PEB 10-Q Quarterly Report March 31, 2022 | Alphaminr
Pebblebrook Hotel Trust
ALPHAMINR

PEB 10-Q Quarter ended March 31, 2022

Balance Sheet
Cash Flow
Income Statement
Debt
PEBBLEBROOK HOTEL TRUST
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PROXIES
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Filed on April 7, 2025
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Filed on March 31, 2023
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Filed on April 1, 2021
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Filed on March 31, 2020
DEF 14A
Filed on April 29, 2019
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Filed on April 27, 2018
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Filed on April 28, 2017
DEF 14A
Filed on April 29, 2016
DEF 14A
Filed on April 30, 2015
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Filed on March 28, 2014
DEF 14A
Filed on April 5, 2013
DEF 14A
Filed on April 27, 2012
DEF 14A
Filed on March 25, 2011
DEF 14A
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 001-34571
PEBBLEBROOK HOTEL TRUST
(Exact Name of Registrant as Specified in Its Charter)

Maryland 27-1055421
(State of Incorporation or Organization) (I.R.S. Employer Identification No.)
4747 Bethesda Avenue , Suite 1100 , Bethesda , Maryland
20814
(Address of Principal Executive Offices) (Zip Code)

(240) 507-1300
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Shares, $0.01 par value per share PEB New York Stock Exchange
Series E Cumulative Redeemable Preferred Shares, $0.01 par value PEB-PE New York Stock Exchange
Series F Cumulative Redeemable Preferred Shares, $0.01 par value PEB-PF New York Stock Exchange
Series G Cumulative Redeemable Preferred Shares, $0.01 par value PEB-PG New York Stock Exchange
Series H Cumulative Redeemable Preferred Shares, $0.01 par value PEB-PH New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ☑ Yes ☐ No


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☑ Accelerated filer ☐
Non-accelerated filer ☐ (do not check if a smaller reporting company) Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
Outstanding at April 19, 2022
Common shares of beneficial interest ($0.01 par value per share) 131,351,374



Pebblebrook Hotel Trust
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II. OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
2

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.

Pebblebrook Hotel Trust
Consolidated Balance Sheets
(in thousands, except share and per-share data)
March 31, 2022 December 31, 2021
(Unaudited)
ASSETS
Investment in hotel properties, net $ 5,975,857 $ 6,079,333
Cash and cash equivalents 69,446 58,518
Restricted cash 26,507 33,729
Hotel receivables (net of allowance for doubtful accounts of $ 236 and $ 1,142 , respectively)
40,645 37,045
Prepaid expenses and other assets 66,918 52,565
Total assets $ 6,179,373 $ 6,261,190
LIABILITIES AND EQUITY
Debt $ 2,443,090 $ 2,441,888
Accounts payable, accrued expenses and other liabilities 233,298 250,584
Lease liabilities - operating leases 319,375 319,426
Deferred revenues 78,756 69,064
Accrued interest 8,355 4,567
Distribution payable 11,565 11,756
Total liabilities 3,094,439 3,097,285
Commitments and contingencies (Note 11)
Shareholders’ equity:
Preferred shares of beneficial interest, $ .01 par value (liquidation preference $ 740,000 at March 31, 2022 and December 31, 2021), 100,000,000 shares authorized; 29,600,000 shares issued and outstanding at March 31, 2022 and December 31, 2021
296 296
Common shares of beneficial interest, $ .01 par value, 500,000,000 shares authorized; 130,904,299 shares issued and outstanding at March 31, 2022 and 130,813,750 shares issued and outstanding at December 31, 2021
1,309 1,308
Additional paid-in capital 4,269,322 4,268,042
Accumulated other comprehensive income (loss) 12,092 ( 19,442 )
Distributions in excess of retained earnings ( 1,206,019 ) ( 1,094,023 )
Total shareholders’ equity 3,077,000 3,156,181
Non-controlling interests 7,934 7,724
Total equity 3,084,934 3,163,905
Total liabilities and equity $ 6,179,373 $ 6,261,190

The accompanying notes are an integral part of these financial statements.
3
Pebblebrook Hotel Trust
Consolidated Statements of Operations and Comprehensive Income
(in thousands, except share and per-share data)
(Unaudited)
For the three months ended March 31,
2022 2021
Revenues:
Room $ 168,632 $ 53,463
Food and beverage 62,424 14,809
Other operating 27,012 15,371
Total revenues 258,068 83,643
Expenses:
Hotel operating expenses:
Room 42,463 16,710
Food and beverage 46,050 10,743
Other direct and indirect 85,847 45,228
Total hotel operating expenses 174,360 72,681
Depreciation and amortization 59,100 55,443
Real estate taxes, personal property taxes, property insurance, and ground rent 30,457 28,590
General and administrative 9,708 7,646
Impairment loss 60,983 14,856
Other operating expenses 1,123 562
Total operating expenses 335,731 179,778
Operating income (loss) ( 77,663 ) ( 96,135 )
Interest expense ( 22,572 ) ( 25,331 )
Other 19 29
Income (loss) before income taxes ( 100,216 ) ( 121,437 )
Income tax (expense) benefit — ( 3 )
Net income (loss) ( 100,216 ) ( 121,440 )
Net income (loss) attributable to non-controlling interests ( 686 ) ( 858 )
Net income (loss) attributable to the Company ( 99,530 ) ( 120,582 )
Distributions to preferred shareholders ( 11,344 ) ( 8,139 )
Net income (loss) attributable to common shareholders $ ( 110,874 ) $ ( 128,721 )
Net income (loss) per share available to common shareholders, basic $ ( 0.85 ) $ ( 0.98 )
Net income (loss) per share available to common shareholders, diluted $ ( 0.85 ) $ ( 0.98 )
Weighted-average number of common shares, basic 130,904,299 130,775,873
Weighted-average number of common shares, diluted 130,904,299 130,775,873
4
Pebblebrook Hotel Trust
Consolidated Statements of Operations and Comprehensive Income - Continued
(in thousands, except share and per-share data)
(Unaudited)
For the three months ended March 31,
2022 2021
Comprehensive Income:
Net income (loss) $ ( 100,216 ) $ ( 121,440 )
Other comprehensive income (loss):
Change in fair value of derivative instruments 27,367 9,736
Amounts reclassified from other comprehensive income 4,374 6,418
Comprehensive income (loss) ( 68,475 ) ( 105,286 )
Comprehensive income (loss) attributable to non-controlling interests ( 479 ) ( 752 )
Comprehensive income (loss) attributable to the Company $ ( 67,996 ) $ ( 104,534 )

The accompanying notes are an integral part of these financial statements.
5
Pebblebrook Hotel Trust
Consolidated Statements of Equity
(in thousands, except share data)
(Unaudited)
For the three months ended March 31, 2021
Preferred Shares Common Shares Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Distributions in Excess of Retained Earnings Total Shareholders' Equity Non-Controlling Interests Total Equity
Shares Amount Shares Amount
Balance at December 31, 2020 20,400,000 $ 204 130,673,300 $ 1,307 $ 4,169,870 $ ( 60,071 ) $ ( 853,973 ) $ 3,257,337 $ 6,989 $ 3,264,326
Issuance of shares, net of offering costs — — — — ( 10 ) — — ( 10 ) — ( 10 )
Issuance of common shares for Board of Trustees compensation — — 27,711 1 515 — — 516 — 516
Repurchase of common shares — — ( 38,310 ) ( 1 ) ( 719 ) — — ( 720 ) — ( 720 )
Share-based compensation — — 150,216 1 3,278 — — 3,279 349 3,628
Distributions on common shares/units — — — — — — ( 1,077 ) ( 1,077 ) ( 8 ) ( 1,085 )
Distributions on preferred shares — — — — — — ( 8,139 ) ( 8,139 ) — ( 8,139 )
Cumulative effect adjustment from adoption of new accounting standard — — — — ( 113,099 ) — — ( 113,099 ) — ( 113,099 )
Purchases of capped calls in connection with convertible senior notes — — — — ( 20,975 ) — — ( 20,975 ) — ( 20,975 )
Other comprehensive income (loss):
Change in fair value of derivative instruments — — — — — 9,736 — 9,736 — 9,736
Amounts reclassified from other comprehensive income — — — — — 6,418 — 6,418 — 6,418
Net income (loss) — — — — — — ( 120,582 ) ( 120,582 ) ( 858 ) ( 121,440 )
Balance at March 31, 2021 20,400,000 $ 204 130,812,917 $ 1,308 $ 4,038,860 $ ( 43,917 ) $ ( 983,771 ) $ 3,012,684 $ 6,472 $ 3,019,156
6
Pebblebrook Hotel Trust
Consolidated Statements of Equity - Continued
(in thousands, except share data)
(Unaudited)
For the three months ended March 31, 2022
Preferred Shares Common Shares Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Distributions in Excess of Retained Earnings Total Shareholders' Equity Non-Controlling Interests Total Equity
Shares Amount Shares Amount
Balance at December 31, 2021 29,600,000 $ 296 130,813,750 $ 1,308 $ 4,268,042 $ ( 19,442 ) $ ( 1,094,023 ) $ 3,156,181 $ 7,724 $ 3,163,905
Issuance of common shares for Board of Trustees compensation — — 33,866 1 737 — — 738 — 738
Repurchase of common shares — — ( 49,787 ) ( 1 ) ( 1,112 ) — — ( 1,113 ) — ( 1,113 )
Share-based compensation — — 106,470 1 1,655 — — 1,656 698 2,354
Distributions on common shares/units — — — — — — ( 1,122 ) ( 1,122 ) ( 9 ) ( 1,131 )
Distributions on preferred shares — — — — — — ( 11,344 ) ( 11,344 ) — ( 11,344 )
Other comprehensive income (loss):
Change in fair value of derivative instruments — — — — — 27,160 — 27,160 207 27,367
Amounts reclassified from other comprehensive income — — — — — 4,374 — 4,374 — 4,374
Net income (loss) — — — — — — ( 99,530 ) ( 99,530 ) ( 686 ) ( 100,216 )
Balance at March 31, 2022 29,600,000 $ 296 130,904,299 $ 1,309 $ 4,269,322 $ 12,092 $ ( 1,206,019 ) $ 3,077,000 $ 7,934 $ 3,084,934

The accompanying notes are an integral part of these financial statements.
