18/2024

1.65%

(1,610
)

(2,593
)

50,000

8/21/2019

8/23/2019

8/18/2024

1.32%

(1,141
)

(2,036
)

50,000

8/21/2019

8/23/2019

8/30/2024

1.32%

(1,143
)

(2,049
)

85,000

12/31/2019

12/31/2019

12/31/2029

1.86%

(3,978
)

(8,677
)

25,000

12/6/2018

1/31/2020

6/30/2025

2.75%

(1,904
)

(2,801
)

50,000

12/7/2018

5/18/2020

1/31/2024

2.72%

(2,736
)

(3,967
)

75,000

8/21/2019

5/18/2020

5/18/2025

1.27%

(1,536
)

(3,294
)

75,000

7/31/2020

8/18/2020

8/18/2022

0.13%

(8
)

14

75,000

8/21/2019

5/18/2021

5/18/2026

1.30%

(1,401
)

(3,415
)

770,000

(24,650
)

(42,685
)

��

Matured interest rate swap at September 30, 2021:

$
50,000

4/7/2016

9/30/2016

3/31/2021

1.09%

-

(117
)

$
(24,650
)

$
(42,802
)

The Company assesses, both at inception and on an ongoing basis, the effectiveness of its qualifying cash flow hedges. As of September 30, ~~2021,~~2022, all of the 1312 active interest rate swap agreements listed above were designated as cash flow hedges. The change in the fair value of the Company’s designated cash flow hedges is recorded to accumulated other comprehensive ~~loss,~~income, a component of shareholders’ equity in the Company’s consolidated balance sheets.

Amounts reported in accumulated other comprehensive ~~loss~~income will be reclassified to interest and other expense, net as interest payments are made or received on the Company’s variable-rate derivatives. The Company estimates that approximately ~~$11.4~~$15.7 million of net unrealized ~~losses~~gains included in accumulated other comprehensive ~~loss~~income at September 30, ~~2021~~2022 will be reclassified as ~~an increase~~a decrease to interest and other expense, net within the next 12 months.

1617

Index

The following table presents the effect of derivative instruments in cash flow hedging relationships in the Company’s consolidated statements of operations and comprehensive income ~~(loss)~~ for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (in thousands):


	Net Unrealized Gain Recognized in Other Comprehensive Income				Net Unrealized Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) to Interest and Other Expense, net
	Three Months Ended September 30,				Three Months Ended September 30,
	2022		2021		2022			2021
Interest rate derivatives in cash flow hedging relationships	$	17,130	$	478	$	1,106		$	(2,948	)

	Net Unrealized Gain Recognized in Other Comprehensive Income				Net Unrealized Loss Reclassified from Accumulated Other Comprehensive Income (Loss) to Interest and Other Expense, net
	Nine Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022			2021
Interest rate derivatives in cash flow hedging relationships	$	50,649	$	9,714	$	(3,213	)	$	(8,438	)

Net Unrealized Gain
Recognized in Other
Comprehensive Income
(Loss)

Net Unrealized Loss Reclassified
from Accumulated Other Comprehensive
Income (Loss) to Interest and Other
Expense, net

Three Months Ended September 30,

Three Months Ended September 30,

2021

2020

2021

2020

Interest rate derivatives in cash flow
hedging relationships

$
478

$
33

$
(2,948
)

$
(2,706
)

Net Unrealized Gain (Loss)
Recognized in Other
Comprehensive Income (Loss)

Net Unrealized Loss Reclassified
from Accumulated Other Comprehensive
Income (Loss) to Interest and Other
Expense, net

Nine Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Interest rate derivatives in cash flow
hedging relationships

$
9,714

$
(48,628
)

$
(8,438
)

$
(5,006
)

6. Related Parties

The Company has engaged in, and is expected to continue to engage in, transactions with related parties. These transactions cannot be construed to be at arm’s length, and the results of the Company’s operations may be different if these transactions were conducted with non-related parties. There have been no changes to the contracts and relationships discussed in the ~~2020~~2021 Form 10-K. Below is a summary of the significant related party relationships in effect during the nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021.

Glade M. Knight, Executive Chairman of the Company, owns Apple Realty Group, Inc. (“ARG”), which receives support services from the Company and reimburses the Company for the cost of these services as discussed below. Mr. Knight is also currently a partner and Chief Executive Officer of Energy 11 GP, LLC and Energy Resources 12 GP, LLC, which are the respective general partners of Energy 11, L.P. and Energy Resources 12, L.P., each of which receives support services from ARG.

The Company provides support services, including the use of the Company’s employees and corporate office, to ARG and is reimbursed by ARG for the cost of these services. Under this cost sharing structure, amounts reimbursed to the Company include both compensation for personnel and office related costs (including office rent, utilities, office supplies, etc.) used by ARG. The amounts reimbursed to the Company are based on the actual costs of the services and a good faith estimate of the proportionate amount of time incurred by the Company’s employees on behalf of ARG. Total reimbursed costs allocated by the Company to ARG for the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 totaled approximately ~~$0.5~~$0.6 million and ~~$0.9~~$0.5 million, respectively, and are recorded as a reduction to general and administrative expenses in the Company’s consolidated statements of operations.

As part of the cost sharing arrangement, certain day-to-day transactions may result in amounts due to or from the Company and ARG. To efficiently manage cash disbursements, the Company or ARG may make payments for the other company. Under this cash management process, each company may advance or defer up to $1$1 million at any time. Each quarter, any outstanding amounts are settled between the companies. This process allows each company to minimize its cash on hand and reduces the cost for each company. The amounts outstanding at any point in time are not significant to either of the companies. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, total amounts due from ARG for reimbursements under the cost sharing structure totaled approximately ~~$0.2~~$0.2 million and ~~$0.3~~$0.3 million, respectively, and are included in other assets, net in the Company’s consolidated balance sheets.

The Company, through its wholly-owned subsidiary, Apple Air Holding, LLC, owns a Learjet used primarily for acquisition, asset management, renovation, ~~and~~ investor, corporate and public relations and other business purposes. The aircraft is also leased to affiliates of the Company based on ~~third party rates, which leasing~~third-party rates. Lease activity was not significant during the reporting periods. ~~The~~

From time to time, the Company ~~also~~ utilizes ~~one~~ aircraft, owned ~~through~~by an entity which is owned by the Company’s Executive Chairman, for acquisition, asset management, renovation, ~~and~~ investor, corporate and public relations and other business purposes, and reimburses ~~the~~this entity at third party rates. Total costs incurred for the use of ~~the~~these aircraft during the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 were less than ~~$0.1~~$0.1 million ~~for each respective period~~ and are included in general and administrative expenses in the Company’s consolidated statements of operations.

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

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the ~~Securities~~ Exchange ~~Act of 1934, as amended.~~Act. Forward-looking statements are typically identified by use of statements that include phrases such as “may,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,��” “target,” “goal,” “plan,” “should,” “will,” “predict,” “potential,” “outlook,” “strategy,” and similar expressions that convey the uncertainty of future events or outcomes. Such statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.

Currently, one of the most significant factors that could cause actual outcomes to differ materially from the Company’s forward-looking statements continues to be the adverse effect of COVID-19, including resurgences and variants, on the Company’s business, financial performance and condition, operating results and cash flows, the real estate market and the hospitality industry specifically, and the global economy and financial markets generally. The significance, extent and duration of the continued impacts caused by the COVID-19 ~~outbreak~~pandemic on the Company will depend on future developments, which are highly uncertain and cannot be predicted with confidence at this time, including the ~~scope, severity and duration of the pandemic, the~~ extent and effectiveness of the actions taken to ~~contain the pandemic or~~ mitigate its impact, the ~~speed of the vaccine distribution, the efficacy,~~ acceptance and availability of vaccines, the duration of associated immunity and efficacy of the vaccines against variants of COVID-19, the potential for additional hotel closures/consolidations that may be mandated or advisable, whether based on increased COVID-19 cases, new variants or other factors, ~~the slowing or potential rollback of “reopenings” in certain states,~~ and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, investors are cautioned to interpret many of the risks identified under the section titled “Risk Factors” in the Company’s ~~2020~~2021 Form 10-K as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19. Additional factors include, but are not limited to, the ability of the Company to effectively acquire and dispose of properties and redeploy proceeds; the anticipated timing and frequency of shareholder distributions; the ability of the Company to fund capital obligations; the ability of the Company to successfully integrate pending transactions and implement its operating strategy; changes in general political, economic and competitive conditions and specific market ~~conditions;~~conditions (including the potential effects of inflation or a recessionary environment); reduced business and leisure travel due to travel-related health concerns, including the ~~widespread outbreak of~~ COVID-19 pandemic or an increase in COVID-19 cases or any other infectious or contagious diseases in the U.S. or abroad; adverse changes in the real estate and real estate capital markets; financing risks; changes in interest rates; litigation risks; regulatory proceedings or inquiries; and changes in laws or regulations or interpretations of current laws and regulations that impact the Company’s business, assets or classification as a REIT. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore there can be no assurance that such statements included in this Quarterly Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the results or conditions described in such statements or the objectives and plans of the Company will be achieved. In addition, the Company’s qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code of 1986, as ~~amended.~~amended (the “Code”). Readers should carefully review the risk factors described in the Company’s filings with the Securities and Exchange Commission (“SEC”), including but not limited to those discussed in the section titled “Risk Factors” in the ~~2020~~2021 Form 10-K. Any forward-looking statement that the Company makes speaks only as of the date of this Quarterly Report. The Company undertakes no obligation to publicly update or revise any forward-looking statements or cautionary factors, as a result of new information, future events, or otherwise, except as required by law.

The following discussion and analysis should be read in conjunction with the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, as well as the information contained in the ~~2020~~2021 Form 10-K.

The Company is a Virginia corporation that has elected to be treated as a REIT for federal income tax purposes. The Company is self-advised and invests in income-producing real estate, primarily in the lodging sector, in the U.S. As of September 30, ~~2021,~~2022, the Company owned ~~215~~218 hotels with an aggregate of ~~28,085~~28,693 rooms located in urban, high-end suburban and developing markets throughout 3536 states. Substantially all of the Company’s hotels operate under Marriott or Hilton brands. The hotels are operated and managed under separate management agreements with 1617 hotel management companies, none of which are affiliated with the Company. The Company’s common shares are listed on the NYSE under the ticker symbol “APLE.”

Since first being reported in December 2019, COVID-19 has spread globally, including to every state in the U.S. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the U.S. declared a national emergency with respect to COVID-19.

