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Debt | 6 Months Ended
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Jun. 30, 2020
Debt Disclosure [Abstract] |
Debt | Debt The following table sets forth information regarding the Company’s debt as of June 30, 2020 and December 31, 2019 (dollars in thousands):
|  |  |  |  |  | Principal Balance as of
Loan |  | Interest Rate as of June 30, 2020 |  | Maturity Date |  | June 30, 2020 |  | December 31, 2019
Salt Lake City Marriott Downtown mortgage loan (repaid on June 25, 2020) |  | 4.25% |  | November 2020 |  | $ | — |  |  | $ | 53,273 |
Salt Lake City Marriott Downtown mortgage loan |  | LIBOR + 3.25% (1) |  | January 2022 (2) |  | 48,000 |  |  | — |
Westin Washington, D.C. City Center mortgage loan |  | 3.99% |  | January 2023 |  | 59,427 |  |  | 60,550 |
The Lodge at Sonoma, a Renaissance Resort & Spa mortgage loan |  | 3.96% |  | April 2023 |  | 26,675 |  |  | 26,963 |
Westin San Diego mortgage loan |  | 3.94% |  | April 2023 |  | 61,064 |  |  | 61,851 |
Courtyard Manhattan / Midtown East mortgage loan |  | 4.40% |  | August 2024 |  | 80,330 |  |  | 81,107 |
Renaissance Worthington mortgage loan |  | 3.66% |  | May 2025 |  | 80,067 |  |  | 80,904 |
JW Marriott Denver at Cherry Creek mortgage loan |  | 4.33% |  | July 2025 |  | 60,659 |  |  | 61,253 |
Westin Boston Waterfront Hotel mortgage loan |  | 4.36% |  | November 2025 |  | 188,804 |  |  | 190,725 |
New Market Tax Credit loan (3) |  | 5.17% |  | December 2020 |  | 2,943 |  |  | 2,943 |
Unamortized debt issuance costs |  |  |  |  |  | (2,935 | ) |  | (3,240 | )
Total mortgage and other debt, net of unamortized debt issuance costs |  |  |  |  |  | 605,034 |  |  | 616,329 |
Unsecured term loan |  | LIBOR + 2.35% (4) |  | October 2023 |  | 50,000 |  |  | 50,000 |
Unsecured term loan |  | LIBOR + 2.35% (5) |  | July 2024 |  | 350,000 |  |  | 350,000 |
Unamortized debt issuance costs |  |  |  |  |  | (1,733 | ) |  | (1,230 | )
Unsecured term loans, net of unamortized debt issuance costs |  |  |  |  |  | 398,267 |  |  | 398,770 |
Senior unsecured credit facility |  | LIBOR + 2.40% (6) |  | July 2023 (7) |  | 148,985 |  |  | 75,000 |
Total debt, net of unamortized debt issuance costs |  |  |  |  |  | $ | 1,152,286 |  |  | $ | 1,090,099 |
Weighted-Average Interest Rate |  | 3.80% |  |  |  |  |  |
_______________________
(1) | LIBOR is subject to a floor of 1.0%.
(2) | The loan may be extended for an additional year upon satisfaction of certain conditions.
(3) | Assumed in connection with the acquisition of the Hotel Palomar Phoenix on March 1, 2018.
(4) | We are party to an interest rate swap agreement that fixes LIBOR at 2.41% through October 2023.
(5) | We are party to an interest rate swap agreement that fixes LIBOR at 1.70% through July 2024 for $175 million of the loan. Effective June 9, 2020, LIBOR is subject to a floor of 0.25%.
(6) | Effective June 9, 2020, LIBOR is subject to a floor of 0.25%.
(7) | The credit facility may be extended for an additional year upon the payment of applicable fees and the satisfaction of certain customary conditions.