7
Pebblebrook Hotel Trust
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
For the three months ended March 31,
2022 2021
Operating activities:
Net income (loss) $ ( 100,216 ) $ ( 121,440 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization 59,100 55,443
Share-based compensation 2,354 2,182
Amortization of deferred financing costs, non-cash interest and other amortization 3,489 4,744
Impairment loss 60,983 14,856
Non-cash ground rent 2,489 1,521
Other adjustments ( 1,906 ) 69
Changes in assets and liabilities:
Hotel receivables ( 2,694 ) ( 6,800 )
Prepaid expenses and other assets ( 2,127 ) 1,686
Accounts payable and accrued expenses 7,147 35,110
Deferred revenues 10,213 5,493
Net cash provided by (used in) operating activities 38,832 ( 7,136 )
Investing activities:
Improvements and additions to hotel properties ( 19,906 ) ( 9,623 )
Other investing activities ( 47 ) ( 47 )
Net cash provided by (used in) investing activities ( 19,953 ) ( 9,670 )
Financing activities:
Payment of offering costs — common and preferred shares — ( 10 )
Payment of deferred financing costs ( 32 ) ( 9,576 )
Repayments under revolving credit facilities — ( 40,000 )
Proceeds from debt — 263,750
Repayments of debt ( 324 ) ( 177,000 )
Purchases of capped calls for convertible senior notes — ( 20,975 )
Repurchases of common shares ( 1,113 ) ( 720 )
Distributions — common shares/units ( 1,322 ) ( 1,312 )
Distributions — preferred shares ( 11,344 ) ( 8,139 )
Repayments of refundable membership deposits ( 1,038 ) ( 880 )
Net cash provided by (used in) financing activities ( 15,173 ) 5,138
Net change in cash and cash equivalents and restricted cash 3,706 ( 11,668 )
Cash and cash equivalents and restricted cash, beginning of year 92,247 136,300
Cash and cash equivalents and restricted cash, end of period $ 95,953 $ 124,632

The accompanying notes are an integral part of these financial statements.
8

PEBBLEBROOK HOTEL TRUST
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Organization
Pebblebrook Hotel Trust (the "Company") is an internally managed hotel investment company, formed as a Maryland real estate investment trust in October 2009 to opportunistically acquire and invest in hotel properties located primarily in major United States cities, with an emphasis on major gateway coastal markets.
As of March 31, 2022, the Company owned 53 hotels with a total of 13,247 guest rooms. The hotel properties are located in: Boston, Massachusetts; Chicago, Illinois; Hollywood, Florida; Jekyll Island, Georgia; Key West, Florida; Miami (Coral Gables), Florida; Los Angeles, California (Beverly Hills, Santa Monica, and West Hollywood); Naples, Florida; Philadelphia, Pennsylvania; Portland, Oregon; San Diego, California; San Francisco, California; Santa Cruz, California; Seattle, Washington; Stevenson, Washington; and Washington, D.C.
Substantially all of the Company’s assets are held by, and all of the Company's operations are conducted through, Pebblebrook Hotel, L.P. (the "Operating Partnership"). The Company is the sole general partner of the Operating Partnership. As of March 31, 2022, the Company owned 99.3 % of the common limited partnership units issued by the Operating Partnership ("common units"). The remaining 0.7 % of the common units are owned by the other limited partners of the Operating Partnership. For the Company to maintain its qualification as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"), it cannot operate the hotels it owns. Therefore, the Operating Partnership and its subsidiaries lease the hotel properties to subsidiaries of Pebblebrook Hotel Lessee, Inc. (collectively with its subsidiaries, "PHL"), a taxable REIT subsidiary ("TRS"), which in turn engage third-party eligible independent contractors to manage the hotels. PHL is consolidated into the Company’s financial statements.
COVID-19 and Liquidity Update
In March 2020, the World Health Organization declared the novel coronavirus ("COVID-19") to be a global pandemic and the virus spread throughout the United States and the world. As a result of this pandemic and subsequent government mandates, health official recommendations, corporate policy changes and individual responses, hotel demand dramatically declined. In response, the Company implemented significant cost controls, salary reductions and temporarily suspended operations at 47 of its hotels and resorts in 2020. In addition, to improve liquidity, the Company raised capital by issuing convertible notes and additional preferred shares. The Company also amended the agreements governing its existing credit facilities, term loan facilities and unsecured senior notes which, among other things, waived quarterly financial covenants until the second quarter of 2022, with substantially less-restrictive covenants through the end of the first quarter of 2023.
As demand has since improved as a result of an increase in vaccinations and corresponding lifting of governmental restrictions and recommendations, the Company gradually reopened its hotels and resorts. As of July 1, 2021, all of the Company's hotels and resorts were open, with the exception of Hotel Vitale, whose operations will remain suspended until the completion of its renovations and repositioning, which is expected to occur in the second quarter of 2022.
The COVID-19 pandemic has had a significant negative impact on the Company's operations and financial results and is expected to continue to have a negative impact on the Company's results of operations, financial position and cash flows for the remainder of 2022. However, results have improved in the first quarter of 2022 relative to 2021 and this trend is expected to continue throughout 2022. The demand recovery has been led by strong leisure travel with a slower recovery in business and group travel. As a result of the strength in leisure travel, the Company's resort properties are operating at or above pre-pandemic levels.
Based on the amendments to the Company's credit agreements, assumptions regarding the recovery of demand and the Company's liquidity of $ 694.4 million as of March 31, 2022, the Company believes it has sufficient liquidity to meet its obligations for the next 12 months.
9
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and in conformity with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) applicable to interim financial information. As such, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted in accordance with the rules and regulations of the SEC. These unaudited consolidated financial statements include all adjustments considered necessary for a fair presentation of the consolidated balance sheets, consolidated statements of operations and comprehensive income, consolidated statements of equity and consolidated statements of cash flows for the periods presented. Interim results are not necessarily indicative of full-year performance, as a result of the impact of seasonal and other short-term variations and the acquisitions and or dispositions of hotel properties. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
The Company and its subsidiaries are separate legal entities and maintain records and books of account separate and apart from each other. The consolidated financial statements include all of the accounts of the Company and its subsidiaries and are presented in accordance with U.S. GAAP. All significant intercompany balances and transactions have been eliminated in consolidation.
Certain reclassifications have been made to the prior period's financial statements to conform to the current year presentation.
Use of Estimates
The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses. These estimates are prepared using management’s best judgment, after considering past, current and expected events and economic conditions. Actual results could differ from these estimates.
Risks and Uncertainties
The state of the overall economy can significantly impact hotel operational performance and thus the Company's financial position. As discussed in Note 1, Organization, the COVID-19 pandemic has significantly impacted the hotels' operational performance. A continued reduction in travel may impact the Company's ability to service debt or meet other financial obligations.
New Accounting Pronouncements
Reference Rate Reform
In March 2020 and January 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and ASU 2021-01, Reference Rate Reform (Topic 848) , respectively. ASU 2020-04 and ASU 2021-01 provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform, if certain criteria are met. The guidance in ASU 2020-04 and ASU 2021-01 was effective upon issuance and, once adopted, may be applied prospectively to contract modifications and hedging relationships through December 31, 2022.
In 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company will continue to evaluate the impact of the adoption of ASU 2020-04 and ASU 2021-01 on its consolidated financial statements and disclosures.
Business Combinations
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the recognition of an acquired contract liability and to payment terms and their effect on subsequent revenue recognized by the acquirer. The amendments in ASU 2021-08 require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts.