The ~~outbreak of~~ COVID-19 pandemic has ~~not only specifically reduced travel, but also has had a detrimental impact on regional~~negatively impacted the U.S. and global economies and financial markets. The ~~global, national and local impact~~effect of the outbreak has continued to evolve and many countries, including the U.S., as well as state and local governments, have reacted and continue to react with a wide variety of measures intended to control its spread, including states of emergency, mandatory quarantines, implementation of “stay at home” orders, business closures, border closings, and restrictions on travel and large gatherings, which has resulted in, and may continue to result in, cancellation of events, including sporting events, conferences and meetings. While the Company’s operating results and the overall economy in the U.S. continue to show signs of recovery, the Company cannot presently determine the extent or duration of the overall operational and financial effects that COVID-19 ~~will have on the Company, its business, the hospitality industry and the economy, or whether the recovery will continue.~~

~~The effects of the pandemic~~ on the hotel industry ~~are unprecedented. COVID-19 disrupted the industry~~has been unprecedented and has dramatically reduced business and impacted leisure travel, which ~~has had a significant adverse impact on, and management expects COVID-19 will continue to significantly~~ adversely ~~impact and disrupt,~~impacted the Company’s business, financial performance, ~~and condition,~~ operating results and cash ~~flows. While a number of initial restrictions put into place during 2020 have eased, occupancy and average daily rate (“ADR”) during~~flows, beginning in March 2020.

From the first three quarters of 2021 were still generally below 2019 pre-pandemic levels. Additionally, while the development and distribution of vaccines have helped contribute to improved conditions over the first three quarters of 2021, there can be no assurances that the vaccines will contain the spread of the virus and its variants and allow the economy to fully recover. The Company expects the decline in revenue associated with COVID-19 and the overall influence on the U.S. economy to negatively impact the Company’s operating results for an extended period of time. While the Company has experienced significant recovery in leisure travel through the third quarter of 2021, the Company does not expect a full recovery in results until business travel improves and government restrictions on travel and business operations are lifted more broadly.

~~Since the beginning~~outset of the pandemic, the Company, with the support of its management companies and ~~its~~ brands, ~~have~~has taken steps to minimize costs and cash outflow to ~~maintain a sound liquidity position. The Company has implemented~~operate efficiently and maximize performance in light of the impacts to business resulting from COVID-19. These activities included implementing cost elimination and efficiency initiatives at each of ~~the Company’s~~its hotels by adjusting operations to manage total labor costs, reducing or eliminating certain amenities and reducing rates under various service ~~contracts,~~contracts; enhancing ~~its~~ sales efforts by ~~focusing on COVID-19-specific demand opportunities in certain markets and has~~ strategically ~~targeted and maximized performance based on~~targeting available ~~demand, reduced non-essential~~demand; reducing capital improvement projects, ~~planned for 2021,~~particularly in 2020 and 2021; and entering into various amendments to its unsecured credit facilities ~~that provided~~to provide for the temporary waiver of financial covenant testing for the majority of its financial maintenance covenants (the Company exited ~~the~~this waiver period early in July 2021 due to improved financial performance). Cost reduction initiatives, including those discussed above have not, and are not expected to, ~~fully, or even~~ materially offset revenue losses from COVID-19. ~~The extent and duration~~

While operations in the first nine months of 2022 have continued to improve to 2019 pre-pandemic levels, the volatility due to the impacts of COVID-19 ~~effects continue to remain unknown, and these uncertainties~~variants continue to make it difficult to ~~predict~~project operating ~~results for~~results. The Company has experienced significant improvement in its business during 2021 and through the ~~Company’s hotels for the near future.~~first nine months of 2022 driven by strength in leisure, small group and local negotiated business demand. While the Company has ~~experienced~~seen continued improvement ~~through the third quarter of 2021 and expects continued improvement,~~ ~~future revenues and operating results could be negatively impacted by, among other things, historical seasonal trends, an increase~~ in ~~COVID-19 cases, state and local governments and businesses reverting back~~overall business demand, it anticipates that some larger corporate demand drivers may take longer to ~~tighter mitigation restrictions, deterioration of consumer sentiment, labor shortages and resulting pressure on wages or significant inflationary impacts. Therefore,~~ there can be no assurances that the Company will not experience setbacks or further declines in hotel revenues or earnings at its hotels and the Company cannot predict how long the effects will continue to impact the Company’s operating results as compared to pre-pandemic levels.fully recover.

The Company continually monitors market conditions and attempts to maximize shareholder value by investing in properties that it believes provide superior value over the long term. Consistent with this strategy and the Company’s focus on investing in rooms-focused hotels, in 2019 the Company entered into a contract to purchase a 176-room Hilton Garden Inn to be constructed in Madison, Wisconsin. Construction of the hotel was completed in February 2021 and the Company acquired the hotel on February 18, 2021 for a gross purchase price of $49.6 million, utilizing borrowings on the Company’s revolving credit facility. In 2021, the Company entered into contracts to purchase a 178-room AC Hotel in Portland, Maine, acquired on August 20, 2021, a 130-room Hyatt Place in Greenville, South Carolina, acquired on September 1, 2021, and a 157-room Aloft in Portland, Maine, acquired on September 10, 2021 for an aggregate gross purchase price of $147.9 million, utilizing available cash (including a portion of the proceeds from the sale of 20 hotels in July 2021). In addition, during the second quarter of 2021 the Company entered into a contract to purchase the fee interest in the land at its Seattle, Washington Residence Inn that was previously under a ground lease. The land purchase was completed on August 16, 2021 for a purchase price of $80.0 million, consisting of ~~a $24.0 million cash payment utilizing a portion of the proceeds from the sale of 20 hotels in July 2021 and a one-year note payable to the seller for $56.0 million.~~

Asas of September 30, ~~2021,~~2022, the Company had separate outstanding contracts for the potential purchase of ~~five~~three hotels, consisting of one hotel in Madison, Wisconsin, one hotel in ~~Memphis, Tennessee, two hotels in Fort Worth, Texas~~Louisville, Kentucky and one hotel in ~~Portland, Oregon~~Pittsburgh, Pennsylvania for a total combined purchase price of approximately ~~$242.6~~$163.6 million. ~~Four~~Two of the hotels are already in operation and one is in development and scheduled to open ~~no earlier than 2023.~~in early 2024. Closings on the ~~four~~two hotels already in operation ~~are expected to occur~~were completed on October 25, 2022. See Note 9 titled “Subsequent Events” in the ~~fourth quarter of 2021, while closing~~Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on ~~the~~Form 10-Q, for additional information concerning these two acquisitions. The remaining hotel is expected to close upon completion of ~~development.~~development, which is currently expected in early 2024. Although the Company is working towards acquiring ~~these hotels,~~this hotel, there are many conditions to closing that have not yet been satisfied and there can be no

assurance that ~~closings~~closing on ~~these hotels~~this hotel will occur under the outstanding purchase ~~contracts.~~contract. The Company plans to utilize its available cash or borrowings under its unsecured credit facilities available at closing to purchase ~~hotels~~the remaining hotel under contract if ~~closings occur.~~closing occurs.

For its existing portfolio, the Company monitors each property’s profitability, market conditions and capital requirements and attempts to maximize shareholder value by disposing of properties when it believes that superior value can be provided from the sale of the property. As a result, during the first nine months of ~~2021,~~2022, the Company sold ~~23 hotels~~one hotel for a ~~total combined~~ gross sales price of approximately ~~$234.6~~$8.5 million and recognized a net gain on sale ~~after giving effect to impairment charges discussed below,~~ of approximately ~~$3.7~~$1.8 million. The Company used the net proceeds from the ~~sales to pay down borrowings on the Company’s revolving credit facility, for the acquisitions of hotel properties in the second half of 2021 and~~sale for general corporate purposes.

See Note 2 titled “Investment in Real Estate” and Note 3 titled “Dispositions” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, for additional information concerning these transactions.

As of September 30, ~~2021,~~2022, the Company owned 218 hotels with a total of 28,693 rooms as compared to 215 hotels with a total of 28,085 rooms as ~~compared to 235 hotels with a total of 30,023 rooms as~~ of September 30, ~~2020.~~2021. Results of operations are included only for the period of ownership for hotels acquired or disposed of during the current reporting period and prior year. During the nine months ended September 30, 2022, the Company sold one hotel and did not acquire any properties. During the same period of 2021, the Company acquired four hotels and sold 23 ~~hotels. During 2020, the Company acquired four hotels and sold three~~ hotels. As a result, the comparability of results for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021, as discussed below, is impacted by these ~~transactions in addition to the impact of COVID-19 beginning in March 2020.~~transactions.

In evaluating financial condition and operating performance, the most important indicators on which the Company focuses are revenue measurements, such as average occupancy, ~~ADR~~average daily rate (“ADR”) and revenue per available room (“RevPAR”), and expenses, such as hotel operating expenses, general and administrative expenses and other expenses described below. RevPAR and operating results may be impacted by regional and local economies as well as changes in lodging demand due to macroeconomic factors including inflationary pressures, higher energy prices or a recessionary environment.

The following is a summary of the results from operations of the Company’s hotels for their respective periods of ownership by the Company:

The following table highlights the Company’s quarterly ~~impact of COVID-19 on the Company’s~~ ADR, Occupancy, RevPAR, net income ~~(loss)~~ and adjusted hotel earnings before interest, income taxes, depreciation and amortization for real estate (“Adjusted Hotel EBITDA”), all of which have been impacted by COVID-19, during the last five quarters (in thousands except statistical data):

Beginning in March 2020, COVID-19 caused widespread cancellations of both business and leisure travel throughout the U.S., resulting in significant decreases in RevPAR throughout the Company’s hotel portfolio and the hospitality industry as a whole. With the overall uncertainty of the longevity of COVID-19 in the U.S. and the resulting economic decline, it is difficult to project the depth and duration of revenue declines for the industry and Company; however, the Company currently expects declines in revenue and operating results as compared to 2019 to continue throughout the remainder of 2021 and into the future. While the Company experienced its most significant decline in operating results (driven by the impact of COVID-19) during 2020 and the ~~second~~first quarter of ~~2020 as compared to previous quarters,~~2021, occupancy and RevPAR have since shown ~~improvement.~~improvement with a RevPAR increase of 19.4% and 38.1% for the three and nine months ended September 30, 2022, compared to the same periods in 2021. Although the Company expects continued recovery in rate and occupancy, it is difficult to project the pace at which the Company will experience a full recovery to pre-pandemic levels and future revenues and operating results could be negatively impacted by, among other things, historical seasonal trends, ~~an increase in~~new COVID-19 ~~cases,~~variants, state and local governments and businesses reverting ~~back~~ to tighter COVID-19 mitigation restrictions, deterioration of consumer sentiment, ~~or significant~~ labor ~~and~~shortages, supply chain disruptions, a recessionary macroeconomic environment or inflationary pressures.

The following ~~table reflects~~tables reflect certain operating statistics for the Company’s ~~215~~218 hotels owned as of September 30, ~~2021~~2022 (“Comparable Hotels”). The Company defines metrics from Comparable Hotels as results generated by the ~~215~~218 hotels owned as of the end of the reporting period. For the hotels acquired during the ~~current~~ reporting ~~period and prior year,~~periods shown, the Company has included, as applicable, results of those hotels for periods prior to the Company’s ownership using information provided by the properties’ prior owners at the time of acquisition and not adjusted by the Company. This information has not been audited, either for the periods owned or prior to ownership by the Company. For dispositions, results have been excluded for the Company’s period of ownership.

The following ~~table reflects~~tables reflect certain operating statistics for the ~~207~~204 hotels owned by the Company as of January 1, ~~2020~~2019 and during the entirety of the reporting periods being compared (“Same Store Hotels”). Comparisons to 2019 operating results are included to provide a better understanding of the Company’s recovery from the impact of COVID-19 on hotel operations. This information has not been audited.