Mortgage and Other Debt We have incurred limited recourse, property specific mortgage debt secured by certain of our hotels. In the event of default, the lender may only foreclose on the secured assets; however, in the event of fraud, misapplication of funds or other customary recourse provisions, the lender may seek payment from us. As of June 30, 2020, eight of our 31 hotels were secured by mortgage debt. On June 25, 2020, we refinanced our only significant near-term debt maturity by closing on a $48.0 million mortgage loan secured by the Salt Lake City Marriott Downtown. The loan proceeds were used to repay the existing $52.5 million mortgage loan secured by the Salt Lake City Marriott Downtown that was scheduled to mature in November 2020, with the balance funded by corporate cash on hand. The new loan matures in January 2022 and has an option to extend the maturity to January 2023, subject to the satisfaction of certain conditions. The new loan bears interest at LIBOR plus 3.25%. The LIBOR rate is subject to a floor of 1.0%. The loan requires principal payments of $150 thousand per month, with the remaining principal due at maturity. Due to the impact of COVID-19, we have requested relief with respect to certain conditions of the loans on our hotels syndicated through commercial mortgage backed security (“CMBS”) pools. With the exception of the mortgage loan secured by the Westin Boston Waterfront Hotel, we have not received any of the requested relief. On July 16, 2020, we entered into an amendment to the mortgage loan secured by the Westin Boston Waterfront Hotel. The amendment allows the Company to use the hotel’s current reserve balance for replacement of furniture and fixtures (“FF&E Reserve”) for the debt service payments due for three months beginning August 2020. Any funds from the FF&E Reserve used for amounts due under the loan are required to be replenished by the Company ratably over a 12-month period ending in June 2022. Our mortgage debt contains certain property specific covenants and restrictions, including minimum debt service coverage ratios or debt yields that trigger “cash trap” provisions, as well as restrictions on incurring additional debt without lender consent. Such cash trap provisions are triggered when the hotel’s operating results fall below a certain debt service coverage ratio or debt yield. When these provisions are triggered, all of the excess cash flow generated by the hotel is deposited directly into cash management accounts for the benefit of our lenders until a specified debt service coverage ratio or debt yield is reached and maintained for a certain period of time. Such provisions do not provide the lender the right to accelerate repayment of the underlying debt. As of June 30, 2020, the debt service coverage ratios or debt yields for the Courtyard Manhattan Midtown East, Westin Boston Waterfront Hotel, The Lodge at Sonoma, Westin Washington, D.C. City Center, JW Marriott Denver at Cherry Creek, and Renaissance Worthington were below the minimum thresholds such that the cash trap provision of each respective loan was triggered. We expect that the cash trap provision on the Westin San Diego loan will be triggered as of the third quarter of 2020 due to the continuing negative impact of the COVID-19 pandemic on our hotel operations. We do not expect that such cash traps affect our ability to satisfy our short-term liquidity requirements. Senior Unsecured Credit Facility and Unsecured Term Loans We are party to credit agreements (the “Credit Agreements”) that provide for a $400 million senior unsecured credit facility (the “Revolving Credit Facility”), which matures in July 2023, a $350 million unsecured term loan maturing in July 2024 (the “Facility Term Loan”) and a $50 million unsecured term loan maturing in October 2023 (the "2023 Term Loan"). The maturity date for the Revolving Credit Facility may be extended for an additional year upon the payment of applicable fees and the satisfaction of certain customary conditions. The interest rate on the Revolving Credit Facility is based upon LIBOR, plus an applicable margin based upon the Company’s leverage ratio, as follows:
|  | Applicable Margin
Leverage Ratio |  | Revolving Credit Facility |  | Unsecured Term Loans
Less than 30% |  | 1.40% |  | 1.35%
Greater than or equal to 30% but less than 35% |  | 1.45% |  | 1.40%
Greater than or equal to 35% but less than 40% |  | 1.50% |  | 1.45%
Greater than or equal to 40% but less than 45% |  | 1.55% |  | 1.50%
Greater than or equal to 45% but less than 50% |  | 1.70% |  | 1.65%
Greater than or equal to 50% but less than 55% |  | 1.90% |  | 1.85%
