Debt

9 Months Ended

Sep. 30, 2019

The following table sets forth information regarding the Company’s debt as of September 30, 2019 and December 31, 2018 (dollars in thousands):



			Principal Balance as of
Loan	Interest Rate	Maturity Date	September 30, 2019			December 31, 2018
Salt Lake City Marriott Downtown mortgage loan	4.25%	November 2020	$	53,866		$	55,032
Westin Washington D.C. City Center mortgage loan	3.99%	January 2023	61,106			62,734
The Lodge at Sonoma, a Renaissance Resort & Spa mortgage loan	3.96%	April 2023	27,188			27,633
Westin San Diego mortgage loan	3.94%	April 2023	62,241			63,385
Courtyard Manhattan / Midtown East mortgage loan	4.40%	August 2024	81,494			82,620
Renaissance Worthington mortgage loan	3.66%	May 2025	81,321			82,540
JW Marriott Denver at Cherry Creek mortgage loan	4.33%	July 2025	61,549			62,411
Boston Westin mortgage loan	4.36%	November 2025	191,682			194,466
New Market Tax Credit loan (1)	5.17%	December 2020	2,943			2,943
Unamortized debt issuance costs			(3,434		)	(4,017		)
Total mortgage and other debt, net of unamortized debt issuance costs			619,956			629,747

Unsecured term loan	LIBOR + 1.45% (2)	May 2021	—			100,000
Unsecured term loan	LIBOR + 1.45% (2)	April 2022	—			200,000
Unsecured term loan	LIBOR + 1.40% (3)	October 2023	50,000			50,000
Unsecured term loan	LIBOR + 1.40% (4)	July 2024	350,000			—
Unamortized debt issuance costs			(1,301		)	(1,781		)
Unsecured term loans, net of unamortized debt issuance costs			398,699			348,219

Senior unsecured credit facility	LIBOR + 1.45% (5)	July 2023	75,000			—

Total debt, net of unamortized debt issuance costs			$	1,093,655		$	977,966
Weighted-Average Interest Rate	3.87%

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


(2)	The loan was prepaid on July 25, 2019 in connection with the refinancing described below under the heading "Unsecured Term Loans."


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


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


(5)	The credit facility may be extended for an additional year upon the payment of applicable fees and the satisfaction of certain customary conditions. On July 25, 2019, the credit facility was amended to increase capacity to $400 million and extend maturity to July 2023.

Mortgage and Other Debt

We have incurred limited recourse, property specific mortgage debt secured by certain of our hotels. In the event of default, the lender may only foreclose on the secured assets; however, in the event of fraud, misapplication of funds or other customary recourse provisions, the lender may seek payment from us. As of September 30, 2019, eight of our 31 hotels were secured by mortgage debt.

Our mortgage debt contains certain property specific covenants and restrictions, including minimum debt service coverage ratios that trigger “cash trap” provisions as well as restrictions on incurring additional debt without lender consent. As of September 30, 2019, we were in compliance with the financial covenants of our mortgage debt.

Senior Unsecured Credit Facility

Prior to July 25, 2019, we were party to a senior unsecured credit facility with a capacity up to $300 million with an accordion feature to expand up to $600 million, subject to lender consent. The maturity date was May 2020 and the interest rate on the facility was based on a pricing grid ranging from 150 to 225 basis points over LIBOR, based on the Company's leverage ratio.

On July 25, 2019, we entered into a Fifth Amended and Restated Credit Agreement (the "Credit Agreement"). The Credit Agreement amended and restated the senior unsecured credit facility (the "Revolving Credit Facility") to increase the capacity from $300 million to $400 million, decrease the pricing and extend the maturity date to July 2023. The maturity date may be extended for an additional year upon the payment of applicable fees and the satisfaction of certain customary conditions. The interest rate on the Revolving Credit Facility is based upon LIBOR, plus an applicable margin based upon the Company’s leverage ratio, as follows:



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

In addition to the interest payable on amounts outstanding under the Revolving Credit Facility, we are required to pay an amount equal to 0.20% of the unused portion of the Revolving Credit Facility if the average usage is greater than 50% or 0.30% of the unused portion of the Revolving Credit Facility if the average usage is less than or equal to 50%.

The Revolving Credit Facility also contains various corporate financial covenants. A summary of the most restrictive covenants is as follows:



		Actual at
	Covenant	September 30, 2019
Maximum leverage ratio (1)	60%	31.4%
Minimum fixed charge coverage ratio (2)	1.50x	3.74x
Secured recourse indebtedness	Less than 45% of Total Asset Value	18.7%
Unencumbered leverage ratio	60.0%	26.1%
Unencumbered implied debt service coverage ratio	1.2x	2.79x

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


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

As of September 30, 2019, we had $75.0 million in borrowings outstanding under the Revolving Credit Facility and the Company's leverage ratio was 31.4%. Accordingly, interest on our borrowings under the Revolving Credit Facility will be based on LIBOR plus 145 basis points for the following quarter. We incurred interest and unused fees on the applicable facility of $1.1 million and $0.3 million for the three months ended September 30, 2019 and 2018, respectively. We incurred interest and unused fees on the applicable facility of $2.8 million and $1.0 million for the nine months ended September 30, 2019 and 2018, respectively.

Unsecured Term Loans

As of September 30, 2019, we are party to two five-year unsecured term loans. The Credit Agreement described above provided a new five-year, $350 million unsecured term loan (the "Term Loan Facility"). In connection with the Term Loan Facility, we repaid

the existing $100 million and $200 million unsecured term loans. In connection with the repayment of these term loans, we recorded a $2.4 million loss on early extinguishment of debt during the three and nine months ended September 30, 2019, which relates to the write-off of unamortized debt issuance costs. The Credit Agreement includes the right to increase the Revolving Credit Facility and Term Loan Facility in aggregate up to $1.2 billion, subject to lender approval.

The financial covenants of the two term loans are consistent with the covenants on our Revolving Credit Facility, which are described above. In connection with the transaction in July 2019, we also amended our $50 million term loan to align the pricing grid and certain other terms with the Credit Agreement. The interest rate on each of the term loans is based LIBOR, plus an applicable margin based upon the Company’s leverage ratio, as follows:



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

As of September 30, 2019, the Company's leverage ratio was 31.4%. Accordingly, interest on our borrowings under the term loans will be based on LIBOR plus 140 basis points for the following quarter. In January 2019, we entered into an interest rate swap agreement to fix LIBOR at 2.41% through October 2023 for the $50 million unsecured term loan. We entered into an interest rate swap agreement on July 25, 2019 to fix LIBOR at 1.70% through July 2024 for $175 million of the Term Loan Facility. We incurred interest on the term loans of $3.5 million and $2.6 million for the three months ended September 30, 2019 and 2018, respectively. We incurred interest on the term loans of $10.4 million and $7.6 million for the nine months ended September 30, 2019 and 2018, respectively.