As discussed above, hotel performance is impacted by many factors, including the economic conditions in the U.S. as well as each individual locality. COVID-19 has been negatively affecting the U.S. hotel industry since March 2020. The Company’s Same Store Hotels revenue and operating results improved during the three and nine months ended September 30, ~~2021~~2022 compared to the three and nine months ended September 30, ~~2020,~~2021, which is consistent with the overall lodging industry. ~~However, as a result of COVID-19,~~While the Company’s ~~revenue and operating results have declined as~~Same Store Hotels RevPAR was down approximately 2.3% for the nine months ended September 30, 2022, compared to the same period in 2019 ~~and~~(the last year prior to the COVID-19 pandemic), RevPAR was approximately 2.8% higher for the three months ended September 30, 2022 compared to the same period in 2019. Though the Company ~~expects these declines relative~~anticipates further improvement to ~~2019 levels~~RevPAR compared to ~~continue throughout~~2021, the ~~remainder of 2021. The~~ Company can give no assurances as to the amount or period of ~~decline~~improvement due to the uncertainty ~~regarding~~resulting from the ~~duration and long-term~~ impact of ~~as well as governmental and consumer response to,~~ COVID-19.

The Company’s principal source of revenue is hotel revenue consisting of room, food and beverage, and other related revenue. For the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the Company had total revenue of ~~$277.2~~$341.2 million and ~~$148.8~~$277.2 million, respectively. For the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the Company had total revenue of ~~$683.3~~$939.3 million and ~~$467.9~~$683.3 million, respectively. For the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, Comparable Hotels achieved combined average occupancy of ~~71.6%~~75.7% and ~~48.7%~~71.4%, ADR of ~~$141.56~~$157.90 and ~~$106.13~~$141.84 and RevPAR of ~~$101.32~~$119.53 and ~~$51.64.~~$101.34. For the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, Comparable Hotels achieved combined average occupancy of ~~66.0%~~73.6% and ~~45.9%~~65.9%, ADR of ~~$123.19~~$149.99 and ~~$117.16~~$123.41 and RevPAR of ~~$81.33~~$110.40 and ~~$53.81.~~$81.33. ADR is calculated as room revenue divided by the number of rooms sold, and RevPAR is calculated as occupancy multiplied by ADR.

Compared to the same ~~period~~periods in ~~2020,~~2021, during the three and nine months ended September 30, ~~2021,~~2022, the Company experienced increases in ADR and occupancy, resulting in ~~an increase~~increases of ~~96.2%~~17.9% and 35.7%, respectively, in RevPAR for Comparable Hotels. ~~As compared~~Compared to the ~~third quarter~~same periods of 2019 (pre-COVID-19), Comparable Hotels RevPAR for the third quarter of ~~2021 decreased~~2022 increased by ~~11.4%~~3.7% primarily as a result of ~~reduced~~increases in ADR, offset by reductions in occupancy ~~as Comparable Hotels ADR~~and for the first nine months of 2022 decreased by only 1.0%. Occupancy for the Company’s portfolio for the month of July 2021 was approximately 76%, the highest monthly level since the onset of the pandemic. Occupancy for the month of October 2021 was approximately 73%. During March 2020, the hotel industry and the Company began to see a significant decrease in occupancy as both mandated and voluntary restrictions on travel were implemented throughout the U.S. For Comparable Hotels, average occupancy fell below 50% for most of 2020 before improving over subsequent quarters to 71.6% in the third quarter of 2021 driven predominately by increased leisure demand1.8% primarily as a result of ~~improved consumer confidence~~reductions in ~~travel and the lifting of some COVID-19 mitigation restrictions, but also~~occupancy, offset by increased demand from a wide variety of demand generators such as government, healthcare, automotive, construction, disaster recovery, insurance, athletics, education and local and regional business-related travel.increases in ADR. Revenue recovery in the ~~third quarter~~three and nine months ended September 30, 2022, as compared to the same periods of 2021 was led by leisure transient and small group demand, with increased demand from small corporate ~~and government~~ business. Suburban markets continued to see stronger demand than urban ~~markets. Throughout~~markets and the Sun Belt generally outperformed other regions of the U.S. throughout the hospitality ~~industry, upscale and upper mid-scale chain scales have outperformed luxury and upper upscale and suburban locations have outperformed urban locations.~~industry. The Company expects ~~this trend~~improvement to ~~generally~~ continue, however, future revenues could be negatively impacted by, among other things, historical seasonal trends, an increase in COVID-19 cases, new COVID-19 variants, state and local governments and businesses reverting ~~back~~ to tighter mitigation restrictions, or deterioration of consumer ~~sentiment.~~sentiment, labor shortages, supply chain disruptions, a recessionary macroeconomic environment or inflationary pressures.

The Company, its management companies and the brands the Company’s hotels are franchised with all aggressively worked to mitigate the costs and uses of cash associated with operating the hotels in the low-occupancy environment experienced in 2020, have worked to maintain cost-reduction practices where feasible as the economy recovers, and are thoughtfully working to position the hotels to adapt to the changes that may occur to guest preferences in the future. The impact has varied and will continue to vary by market and hotel. With the support of its brands and third-party management companies, the Company will continue to evaluate and implement adjustments to the hotel operating model in response to continued changes in the operating environment and guest preferences.

Hotel operating expense consists of direct room operating expense, hotel administrative expense, sales and marketing expense, utilities expense, repair and maintenance expense, franchise fees and management fees. Hotel operating expense for the three months ended September 30, 2022 and 2021 ~~and 2020~~ totaled ~~$154.0~~$193.1 million and ~~$93.8~~$154.0 million, respectively, or ~~55.5%~~56.6% and ~~63.0%~~55.5% of total revenue for the respective periods. Hotel operating expense for the nine months ended September 30, 2022 and 2021 ~~and 2020~~ totaled ~~$393.1~~$529.6 million and ~~$310.8~~$393.1 million, respectively, or ~~57.5%~~56.4% and ~~66.4%~~57.5% of total revenue for the respective periods. Comparatively, prior to COVID-19, hotel operating expense was 56.6% and 56.3%~~, respectively,~~ of total revenue for the three and nine months ended September 30, 2019.

The ~~Company~~impact of the pandemic has ~~worked~~varied and will continue to ~~work with~~vary by market and hotel. With the support of its brands and third-party management companies, to optimize staffing models, and adjust food and beverage offerings and other amenities, among other efficiency initiatives, to mitigate the impact of revenue declines and cost pressures on its results of operations. For example, the Company has reduced service and amenity offerings as allowed by the relaxation of certain brand standards and the Company also successfully reduced rates under various service contracts. Although certain operating costs of a hotel are more fixed in nature, such as base utility and maintenance costs, the Company has worked ~~and will continue to work~~ to reduce ~~all non-essential~~ costs ~~including service contracts, utilities~~associated with operating hotels in ~~areas not utilized and certain maintenance costs. However, the Company may continue~~a lower occupancy environment than that experienced prior to ~~see ongoing cost increases related to both labor and supplies due to scarcity.~~COVID-19. As occupancy has increased, ~~throughout the nine months ended September 30, 2021, increasing staffing~~adding staff to meet increased demand has been challenging, and while the Company’s hotels made progress in filling open positions ~~during~~through the ~~third quarter~~first three quarters of ~~2021,~~2022, they have often done so at higher wage ~~rates.~~rates or with more expensive contract labor as compared to 2021 and 2019. Likewise, supply chain disruptions and broader inflationary pressures throughout the overall economy and global tensions have driven shortages and cost increases ~~in the cost of~~for materials and supplies such as food and equipment. The Company continues to work with its management companies to realize operational efficiencies and mitigate the impact of cost pressures resulting from supply chain shortages, inflation and staffing challenges. The Company will continue to evaluate and work with its management companies to implement adjustments to the hotel operating model in response to continued changes in the operating environment and guest preferences including evaluating staffing levels at its hotels to maximize efficiency.

Property taxes, insurance, and other expense for the three months ended September 30, 2022 and 2021 ~~and 2020~~ was ~~$17.9~~$19.1 million and ~~$20.5~~$17.9 million, respectively, or ~~6.5%~~5.6% and ~~13.8%~~6.5% of total revenue for the respective periods. For the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, property taxes, insurance and other expense totaled ~~$54.9~~$56.5 million and ~~$58.8~~$54.9 million, respectively, or ~~8.0%~~6.0% and ~~12.6%~~

of total revenue for the respective periods. Prior to COVID-19, property taxes, insurance and other expense for the three and nine months ended September 30, 2019 totaled $19.6 million and $58.5 million, respectively, or 5.9% and 6.0%8.0% of total revenue for the respective periods. The ~~decrease from 2019 and 2020 to 2021 was~~increases were primarily due to ~~decreases~~increases in property taxes in certain ~~localities. Although~~locations due to the reassessment of property values by localities related to the improved economy, partially offset by decreases at other locations due to successful appeals of tax assessments. The Company will continue to aggressively appeal tax assessments in certain jurisdictions in an attempt to minimize tax increases, as warranted, and will continue to monitor locality guidance as a result of ~~COVID-19, it does not currently anticipate further significant decreases in property taxes in 2021 as compared to 2020.~~COVID-19.

General and administrative expense for the three months ended September 30, 2022 and 2021 ~~and 2020~~ was ~~$13.3~~$10.3 million and ~~$6.7~~$13.3 million, respectively, or ~~4.8%~~3.0% and ~~4.5%~~4.8% of total revenue for the respective periods. For the nine months ended September 30, 2022 and

2021, ~~and 2020,~~ general and administrative expense was ~~$29.8~~$30.2 million and ~~$22.3~~$29.8 million, respectively, or ~~4.4%~~3.2% and ~~4.8%~~4.4% of total revenue for the respective periods. The principal components of general and administrative expense are payroll and related benefit costs, legal fees, accounting fees and reporting expenses. ~~The increases in general~~General and administrative expense for the three ~~and nine~~ months ended September 30, 2022 and 2021 ~~over the three and nine months ended September 30, 2020 include increased accruals of $5.5~~included approximately $4.0 million and ~~$9.0~~$7.0 million, respectively, of expense related to the accrual for executive incentive compensation. The third quarter of 2021 included an adjustment to previous estimates of the projected executive incentive compensation ~~related~~payout based on favorable increases to ~~anticipated higher~~expected shareholder return and operating performance in 2021 as compared to 2020. Additionally, general and administrative expense in 2020 was reduced by voluntary reductions in compensation by the Company’s Executive Chairman, Chief Executive Officer and non-employee directors on the Board of Directors.metrics.

The Company did not recognize any loss on the impairment of depreciable real estate assets for the nine months ended September 30, 2022. Loss on impairment of depreciable real estate assets was $10.8 million for the nine months ended September 30, 2021, consisting of impairment losses of $1.3 million for the Overland Park, Kansas SpringHill Suites and $9.4 million for four hotel properties identified by the Company in the first quarter of 2021 for potential sale. Loss on impairment of depreciable real estate assets was $4.4 million for the nine months ended September 30, 2020, consisting of an impairment charge for the Memphis, Tennessee Homewood Suites in 2020. See Note 3 titled “Dispositions” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, for additional information concerning these impairment losses.

