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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-34693

CHATHAM LODGING TRUST
(Exact Name of Registrant as Specified in Its Charter)

Maryland |  | 27-1200777
(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
222 Lakeview Avenue, Suite 200 |  |
West Palm Beach | Florida | 33401
(Address of Principal Executive Offices) |  | (Zip Code)

(561) 802-4477
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class |  | Trading Symbol(s) |  | Name of Each Exchange on Which Registered
Common Shares of Beneficial Interest, $0.01 par value |  | CLDT |  | New York Stock Exchange
6.625% Series A Cumulative Redeemable Preferred Shares |  | CLDT-PA |  | New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ¨ | Accelerated filer | x
Non-accelerated filer | ¨ | Smaller reporting company | ☐
|  | Emerging growth company | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes x No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class | Outstanding at November 4, 2021
Common Shares of Beneficial Interest ($0.01 par value per share) | 48,768,181

1

TABLE OF CONTENTS

|  | Page
| PART I. FINANCIAL INFORMATION |
Item1. | Financial Statements. | 3
Item2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 22
Item3. | Quantitative and Qualitative Disclosures about Market Risk. | 39
Item4. | Controls and Procedures. | 40
| PART II. OTHER INFORMATION |
Item1. | Legal Proceedings. | 40
Item1A. | Risk Factors. | 40
Item2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 40
Item3. | Defaults Upon Senior Securities. | 40
Item4. | Mine Safety Disclosures. | 40
Item5. | Other Information. | 40
Item6. | Exhibits. | 41

2

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CHATHAM LODGING TRUST
Consolidated Balance Sheets
(In thousands, except share and per share data)

| September 30, 2021 |  | December 31, 2020
| (unaudited) |  |
Assets: |  |  |
Investment in hotel properties, net | $ | 1,299,296 |  |  | $ | 1,265,174 |
Investment in hotel properties under development | 64,168 |  |  | 43,651 |
Cash and cash equivalents | 18,580 |  |  | 21,124 |
Restricted cash | 10,986 |  |  | 10,329 |
Right of use asset, net | 20,151 |  |  | 20,641 |
Hotel receivables (net of allowance for doubtful accounts of $393 and $248, respectively) | 3,235 |  |  | 1,688 |
Deferred costs, net | 4,413 |  |  | 5,384 |
Prepaid expenses and other assets | 5,138 |  |  | 2,266 |
Total assets | $ | 1,425,967 |  |  | $ | 1,370,257 |
Liabilities and Equity: |  |  |
Mortgage debt, net | $ | 441,414 |  |  | $ | 460,145 |
Revolving credit facility | 70,000 |  |  | 135,300 |
Construction loan | 32,283 |  |  | 13,325 |
Accounts payable and accrued expenses | 30,772 |  |  | 25,374 |
Distributions and losses in excess of investments in unconsolidated real estate entities | — |  |  | 19,951 |
Lease liability, net | 22,836 |  |  | 23,233 |
Distributions payable | 2,134 |  |  | 469 |
Total liabilities | 599,439 |  |  | 677,797 |
Commitments and contingencies (Note 15) |  |  |
Equity: |  |  |
Shareholders’ Equity: |  |  |
Preferred shares, $0.01 par value, 100,000,000 shares authorized; 4,800,000 and 0 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively | 48 |  |  | — |
Common shares, $0.01 par value, 500,000,000 shares authorized; 48,767,816 and 46,973,473 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively | 487 |  |  | 470 |
Additional paid-in capital | 1,048,059 |  |  | 906,000 |
Accumulated deficit | (237,927) |  |  | (228,718) |
Total shareholders’ equity | 810,667 |  |  | 677,752 |
Noncontrolling Interests: |  |  |
Noncontrolling interest in Operating Partnership | 15,861 |  |  | 14,708 |
Total equity | 826,528 |  |  | 692,460 |
Total liabilities and equity | $ | 1,425,967 |  |  | $ | 1,370,257 |

The accompanying notes are an integral part of these consolidated financial statements.
3

CHATHAM LODGING TRUST
Consolidated Statements of Operations
(In thousands, except share and per share data)
(unaudited)

| For the three months ended |  | For the nine months ended
| September 30, |  | September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020
Revenue: |  |  |  |  |  |  |
Room | $ | 59,305 |  |  | $ | 32,307 |  |  | $ | 135,210 |  |  | $ | 104,205 |
Food and beverage | 1,025 |  |  | 237 |  |  | 2,145 |  |  | 2,417 |
Other | 3,679 |  |  | 1,630 |  |  | 7,898 |  |  | 5,560 |
Reimbursable costs from unconsolidated entities | 286 |  |  | 795 |  |  | 1,400 |  |  | 3,169 |
Total revenue | 64,295 |  |  | 34,969 |  |  | 146,653 |  |  | 115,351 |
Expenses: |  |  |  |  |  |  |
Hotel operating expenses: |  |  |  |  |  |  |
Room | 11,884 |  |  | 6,903 |  |  | 28,537 |  |  | 24,814 |
Food and beverage | 717 |  |  | 184 |  |  | 1,493 |  |  | 2,202 |
Telephone | 366 |  |  | 344 |  |  | 1,114 |  |  | 1,073 |
Other hotel operating | 743 |  |  | 312 |  |  | 1,652 |  |  | 1,303 |
General and administrative | 6,082 |  |  | 3,907 |  |  | 14,950 |  |  | 12,543 |
Franchise and marketing fees | 5,294 |  |  | 2,876 |  |  | 11,983 |  |  | 9,232 |
Advertising and promotions | 1,078 |  |  | 848 |  |  | 2,670 |  |  | 3,212 |
Utilities | 3,059 |  |  | 2,592 |  |  | 7,698 |  |  | 6,971 |
Repairs and maintenance | 3,253 |  |  | 2,250 |  |  | 8,433 |  |  | 7,352 |
Management fees | 2,185 |  |  | 1,292 |  |  | 5,141 |  |  | 4,164 |
Insurance | 716 |  |  | 361 |  |  | 2,072 |  |  | 1,082 |
Total hotel operating expenses | 35,377 |  |  | 21,869 |  |  | 85,743 |  |  | 73,948 |
Depreciation and amortization | 13,668 |  |  | 13,620 |  |  | 40,355 |  |  | 40,349 |
Impairment loss on investment in unconsolidated real estate entities | — |  |  | — |  |  | — |  |  | 15,282 |
Property taxes, ground rent and insurance | 6,114 |  |  | 6,171 |  |  | 17,947 |  |  | 18,161 |
General and administrative | 4,147 |  |  | 2,958 |  |  | 11,993 |  |  | 8,210 |
Other charges | 256 |  |  | (199) |  |  | 633 |  |  | 2,785 |
Reimbursable costs from unconsolidated entities | 286 |  |  | 795 |  |  | 1,400 |  |  | 3,169 |
Total operating expenses | 59,848 |  |  | 45,214 |  |  | 158,071 |  |  | 161,904 |
Operating income (loss) before (loss) gain on sale of hotel property | 4,447 |  |  | (10,245) |  |  | (11,418) |  |  | (46,553) |
(Loss) gain on sale of hotel property | (7) |  |  | — |  |  | (21) |  |  | 3 |
Operating income (loss) | 4,440 |  |  | (10,245) |  |  | (11,439) |  |  | (46,550) |
Interest and other income | — |  |  | 25 |  |  | 103 |  |  | 145 |
Interest expense, including amortization of deferred fees | (5,823) |  |  | (7,245) |  |  | (18,649) |  |  | (21,112) |
Loss from unconsolidated real estate entities | — |  |  | (847) |  |  | (1,231) |  |  | (6,099) |
Gain on sale of investment in unconsolidated real estate entities | — |  |  | — |  |  | 23,817 |  |  | — |
Loss before income tax expense | (1,383) |  |  | (18,312) |  |  | (7,399) |  |  | (73,616) |
Income tax expense | — |  |  | — |  |  | — |  |  | — |
Net loss | (1,383) |  |  | (18,312) |  |  | (7,399) |  |  | (73,616) |
Net loss attributable to noncontrolling interests | 64 |  |  | 255 |  |  | 178 |  |  | 949 |
Net loss attributable to Chatham Lodging Trust | (1,319) |  |  | (18,057) |  |  | (7,221) |  |  | (72,667) |
Preferred dividends | (1,988) |  |  | — |  |  | (1,988) |  |  | — |
Net loss attributable to common shareholders | $ | (3,307) |  |  | $ | (18,057) |  |  | $ | (9,209) |  |  | $ | (72,667) |
Loss per Common Share - Basic: |  |  |  |  |  |  |
Net loss attributable to common shareholders (Note 12) | $ | (0.07) |  |  | $ | (0.38) |  |  | $ | (0.19) |  |  | $ | (1.55) |
Loss per Common Share - Diluted: |  |  |  |  |  |  |
Net loss attributable to common shareholders (Note 12) | $ | (0.07) |  |  | $ | (0.38) |  |  | $ | (0.19) |  |  | $ | (1.55) |
Weighted average number of common shares outstanding: |  |  |  |  |  |  |
Basic | 48,755,561 |  |  | 46,965,526 |  |  | 48,211,612 |  |  | 46,958,143 |
Diluted | 48,755,561 |  |  | 46,965,526 |  |  | 48,211,612 |  |  | 46,958,143 |
Distributions declared per common share: | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 0.22 |

The accompanying notes are an integral part of these consolidated financial statements.
4

CHATHAM LODGING TRUST
Consolidated Statements of Equity
(In thousands, except share and per share data)
(unaudited)

Three months ended September 30, 2020 and 2021
| Preferred Shares |  | Common Shares |  | Additional Paid - In Capital |  | Retained earnings (distributions in excess of retained earnings) |  | Total Shareholders’ Equity |  | Noncontrolling Interest in Operating Partnership |  | Total Equity
| Shares |  | Amount |  | Shares |  | Amount |  |  |  |  |
Balance, July 1, 2020 | — |  |  | $ | — |  |  | 46,965,827 |  |  | $ | 470 |  |  | $ | 905,977 |  |  | $ | (207,306) |  |  | $ | 699,141 |  |  | $ | 13,003 |  |  | $ | 712,144 |
Issuance of common shares, net of offering costs of zero | — |  |  | — |  |  | 5,798 |  |  | — |  |  | 37 |  |  | — |  |  | 37 |  |  | — |  |  | 37 |
Amortization of share based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 7 |  |  | — |  |  | 7 |  |  | 1,005 |  |  | 1,012 |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (18,057) |  |  | (18,057) |  |  | (255) |  |  | (18,312) |
Balance, September 30, 2020 | — |  |  | $ | — |  |  | 46,971,625 |  |  | $ | 470 |  |  | $ | 906,021 |  |  | $ | (225,363) |  |  | $ | 681,128 |  |  | $ | 13,753 |  |  | $ | 694,881 |
Balance, July 1, 2021 | 4,800,000 |  |  | $ | 48 |  |  | 48,756,555 |  |  | $ | 487 |  |  | $ | 1,048,306 |  |  | $ | (234,620) |  |  | $ | 814,221 |  |  | $ | 14,838 |  |  | $ | 829,059 |
Issuance of preferred shares, net of offering costs of $263 | — |  |  | — |  |  | — |  |  | — |  |  | (263) |  |  | — |  |  | (263) |  |  | — |  |  | (263) |
Issuance of common shares pursuant to Equity Incentive Plan | — |  |  | — |  |  | 10,000 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Issuance of common shares, net of offering costs of $12 | — |  |  | — |  |  | 1,261 |  |  | — |  |  | 3 |  |  | — |  |  | 3 |  |  | — |  |  | 3 |
Amortization of share based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 13 |  |  | — |  |  | 13 |  |  | 1,087 |  |  | 1,100 |
Dividends accrued on preferred shares | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,988) |  |  | (1,988) |  |  | — |  |  | (1,988) |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,319) |  |  | (1,319) |  |  | (64) |  |  | (1,383) |
Balance, September 30, 2021 | 4,800,000 |  |  | $ | 48 |  |  | 48,767,816 |  |  | $ | 487 |  |  | $ | 1,048,059 |  |  | $ | (237,927) |  |  | $ | 810,667 |  |  | $ | 15,861 |  |  | $ | 826,528 |

5

Nine Months Ended September 30, 2020 and 2021
| Preferred Shares |  | Common Shares |  | Additional Paid - In Capital |  | Retained earnings (distributions in excess of retained earnings) |  | Total Shareholders’ Equity |  | Noncontrolling Interest in Operating Partnership |  | Total Equity
| Shares |  | Amount |  | Shares |  | Amount |  |  |  |  |
Balance, January 1, 2020 | — |  |  | $ | — |  |  | 46,928,445 |  |  | $ | 469 |  |  | $ | 904,273 |  |  | $ | (142,365) |  |  | $ | 762,377 |  |  | $ | 12,647 |  |  | $ | 775,024 |
Issuance of shares pursuant to Equity Incentive Plan | — |  |  | — |  |  | 24,516 |  |  | — |  |  | 450 |  |  | — |  |  | 450 |  |  | — |  |  | 450 |
Issuance of common shares, net of offering costs of $3 | — |  |  | — |  |  | 18,664 |  |  | 1 |  |  | 162 |  |  | — |  |  | 163 |  |  | — |  |  | 163 |
Amortization of share based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 22 |  |  | — |  |  | 22 |  |  | 3,402 |  |  | 3,424 |
Dividends declared on common shares ($0.22 per share) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (10,331) |  |  | (10,331) |  |  | — |  |  | (10,331) |
Distributions declared on LTIP units ($0.22 per unit) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (233) |  |  | (233) |
Reallocation of noncontrolling interest | — |  |  | — |  |  | — |  |  | — |  |  | 1,114 |  |  | — |  |  | 1,114 |  |  | (1,114) |  |  | — |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (72,667) |  |  | (72,667) |  |  | (949) |  |  | (73,616) |
Balance, September 30, 2020 | — |  |  | $ | — |  |  | 46,971,625 |  |  | $ | 470 |  |  | $ | 906,021 |  |  | $ | (225,363) |  |  | $ | 681,128 |  |  | $ | 13,753 |  |  | $ | 694,881 |
Balance, January 1, 2021 | — |  |  | $ | — |  |  | 46,973,473 |  |  | $ | 470 |  |  | $ | 906,000 |  |  | $ | (228,718) |  |  | $ | 677,752 |  |  | $ | 14,708 |  |  | $ | 692,460 |
Issuance of preferred shares, net of offering costs of $4,043 | 4,800,000 |  |  | 48 |  |  | — |  | 0 | — |  |  | 115,909 |  |  | — |  |  | 115,957 |  |  | — |  |  | 115,957 |
Issuance of common shares pursuant to Equity Incentive Plan | — |  |  | — |  |  | 50,203 |  |  | — |  |  | 450 |  |  | — |  |  | 450 |  |  | — |  |  | 450 |
Issuance of common shares, net of offering costs of $822 | — |  |  | — |  |  | 1,744,140 |  |  | 17 |  |  | 23,758 |  |  | — |  |  | 23,775 |  |  | — |  |  | 23,775 |
Amortization of share based compensation | — |  |  | — |  |  | — |  |  | — |  |  | 27 |  |  | — |  |  | 27 |  |  | 3,206 |  |  | 3,233 |
Forfeited distributions declared on LTIP units | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 40 |  |  | 40 |
Dividends accrued on preferred shares | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,988) |  |  | (1,988) |  |  | — |  |  | (1,988) |
Reallocation of noncontrolling interest | — |  |  | — |  |  | — |  |  | — |  |  | 1,915 |  |  | — |  |  | 1,915 |  |  | (1,915) |  |  | — |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (7,221) |  |  | (7,221) |  |  | (178) |  |  | (7,399) |
Balance, September 30, 2021 | 4,800,000 |  |  | $ | 48 |  |  | 48,767,816 |  |  | $ | 487 |  |  | $ | 1,048,059 |  |  | $ | (237,927) |  |  | $ | 810,667 |  |  | $ | 15,861 |  |  | $ | 826,528 |

