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Debt | 9 Months Ended
--- | ---
Sep. 30, 2023
Debt Disclosure [Abstract] |
Debt | Debt The Company's debt consisted of the following (in thousands):
| September 30, 2023 |  | December 31, 2022
Senior Notes, net | $ | 991,081 |  |  | $ | 989,307 |
Revolver | — |  |  | — |
Term Loans, net | 821,030 |  |  | 820,536 |
Mortgage loans, net | 407,670 |  |  | 407,712 |
Debt, net | $ | 2,219,781 |  |  | $ | 2,217,555 |
Senior Notes The Company's senior notes (collectively, the "Senior Notes") consisted of the following (dollars in thousands):
|  |  |  |  |  | Carrying Value at
|  | Interest Rate |  | Maturity Date |  | September 30, 2023 |  | December 31, 2022
2029 Senior Notes (1) |  | 4.00% |  | September 2029 |  | $ | 500,000 |  |  | $ | 500,000 |
2026 Senior Notes (1) |  | 3.75% |  | July 2026 |  | 500,000 |  |  | 500,000 |
|  |  |  |  |  | 1,000,000 |  |  | 1,000,000 |
Deferred financing costs, net |  |  |  |  |  | (8,919) |  |  | (10,693) |
Total senior notes, net |  |  |  |  |  | $ | 991,081 |  |  | $ | 989,307 |
(1)Requires payment of interest only through maturity. The indentures governing the Senior Notes contain customary covenants that limit the Operating Partnership’s ability and, in certain instances, the ability of its subsidiaries, to incur additional debt, create liens on assets, make distributions and pay dividends, make certain types of investments, issue guarantees of indebtedness, and make certain restricted payments. These limitations are subject to a number of exceptions and qualifications set forth in the indentures. A summary of the various restrictive covenants for the Senior Notes are as follows:
|  | Covenant |  | Compliance
Maintenance Covenant |  |  |  |
Unencumbered Asset to Unencumbered Debt Ratio |  | > 150.0% |  | Yes
Incurrence Covenants |  |  |  |
Consolidated Indebtedness less than Adjusted Total Assets |  | < .65x |  | Yes
Consolidated Secured Indebtedness less than Adjusted Total Assets |  | < .45x |  | Yes
Interest Coverage Ratio |  | > 1.5x |  | Yes
As of September 30, 2023 and December 31, 2022, the Company was in compliance with all covenants associated with the Senior Notes. Revolver and Term Loans The Company has the following unsecured credit agreements in place: •$600.0 million revolving credit facility with a scheduled maturity date of May 10, 2027 and either a one-year extension option or up to two six-month extension options if certain conditions are satisfied (the "Revolver"); •$400.0 million term loan with a scheduled maturity date of May 18, 2025 (the "$400 Million Term Loan Maturing 2025"); •$200.0 million term loan with a scheduled maturity date of January 31, 2026 and two one-year extension options if certain conditions are satisfied (the "$200 Million Term Loan Maturing 2026"); and •$225.0 million term loan with a scheduled maturity date of May 10, 2026 and two one-year extension options if certain conditions are satisfied (the "$225 Million Term Loan Maturing 2026"). The $400 Million Term Loan Maturing 2025, the $200 Million Term Loan Maturing 2026, and the $225 Million Term Loan Maturing 2026 are collectively referred to as the "Term Loans." In January 2023, the Company received the remaining $95.0 million in proceeds on the $200 Million Term Loan Maturing 2026 and utilized these proceeds to pay off approximately $52.3 million of a term loan with a scheduled maturity date of January 25, 2023 (the "$400 Million Term Loan Maturing 2023") and approximately $41.7 million of another term loan with a scheduled maturity date of January 25, 2023 (the "$225 Million Term Loan Maturing 2023"). In May 2023, the Company amended its Revolver. The amendment extends the maturity date of the Revolver to May 10, 2027, which may be extended by the exercise of either a one-year extension option or up to two six-month extension options, subject to the satisfaction of certain conditions. The borrowings under the Revolver bear interest at a variable rate equal to (i) the Secured Overnight Financing Rate ("SOFR") plus a credit spread adjustment of ten basis points ("Adjusted SOFR") and a margin ranging from 1.40% to 1.95% or (ii) a base rate plus a margin ranging from 0.40% to 0.95%. In May 2023, the Company entered into the $225 Million Term Loan Maturing 2026, the proceeds of which were used to fully repay a $151.7 million term loan