10
ASU 2021-08 is effective for fiscal years beginning after December 15, 2022 and early adoption is permitted. While the Company is continuing to assess the timing of adoption and the potential impacts of ASU 2021-08, it does not expect ASU 2021-08 to have a material effect on its consolidated financial statements and disclosures.
Note 3. Acquisition and Disposition of Hotel Properties
There were no acquisitions or dispositions of hotel properties during the three months ended March 31, 2022 and 2021.
Note 4. Investment in Hotel Properties
Investment in hotel properties as of March 31, 2022 and December 31, 2021 consisted of the following (in thousands):
March 31, 2022 December 31, 2021
Land $ 902,262 $ 926,330
Buildings and improvements 5,176,540 5,197,816
Furniture, fixtures and equipment 540,944 535,607
Finance lease asset 91,181 91,181
Construction in progress 13,624 15,869
$ 6,724,551 $ 6,766,803
Right-of-use asset, operating leases 376,574 378,939
Investment in hotel properties $ 7,101,125 $ 7,145,742
Less: Accumulated depreciation ( 1,125,268 ) ( 1,066,409 )
Investment in hotel properties, net $ 5,975,857 $ 6,079,333
Impairment
The Company reviews its investment in hotel properties for impairment whenever events or circumstances indicate potential impairment. As a result of the ongoing effects of the COVID-19 pandemic on its expected future operating cash flows and estimated hold periods for certain properties, the Company determined certain impairment triggers had occurred and therefore, the Company assessed its investment in hotel properties for recoverability. Based on the analyses performed, for the three months ended March 31, 2022, the Company recognized an impairment loss of $ 61.0 million related to two hotels as a result of their fair values being lower than their carrying values. The impairment loss was determined using Level 2 inputs under authoritative guidance for fair value measurements using information from marketing efforts for these properties. For the three months ended March 31, 2021, the Company recognized an impairment loss of $ 14.9 million related to one hotel as a result of its fair value being lower than its carrying value. The impairment loss was determined using Level 2 inputs under authoritative guidance for fair value measurements using information from marketing efforts for this property.
Right-of-use Assets and Lease Liabilities
The Company recognized right-of-use assets and related liabilities related to its ground leases, all of which are operating leases. When the rate implicit in the lease could not be determined, the Company used incremental borrowing rates, which ranged from 4.7 % to 7.6 %. In addition, the term used includes any options to exercise extensions when it is reasonably certain the Company will exercise such options. See Note 11. Commitments and Contingencies , for additional information about the ground leases.
The right-of-use assets and liabilities are amortized to ground rent expense over the term of the underlying lease agreements. As of March 31, 2022, the Company's lease liabilities consisted of operating lease liabilities of $ 319.4 million and financing lease liabilities of $ 42.2 million. As of December 31, 2021, the Company's lease liabilities consisted of operating lease liabilities of $ 319.4 million and financing lease liabilities of $ 42.0 million. The financing lease liabilities are included in accounts payable, accrued expenses and other liabilities on the Company's accompanying consolidated balance sheets.
Note 5. Debt
In 2021, the Company amended the agreements governing its existing credit facilities, term loan facilities and senior notes to, among other things, waive financial covenants until the second quarter of 2022 (with substantially less-restrictive covenants through the end of the first quarter of 2023), extend certain debt maturity dates and increase the interest rate spread.
11
The Company's debt consisted of the following as of March 31, 2022 and December 31, 2021 (dollars in thousands):
Balance Outstanding as of
Interest Rate Maturity Date March 31, 2022 December 31, 2021
Revolving credit facilities
Senior unsecured credit facility Floating
(1)(2)
March 2023 $ — $ —
PHL unsecured credit facility Floating
(3)
March 2023 — —
Total revolving credit facilities $ — $ —
Unsecured term loans
First Term Loan Floating
(4)
January 2023 26,000 26,000
First Term Loan Extended Floating
(4)
March 2024 274,000 274,000
Second Term Loan Floating
(4)(10)
April 2022 26,327 26,327
Fourth Term Loan Floating
(4)
October 2024 110,000 110,000
Sixth Term Loan
Tranche 2021 Extended Floating
(4)(8)
November 2022 82,071 82,071
Tranche 2022 Floating
(4)(9)
November 2022 114,670 114,670
Tranche 2023 Floating
(4)
November 2023 400,000 400,000
Tranche 2024 Floating
(4)
January 2024 400,000 400,000
Total Sixth Term Loan 996,741 996,741
Total term loans at stated value 1,433,068 1,433,068
Deferred financing costs, net ( 4,883 ) ( 5,812 )
Total term loans $ 1,428,185 $ 1,427,256
Convertible senior notes
Convertible senior notes 1.75 % December 2026 750,000 750,000
Debt premium (discount), net 11,020 11,605
Deferred financing costs, net ( 15,386 ) ( 16,204 )
Total convertible senior notes $ 745,634 $ 745,401
Senior unsecured notes
Series A Notes 5.15 %
(5)
December 2023 47,600 47,600
Series B Notes 5.38 %
(6)
December 2025 2,400 2,400
Total senior unsecured notes at stated value 50,000 50,000
Deferred financing costs, net ( 142 ) ( 162 )
Total senior unsecured notes $ 49,858 $ 49,838
Mortgage loans
Margaritaville Hollywood Beach Resort Floating
(7)
May 2023 161,500 161,500
Estancia La Jolla Hotel & Spa 5.07 % September 2028 61,049 61,373
Total mortgage loans at stated value 222,549 222,873
Debt premium (discount), net ( 2,447 ) ( 2,735 )
Deferred financing costs, net ( 689 ) ( 745 )
Total mortgage loans $ 219,413 $ 219,393
Total debt $ 2,443,090 $ 2,441,888
______________________
(1) Borrowings bear interest at floating rates equal to, at the Company's option, either (i) LIBOR plus an applicable margin or (ii) an Adjusted Base Rate (as defined in the applicable credit agreement) plus an applicable margin.
(2) $ 39.0 million of the total borrowing capacity matured in January 2022. The Company has the option to extend the maturity date of March 2023 for the remaining $ 611.0 million for up to two six-month periods, pursuant to certain terms and conditions and payment of an extension fee.
(3) Borrowings bear interest at floating rates equal to, at the Company's option, either (i) LIBOR plus an applicable margin or (ii) a Eurocurrency Rate (as defined in the applicable credit agreement) plus an applicable margin.
(4) Borrowings under the term loan facilities bear interest at floating rates equal to, at the Company's option, either (i) LIBOR plus an applicable margin or (ii) a Base Rate plus an applicable margin. As of March 31, 2022, approximately $ 1.1 billion of the borrowings under the term loan facilities bore an effective weighted-average fixed interest rate of 4.05 %, after taking into account interest rate swap agreements, and approximately $ 293.1 million bore an effective weighted-average floating interest rate of 2.82 %. As of December 31, 2021, approximately $ 1.3 billion of the borrowings under the term loan facilities bore an effective weighted-average fixed interest rate of 4.06 %, after taking into account interest rate swap agreements, and approximately $ 113.1 million bore a weighted-average floating interest rate of 2.64 %.
(5) In February 2021, the interest rate increased from 4.70 % to 5.15 %. The increased interest rate is effective through the end of the waiver period.
(6) In February 2021, the interest rate increased from 4.93 % to 5.38 %. The increased interest rate is effective through the end of the waiver period.
(7) In April 2022, the Company exercised the option to extend the maturity date to May 2023. The loan bears interest at a floating rate equal to one-month LIBOR plus a weighted-average spread of 2.37 %. The Company has the option to extend the maturity date to May 2024.
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(8) The Company has the option to extend the maturity date for $ 69.8 million of the principal balance by up to one year, subject to certain terms and conditions and payment of an extension fee.
(9) The Company has the option to extend the maturity date for $ 93.0 million of the principal balance by up to one year, subject to certain terms and conditions and payment of an extension fee.
(10) The Company used cash on hand to payoff this term loan upon maturity in April 2022.
Unsecured Revolving Credit Facilities
The Company has a $ 611.0 million senior unsecured revolving credit facility which will mature in March 2023, with options to extend the maturity date for up to two six-month periods , subject to certain terms and conditions and payment of an extension fee. As of March 31, 2022, the Company had no outstanding borrowings, $ 12.6 million of outstanding letters of credit and borrowing capacity of $ 598.4 million remaining on its senior unsecured credit facility. Interest is paid on the periodic advances under the senior unsecured revolving credit facility at varying rates, based upon either the London Inter-bank Offered Rate ("LIBOR") or the alternate base rate, plus an additional margin amount, or spread. The Company has the ability to further increase the aggregate borrowing capacity under the credit agreement up to $ 1.3 billion, subject to lender approval. Borrowings on the revolving credit facility bear interest at LIBOR plus 1.45 % to 2.25 %, depending on the Company’s leverage ratio. As a result of the amendments to the credit agreements, the spread on the borrowings is fixed at 2.40 % during the waiver period. Additionally, the Company is required to pay an unused commitment fee at an annual rate of 0.20 % or 0.30 % of the unused portion of the revolving credit facility, depending on the amount of borrowings outstanding. The credit agreement contains certain financial covenants, including a maximum leverage ratio, a minimum fixed charge coverage ratio, and a maximum percentage of secured debt to total asset value.