The accompanying notes are an integral part of these consolidated financial statements.
6

CHATHAM LODGING TRUST
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)

| For the nine months ended
| September 30,
| 2021 |  | 2020
Cash flows from operating activities: |  |  |
Net loss | $ | (7,399) |  |  | $ | (73,616) |
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
Depreciation | 40,172 |  |  | 40,165 |
Amortization of deferred franchise fees | 183 |  |  | 184 |
Amortization of deferred financing fees included in interest expense | 1,444 |  |  | 866 |
Loss on sale of hotel property | 21 |  |  | — |
Gain on sale of investment in unconsolidated real estate entities | (23,817) |  |  | — |
Impairment loss on investment in unconsolidated real estate entities | — |  |  | 15,282 |
Share based compensation | 3,585 |  |  | 3,473 |
Accelerated share based compensation for employee severance | — |  |  | 288 |
Loss from unconsolidated real estate entities | 1,231 |  |  | 6,099 |
Changes in assets and liabilities: |  |  |
Right of use asset | 490 |  |  | 469 |
Hotel receivables | (1,547) |  |  | 2,401 |
Deferred costs | (327) |  |  | (21) |
Prepaid expenses and other assets | (2,872) |  |  | (1,415) |
Accounts payable and accrued expenses | 7,649 |  |  | (6,569) |
Lease liability | (397) |  |  | (356) |
Net cash provided by (used in) operating activities | 18,416 |  |  | (12,750) |
Cash flows from investing activities: |  |  |
Improvements and additions to hotel properties | (5,224) |  |  | (13,907) |
Acquisition of hotel properties | (71,335) |  |  | — |
Investment in hotel properties under development | (20,517) |  |  | (13,223) |
Proceeds from sale of unconsolidated real estate entity | 2,800 |  |  | — |
Net cash used in investing activities | (94,276) |  |  | (27,130) |
Cash flows from financing activities: |  |  |
Borrowings on revolving credit facility | 90,000 |  |  | 86,000 |
Repayments on revolving credit facility | (155,300) |  |  | (3,000) |
Borrowings on construction loan | 18,958 |  |  | 3,923 |
Payments on mortgage debt | (18,992) |  |  | (6,732) |
Payment of financing costs | (144) |  |  | (2,004) |
Payment of offering costs on common shares | (822) |  |  | (3) |
Proceeds from issuance of common shares | 24,598 |  |  | 166 |
Payment of offering costs on preferred shares | (4,043) |  |  | — |
Proceeds from issuance of preferred shares | 120,000 |  |  | — |
Distributions-common shares/units | (282) |  |  | (16,237) |
Net cash provided by financing activities | 73,973 |  |  | 62,113 |
Net change in cash, cash equivalents and restricted cash | (1,887) |  |  | 22,233 |
Cash, cash equivalents and restricted cash, beginning of period | 31,453 |  |  | 20,182 |
Cash, cash equivalents and restricted cash, end of period | $ | 29,566 |  |  | $ | 42,415 |
Supplemental disclosure of cash flow information: |  |  |
Cash paid for interest | $ | 19,507 |  |  | $ | 20,968 |
Capitalized interest | $ | 2,508 |  |  | $ | 951 |
Cash paid for income taxes | $ | 322 |  |  | $ | 328 |

-continued-
Supplemental disclosure of non-cash investing and financing information:
On January 15, 2021, the Company issued 40,203 shares to its independent trustees pursuant to the Company’s Equity Incentive Plan as compensation for services performed in 2020. On January 15, 2020, the Company issued 24,516 shares to its independent trustees pursuant to the Company’s Equity Incentive Plan as compensation for services performed in 2019.
As of September 30, 2021, the Company had accrued distributions payable of $2,134. As of September 30, 2020, the Company had accrued distributions payable of $469. These distributions related to accrued but unpaid distributions on unvested performance based shares and LTIP units.
Accrued share based compensation of $353 and $338 is included in accounts payable and accrued expenses as of September 30, 2021 and 2020, respectively.
Accrued capital improvements of $2,271 and $3,670 are included in accounts payable and accrued expenses as of September 30, 2021 and 2020, respectively.
The accompanying notes are an integral part of these consolidated financial statements.
7

CHATHAM LODGING TRUST
Notes to the Consolidated Financial Statements
(in thousands, except share and per share data, unless otherwise specified)
(unaudited)
1. Organization
Chatham Lodging Trust (“we,” “us” or the “Company”) was formed as a Maryland real estate investment trust (“REIT”) on October 26, 2009. The Company is internally-managed and invests primarily in upscale extended-stay and premium-branded select-service hotels. The Company has elected to be treated as a REIT for federal income tax purposes.
The net proceeds from any share offerings or issuances are contributed to Chatham Lodging, L.P., our operating partnership (the “Operating Partnership”), in exchange for partnership interests. Substantially all of the Company’s assets are held by, and all operations are conducted through, the Operating Partnership. Chatham Lodging Trust is the sole general partner of the Operating Partnership and owns 100.0% of the common units of limited partnership interest in the Operating Partnership. Certain of the Company’s executive officers hold vested and unvested long-term incentive plan units in the Operating Partnership ("LTIP units"), which are presented as non-controlling interests on our consolidated balance sheets.
As of September 30, 2021, the Company wholly owned 41 hotels with an aggregate of 6,169 rooms located in 15 states and the District of Columbia. Prior to September 23, 2021, the Company held a 10% noncontrolling interest in a joint venture (the "Inland JV") with affiliates of Colony Capital, Inc. ("CLNY"), which owned 48 hotels acquired from Inland American Real Estate Trust, Inc. ("Inland"), comprising an aggregate of 6,402 rooms. Chatham sold its interest in the Inland JV in September 2021. Prior to March 18, 2021, the Company also held a 10.3% noncontrolling interest in a joint venture (the “NewINK JV”) with affiliates of CLNY, which owned 46 hotels with an aggregate of 5,948 rooms. Chatham sold its interest in the NewINK JV in March 2021 for $2.8 million. We sometimes use the term "JVs", which refers collectively to the Inland JV and NewINK JV.
To qualify as a REIT, the Company cannot operate the hotels. Therefore, the Operating Partnership and its subsidiaries lease the Company's wholly owned hotels to taxable REIT subsidiary lessees (“TRS Lessees”), which are wholly owned by the Company’s taxable REIT subsidiary (“TRS”) holding company. Each hotel is leased to a TRS Lessee under a percentage lease that provides for rental payments equal to the greater of (i) a fixed base rent amount or (ii) a percentage rent based on hotel revenue. The initial term of each of the TRS leases is 5 years. Lease revenue from each TRS Lessee is eliminated in consolidation.
The TRS Lessees have entered into management agreements with third-party management companies that provide day-to-day management for the hotels. As of September 30, 2021, Island Hospitality Management LLC (“IHM”), which is 100% owned by Jeffrey H. Fisher, the Company's Chairman, President and Chief Executive Officer, managed all 41 of the Company’s wholly owned hotels.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim consolidated financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and in conformity with the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim financial information. These unaudited consolidated financial statements, in the opinion of management, include all adjustments consisting of normal, recurring adjustments which are considered necessary for a fair statement of the consolidated balance sheets, consolidated statements of operations, consolidated statements of equity, and consolidated statements of cash flows for the periods presented. Interim results are not necessarily indicative of full year performance due to seasonal and other factors, including the timing of the acquisition or sale of hotels.
The consolidated financial statements include all of the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions are eliminated in consolidation. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited financial statements prepared in accordance with GAAP, and the related notes thereto as of December 31, 2020, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
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Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
3. Acquisition of Hotel Properties
On August 3, 2021, the Company acquired both the Residence Inn Austin Northwest/The Domain Area ("RI Austin") hotel in Austin, TX for $37.0 million and the TownePlace Suites Austin Northwest/The Domain Area ("TPS Austin") hotel in Austin, TX for $34.3 million. The Company allocated the purchase price of each hotel acquired based on the estimated fair values of the assets on the date of acquisition. Property acquisition costs of $0.1 million were capitalized in 2021.
4. Disposition of Hotel Properties
On November 24, 2020, the Company sold the Residence Inn Mission Valley hotel in San Diego, CA for $67.0 million and recognized a gain on sale of the hotel property of $21.1 million. The balance of the mortgage loan of $26.7 million was repaid with proceeds from the sale. Additional proceeds were used to repay amounts outstanding on the Company's revolving credit facility. The sale did not represent a strategic shift that had or will have a major effect on the Company's operations and financial results and did not qualify to be reported as discontinued operations.
5. Allowance for Doubtful Accounts
The Company maintains an allowance for doubtful accounts at a level believed to be adequate to absorb estimated probable losses. That estimate is based on past loss experience, current economic and market conditions and other relevant factors. The allowance for doubtful accounts was $0.4 million and $0.2 million as of September 30, 2021 and December 31, 2020, respectively.
6. Investment in Hotel Properties
Investment in hotel properties,net
Investment in hotel properties, net as of September 30, 2021 and December 31, 2020 consisted of the following (in thousands):

| September 30, 2021 |  | December 31, 2020
Land and improvements | $ | 291,749 |  |  | $ | 287,049 |
Building and improvements | 1,263,289 |  |  | 1,195,276 |
Furniture, fixtures and equipment | 90,799 |  |  | 84,381 |
Renovations in progress | 6,387 |  |  | 11,225 |
| 1,652,224 |  |  | 1,577,931 |
Less: accumulated depreciation | (352,928) |  |  | (312,757) |
Investment in hotel properties, net | $ | 1,299,296 |  |  | $ | 1,265,174 |

Investment in hotel properties under development
We are developing a Home2 Suites by Hilton hotel in the Warner Center submarket of Los Angeles, CA on a parcel of land owned by us. We have incurre d $64.2 million of cost s to date, which includes $6.6 million of land acquisition costs and $57.6 million of other development costs.
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7. Investment in Unconsolidated Entities
On June 9, 2014, the Company acquired a 10.3% interest in the NewINK JV, a joint venture between affiliates of NorthStar Realty Finance Corp. ("NorthStar") and the Operating Partnership. NorthStar merged with Colony Capital, Inc. ("Colony") on January 10, 2017 to form a new company, CLNY, which owned a 89.7% interest in the NewINK JV. Chatham sold its interest in the NewINK JV in March 2021 for $2.8 million which resulted in Chatham recording a gain on sale of investment in unconsolidated real estate entities of $23.8 million during the nine months ended September 30, 2021. The Company accounted for this investment under the equity method.
On November 17, 2014, the Company acquired a 10.0% interest in the Inland JV, a joint venture between affiliates of NorthStar and the Operating Partnership. NorthStar merged with Colony on January 10, 2017 to form a new company, CLNY, which owned a 90% interest in the Inland JV. During the three months ended March 31, 2020, the Company determined that an other than temporary decline in the value of its equity investment in the Inland JV had occurred and recorded an impairment of $15.3 million which brought the Company's basis in the Inland JV to zero. Chatham sold its interest in the Inland JV for $0 in September 2021. The Company accounted for this investment under the equity method.
The Company's recorded investments in the NewINK JV and the Inland JV were $0.0 million and $0.0 million, respectively, at September 30, 2021. The following table sets forth the combined components of net loss, including the Company’s share, related to all JVs for the three and nine months ended September 30, 2021 and 2020 (in thousands):

| For the three months ended |  | For the nine months ended
| September 30, |  | September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020
Revenue | $ | — |  |  | $ | 63,509 |  |  | $ | 24,690 |  |  | $ | 192,276 |
Total hotel operating expenses | — |  |  | 53,636 |  |  | 24,106 |  |  | 165,588 |
Hotel operating income | $ | — |  |  | $ | 9,873 |  |  | $ | 584 |  |  | $ | 26,688 |
Impairment loss | $ | — |  |  | $ | 2,842 |  |  | $ | — |  |  | $ | 578,217 |
Loss from continuing operations | $ | — |  |  | $ | (26,637) |  |  | $ | (13,109) |  |  | $ | (671,644) |
Loss on sale of hotels | — |  |  | (6) |  |  | — |  |  | (20) |
Net loss | $ | — |  |  | $ | (26,643) |  |  | $ | (13,109) |  |  | $ | (671,664) |
Loss allocable to the Company | $ | — |  |  | $ | (982) |  |  | $ | (1,347) |  |  | $ | (6,960) |
Basis difference adjustment | — |  |  | 135 |  |  | 116 |  |  | 861 |
Total loss from unconsolidated real estate entities attributable to the Company | $ | — |  |  | $ | (847) |  |  | $ | (1,231) |  |  | $ | (6,099) |

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8. Debt
The Company’s mortgage loans are collateralized by first-mortgage liens on certain of the Company’s properties. The mortgage loans are non-recourse except for instances of fraud or misapplication of funds. Mortgage and revolving credit facility debt consisted of the following (dollars in thousands):

Collateral | Interest Rate |  | Maturity Date |  | 9/30/21 Property Carrying Value |  | Balance Outstanding on Loan as of
| September 30, 2021 |  | December 31, 2020
Revolving Credit Facility (1) | 3.45 | % |  | March 8, 2022 |  | $ | 616,243 |  |  | $ | 70,000 |  |  | $ | 135,300 |
Construction loan (2) | 7.75 | % |  | August 3, 2024 |  | 64,168 |  |  | 32,283 |  |  | 13,325 |
Residence Inn by Marriott New Rochelle, NY | 5.75 | % |  | September 1, 2021 |  | 21,366 |  |  | — |  |  | 12,602 |
Homewood Suites by Hilton San Antonio, TX | 4.59 | % |  | February 6, 2023 |  | 27,810 |  |  | 14,907 |  |  | 15,195 |
Residence Inn by Marriott Vienna, VA | 4.49 | % |  | February 6, 2023 |  | 30,358 |  |  | 20,380 |  |  | 20,780 |
Courtyard by Marriott Houston, TX | 4.19 | % |  | May 6, 2023 |  | 29,422 |  |  | 16,788 |  |  | 17,126 |
Hyatt Place Pittsburgh, PA | 4.65 | % |  | July 6, 2023 |  | 32,972 |  |  | 20,647 |  |  | 21,031 |
Residence Inn by Marriott Bellevue, WA | 4.97 | % |  | December 6, 2023 |  | 61,253 |  |  | 42,322 |  |  | 42,998 |
Residence Inn by Marriott Garden Grove, CA | 4.79 | % |  | April 6, 2024 |  | 40,191 |  |  | 30,999 |  |  | 31,463 |
Residence Inn by Marriott Silicon Valley I, CA | 4.64 | % |  | July 1, 2024 |  | 72,695 |  |  | 62,642 |  |  | 63,418 |
Residence Inn by Marriott Silicon Valley II, CA | 4.64 | % |  | July 1, 2024 |  | 80,661 |  |  | 68,345 |  |  | 69,192 |
Residence Inn by Marriott San Mateo, CA | 4.64 | % |  | July 1, 2024 |  | 60,542 |  |  | 46,981 |  |  | 47,564 |
Residence Inn by Marriott Mountain View, CA | 4.64 | % |  | July 6, 2024 |  | 46,053 |  |  | 36,638 |  |  | 37,092 |
SpringHill Suites by Marriott Savannah, GA | 4.62 | % |  | July 6, 2024 |  | 32,620 |  |  | 28,997 |  |  | 29,358 |
Hilton Garden Inn Marina del Rey, CA | 4.68 | % |  | July 6, 2024 |  | 37,328 |  |  | 20,143 |  |  | 20,490 |
Homewood Suites by Hilton Billerica, MA | 4.32 | % |  | December 6, 2024 |  | 12,393 |  |  | 15,190 |  |  | 15,411 |
Hampton Inn & Suites Houston Medical Center, TX | 4.25 | % |  | January 6, 2025 |  | 15,281 |  |  | 17,145 |  |  | 17,396 |
Total debt before unamortized debt issue costs |  |  |  |  | $ | 1,281,356 |  |  | $ | 544,407 |  |  | $ | 609,741 |
Unamortized mortgage debt issue costs |  |  |  |  |  |  | (710) |  |  | (971) |
Total debt outstanding |  |  |  |  |  |  | $ | 543,697 |  |  | $ | 608,770 |