Depreciation and amortization expense for the three months ended September 30, 2022 and 2021 ~~and 2020~~ was ~~$44.2~~$45.1 million and ~~$50.2~~$44.2 million, respectively. For the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, depreciation and amortization expense was ~~$139.3~~$135.8 million and ~~$149.6~~$139.3 million, respectively. Depreciation and amortization expense primarily represents expense of the Company’s hotel buildings and related improvements, and associated personal property (furniture, fixtures, and equipment) for the respective periods owned. The ~~decreases were~~increase of approximately $0.9 million for the three months ended September 30, 2022 compared to the same period in 2021 was primarily due to the acquisition of four hotels betweenSeptember 30, 2021 and September 30, 2022. The decrease of approximately $3.5 million for the nine months ended September 30, 2022 compared to the same period in 2021 was primarily due to the hotel dispositions completed throughout ~~2020 and the first nine months of~~ 2021, partially offset by acquisitions completed throughout 2021 and ~~limited renovation activity.~~renovations completed throughout 2022.

Interest and other expense, net for the three months ended September 30, 2022 and 2021 ~~and 2020~~ was ~~$16.0~~$14.9 million and ~~$18.5~~$16.0 million, respectively. For the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, interest and other expense, net was ~~$53.1~~$44.8 million and ~~$52.5~~$53.1 million, respectively. Interest and other expense, net for the nine months ended September 30, ~~2020~~2022 is net of approximately ~~$0.9~~$0.5 million of interest capitalized associated with renovation projects. Additionally, interest and other expense, net for the three months ended September 30, ~~2021~~2022 and ~~2020~~2021 includes approximately ~~$2.1~~$1.5 million and ~~$2.8~~$2.1 million, respectively, of interest recorded on the Company’s finance lease liabilities. For the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, interest and other expense, net includes approximately ~~$7.9~~$4.4 million and ~~$8.5~~$7.9 million, respectively, of interest recorded on the ~~Company’s~~Company's finance lease liabilities.

~~Interest expense related~~ The decrease is due to the August 16, 2021 purchase of the fee interest in the land at the Company’s ~~debt instruments for the three months ended September 30, 2021 decreased compared to the three months ended September 30, 2020 as~~Seattle, Washington Residence Inn that was previously under a ~~result of both lower average borrowings and lower average interest rates as the Company exited the Extended Covenant Waiver Period in July 2021.~~ ground lease.

Interest expense related to the Company’s debt instruments for the nine months ended September 30, ~~2021 was virtually unchanged~~2022 decreased compared to the nine months ended September 30, ~~2020~~2021 as a result of lower average borrowings ~~offset by increased~~due to the repayment of loans maturing in 2022 and lower average interest rates onas the ~~Company’s unsecured credit facilities associated with~~Company paid higher rates due to its covenant waiver status during the ~~amendments to obtain covenant waivers.~~first half of 2021. The Company anticipates interest expense ~~to be lower~~ for the remainder of ~~2021 compared~~2022 to be similar to the interest expense for the same period of ~~2020~~2021 due to reduced average borrowings ~~on the Company’s unsecured credit facilities and lower~~offset by higher interest ~~rates compared to the same period of 2020 as a result of exiting the Extended Covenant Waiver Period (as discussed below under “Liquidity and Capital Resources”).~~rates. See Note 4 titled “Debt” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, for additional discussion of the Company’s amended unsecured credit facilities.

Income tax expense for the three months ended September 30, 2022 and 2021 was $1.3 million and $0.1 million, respectively. For the nine months ended September 30, 2022 and 2021, income tax expense was $1.7 million and $0.3 million, respectively. The increase is primarily due to increases in state income taxes as a result of significant improvement in operating results in 2022 as well as limitations placed by certain states on the application of prior net operating losses.

The Company considers the following non-GAAP financial measures useful to investors as key supplemental measures of its operating performance: Funds from Operations (“FFO”), Modified Funds from Operations (“MFFO”), Earnings Before Interest,

Income Taxes, Depreciation and Amortization (“EBITDA”), Earnings Before Interest, Income Taxes, Depreciation and Amortization for Real Estate (“EBITDAre”), Adjusted EBITDAre (“Adjusted EBITDAre”) and Adjusted Hotel EBITDA. These non-GAAP financial measures should be considered along with, but not as alternatives to, net income (loss), cash flow from operations or any other operating GAAP measure. FFO, MFFO, EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA are not necessarily indicative of funds available to fund the Company’s cash needs, including its ability to make cash distributions. Although FFO, MFFO, EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA, as calculated by the Company, may not be comparable to FFO, MFFO, EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA, as reported by other companies that do not define such terms exactly as the Company defines such terms, the Company believes these supplemental measures are useful to investors when comparing the Company’s results between periods and with other REITs.

The Company calculates and presents FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (“Nareit”), which defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains and losses from the sale of certain real estate assets (including gains and losses from change in control), extraordinary items as defined by GAAP, and the cumulative effect of changes in accounting principles, plus real estate related depreciation, amortization and impairments, and adjustments for unconsolidated affiliates. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most real estate industry investors consider FFO to be helpful in evaluating a real estate company’s operations. The Company further believes that by excluding the effects of these items, FFO is useful to investors in comparing its operating performance between periods and between REITs that report FFO using the Nareit definition. FFO as presented by the Company is applicable only to its common shareholders, but does not represent an amount that accrues directly to common shareholders.

The Company calculates MFFO by further adjusting FFO for the exclusion of amortization of finance ground lease assets, amortization of favorable and unfavorable operating leases, net and non-cash straight-line operating ground lease expense, as these expenses do not reflect the underlying performance of the related hotels. The Company presents MFFO when evaluating its performance because it believes that it provides further useful supplemental information to investors regarding its ongoing operating performance.

The following table reconciles the Company’s GAAP net income ~~(loss)~~ to FFO and MFFO for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (in thousands):

EBITDA is a commonly used measure of performance in many industries and is defined as net income (loss) excluding interest, income taxes, depreciation and amortization. The Company believes EBITDA is useful to investors because it helps the Company and its investors evaluate the ongoing operating performance of the Company by removing the impact of its capital structure (primarily interest expense) and its asset base (primarily depreciation and amortization). In addition, certain covenants included in the agreements governing the Company’s indebtedness use EBITDA, as defined in the specific credit agreement, as a measure of financial compliance.

In addition to EBITDA, the Company also calculates and presents EBITDAre in accordance with standards established by Nareit, which defines EBITDAre as EBITDA, excluding gains and losses from the sale of certain real estate assets (including gains

and losses from change in control), plus real estate related impairments, and adjustments to reflect the entity’s share of EBITDAre of unconsolidated affiliates. The Company presents EBITDAre because it believes that it provides further useful information to investors in comparing its operating performance between periods and between REITs that report EBITDAre using the Nareit definition.

The Company also considers the exclusion of non-cash straight-line operating ground lease expense from EBITDAre useful, as this expense does not reflect the underlying performance of the related hotels (Adjusted EBITDAre).

The Company further excludes actual corporate-level general and administrative expense for the Company from Adjusted EBITDAre (Adjusted Hotel EBITDA) to isolate property-level operational performance over which the Company’s hotel operators have direct control. The Company believes Adjusted Hotel EBITDA provides useful supplemental information to investors regarding operating performance and is used by management to measure the performance of the Company’s hotels and effectiveness of the operators of the hotels.

The following table reconciles the Company’s GAAP net income ~~(loss)~~ to EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (in thousands):

The following table reconciles the Company’s GAAP net income ~~(loss)~~ to EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA by quarter for the last five quarters (in thousands):

As of September 30, ~~2021,~~2022, the Company owned ~~215~~218 hotels with an aggregate of ~~28,085~~28,693 rooms located in 3536 states. The following tables summarize the number of hotels and rooms by brand and by state:

The following table summarizes the location, brand, manager, date acquired or completed and number of rooms for each of the ~~215~~218 hotels the Company owned as of September 30, ~~2021.~~2022:

City

State

Brand

Manager

Date

Acquired or

Completed

Rooms

~~Richmond~~Stafford

VATX

~~Residence Inn~~Homewood Suites

~~White Lodging~~Western

~~12/8/~~3/1/2014

7578

~~Suffolk~~Texarkana

VATX

~~Courtyard~~Hampton

~~Crestline~~Aimbridge

3/1/~~2014~~31/2011

9281

~~Suffolk~~Provo

VAUT

~~TownePlace Suites~~Residence Inn

~~Crestline~~Dimension

3/1/2014

72114

~~Virginia Beach~~Salt Lake City

VAUT

~~Courtyard~~Residence Inn

~~Crestline~~Huntington

~~3/1/2014~~10/20/2017

~~141~~136

~~Virginia Beach~~Salt Lake City

VAUT

~~Courtyard~~SpringHill Suites

~~Crestline~~HHM

~~3/1/2014~~11/2/2010

~~160~~143

~~Kirkland~~Alexandria

WAVA

Courtyard

~~InnVentures~~Marriott

3/1/2014

~~150~~178

~~Seattle~~Alexandria

WAVA

~~Residence Inn~~SpringHill Suites

~~InnVentures~~Marriott

3/~~1/2014~~28/2011

~~234~~155

~~Tukwila~~Charlottesville

WAVA

~~Homewood Suites~~Courtyard

~~Dimension~~Crestline

3/1/2014

~~106~~139

~~Madison~~Manassas

WIVA

~~Hilton Garden~~Residence Inn

~~Raymond~~Crestline

2/~~18/2021~~16/2011

~~176~~107

~~Total~~Richmond

Courtyard

White Lodging

12/8/2014

~~28,085~~135

Richmond

Marriott

White Lodging

3/1/2014

413

Richmond

Residence Inn

White Lodging

12/8/2014

Suffolk

Courtyard

Crestline

3/1/2014

Suffolk

TownePlace Suites

Crestline

3/1/2014

Virginia Beach

Courtyard

Crestline

3/1/2014

141

Virginia Beach

Courtyard

Crestline

3/1/2014

160

Kirkland

Courtyard

InnVentures

3/1/2014

150

Seattle

Residence Inn

InnVentures

3/1/2014

234

Tukwila

Homewood Suites

Dimension

3/1/2014

106

Madison

Hilton Garden Inn

Raymond

2/18/2021

176

Total

28,693

(1)

Manager noted was as of September 30, 2022. Effective October 1, 2022, management responsibility of these three properties was transferred from Stonebridge Realty Advisors, Inc. ("Stonebridge") to InnVentures IVI, LP ("InnVentures").

Related Parties

The Company has engaged in, and is expected to continue to engage in, transactions with related parties. These transactions cannot be construed to be at arm’s length and the results of the Company’s operations may be different if these transactions were conducted with non-related parties. See Note 6 titled “Related Parties” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, for additional information concerning the Company’s related party transactions.