The Company also has a $ 20.0 million unsecured revolving credit facility (the "PHL Credit Facility") to be used for PHL's working capital and general corporate purposes. This credit facility has substantially similar terms as the Company's senior unsecured revolving credit facility and matures in March 2023. Borrowings on the PHL Credit Facility bear interest at LIBOR plus 1.45 % to 2.25 %, depending on the Company's leverage ratio. As a result of the amendments described above, the spread of the borrowings is fixed at 2.40 % during the waiver period. The PHL Credit Facility is subject to debt covenants substantially similar to the covenants under the Company's credit agreement that governs the Company's senior unsecured revolving credit facility. As of March 31, 2022, the Company had no borrowings under the PHL Credit Facility and had $ 20.0 million borrowing capacity remaining available under the PHL Credit Facility.
Under the terms of the credit agreement for the unsecured revolving credit facility, one or more standby letters of credit, up to a maximum aggregate outstanding balance of $ 30.0 million, may be issued on behalf of the Company by the lenders under the unsecured revolving credit facility. The Company will incur a fee that shall be agreed upon with the issuing bank. Any outstanding standby letters of credit reduce the available borrowings on the senior unsecured revolving credit facility by a corresponding amount. Standby letters of credit of $ 12.6 million and $ 12.1 million were outstanding as of March 31, 2022 and December 31, 2021, respectively.
As of March 31, 2022, the Company was in compliance with all debt covenants of the credit agreements that govern the unsecured revolving credit facilities.
Unsecured Term Loan Facilities
The Company has senior unsecured term loans with different maturities. Each unsecured term loan bears interest at a variable rate of a benchmark interest rate plus an applicable margin, depending on the Company's leverage ratio. Each of the term loan facilities is subject to debt covenants substantially similar to the covenants under the credit agreement that governs the revolving credit facility. As of March 31, 2022, the Company was in compliance with all debt covenants of its term loan facilities.
The Company entered into interest rate swap agreements to fix the LIBOR rate on a portion of these unsecured term loan facilities. See Derivative and Hedging Activities for further discussion on the interest rate swaps.
Convertible Senior Notes
In December 2020, the Company issued $ 500.0 million aggregate principal amount of 1.75 % Convertible Senior Notes due December 2026 (the "Convertible Notes"). The net proceeds from this offering of the Convertible Notes were approximately $ 487.3 million after deducting the underwriting fees and other expenses paid by the Company.
In February 2021, the Company issued an additional $ 250.0 million aggregate principal amount of Convertible Notes. These additional Convertible Notes were sold at a 5.5 % premium to par and generated net proceeds of approximately $ 257.2 million after deducting the underwriting fees and other expenses paid by the Company of $ 6.5 million, which was offset by a premium received in the amount of $ 13.8 million.
The Convertible Notes are governed by an indenture (the “Base Indenture”) between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee. The Convertible Notes bear interest at a rate of 1.75 % per annum, payable semi-annually in arrears on June 15th and December 15th of each year, beginning on June 15, 2021. The Convertible Notes will mature on December 15, 2026.
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The Company separated the Convertible Notes issued in December 2020 into liability and equity components. The initial carrying amount of the liability component was $ 386.1 million and was calculated using a discount rate of 6.25 %. The discount rate was based on the terms of debt instruments that were similar to the Convertible Notes. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the principal amount of such Convertible Notes, or $ 113.9 million. The amount recorded in equity was not subject to remeasurement or amortization. The $ 113.9 million also represented the initial discount recorded on the Convertible Notes. As a result of the Company's early adoption of ASU 2020-06 on January 1, 2021, the Convertible Notes are now recorded as a single liability with no portion recorded in equity. The Company also ceased recording non-cash interest expense associated with the amortization of the debt discount.
Prior to June 15, 2026, the Convertible Notes will be convertible upon certain circumstances. On and after June 15, 2026, holders may convert any of their Convertible Notes into the Company’s common shares of beneficial interest (“common shares”) at the applicable conversion rate at any time at their election two days prior to the maturity date. The initial conversion rate is 39.2549 common shares per $1,000 principal amount of Convertible Notes, which represents an initial conversion price of approximately $ 25.47 per share. The conversion rate is subject to adjustment in certain circumstances. As of March 31, 2022 and December 31, 2021, the if-converted value of the Convertible Notes did not exceed the principal amount.
The Company may redeem for cash all or a portion of the Convertible Notes, at its option, on or after December 20, 2023 upon certain circumstances. The redemption price will be equal to 100 % of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If certain make-whole fundamental changes occur, the conversion rate for the Convertible Notes may be increased.
In connection with the Convertible Notes issuances, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain of the underwriters of the offerings of the Convertible Notes or their respective affiliates and other financial institutions. The Capped Call Transactions initially cover, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes, the number of common shares underlying the Convertible Notes. The Capped Call Transactions are expected generally to reduce the potential dilution to holders of common shares upon conversion of the Convertible Notes and/or offset the potential cash payments that the Company could be required to make in excess of the principal amount of any converted Convertible Notes upon conversion thereof, with such reduction and/or offset subject to a cap. The upper strike price of the Capped Call Transactions is $ 33.0225 per share. The cost of the Capped Call Transactions entered into in December 2020 and February 2021 was $ 38.3 million and $ 21.0 million, respectively, and was recorded within additional paid-in capital.
Senior Unsecured Notes
The Company has $ 47.6 million of senior unsecured notes outstanding bearing a fixed interest rate of 4.70 % per annum and maturing in December 2023 (the "Series A Notes") and $ 2.4 million of senior unsecured notes outstanding bearing a fixed interest rate of 4.93 % per annum and maturing in December 2025 (the "Series B Notes"). As a result of the amendments described above, the interest rates of the Series A Notes and the Series B Notes are fixed at 5.15 % and 5.38 %, respectively, for the duration of the waiver period. The debt covenants of the Series A Notes and the Series B Notes are substantially similar to those of the Company's senior unsecured revolving credit facility. As of March 31, 2022, the Company was in compliance with all such debt covenants.
Mortgage Loans
On September 23, 2021, the Company assumed a $ 161.5 million loan secured by a first-lien mortgage on the leasehold interest of Margaritaville Hollywood Beach Resort ("Margaritaville"). The loan requires interest-only payments based on a floating interest rate of one-month LIBOR plus a weighted-average spread of 2.37 %. The loan matures on May 9, 2023 and may be extended by one-year . If the loan is extended, the interest rate spread will increase by 20 basis points for the extension period only. The Company expects to exercise this extension. The loan is also subject to an interest rate cap agreement.
On December 1, 2021, the Company assumed a $ 61.7 million loan secured by a first-lien mortgage on the leasehold interest of Estancia La Jolla Hotel & Spa ("Estancia"). The loan requires both principal and interest monthly payments based on a fixed interest rate of 5.07 %. The loan matures on September 1, 2028.
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The Company's mortgage loans associated with Margaritaville and Estancia are non-recourse to the Company except for customary carve-outs to the general non-recourse liability. The loans contain customary provisions regarding events of default, as well as customary cash management, cash trap and lockbox provisions. Cash trap provisions are triggered if the hotel's performance is below a certain threshold. Once triggered, all of the cash flow generated by the hotel is deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of our lender. No event of default has occurred under the loan documents.
Estancia's mortgage loan triggered the cash trap provisions prior to its acquisition, and therefore cash from hotel operations is being held by the lender in the cash management accounts and is reflected as restricted cash in the accompanying consolidated balance sheets. Cash will be released from the lockbox once the hotel reaches profitability levels that terminate the cash trap or the loan is paid off. Margaritaville's mortgage loan also triggered cash trap provisions prior to its acquisition, but the hotel reached profitability levels that terminated the cash trap and all cash in the lockbox was released during the first quarter of 2022.
Interest Expense
The components of the Company's interest expense consisted of the following for the three months ended March 31, 2022 and 2021 (in thousands):
For the three months ended March 31,
2022 2021
Unsecured revolving credit facilities $ 493 $ 561
Unsecured term loan facilities 13,534 15,909
Convertible senior notes 3,281 2,819
Senior unsecured notes 645 1,252
Mortgage debt 1,810 —
Amortization of deferred financing fees, (premiums) and discounts 2,285 2,659
Other 524 2,131
Total interest expense $ 22,572 $ 25,331
Fair Value
The Company estimates the fair value of its fixed rate debt by discounting the future cash flows of each instrument at estimated market rates, taking into consideration general market conditions and maturity of the debt with similar credit terms and is classified within Level 2 of the fair value hierarchy. The estimated fair value of the Company’s fixed rate debt (unsecured senior notes, convertible senior notes and the Estancia mortgage loan) as of March 31, 2022 and December 31, 2021 was $ 714.7 million and $ 747.8 million, respectively. The estimated fair value of the Company's variable rate debt approximates its book value.