1.The interest rate for the revolving credit facility is variable and based on LIBOR (subject to a 0.5% floor) plus a spread of 2.5% if borrowings remain at or below $200 million and a spread of 3.0% if borrowings exceed $200 million. At September 30, 2021 and December 31, 2020, the Company had $70.0 million and $135.3 million, respectively, of outstanding borrowings under its $250.0 million revolving credit facility. The credit facility provides two six-month extension options that would extend the final maturity to March 8, 2023 if exercised.
2.On August 4, 2020, a subsidiary of Chatham entered into an agreement with affiliates of Mack Real Estate Credit Strategies to obtain a $40 million loan to fund the remaining construction costs of the Warner Center hotel development. The loan has an initial term of 4 years and there are two six-month extension options. The rate on the loan is LIBOR, subject to a 0.25% floor, plus a spread of 7.5%.
The Company estimates the fair value of its fixed rate debt by discounting the future cash flows of each instrument at estimated market rates. All of the Company's mortgage loans are fixed-rate. Rates take into consideration general market conditions, quality and estimated value of collateral and maturity of debt with similar credit terms and are classified within level 3 of the fair value hierarchy. The estimated fair value of the Company’s fixed rate debt as of September 30, 2021 and December 31, 2020 was $450.7 million and $462.6 million, respectively.
The Company estimates the fair value of its variable rate debt by taking into account general market conditions and the estimated credit terms it could obtain for debt with similar maturity and is classified within level 3 of the fair value hierarchy. As of September 30, 2021, the Company’s variable rate debt consisted of its revolving credit facility and construction loan. The estimated fair value of the Company’s variable rate debt as of September 30, 2021 and December 31, 2020 was $102.3 million and $148.6 million, respectively.
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On December 16, 2020, the Company, entered into a Third Amendment to the Company’s Amended and Restated Credit Agreement, dated as of March 8, 2018 (as amended by the Credit Agreement Amendment, and as previously amended by that certain First Amendment to the Amended and Restated Credit Agreement, dated as of May 6, 2020, and as further amended by that certain Second Amendment to Amended and Restated Credit Agreement, dated as of July 23, 2020), with certain lenders for whom Barclays Bank PLC is acting as the administrative agent. The amendment provides for the waiver of certain financial covenants through December 31, 2021 and allows the Company to borrow up to the entire $250.0 million facility size during this period. During this covenant waiver period, the Company will be required to maintain a minimum liquidity of $25.0 million which will include both unrestricted cash and credit facility availability. In connection with the amendment, the Company added 6 hotels to the credit facility’s borrowing base which now has a total of 24 properties. The amendment provided the Company’s credit facility lenders with pledges of the equity in the 24 borrowing base hotels. The amendment places additional limits on the Company’s ability to incur debt, pay dividends, and make capital expenditures during the covenant waiver period. During the covenant waiver period interest will be calculated as LIBOR (subject to a 0.5% floor) plus a spread of 2.50% if borrowings remain at or below $200.0 million and a spread of 3.0% if borrowings exceed $200.0 million. As of September 30, 2021, the Company was in compliance with all of its modified financial covenants.
Our mortgage debt agreements contain “cash trap” provisions that 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. Such provisions do not allow the lender the right to accelerate repayment of the underlying debt. As of September 30, 2021, the debt service coverage ratios or debt yields for all of our mortgage loans were below the minimum thresholds such that the cash trap provision of each respective loan could be enforced. As of September 30, 2021, none of our mortgage debt lenders has enforced cash trap provisions. We do not expect that such cash traps will affect our ability to satisfy our short-term liquidity requirements.
Future scheduled principal payments of debt obligations as of September 30, 2021, for the current year and each of the next five calendar years and thereafter are as follows (in thousands):

| Amount
2021 (remaining three months) | $ | 2,450 |
2022 | 79,249 |
2023 | 117,876 |
2024 | 328,898 |
2025 | 15,934 |
Thereafter | — |
Total debt before unamortized debt issue costs | $ | 544,407 |
Unamortized mortgage debt issue costs | (710) |
Total debt outstanding | $ | 543,697 |

Accounting for Derivative Instruments
The Company has entered into interest rate cap agreements to hedge against interest rate fluctuations related to the construction loan for the Warner Center hotel. The Company records its derivative instruments on the balance sheet at their estimated fair values. Changes in the fair value of the derivatives are recorded each period in current earnings or in other comprehensive income, depending on whether a derivative is designated as part of a hedging relationship and, if it is, depending on the type of hedging relationship. The Company's interest rate caps are not designated as a hedge but to eliminate the incremental cost to the Company if the one-month LIBOR were to exceed 3.5%. Accordingly, the interest rate caps are recorded on the balance sheet under prepaid expenses and other assets at the estimated fair value and realized and unrealized changes in the fair value are reported in the consolidated statement of operations. As of September 30, 2021, the fair value of the interest rate caps were $41 thousand.
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9. Income Taxes
The Company’s TRS is subject to federal and state income taxes. Income tax expense was zero for the three and nine months ended September 30, 2021 and 2020.
As of each reporting date, the Company's management considers new evidence, both positive and negative, that could impact management's view with regard to future realization of deferred tax assets. The Company's TRS is expecting continued taxable losses in 2021. As of September 30, 2021, the TRS continues to recognize a full valuation allowance equal to 100% of the net deferred tax assets due to the uncertainty of the TRS's ability to utilize these net deferred tax assets. Management will continue to monitor the need for a valuation allowance.
10. Dividends Declared and Paid
Common Dividends
The Company suspended common dividends beginning after the payment of the March 27, 2020 dividend due to a decline in operating performance caused by the COVID-19 pandemic. During the three months ended March 31, 2020, the Company declared total common share dividends of $0.22 per share and distributions on LTIP units of $0.22 per unit. There were no common share dividends declared during the three and nine months ended September 30, 2021. The common share dividends and distributions paid during the three months ended March 31, 2020 were as follows:

|  | Record Date |  | Payment Date |  | Common share distribution amount |  | LTIP unit distribution amount
January | 1/31/2020 |  | 2/28/2020 |  | $ | 0.11 |  |  | $ | 0.11 |
February | 2/28/2020 |  | 3/27/2020 |  | 0.11 |  |  | 0.11 |
1st Quarter 2020 |  |  |  |  | $ | 0.22 |  |  | $ | 0.22 |
Total 2020 |  |  |  |  | $ | 0.22 |  |  | $ | 0.22 |

Preferred Dividends
In September 2021, Chatham declared a dividend of $0.48307 per share of 6.625% Series A Cumulative Redeemable Preferred Shares payable on October 15, 2021 to shareholders of record as of September 30, 2021.
11. Shareholders' Equity
Common Shares
The Company is authorized to issue up to 500,000,000 common shares of beneficial interest, $0.01 par value per share ("common shares"). Each outstanding common share entitles the holder to one vote on all matters submitted to a vote of shareholders. Holders of the Company’s common shares are entitled to receive dividends when authorized by the Company's Board of Trustees. As of September 30, 2021, 48,767,816 common shares were outstanding.
In December 2017, the Company established an At the Market Equity Offering ("Prior ATM Plan") whereby, from time to time, we may publicly offer and sell our common shares having an aggregate maximum offering price of up to $100 million by means of ordinary brokers’ transactions on the New York Stock Exchange (the "NYSE"), in negotiated transactions or in transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended. The Company filed a $100 million registration statement for a new ATM program (the "ATM Plan" and together with the Prior ATM Plan, the "ATM Plans") on March 5, 2021 to replace the prior program. At the same time, the Company entered into sales agreements with Cantor Fitzgerald & Co., Barclays Capital Inc., BMO Capital Markets Corp., BofA Securities, Inc., BTIG, LLC, Citigroup Global Markets Inc., Regions Securities LLC, Stifel, Nicolaus & Company, Incorporated and Wells Fargo Securities as sales agents. As of September 30, 2021, ther e was approximately $77.5 million available for issuance under the ATM Plan.
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In December 2017, the Company established a $50 million dividend reinvestment and stock purchase plan (the "Prior DRSPP"). We filed a new $50 million shelf registration statement for the dividend reinvestment and stock purchase plan (the "New DRSPP" and together with the Prior DRSPP, the "DRSPPs") on December 22, 2020 to replace the prior program. Under the DRSPPs, shareholders may purchase additional common shares by reinvesting some or all of the cash dividends received on the Company's common shares. Shareholders may also make optional cash purchases of the Company's common shares subject to certain limitations detailed in the prospectus for the DRSPPs. During the three months ended September 30, 2021, the Company issued 1,261 shares under the New DRSPP at a weighted average price of $11.91, which generated $15 thousand of proceeds. As of September 30, 2021, there was approximately $48.0 million available for issuance under the New DRSPP.
Preferred Shares
The Company is authorized to issue up to 100,000,000 preferred shares of beneficial interest, $0.01 par value per share, in one or more series.
On June 30, 2021, the Company issued 4,800,000 6.625% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest, $0.01 par value per share (the “Series A Preferred Shares”), and received net proceeds of approximately $115.9 million. The Series A Preferred Shares rank senior to the Company’s common shares with respect to the payment of dividends and distributions of assets in the event of a liquidation, dissolution, or winding up. The Series A Preferred Shares do not have any maturity date and are not subject to mandatory redemptions or sinking fund requirements. The distribution rate is 6.625% per annum of the $25.00 liquidation preference, which is equivalent to $1.65625 per annum per Series A Preferred Share. Distributions on the Series A Preferred Shares will be payable quarterly in arrears with the first distribution on the Series A Preferred Shares paid on October 15, 2021. The Company may not redeem the Series A Preferred Shares before June 30, 2026 except in limited circumstances to preserve the Company's status as a REIT for federal income tax purposes and upon the occurrence of a change of control. On and after June 30, 2026, the Company may, at its option, redeem the Series A Preferred Shares, in whole or from time to time in part, by paying $25.00 per share, plus any accrued and unpaid distributions to, but not including, the date of redemption. Upon the occurrence of a change of control, as defined in the Company's declaration of trust, the result of which the Company’s common shares and the common securities of the acquiring or surviving entity are not listed on the New York Stock Exchange, the NYSE MKT or NASDAQ, or any successor exchanges, the Company may, at its option, redeem the Preferred Shares in whole or in part within 120 days following the change of control by paying $25.00 per share, plus any accrued and unpaid distributions through the date of redemption. If the Company does not exercise its right to redeem the Preferred Shares upon a change of control, the holders of the Preferred Shares have the right to convert some or all of their shares into a number of the Company’s common shares based on defined formulas subject to share caps. The share cap on each Series A Preferred Share is 3.701 common shares. As of September 30, 2021, 4,800,000 preferred shares were issued and outstanding. During the three months ended September 30, 2021, the Company accrued preferred share dividends of $2.0 million.
Operating Partnership Units
Holders of common units in the Operating Partnership, if and when issued, will have certain redemption rights, which will enable the unit holders to cause the Operating Partnership to redeem their units in exchange for, at the Company’s option, cash per unit equal to the market price of the Company’s common shares at the time of redemption or for the Company’s common shares on a one-for-one basis. The number of shares issuable upon exercise of the redemption rights will be adjusted upon the occurrence of share splits, mergers, consolidations or similar pro-rata share transactions, which otherwise would have the effect of diluting the ownership interests of limited partners or shareholders. As of September 30, 2021, there were 976,102 vested Operating Partnership LTIP units held by current and former employees.
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12. Earnings Per Share
The two-class method is used to determine earnings per share because unvested restricted shares and unvested LTIP units are considered to be participating shares. The LTIP units held by the non-controlling interest holders, which may be converted to common shares of beneficial interest, have been excluded from the denominator of the diluted earnings per share calculation as there would be no effect on the amounts since limited partners' share of income or loss would also be added back to net income or loss. Unvested restricted shares, unvested long-term incentive plan units and unvested Class A Performance LTIP units that could potentially dilute basic earnings per share in the future would not be included in the computation of diluted loss per share, for the periods where a loss has been recorded, because they would have been anti-dilutive for the periods presented. The following is a reconciliation of the amounts used in calculating basic and diluted net income per share (in thousands, except share and per share data):

| For the three months ended |  | For the nine months ended
| September 30, |  | September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020
Numerator: |  |  |  |  |  |  |
Net loss attributable to common shareholders | $ | (3,307) |  |  | $ | (18,057) |  |  | $ | (9,209) |  |  | $ | (72,667) |
Dividends paid on unvested shares and units | — |  |  | — |  |  | — |  |  | (50) |
Net loss attributable to common shareholders | $ | (3,307) |  |  | $ | (18,057) |  |  | $ | (9,209) |  |  | $ | (72,717) |
Denominator: |  |  |  |  |  |  |
Weighted average number of common shares - basic | 48,755,561 |  |  | 46,965,526 |  |  | 48,211,612 |  |  | 46,958,143 |
Unvested shares and units | — |  |  | — |  |  | — |  |  | — |
Weighted average number of common shares - diluted | 48,755,561 |  |  | 46,965,526 |  |  | 48,211,612 |  |  | 46,958,143 |
Basic loss per Common Share: |  |  |  |  |  |  |
Net loss attributable to common shareholders per weighted average basic common share | $ | (0.07) |  |  | $ | (0.38) |  |  | $ | (0.19) |  |  | $ | (1.55) |
Diluted loss per Common Share: |  |  |  |  |  |  |
Net loss attributable to common shareholders per weighted average diluted common share | $ | (0.07) |  |  | $ | (0.38) |  |  | $ | (0.19) |  |  | $ | (1.55) |

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13. Equity Incentive Plan
The Company maintains its Equity Incentive Plan to attract and retain independent trustees, executive officers and other key employees and service providers. The plan provides for the grant of options to purchase common shares, share awards, share appreciation rights, performance units and other equity-based awards. The plan was amended and restated as of May 17, 2013 to increase the maximum number of shares available under the plan to 3,000,000 shares. Share awards under this plan generally vest over three to five years, though compensation for the Company’s independent trustees includes share grants that vest immediately. The Company pays dividends on unvested shares and units, except for performance-based shares and outperformance based units, for which dividends on unvested performance-based shares and units are accrued and not paid until those shares or units vest. Certain awards may provide for accelerated vesting if there is a change in control. In January 2021 and 2020, the Company issued 40,203 and 24,516 common shares, respectively, to its independent trustees as compensation for services performed in 2020 and 2019, respectively. As of September 30, 2021, there were 579,825 common shares available for issuance under the Equity Incentive Plan.
Restricted Share Awards
From time to time, the Company may award restricted shares under the Equity Incentive Plan as compensation to officers, employees and non-employee trustees. The Company recognizes compensation expense for the restricted shares on a straight-line basis over the vesting period based on the fair market value of the shares on the date of issuance.
A summary of the Company’s restricted share awards for the nine months ended September 30, 2021 and the year ended December 31, 2020 is as follows:

| For the nine months ended |  | For the year ended
| September 30, 2021 |  | December 31, 2020
| Number of Shares |  | Weighted-Average Grant Date Fair Value |  | Number of Shares |  | Weighted-Average Grant Date Fair Value
Non-vested at beginning of the period | 1,667 |  |  | $ | 17.40 |  |  | 5,001 |  |  | $ | 18.33 |
Granted | 10,000 |  |  | 11.47 |  |  | — |  |  | — |
Vested | — |  |  | — |  |  | (3,334) |  |  | 18.80 |
Forfeited | — |  |  | — |  |  | — |  |  | — |
Non-vested at end of the period | 11,667 |  |  | $ | 12.32 |  |  | 1,667 |  |  | $ | 17.40 |