with a scheduled maturity date of January 25, 2024 (the "$400 Million Term Loan Maturing 2024") and a $73.0 million term loan with a scheduled maturity date of January 25, 2024 (the "$225 Million Term Loan Maturing 2024"). The $225 Million Term Loan Maturing 2026 matures on May 10, 2026, with two additional one year extension options to May 2027 and May 2028, respectively. Borrowings under the $225 Million Term Loan Maturing 2026 bear interest at a variable rate equal to (i) Adjusted SOFR plus a margin ranging from 1.45% to 2.20% or (ii) a base rate plus a margin ranging from 0.45% to 1.20%. In May 2023, the Company also amended the $400 Million Term Loan Maturing 2025 to bear interest at a variable rate equal to Adjusted SOFR (replacing LIBOR), plus an applicable margin. In addition, during the May 2023 amendments, all of the Company's unsecured credit agreements were amended to, among other things, (i) modify the calculation of certain financial covenants, including increasing the leverage ratio limit to 7.25x, (ii) modify the calculation of the unencumbered leverage ratio, (iii) remove the requirement to provide equity pledges if a certain leverage ratio is exceeded and (iv) reduce the interest floor to zero. The Company paid approximately $7.5 million in lender fees and legal costs related to the refinancing. In all cases, the actual margin is determined based on the Company’s leverage ratio, as calculated under the terms of the facility. The Company's unsecured credit agreements consisted of the following (dollars in thousands):
|  |  |  |  |  | Carrying Value at
|  | Interest Rate at September 30, 2023 (1) |  | Maturity Date |  | September 30, 2023 |  | December 31, 2022
Revolver (2) |  | —% |  | May 2027 |  | $ | — |  |  | $ | — |
$400 Million Term Loan Maturing 2023 (3) |  | —% |  | — |  | — |  |  | 52,261 |
$400 Million Term Loan Maturing 2024 (4) |  | —% |  | — |  | — |  |  | 151,683 |
$225 Million Term Loan Maturing 2023 (3) |  | —% |  | — |  | — |  |  | 41,745 |
$225 Million Term Loan Maturing 2024 (4) |  | —% |  | — |  | — |  |  | 72,973 |
$400 Million Term Loan Maturing 2025 |  | 3.38% |  | May 2025 |  | 400,000 |  |  | 400,000 |
$200 Million Term Loan Maturing 2026 (5) |  | 3.48% |  | January 2026 (6) |  | 200,000 |  |  | 105,000 |
$225 Million Term Loan Maturing 2026 |  | 2.97% |  | May 2026 (6) |  | 225,000 |  |  | — |
|  |  |  |  |  | 825,000 |  |  | 823,662 |
Deferred financing costs, net (7) |  |  |  |  |  | (3,970) |  |  | (3,126) |
Total Revolver and Term Loans, net |  |  |  |  |  | $ | 821,030 |  |  | $ | 820,536 |
(1)Interest rate at September 30, 2023 gives effect to interest rate hedges. (2)There was $600.0 million of capacity on the Revolver at both September 30, 2023 and December 31, 2022. The Company has the ability to extend the maturity date for an additional one-year period or up to two six-month periods ending May 2028 if certain conditions are satisfied. (3)In January 2023, the Company received the remaining $95.0 million in proceeds on the $200 Million Term Loan Maturing 2026 and utilized these proceeds to pay off these Term Loans. (4)In May 2023, the Company entered into the $225 Million Term Loan Maturing 2026 and utilized the proceeds to pay off these Term Loans. (5)In January 2023, the Company received the remaining $95.0 million in proceeds on this Term Loan. (6)This Term Loan includes two one-year extension options. The exercise of the extension options will be at the Company's discretion, subject to certain conditions. (7)Excludes $6.0 million and $1.7 million as of September 30, 2023 and December 31, 2022, respectively, related to deferred financing costs on the Revolver, which are included in prepaid expense and other assets in the accompanying consolidated balance sheets. The Revolver and Term Loans are subject to various financial covenants. A summary of the most restrictive covenants is as follows:
|  | Covenant |  |  |  | Compliance
Leverage ratio (1) |  | <= 7.25x |  |  |  | Yes
Fixed charge coverage ratio (2) |  | >= 1.50x |  |  |  | Yes
Secured indebtedness ratio |  | <= 45.0% |  |  |  | Yes
Unencumbered indebtedness ratio |  | <= 60.0% |  |  |  | Yes
Unencumbered debt service coverage ratio |  | >= 2.00x |  |  |  | Yes
