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Debt | 9 Months Ended
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Sep. 30, 2024
Debt Disclosure [Abstract] |
Debt | Debt On October 13, 2022, the Company entered into the Fifth Amended and Restated Credit Agreement with Bank of America, N.A., as administrative agent and certain other agents and lenders ("Credit Agreement"). The Credit Agreement provides for a $650.0 million senior unsecured revolving credit facility and three $460.0 million unsecured term loan facilities totaling $1.38 billion. The Company may request additional lender commitments to increase the aggregate borrowing capacity under the Credit Agreement up to an additional $970.0 million. On January 3, 2024, the Company entered into the First Amendment to the Credit Agreement which extended the maturity date of $356.7 million borrowed under Term Loan 2024 to January 2028. This extended indebtedness is referred to as Term Loan 2028. In connection with the extension, the Company also repaid $60.0 million of its borrowings under Term Loan 2024 with available cash. The remaining $43.3 million of Term Loan 2024's balance remained outstanding. On January 3, 2024, the Company also repaid $50.0 million of its outstanding Term Loan 2025 obligation with available cash. On October 3, 2024, the Company issued $400.0 million aggregate principal amount of its 6.375% senior notes due October 15, 2029. The net proceeds were approximately $390.0 million after deducting discounts and offering expenses paid by the Company, of which $353.3 million was used to repay all $43.3 million of its borrowings under Term Loan 2024, $210.0 million of its borrowings under Term Loan 2025 and $100.0 million of its borrowings under Term Loan 2027. On November 1, 2024, the Company entered into the Third Amendment to the Credit Agreement which extended the maturity date of $185.2 million borrowed under Term Loan 2025 to January 2029. The Company also extended the maturity date of $602.0 million of its senior unsecured revolving credit facility from October 2026 to October 2028, with the option to extend the new maturity date for two six-month periods. The Company's debt consisted of the following as of September 30, 2024 and December 31, 2023 (dollars in thousands):
|  |  |  |  |  | Balance Outstanding as of |
| Interest Rate at September 30, 2024 |  | Maturity Date |  |  | September 30, 2024 |  | December 31, 2023 |
Revolving credit facilities |  |  |  |  |  |  |  |  |
Senior unsecured credit facility | — | (1)(2) | October 2026 |  |  | $ | — |  |  | $ | — |  |
PHL unsecured credit facility | — | (1) | October 2026 |  |  | — |  |  | — |  |
Total revolving credit facilities |  |  |  |  |  | $ | — |  |  | $ | — |  |
Unsecured term loans |  |  |  |  |  |  |  |  |
Term Loan 2024 | 7.05% | (1)(4) | October 2024 |  |  | 43,348 |  |  | 460,000 |  |
Term Loan 2025 | 4.40% | (1) | October 2025 |  |  | 410,000 |  |  | 460,000 |  |
Term Loan 2027 | 5.23% | (1) | October 2027 |  |  | 460,000 |  |  | 460,000 |  |
Term Loan 2028 | 7.05% | (1) | January 2028 |  |  | 356,652 |  |  | — |  |
Term loan principal |  |  |  |  |  | $ | 1,270,000 |  |  | $ | 1,380,000 |  |
Convertible senior notes principal | 1.75% |  | December 2026 |  |  | $ | 750,000 |  |  | $ | 750,000 |  |
Senior unsecured notes principal | 4.93% |  | December 2025 |  |  | $ | 2,400 |  |  | $ | 2,400 |  |
Mortgage loans |  |  |  |  |  |  |  |  |
Margaritaville Hollywood Beach Resort | 7.04% | (3) | September 2026 |  |  | 140,000 |  |  | 140,000 |  |
Estancia La Jolla Hotel & Spa | 5.07% |  | September 2028 |  |  | 56,120 |  |  | 57,497 |  |
Mortgage loans principal |  |  |  |  |  | $ | 196,120 |  |  | $ | 197,497 |  |
Total debt principal |  |  |  |  |  | $ | 2,218,520 |  |  | $ | 2,329,897 |  |
Unamortized debt premiums, discount and deferred financing costs, net |  |  |  |  |  | (10,806) |  |  | (10,096) |  |
Debt, net |  |  |  |  |  | $ | 2,207,714 |  |  | $ | 2,319,801 |  |