As of September 30, 2021 and December 31, 2020, there were $116 thousand and $29 thousand, respectively, of unrecognized compensation costs related to restricted share awards. As of September 30, 2021, these costs were expected to be recognized over a weighted–average period of approximately 2.7 years. For the three months ended September 30, 2021 and 2020, the Company recognized approximately $13 thousand and $7 thousand, respectively, and for the nine months ended September 30, 2021 and 2020, the Company recognized approximately $27 thousand and $23 thousand, respectively, of expense related to the restricted share awards.
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Long-Term Incentive Plan Awards
LTIP units are a special class of partnership interests in the Operating Partnership which may be issued to eligible participants for the performance of services to or for the benefit of the Company. Under the Equity Incentive Plan, each LTIP unit issued is deemed equivalent to an award of one common share thereby reducing the number of shares available for other equity awards on a one-for-one basis.
A summary of the Company's LTIP Unit awards for the nine months ended September 30, 2021 and the year ended December 31, 2020 is as follows:

| For the nine months ended |  | For the year ended
| September 30, 2021 |  | December 31, 2020
| Number of Units |  | Weighted-Average Grant Date Fair Value |  | Number of Units |  | Weighted-Average Grant Date Fair Value
Non-vested at beginning of the period | 669,609 |  |  | $ | 15.73 |  |  | 598,320 |  |  | $ | 18.30 |
Granted | 330,945 |  |  | 14.55 |  |  | 325,507 |  |  | 13.42 |
Vested | (219,451) |  |  | 16.39 |  |  | (254,218) |  |  | 18.82 |
Forfeited | (16,925) |  |  | 17.02 |  |  | — |  |  | — |
Non-vested at end of the period | 764,178 |  |  | $ | 15.00 |  |  | 669,609 |  |  | $ | 15.73 |

Time-Based LTIP Awards
On March 1, 2021, the Company’s Operating Partnership, upon the recommendation of the Compensation Committee, granted 132,381 time-based awards (the “2021 Time-Based LTIP Unit Award”). The grants were made pursuant to award agreements that provide for time-based vesting (the "LTIP Unit Time-Based Vesting Agreement").
Time-based LTIP Unit Awards will vest ratably provided that the recipient remains employed by the Company through the applicable vesting date, subject to acceleration of vesting in the event of the recipient’s death, disability, termination without cause or resignation with good reason, or in the event of a change of control of the Company. Prior to vesting, a holder is entitled to receive distributions on the LTIP Units that comprise the 2021 Time-Based LTIP Unit Awards and the prior year LTIP unit Awards set forth in the table above.
Performance-Based LTIP Awards
On March 1, 2021, the Company's Operating Partnership, upon the recommendation of the Compensation Committee, also granted 198,564 performance-based awards (the "2021 Performance-Based LTIP Unit Awards"). The grants were made pursuant to award agreements that have market based vesting conditions. The Performance-Based LTIP Unit Awards are comprised of Class A Performance LTIP Units that will vest only if and to the extent that (i) the Company achieves certain long-term market based TSR criteria established by the Compensation Committee and (ii) the recipient remains employed by the Company through the applicable vesting date, subject to acceleration of vesting in the event of the recipient’s death, disability, termination without cause or resignation with good reason, or in the event of a change of control of the Company. Compensation expense is based on an estimated value of $15.91 per 2021 Performance-Based LTIP Unit Award, which takes into account that some or all of the awards may not vest if long-term market based TSR criteria are not met during the vesting period.
The 2021 Performance-Based LTIP Unit Awards may be earned based on the Company’s relative TSR performance for the three-year period beginning on March 1, 2021 and ending on February 28, 2024. The 2021 Performance-Based LTIP Unit Awards, if earned, will be paid out between 50% and 150% of target value as follows:

| Relative TSR Hurdles (Percentile) |  | Payout Percentage
Threshold | 25th |  | 50%
Target | 50th |  | 100%
Maximum | 75th |  | 150%

Payouts at performance levels in between the hurdles will be calculated by straight-line interpolation.
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The Company estimated the aggregate compensation cost to be recognized over the service period determined as of the grant date under ASC 718, excluding the effect of estimated forfeitures, using a Monte Carlo approach. In determining the discounted value of the LTIP units, the Company considered the inherent uncertainty that the LTIP units would never reach parity with the other common units of the Operating Partnership and thus have an economic value of zero to the grantee. Additional factors considered in estimating the value of LTIP units included discounts for illiquidity; expectations for future dividends; risk free interest rates; stock price volatility; and economic environment and market conditions.
The grant date fair values of the LTIPs and the assumptions used to estimate the values are as follows:

| Grant Date | Number of Units Granted | Estimated Value Per Unit | Volatility | Dividend Yield | Risk Free Interest Rate
Outperformance Plan LTIP Unit Awards | 6/1/2015 | 183,300 | $14.13 | 26% | 4.5% | 0.95%
2016 Time-Based LTIP Unit Awards | 1/28/2016 | 72,966 | $16.69 | 28% | —% | 0.79%
2016 Performance-Based LTIP Unit Awards | 1/28/2016 | 39,285 | $11.09 | 30% | 5.8% | 1.13%
2017 Time-Based LTIP Unit Awards | 3/1/2017 | 89,574 | $18.53 | 24% | —% | 0.92%
2017 Performance-Based LTIP Unit Awards | 3/1/2017 | 134,348 | $19.65 | 25% | 5.8% | 1.47%
2018 Time-Based LTIP Unit Awards | 3/1/2018 | 97,968 | $16.83 | 26% | —% | 2.07%
2018 Performance-Based LTIP Unit Awards | 3/1/2018 | 146,949 | $17.02 | 26% | 6.2% | 2.37%
2019 Time-Based LTIP Unit Awards | 3/1/2019 | 88,746 | $18.45 | 21% | —% | 2.57%
2019 Performance-Based LTIP Unit Awards | 3/1/2019 | 133,107 | $18.91 | 21% | 6.2% | 2.55%
2020 Time-Based LTIP Unit Awards | 3/1/2020 | 130,206 | $13.05 | 20% | —% | 1.06%
2020 Performance-Based LTIP Unit Awards | 3/1/2020 | 195,301 | $13.66 | 20% | 8.1% | 0.90%
2021 Time-Based LTIP Unit Awards | 3/1/2021 | 132,381 | $12.52 | 78% | —% | 0.08%
2021 Performance-Based LTIP Unit Awards | 3/1/2021 | 198,564 | $15.91 | 64% | 3.4% | 0.30%

The Company recorded $1.1 million and $1.0 million in compensation expense related to the LTIP units for the three months ended September 30, 2021 and 2020, respectively, and $3.2 million and $3.4 million in compensation expense related to the LTIP units for the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021 and December 31, 2020, there was $6.5 million and $4.9 million, respectively, of total unrecognized compensation cost related to LTIP units. This cost is expected to be recognized over approximately 1.9 years, which represents the weighted average remaining vesting period of the LTIP units.
14. Leases
The Residence Inn Gaslamp hotel is subject to a ground lease with an expiration date of January 31, 2065 with an extension option by the Company of up to three additional terms of ten years each. Monthly payments are currently approximately $44,400 per month and increase 10% every five years. The hotel is subject to annual supplemental rent payments calculated as 5% of gross revenues during the applicable lease year, minus 12 times the monthly base rent scheduled for the lease year.
The Residence Inn New Rochelle is subject to an air rights lease and garage lease that each expire on December 1, 2104. The lease agreements with the City of New Rochelle cover the space above the parking garage that is occupied by the hotel as well as 128 parking spaces in a parking garage that is attached to the hotel. The annual base rent for the garage lease is the hotel’s proportionate share of the city’s adopted budget for the operations, management and maintenance of the garage and established reserves to fund for the cost of capital repairs. Aggregate rent for 2021 is approximately $30,000 per quarter.
The Hilton Garden Inn Marina del Rey hotel is subject to a ground lease with an expiration date of December 31, 2067. Minimum monthly payments are currently approximately $47,500 per month and a percentage rent payment less the minimum rent is due in arrears equal to 5% to 25% of gross income based on the type of income.
The Company entered into a corporate office lease in September 2015. The lease is for a term of 11 years and includes a 12-month rent abatement period and certain tenant improvement allowances. The Company has a renewal option of up to two successive terms of 5 years each. The Company shares the space with related parties and is reimbursed for the pro-rata share of rentable space occupied by the related parties.
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The Company is the lessee under ground, air rights, garage and office lease agreements for certain of its properties, all of which qualify as operating leases as of September 30, 2021. These leases typically provide multi-year renewal options to extend term as lessee at the Company's option. Option periods are included in the calculation of the lease obligation liability only when options are reasonably certain to be exercised.
In calculating the Company's lease obligations under the various leases, the Company uses discount rates estimated to be equal to what the Company would have to pay to borrow on a collateralized basis over a similar term, for an amount equal to the lease payments, in a similar economic environment.
The following is a schedule of the minimum future payments required under the ground, air rights, garage leases and office lease as of September 30, 2021, for each of the next five calendar years and thereafter:

Total Future Lease Payments
| Amount
2021 (remaining three months) | $ | 516 |
2022 | 2,071 |
2023 | 2,093 |
2024 | 2,115 |
2025 | 2,186 |
Thereafter | 66,720 |
Total lease payments | $ | 75,701 |
Less: Imputed interest | (52,865) |
Present value of lease liabilities | $ | 22,836 |

The following is a schedule of the minimum future payments required under the ground, air rights, garage leases and office lease as of December 31, 2020, for each of the next five calendar years and thereafter:

Total Future Lease Payments |
| Amount
2021 | $ | 2,051 |
2022 | 2,071 |
2023 | 2,093 |
2024 | 2,115 |
2025 | 2,186 |
Thereafter | 66,720 |
Total lease payments | $ | 77,236 |
Less: Imputed interest | (54,003) |
Present value of lease liabilities | $ | 23,233 |

The Company incurred $0.3 million of fixed lease payments and $0.1 million of variable lease payments for the three months ended September 30, 2021, and $0.9 million of fixed lease payments and $0.2 million of variable lease payments for the nine months ended September 30, 2021, which are included in property taxes, ground rent and insurance in our consolidated statement of operations.
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The following table includes information regarding the right of use assets and lease liabilities of the Company as of September 30, 2021:

| Right of Use Asset |  | Lease Liability
Balance as of January 1, 2021 | $ | 20,641 |  |  | $ | 23,233 |
Amortization | (490) |  |  | (397) |
Balance as of September 30, 2021 | $ | 20,151 |  |  | $ | 22,836 |

Lease Term and Discount Rate | September 30, 2021
Weighted-average remaining lease term (years) | 40.56
Weighted-average discount rate | 6.59%

