Debt

12 Months Ended

Dec. 31, 2021

The Company's mortgage loans are collateralized by first-mortgage liens on certain of the Company's properties. The mortgages are non-recourse except for instances of fraud or misapplication of funds. The Company's credit facility is secured by pledges of its equity interests in certain properties. Debt consisted of the following (in thousands):


Loan/Collateral	Interest Rate		Maturity Date	12/31/21 Property Carrying Value		Balance Outstanding as of
						December 31, 2021		December 31, 2020
Revolving Credit Facility (1)	3.43	%	March 8, 2023	$	697,911	$	70,000	$	135,300
Construction loan (2)	7.75	%	August 4, 2024	67,554		35,007		13,325
Residence Inn by Marriott New Rochelle, NY	5.75	%	September 1, 2021	—		—		12,602
Homewood Suites by Hilton San Antonio, TX	4.59	%	February 6, 2023	27,634		14,808		15,195
Residence Inn by Marriott Vienna, VA	4.49	%	February 6, 2023	29,931		20,243		20,780
Courtyard by Marriott Houston, TX	4.19	%	May 6, 2023	29,258		16,673		17,126
Hyatt Place Pittsburgh, PA	4.65	%	July 6, 2023	32,697		20,515		21,031
Residence Inn by Marriott Bellevue, WA	4.97	%	December 6, 2023	60,851		42,089		42,998
Residence Inn by Marriott Garden Grove, CA	4.79	%	April 6, 2024	39,712		30,839		31,463
Residence Inn by Marriott Silicon Valley I, CA	4.64	%	July 1, 2024	71,675		62,374		63,418
Residence Inn by Marriott Silicon Valley II, CA	4.64	%	July 1, 2024	79,649		68,054		69,192
Residence Inn by Marriott San Mateo, CA	4.64	%	July 1, 2024	59,812		46,781		47,564
Residence Inn by Marriott Mountain View, CA	4.64	%	July 1, 2024	45,254		36,481		37,092
SpringHill Suites by Marriott Savannah, GA	4.62	%	July 6, 2024	32,481		28,873		29,358
Hilton Garden Inn Marina del Rey, CA	4.68	%	July 6, 2024	37,217		20,024		20,490
Homewood Suites by Hilton Billerica, MA	4.32	%	December 6, 2024	12,214		15,114		15,411
Hampton Inn & Suites Houston Medical Cntr., TX	4.25	%	January 6, 2025	15,100		17,058		17,396
Total debt before unamortized debt issue costs				$	1,338,950	$	544,933	$	609,741
Unamortized mortgage debt issue costs						(644)		(971)
Total debt outstanding						$	544,289	$	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 2.50% if borrowings remain at or below $200 million and a spread of 3.0% if borrowings exceed $200 million. At December 31, 2021 and 2020, the Company had $70.0 million and $135.3 million, respectively, of outstanding borrowings under its $250.0 million revolving credit facility. Credit facility lenders representing $227.5 million of

commitments have provided two six-month extension options that would extend the final maturity of these commitments to March 8, 2024, if exercised. The Company can exercise the extension options as long as there is no default.

2.On August 4, 2020, a subsidiary of the Company entered into an agreement with affiliates of Mack Real Estate Credit Strategies to obtain a loan with a total commitment of up to $40 million 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%.

At December 31, 2021 and 2020, the Company had $70.0 million and $135.3 million, respectively, of outstanding borrowings under its revolving credit facility. At December 31, 2021, the maximum borrowing availability under the revolving credit facility was $250.0 million.

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 December 31, 2021 and 2020 was $443.4 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 a similar maturity and that is classified within level 3 of the fair value hierarchy. As of December 31, 2021, the Company’s variable rate debt consists of its revolving credit facility and its construction loan. The estimated fair value of the Company’s variable rate debt as of December 31, 2021 and 2020 was $105.0 million and $148.6 million, respectively.

On October 26, 2021, Chatham executed an amendment to its credit facility which extended a waiver of financial covenants until June 30, 2022, provided for the immediate exercise of an option to extend the maturity of the entire $250 million credit facility through March 8, 2023, and added two six-month options to further extend the maturity of the credit 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 credit facility did not change as a result of the amendment. The amendment places 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. As of December 31, 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 December 31, 2021, the debt service coverage ratios or debt yields for eight of our mortgage loans were below the minimum thresholds such that the cash trap provision of each respective loan could be enforced. As of December 31, 2021, none of our mortgage debt lenders have 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 December 31, 2021, for each of the next five calendar years and thereafter are as follows (in thousands):


	Amount
2022	$	9,249
2023	187,919
2024	331,818
2025	15,947
2026	—
Thereafter	—
Total debt before unamortized debt issue costs	$	544,933
Unamortized mortgage debt issue costs	(644)
Total debt outstanding	$	544,289

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 statements of operations. As of December 31, 2021, the fair value of the interest rate caps were $61 thousand.