Liquidity and Capital Resources

Capital Resources

The Company’s principal short term sources of liquidity are the operating cash flows generated from the Company’s properties and availability under its ~~revolving credit facility. Periodically,~~Revolving Credit Facility. Over the long term, the Company may receive proceeds from strategic additional secured and unsecured debt financing, dispositions of its hotel properties ~~(such as the sale of 23 hotels in the first nine months of 2021 for proceeds of approximately $235 million discussed above in “2021 Hotel Portfolio Activities”)~~ and offerings of the Company’s common shares, including pursuant to the ATM ~~Program (as defined below).~~Program. Macroeconomic pressures including inflation, increases in interest rates and general market uncertainty could impact the Company’s ability to raise debt or equity capital to fund long-term liquidity requirements in a cost-effective manner.

As of September 30, ~~2021,~~2022, the Company had ~~$1.4~~$1.3 billion of total outstanding debt consisting of ~~$502.4~~$331.8 million of mortgage debt and ~~$870.0 million~~$1.0 billion outstanding under its unsecured credit facilities, excluding unamortized debt issuance costs and fair value adjustments. As of September 30, ~~2021,~~2022, the Company had available corporate cash on hand of approximately ~~$39.4~~$25.6 million, ~~as well as~~$100 million of available funds under the $575 million term loan facility and unused borrowing capacity under its ~~revolving credit facility~~Revolving Credit Facility of approximately ~~$425~~$650 million. In the near term, the impact of COVID-19 on the global economy, including any sustained decline in the Company’s performance, may make it more difficult or costly for the Company to raise debt or equity capital to fund long-term liquidity requirements.

The credit agreements governing the unsecured credit facilities contain mandatory prepayment requirements, customary affirmative and negative covenants and events of default. The credit agreements require that the Company comply with various covenants, which include, among others, a minimum tangible net worth, maximum debt limits, minimum interest and fixed charge

Index

coverage ratios, and restrictions on certain investments. The Company was in compliance with the applicable covenants as of September 30, 2022.

As a result of COVID-19 and the associated disruption to the Company’s operating results, the Company first entered into amendments in June 2020 that suspended the testing of the Company’s ~~existing~~ financial maintenance covenants under the unsecured credit ~~facilities. These amendments~~facilities and imposed certain restrictions regarding ~~its~~the Company's investing and financing ~~activities including, but not limited to, limitations on~~activities. Further amendments were entered into in March 2021 (the “March 2021 amendments”), extending the ~~acquisition of property, payment of distributions to shareholders, capital expenditures and use of proceeds from the sale of property or common shares~~majority of the Company, that applied during such testing suspension period. On March 1, 2021, as a result of the continued disruption from COVID-19 and the related uncertainty with respect to the Company’s future operating results, the Company entered into further amendments to each of the unsecured credit facilities to extend the covenant ~~waiver period for all but two of the Company’s existing financial maintenance covenants~~waivers until the date that the compliance certificate was required to be delivered for the fiscal quarter ~~ending~~ended June 30, 2022 (unless the Company elected an earlier date) (the “Extended Covenant Waiver Period”). The ~~testing for the Minimum Fixed Charge Coverage Ratio~~March 2021 amendments imposed several modifications and the Minimum Unsecured Interest Coverage Ratio was suspended until the compliance certificate was required to be delivered for the fiscal quarter ending March 31, 2022 (unless the Company elected an earlier date).

~~Additionally, these amendments modified the calculation of the existing financial covenants for the first three quarterly calculations subsequent to the end of~~restrictions during the Extended Covenant Waiver Period, including continued cash distribution restrictions, except for the payment of cash dividends of $0.01 per common share per quarter or to ~~annualize calculated amounts based on~~ the ~~period beginning with~~extent required to maintain REIT status, modification of the ~~first fiscal quarter~~previous operating restrictions to less restrictive levels, and changes to the calculation, of the financial maintenance covenants upon exiting the Extended Covenant Waiver Period, ~~through~~and an increase in the ~~most recently ended fiscal~~

~~Index~~

~~quarter.~~ ~~The March 2021 amendments also modified certain~~LIBOR floor and establishment of ~~the existing financial maintenance covenants to less restrictive levels upon exiting the Extended Covenant Waiver Period as follows~~ ~~(capitalized terms are~~a Base Rate (as defined in the credit agreements): floor under the $425 million revolving credit facility.

●

~~Minimum Fixed Charge Coverage Ratio of 1.05 to 1.00 for the first fiscal quarter, 1.25 to 1.00 for one fiscal quarter and then a ratio of 1.50 to 1.00 thereafter;~~

●

~~Maximum Unsecured Leverage Ratio of 65% for two fiscal quarters and 60% thereafter.~~

~~Except as otherwise set forth in the amendments, the terms of the credit agreements remain in effect.~~

In July 2021, the Company notified its lenders under its unsecured credit facilities that it had elected to exit the Extended Covenant Waiver Period early, effective on July 29, ~~2021.~~2021 pursuant to the terms of each of its unsecured credit facilities. The unsecured credit facilities do not provide the Company the ability to re-enter the Extended Covenant Waiver Period once it has elected to exit. Upon exiting the Extended Covenant Waiver Period, the Company iswas no longer subject to the restrictions ~~described above~~ regarding its investing and financing activities that were applicable during the Extended Covenant Waiver Period, including, but not limited to, limitations on the acquisition of property, payment of distributions to shareholders (except for the payment of cash dividends of $0.01 per common share per quarter or to the extent required to maintain REIT status), capital expenditures and use of proceeds from the sale of property or common shares of the Company. Those restrictions, including the restriction on payment of distributions to shareholders, were still in place throughout the second quarter of 2021.

On June 2, 2022, the Company entered into an unsecured $75 million senior notes facility with a maturity date of June 2, 2029. The Company used the net proceeds from the $75 million senior notes facility for general corporate purposes, including the repayment of borrowings under the Company’s ~~annualized results for~~$425 million revolving credit facility and repayment of mortgage debt.

In July 2022, the ~~six months ended September 30, 2021 met~~Company entered into an amendment and restatement of its $850 million credit facility, increasing the ~~financial maintenance covenants based~~borrowing capacity to $1.2 billion. The amendment and restatement effectively extended the maturity date of the facility and changed the reference rate of the facility from LIBOR to SOFR plus 10 basis points plus a margin ranging from 1.35% to 2.25% depending on the ~~thresholds stipulated for the second fiscal quarter tested upon exiting the Extended Covenant Waiver Period as described in Note 4 titled “Debt”~~ in ~~the~~ Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q. The unsecured credit facilities do not provide the Company the ability to re-enter the Extended Covenant Waiver Period once it has elected to exit.leverage ratio.

See Note 4 titled “Debt” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, for a description of the Company’s debt ~~instruments~~agreements as of September 30, ~~2021.~~2022 and amendments to those agreements prior to that date.

~~On August 12, 2020,~~The Company has a universal shelf registration statement on Form S-3 (No. 333-262915) that was automatically effective upon filing on February 23, 2022. The Company may offer an indeterminate number or amount, as the case may be, of (1) common shares, no par value per share; (2) preferred shares, no par value per share; (3) depository shares representing the Company’s preferred shares; (4) warrants exercisable for the Company’s common shares, preferred shares or depository shares representing preferred shares; (5) rights to purchase common shares; and (6) unsecured senior or subordinate debt securities, all of which may be issued from time to time on a delayed or continuous basis pursuant to Rule 415 under the Securities Act. Future offerings will depend on a variety of factors to be determined by the Company, including market conditions, the trading price of the Company’s common shares and opportunities for uses of any proceeds.

The Company has entered into an equity distribution agreement pursuant to which the Company may sell, from time to time, up to an aggregate of $300 million of its common shares under ~~an at-the-market offering program (the “ATM Program”). During~~ the ~~second quarter~~ATM Program under the Company’s prior shelf registration statement and the current shelf registration statement described above. Since inception of ~~2021,~~the ATM Program in August 2020 through September 30, 2022, the Company has sold approximately 4.7 million common shares ~~under its ATM Program~~ at a weighted-average market sales price of approximately $16.26 per common share and received aggregate gross proceeds of approximately $76.0 million and proceeds net of offering costs, which included $0.9 million of commissions, of approximately $75.1 million. The Company used the net proceeds from the sale of these shares primarily to pay down borrowings onunder its $425 million revolving credit facility and for general corporate purposes, including acquisitions of hotel properties. As of September 30, ~~2021,~~2022, approximately $224.0 million remained available for issuance under the ATM Program. No shares were sold under the Company’s ATM Program in the ~~third quarter~~first three quarters of ~~2021.~~2022. The Company plans to use future net proceeds from the sale of ~~these~~ shares ~~to continue to pay down borrowings on its revolving credit facility (if any). The Company plans to use the corresponding increased availability~~ under the ~~revolving credit facility~~ATM Program for general corporate purposes which may include, among other things, acquisitions of additional properties, the repayment of ~~other~~ outstanding indebtedness, capital

Index

expenditures, improvement of properties in its portfolio and working capital. The Company may also use the net proceeds to acquire another REIT or other company that invests in income producing properties.

Capital Uses

The Company anticipates that cash flow from operations, availability under its unsecured credit facilities, additional borrowings and proceeds from hotel dispositions and equity offerings will be adequate to meet its anticipated liquidity requirements, including required distributions to shareholders, share repurchases, capital improvements, debt service, hotel acquisitions, ~~hotel renovations, share repurchases,~~lease commitments, and ~~required distributions to shareholders.~~cash management activities.

Distributions

The Company generally must distribute annually at least 90% of its REIT taxable income, subject to certain adjustments and excluding any net capital gain, in order to maintain its REIT status. During the Extended Covenant Waiver Period, as a requirement under the amendments to its unsecured credit facilities, the Company was restricted in its ability to make distributions except for the payment of cash distributions of $0.01 per common share per quarter or to the extent required to maintain REIT status. ~~In March and June 2021,~~The Company exited the ~~Company declared quarterly distributions of $0.01 per common share, which were paid in April and July, respectively, totaling~~ $0.02 per common share and $4.5 million for the nine months ended September 30, 2021. Additionally, in September 2021, the Company declared a quarterly distribution of $0.01 per common share, totaling $2.3 million that was paid on October 18, 2021. As discussed above, in July 2021, the Company notified its lendersExtended Covenant Waiver Period under its unsecured credit facilities ~~that it had elected to exit the~~

~~Index~~

~~Extended Covenant Waiver Period effective on~~in July ~~29, 2021. As~~2021 and, as a result, ~~upon exiting the Extended Covenant Waiver Period, the Company~~ is no longer subject to the ~~restrictions~~above-described restriction on distributions. On February 22, 2022, the Company announced that its Board of Directors reinstated its policy of distributions ~~that were applicable during~~on a monthly basis, and declared a monthly cash distribution of $0.05 per common share with the ~~Extended Covenant Waiver Period.~~first monthly cash distribution paid on March 15, 2022 for shareholders of record on March 4, 2022. In August 2022, the Board of Directors approved an increase in the monthly cash distribution from $0.05 to $0.07 per common share and declared a monthly cash distribution of $0.07 per common share payable on September 15, 2022 for shareholders of record on September 2, 2022. On September 20, 2022, the Company declared a monthly cash distribution of $0.07 per common share for the month of October, paid on October 17, 2022, to shareholders of record as of October 4, 2022. For the three and nine months ended September 30, 2022, the Company paid distributions of $0.17 and $0.38, respectively, per common share for a total of $38.8 million and $86.8 million, respectively. Subsequent to quarter end, in October 2022, the Company declared a monthly cash distribution of $0.08 per common share for the month of November 2022.