15. Commitments and Contingencies
Litigation
The Company is subject to various claims, lawsuits and legal proceedings, including routine litigation arising in the ordinary course of business, regarding the operation of its hotels, its managers and other Company matters. While it is not possible to ascertain the ultimate outcome of such matters, the Company believes that the aggregate identifiable amount of such liabilities, if any, will not have a material adverse impact on its financial condition or results of operations.
Management Agreements
The management agreements with IHM have an initial term of five years and automatically renew for two five-year periods unless IHM provides written notice to us no later than 90 days prior to the then current term’s expiration date of its intent not to renew. The IHM management agreements provide for early termination at the Company’s option upon sale of any IHM-managed hotel for no termination fee, with six months advance notice. The IHM management agreements may be terminated for cause, including the failure of the managed hotel to meet specified performance levels. Base management fees are calculated as a percentage of the hotel's gross room revenue. If certain financial thresholds are met or exceeded, an incentive management fee is calculated as 10% of the hotel's net operating income less fixed costs, base management fees and a specified return threshold. The incentive management fee is capped at 1% of gross hotel revenues for the applicable calculation.
Management fees totaled approximately $2.2 million and $1.3 million for the three months ended September 30, 2021 and 2020, respectively, and $5.1 million and $4.2 million for the nine months ended September 30, 2021 and 2020, respectively.
Franchise Agreements
The fees associated with the franchise agreements are calculated as a specified percentage of the hotel's gross room revenue. Franchise and marketing fees totaled approximately $5.3 million and $2.9 million for the three months ended September 30, 2021 and 2020, respectively, and $12.0 million and $9.2 million for the nine months ended September 30, 2021 and 2020, respectively. The initial term of the agreements range from 10 to 30 years with the weighted average expiration being August 2030.
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16. Related Party Transactions
Prior to March 18, 2021, Mr. Fisher owned 52.5% of IHM. During the nine months ended September 30, 2021, Mr. Fisher acquired the remaining 47.5% ownership interest and as of September 30, 2021, Mr. Fisher owns 100% of IHM. As of September 30, 2021, the Company had hotel management agreements with IHM to manage all 41 of its wholly owned hotels. Hotel management, revenue management and accounting fees accrued or paid to IHM for the hotels owned by the Company for the three months ended September 30, 2021 and 2020 were $2.2 million and $1.3 million, respectively, and for the nine months ended September 30, 2021 and 2020 were $5.1 million and $4.2 million, respectively. At September 30, 2021 and December 31, 2020, the amounts due to IHM were $0.6 million and $0.3 million, respectively. The Company also provided services to an entity, Castleblack Owner Holding, LLC ("Castleblack"), that sold on March 24, 2021 as part of the larger CLNY transaction, which was 97.5% owned by affiliates of CLNY and 2.5% owned by Mr. Fisher. During the nine months ended September 30, 2021 and 2020 the Company received $23 thousand and $74 thousand, respectively, for these services.
Cost reimbursements from unconsolidated entities revenue represent reimbursements of costs incurred on behalf of the NewINK JV, Inland JV, Castleblack and IHM. These costs relate primarily to corporate payroll costs at the NewINK JV, Inland JV and Castleblack where the Company is the employer and office expenses shared with these entities and IHM. Various shared office expenses and rent are paid by the Company and allocated to the NewINK JV, the Inland JV, Castleblack and IHM based on the amount of square footage occupied by each entity. As the Company records cost reimbursements based upon costs incurred with no added markup, the revenue and related expense has no impact on the Company’s operating income or net income. Cost reimbursements are recorded based upon the occurrence of a reimbursed activity.
17. Subsequent Events
On October 26, 2021, Chatham executed an amendment to its credit facility which extended the waiver of financial covenants until June 30, 2022, provided for the immediate exercise of an option to extend the maturity of the entire $250.0 million facility through March 8, 2023, and added two six-month options to further extend the maturity of the facility through March 8, 2024 from lenders representing $227.5 million of commitments. In conjunction with the amendment, Chatham provided credit facility lenders with equity pledges on three unencumbered hotels. The spread on the facility did not change as a result of the amendment.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Dollar amounts presented in this Item 2 are in thousands, except per share data, unless otherwise specified.
The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2020. In this report, we use the terms “the Company," “we” or “our” to refer to Chatham Lodging Trust and its consolidated subsidiaries, unless the context indicates otherwise.
COVID-19 Pandemic
The lodging industry has been significantly impacted by the COVID-19 pandemic. Steps have been taken to restrict inbound international travel and there has been a significant decline in domestic travel. The full impact of the COVID-19 pandemic on the lodging industry continues to evolve and will depend on future developments including the duration and spread of the outbreak, and the possibility of additional subsequent widespread outbreaks and variant strains and the impact of actions taken in response, the existence of governmental stay-at-home orders, peoples' willingness to travel and the strength and timing of an economic recovery. All of these factors are uncertain, and the full impact of the COVID-19 pandemic on the lodging industry and the Company cannot be predicted at this time. The full magnitude of the impact of the COVID-19 pandemic on the Company’s financial condition, liquidity, and future results of operations will depend on future developments which are highly uncertain. The Company has taken actions to mitigate the operating and financial impact of the COVID-19 pandemic including suspending common share dividends, reducing capital expenditures, borrowing under its credit facility, obtaining credit facility covenant waivers, and temporarily reducing executive compensation.
Statement Regarding Forward-Looking Information
The following information contains forward-looking statements, including those with regard to the potential future impact of the COVID-19 pandemic, within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements include information about possible or assumed future results of the lodging industry and our business, financial condition, liquidity, results of operations, cash flow and plans and objectives. These statements generally are characterized by the use of the words “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may” or similar expressions. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, our actual results could differ materially from those set forth in the forward-looking statements. Important factors that we think could cause our actual results to differ materially from expected results are summarized below. One of the most significant factors, however, is the ongoing impact of the current outbreak of the COVID-19 pandemic on the United States, regional and global economies, the broader financial markets, our customers and employees, governmental responses thereto and the operation changes we have and may implement in response thereto. The current outbreak of the COVID-19 pandemic has also impacted, and is likely to continue to impact, directly or indirectly, many of the other important factors below. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. In particular, it is difficult to fully assess the impact of the COVID-19 pandemic at this time due to, among other factors, uncertainty regarding the severity and duration of the outbreak domestically and internationally, and the possibility of additional subsequent widespread outbreaks and variant strains and the impact of actions taken in response, and the effectiveness of federal, state and local governments' efforts to contain the spread of COVID-19 and respond to its direct and indirect impact on the U.S. economy and economic activity. Some factors that might cause such a difference include the following: local, national and global economic conditions, increased direct competition, changes in government regulations or accounting rules, changes in local, national and global real estate conditions, declines in lodging industry fundamentals, increased operating costs, seasonality of the lodging industry, our ability to obtain debt and equity financing on satisfactory terms, changes in interest rates, our ability to identify suitable investments, our ability to close on identified investments, inaccuracies of our accounting estimates, the uncertainty and economic impact of pandemics, epidemics or other public health emergencies or fear of such events, such as the recent COVID-19 pandemic the impact of and changes to various government programs, including in response to COVID-19, the timing of the development of any effective cure or treatment for COVID-19, the restoration of public confidence in domestic and international travel and or ability to dispose of selected hotel properties on the terms and timing we expect, if at all. Given these uncertainties, undue reliance should not be placed on such statements. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances or to reflect the occurrence of unanticipated events. The forward-looking statements should also be read in light of the risk factors identified in the “Risk Factors” section in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 as updated by the Company's subsequent filings with the SEC under the Exchange Act.
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Overview
We are a self-advised hotel investment company organized in October 2009 that commenced operations in April 2010. Our investment strategy is to invest in upscale extended-stay and premium-branded select-service hotels in geographically diverse markets with high barriers to entry near strong demand generators. We may acquire portfolios of hotels or single hotels. We expect that a significant portion of our portfolio will consist of hotels in the upscale extended-stay or select-service categories, including brands such as Homewood Suites by Hilton®, Residence Inn by Marriott®, Hyatt Place®, Courtyard by Marriott®, SpringHill Suites by Marriott®, Hilton Garden Inn by Hilton®, Embassy Suites®, Hampton Inn®, Hampton Inn and Suites® , Home2 Suites by Hilton® and TownePlace Suites by Marriott®.
The Company's future hotel acquisitions may be funded by issuances of both common and preferred shares or the issuance of partnership interests in our operating partnership, Chatham Lodging, L.P. (the "Operating Partnership"), draw-downs under our revolving credit facility, the incurrence or assumption of debt, available cash, or proceeds from dispositions of assets. We intend to acquire quality assets at attractive prices and improve their returns through knowledgeable asset management and seasoned, proven hotel management while remaining prudently leveraged.
At September 30, 2021, our leverage ratio was 30.6% measured as the ratio of our net debt (total debt outstanding before deferred financing costs less unrestricted cash and cash equivalents) to hotel investments at cost. Over the past several years, we have maintained a leverage ratio between the high-20s and the low 50s to fund our acquisitions and JV investments. As of September 30, 2021, we have total debt of $544.4 million at an average interest rate of approximately 4.7%.
We are a real estate investment trust (“REIT”) for federal income tax purposes. In order to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), we cannot operate our hotels. Therefore, our Operating Partnership and its subsidiaries lease our hotel properties to taxable REIT subsidiary lessees (“TRS Lessees”), who in turn engage eligible independent contractors to manage the hotels. Each of the TRS Lessees is treated as a taxable REIT subsidiary for federal income tax purposes and is consolidated within our financial statements for accounting purposes. However, since we control both the Operating Partnership and the TRS Lessees, our principal source of funds on a consolidated basis is from the operations of our hotels. The earnings of the TRS Lessees are subject to taxation as regular C corporations, as defined in the Code, potentially reducing the TRS Lessees’ cash available to pay dividends to us, and therefore our funds from operations and the cash available for distribution to our shareholders.
Key Indicators of Operating Performance and Financial Condition
We measure financial condition and hotel operating performance by evaluating non-financial and financial metrics and measures such as:
•Average Daily Rate (“ADR”), which is the quotient of room revenue divided by total rooms sold,
•Occupancy, which is the quotient of total rooms sold divided by total rooms available,
•Revenue Per Available Room (“RevPAR”), which is the product of occupancy and ADR, and does not include food and beverage revenue, or other operating revenue,
•Funds From Operations (“FFO”),
•Adjusted FFO,
•Earnings before interest, taxes, depreciation and amortization (“EBITDA”),
•EBITDA re,
•Adjusted EBITDA, and
•Adjusted Hotel EBITDA.
We evaluate the hotels in our portfolio and potential acquisitions using these metrics to determine each hotel’s contribution toward providing income to our shareholders through increases in distributable cash flow and increasing long-term total returns through appreciation in the value of our common shares. RevPAR, ADR and Occupancy are hotel industry measures commonly used to evaluate operating performance.
See “Non-GAAP Financial Measures” for further discussion of FFO, Adjusted FFO, EBITDA, EBITDA re, Adjusted EBITDA and Adjusted Hotel EBITDA.
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Results of Operations
Industry Outlook
The lodging industry has been significantly impacted by the COVID-19 pandemic and there has been a significant decline in travel relative to 2019 but trends are improving and we expect strong growth in 2021 relative to 2020. Smith Travel Research reported that US lodging industry RevPAR increased 83.8% for the three months ended September 30, 2021, with RevPAR up 107.0% in July 2021, up 73.2% in August 2021 and up 70.9% in September 2021. We expect that over the remainder of 2021, RevPAR will increase significantly versus 2020 but remain below the RevPAR levels achieved in 2019.
Comparison of the three months ended September 30, 2021 to the three months ended September 30, 2020
Results of operations for the three months ended September 30, 2021 include the operating activities of our 39 wholly owned hotels that were owned for the entire period, and two hotels located in Austin, TX which were acquired on August 3, 2021. We sold our investment in the NewINK JV on March 18, 2021, sold our investment in the Inland JV on September 23, 2021, and sold one hotel in San Diego, CA on November 24, 2020. Our financial results benefited from increased visitation at our properties due to a reduction in the impact from the COVID-19 pandemic relative to 2020. T he comparisons below are influenced by the COVID-19 pandemic, the acquisition of two hotels, the sale of our investment in the NewINK JV, and the disposition of one hotel.
Revenues
Revenue, which consists primarily of room, food and beverage and other operating revenues from our wholly owned hotels, was as follows for the periods indicated (dollars in thousands):

| For the three months ended |  |
| September 30, 2021 |  | September 30, 2020 |  | % Change
Room | $ | 59,305 |  |  | $ | 32,307 |  |  | 83.6 | %
Food and beverage | 1,025 |  |  | 237 |  |  | 332.5 | %
Other | 3,679 |  |  | 1,630 |  |  | 125.7 | %
Cost reimbursements from unconsolidated real estate entities | 286 |  |  | 795 |  |  | (64.0) | %
Total revenue | $ | 64,295 |  |  | $ | 34,969 |  |  | 83.9 | %

Total revenue was $64.3 million for the quarter ended September 30, 2021, up $29.3 million compared to total revenue of $35.0 million for the corresponding 2020 period. The increase in total revenue primarily was related to the recovery from the COVID-19 pandemic and the two hotels acquired in 2021. The two hotels acquired in 2021 contributed $1.5 million in total revenue. This was partially offset by a decrease in total revenue related to the hotel sold in 2020 of $2.0 million. Since all of our hotels are select-service or limited-service hotels, room revenue is the primary revenue source as these hotels do not have significant food and beverage revenue or large group conference facilities. Room revenue comprised 92.2% and 92.4%, respectively, of total revenue for the quarters ended September 30, 2021 and 2020. Room revenue was $59.3 million and $32.3 million for the quarters ended September 30, 2021 and 2020, respectively, and the increase in room revenue primarily was related to the recovery from the COVID-19 pandemic and the two hotels acquired in 2021. The decrease in room revenue related to the hotel sold in 2020 was $1.9 million.
Food and beverage revenue was $1.0 million for the quarter ended September 30, 2021, up $0.8 million compared to $0.2 million for the corresponding 2020 period. The increase in food and beverage revenue primarily was related to an increase in occupancies at our hotels due to the recovery from the COVID-19 pandemic.
Other operating revenue, comprised of parking, meeting room, gift shop, in-room movie and other ancillary amenities revenue, was up $2.1 million for the three months ended September 30, 2021. Other operating revenue was $3.7 million and $1.6 million for the quarters ended September 30, 2021 and 2020, respectively. The increase in other operating revenue primarily was related to an increase in occupancies at our hotels due to the recovery from the COVID-19 pandemic.
Reimbursable costs from unconsolidated real estate entities were $0.3 million and $0.8 million for the three months ended September 30, 2021 and 2020, respectively. The cost reimbursements were offset by the reimbursed costs from unconsolidated real estate entities included in operating expenses. The decrease in cost reimbursements primarily was related to the sale of the NewINK JV.
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As reported by Smith Travel Research, U.S lodging industry RevPAR for the three months ended September 30, 2021 and 2020 increased 83.8% and decreased 48.5%, respectively, in the 2021 and 2020 periods as compared to the respective prior periods. Smith Travel Research reported that US lodging industry RevPAR increased 107.0% in July 2021, up 73.2% in August 2021 and up 70.9% in September 2021. We expect that over the remainder of 2021, RevPAR will increase significantly versus 2020 but remain below the RevPAR levels achieved in 2019.
In the table below, we present both actual and same property room revenue metrics. Actual Occupancy, ADR and RevPAR metrics reflect the performance of the hotels for the actual days such hotels were owned by the Company during the periods presented. Same property Occupancy, ADR, and RevPAR results for the 40 hotels wholly owned by the Company as of September 30, 2021 that have been in operation for a full year regardless of our ownership during the period presented, which is a non-GAAP financial measure. Results for the hotels for periods prior to our ownership were provided to us by prior owners and have not been adjusted by us.

| For the three months ended September 30, |  |  |  |
| 2021 |  | 2020 |  | Percentage Change
| Same Property (40 hotels) |  | Actual (41 hotels) |  | Same Property (40 hotels) |  | Actual (40 hotels) |  | Same Property (40 hotels) |  | Actual (41/40 hotels)
Occupancy | 71.4 | % |  | 71.2 | % |  | 51.7 | % |  | 52.5 | % |  | 38.1 | % |  | 35.6 | %
ADR | $ | 149.63 |  |  | $ | 148.76 |  |  | $ | 107.43 |  |  | $ | 109.74 |  |  | 39.3 | % |  | 35.6 | %
RevPAR | $ | 106.78 |  |  | $ | 105.85 |  |  | $ | 55.57 |  |  | $ | 57.64 |  |  | 92.2 | % |  | 83.6 | %

For the three months ended September 30, 2021 same property RevPAR increased 92.2% due to an increase in ADR of 39.3% and an increase in occupancy of 38.1% primarily related to the recovery from the COVID-19 pandemic. Same property RevPAR increased 127.8% in July 2021, increased 77.3% in August 2021, and increased 76.2% in September 2021. Same property RevPAR was $113.30 in July 2021, $103.72 in August 2021, and $103.19 in September 2021.
Hotel Operating Expenses
Hotel operating expenses consist of the following for the periods indicated (dollars in thousands):

| For the three months ended |  |
| September 30, 2021 |  | September 30, 2020 |  | % Change
Hotel operating expenses: |  |  |  |  |
Room | $ | 11,884 |  |  | $ | 6,903 |  |  | 72.2 | %
Food and beverage | 717 |  |  | 184 |  |  | 289.7 | %
Telephone | 366 |  |  | 344 |  |  | 6.4 | %
Other hotel operating | 743 |  |  | 312 |  |  | 138.1 | %
General and administrative | 6,082 |  |  | 3,907 |  |  | 55.7 | %
Franchise and marketing fees | 5,294 |  |  | 2,876 |  |  | 84.1 | %
Advertising and promotions | 1,078 |  |  | 848 |  |  | 27.1 | %
Utilities | 3,059 |  |  | 2,592 |  |  | 18.0 | %
Repairs and maintenance | 3,253 |  |  | 2,250 |  |  | 44.6 | %
Management fees | 2,185 |  |  | 1,292 |  |  | 69.1 | %
Insurance | 716 |  |  | 361 |  |  | 98.3 | %
Total hotel operating expenses | $ | 35,377 |  |  | $ | 21,869 |  |  | 61.8 | %

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Hotel operating expenses increased $13.5 million or 61.8% to $35.4 million for the three months ended September 30, 2021 from $21.9 million for the three months ended September 30, 2020. The primary cause of the increase in hotel operating expenses was related to the increase in revenues and occupancy caused by the recovery from the COVID-19 pandemic and the two hotels acquired in 2021. The two hotels acquired in 2021 contributed $0.7 million in hotel operating expenses. The decrease in hotel operating expenses related to the hotel sold in 2020 was $0.9 million.
Room expenses, which are the most significant component of hotel operating expenses, increased $5.0 million from $6.9 million in 2020 to $11.9 million in the third quarter of 2021. The increase in room expenses primarily was related to an increase in occupancies and revenues at our hotels due to the recovery from the COVID-19 pandemic and the two hotels acquired in 2021. The decrease in room expenses related to the hotel sold in 2020 was $0.3 million.
The remaining hotel operating expenses increased $8.5 million, from $15.0 million in the third quarter of 2020 to $23.5 million in the third quarter of 2021. The increase in other remaining expenses primarily was related to an increase in occupancies and revenues at our hotels due to the recovery from the COVID-19 pandemic and the two hotels acquired in 2021. The decrease in other remaining expenses related to the hotel sold in 2020 was $0.6 million.
Depreciation and Amortization
Depreciation and amortization expense increased $0.1 million from $13.6 million for the three months ended September 30, 2020 to $13.7 million for the three months ended September 30, 2021. The increase was primarily due to the two hotels acquired in 2021 partially offset by the sale of one hotel. Depreciation is generally recorded on our assets over 40 years for buildings, 20 years for land improvements, 15 years for building improvements and one to ten years for furniture, fixtures and equipment from the date of acquisition on a straight-line basis. Depreciable lives of hotel furniture, fixtures and equipment are generally assumed to be the difference between the date of acquisition and the date that the furniture, fixtures and equipment will be replaced. Amortization of franchise fees is recorded on a straight-line basis over the term of the respective franchise agreement.
Property Taxes, Ground Rent and Insurance
Total property taxes, ground rent and insurance expenses decreased from $6.2 million for the three months ended September 30, 2020 to $6.1 million for the three months ended September 30, 2021. The decrease was related to $0.2 million attributable to the sale of the Residence Inn Mission Valley hotel on November 24, 2020, partially offset by expense from the two hotels acquired in 2021.
General and Administrative
General and administrative expenses principally consist of employee-related costs, including base payroll, bonuses and amortization of restricted stock and awards of long-term incentive plan units. These expenses also include corporate operating costs, professional fees and trustees’ fees. Total general and administrative expenses (excluding amortization of stock based compensation of $1.2 million and $1.1 million for the three months ended September 30, 2021 and 2020, respectively) increased to $2.9 million for the three months ended September 30, 2021 from $1.8 million in the three months ended September 30, 2020 with the increase primarily due to the Company's decision to temporarily reduce executive compensation in the three months ended September 30, 2020 due to the COVID-19 pandemic.
Other Charges
Other charges increased from $(0.2) million for the three months ended September 30, 2020 to $0.3 million for the three months ended September 30, 2021. Other charges for both periods primarily relate to the payment of insurance deductibles.
Reimbursable Costs from Unconsolidated Entities
Reimbursable costs from unconsolidated entities, comprised of corporate payroll and rent costs were $0.3 million and $0.8 million for the three months ended September 30, 2021 and 2020, respectively. The cost reimbursements were offset by the cost reimbursements from unconsolidated entities included in revenues. The decrease in cost reimbursements primarily was related to the sale of the NewINK JV.
26