Derivative and Hedging Activities
The Company enters into interest rate swap agreements to hedge against interest rate fluctuations. All of the Company's interest rate swaps are cash flow hedges. All unrealized gains and losses on these hedging instruments are reported in accumulated other comprehensive income (loss) and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.
The Company's interest rate swaps at March 31, 2022 and December 31, 2021 consisted of the following, by maturity date (dollars in thousands):
Aggregate Notional Value as of
Hedge Type Interest Rate Range Maturity March 31, 2022 December 31, 2021
Swap-cash flow
1.78 % - 1.79 %
January 2022 $ — $ 180,000
Swap-cash flow
1.64 % - 1.68 %
April 2022 100,000 100,000
Swap-cash flow
0.17 %
January 2023 200,000 200,000
Swap-cash flow
1.99 %
November 2023 250,000 250,000
Swap-cash flow
2.60 %
January 2024 300,000 300,000
Swap-cash flow
1.43 % - 1.44 %
February 2026 290,000 290,000
Total $ 1,140,000 $ 1,320,000
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The Company records all derivative instruments at fair value in the accompanying consolidated balance sheets. Fair values of interest rate swaps and caps are determined using the standard market methodology of netting the discounted future fixed cash receipts/payments and the discounted expected variable cash payments/receipts. Variable interest rates used in the calculation of projected receipts and payments on the swaps are based on an expectation of future interest rates derived from observable market interest rate curves (Overnight Index Swap curves) and volatilities (Level 2 inputs). Derivatives expose the Company to credit risk in the event of non-performance by the counterparties under the terms of the interest rate hedge agreements. The Company incorporates these counterparty credit risks in its fair value measurements. The Company believes it minimizes the credit risk by transacting with major creditworthy financial institutions.
As of March 31, 2022, the Company's derivative instruments were in both asset and liability positions, with aggregate asset and liability fair values of $ 13.8 million and $ 1.6 million, respectively. Derivative assets are included in prepaid expenses and other assets and derivative liabilities are included in accounts payable, accrued expenses and other liabilities in the accompanying consolidated balance sheets. The Company expects approximately $ 0.2 million will be reclassified from accumulated other comprehensive income (loss) to interest expense within the next 12 months.
Note 6. Revenue
The Company presents revenue on a disaggregated basis in the accompanying consolidated statements of operations and comprehensive income. The following table presents revenues by geographic location for the three months ended March 31, 2022 and 2021 (in thousands):
For the three months ended March 31,
2022 2021
Southern Florida/Georgia $ 85,241 $ 35,244
San Diego, CA 52,879 14,678
Los Angeles, CA 36,221 8,040
Boston, MA 33,936 9,757
San Francisco, CA 14,067 2,953
Portland, OR 13,524 5,782
Other (1)
7,283 2,975
Chicago, IL 6,668 1,824
Washington, D.C. 6,276 1,902
Seattle, WA 1,973 488
$ 258,068 $ 83,643
______________________
(1) Other includes: New York, NY, Philadelphia, PA and Santa Cruz, CA.
Payments from customers are primarily made when services are provided. Due to the short-term nature of the Company's contracts and the almost simultaneous receipt of payment, almost all of the contract liability balance at the beginning of the period is expected to be recognized as revenue over the following 12 months.
Note 7. Equity
Common Shares
The Company is authorized to issue up to 500,000,000 common shares. Each outstanding common share entitles the holder to one vote on each matter submitted to a vote of shareholders. Holders of common shares are entitled to receive dividends when authorized by the Board of Trustees.
Share Repurchase Program
On February 22, 2016, the Company announced that the Board of Trustees authorized a share repurchase program of up to $ 150.0 million of common shares. Under this program, the Company may repurchase common shares from time to time in transactions on the open market or by private agreement. The Company may suspend or discontinue this program at any time. Upon repurchase by the Company, common shares cease to be outstanding and become authorized but unissued common shares. For the three months ended March 31, 2022, the Company had no repurchases under this program and as of March 31, 2022, $ 56.6 million of common shares remained available for repurchase under this program. The credit agreements governing the Company's existing indebtedness prohibit the Company from repurchasing common shares until the Company has certified compliance with certain financial covenants through June 30, 2022.
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On July 27, 2017, the Company announced that the Board of Trustees authorized a new share repurchase program of up to $ 100.0 million of common shares. Under this program, the Company may repurchase common shares from time to time in transactions on the open market or by private agreement. The Company may suspend or discontinue this program at any time. This $ 100.0 million share repurchase program will commence upon completion of the Company's $ 150.0 million share repurchase program.
ATM Program
On April 29, 2021, the Company filed a prospectus supplement with the SEC to sell up to $ 200.0 million of common shares under an "at the market" offering program (the "ATM program"). No common shares were issued or sold under the ATM program during the three months ended March 31, 2022. As of March 31, 2022, $ 200.0 million of common shares remained available for issuance under the ATM program.
Common Dividends
The Company declared the following dividends on common shares/units for the three months ended March 31, 2022:
Dividend per Share/Unit For the Quarter Ended Record Date Payable Date
$ 0.01 March 31, 2022 March 31, 2022 April 15, 2022
Preferred Shares
The Company is authorized to issue up to 100,000,000 preferred shares of beneficial interest, $ 0.01 par value per share (“preferred shares”).
In May 2021, the Company issued 9,200,000 6.375 % Series G Cumulative Redeemable Preferred Shares at a public offering price of $ 25.00 per share for net proceeds of $ 222.6 million. In July 2021, the Company issued 10,000,000 5.70 % Series H Cumulative Redeemable Preferred Shares at a public offering price of $ 25.00 per share for net proceeds of $ 242.1 million.
In August 2021, the Company redeemed all outstanding 6.50 % Series C Cumulative Redeemable Preferred Shares and 6.375 % Series D Cumulative Redeemable Preferred Shares at the redemption amount of $ 25.00 per share plus accrued and unpaid dividends of $ 0.17 and $ 0.16 per share, respectively.
The following Preferred Shares were outstanding as of March 31, 2022 and December 31, 2021:
Security Type March 31, 2022 December 31, 2021
6.375 % Series E
4,400,000 4,400,000
6.30 % Series F
6,000,000 6,000,000
6.375 % Series G
9,200,000 9,200,000
5.70 % Series H
10,000,000 10,000,000
29,600,000 29,600,000
.
The Series E, Series F, Series G and Series H Cumulative Redeemable Preferred Shares (collectively, the “Preferred Shares”) rank senior to the common shares and on parity with each other with respect to payment of distributions. The Preferred Shares do not have any maturity date and are not subject to mandatory redemption. The Company may redeem the Series E and Series F Preferred Shares at any time. The Series G and Series H Preferred Shares may not be redeemed prior to May 13, 2026 and July 27, 2026, respectively, except in limited circumstances relating to the Company’s continuing qualification as a REIT or as discussed below. On or after such dates, the Company may, at its option, redeem the Preferred Shares, in each case in whole or from time to time in part, by payment of $ 25.00 per share, plus any accumulated, accrued and unpaid distributions through the date of redemption. Upon the occurrence of a change of control, as defined in the Company's declaration of trust, the result of which the common shares and the common securities of the acquiring or surviving entity are not listed on the New York Stock Exchange, the NYSE MKT or Nasdaq, or any successor exchanges, the Company may, at its option, redeem the Preferred Shares in whole or in part within 120 days following the change of control by paying $ 25.00 per share, plus any accrued and unpaid distributions through the date of redemption. If the Company does not exercise its right to redeem the Preferred Shares upon a change of control, the holders of the Preferred Shares have the right to convert some or all of their shares into a number of common shares based on defined formulas subject to share caps. The share cap on each Series E Preferred Share is 1.9372 common shares, on each Series F Preferred Share is 2.0649 common shares, on each Series G Preferred Share is 2.1231 common shares, and on each Series H Preferred Share is 2.2311 common shares.
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Preferred Dividends
The Company declared the following dividends on preferred shares for the three months ended March 31, 2022:
Security Type Dividend per Share/Unit For the Quarter Ended Record Date Payable Date
6.375 % Series E
$ 0.40 March 31, 2022 March 31, 2022 April 15, 2022
6.30 % Series F
$ 0.39 March 31, 2022 March 31, 2022 April 15, 2022
6.375 % Series G
$ 0.40 March 31, 2022 March 31, 2022 April 15, 2022
5.70 % Series H
$ 0.36 March 31, 2022 March 31, 2022 April 15, 2022
Non-controlling Interest of Common Units in Operating Partnership
Holders of Operating Partnership units ("OP units") have certain redemption rights that enable OP Unit holders to cause the Operating Partnership to redeem their units in exchange for, at the Company’s option, cash per unit equal to the market price of common shares at the time of redemption or common shares on a one-for-one basis. The number of shares issuable upon exercise of the redemption rights will be adjusted upon the occurrence of share splits, mergers, consolidations or similar pro-rata share transactions, which otherwise would have the effect of diluting the ownership interests of the Operating Partnership's limited partners or the Company's shareholders.