The Company, as it has done historically due to seasonality, may use its ~~revolving credit facility~~Revolving Credit Facility to maintain the consistency of distributions, taking into consideration any acquisitions, dispositions, capital improvements and economic cycles. Any distribution will be subject to approval of the Company’s Board of Directors and there can be no assurance of the classification or duration of distributions at any particular distribution rate. The Board of Directors monitors the Company’s distribution rate relative to the performance of its hotels on an ongoing basis and may make adjustments to the distribution rate as determined to be prudent in relation to other cash requirements of the ~~Company.~~Company or to the extent required to maintain REIT status. If cash flow from operations and the ~~revolving credit facility~~Revolving Credit Facility are not adequate to meet liquidity requirements, the Company may utilize additional financing sources to make distributions. Although the Company has relatively low levels of debt, there can be no ~~assurances~~assurance it will be successful with this strategy, and it may need to reduce its distributions to minimum levels required to maintain its qualification as a real estate investment trust. If the Company were unable to extend its maturing debt in future periods or if it were to default on its debt, it may be unable to make distributions.

Share Repurchases

In May ~~2021,~~2022, the Company’s Board of Directors approved a one-year extension of its existing share repurchase program, authorizing share repurchases up to an aggregate of $345 million (the “Share Repurchase Program”). The Share Repurchase Program may be suspended or terminated at any time by the Company and will end in July ~~2022~~2023 if not terminated or extended earlier. During the ~~first three~~nine months ~~of 2020,~~ended September 30, 2022, the Company purchased, under its Share Repurchase Program, ~~approximately 1.5~~0.1 million of its common shares at a weighted-average market purchase price of approximately ~~$9.42~~$14.20 per common share for an aggregate purchase price, including commissions, of approximately ~~$14.3~~$1.5 million. The shares were repurchased under a written trading plan as part of the Share Repurchase Program that ~~provided~~provides for share repurchases in open market transactions and ~~was~~that is intended to comply with Rule 10b5-1 under the ~~Securities~~ Exchange ~~Act of 1934, as amended. In March 2020 the Company terminated its written trading plan under the Share Repurchase Program and has not repurchased any shares since that time.~~Act. Repurchases under the Share Repurchase Program have been funded, and the Company intends to fund ~~any~~ future ~~purchases,~~repurchases, with cash on hand or availability under its unsecured credit facilities, subject to applicable restrictions under the Company’s unsecured credit facilities (if any). The timing of share repurchases and the number of common shares to be repurchased under the Share Repurchase Program will also depend upon prevailing market conditions, regulatory requirements and other ~~factors, including compliance with applicable credit facility covenants (if any).~~factors. As of September 30, 2022, approximately $343.5 million remained available for purchase under the Share Repurchase Program.

Capital Improvements

Management routinely monitors the condition and operations of its hotels and plans renovations and other improvements as it deems prudent. The Company is committed to maintaining and enhancing each property’s competitive position in its market. The

Index

Company has invested in and plans to continue to reinvest in its hotels. Under certain loan and management agreements, the Company is required to place in escrow funds for the repair, replacement and refurbishing of furniture, fixtures, and equipment, based on a percentage of gross revenues, provided that such amount may be used for the Company’s capital expenditures with respect to the hotels. As of September 30, ~~2021,~~2022, the Company held approximately ~~$27.5~~$31.1 million in reserve related to these properties. During the nine months ended September 30, ~~2021,~~2022, the Company invested approximately ~~$9.7~~$32.2 million in capital ~~expenditures and~~expenditures. The Company anticipates spending ~~an additional $15-20~~approximately $55 million to $65 million during ~~the remainder of 2021,~~2022, which includes ~~scheduled~~various renovation projects for approximately ~~eight properties.~~20 to 25 properties, however, inflationary pressures or supply chain shortages, among other issues, may result in increased costs and delays for anticipated projects. The Company does not currently have any existing or planned projects for new property development.

Upcoming Debt Maturities and Debt Service Payments

The Company has approximately $146.0 million of principal and interest payments due on its debt over the next 12 months. Included in this total is approximately $37.8 million of mortgage loans maturing in the first half of 2023, which the Company plans to pay off using borrowings under its Revolving Credit Facility and/or new financing. The Company has paid off $153.5 million of loans that matured in 2022, including $31.5 million paid on August 1, 2022, using borrowings under its unsecured credit facilities. See Note 4 titled “Debt” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q.

Hotel Purchase Contract Commitments

As of September 30, ~~2021,~~2022, the Company had separate outstanding contracts for the potential purchase of ~~five~~three hotels, consisting of one hotel in Madison, Wisconsin, one hotel in ~~Memphis, Tennessee, two hotels in Fort Worth, Texas~~Louisville, Kentucky and one hotel in ~~Portland, Oregon~~Pittsburgh, Pennsylvania for a total combined purchase price of approximately ~~$242.6~~$163.6 million. ~~Four~~Two of the hotels are already in operation and one is under development and scheduled to open ~~no earlier than 2023.~~in early 2024. Closings on the ~~four~~two hotels already in operation ~~are~~were completed on October 25, 2022. See Note 9 titled “Subsequent Events” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, for additional information concerning these two acquisitions. The remaining hotel is expected to close upon completion of development, which is currently expected to occur in ~~the fourth quarter of 2021, while closing on the remaining hotel is expected upon completion of development.~~early 2024. Although the Company is working towards acquiring ~~these hotels,~~this hotel, there are many conditions to closing that have not yet been satisfied and there can be no assurance that ~~closings~~closing on ~~these hotels~~this hotel will occur under the outstanding purchase ~~contracts.~~contract. The Company plans to utilize its available cash ~~(including a portion of the proceeds from the sale of 20 hotels in July 2021)~~ or borrowings under its unsecured credit facilities available at closing to purchase ~~hotels~~the remaining hotel under contract if ~~closings occur.~~closing occurs.

Cash Management Activities

As part of the cost sharing arrangements discussed in Note 6, titled “Related Parties” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, certain day-to-day transactions may result in amounts due to or from the Company and ARG. To efficiently manage cash disbursements, the Company or ARG may make payments for the other company. Under the cash management process, each company may advance or defer up to $1 million at any time. Each quarter, any outstanding amounts are settled between the companies. This process allows each company to minimize its cash on hand and reduces the cost for each company. The amounts outstanding at any point in time are not significant to either of the companies.

~~Index~~

Business Interruption

Being in the real estate industry, the Company is exposed to natural disasters on both a local and national scale. Although management believes ~~there is~~the Company has adequate insurance to cover this exposure, there can be no assurance that such events will not have a material adverse effect on the Company’s financial position or results of operations.

Seasonality

The hotel industry historically has been seasonal in nature. Seasonal variations in occupancy at the Company’s hotels may cause quarterly fluctuations in its revenues. Generally, occupancy rates and hotel revenues for the Company’s hotels are greater in the second and third quarters than in the first and fourth quarters. However, due to the effects of COVID-19, these typical seasonal patterns ~~were~~have been disrupted ~~in 2020 and~~since the first ~~nine months~~quarter of ~~2021 and may also be disrupted~~2020, although the Company experienced some seasonal decrease in demand in the ~~remainder~~first and fourth quarters of ~~2021.~~each year. To the extent that cash flow from operations is insufficient during any quarter due to temporary or seasonal fluctuations in revenue, the Company expects to utilize cash on hand or available financing sources to meet cash requirements.

Index

Critical Accounting Policies and Estimates

The preparation of the Company’s financial statements in accordance with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Company’s financial statements, the reported amounts of revenues and expenses during the reporting periods and the related disclosures in the Company’s Unaudited Consolidated Financial Statements and Notes thereto. The Company has discussed those policies and estimates that it believes are critical and require the use of complex judgment in their application in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on February 22, 2022. There have been no material changes to the Company’s critical accounting policies or the methods or assumptions we apply.

New Accounting Standards

See Note 1 titled “Organization and Summary of Significant Accounting Policies” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q,, for information on the adoption of ~~the guidance~~recently issued accounting standards in the ~~reference rate reform accounting standards effective in March 2020 and January 2021 as well as recent accounting standards updates to be adopted in the future.~~nine months ended September 30, 2022.

Subsequent Events

On October ~~18, 2021,~~17, 2022, the Company paid approximately ~~$2.3~~$16.0 million, or ~~$0.01~~$0.07 per ~~outstanding~~ common share, in distributions to ~~its~~shareholders of record as of October 4, 2022.

In October 2022, the Company declared a monthly cash distribution of $0.08 per common ~~shareholders.~~share for the month of November 2022. The distribution is payable on November 15, 2022, to shareholders of record as of November 2, 2022.

On October ~~28, 2021,~~25, 2022, the Company completed the purchase of the existing ~~150-room Hilton Garden Inn~~156-room AC Hotel in ~~Memphis, Tennessee~~Louisville, Kentucky and the 134-room AC Hotel in Pittsburgh, Pennsylvania for a total combined gross purchase price of approximately ~~$38.0~~$85 million. The Company utilized its available cash on hand and a $50 million draw on its $575 million term loan facility to purchase the ~~hotel.~~hotels. After this transaction, the $575 million term loan facility had $50 million of remaining available capacity on its delayed draw option.

3840

Index

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As of September 30, ~~2021,~~2022, the Company’s financial instruments were not exposed to significant market risk due to foreign currency exchange risk, commodity price risk or equity price risk. However, the Company is exposed to interest rate risk due to possible changes in short term interest rates as it invests its cash or borrows on its ~~revolving credit facility~~Revolving Credit Facility and due to the portion of its variable-rate term debt that is not fixed by interest rate swaps. As of September 30, ~~2021,~~2022, after giving effect to interest rate swaps, as described below, approximately ~~$50.0~~$175.0 million, or approximately 4%13% of the Company’s total debt outstanding, was subject to variable interest rates. Based on the Company’s variable-rate debt outstanding as of September 30, ~~2021,~~2022, every 100 basis points change in interest rates will impact the Company’s annual net income by approximately ~~$0.5~~$1.8 million, all other factors remaining the same. With the exception of interest rate swap transactions, the Company has not engaged in transactions in derivative financial instruments or derivative commodity instruments.

As of September 30, ~~2021,~~2022, the Company’s variable-rate debt consisted of its ~~$820~~unsecured credit facilities, including borrowings outstanding under its Revolving Credit Facility and $870 million of term loans. Currently, the Company uses interest rate swaps to manage its interest rate risk on a portion of its variable-rate debt. As of September 30, ~~2021,~~2022, the Company had 1312 interest rate swap agreements that effectively fix the interest payments on approximately ~~$770.0~~$695.0 million of the Company’s variable-rate debt outstanding with swap maturity dates ranging from ~~August 2022~~March 2023 to December 2029. Under the terms of all of the Company’s interest rate swaps, the Company pays a fixed rate of interest and receives a floating rate of interest equal to the annual rate of the one-month ~~LIBOR.~~SOFR plus a 0.10% SOFR spread adjustment. See Note 5 titled “Fair Value of Financial Instruments” in the Company’s Unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q, for a description of the Company’s interest rate swaps as of September 30, ~~2021.~~2022.