Interest and Other Income
Interest on cash and cash equivalents and other income decreased $25 thousand from $25 thousand for the three months ended September 30, 2020 to $0 for the three months ended September 30, 2021. The decrease is primarily related to fees received for services provided to an entity, Castleblack, which was 97.5% owned by Colony.
Interest Expense, Including Amortization of Deferred Fees
Interest expense decreased $1.4 million from $7.2 million for the three months ended September 30, 2020 to $5.8 million for the three months ended September 30, 2021 and is comprised of the following (dollars in thousands):

| For the three months ended |  |
| September 30, 2021 |  | September 30, 2020 |  | % Change
Mortgage debt interest | $ | 5,241 |  |  | $ | 5,856 |  |  | (10.5) | %
Credit facility interest and unused fees | 575 |  |  | 1,383 |  |  | (58.4) | %
Interest rate cap | 11 |  |  | 24 |  |  | (54.2) | %
Construction loan interest | 602 |  |  | 20 |  |  | 2,910.0 | %
Capitalized interest | (975) |  |  | (356) |  |  | 173.9 | %
Amortization of deferred financing costs | 369 |  |  | 318 |  |  | 16.0 | %
Total | $ | 5,823 |  |  | $ | 7,245 |  |  | (19.6) | %

The decrease in interest expense for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020 is primarily due to a decrease in mortgage debt interest from the sale of the Residence Inn Mission Valley in November 2020 and the repayment of the mortgage loan on that property, the repayment of the mortgage loan on the Residence Inn New Rochelle in April 2021, and a reduction of the outstanding balance on the revolving credit facility.
Loss from Unconsolidated Real Estate Entities
Loss from unconsolidated real estate entities was $0.8 million for the three months ended September 30, 2020 compared to a loss of $0.0 million for the three months ended September 30, 2021. The decrease in loss to $0 is due to the sale of the NewINK JV.
Income Tax Expense
Income tax expense for the three months ended September 30, 2021 and 2020 was $0.0 million and $0.0 million, respectively. We are subject to income taxes based on the taxable income of our TRS Lessees at a combined federal and state tax rate of approximately 25%. The Company’s TRS is expecting taxable losses in 2021 and recognizes a full valuation allowance equal to 100% of the gross deferred tax assets due to the uncertainty of the TRS's ability to utilize these deferred tax assets.
Net Loss
Net loss was $1.4 million for the three months ended September 30, 2021, compared to net loss of $18.3 million for the three months ended September 30, 2020. The change in net loss was primarily due to an increase in occupancies and revenues at our hotels due to the recovery from the COVID-19 pandemic, the sale of the NewINK JV which resulted in no losses from unconsolidated real estate entities, combined with the factors discussed above.
27

Comparison of the nine months ended September 30, 2021 to the nine months ended September 30, 2020
Results of operations for the nine months ended September 30, 2021 include the operating activities of our 39 wholly owned hotels that were owned for the entire period and two hotels located hotels in Austin, TX which were acquired on August 3, 2021. We sold our investment in the NewINK JV on March 18, 2021, sold our investment in the Inland JV on September 23, 2021, and sold one hotel in San Diego, CA on November 24, 2020. Our financial results benefited from increased visitation at our properties due to a reduction in the impact from the COVID-19 pandemic relative to 2020. T he comparisons below are influenced by the COVID-19 pandemic, the acquisition of two hotels, the sale of our investment in the NewINK JV, and the disposition of one hotel.
Revenues
Revenue, which consists primarily of room, food and beverage and other operating revenues from our wholly owned hotels, was as follows for the periods indicated (dollars in thousands):

| For the nine months ended |  |
| September 30, 2021 |  | September 30, 2020 |  | % Change
Room | $ | 135,210 |  |  | $ | 104,205 |  |  | 29.8 | %
Food and beverage | 2,145 |  |  | 2,417 |  |  | (11.3) | %
Other | 7,898 |  |  | 5,560 |  |  | 42.1 | %
Cost reimbursements from unconsolidated real estate entities | 1,400 |  |  | 3,169 |  |  | (55.8) | %
Total revenue | $ | 146,653 |  |  | $ | 115,351 |  |  | 27.1 | %

Total revenue was $146.7 million for the nine months ended September 30, 2021, up $31.3 million compared to total revenue of $115.4 million for the corresponding 2020 period. The increase in total revenue primarily was related to the recovery from the COVID-19 pandemic and the two hotels acquired in 2021. The two hotels acquired in 2021 contributed $1.5 million in total revenue. This was partially offset by a decrease in total revenue related to the hotel sold in 2020 of $5.6 million. Since all of our hotels are select-service or limited-service hotels, room revenue is the primary revenue source as these hotels do not have significant food and beverage revenue or large group conference facilities. Room revenue comprised 92.2% and 90.3% of total revenue for the nine months ended September 30, 2021 and 2020, respectively. Room revenue was $135.2 million and $104.2 million for the nine months ended September 30, 2021 and 2020, respectively, and the increase in room revenue primarily was related to the recovery from the COVID-19 pandemic and the two hotels acquired in 2021. The decrease in room revenue related to the hotel sold in 2020 was $5.2 million.
Food and beverage revenue was $2.1 million for the nine months ended September 30, 2021, down $0.3 million compared to food and beverage revenue of $2.4 million for the corresponding 2020 period. The decrease in food and beverage revenue primarily was related to limited food and beverage offerings at our hotels due to the COVID-19 pandemic.
Other operating revenue, comprised of parking, meeting room, gift shop, in-room movie and other ancillary amenities revenue was up $2.3 million for the nine months ended September 30, 2021. Other operating revenue was $7.9 million and $5.6 million for the nine months ended September 30, 2021 and 2020, respectively. The increase in other operating revenue primarily was related to an increase in occupancies at our hotels due to the recovery from the COVID-19 pandemic.
Reimbursable costs from unconsolidated real estate entities were $1.4 million and $3.2 million for the nine months ended September 30, 2021 and 2020, respectively. The cost reimbursements were offset by the reimbursed costs from unconsolidated real estate entities included in operating expenses. The decrease in cost reimbursements primarily was related to the sale of the NewINK JV.
As reported by Smith Travel Research, industry RevPAR for the nine months ended September 30, 2021 and 2020 increased 47.3% and decreased 46.6%, respectively, in the 2021 and 2020 periods as compared to the respective prior year periods. We expect that over the remainder of 2021, RevPAR will increase significantly versus 2020 but remain below the RevPAR levels achieved in 2019.
28

In the table below, we present both actual and same property room revenue metrics. Actual Occupancy, ADR and RevPAR metrics reflect the performance of the hotels for the actual days such hotels were owned by the Company during the periods presented. Same property Occupancy, ADR, and RevPAR results for the 40 hotels wholly owned by the Company as of September 30, 2021 that have been in operation for a full year regardless of our ownership during the period presented, which is a non-GAAP financial measure. Results for the hotels for periods prior to our ownership were provided to us by prior owners and have not been adjusted by us.

| For the nine months ended September 30, |  |  |  |
| 2021 |  | 2020 |  | Percentage Change
| Same Property (40 hotels) |  | Actual (41 hotels) |  | Same Property (40 hotels) |  | Actual (40 hotels) |  | Same Property (40 hotels) |  | Actual (41/40 hotels)
Occupancy | 64.3 | % |  | 64.3 | % |  | 48.9 | % |  | 49.7 | % |  | 31.5 | % |  | 29.4 | %
ADR | $ | 129.95 |  |  | $ | 129.75 |  |  | $ | 124.30 |  |  | $ | 125.11 |  |  | 4.5 | % |  | 3.7 | %
RevPAR | $ | 83.61 |  |  | $ | 83.37 |  |  | $ | 60.77 |  |  | $ | 62.15 |  |  | 37.6 | % |  | 34.1 | %

For the nine months ended September 30, 2021 same property RevPAR increased 37.6% due to an increase in ADR of 4.5% and an increase in occupancy of 31.5% primarily related to the COVID-19 pandemic.
Hotel Operating Expenses
Hotel operating expenses consist of the following for the periods indicated (dollars in thousands):

| For the nine months ended |  |
| September 30, 2021 |  | September 30, 2020 |  | % Change
Hotel operating expenses: |  |  |  |  |
Room | $ | 28,537 |  |  | $ | 24,814 |  |  | 15.0 | %
Food and beverage | 1,493 |  |  | 2,202 |  |  | (32.2) | %
Telephone | 1,114 |  |  | 1,073 |  |  | 3.8 | %
Other hotel operating | 1,652 |  |  | 1,303 |  |  | 26.8 | %
General and administrative | 14,950 |  |  | 12,543 |  |  | 19.2 | %
Franchise and marketing fees | 11,983 |  |  | 9,232 |  |  | 29.8 | %
Advertising and promotions | 2,670 |  |  | 3,212 |  |  | (16.9) | %
Utilities | 7,698 |  |  | 6,971 |  |  | 10.4 | %
Repairs and maintenance | 8,433 |  |  | 7,352 |  |  | 14.7 | %
Management fees | 5,141 |  |  | 4,164 |  |  | 23.5 | %
Insurance | 2,072 |  |  | 1,082 |  |  | 91.5 | %
Total hotel operating expenses | $ | 85,743 |  |  | $ | 73,948 |  |  | 16.0 | %

Hotel operating expenses increased $11.8 million to $85.7 million for the nine months ended September 30, 2021 from $73.9 million for the nine months ended September 30, 2020. The primary cause of the increase in hotel operating expenses was related to the increase in revenues and occupancy caused by the recovery from the COVID-19 pandemic and the two hotels acquired in 2021. The two hotels acquired in 2021 contributed $0.7 million in hotel operating expenses. The decrease in hotel operating expenses related to the hotel sold in 2020 was $2.8 million.
Room expenses, which are the most significant component of hotel operating expenses, increased $3.7 million from $24.8 million for the nine months ended September 30, 2020 to $28.5 million for the nine months ended September 30, 2021. The increase in room expenses primarily was related to an increase in occupancies and revenues at our hotels due to the recovery from the COVID-19 pandemic and the two hotels acquired in 2021. The decrease in room expenses related to the hotel sold in 2020 was $1.0 million.
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The remaining hotel operating expenses increased $8.1 million, from $49.1 million for the nine months ended September 30, 2020 to $57.2 million for the nine months ended September 30, 2021. The increase in other remaining expenses primarily was related to an increase in occupancies and revenues at our hotels due to the recovery from the COVID-19 pandemic and the two hotels acquired in 2021. The decrease in other remaining expenses related to the hotel sold in 2020 was $1.9 million.
Depreciation and Amortization
Depreciation and amortization expense increased $0.1 million from $40.3 million for the nine months ended September 30, 2020 to $40.4 million for the nine months ended September 30, 2021. The increase was primarily due to the two hotels acquired in 2021 partially offset by the sale of one hotel. Depreciation is generally recorded on our assets over 40 years for buildings, 20 years for land improvements, 15 years for building improvements and one to ten years for furniture, fixtures and equipment from the date of acquisition on a straight-line basis. Depreciable lives of hotel furniture, fixtures and equipment are generally assumed to be the difference between the date of acquisition and the date that the furniture, fixtures and equipment will be replaced. Amortization of franchise fees is recorded on a straight-line basis over the term of the respective franchise agreement.
Impairment Loss on Investment in Unconsolidated Real Estate Entities
Impairment loss on investment in unconsolidated real estate entities decreased $15.3 million for the nine months ended September 30, 2021. The Company recorded an impairment of the entire carrying value of $15.3 million on our investment in the Inland JV during the nine months ended September 30, 2020 related to a decline in operating performance caused by the COVID-19 pandemic.
Property Taxes, Ground Rent and Insurance
Total property taxes, ground rent and insurance expenses decreased $0.3 million from $18.2 million for the nine months ended September 30, 2020 to $17.9 million for the nine months ended September 30, 2021. The decrease was related to $0.6 million attributable to the sale of the Residence Inn Mission Valley hotel on November 24, 2020, partially offset by expense from the two hotels acquired in 2021.
General and Administrative
General and administrative expenses principally consist of employee-related costs, including base payroll, bonuses and amortization of restricted stock and awards of LTIP units. These expenses also include corporate operating costs, professional fees and trustees’ fees. Total general and administrative expenses (excluding amortization of stock based compensation of $3.6 million and $3.5 million for the nine months ended September 30, 2021 and 2020, respectively) increased $3.7 million to $8.4 million for the nine months ended September 30, 2021 from $4.7 million for the nine months ended September 30, 2020 with the increase primarily due to the Company's decision to temporarily reduce executive compensation in the nine months ended September 30, 2020 due to the COVID-19 pandemic.
Other Charges
Other charges decreased $2.2 million from $2.8 million for the nine months ended September 30, 2020 to $0.6 million for the nine months ended September 30, 2021. Other charges primarily include severance costs and accelerated vesting of LTIP awards related to the departure of our former Chief Investment Officer during the nine months ended September 30, 2020 and deductibles for insurance claims.
Reimbursable Costs from Unconsolidated Entities
Reimbursable costs from unconsolidated entities, comprised of corporate payroll and rent costs were $1.4 million and $3.2 million for the nine months ended September 30, 2021 and 2020, respectively. The cost reimbursements were offset by the cost reimbursements from unconsolidated entities included in revenues. The decrease in cost reimbursements primarily was related to the sale of the NewINK JV.
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Interest and Other Income
Interest on cash and cash equivalents and other income was $145 thousand for the nine months ended September 30, 2020 compared to $103 thousand for the nine months ended September 30, 2021.
Interest Expense, Including Amortization of Deferred Fees
Interest expense decreased $2.5 million from $21.1 million for the nine months ended September 30, 2020 to $18.6 million for the nine months ended September 30, 2021 and is comprised of the following (dollars in thousands):

| For the nine months ended |  |
| September 30, 2021 |  | September 30, 2020 |  | % Change
Mortgage debt interest | $ | 15,865 |  |  | $ | 17,505 |  |  | (9.4) | %
Credit facility interest and unused fees | 2,743 |  |  | 3,704 |  |  | (25.9) | %
Interest rate cap | (32) |  |  | 24 |  |  | (233.3) | %
Construction loan interest | 1,447 |  |  | 20 |  |  | 7,135.0 | %
Capitalized interest | (2,508) |  |  | (951) |  |  | 163.7 | %
Amortization of deferred financing costs | 1,134 |  |  | 810 |  |  | 40.0 | %
Total | $ | 18,649 |  |  | $ | 21,112 |  |  | (11.7) | %

