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Indebtedness, net
 9 Months Ended
Sep. 30, 2021
Debt Disclosure [Abstract]  
Indebtedness, net Indebtedness, net
Indebtedness, net consisted of the following (dollars in thousands):
IndebtednessCollateralCurrent Maturity
Final
Maturity (12)
Interest RateSeptember 30, 2021December 31, 2020
Mortgage loan (3)
Park Hyatt Beaver Creek Resort & SpaApril 2022April 2022
LIBOR (1) +3.00%
$67,500 $67,500 
Mortgage loan (4)
The Notary HotelJune 2022June 2025
LIBOR (1) + 2.16%
435,000 435,000 
The Clancy
Sofitel Chicago Magnificent Mile
Marriott Seattle Waterfront
Mortgage loan (5)
The Ritz-Carlton St. ThomasAugust 2022August 2024
LIBOR (1) + 3.95%
42,500 42,500 
Term loan (6)
EquityOctober 2022October 2022
Base Rate (2) + 1.25% to 2.65% or LIBOR (1) + 2.25% to 3.65%
— 61,495 
Mortgage loan (7)
The Ritz-Carlton SarasotaApril 2023April 2023
LIBOR (1) + 2.65%
99,750 100,000 
Mortgage loan (7) (8)
Hotel YountvilleMay 2023May 2023
LIBOR (1) + 2.55%
51,000 51,000 
Mortgage loan (7) (8)
Bardessono Hotel and SpaAugust 2023August 2023
LIBOR (1) + 2.55%
40,000 40,000 
Mortgage loan (7)
The Ritz-Carlton Lake TahoeJanuary 2024January 2024
LIBOR (1) + 2.10%
54,000 54,000 
Mortgage loan (9)
Capital HiltonFebruary 2024February 2024
LIBOR (1) + 1.70%
195,203 197,229 
Hilton La Jolla Torrey Pines
Mortgage loan (10)
Mr. C Beverly Hills HotelAugust 2024August 2024
LIBOR (1) + 3.60%
30,000 — 
Mortgage loan (7)
Pier House Resort & SpaSeptember 2024September 2024
LIBOR (1) + 1.85%
80,000 80,000 
Convertible Senior Notes (11)
EquityJune 2026June 20264.50%86,250 — 
1,181,203 1,128,724 
Capitalized default interest and late charges4,425 7,304 
Deferred loan costs, net(3,997)(5,434)
Discounts, net(8,844)— 
Indebtedness, net$1,172,787 $1,130,594 
__________________
(1)LIBOR rates were 0.080% and 0.144% at September 30, 2021 and December 31, 2020, respectively.
(2)Base Rate, as defined in the secured term loan agreement, is the greater of (i) the prime rate set by Bank of America, or (ii) federal funds rate + 0.5%, or (iii) LIBOR + 1.0%.
(3)Effective January 9, 2021, we amended this mortgage loan. Terms of the agreement included monthly FF&E escrow deposits being waived from January 2021 through June 2021. This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions, of which the third was exercised in April 2021.
(4)This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions, of which the second was exercised in June 2021.
(5)This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions, of which the first was exercised in August 2021. This mortgage loan has a LIBOR floor of 1.00%.
(6)Effective February 22, 2021, we amended this term loan. In conjunction with the amendment, the interest rate spread increased from a rate of Base Rate + 1.25% - 2.50% or LIBOR + 2.25% - 3.50% to a Base Rate + 1.25% - 2.65% or LIBOR + 2.25% - 3.65%, with a LIBOR floor of 0.50%. On May 18, 2021, we repaid this term loan in full.
(7)Effective December 31, 2020, we amended this mortgage loan. Terms of the agreement included monthly FF&E escrow deposits being waived from January 2021 through December 2021. This mortgage loan has a LIBOR floor of 0.25%.
(8)On September 23, 2021, we amended this mortgage loan. Terms of the agreement included extending the current and final maturity dates by one year.
(9)Effective March 5, 2021, we amended this mortgage loan. Terms of the agreement included monthly FF&E escrow deposits waived through July 1, 2021.
(10)This mortgage loan has a LIBOR floor of 1.50%.
(11)On May 18, 2021, we executed a purchase agreement to sell convertible senior notes in a private offering. In conjunction with the private offering, we sold convertible senior notes with an aggregate principal amount of $86.25 million.