In addition to its variable-rate debt and interest rate swaps discussed above, the Company has assumed or originated fixed interest rate mortgages payable to lenders under permanent financing arrangements as well as ~~one $50 million~~two fixed-rate senior notes ~~facility.~~facilities totaling $125 million. The following table summarizes the annual maturities and average interest rates of the Company’s mortgage debt and borrowings outstanding under its unsecured credit facilities at September 30, ~~2021.~~2022. All dollar amounts are in thousands.


	October 1 - December 31, 2021			2022			2023			2024			2025			Thereafter			Total		Fair Market Value		October 1 - December 31, 2022			2023			2024			2025			2026			Thereafter			Total		Fair Market Value
Total debt:
Maturities	$	4,375		$	165,831		$	296,213		$	338,597		$	245,140		$	322,265		$	1,372,421	$	1,346,923	$	2,587		$	96,214		$	113,597		$	245,140		$	74,649		$	794,616		$	1,326,803	$	1,271,535
Average interest rates⁽¹⁾		3.5	%		3.4	%		3.4	%		3.7	%		3.9	%		4.0	%						3.7	%		3.8	%		3.9	%		4.1	%		4.2	%		4.3	%

Variable-rate debt:
Maturities	$	-		$	-		$	250,000		$	310,000		$	175,000		$	85,000		$	820,000	$	794,876	$	-		$	50,000		$	85,000		$	175,000		$	-		$	560,000		$	870,000	$	868,364
Average interest rates ⁽¹⁾		3.0	%		3.0	%		3.2	%		3.6	%		4.1	%		4.7	%						3.5	%		3.6	%		3.9	%		4.1	%		4.3	%		4.4	%

Fixed-rate debt:
Maturities	$	4,375		$	165,831		$	46,213		$	28,597		$	70,140		$	237,265		$	552,421	$	552,047	$	2,587		$	46,214		$	28,597		$	70,140		$	74,649		$	234,616		$	456,803	$	403,171
Average interest rates		4.1	%		4.0	%		3.9	%		3.9	%		3.8	%		3.7	%						4.1	%		4.1	%		4.1	%		4.0	%		4.0	%		4.1	%

~~(1)~~

(1)

The average interest rate gives effect to interest rate swaps, as applicable.

Senior management, including the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation process, the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer have concluded that the Company’s disclosure controls and procedures were effective as of September 30, ~~2021.~~2022. There have been no changes in the Company’s internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company is or may be a party to various legal proceedings that arise in the ordinary course of business. The Company is not currently involved in any litigation nor, to management’s knowledge, is any litigation threatened against the Company where the outcome would, in management’s judgment based on information currently available to the Company, have a material adverse effect on the Company’s consolidated financial position or results of operations.

The following is a summary of all share repurchases during the third quarter of 2022.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Virginia	26-1379210
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

814 East Main Street Richmond, Virginia		23219
(Address of principal executive offices)	(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, no par value	APLE	New York Stock Exchange


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


			Page Number
PART I. FINANCIAL INFORMATION

	Item 1.	Financial Statements (Unaudited)	3

		Consolidated Balance Sheets – September 30, ~~2021~~2022 and December 31, ~~2020~~2021	3

		Consolidated Statements of Operations and Comprehensive Income ~~(Loss)~~ – three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021	4

		Consolidated Statements of Shareholders’ Equity – three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021	5

		Consolidated Statements of Cash Flows – nine months ended September 30, ~~2021~~2022 and ~~2020~~2021	6

		Notes to Consolidated Financial Statements	7

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2122

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3941

	Item 4.	Controls and Procedures	3941

PART II. OTHER INFORMATION

	Item 1.	Legal Proceedings	42

	Item 2.	40Unregistered Sales of Equity Securities and Use of Proceeds	42

	Item 6.	Exhibits	4043

Signatures			4144


	September 30,			December 31,			September 30,			December 31,
	2021			2020			2022			2021
	(unaudited)						(unaudited)
Assets
Investment in real estate, net of accumulated depreciation and amortization of $1,266,122 and $1,235,698, respectively	$	4,541,424		$	4,732,896
Assets held for sale		0			5,316
Investment in real estate, net of accumulated depreciation and amortization of $1,446,221 and $1,311,262, respectively							$	4,567,000		$	4,677,185
Cash and cash equivalents		39,432			5,556			25,573			3,282
Restricted cash-furniture, fixtures and other escrows		34,446			28,812			38,821			36,667
Due from third party managers, net		52,322			22,137			65,110			40,052
Other assets, net		37,203			35,042			80,999			33,341
Total Assets	$	4,704,827		$	4,829,759		$	4,777,503		$	4,790,527

Liabilities
Debt, net	$	1,366,621		$	1,482,571		$	1,318,319		$	1,438,758
Finance lease liabilities		111,706			219,981			111,969			111,776
Accounts payable and other liabilities		98,386			97,860			94,219			92,672
Total Liabilities		1,576,713			1,800,412			1,524,507			1,643,206

Shareholders' Equity
Preferred stock, authorized 30,000,000 shares; NaN issued and outstanding		0			0
Common stock, no par value, authorized 800,000,000 shares; issued and outstanding 228,354,214 and 223,212,346 shares, respectively		4,570,217			4,488,419
Accumulated other comprehensive loss		(24,650	)		(42,802	)
Preferred stock, authorized 30,000,000 shares; none issued and outstanding								-			-
Common stock, no par value, authorized 800,000,000 shares; issued and outstanding 228,833,710 and 228,255,642 shares, respectively								4,579,198			4,569,352
Accumulated other comprehensive income (loss)								38,354			(15,508	)
Distributions greater than net income		(1,417,453	)		(1,416,270	)		(1,364,556	)		(1,406,523	)
Total Shareholders' Equity		3,128,114			3,029,347			3,252,996			3,147,321

Total Liabilities and Shareholders' Equity	$	4,704,827		$	4,829,759		$	4,777,503		$	4,790,527


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


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

Nine Months Ended September 30, 2021 and 2020
	Common Stock						Accumulated Other			Distributions
	Number of Shares			Amount			Comprehensive Income (Loss)			Greater Than Net Income			Total
Balance at December 31, 2020		223,212		$	4,488,419		$	(42,802	)	$	(1,416,270	)	$	3,029,347
Share based compensation, net		465			6,762			-			-			6,762
Issuance of common shares, net		4,677			75,036			-			-			75,036
Interest rate derivatives		-			-			18,152			-			18,152
Net income		-			-			-			5,607			5,607
Distributions declared to shareholders ($0.03 per share)		-			-			-			(6,790	)		(6,790	)
Balance at September 30, 2021		228,354		$	4,570,217		$	(24,650	)	$	(1,417,453	)	$	3,128,114

Balance at December 31, 2019		223,863		$	4,493,763		$	(4,698	)	$	(1,198,052	)	$	3,291,013
Share based compensation, net		889			9,198			-			-			9,198
Issuance of common shares, net		-			(337	)								(337	)
Common shares repurchased		(1,521	)		(14,336	)		-			-			(14,336	)
Interest rate derivatives		-			-			(43,622	)		-			(43,622	)
Net loss		-			-			-			(121,960	)		(121,960	)
Distributions declared to shareholders ($0.20 per share)		-			-			-			(44,952	)		(44,952	)
Balance at September 30, 2020		223,231		$	4,488,288		$	(48,320	)	$	(1,364,964	)	$	3,075,004

Location	Brands	Date of Purchase Contract	Rooms		Refundable Deposits		Gross Purchase Price
Madison, WI (1)	Embassy Suites	7/27/2021		260	$	893	$	78,598
Memphis, TN	Hilton Garden Inn	8/27/2021		150		300		38,000
Fort Worth, TX	Hilton Garden Inn	9/2/2021		157		176		29,500
Fort Worth, TX	Homewood Suites	9/2/2021		112		128		21,500
Portland, OR	Hampton	9/2/2021		243		446		75,000
				922	$	1,943	$	242,598

~~City~~	~~State~~	~~Brand~~	~~Date Sold~~	~~Rooms~~
~~Sanford~~	FL	~~SpringHill Suites~~	~~1/16/2020~~		~~105~~
~~Boise~~	ID	~~SpringHill Suites~~	~~2/27/2020~~		~~230~~
~~Tulare~~	CA	~~Hampton~~	~~12/30/2020~~		86
~~Total~~					~~421~~

	September 30, 2021		December 31, 2020
Revolving credit facility	$	-	$	105,800
Term loans and senior notes, net		864,705		864,225
Mortgage debt, net		501,916		512,546
Debt, net	$	1,366,621	$	1,482,571

							Fair Value Asset (Liability)
Notional Amount at September 30, 2021		Origination Date	Effective Date	Maturity Date	Swap Fixed Interest Rate		September 30, 2021			December 31, 2020
Active interest rate swaps designated as cash flow hedges at September 30, 2021:
	100,000	4/7/2016	9/30/2016	3/31/2023	1.33%		$	(1,690	)	$	(2,681	)
	75,000	5/31/2017	7/31/2017	6/30/2024	1.96%			(3,022	)		(4,639	)
	10,000	8/10/2017	8/10/2017	6/30/2024	2.01%			(416	)		(636	)
	50,000	6/1/2018	1/31/2019	6/30/2025	2.89%			(4,065	)		(5,911	)
	50,000	7/2/2019	7/5/2019	7/18/2024	1.65%			(1,610	)		(2,593	)
	50,000	8/21/2019	8/23/2019	8/18/2024	1.32%			(1,141	)		(2,036	)
	50,000	8/21/2019	8/23/2019	8/30/2024	1.32%			(1,143	)		(2,049	)
	85,000	12/31/2019	12/31/2019	12/31/2029	1.86%			(3,978	)		(8,677	)
	25,000	12/6/2018	1/31/2020	6/30/2025	2.75%			(1,904	)		(2,801	)
	50,000	12/7/2018	5/18/2020	1/31/2024	2.72%			(2,736	)		(3,967	)
	75,000	8/21/2019	5/18/2020	5/18/2025	1.27%			(1,536	)		(3,294	)
	75,000	7/31/2020	8/18/2020	8/18/2022	0.13%			(8	)		14
	75,000	8/21/2019	5/18/2021	5/18/2026	1.30%			(1,401	)		(3,415	)
	770,000							(24,650	)		(42,685	)
						��
Matured interest rate swap at September 30, 2021:
$	50,000	4/7/2016	9/30/2016	3/31/2021	1.09%			-			(117	)
							$	(24,650	)	$	(42,802	)

	2020 Incentive Plan			2019 Incentive Plan
Period common shares issued	First Quarter 2021			First Quarter 2020

Common shares earned under each incentive plan		555,726			665,552
Common shares surrendered on issuance date to satisfy tax withholding obligations		117,647			60,616
Common shares earned and issued under each incentive plan, net of common shares surrendered on issuance date to satisfy tax withholding obligations		438,079			604,936
Closing stock price on issuance date	$	14.03		$	13.01
Total share-based compensation earned, including the surrendered shares (in millions)	$	7.8	(1)	$	8.7	(2)
Of the total common shares earned and issued, total common shares unrestricted at time of issuance		160,216			426,553
Of the total common shares earned and issued, total common shares restricted at time of issuance		277,863			178,383