The decrease in interest expense for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020 is primarily due to a decrease in mortgage debt interest from the sale of the Residence Inn Mission Valley in November 2020 and the repayment of the mortgage loan on that property, the repayment of the mortgage loan on the Residence Inn New Rochelle in April 2021, and a reduction of the outstanding balance on the revolving credit facility.
Loss from Unconsolidated Real Estate Entities
Loss from unconsolidated real estate entities decreased $4.9 million from a loss of $6.1 million for the nine months ended September 30, 2020 to a loss of $1.2 million for the nine months ended September 30, 2021. The decrease is primarily due to the sale of the NewINK JV.
Gain on sale of investment in unconsolidated real estate entities
Gain on sale of investment in unconsolidated real estate entities increased $23.8 million from $0 for the nine months ended September 30, 2020 to a gain of $23.8 million for the nine months ended September 30, 2021. The gain in 2021 is due to the sale of the NewINK JV.
Income Tax Expense
Income tax expense for the nine months ended September 30, 2021 and 2020 was $0.0 million and $0.0 million, respectively. We are subject to income taxes based on the taxable income of our TRS Lessees at a combined federal and state tax rate of approximately 25%. The Company’s TRS is expecting taxable losses in 2021 and recognizes a full valuation allowance equal to 100% of the gross deferred tax assets due to the uncertainty of the TRS's ability to utilize these deferred tax assets.
Net Loss
Net loss was $7.4 million for the nine months ended September 30, 2021, compared to a net loss of $73.6 million for the nine months ended September 30, 2020. The change in net loss was primarily due to an increase in occupancies and revenues at our hotels due to the recovery from the COVID-19 pandemic, the sale of the NewINK JV which resulted in a large gain on sale of investment in unconsolidated real estate entities, combined with the factors discussed above.
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Non-GAAP Financial Measures
We consider the following non-GAAP financial measures useful to investors as key supplemental measures of our operating performance: (1) FFO, (2) Adjusted FFO, (3) EBITDA, (4) EBITDA re, (5) Adjusted EBITDA and (6) Adjusted Hotel EBITDA. These non-GAAP financial measures should be considered along with, but not as alternatives to, net income or loss as prescribed by GAAP as a measure of our operating performance.
FFO, Adjusted FFO, EBITDA, EBITDA re, Adjusted EBITDA and Adjusted Hotel EBITDA do not represent cash generated from operating activities under GAAP and should not be considered as alternatives to net income or loss, cash flows from operations or any other operating performance measure prescribed by GAAP. FFO, Adjusted FFO, EBITDA, EBITDA re, Adjusted EBITDA and Adjusted Hotel EBITDA are not measures of our liquidity, nor are FFO, Adjusted FFO, EBITDA, EBITDA re, Adjusted EBITDA and Adjusted Hotel EBITDA indicative of funds available to fund our cash needs, including our ability to make cash distributions. These measurements do not reflect cash expenditures for long-term assets and other items that have been and will be incurred. FFO, Adjusted FFO, EBITDA, EBITDA re, Adjusted EBITDA and Adjusted Hotel EBITDA may include funds that may not be available for management’s discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, and other commitments and uncertainties.
We calculate FFO in accordance with standards established by the National Association of Real Estate Investment
Trusts ("NAREIT"), which defines FFO as net income or loss (calculated in accordance with GAAP), excluding gains or losses from sales of real estate, impairment write-downs, the cumulative effect of changes in accounting principles, plus depreciation and amortization (excluding amortization of deferred financing costs), and after adjustments for unconsolidated partnerships and joint ventures following the same approach. We believe that the presentation of FFO provides useful information to investors regarding our operating performance because it measures our performance without regard to specified non-cash items such as real estate depreciation and amortization, gain or loss on sale of real estate assets and certain other items that we believe are not indicative of the property level performance of our hotel properties. We believe that these items reflect historical cost of our asset base and our acquisition and disposition activities and are less reflective of our ongoing operations, and that by adjusting to exclude the effects of these items, FFO is useful to investors in comparing our operating performance between periods and between REITs that also report FFO using the NAREIT definition.
We calculate Adjusted FFO by further adjusting FFO for certain additional items that are not addressed in NAREIT’s definition of FFO, including other charges, costs associated with the departure of our former Chief Investment Officer, losses on the early extinguishment of debt and similar items related to our unconsolidated real estate entities that we believe do not represent costs related to hotel operations. We believe that Adjusted FFO provides investors with another financial measure that may facilitate comparisons of operating performance between periods and between REITs that make similar adjustments to FFO.
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The following is a reconciliation of net income to FFO and Adjusted FFO for the three and nine months ended September 30, 2021 and 2020 (in thousands, except share data):

| For the three months ended |  | For the nine months ended
| September 30, |  | September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020
Funds From Operations (“FFO”): |  |  |  |  |  |  |
Net loss | $ | (1,383) |  |  | $ | (18,312) |  |  | $ | (7,399) |  |  | $ | (73,616) |
Preferred dividends | (1,988) |  |  | — |  |  | (1,988) |  |  | — |
Net loss attributable to common shares and common units | (3,371) |  |  | (18,312) |  |  | (9,387) |  |  | (73,616) |
Loss (gain) on sale of hotel property | 7 |  |  | — |  |  | 21 |  |  | (3) |
Loss on sale of assets within the unconsolidated real estate entities | — |  |  | 1 |  |  | — |  |  | 2 |
Gain on sale of investment in unconsolidated real estate entities | — |  |  | — |  |  | (23,817) |  |  | — |
Depreciation | 13,605 |  |  | 13,559 |  |  | 40,172 |  |  | 40,165 |
Impairment loss on investment in unconsolidated real estate entities | — |  |  | — |  |  | — |  |  | 15,282 |
Impairment loss within the unconsolidated real estate entities | — |  |  | — |  |  | — |  |  | 1,388 |
Adjustments for unconsolidated real estate entity items | — |  |  | 778 |  |  | 568 |  |  | 3,641 |
FFO attributable to common share and unit holders | 10,241 |  |  | (3,974) |  |  | 7,557 |  |  | (13,141) |
Other charges | 256 |  |  | (199) |  |  | 633 |  |  | 2,785 |
Adjustments for unconsolidated real estate entity items | — |  |  | — |  |  | 46 |  |  | 5 |
Adjusted FFO attributable to common share and unit holders | $ | 10,497 |  |  | $ | (4,173) |  |  | $ | 8,236 |  |  | $ | (10,351) |
Weighted average number of common shares and units |  |  |  |  |  |  |
Basic | 49,731,663 |  |  | 47,682,142 |  |  | 49,129,734 |  |  | 47,618,584 |
Diluted | 49,941,959 |  |  | 47,682,142 |  |  | 49,311,113 |  |  | 47,618,584 |

Diluted weighted average common share count used for calculation of adjusted FFO per share may differ from diluted weighted average common share count used for calculation of GAAP Net Income per share by LTIP units, which may be converted to common shares of beneficial interest if Net Income per share is negative and Adjusted FFO is positive. Unvested restricted shares and unvested LTIP units that could potentially dilute basic earnings per share in the future would not be included in the computation of diluted loss per share for the periods where a loss has been recorded because they would have been anti-dilutive for the periods presented.
Earnings before interest, taxes, depreciation and amortization ("EBITDA") is defined as net income or loss excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sales of assets; (3) depreciation and amortization; and (4) unconsolidated real estate entity items including interest, depreciation and amortization excluding gains and losses from sales of real estate. We consider EBITDA useful to an investor in evaluating and facilitating comparisons of our operating performance between periods and between REITs by removing the impact of our capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from our operating results. In addition, EBITDA is used as one measure in determining the value of hotel acquisitions and dispositions.
In addition to EBITDA, we present EBITDA re in accordance with NAREIT guidelines, which defines EBITDA re as net income or loss excluding interest expense, income tax expense, depreciation and amortization expense, gains or losses from sales of real estate, impairment, and adjustments for unconsolidated joint ventures. We believe that the presentation of EBITDA re provides useful information to investors regarding the Company's operating performance and can facilitate comparisons of operating performance between periods and between REITs.
We also present Adjusted EBITDA, which includes additional adjustments for items such as other charges, gains or losses on extinguishment of indebtedness, costs associated with the departure of our former Chief Investment officer, the amortization of share-based compensation, and certain other expenses that we consider outside the normal course of operations. We believe that Adjusted EBITDA provides useful supplemental information to investors regarding our ongoing operating performance that, when considered with net income, EBITDA and EBITDA re, is beneficial to an investor's understanding of our performance.
The following is a reconciliation of net income to EBITDA, EBITDA re and Adjusted EBITDA for the three and nine months ended September 30, 2021 and 2020 (in thousands):
33

| For the three months ended |  | For the nine months ended
| September 30, |  | September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020
Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”): |  |  |  |  |  |  |
Net loss | $ | (1,383) |  |  | $ | (18,312) |  |  | $ | (7,399) |  |  | $ | (73,616) |
Interest expense | 5,823 |  |  | 7,245 |  |  | 18,649 |  |  | 21,112 |
Depreciation and amortization | 13,668 |  |  | 13,620 |  |  | 40,355 |  |  | 40,349 |
Adjustments for unconsolidated real estate entity items | — |  |  | 1,576 |  |  | 1,184 |  |  | 7,477 |
EBITDA | 18,108 |  |  | 4,129 |  |  | 52,789 |  |  | (4,678) |
Impairment loss on investment in unconsolidated real estate entities | — |  |  | — |  |  | — |  |  | 15,282 |
Impairment loss within the unconsolidated real estate entities | — |  |  | — |  |  | — |  |  | 1,388 |
Loss (gain) on sale of hotel property | 7 |  |  | — |  |  | 21 |  |  | (3) |
Loss on the sale of assets within unconsolidated real estate entities | — |  |  | 1 |  |  | — |  |  | 2 |
Gain on sale of investment in unconsolidated real estate entities | — |  |  | — |  |  | (23,817) |  |  | — |
EBITDA re | 18,115 |  |  | 4,130 |  |  | 28,993 |  |  | 11,991 |
Other charges | 256 |  |  | (199) |  |  | 633 |  |  | 2,785 |
Adjustments for unconsolidated real estate entity items | — |  |  | — |  |  | 46 |  |  | 5 |
Share based compensation | 1,235 |  |  | 1,125 |  |  | 3,585 |  |  | 3,473 |
Adjusted EBITDA | $ | 19,606 |  |  | $ | 5,056 |  |  | $ | 33,257 |  |  | $ | 18,254 |

Adjusted Hotel EBITDA is defined as net income before interest, income taxes, depreciation and amortization, corporate general and administrative, impairment loss, loss on early extinguishment of debt, other charges, interest and other income, losses on sales of hotel properties and income or loss from unconsolidated real estate entities. We present Adjusted Hotel EBITDA because we believe it is useful to investors in comparing our hotel operating performance between periods and comparing our Adjusted Hotel EBITDA margins to those of our peer companies. Adjusted Hotel EBITDA represents the results of operations for our wholly owned hotels only.
The following is a presentation of Adjusted Hotel EBITDA for the three and nine months ended September 30, 2021 and 2020 (in thousands):

|  | For the three months ended |  | For the nine months ended
|  | September 30, |  | September 30,
|  | 2021 |  | 2020 |  | 2021 |  | 2020
Net loss | $ | (1,383) |  |  | $ | (18,312) |  |  | $ | (7,399) |  |  | $ | (73,616) |
Add: | Interest expense | 5,823 |  |  | 7,245 |  |  | 18,649 |  |  | 21,112 |
| Depreciation and amortization | 13,668 |  |  | 13,620 |  |  | 40,355 |  |  | 40,349 |
| Corporate general and administrative | 4,147 |  |  | 2,958 |  |  | 11,993 |  |  | 8,210 |
| Other charges | 256 |  |  | — |  |  | 633 |  |  | 2,785 |
| Loss from unconsolidated real estate entities | — |  |  | 847 |  |  | 1,231 |  |  | 6,099 |
| Impairment loss on investment in unconsolidated real estate entities | — |  |  | — |  |  | — |  |  | 15,282 |
| Loss on sale of hotel property | 7 |  |  | — |  |  | 21 |  |  | — |
Less: | Interest and other income | — |  |  | (25) |  |  | (103) |  |  | (145) |
| Other charges | — |  |  | (199) |  |  | — |  |  | — |
| Gain on sale of hotel property | — |  |  | — |  |  | — |  |  | (3) |
| Gain on sale of investment in unconsolidated real estate entities | — |  |  | — |  |  | (23,817) |  |  | — |
| Adjusted Hotel EBITDA | $ | 22,518 |  |  | $ | 6,134 |  |  | $ | 41,563 |  |  | $ | 20,073 |