(12)The final maturity date assumes all available extensions options will be exercised.
During the second and third quarters of 2020, we reached forbearance and other agreements with our lenders relating to loans secured by the Pier House Resort & Spa, The Ritz-Carlton Sarasota, The Ritz-Carlton Lake Tahoe, Hotel Yountville, Bardessono Hotel and Spa, Sofitel Chicago Magnificent Mile, The Notary Hotel, The Clancy, Marriott Seattle Waterfront, Capital Hilton and Hilton La Jolla Torrey Pines. As of September 30, 2021, no loans are in default. See note 14 for discussion of the loan modification agreement with Lismore Capital LLC (“Lismore”). The Company determined that all of the forbearance and other agreements evaluated were considered troubled debt restructurings due to terms that allowed for deferred interest and the forgiveness of default interest and late charges. No gain or loss was recognized during 2020, as the carrying amount of the original loans was not greater than the undiscounted cash flows of the modified loans. Additionally, as a result of the troubled debt restructurings all accrued default interest and late charges were capitalized into the applicable loan balances and are being amortized over the remaining term of the loans using the effective interest method. The amount of non-cash principal amortization associated with the default interest and late charges during the three and nine months ended September 30, 2021 was approximately $519,000 and $2.9 million, respectively. The amount of principal amortization during the three and nine months ended September 30, 2020 was $937,000 and $1.2 million, respectively.
On August 5, 2021, in connection with the acquisition of the Mr. C Beverly Hills Hotel and the adjacent residences in Los Angeles, California, the Company assumed a $50 million mortgage loan and repaid $20 million upon closing. This mortgage loan provides for an interest rate of LIBOR + 3.60%. The mortgage loan is interest only with the stated maturity in August 2024.
Convertible Senior Notes
In May 2021, the Company issued $86.25 million aggregate principal amount of 4.50% Convertible Senior Notes due June 2026 (the “Convertible Senior Notes”). The net proceeds from this offering of the Convertible Senior Notes were approximately $82.8 million after deducting the underwriting fees and other expenses paid by the Company. A portion of the proceeds were used to fully repay the secured term loan.
The Convertible Senior Notes are governed by an indenture (the “Base Indenture”) between the Company and U.S. Bank National Association, as trustee. The Convertible Senior Notes bear interest at a rate of 4.50% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2021. The Convertible Senior Notes will mature on June 1, 2026. The Company recorded coupon interest expense of $970,000 and $1.4 million, respectively, for the three and nine months ended September 30, 2021.
The Company separated the Convertible Senior Notes into liability and equity components. The initial carrying amount of the liability component was calculated using a discount rate of 7.1%. The discount rate was based on the terms of debt instruments that were similar to the Convertible Senior Notes. The $6.3 million carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the net proceeds of the Convertible Senior Notes. The amount recorded in equity is not subject to remeasurement or amortization. The initial discount of $9.3 million is accreted to interest expense using the effective interest rate method over the contractual term of the Convertible Senior Notes. The Company recorded discount amortization of $391,000 and $576,000, respectively, for the three and nine months ended September 30, 2021.
The Convertible Senior Notes are convertible at any time prior to the close of business on the business day immediately preceding the maturity date for cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the election of the Company, based on an initial conversion rate of 157.7909 shares of the Company’s common stock per $1,000 principal amount of notes (equivalent to a conversion price of approximately $6.34 per share of common stock), subject to adjustment of the conversion rate under certain circumstances. In addition, following the occurrence of certain corporate events, if the Company provides notice of redemption or if it exercises its option to convert the Convertible Senior Notes, the Company will, in certain circumstances, increase the conversion rate for a holder that converts its
Convertible Senior Notes in connection with such corporate event, such notice of redemption, or such issuer conversion option, as the case may be.
The Company may redeem the Convertible Senior Notes at the Company’s option, in whole or in part, on any business day on or after the date of issuance if the last reported sale price per share of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides a notice of redemption at a redemption price equal to 100% of the principal amount of the Convertible Senior Notes to be redeemed subject to certain adjustments, plus accrued and unpaid interest to, but excluding, the redemption date.
If we violate covenants in any debt agreement, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms, if at all. The assets of certain of our subsidiaries are pledged under non-recourse indebtedness and are not available to satisfy the debts and other obligations of the consolidated group. As of September 30, 2021, we were in compliance with all covenants.