Debt

6 Months Ended

Jun. 30, 2024

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, revolving credit facility, and unsecured term loan debt consisted of the following (dollars in thousands):


Collateral	Interest Rate		Maturity Date	June 30, 2024 Property Carrying Value		Balance Outstanding on Loan as of
						June 30, 2024		December 31, 2023
Revolving Credit Facility (1)	6.96	%	October 28, 2026	$	689,811	$	120,000	$	—
Unsecured Term Loan (2)	6.91	%	October 28, 2025	689,811		140,000		90,000






Residence Inn by Marriott Garden Grove, CA	4.79	%	April 6, 2024	—		—		29,496
Residence Inn by Marriott Silicon Valley I, CA	4.64	%	July 1, 2024	—		—		60,134
Residence Inn by Marriott Silicon Valley II, CA	4.64	%	July 1, 2024	—		—		65,609
Residence Inn by Marriott San Mateo, CA	4.64	%	July 1, 2024	—		—		45,100
Residence Inn by Marriott Mountain View, CA	4.64	%	July 1, 2024	—		—		35,171

Hilton Garden Inn Marina del Rey, CA	4.68	%	July 6, 2024	38,001		18,759		19,023
Homewood Suites by Hilton Billerica, MA	4.32	%	December 6, 2024	10,749		14,314		14,481
Hampton Inn & Suites Houston Medical Center, TX	4.25	%	January 6, 2025	13,852		16,150		16,338
Courtyard by Marriott Dallas, TX (3)	7.61	%	September 11, 2028	39,889		24,500		24,500
Hyatt Place Pittsburgh, PA (6)	7.29	%	June 11, 2029	30,442		23,300		—
Residence Inn by Marriott Austin, TX (4)	7.42	%	September 6, 2033	34,161		20,850		20,850
TownePlace Suites by Marriott Austin, TX (4)	7.42	%	September 6, 2033	30,683		19,075		19,075
Courtyard by Marriott Summerville, SC (5)	7.33	%	September 11, 2033	18,534		9,000		9,000
Residence Inn by Marriott Summerville, SC (5)	7.33	%	September 11, 2033	17,116		9,500		9,500
SpringHill Suites by Marriott Savannah, GA (7)	6.70	%	June 6, 2034	31,635		22,000		27,832
Hampton Inn & Suites Exeter, NH (7)	6.70	%	June 11, 2034	12,318		15,000		—
Total debt before unamortized debt issue costs				$	967,191	$	452,448	$	486,109
Unamortized term loan and mortgage debt issue costs						(2,658)		(2,032)
Total debt outstanding						$	449,790	$	484,077

1.The interest rate for the revolving credit facility is variable and based on one-month term secured overnight financing rate ("SOFR") plus a spread of 1.50% to 2.25% based on the Company's leverage and a credit spread adjustment of 0.10%.

2.The interest rate for the unsecured term loan is variable and based on one-month term SOFR plus a spread of 1.45% to 2.20% based on the Company's leverage and a credit spread adjustment of 0.10%.

3.On August 30, 2023, a subsidiary of Chatham entered into an agreement with Wells Fargo Bank to obtain a $24.5 million loan secured by the Courtyard by Marriott Dallas Downtown. The loan has a term of five years, carries a fixed interest rate of 7.61%, and is interest-only for its duration.

4.On August 16, 2023, two subsidiaries of Chatham entered into two agreements with Barclays Capital Real Estate to obtain a $20.9 million loan and a $19.1 million loan secured by the Residence Inn by Marriott Austin and the TownePlace Suites by Marriott Austin, respectively. Each loan has a term of ten years, carries a fixed interest rate of 7.42%, and is interest-only for the first five years before amortizing based upon a 30-year amortization schedule.

5.On August 31, 2023, two subsidiaries of Chatham entered into two agreements with Wells Fargo Bank to obtain a $9.0 million loan and a $9.5 million loan secured by the Courtyard by Marriott Summerville and the Residence Inn by Marriott Summerville, respectively. Each loan has a term of ten years, carries a fixed interest rate of 7.33%, and is interest-only for its duration.