(1)Leverage ratio is net indebtedness, as defined in the Revolver and Term Loan agreements, to corporate earnings before interest, taxes, depreciation, and amortization ("EBITDA"), as defined in the Revolver and Term Loan agreements. (2)Fixed charge coverage ratio is Adjusted EBITDA, generally defined in the Revolver and Term Loan agreements as EBITDA less furniture, fixtures and equipment ("FF&E") reserves, to fixed charges, which is generally defined in the Revolver and Term Loan agreements as interest expense, all regularly scheduled principal payments, preferred dividends paid, and cash taxes paid. Mortgage Loans The Company's mortgage loans consisted of the following (dollars in thousands):
|  |  |  |  |  |  |  | Carrying Value at
|  | Number of Assets Encumbered |  | Interest Rate at September 30, 2023 |  | Maturity Date |  | September 30, 2023 |  | December 31, 2022
Mortgage loan (1) |  | 7 |  | 5.94% | (3) | April 2024 | (4) | $ | 200,000 |  |  | $ | 200,000 |
Mortgage loan (1) |  | 3 |  | 5.02% | (3) | April 2024 | (5) | 96,000 |  |  | 96,000 |
Mortgage loan (1) |  | 4 |  | 5.61% | (3) | April 2024 | (5) | 85,000 |  |  | 85,000 |
Mortgage loan (2) |  | 1 |  | 5.06% |  | January 2029 |  | 26,923 |  |  | 27,193 |
|  | 15 |  |  |  |  |  | 407,923 |  |  | 408,193 |
Deferred financing costs, net |  |  |  |  |  |  |  | (253) |  |  | (481) |
Total mortgage loans, net |  |  |  |  |  |  |  | $ | 407,670 |  |  | $ | 407,712 |
(1)The hotels encumbered by the mortgage loan are cross-collateralized. Requires payments of interest only through maturity. (2)Includes $1.9 million and $2.2 million at September 30, 2023 and December 31, 2022, respectively, related to a fair value adjustment on this mortgage loan. (3)Interest rate at September 30, 2023 gives effect to interest rate hedges. (4)In April 2023, the Company exercised its final extension option to extend the maturity on this mortgage loan to April 2024. (5)This mortgage loan provides two one-year extension options, subject to certain conditions. Certain mortgage agreements are subject to various maintenance covenants requiring the Company to maintain a minimum debt yield or debt service coverage ratio ("DSCR"). Failure to meet the debt yield or DSCR thresholds is not an event of default, but instead triggers a cash trap event. As of December 31, 2022, although all mortgage loans met their debt yield or DSCR thresholds, one mortgage loan was in a cash trap event pending notification to the lender to remove the restrictions. As of December 31, 2022, there was approximately $26.9 million of restricted cash held by this lender due to the cash trap event, and during the first quarter of 2023, all of the restrictions on this cash were removed. At September 30, 2023, all mortgage loans exceeded the minimum debt yield or DSCR thresholds. Interest Expense The components of the Company's interest expense consisted of the following (in thousands):
| For the three months ended September 30, |  | For the nine months ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Senior Notes | $ | 9,695 |  |  | $ | 9,695 |  |  | $ | 29,070 |  |  | $ | 29,125 |
Revolver and Term Loans | 7,365 |  |  | 7,870 |  |  | 23,176 |  |  | 26,975 |
Mortgage loans | 5,727 |  |  | 3,388 |  |  | 15,286 |  |  | 9,926 |
Amortization of deferred financing costs | 1,564 |  |  | 1,420 |  |  | 4,528 |  |  | 4,522 |
Non-cash interest expense related to interest rate hedges | 482 |  |  | 252 |  |  | 1,446 |  |  | 493 |
Total interest expense | $ | 24,833 |  |  | $ | 22,625 |  |  | $ | 73,506 |  |  | $ | 71,041 |

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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 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 235 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(c)) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 470 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//470/tableOfContent Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Subparagraph (i) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1C -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1C -Subparagraph (c) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1E -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1E Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1I -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1I -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1I -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I + Details
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