On November 30, 2018, in connection with the merger with LaSalle Hotel Properties ("LaSalle"), the Company issued 133,605 OP units in the Operating Partnership to third-party limited partners of LaSalle's operating partnership. As of March 31, 2022 and December 31, 2021, the Operating Partnership had 133,605 OP units held by third parties, excluding LTIP units.
As of March 31, 2022, the Operating Partnership had two classes of long-term incentive partnership units ("LTIP") units, LTIP Class A units and LTIP Class B units. All of the outstanding LTIP units are held by officers of the Company.
As of March 31, 2022 and December 31, 2021, the Operating Partnership had 727,208 LTIP units outstanding. Of the 727,208 LTIP units outstanding at March 31, 2022, 127,111 LTIP units have vested. Only vested LTIP units may be converted to common OP units, which in turn can be tendered for redemption as described above.
Note 8. Share-Based Compensation Plan
Available Shares
The Company maintains the 2009 Equity Incentive Plan, as amended and restated (as amended, the "Plan"), to attract and retain independent trustees, executive officers and other key employees and service providers. On May 19, 2021, the Company’s shareholders approved an amendment to the Plan which increased the aggregate number of common shares that may be issued under the Plan as share awards, performance units, options, share appreciation rights and other equity-based awards by 1,675,000 . As of March 31, 2022, there were 1,839,323 common shares available for issuance under the Plan.
Service Condition Share Awards
The following table provides a summary of service condition restricted share activity as of March 31, 2022:
Shares Weighted-Average
Grant Date
Fair Value
Unvested at December 31, 2021 567,431 $ 22.53
Vested ( 106,470 ) $ 26.17
Forfeited ( 13,886 ) $ 22.78
Unvested at March 31, 2022 447,075 $ 21.65
For the three months ended March 31, 2022 and 2021, the Company recognized approximately $ 0.8 million of share-based compensation expense related to these awards in the accompanying consolidated statements of operations and comprehensive income.
Performance-Based Equity Awards
For the three months ended March 31, 2022 and 2021, the Company recognized approximately $ 0.9 million and $ 1.0 million, respectively, of share-based compensation expense related to performance-based equity awards in the accompanying consolidated statements of operations and comprehensive income.
Long-Term Incentive Partnership ("LTIP") Units
As of March 31, 2022, the Operating Partnership had two classes of LTIP units, LTIP Class A units and LTIP Class B units. All of the outstanding LTIP units are held by officers of the Company.
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As of March 31, 2022 and December 31, 2021, the Operating Partnership had 727,208 LTIP units outstanding. Of the 727,208 LTIP units outstanding at March 31, 2022, 127,111 LTIP units have vested. Only vested LTIP units may be converted to common OP units, which in turn can be tendered for redemption as described in Note 7, Equity .
For the three months ended March 31, 2022 and 2021, the Company recognized approximately $ 0.7 million and $ 0.3 million, respectively, in expense related to these LTIP units. The aggregate expense related to the LTIP unit grants is presented as non-controlling interest in the Company’s accompanying consolidated balance sheets.
Note 9. Income Taxes
PHL is subject to federal and state corporate income taxes at statutory tax rates. Given the continued negative impact of the COVID-19 pandemic on the Company's financial results and uncertainties about the Company's ability to utilize its net operating loss in future years, the Company has recorded a valuation allowance on its income tax benefit for the three months ended March 31, 2022, and has recorded a valuation allowance on all deferred tax assets.
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal, state and local jurisdictions, where applicable. As of March 31, 2022 and December 31, 2021, the statute of limitations remains open for all major jurisdictions for tax years dating back to 2017.
Note 10. Earnings (Loss) Per Share
The following is a reconciliation of basic and diluted earnings (loss) per common share (in thousands, except share and per-share data):
For the three months ended March 31,
2022 2021
Numerator:
Net income (loss) attributable to common shareholders $ ( 110,874 ) $ ( 128,721 )
Less: dividends paid on unvested share-based compensation ( 10 ) ( 12 )
Net income (loss) available to common shareholders $ ( 110,884 ) $ ( 128,733 )
Denominator:
Weighted-average number of common shares — basic 130,904,299 130,775,873
Effect of dilutive share-based compensation — —
Weighted-average number of common shares — diluted 130,904,299 130,775,873
Net income (loss) per share available to common shareholders — basic $ ( 0.85 ) $ ( 0.98 )
Net income (loss) per share available to common shareholders — diluted $ ( 0.85 ) $ ( 0.98 )
For the three months ended March 31, 2022 and 2021, 787,871 and 1,041,130 , respectively, of unvested service condition restricted shares and performance-based equity awards were excluded from diluted weighted-average common shares, as their effect would have been anti-dilutive. For the three months ended March 31, 2022 and 2021, 29,441,175 of common shares underlying the Convertible Notes have been excluded from diluted shares as their effect would have been anti-dilutive. The LTIP and OP units held by the non-controlling interest holders have been excluded from the denominator of the diluted earnings per share as there would be no effect on the amounts since the limited partners' share of income (loss) would also be added or subtracted to derive net income (loss) available to common shareholders.
Note 11. Commitments and Contingencies
Hotel Management Agreements
The Company’s hotel properties are operated pursuant to management agreements with various management companies. The terms of these management agreements range from 1 year to 22 years, not including renewals, and 1 year to 52 years, including renewals. The majority of the Company’s management agreements are terminable at will by the Company upon paying a termination fee and some are terminable by the Company upon sale of the property, with, in some cases, the payment of termination fees. Most of the agreements also provide the Company the ability to terminate based on failure to achieve defined operating performance thresholds. Termination fees range from zero to up to six times the annual base management and incentive management fees, depending on the agreement and the reason for termination. Certain of the Company’s management agreements are non-terminable except upon the manager’s breach of a material representation or the manager’s failure to meet performance thresholds as defined in the management agreement.
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The management agreements require the payment of a base management fee generally between 1 % and 4 % of hotel revenues. Under certain management agreements, the management companies are also eligible to receive an incentive management fee if hotel operating income, cash flows or other performance measures, as defined in the agreements, exceed certain performance thresholds. The incentive management fee is generally calculated as a percentage of hotel operating income after the Company has received a priority return on its investment in the hotel. For the three months ended March 31, 2022 and 2021, com bined base and incentive management fees were $ 7.7 million and $ 2.3 million, respectively. Base and incentive management fees are included in other direct and indirect expenses in the Company's accompanying consolidated statements of operations and comprehensive income.
Reserve Funds
Certain of the Company’s agreements with its hotel managers, franchisors, ground lessors and lenders have provisions for the Company to provide funds, typically 4.0 % of hotel revenues, sufficient to cover the cost of (a) certain non-routine repairs and maintenance to the hotels and (b) replacements and renewals to the hotels’ furniture, fixtures and equipment.
Restricted Cash
At March 31, 2022 and December 31, 2021, the Company had $ 26.5 million and $ 33.7 million, respectively, in restricted cash, which consisted of funds held in cash management and lockbox accounts held by a lender, reserves for replacement of furniture and fixtures and reserves to pay for real estate taxes, ground rent or property insurance under certain hotel management agreements or loan agreements.
Hotel, Ground and Finance Leases
As of March 31, 2022, the following hotels were subject to leases as follows:
Lease Properties Lease Type Lease Expiration Date
Restaurant at Southernmost Beach Resort Operating lease April 2029
Paradise Point Resort & Spa Operating lease May 2050
Hotel Monaco Washington DC Operating lease November 2059
Argonaut Hotel Operating lease December 2059
Hotel Zephyr Fisherman's Wharf Operating lease February 2062
Viceroy Santa Monica Hotel Operating lease September 2065
Estancia La Jolla Hotel & Spa Operating lease January 2066
San Diego Mission Bay Resort Operating lease July 2068
Hotel Vitale Operating lease March 2070
(1)
Hyatt Regency Boston Harbor Operating lease April 2077
The Westin Copley Place, Boston Operating lease December 2077
(2)
The Liberty, a Luxury Collection Hotel, Boston Operating lease May 2080
Jekyll Island Club Resort and Restaurant Operating lease January 2089
Hotel Zelos San Francisco Operating lease June 2097
Hotel Palomar Los Angeles Beverly Hills Operating lease January 2107
(3)
Margaritaville Hollywood Beach Resort Operating lease July 2112
Hotel Zeppelin San Francisco Operating and finance lease June 2089
(4)
Harbor Court Hotel San Francisco Finance lease August 2052
______________________
(1) The expiration date assumes the exercise of a 14 -year extension option.