6.On May 31, 2024, a subsidiary of Chatham entered into an agreement with Wells Fargo Bank to obtain a $23.3 million loan secured by the Hyatt Place Pittsburgh. The loan has a term of five years, carries a fixed interest rate of 7.29%, and is interest-only for its duration.

7.On June 6, 2024, two subsidiaries of Chatham entered into two agreements with Barclays Capital Real Estate and Wells Fargo Bank to obtain a $22.0 million loan secured by the SpringHill Suites Savannah and a $15.0 million loan secured by the Hampton Inn & Suites Exeter. Each loan has a term of ten years, carries a fixed interest rate of 6.70%, and is interest-only for its duration.

On October 28, 2022, the Company entered into a $215.0 million unsecured revolving credit facility and a $90.0 million unsecured delayed-draw term loan facility. The unsecured revolving credit facility has an initial maturity of October 28, 2026 and provides two six-month extension options. The unsecured delayed-draw term loan facility has an initial maturity of October 28, 2025 and provides two one-year extension options. On December 19, 2022, the Company executed an amendment to its unsecured revolving credit facility, increasing commitments by $45.0 million for a total borrowing capacity of $260.0 million. On May 3, 2024, the Company amended its funded unsecured term loan to increase its size from $90.0 million to $140.0 million, its current balance outstanding as of June 30, 2024.

During the six months ended June 30, 2024, the Company repaid the maturing mortgage loans of $29.3 million on the Residence Inn Garden Grove hotel property, $34.9 million on the Residence Inn Mountain View hotel property, $27.6 million on the SpringHill Suites Savannah hotel property, $59.5 million on the Residence Inn Silicon Valley I hotel property, $65.0 million on the Residence Inn Silicon Valley II hotel property, and $44.7 million on the Residence Inn San Mateo hotel property. During the year ended December 31, 2023, the Company repaid the $39.3 million construction loan on the Home2 Woodland Hills hotel property, and the maturing mortgage loans of $14.4 million on the Homewood Suites San Antonio hotel property, $19.7 million on the Residence Inn Tysons hotel property, $16.0 million on the Courtyard Houston hotel property, $19.7 million on the Hyatt Place Pittsburgh hotel property, and $40.5 million on the Residence Inn Bellevue hotel property. The Company utilized cash, borrowings under its unsecured credit facility and unsecured term loan, and proceeds from its eight new mortgage loans to repay these loans.

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, 2024 and December 31, 2023 was $198.7 million and $396.0 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, 2024, the Company’s variable rate debt consisted of borrowings under its revolving credit facility and its unsecured term loan. The estimated fair value of the Company’s variable rate debt as of June 30, 2024 and December 31, 2023 was $260.0 million and $90.0 million, respectively.

The Company's 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 the 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, 2024, one of our mortgage debt lenders has enforced cash trap provisions resulting in $0.4 million of restricted cash. The Company does not expect that such cash traps will affect its ability to satisfy its short-term liquidity requirements.

Future scheduled principal payments of debt obligations as of June 30, 2024, for the current year and each of the next five calendar years and thereafter are as follows (in thousands):


	Amount
2024 (remaining six months)	$	33,248
2025	155,975
2026	120,000
2027	—
2028	24,590
Thereafter	118,635
Total debt before unamortized debt issue costs	$	452,448
Unamortized term loan and mortgage debt issue costs	(2,658)
Total debt outstanding	$	449,790

Accounting for Derivative Instruments

The Company had interest rate cap agreements to hedge against interest rate fluctuations related to the construction loan for the Home2 Woodland Hills hotel property. The Company recorded its derivative instruments on the balance sheet at their estimated fair values and categorized the fair value measurement of these assets as Level 2. 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 were 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 were 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. During the six months ended June 30, 2023, the Company terminated its interest rate caps related to the construction loan when the loan was repaid.