XML 24 R15.htm IDEA: XBRL DOCUMENT v3.22.2.2
Debt
 9 Months Ended
Sep. 30, 2022
Debt Disclosure [Abstract]  
Debt DebtThe following table sets forth information regarding the Company’s debt as of September 30, 2022 and December 31, 2021 (dollars in thousands):
Principal Balance as of
Loan
Interest Rate as of September 30, 2022
Maturity DateSeptember 30, 2022December 31, 2021
Salt Lake City Marriott Downtown at City Creek mortgage loan
LIBOR + 3.25% (1)
January 2023 (2)
$42,220 $43,570 
Westin Washington, D.C. City Center mortgage loan3.99%
January 2023 (3)
54,075 55,913 
The Lodge at Sonoma Resort mortgage loan3.96%
April 2023 (2)
24,976 25,542 
Westin San Diego Bayview mortgage loan3.94%April 202357,312 58,600 
Courtyard New York Manhattan/Midtown East mortgage loan4.40%August 202476,595 77,882 
Worthington Renaissance Fort Worth Hotel mortgage loan3.66%May 202576,090 77,453 
Hotel Clio mortgage loan4.33%July 202557,806 58,789 
Westin Boston Seaport District mortgage loan4.36%November 2025179,577 182,755 
Unamortized debt issuance costs(1,282)(1,853)
Total mortgage debt, net of unamortized debt issuance costs567,369 578,651 
Unsecured term loan
LIBOR + 1.45% (4) (5)
October 2023 (6)
— 50,000 
Unsecured term loan
LIBOR + 1.45% (4) (5)
July 2024 (7)
— 350,000 
Unsecured term loan
 SOFR + 1.45%
January 2028500,000 — 
Unsecured term loan
SOFR + 1.45%
January 2025 (8)
300,000 — 
Unamortized debt issuance costs(929)(1,428)
Unsecured term loans, net of unamortized debt issuance costs799,071 398,572 
Senior unsecured credit facility
SOFR + 1.50%
September 2026 (8)
— 90,000 
Total debt, net of unamortized debt issuance costs$1,366,440 $1,067,223 
Weighted-Average Interest Rate (9)
4.26% 
_______________________
(1)LIBOR is subject to a floor of 1.0%.
(2)The loan was prepaid on November 1, 2022.
(3)The loan was prepaid on October 6, 2022.
(4)Prior to August 1, 2022, the applicable margin was 2.40%.
(5)LIBOR is subject to a floor of 0.25%.
(6)The loan was prepaid on September 28, 2022.
(7)The loan was prepaid on September 27, 2022.
(8)Maturity date may be extended for an additional year upon the payment of applicable fees and the satisfaction of certain customary conditions.
(9)Weighted-average interest rate as of September 30, 2022 includes effect of interest rate swaps.

Mortgage 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, 2022, eight of our 34 hotels were secured by mortgage debt, and four of our mortgage loans had a maturity date within twelve months from the date of this report. The principal balance of these mortgage loans was $178.6 million as of September 30, 2022. We utilized the proceeds from the Amended Credit Agreement, as defined and discussed below, to repay much of this mortgage debt. On October 6, 2022, we paid off the Westin Washington, D.C. City Center mortgage loan. On November 1, 2022, we paid off the Salt Lake City
Marriott Downtown at City Creek and The Lodge at Sonoma Resort mortgage loans. We intend to repay the mortgage loan secured by Westin San Diego Bayview in December 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 September 30, 2022, we had $4.2 million held in cash traps, which is included within the restricted cash on the accompanying consolidated balance sheet. We do not expect that such cash traps will affect our ability to satisfy our short-term liquidity requirements.

Senior Unsecured Credit Facility and Unsecured Term Loans

Prior to September 27, 2022, we were party to credit agreements (the “Credit Agreements”) that provided for a $400 million senior unsecured credit facility (the “Revolving Credit Facility”), which was scheduled to mature on July 2023, a $350 million unsecured term loan that was scheduled to mature in July 2024 (the “Facility Term Loan”) and a $50 million unsecured term loan that was scheduled to mature in October 2023 (the “2023 Term Loan”). The interest rate on the Revolving Credit Facility and unsecured term loans was based upon LIBOR, plus an applicable margin based upon the Company’s leverage ratio. In addition to the interest payable on amounts outstanding under the Revolving Credit Facility, we were 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%.