(2) No payments are required through maturity.
(3) The expiration date assumes the exercise of all 19 five-year extension options.
(4) The expiration date assumes the exercise of a 30-year extension option.
The Company's leases may require minimum fixed rent payments, percentage rent payments based on a percentage of revenues in excess of certain thresholds or rent payments equal to the greater of a minimum fixed rent or percentage rent. Minimum fixed rent may be adjusted annually by increases in the consumer price index and may be subject to minimum and maximum increases. Some leases also contain certain restrictions on modifications that can be made to the hotel structures due to their status as national historic landmarks.
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The Company records expense on a straight-line basis for leases that provide for minimum rental payments that increase in pre-established amounts over the remaining terms of the leases. Ground rent expense is included in real estate taxes, personal property taxes, property insurance and ground rent in the Company's accompanying consolidated statements of operations and comprehensive income. The components of ground rent expense for the three months ended March 31, 2022 and 2021 are as follows (in thousands):
For the three months ended March 31,
2022 2021
Fixed ground rent $ 4,456 $ 4,313
Variable ground rent 3,054 1,496
Total ground rent $ 7,510 $ 5,809
Litigation
The nature of the operations of hotels exposes the Company's hotels, the Company and the Operating Partnership to the risk of claims and litigation in the normal course of their business. The Company has insurance to cover certain potential material losses. The Company is not presently subject to any material litigation nor, to the Company’s knowledge, is any material litigation threatened against the Company.
Note 12. Supplemental Information to Statements of Cash Flows (in thousands)
For the three months ended March 31,
2022 2021
Interest paid, net of capitalized interest $ 16,613 $ 17,438
Interest capitalized $ 769 $ —
Income taxes paid (refunded) $ — $ ( 21 )
Non-Cash Investing and Financing Activities:
Convertible debt discount adjustment $ — $ 113,099
Distributions payable on common shares/units $ 1,345 $ 1,524
Distributions payable on preferred shares $ 10,219 $ 7,558
Issuance of common shares for Board of Trustees compensation $ 738 $ 516
Issuance of common shares for executive and employee bonuses $ — $ 1,446
Accrued additions and improvements to hotel properties $ 2,848 $ 2,156
Write-off of fully amortized deferred financing costs $ 5,466 $ 2,817
Note 13. Subsequent Events
On April 21, 2022, the Company announced that it executed a contract to acquire the Inn on Fifth in Naples, Florida. The purchase is expected to be completed by the end of the second quarter of 2022 and is subject to customary closing conditions. The Company offers no assurances that this acquisition will be completed on these terms or at all.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this report. Pebblebrook Hotel Trust is a Maryland real estate investment trust that conducts its operations so as to qualify as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). Substantially all of the operations are conducted through Pebblebrook Hotel, L.P. (our "Operating Partnership"), a Delaware limited partnership of which Pebblebrook Hotel Trust is the sole general partner. In this report, we use the terms "the Company", "we" or "our" to refer to Pebblebrook Hotel Trust and its subsidiaries, unless the context indicates otherwise.

FORWARD-LOOKING STATEMENTS
This report, together with other statements and information publicly disseminated by us, contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words "may", "will", "should", "potential", "could", "seek", "assume", "forecast", "believe", "expect", "intend", "anticipate", "estimate", "project" or similar expressions. Forward-looking statements in this report include, among others, statements about our business strategy, including acquisition and development strategies, industry trends, estimated revenues and expenses, estimated costs and durations of renovation or restoration projects, estimated insurance recoveries, our ability to realize deferred tax assets and expected liquidity needs and sources (including capital expenditures and our ability to obtain financing or raise capital). You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control and which could materially affect actual results, performance or achievements. These factors include, but are not limited to, the following:
• the COVID-19 pandemic has had, and is expected to continue to have, a significant impact on our financial condition and operations, which impacts our ability to obtain acceptable financing to fund resulting reductions in cash from operations. The current and uncertain future impact of the COVID-19 pandemic, including its effect on the ability or desire of people to travel, is expected to continue to impact our results, operations, outlooks, plans, goals, growth, reputation, cash flows, liquidity and share price;
• as a result of the COVID-19 pandemic, we suspended operations at most of our hotels and resorts. Operations have recommenced and are improving. However, if continued improvement is interrupted, we may become out of compliance with maintenance covenants in certain of our debt facilities;
• world events impacting the ability or desire of people to travel may lead to a decline in demand for hotels;
• risks associated with the hotel industry, including competition, changes in visa and other travel policies by the U.S. government making it less convenient, more difficult or less desirable for international travelers to enter the U.S., increases in employment costs, energy costs and other operating costs, or decreases in demand caused by events beyond our control including, without limitation, actual or threatened terrorist attacks, natural disasters, cyber attacks, any type of flu or disease-related pandemic, or downturns in general and local economic conditions;
• the availability and terms of financing and capital and the general volatility of securities markets;
• our dependence on third-party managers of our hotels, including our inability to implement strategic business decisions directly;
• risks associated with the U.S. and global economies, the cyclical nature of hotel properties and the real estate industry, including environmental contamination and costs of complying with new or existing laws, including the Americans with Disabilities Act and similar laws;
• interest rate increases;
• our possible failure to qualify as a REIT under the Code and the risk of changes in laws affecting REITs;
• the timing and availability of potential hotel acquisitions, our ability to identify and complete hotel acquisitions and our ability to complete hotel dispositions in accordance with our business strategy;
• the possibility of uninsured losses;
• risks associated with redevelopment and repositioning projects, including delays and cost overruns; and
• the other factors discussed under Risk Factors in Part II, Item 1A of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2021.
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Accordingly, there is no assurance that our expectations will be realized. Except as otherwise required by the federal securities laws, we disclaim any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
Overview
COVID-19 and Liquidity Update
In March 2020, the World Health Organization declared the novel coronavirus ("COVID-19") to be a global pandemic and the virus spread throughout the United States and the world. As a result of this pandemic and subsequent government mandates, health official recommendations, corporate policy changes and individual responses, hotel demand dramatically declined. In response, we implemented significant cost controls, salary reductions and temporarily suspended operations at 47 of our hotels and resorts in 2020. In addition, to improve liquidity, we raised capital by issuing convertible notes and additional preferred shares. We also amended the agreements governing our existing credit facilities, term loan facilities and unsecured senior notes which, among other things, waived quarterly financial covenants until the second quarter of 2022, with substantially less restrictive covenants through the end of the first quarter of 2023.
As demand has since improved as a result of an increase in vaccinations and corresponding lifting of governmental restrictions and recommendations, we gradually reopened our hotels and resorts. As of July 1, 2021, all of our hotels and resorts were open, with the exception of Hotel Vitale, whose operations will remain suspended until the completion of its renovations and repositioning, which we expect to occur in the second quarter of 2022.
The COVID-19 pandemic has had a significant negative impact on our operations and financial results and is expected to continue to have a negative impact on our results of operations, financial position and cash flows for the remainder of 2022. However, results have improved in the first quarter of 2022 relative to 2021 and this trend is expected to continue throughout 2022. The demand recovery has been led by strong leisure travel with a slower recovery in business and group travel. As a result of the strength in leisure travel, our resort properties are operating at or above pre-pandemic levels.
Based on the amendments to our credit agreements, assumptions regarding the recovery of demand and the Company's liquidity of $694.4 million as of March 31, 2022, we believe we have sufficient liquidity to meet our obligations for the next 12 months. For further discussion on our liquidity, see Liquidity and Capital Resources .
While we do not operate our hotel properties, both our asset management team and our executive management team monitor and work cooperatively with our hotel managers by advising and making recommendations in all aspects of our hotels’ operations, including property positioning and repositioning, revenue and expense management, operations analysis, physical design, renovation and capital improvements, guest experience and overall strategic direction. Through these efforts, we seek to improve property efficiencies, lower costs, maximize revenues and enhance property operating margins, which we expect will enhance returns to our shareholders.
Key Indicators of Financial Condition and Operating Performance
We measure hotel results of operations and the operating performance of our business by evaluating financial and non-financial metrics such as room revenue per available room ("RevPAR"); total revenue per available room ("Total RevPAR"); average daily rate ("ADR"); occupancy rate ("Occupancy"); funds from operations ("FFO"); earnings before interest, income taxes, depreciation and amortization ("EBITDA"); and EBITDA for real estate ("EBITDA re " ) . We evaluate individual hotel and company-wide performance with comparisons to budgets, prior periods and competing properties. ADR, occupancy and RevPAR may be impacted by macroeconomic factors as well as regional and local economies and events. See Non-GAAP Financial Measures for further discussion of FFO, EBITDA and EBIDTA re .