______________________ (1) Borrowings bear interest at floating rates. Interest rate at September 30, 2024 gives effect to interest rate hedges. (2) The Company has the option to extend the maturity date for up to two six-month periods, pursuant to certain terms and conditions and payment of an extension fee. (3) This loan bears interest at a floating rate equal to daily SOFR plus a spread of 3.75%. The interest rate at September 30, 2024 gives effect to an interest rate swap. The Company has the option to extend the maturity date for up to two one-year periods, pursuant to certain terms and conditions and payment of an extension fee. (4) Term Loan 2024 was repaid in October 2024 from proceeds of the senior notes offering. Unsecured Revolving Credit Facilities The $650.0 million senior unsecured revolving credit facility provided for in the Credit Agreement matures in October 2026 and provides for two six-month extension options, subject to certain terms and conditions and payment of an extension fee. All borrowings under the senior unsecured revolving credit facility bear interest at a rate per annum equal to, at the option of the Company, (i) the Secured Overnight Financing Rate ("SOFR") plus 0.10% (the “SOFR Adjustment”) plus a margin that is based upon the Company’s leverage ratio or (ii) the Base Rate (as defined by the Credit Agreement) plus a margin that is based on the Company’s leverage ratio. The margins for revolving credit facility loans range in amount from 1.45% to 2.50% for SOFR-based loans and 0.45% to 1.50% for Base Rate-based loans, depending on the Company’s leverage ratio. As of September 30, 2024, the Company had no outstanding borrowings, $13.7 million of outstanding letters of credit and a borrowing capacity of $636.3 million remaining on the senior unsecured revolving credit facility. The Company is required to pay an unused commitment fee at an annual rate of 0.20% or 0.30% of the unused portion of the senior unsecured revolving credit facility, depending on the amount of borrowings outstanding. The credit agreement contains certain financial covenants, including a maximum leverage ratio, a minimum fixed charge coverage ratio and a maximum percentage of secured debt to total asset value. Under the terms of the Credit Agreement, one or more standby letters of credit, up to a maximum aggregate outstanding balance of $30.0 million, may be issued on behalf of the Company by the lenders under the senior unsecured revolving facility. The Company pays a fee for outstanding standby letters of credit at a rate per annum equal to the applicable margin based upon the Company's leverage ratio. Any outstanding standby letters of credit reduce the available borrowings on the senior unsecured revolving credit facility by a corresponding amount. Standby letters of credit of $13.7 million and $13.6 million were outstanding as of September 30, 2024 and December 31, 2023, respectively. As of September 30, 2024, the Company also has a $20.0 million unsecured revolving credit facility (the "PHL Credit Facility") to be used for PHL's working capital and general corporate purposes. On October 13, 2022, PHL amended and restated the agreement governing the PHL Credit Facility to extend the maturity to October 2026. The PHL Credit Facility has substantially similar terms as the Company's senior unsecured revolving credit facility. Borrowings on the PHL Credit Facility bear interest at a rate per annum equal to, at the option of the Company, (i) SOFR plus the SOFR Adjustment plus a margin that is based upon the Company’s leverage ratio or (ii) the Base Rate (as defined by the Credit Agreement) plus a margin that is based on the Company’s leverage ratio. The PHL Credit Facility is subject to debt covenants substantially similar to the covenants under the Credit Agreement, which governs the Company's senior unsecured revolving credit facility. As of September 30, 2024, the Company had no borrowings under the PHL Credit Facility and had $20.0 million borrowing capacity remaining available under the PHL Credit Facility. As of September 30, 2024, the Company was in compliance with all debt covenants of the credit agreements that govern the unsecured revolving credit facilities. Unsecured Term Loan Facilities The term loan facilities provided for in the Credit Agreement bear interest at a rate per annum equal to, at the option of the Company, (i) SOFR plus the SOFR Adjustment plus a margin that is based upon the Company’s leverage ratio or (ii) the Base Rate (as defined by the Credit Agreement) plus a margin that is based on the Company’s leverage ratio. The margins for term loans range in amount from 1.40% to 2.45% for SOFR-based loans and 0.40% to 1.45% for Base Rate-based loans, depending on the Company's leverage ratio. The term loans are subject to the debt covenants in the Credit Agreement. As of September 30, 2024, the Company was in compliance with all debt covenants of its term loans. The Company entered into interest rate swap agreements to fix the SOFR rate on a portion of these unsecured term loan facilities. See Derivative and Hedging Activities for further discussion on the interest rate swaps. Convertible Senior Notes In December 2020, the Company issued $500.0 million aggregate principal