XML 27 R16.htm IDEA: XBRL DOCUMENT v3.22.2
Debt
 6 Months Ended
Jun. 30, 2022
Debt Disclosure [Abstract]  
Debt 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):
 
CollateralInterest RateMaturity DateJune 30, 2022 Property Carrying ValueBalance Outstanding on Loan as of
June 30, 2022December 31,
2021
Revolving Credit Facility (1)3.38 %March 8, 2023$613,584 $15,000 $70,000 
Construction loan (2)7.98 %August 4, 202468,786 39,143 35,007 
Homewood Suites by Hilton San Antonio, TX 4.59 %February 6, 202327,711 14,606 14,808 
Residence Inn by Marriott Vienna, VA4.49 %February 6, 202329,368 19,963 20,243 
Courtyard by Marriott Houston, TX4.19 %May 6, 202328,896 16,438 16,673 
Hyatt Place Pittsburgh, PA4.65 %July 6, 202332,135 20,247 20,515 
Residence Inn by Marriott Bellevue, WA4.97 %December 6, 202360,411 41,615 42,089 
Residence Inn by Marriott Garden Grove, CA4.79 %April 6, 202438,795 30,514 30,839 
Residence Inn by Marriott Silicon Valley I, CA 4.64 %July 1, 202469,856 61,830 62,374 
Residence Inn by Marriott Silicon Valley II, CA4.64 %July 1, 202477,697 67,459 68,054 
Residence Inn by Marriott San Mateo, CA 4.64 %July 1, 202458,382 46,372 46,781 
Residence Inn by Marriott Mountain View, CA4.64 %July 6, 202443,778 36,163 36,481 
SpringHill Suites by Marriott Savannah, GA4.62 %July 6, 202432,031 28,620 28,873 
Hilton Garden Inn Marina del Rey, CA4.68 %July 6, 202436,713 19,781 20,024 
Homewood Suites by Hilton Billerica, MA 4.32 %December 6, 202411,823 14,960 15,114 
Hampton Inn & Suites Houston Medical Center, TX 4.25 %January 6, 202514,850 16,883 17,058 
Total debt before unamortized debt issue costs$1,244,816 $489,594 $544,933 
Unamortized mortgage debt issue costs(511)(644)
Total debt outstanding$489,083 $544,289 
 
1.The interest rate for the $250.0 million 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 June 30, 2022 and December 31, 2021, the Company had $15.0 million and $70.0 million, respectively, of outstanding borrowings under the 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 to March 8, 2024, if exercised. The credit facility is currently secured by equity pledges in hotel properties that do not serve as collateral for other secured debt.
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 Home2 Woodland Hills hotel development. The loan has an initial term of 4 years and there are two six-month extension options. The interest 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 June 30, 2022 and December 31, 2021 was $417.6 million and $443.4 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 June 30, 2022, 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 June 30, 2022 and December 31, 2021 was $54.2 million and $105.0 million, respectively.
Our credit facility contains financial covenants that require us to maintain secured leverage and total leverage below certain levels and maintain fixed charge coverage above certain levels. On October 26, 2021, the Company executed an amendment to its credit facility which extended a waiver of financial covenants until June 30, 2022. The Company exited its credit facility covenant waiver period as of the end of the second quarter of 2022 and is in compliance with the covenants in the credit facility agreement.

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 June 30, 2022, the debt service coverage ratios or debt yields for seven of our mortgage loans were below the minimum thresholds such that the cash trap provision of each respective loan could be enforced. As of June 30, 2022, one 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 June 30, 2022, for the current year and each of the next five calendar years and thereafter are as follows (in thousands):
Amount
2022 (remaining six months)$4,773 
2023132,919 
2024335,955 
202515,947 
2026— 
Thereafter— 
Total debt before unamortized debt issue costs$489,594 
Unamortized mortgage debt issue costs(511)
Total debt outstanding$489,083 

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 Home2 Woodland Hills 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 June 30, 2022, the fair value of the interest rate caps were $0.4 million.