Greater than or equal to 55% |  | 2.05% |  | 2.00%
In addition to the interest payable on amounts outstanding under the Revolving Credit Facility, we are required to pay an amount equal to 0.20% of the unused portion of the Revolving Credit Facility if the average usage is greater than 50% or 0.30% of the unused portion of the Revolving Credit Facility if the average usage is less than or equal to 50%. As of June 30, 2020, we had $149.0 million in borrowings outstanding under the Revolving Credit Facility. We incurred interest and unused fees on the Revolving Credit Facility of $1.8 million and $1.0 million for the three months ended June 30, 2020 and 2019, respectively. We incurred interest and unused fees on the Revolving Credit Facility of $2.5 million and $1.7 million for the six months ended June 30, 2020 and 2019, respectively. We incurred interest on the unsecured term loans of $2.9 million and $3.5 million for the three months ended June 30, 2020 and 2019, respectively. We incurred interest on the unsecured term loans of $6.1 million and $6.9 million for the six months ended June 30, 2020 and 2019, respectively. On June 9, 2020, we entered into amendments to the Credit Agreements (the “Amended Credit Agreements”). The Amended Credit Agreements waive the quarterly-tested financial covenants from June 9, 2020 through the first quarter of 2021, unless we elect to terminate the waiver on an earlier date (such period between June 9, 2020 and the earlier of such date of termination and the end of the first quarter of 2021, the “Covenant Relief Period”). During the Covenant Relief Period and until the date we have demonstrated compliance with the financial covenants for the fiscal quarter following the end of the Covenant Relief Period (the “Restriction Period”), (i) the Amended Credit Agreements require that the net cash proceeds from certain incurrences of indebtedness, equity issuances and asset dispositions will, subject to various exceptions, be applied as a mandatory prepayment of the amounts outstanding under the Amended Credit Agreements, (ii) the Amended Credit Agreements impose an additional covenant that we and our subsidiaries maintain minimum liquidity, defined as unrestricted cash plus available capacity on the Revolving Credit Facility, of at least $100.0 million, and (iii) the Amended Credit Agreements impose additional negative covenants that will limit our ability to incur additional indebtedness, pay dividends and distributions (except to the extent required to maintain REIT status), repurchase shares, make prepayments of other indebtedness, make capital expenditures, conduct asset dispositions or transfers and make investments, in each case subject to various exceptions. During the Restriction Period, acquisitions of encumbered hotels are permitted, subject to a $300 million limitation, and acquisitions of unencumbered hotels are permitted subject to a partial repayment of the outstanding balance on the Revolving Credit Facility or funded with junior capital. Following the end of the Covenant Relief Period, the Amended Credit Agreements modify certain financial covenants until January 1, 2022 or unless we elect to terminate the period on an earlier date (the “Ratio Adjustment Period”), as follows:
• | Maximum Leverage Ratio is increased from 60% to 65%;
• | Unencumbered Leverage Ratio is increased from 60% to 65%; and
• | Unencumbered Implied Debt Service Coverage Ratio may not be less than 1.00 to 1.00 for the first two testing periods in the Ratio Adjustment Period, not less than 1.10 to 1.00 for the third testing period in the Ratio Adjustment Period and not less than 1.20 to 1.00 for all testing periods thereafter.
During the Covenant Relief Period and until the earlier of (i) January 1, 2022 and (ii) the date on which we have demonstrated compliance with the financial covenants, without giving effect to the modifications imposed during the Ratio Adjustment Period for two consecutive quarters following the Covenant Relief Period, the equity interests of certain of our subsidiaries that own unencumbered properties are required to be pledged to secure the obligations owing under the Amended Credit Agreements. During the Covenant Relief Period and the Ratio Adjustment Period, the Amended Credit Agreements also sets the applicable interest rate to LIBOR plus a margin of 2.40% for the Revolving Credit Facility and LIBOR plus a margin of 2.35% for the Facility Term Loan and 2023 Term Loan. The Amended Credit Agreements also add a LIBOR floor of 0.25% to the variable interest rate calculation.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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