amount of 1.75% Convertible Senior Notes due December 2026 (the "Convertible Notes"). The net proceeds from the offering of the Convertible Notes were approximately $487.3 million after deducting the underwriting fees and other expenses paid by the Company. In February 2021, the Company issued an additional $250.0 million aggregate principal amount of Convertible Notes. These additional Convertible Notes were sold at a 5.5% premium to par and generated net proceeds of approximately $257.2 million after deducting the underwriting fees and other expenses paid by the Company of $6.5 million, which was offset by a premium received in the amount of $13.8 million. The Convertible Notes are governed by an indenture (the “Base Indenture”) between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee. The Convertible Notes bear interest at a rate of 1.75% per annum, payable semi-annually in arrears on June 15th and December 15th of each year, beginning on June 15, 2021. The Convertible Notes will mature on December 15, 2026. Prior to June 15, 2026, the Convertible Notes will be convertible upon certain circumstances. On and after June 15, 2026, holders may convert any of their Convertible Notes into the Company’s common shares of beneficial interest (“common shares”) at the applicable conversion rate at any time at their election two days prior to the maturity date. The initial conversion rate is 39.2549 common shares per $1,000 principal amount of Convertible Notes, which represents an initial conversion price of approximately $25.47 per share. The conversion rate is subject to adjustment in certain circumstances. As of September 30, 2024 and December 31, 2023, the if-converted value of the Convertible Notes did not exceed the principal amount. The Company may redeem for cash all or a portion of the Convertible Notes, at its option, after December 20, 2023, upon certain circumstances. The redemption price will be equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If certain make-whole fundamental changes occur, the conversion rate for the Convertible Notes may be increased. In connection with the Convertible Notes issuances, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain of the underwriters of the offerings of the Convertible Notes or their respective affiliates and other financial institutions. The Capped Call Transactions initially cover, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes, the number of common shares underlying the Convertible Notes. The Capped Call Transactions are expected generally to reduce the potential dilution to holders of common shares upon conversion of the Convertible Notes and/or offset the potential cash payments that the Company could be required to make in excess of the principal amount of any converted Convertible Notes upon conversion thereof, with such reduction and/or offset subject to a cap. The upper strike price of the Capped Call Transactions is $33.0225 per share. Senior Unsecured Notes The Company has $2.4 million of senior unsecured notes outstanding bearing a fixed interest rate of 4.93% per annum maturing in December 2025. The debt covenants of these notes are substantially similar to those of the Company's senior unsecured revolving credit facility. As of September 30, 2024, the Company was in compliance with all such debt covenants. Mortgage Loans On December 1, 2021, the Company assumed a $61.7 million loan secured by a first-lien mortgage on the leasehold interest of Estancia La Jolla Hotel & Spa ("Estancia"). The loan requires both principal and interest monthly payments based on a fixed interest rate of 5.07%. The loan matures on September 1, 2028. On September 7, 2023, the Company entered into a $140.0 million first-lien mortgage on the leasehold interest of Margaritaville Hollywood Beach Resort ("Margaritaville"), which requires interest-only payments based on a floating rate equal to daily SOFR plus a spread of 3.75%. This loan matures on September 7, 2026 and may be extended for up to two one-year periods, subject to certain terms and conditions and payment of an extension fee. The Company's mortgage loans associated with Margaritaville and Estancia are non-recourse to the Company except for customary carve-outs to the general non-recourse liability. The loans contain customary provisions regarding events of default, as well as customary cash management, cash trap and lockbox provisions. Cash trap provisions are triggered if the hotel's performance is below a certain threshold. Once triggered, all of the cash flow generated by the hotel is deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of the lender. These properties are not in a cash trap and no event of default has occurred under the loan documents. Interest Expense The components of the Company's interest expense consisted of the following for the three and nine months ended September 30, 2024 and 2023 (in thousands):
| For the three months ended September 30, |  | For the nine months ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Unsecured revolving credit facilities | $ | 504 |  |  | $ | 504 |  |  | $ | 1,499 |  |  | $ | 1,570 |