On each of June 9, 2020, August 14, 2020, January 20, 2021 and February 4, 2022, we executed amendments (the “Amendments”) to the Credit Agreements. These Amendments provided for a waiver of the quarterly tested financial covenants beginning with the second quarter of 2020 through the first quarter of 2022 (the “Covenant Relief Period”) and allowed for certain other modifications to the covenants thereafter through the second quarter of 2023 (the “Ratio Adjustment Period”). During the Covenant Relief Period and the Ratio Adjustment Period, the Amendments also set the applicable interest rate to LIBOR plus a margin of 2.55% for the Revolving Credit Facility and LIBOR plus a margin of 2.40% for the Facility Term Loan and 2023 Term Loan. The Amendments also added a LIBOR floor of 0.25% to the variable interest rate calculation. As of June 30, 2022, we were in compliance with all of the original, unmodified financial covenants under the Credit Agreements for two consecutive quarters, and had exited covenant waiver restrictions.

On September 27, 2022, we entered into a Sixth Amended and Restated Credit Agreement (the “Amended Credit Agreement”). The Amended Credit Agreement provides for a $400 million senior unsecured revolving credit facility and two term loan facilities in the aggregate amount of $800 million. The revolving credit facility under the Amended Credit Agreement matures on September 27, 2026. We may extend the maturity date of the revolving credit facility for an additional year upon the payment of applicable fees and satisfaction of certain standard conditions. We also have the right to increase the aggregate amount of the facilities to $1.4 billion upon the satisfaction of certain standard conditions. The term loan facilities consist of a $500 million term loan that matures on January 3, 2028 and a $300 million term loan that matures January 3, 2025. The maturity date of the $300 million term loan may be extended for an additional year upon the payment of applicable fees and satisfaction of certain standard conditions.

We utilized the proceeds from the term loans to repay the prior $350 million Facility Term Loan, the $50 million 2023 Term Loan and $150 million that was outstanding on our Revolving Credit Facility. We plan to utilize the remaining proceeds to repay our remaining 2023 mortgage loan maturities. Upon the repayment of the remaining mortgage loan, we will have no debt maturities until August 2024. We recognized a $9.7 million loss on early extinguishment of debt related to the write-off of certain unamortized debt issuance costs and fees paid to the lenders in consideration for the Amended Credit Agreement.

Interest is paid on the periodic advances on the revolving credit facility and amounts outstanding on the term loans at varying rates, based upon the adjusted Secured Overnight Financing Rate (“SOFR”), as defined in the Amended Credit Agreement, plus an applicable margin. The applicable margin is based upon our leverage ratio, as follows:
Leverage RatioApplicable Margin for Revolving LoansApplicable Margin for 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%
1.60%
1.55%
Greater than or equal to 45% but less than 50%
1.80%
1.75%
Greater than or equal to 50% but less than 55%
1.95%
1.85%
Greater than or equal to 55%
2.25%
2.20%

The Amended Credit Agreement contains various comparable financial covenants. A summary of the most significant covenants is as follows:
Actual at
Covenant September 30, 2022
Maximum leverage ratio (1)
60%
29.6%
Minimum fixed charge coverage ratio (2)
1.50x
2.99x
Secured recourse indebtedness
Less than 45% of Total Asset Value
17.9%
Unencumbered leverage ratio
60.0%
33.4%
Unencumbered implied debt service coverage ratio
1.20x
2.19x
_____________________________

(1)Leverage ratio is net indebtedness, as defined in the Credit Agreements, divided by total asset value, defined in the Credit Agreements 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 Agreements as EBITDA less FF&E reserves, for the most recently ending 12 months, to fixed charges, which is defined in the Credit Agreements 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, 2022, our leverage ratio was 29.6%. Accordingly, interest on our borrowings under the revolving credit facility and term loans will be based on SOFR plus 1.40% and 1.35%, respectively, for the following quarter.We incurred interest and unused fees on our revolving credit facilities of $1.9 million and $0.3 million for the three months ended September 30, 2022 and September 30, 2021, respectively. We incurred interest and unused fees on our revolving credit facilities of $5.1 million and $2.0 million for the nine months ended September 30, 2022 and September 30, 2021, respectively.
We incurred interest on the unsecured term loans of $4.1 million and $3.8 million for each of the three months ended September 30, 2022 and September 30, 2021, respectively. We incurred interest on the unsecured term loans of $11.5 million and $11.1 million for the nine months ended September 30, 2022 and September 30, 2021, respectively.