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Although we present FFO, Adjusted FFO, EBITDA, EBITDA re, Adjusted EBITDA and Adjusted Hotel EBITDA because we believe they are useful to investors in comparing our operating performance between periods and between REITs that report similar measures, these measures have limitations as analytical tools. Some of these limitations are:
•FFO, Adjusted FFO, EBITDA, EBITDA re, Adjusted EBITDA and Adjusted Hotel EBITDA do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
•FFO, Adjusted FFO, EBITDA, EBITDA re, Adjusted EBITDA and Adjusted Hotel EBITDA do not reflect changes in, or cash requirements for, our working capital needs;
•FFO, Adjusted FFO, EBITDA, EBITDA re, Adjusted EBITDA and Adjusted Hotel EBITDA do not reflect funds available to make cash distributions;
•EBITDA, EBITDA re, Adjusted EBITDA and Adjusted Hotel EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debts;
•Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may need to be replaced in the future, and FFO, Adjusted FFO, EBITDA, EBITDA re, Adjusted EBITDA and Adjusted Hotel EBITDA do not reflect any cash requirements for such replacements;
•Non-cash compensation is and will remain a key element of our overall long-term incentive compensation package, although we exclude it as an expense when evaluating our ongoing operating performance for a particular period using Adjusted EBITDA;
•Adjusted FFO, Adjusted EBITDA and Adjusted Hotel EBITDA do not reflect the impact of certain cash charges (including acquisition transaction costs) that result from matters we consider not to be indicative of the underlying performance of our hotel properties; and
•Other companies in our industry may calculate FFO, Adjusted FFO, EBITDA, EBITDA re, Adjusted EBITDA and Adjusted Hotel EBITDA differently than we do, limiting their usefulness as a comparative measure.
In addition, FFO, Adjusted FFO, EBITDA, EBITDA re, Adjusted EBITDA and Adjusted Hotel EBITDA do not represent cash generated from operating activities as determined by GAAP and should not be considered as alternatives to net income or loss, cash flows from operations or any other operating performance measure prescribed by GAAP. FFO, Adjusted FFO, EBITDA, EBITDA re, Adjusted EBITDA and Adjusted Hotel EBITDA are not measures of our liquidity. Because of these limitations, FFO, Adjusted FFO, EBITDA, EBITDA re, Adjusted EBITDA and Adjusted Hotel EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using FFO, Adjusted FFO, EBITDA, EBITDA re, Adjusted EBITDA and Adjusted Hotel EBITDA only supplementally. Our consolidated financial statements and the notes to those statements included elsewhere are prepared in accordance with GAAP.
Sources and Uses of Cash
Our principal sources of cash include net cash from operations and proceeds from debt and equity issuances. Our principal uses of cash include acquisitions, capital expenditures, operating costs, corporate expenditures, interest costs, debt repayments and distributions to equity holders.
As of September 30, 2021 and December 31, 2020, we had cash, cash equivalents and restricted cash of approximately $29.6 million and $31.5 million, respectively.
For the nine months ended September 30, 2021, net cash flows provided by operations were $18.4 million, driven by net loss of $7.4 million, $22.8 million of non-cash items, including $41.8 million of depreciation and amortization, $3.6 million of share-based compensation expense, $1.2 million related to loss from unconsolidated entities and ($23.8) million related to the gain on sale of investment in unconsolidated real estate entities. In addition, changes in operating assets and liabilities due to the timing of cash receipts, payments for real estate taxes, payments of corporate compensation and payments from our hotels resulted in net cash inflow of $3.0 million. Net cash flows used in investing activities were $94.3 million, primarily related to the acquisition of the RI Austin and TPS Austin hotels for $71.3 million, capital improvements on our 41 wholly owned hotels of $5.2 million and $20.5 million related to the development of a new hotel offset by $2.8 million of proceeds from the sale of an unconsolidated real estate entity (NewINK JV). Net cash flows provided by financing activities were $74.0 million, comprised of $115.9 million of net proceeds from our Series A Preferred Share offering, $24.6 million of common equity proceeds raised through sales under our DRSPPs and ATM Plan, net repayments of our senior unsecured revolving credit
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facility of $65.3 million, net borrowings on our construction loan of $19.0 million, offset by principal payments on mortgage debt of $19.0 million, payments of financing and offering costs of $1.0 million and distributions to unit holders of $0.3 million.
For the nine months ended September 30, 2020, net cash flows used in operations were $12.8 million, driven by net loss of $73.6 million, $66.3 million of non-cash items, including $41.1 million of depreciation and amortization, $3.5 million of share-based compensation expense, $0.3 million of accelerated LTIP compensation, $6.1 million related to loss from unconsolidated entities and $15.3 million related to the impairment of out interest in the Inland JV. In addition, changes in operating assets and liabilities due to the timing of cash receipts, payments for real estate taxes, payments of corporate compensation and payments from our hotels resulted in net cash outflow of $5.5 million. Net cash flows used in investing activities were $27.1 million, primarily related to capital improvements on our 40 wholly owned hotels of $13.9 million and $13.2 million related to the development of a new hotel. Net cash flows provided by financing activities were $62.1 million, comprised of $0.1 million of common equity proceeds raised through sales under our DRSPP and ATM, net borrowings of our senior unsecured revolving credit facility of $83.0 million, net borrowings on our construction loan of $3.9 million, offset by principal payments on mortgage debt of $6.7 million, payments of financing and offering costs of $2.0 million and distributions to shareholders of $16.2 million.
Liquidity and Capital Resources
At September 30, 2021, our leverage ratio was approximately 30.6% measured as the ratio of our net debt (total debt outstanding before deferred financing costs less unrestricted cash and cash equivalents) to hotel investments at cost, including our JV investments. Over the past several years, we have maintained a leverage ratio between the high-20s and the low-50s to fund our acquisitions and investments in joint ventures. At September 30, 2021, we have total debt of $544.4 million at an average interest rate of approximately 4.7%.
At September 30, 2021 and December 31, 2020, we had $70.0 million and $135.3 million, respectively, in outstanding borrowings under our $250.0 million revolving credit facility. We had $32.3 million and $13.3 million, respectively, in outstanding borrowings under our $40 million construction loan for the Warner Center hotel development at September 30, 2021 and December 31, 2020. We also had mortgage debt on individual hotels aggregating $442.1 million and $461.1 million at September 30, 2021 and December 31, 2020, respectively.
Our credit facility contains representations, warranties, covenants, terms and conditions customary for credit facilities of this type, including a maximum leverage ratio, a minimum fixed charge coverage ratio and minimum net worth financial covenants, limitations on (i) liens, (ii) incurrence of debt, (iii) investments, (iv) distributions, and (v) mergers and asset dispositions, covenants to preserve corporate existence and comply with laws, covenants on the use of proceeds of the revolving credit facility and default provisions, including defaults for non-payment, breach of representations and warranties, insolvency, non-performance of covenants, cross-defaults and guarantor defaults.
On December 16, 2020, the Company entered into a Third Amendment to the Company’s Amended and Restated Credit Agreement, dated as of March 8, 2018 (as amended by the Credit Agreement Amendment, and as previously amended by that certain First Amendment to the Amended and Restated Credit Agreement, dated as of May 6, 2020, and as further amended by that certain Second Amendment to Amended and Restated Credit Agreement, dated as of July 23, 2020), with certain lenders for whom Barclays Bank PLC is acting as the administrative agent. The amendment provides for the waiver of certain financial covenants through December 31, 2021 and allows the Company to borrow up to the entire $250 million facility size during this period. During this covenant waiver period, the Company will be required to maintain a minimum liquidity of $25 million which will include both unrestricted cash and credit facility availability. In connection with the amendment, the Company added six hotels to the credit facility’s borrowing base which now has a total of 24 properties. The amendment provided the Company’s credit facility lenders with pledges of the equity in the 24 borrowing base hotels. The amendment places additional limits on the Company’s ability to incur debt, pay dividends, and make capital expenditures during the covenant waiver period. During the covenant waiver period interest will be calculated as LIBOR (subject to a 0.5% floor) plus a spread of 2.50% if borrowings remain at or below $200 million and a spread of 3.0% if borrowings exceed $200 million. We were in compliance with all modified financial covenants at September 30, 2021.
Our mortgage debt agreements contain “cash trap” provisions that 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. Such provisions do not allow the lender the right to accelerate repayment of the underlying debt. As of September 30, 2021, the debt service coverage ratios or debt yields for all of our mortgage loans were below the minimum thresholds such that the cash trap provision of each respective loan could be enforced. As of September 30,
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2021, none of our mortgage debt lenders has enforced cash trap provisions. We do not expect that such cash traps will affect our ability to satisfy our short-term liquidity requirements.
We expect to meet our short-term liquidity requirements generally through existing cash balances and availability under our credit facility. We believe that our existing cash balances and availability under our credit facility will be adequate to fund operating obligations, pay interest on any borrowings and fund dividends in accordance with the requirements for qualification as a REIT under the Code. We expect to meet our long-term liquidity requirements, such as hotel property acquisitions and debt maturities or repayments through additional long-term secured and unsecured borrowings, the issuance of additional equity or debt securities or the possible sale of existing assets.
The COVID-19 pandemic has caused, and is continuing to cause, significant disruption in the financial markets both globally and in the United States, and will continue to impact, possibly materially, our business, financial condition and results of operations. We cannot predict the degree, or duration, to which our operations will be affected by the COVID-19 outbreak, and the effects could be material. While we believe the liquidity provided by our unrestricted cash and credit facility availability, and aggressive cost reduction initiatives will enable us to fund our current obligations for the foreseeable future, COVID-19 has resulted in significant disruption of global financial markets, which could have a negative impact on our ability to access capital in the future. Because the situation is ongoing, and because the duration and severity remain unclear, it is difficult to forecast any impacts on our future results.
Dividend Policy
Our common share dividend policy has been to distribute, annually, approximately 100% of our annual taxable income. We suspended common share dividends after the March 2020 payment due to the decline in operating performance caused by the COVID-19 pandemic. We plan to pay dividends required to maintain REIT status. The aggregate amount of dividends and distributions declared for the nine months ended September 30, 2021 was $0.00 per common share and LTIP unit. The amount of any dividends is determined by our Board of Trustees.
Chatham declared a dividend of $0.48307 per share of 6.625% Series A Cumulative Redeemable Preferred Shares payable on October 15, 2021 to shareholders of record as of September 30, 2021.
Capital Expenditures
We intend to maintain each hotel property in good repair and condition and in conformity with applicable laws and regulations and in accordance with the franchisors' standards and any agreed-upon requirements in our management and loan agreements. After we acquire a hotel property, we may be required to complete a property improvement plan (“PIP”) in order to be granted a new franchise license for that particular hotel property. PIPs are intended to bring the hotel property up to the franchisors' standards. Certain of our loans require that we escrow, for property improvement purposes, at the hotels collateralizing these loans, amounts up to 5% of gross revenue from such hotels. We intend to spend amounts necessary to
comply with any reasonable loan or franchisor requirements and otherwise to the extent that such expenditures are in the best interest of the hotel. To the extent that we spend more on capital expenditures than is available from our operations, we intend to fund those capital expenditures with available cash and borrowings under our revolving credit facility.
For the nine months ended September 30, 2021 and 2020, we invested approximately $5.2 million and $13.9 million for renovations and other non-recurring capital expenditures on our existing hotels, respectively. We expect to invest an additional $1.1 million on renovations, discretionary and emergency expenditures on our existing hotels for the remainder of 2021, including improvements required under any brand PIP.
We are developing a Home2 Suites by Hilton hotel in the Warner Center submarket of Los Angeles, CA on a parcel of land owned by us. We expect that the total development costs for construction of the hotel to be approximately $70 million, which includes the cost of the land. We have incurred $64.2 million of costs to date, which includes $6.6 million of the land acquisition costs and $57.6 million of other development costs.
Off-Balance Sheet Arrangements
We had no material off-balance sheet arrangements at September 30, 2021.
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Contractual Obligations
The following table sets forth our contractual obligations as of September 30, 2021 and the effect these obligations are expected to have on our liquidity and cash flow in future periods (in thousands).

| Payments Due by Period
Contractual Obligations | Total |  | Less Than One Year |  | One to Three Years |  | Three to Five Years |  | More Than Five Years
Corporate office lease (1) | $ | 4,374 |  |  | $ | 211 |  |  | $ | 1,727 |  |  | $ | 1,814 |  |  | $ | 622 |
Revolving credit facility, including interest (2) | 71,283 |  |  | 740 |  |  | 70,543 |  |  | — |  |  | — |
Construction loan (2) | 39,389 |  |  | 625 |  |  | 5,004 |  |  | 33,760 |  |  | — |
Ground leases | 71,328 |  |  | 305 |  |  | 2,438 |  |  | 2,487 |  |  | 66,098 |
Property loans, including interest (2) | 474,953 |  |  | 7,366 |  |  | 147,374 |  |  | 320,213 |  |  | — |
Total | $ | 661,327 |  |  | $ | 9,247 |  |  | $ | 227,086 |  |  | $ | 358,274 |  |  | $ | 66,720 |

1.The Company entered into a corporate office lease in 2015. The lease is for eleven years and includes a 12-month rent abatement period and certain tenant improvement allowances. The Company shares the space with related parties and is reimbursed for the pro-rata share of rentable space occupied by related parties.
2.Does not reflect paydowns or additional borrowings under the revolving credit facility or construction loan after September 30, 2021. Interest payments are based on the interest rate in effect as of September 30, 2021. See Note 8, “Debt” to our unaudited consolidated financial statements for additional information relating to our property loans.
In addition to the above listed obligations, we pay management and franchise fees to our hotel management companies and franchisors based on the revenues of our hotels. The table above also does not include $1.1 million that we expect to invest on renovations, discretionary and emergency capital expenditures on our existing hotels for the remainder of 2021, or $5.8 million of estimated remaining costs associated with our Los Angeles hotel development. Our contracts associated with these planned capital expenditures contain clauses that allow us to cancel all or some portion of the work. If cancellation of a contract occurred, our commitment would be any costs incurred up to the cancellation date, in addition to any costs associated with the discharge of the contract.
Inflation
Operators of hotels, in general, possess the ability to adjust room rates daily to reflect the effects of inflation. However, competitive pressures may limit the ability of our management companies to raise room rates.
Seasonality
Demand for our hotels is affected by recurring seasonal patterns. Generally, we expect that we will have lower revenue, operating income and cash flow in the first and fourth quarters and higher revenue, operating income and cash flow in the second and third quarters. These general trends are, however, influenced by overall economic cycles and the geographic locations of our hotels.
Critical Accounting Policies
Our consolidated financial statements have been prepared in conformity with GAAP, which requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period. While we do not believe the reported amounts would be materially different, application of these policies involves the exercise of judgment and the use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on experience and on various other assumptions that are believed to be reasonable under the circumstances. All of our significant accounting policies, including certain critical accounting policies, are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.
Recently Issued Accounting Standards
Refer to Note 2, Summary of Significant Accounting Policies for all new recently issued accounting standards.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We may be exposed to interest rate changes primarily as a result of our assumption of long-term debt in connection with our acquisitions and upon refinancing of existing debt. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve these objectives, we seek to borrow primarily at fixed rates or variable rates with the lowest margins available and, in some cases, with the ability to convert variable rates to fixed rates. With respect to variable rate financing, we will assess interest rate risk by identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities.
The Company estimates the fair value of its fixed rate debt by discounting the future cash flows of each instrument at estimated market rates. Rates take into consideration general market conditions, maturity and fair value of the underlying collateral. The estimated fair value of the Company’s fixed rate debt at September 30, 2021 and December 31, 2020 was $450.7 million and $462.6 million, respectively.
At September 30, 2021, our consolidated debt was comprised of floating and fixed interest rate debt. The fair value of our fixed rate debt indicates the estimated principal amount of debt having the same debt service requirements that could have been borrowed at the date presented, at then current market interest rates. The following table provides information about the maturities of our financial instruments as of September 30, 2021 that are sensitive to changes in interest rates (dollars in thousands):

|  |  | 2021 |  | 2022 |  | 2023 |  | 2024 |  | 2025 |  | Thereafter |  | Total/ Weighted Average |  | Fair Value
Floating rate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt |  |  | — |  | $70,000 |  | — |  | $ | 32,283 |  |  | — |  |  | — |  |  | $ | 102,283 |  |  | $ | 102,319 |
Average interest rate |  |  | — |  | 3.45% |  | — |  | 7.75 | % |  | — |  |  | — |  |  | 4.81 | % |  |
Fixed rate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt |  |  | $2,448 |  | $9,249 |  | $ | 117,875 |  |  | $ | 296,617 |  |  | $ | 15,935 |  |  | — |  |  | $ | 442,124 |  |  | $ | 450,725 |
Average interest rate |  |  | 4.63 | % |  | 4.63 | % |  | 4.66 | % |  | 4.64 | % |  | 4.25 | % |  | — |  |  | 4.63 | % |  |

Our credit facility is currently subject to a 0.5% LIBOR floor and our construction loan is subject to a 0.25% LIBOR floor. At September 30, 2021, 1-month LIBOR was 0.08%. We estimate that a hypothetical 100 basis points increase in LIBOR would result in additional interest of approximately $0.7 million annually. This assumes that the amount of floating rate debt outstanding on our revolving credit facility remains $70.0 million and the amount outstanding on our construction loan remains $32.3 million, the balances as of September 30, 2021.
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Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is subject to various claims, lawsuits and legal proceedings, including routine litigation arising in the ordinary course of business, regarding the operation of its hotels, its managers and other Company matters. While it is not possible to ascertain the ultimate outcome of such matters, the Company believes that the aggregate identifiable amount of such liabilities, if any, will not have a material adverse impact on its financial condition or results of operations.
Item 1A. Risk Factors.
Our Annual Report on Form 10-K for the year ended December 31, 2020 includes detailed discussions of our risk factors under the heading “Risk Factors.”
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits.
The following exhibits are filed as part of this report:

Exhibit Number |  | Description of Exhibit
3.1 |  | Articles of Amendment and Restatement of Chatham Lodging Trust (1)
3.2 |  | Second Amended and Restated Bylaws of Chatham Lodging Trust(2)
3.3 |  | Articles Supplementary to the Company's Declaration of Trust designating the 6.625% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest, $0.01 par value per share(3)
10.33 |  | Fourth Amendment to Amended and Restated Credit Agreement, dated as of October 26, 2021, among Chatham Lodging Trust, Chatham Lodging, L.P., as borrower, the several banks and other financial institutions or entities that are parties thereto, as lenders, and Barclays Bank PLC, as administrative agent.
31.1 |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section302 of the Sarbanes-Oxley Act of 2002
31.2 |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section302 of the Sarbanes-Oxley Act of 2002
32.1* |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section906 of the Sarbanes-Oxley Act of 2002
101.INS |  | The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 |  | Cover Page Interactive Data File - the cover page interactive data file does not appear in the interactive date file because its XBRL tags are embedded within the inline XBRL document.

* | Furnished herewith. Such certification shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
(1) |  | Incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K filed with the SEC on February 29, 2016 (File No. 001-34693).
(2) |  | Incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed with the SEC on April 21, 2015 (File No. 001-34693).
(3) |  | Incorporated by reference to Exhibit 3.3 of the Company's Registration Statement on Form 8-A filed with the SEC on June 25, 2021 (File No. 001-34693).

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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|  |  | CHATHAM LODGING TRUST
Dated: | November 4, 2021 |  | By: /s/ JEREMY B. WEGNER
|  |  | Jeremy B. Wegner
|  |  | Senior Vice President and Chief Financial Officer
|  |  | (Principal Financial and Accounting Officer and duly authorized officer of the registrant)

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