Indebtedness, net

12 Months Ended

Dec. 31, 2021

Indebtedness, net consisted of the following (dollars in thousands):


Indebtedness	Collateral	Current Maturity	Final Maturity (12)	Interest Rate	December 31, 2021				December 31, 2020
					Debt Balance		Book Value of Collateral		Debt Balance		Book Value of Collateral
Mortgage loan (3)	Park Hyatt Beaver Creek Resort & Spa	April 2022	April 2022	LIBOR (1) +3.00%	$	67,500	$	137,718	$	67,500	$	140,516
Mortgage loan (4)	The Notary Hotel	June 2022	June 2025	LIBOR (1) + 2.16%	435,000		417,109		435,000		439,215
	The Clancy
	Sofitel Chicago Magnificent Mile
	Marriott Seattle Waterfront
Mortgage loan (5)	The Ritz-Carlton St. Thomas	August 2022	August 2024	LIBOR (1) + 3.95%	42,500		124,114		42,500		130,216
Term loan (6)	Equity	October 2022	October 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 Sarasota	April 2023	April 2023	LIBOR (1) + 2.65%	99,500		162,621		100,000		163,814
Mortgage loan (7) (8)	Hotel Yountville	May 2023	May 2023	LIBOR (1) + 2.55%	51,000		85,847		51,000		87,795
Mortgage loan (7) (8)	Bardessono Hotel and Spa	August 2023	August 2023	LIBOR (1) + 2.55%	40,000		53,413		40,000		56,645
Mortgage loan (7)	The Ritz-Carlton Lake Tahoe	January 2024	January 2024	LIBOR (1) + 2.10%	54,000		112,713		54,000		113,821
Mortgage loan (9)	Capital Hilton	February 2024	February 2024	LIBOR (1) + 1.70%	195,000		193,194		197,229		203,918
	Hilton La Jolla Torrey Pines
Mortgage loan (10)	Mr. C Beverly Hills Hotel	August 2024	August 2024	LIBOR (1) + 3.60%	30,000		73,587		—		—
Mortgage loan (7)	Pier House Resort & Spa	September 2024	September 2024	LIBOR (1) + 1.85%	80,000		85,281		80,000		88,650
Convertible Senior Notes (11)	Equity	June 2026	June 2026	4.50%	86,250		—		—		—
					1,180,750		1,445,597		1,128,724		1,424,590
Capitalized default interest and late charges					3,904				7,304
Deferred loan costs, net					(3,538)				(5,434)
Discounts, net					(8,438)				—
Indebtedness, net					$	1,172,678	$	1,445,597	$	1,130,594	$	1,424,590

__________________

(1)LIBOR rates were 0.101% and 0.144% at December 31, 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 December 31, 2021, no loans are in default. See note 15 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.

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 default interest and late charges capitalized into indebtedness for the year ended December 31, 2020 was $9.9 million. The amount of principal amortization for the years ended December 31, 2021 and 2020 was $3.4 million and $2.6 million, respectively.

On August 5, 2021, in connection with the acquisition of the Mr. C Beverly Hills Hotel and the adjacent residences, 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 a 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 $2.4 million for the year ended December 31, 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 $974,000 for the year ended December 31, 2021, with the remaining discount balance to be amortized through June 2026.

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 December 31, 2021, we were in compliance with all covenants.

Maturities and scheduled amortization of indebtedness as of December 31, 2021, assuming no extension of existing extension options for each of the following five years and thereafter are as follows (in thousands):


2022	$	546,000
2023	189,500
2024	359,000
2025	—
2026	86,250
Thereafter	—
Total	$	1,180,750