Unsecured term loan facilities | 18,239 |  |  | 18,777 |  |  | 56,366 |  |  | 53,750 |
Convertible senior notes | 3,281 |  |  | 3,281 |  |  | 9,844 |  |  | 9,844 |
Senior unsecured notes | 30 |  |  | 589 |  |  | 89 |  |  | 1,767 |
Mortgage debt | 3,247 |  |  | 4,094 |  |  | 9,690 |  |  | 11,437 |
Amortization of deferred financing fees, (premiums) and discounts | 1,541 |  |  | 2,755 |  |  | 6,149 |  |  | 6,486 |
Other | 1,083 |  |  | 1,022 |  |  | (1,352) |  |  | 3,142 |
Total interest expense | $ | 27,925 |  |  | $ | 31,022 |  |  | $ | 82,285 |  |  | $ | 87,996 |
Fair Value The Company estimates the fair value of its fixed rate debt by discounting the future cash flows of each instrument at estimated market rates, taking into consideration general market conditions and maturity of the debt with similar credit terms and is classified within Level 2 of the fair value hierarchy. The estimated fair value of the Company’s fixed rate debt (unsecured senior notes, convertible senior notes and the Estancia mortgage loan) as of September 30, 2024 and December 31, 2023 was $711.0 million and $686.3 million, respectively. The fair value of the Company's variable rate debt approximates its carrying value Derivative and Hedging Activities The Company enters into interest rate swap agreements to hedge against interest rate fluctuations. All of the Company's interest rate swaps are cash flow hedges. All unrealized gains and losses on these hedging instruments are reported in accumulated other comprehensive income (loss) and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The Company's interest rate swaps at September 30, 2024 and December 31, 2023 consisted of the following, by maturity date (dollars in thousands):
|  |  |  |  |  | Aggregate Notional Value as of
Hedge Type |  | Interest Rate Range (SOFR) |  | Maturity |  | September 30, 2024 |  | December 31, 2023
Swap-cash flow |  | 2.47% - 2.50% |  | January 2024 |  | $ | — |  |  | $ | 300,000 |
Swap-cash flow |  | 3.22% - 3.25% |  | October 2025 |  | 200,000 |  |  | 200,000 |
Swap-cash flow |  | 1.33% - 1.36% |  | February 2026 |  | 290,000 |  |  | 290,000 |
Swap-cash flow |  | 3.02% - 3.03% |  | October 2026 |  | 200,000 |  |  | 200,000 |
Swap-cash flow |  | 3.29% |  | October 2027 |  | 165,000 |  |  | 165,000 |
Total |  |  |  |  |  | $ | 855,000 |  |  | $ | 1,155,000 |
The Company records all derivative instruments at fair value in the accompanying consolidated balance sheets. Fair values of interest rate swaps and caps are determined using the standard market methodology of netting the discounted future fixed cash receipts/payments and the discounted expected variable cash payments/receipts. Variable interest rates used in the calculation of projected receipts and payments on the swaps are based on an expectation of future interest rates derived from observable market interest rate curves (Overnight Index Swap curves) and volatilities (Level 2 inputs). Derivatives expose the Company to credit risk in the event of non-performance by the counterparties under the terms of the interest rate hedge agreements. The Company incorporates these counterparty credit risks in its fair value measurements. The Company believes it minimizes the credit risk by transacting with major creditworthy financial institutions. As of September 30, 2024, the Company's interest rate swap assets had an aggregate fair value of $11.3 million and its interest rate swap liabilities were immaterial. Interest rate swap assets are included in prepaid expenses and other assets and interest rate swap liabilities are included in accounts payable, accrued expenses and other liabilities in the accompanying consolidated balance sheets. The Company expects approximately $10.5 million will be reclassified from accumulated other comprehensive income (loss) to interest expense within the next 12 months.

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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://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147481544/470-10-50-6 Reference 2: 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