Restricted common shares vesting date	December 10, 2021			December 11, 2020
Common shares surrendered on vesting date to satisfy tax withholding requirements resulting from vesting of restricted common shares	n/a				60,066


	2021 Incentive Plan			2020 Incentive Plan
Period common shares issued	First Quarter 2022			First Quarter 2021

Common shares earned under each incentive plan		868,079			555,726
Common shares surrendered on issuance date to satisfy tax withholding obligations		245,597			117,647
Common shares earned and issued under each incentive plan, net of common shares surrendered on issuance date to satisfy tax withholding obligations		622,482			438,079
Closing stock price on issuance date	$	17.79		$	14.03
Total share-based compensation earned, including the surrendered shares (in millions)	$	15.4	(1)	$	7.8	(2)
Of the total common shares earned and issued, total common shares unrestricted at time of issuance		338,032			160,216
Of the total common shares earned and issued, total common shares restricted at time of issuance		284,450			277,863

Restricted common shares vesting date	December 9, 2022			December 10, 2021
Common shares surrendered on vesting date to satisfy tax withholding requirements resulting from vesting of restricted common shares	n/a				108,292


	Three Months Ended September 30,															Nine Months Ended September 30,
(in thousands, except statistical data)	2022			Percent of Revenue			2021			Percent of Revenue			Percent Change			2022			Percent of Revenue			2021			Percent of Revenue			Percent Change
Total revenue	$	341,150			100.0	%	$	277,164			100.0	%		23.1	%	$	939,296			100.0	%	$	683,281			100.0	%		37.5	%
Hotel operating expense		193,067			56.6	%		153,953			55.5	%		25.4	%		529,584			56.4	%		393,103			57.5	%		34.7	%
Property taxes, insurance and other expense		19,052			5.6	%		17,927			6.5	%		6.3	%		56,510			6.0	%		54,936			8.0	%		2.9	%
General and administrative expense		10,271			3.0	%		13,261			4.8	%		-22.5	%		30,216			3.2	%		29,815			4.4	%		1.3	%

Loss on impairment of depreciable real estate assets		-						-					n/a				-						10,754					n/a
Depreciation and amortization expense		45,135						44,217						2.1	%		135,781						139,313						-2.5	%
Gain on sale of real estate		1,785						44					n/a				1,785						3,664						-51.3	%
Interest and other expense, net		14,933						15,977						-6.5	%		44,785						53,108						-15.7	%
Income tax expense		1,331						114					n/a				1,712						309						454.0	%

Net income		59,146						31,759						86.2	%		142,493						5,607					n/a
Adjusted Hotel EBITDA (1)		129,166						105,423						22.5	%		353,617						235,664						50.1	%

Number of hotels owned at end of period		218						215						1.4	%		218						215						1.4	%
ADR	$	157.91					$	140.02						12.8	%	$	150.02					$	121.36						23.6	%
Occupancy		75.7	%					71.5	%					5.9	%		73.6	%					65.9	%					11.7	%
RevPAR	$	119.52					$	100.14						19.4	%	$	110.40					$	79.94						38.1	%


City	State	Brand	Date Sold	Rooms
Charlotte	NC	Homewood Suites	2/25/2021		118
Memphis	TN	Homewood Suites	3/16/2021		140
Overland Park	KS	SpringHill Suites	4/30/2021		102
Montgomery	AL	Hilton Garden Inn	7/22/2021		97
Montgomery	AL	Homewood Suites	7/22/2021		91
Rogers	AR	Residence Inn	7/22/2021		88
Phoenix	AZ	Courtyard	7/22/2021		127
Lakeland	FL	Courtyard	7/22/2021		78
Albany	GA	Fairfield	7/22/2021		87
Schaumburg	IL	Hilton Garden Inn	7/22/2021		166
Andover	MA	SpringHill Suites	7/22/2021		136
Fayetteville	NC	Residence Inn	7/22/2021		92
Greenville	SC	Residence Inn	7/22/2021		78
Jackson	TN	Hampton	7/22/2021		85
Johnson City	TN	Courtyard	7/22/2021		90
Allen	TX	Hampton	7/22/2021		103
Allen	TX	Hilton Garden Inn	7/22/2021		150
Beaumont	TX	Residence Inn	7/22/2021		133
Burleson/Fort Worth	TX	Hampton	7/22/2021		88
El Paso	TX	Hilton Garden Inn	7/22/2021		145
Irving	TX	Homewood Suites	7/22/2021		77
Richmond	VA	SpringHill Suites	7/22/2021		103
Vancouver	WA	SpringHill Suites	7/22/2021		119
Total					2,493


	3rd Quarter			4th Quarter			1st Quarter			2nd Quarter			3rd Quarter
	2021			2021			2022			2022			2022

ADR	$	140.02		$	131.04		$	137.03		$	153.35		$	157.91
Occupancy		71.5	%		67.5	%		67.1	%		77.9	%		75.7	%
RevPAR	$	100.14		$	88.43		$	91.98		$	119.41		$	119.52
Net income	$	31,759		$	13,221		$	18,002		$	65,345		$	59,146
Adjusted Hotel EBITDA (1)	$	105,423		$	84,609		$	87,936		$	136,515		$	129,166

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			Three Months Ended September 30,						Nine Months Ended September 30,
Net income (loss)	$	31,759		$	(40,948	)	$	5,607		$	(121,960	)
													2022			2021			2022			2021
Net income													$	59,146		$	31,759		$	142,493		$	5,607
Depreciation of real estate owned		43,028			48,307			134,880			144,019			44,372			43,028			133,489			134,880
Gain on sale of real estate		(44	)		-			(3,664	)		(8,785	)		(1,785	)		(44	)		(1,785	)		(3,664	)
Loss on impairment of depreciable real estate assets		-			-			10,754			4,382			-			-			-			10,754
Funds from operations		74,743			7,359			147,577			17,656			101,733			74,743			274,197			147,577
Amortization of finance ground lease assets		1,183			1,612			4,418			4,816			759			1,183			2,278			4,418
Amortization of favorable and unfavorable operating leases, net		98			103			294			305			97			98			299			294
Non-cash straight-line operating ground lease expense		41			44			128			135			38			41			116			128
Modified funds from operations	$	76,065		$	9,118		$	152,417		$	22,912		$	102,627		$	76,065		$	276,890		$	152,417


Number of Hotels and Guest Rooms by Brand	Number of Hotels and Guest Rooms by Brand				Number of Hotels and Guest Rooms by Brand
		Number of	Number of			Number of		Number of
Brand		Hotels	Rooms			Hotels		Rooms
Hilton Garden Inn		38		5,285			40		5,593
Hampton		36		4,710			37		4,953
Courtyard		33		4,653			33		4,653
Homewood Suites							30		3,417
Residence Inn		29		3,548			29		3,548
Homewood Suites		29		3,305
Fairfield		10		1,213			10		1,213
Home2 Suites		10		1,146			10		1,146
SpringHill Suites		9		1,245			9		1,245
TownePlace Suites		9		931			9		931
Hyatt Place		3		411			3		411
Marriott		2		619			2		619
Embassy Suites		2		316			2		316
Independent		2		263			1		208
AC Hotels		1		178			1		178
Aloft		1		157			1		157
Hyatt House		1		105			1		105
Total		215		28,085			218		28,693


Number of Hotels and Guest Rooms by State
	Number of		Number of
State	Hotels		Rooms
Alabama		13		1,246
Alaska		2		304
Arizona		13		1,776
Arkansas		2		248
California		26		3,721
Colorado		4		567
Florida		22		2,844
Georgia		5		585
Idaho		1		186
Illinois		7		1,255
Indiana		4		479
Iowa		3		301
Kansas		3		320
Louisiana		3		422
Maine		3		514
Maryland		2		233
Massachusetts		3		330
Michigan		1		148
Minnesota		3		405
Mississippi		2		168
Missouri		4		544
Nebraska		4		621
New Jersey		5		629
New York		4		554
North Carolina		8		881
Ohio		2		252
Oklahoma		4		545
Oregon		1		243
Pennsylvania		3		391
South Carolina		5		590
Tennessee		11		1,337
Texas		27		3,328
Utah		3		393
Virginia		11		1,667
Washington		3		490
Wisconsin		1		176
Total		218		28,693


Issuer Purchases of Equity Securities
	(a)		(b)		(c)		(d)
Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) (1)
July 1 - July 31, 2022		7,900	$	14.45		7,900	$	344,741
August 1 - August 31, 2022		-	-			-	$	344,741
September 1 - September 30, 2022		89,115	$	14.15		89,115	$	343,479
Total		97,015				97,015


Exhibit Number		Description of Documents
3.1		Amended and Restated Articles of Incorporation of the Company, as amended (Incorporated by reference to Exhibit 3.1 to the Company’s quarterly report on Form 10-Q (SEC File No. 001-37389) filed August 6, 2018)

3.2		Third Amended and Restated Bylaws of the Company (Incorporated by reference to Exhibit 3.2 to the Company’s quarterly report on Form 10-Q (SEC File No. 001-37389) filed May 18, 2020)

~~31.1~~10.1		Third Amended and Restated Credit Agreement dated as of July 25, 2022, among the Company, as borrower, certain subsidiaries of the Company, as guarantors, Bank of America, N.A., as Administrative Agent, KeyBank National Association and Wells Fargo Bank, National Association, as Co-Syndication Agents, U.S. Bank National Association, as Documentation Agent, Regions Bank as Managing Agent, the Lenders and Letter of Credit Issuers party thereto, and BofA Securities, Inc., KeyBanc Capital Markets, Wells Fargo Securities, LLC and U.S. Bank National Association, as Joint Lead Arrangers and Joint Bookrunners (Incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K (SEC File No. 001-37389) filed July 27, 2022)

31.1		Certification of the Company’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH)

31.2		Certification of the Company’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH)

31.3		Certification of the Company’s Chief Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH)

32.1		Certification of the Company’s Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (FURNISHED HEREWITH)

101		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2021~~2022 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations and Comprehensive Income, ~~(Loss),~~ (iii) the Consolidated Statements of Shareholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) related notes to these financial statements, tagged as blocks of text and in detail (FILED HEREWITH)
104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2021,~~2022, formatted as Inline XBRL and contained in Exhibit 101.


Apple Hospitality REIT, Inc.

By:	/s/ Justin G. Knight	Date: ~~Nov 4, 2021~~November 7, 2022
	Justin G. Knight,
	Chief Executive Officer (Principal Executive Officer)

By:	/s/ Elizabeth S. Perkins	Date: ~~Nov 4, 2021~~November 7, 2022
	Elizabeth S. Perkins,
	Chief Financial Officer (Principal Financial Officer)

By:	/s/ Rachel S. Labrecque	Date: ~~Nov 4, 2021~~November 7, 2022
	Rachel S. Labrecque,
	Chief Accounting Officer (Principal Accounting Officer)