Hotel Operating Statistics
The following table represents the key same-property hotel operating statistics for our hotels for the three months ended March 31, 2022 and 2021:
For the three months ended March 31,
2022 2021
Same-Property Occupancy 48.3 % 22.1 %
Same-Property ADR $ 297.29 $ 250.47
Same-Property RevPAR $ 143.61 $ 55.33
Same-Property Total RevPAR $ 219.75 $ 89.02
The above table of hotel operating statistics includes information from all hotels owned as of March 31, 2022 for the first quarters of 2022 and 2021, except for Hotel Vitale, which was closed for renovations in the first quarter of 2022.
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Non-GAAP Financial Measures
Non-GAAP financial measures are measures of our historical or future financial performance that are different from measures calculated and presented in accordance with U.S. GAAP. We report FFO, EBITDA and EBITDA re , which are non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance.
We calculate FFO in accordance with standards established by Nareit, formerly known as the National Association of Real Estate Investment Trusts, which defines FFO as net income (calculated in accordance with U.S. GAAP), excluding real estate related depreciation and amortization, gains (losses) from sales of real estate, impairments of real estate assets (including impairment of real estate related joint ventures), the cumulative effect of changes in accounting principles and adjustments for unconsolidated partnerships and joint ventures. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. By excluding the effect of real estate related depreciation and amortization including our share of the joint venture depreciation and amortization, gains (losses) from sales of real estate and impairments of real estate assets (including impairment of real estate related joint ventures), all of which are based on historical cost accounting and which may be of lesser significance in evaluating current performance, we believe that FFO provides investors a useful financial measure to evaluate our operating performance.
The following table reconciles net income (loss) to FFO and FFO available to common share and unit holders for the three months ended March 31, 2022 and 2021 (in thousands):
For the three months ended March 31,
2022 2021
Net income (loss) $ (100,216) $ (121,440)
Adjustments:
Real estate depreciation and amortization 59,010 55,333
Impairment loss 60,983 14,856
FFO $ 19,777 $ (51,251)
Distribution to preferred shareholders (11,344) (8,139)
FFO available to common share and unit holders $ 8,433 $ (59,390)
EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. The white paper issued by Nareit entitled “Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate” defines EBITDA re as net income or loss (computed in accordance with U.S. GAAP), excluding interest expense, income tax, depreciation and amortization, gains or losses on the disposition of depreciated property (including gains or losses on change of control), impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate, and after comparable adjustments for our portion of these items related to unconsolidated affiliates. We believe that EBITDA and EBITDA re provide investors useful financial measures to evaluate our operating performance, excluding the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization).
The following table reconciles net income (loss) to EBITDA and EBITDA re for the three months ended March 31, 2022 and 2021 (in thousands):
For the three months ended March 31,
2022 2021
Net income (loss) $ (100,216) $ (121,440)
Adjustments:
Interest expense 22,572 25,331
Income tax expense (benefit) — 3
Depreciation and amortization 59,100 55,443
EBITDA $ (18,544) $ (40,663)
Impairment loss 60,983 14,856
EBITDA re
$ 42,439 $ (25,807)
FFO, EBITDA and EBITDA re do not represent cash generated from operating activities as determined by U.S. GAAP and should not be considered as alternatives to U.S. GAAP net income (loss), as indications of our financial performance, or to U.S. GAAP cash flow from operating activities, as measures of liquidity. In addition, FFO, EBITDA and EBITDA re are not indicative of funds available to fund cash needs, including the ability to make cash distributions.
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Results of Operations
At March 31, 2022 and 2021, we had 53 wholly owned properties and leasehold interests. All properties owned during these periods have been included in our results of operations during the respective periods since their dates of acquisition and through the dates of disposition, as applicable. Based on when a property was acquired or disposed, operating results for certain properties are not comparable for the three months ended March 31, 2022 and 2021. The properties listed in the table below are hereinafter referred to as "non-comparable properties" for the periods indicated and all other properties are referred to as "comparable properties":
Property Location Disposition Date
Sir Francis Drake San Francisco, CA April 1, 2021
The Roger New York New York, NY June 10, 2021
Villa Florence San Francisco on Union Square San Francisco, CA September 9, 2021
Property Location Acquisition Date
Jekyll Island Club Resort Jekyll Island, GA July 22, 2021
Margaritaville Hollywood Beach Resort Hollywood, FL September 23, 2021
Estancia La Jolla Hotel & Spa La Jolla, CA December 1, 2021
Comparison of the three months ended March 31, 2022 to the three months ended March 31, 2021
Revenues — Total hotel revenues increased by $174.4 million, of which $38.4 million was due to non-comparable properties, and the remaining increase was primarily due to an increase in leisure travel demand during the spring break travel season, as well as some recoveries in business and group bookings. This increase in demand was the result of an increase in COVID-19 vaccination rates and an easing of governmental restrictions relative to the prior year. Also, 13 of our hotels' operations remained temporarily suspended throughout the first quarter of 2021.
Hotel operating expenses — Total hotel operating expenses increased by $101.7 million, of which $21.0 million was due to non-comparable properties, and the remaining increase was primarily due to resuming operations at our comparable properties and returning demand in the first quarter of 2022.
Depreciation and amortization — Depreciation and amortization expense increased by $3.7 million primarily due to our three non-comparable properties acquired in 2021.
Real estate taxes, personal property taxes, property insurance and ground rent — Real estate taxes, personal property taxes, property insurance and ground rent increased by $1.9 million primarily due to an increase in ground rent at our three non-comparable properties acquired in 2021.
General and administrative — General and administrative expenses increased by $2.1 million primarily due to an increase of $1.6 million in compensation expense. General and administrative expenses consist of employee compensation costs, legal and professional fees, insurance and other expenses.
Impairment loss — For the three months ended March 31, 2022, we recognized an impairment loss of $61.0 million related to two hotels. For the three months ended March 31, 2021, we recognized an impairment loss of $14.9 million related to one hotel.
Interest expense — Interest expense decreased by $2.8 million primarily due to slightly lower interest rates in 2022.
Distributions to preferred shareholders — Distributions to preferred shareholders primarily increased as a result of the issuance of the Series G and Series H Cumulative Redeemable Preferred Shares in May 2021 and July 2021, respectively.
Critical Accounting Policies
Our consolidated financial statements have been prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period. While we do not believe the reported amounts would be materially different, application of these policies involves the exercise of judgment and the use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on experience and on various other assumptions that are believed to be reasonable under the circumstances. All of our significant accounting policies, including certain critical accounting policies, are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.
New Accounting Pronouncements
See Note 2. Summary of Significant Accounting Policies, to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for recently issued accounting pronouncements that may affect us.
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Liquidity and Capital Resources
Our primary sources of liquidity are cash provided by our operations, borrowings under our credit facilities, net proceeds from equity and debt offerings, and net proceeds from hotel property sales. Our primary cash requirements in the short term (i.e., those requiring cash on or before March 31, 2023) will be to fund property lease obligations, interest and current principal on debt, capital improvements, dividends on common and preferred shares, and working capital of our hotel property operations. We believe our cash and cash equivalents, restricted cash and the amount available on our senior unsecured revolving credit facility, which totaled $694.4 million as of March 31, 2022, along with cash generated from ongoing operations will be sufficient to satisfy our short-term cash requirements. As of March 31, 2022, we had no off-balance sheet arrangements.
In order to maintain our qualification as a REIT, we must pay dividends to our shareholders of at least 90% of our taxable income. As a result of this requirement, we cannot rely on retained earnings to fund long-term liquidity requirements such as hotel property acquisitions, redevelopements and repayments of long-term debt. As such, we expect to continue to raise capital through equity and debt offerings to fund our growth.
For a discussion on the impact of the COVID-19 pandemic on our liquidity, see Overview .
Our material cash requirements include the following contractual and other obligations.
Debt
Our outstanding debt consisted of floating- and fixed-rate unsecured term loans, convertible senior notes, senior unsecured notes and mortgage loans with varying maturities. Our total debt had an aggregate face value of $2.5 billion as of March 31, 2022, as summarized in the following table.
March 31, 2022
(in thousands)
Revolving credit facilities $ —
Term loans 1,433,068
Convertible senior notes 750,000
Senior unsecured notes 50,000
Mortgage loans 222,549
Total debt at face value $ 2,455,617
For further discussion on the components of our debt, see Note 5. Debt , to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
We have the option to extend certain of our current debt maturities with the payment of extension fees. Assuming we exercise all extension options available in our debt agreements, we expect that future principal and interest payments associated with our debt obligations outstanding as of March 31, 2022 will be $2.6 billion through their maturity, with $162.3 million payable on or before March 31, 2023. In April 2022, we repaid the remaining $26.3 million principal balance on our Second Term Loan using cash on hand. We intend to pay amounts due with available cash, borrowings under our revolving credit facility, or refinance with long term debt.
In February 2021 and December 2021, we amended the agreements governing our existing credit facilities, term loan facilities and senior notes to, among other things, waive financial covenants until the second quarter of 2022 (with substantially less-restrictive covenants through the end of the first quarter of 2023), extend certain debt maturity dates and increase the interest rate spread.
We are in compliance with all covenants governed by our existing credit facilities, term loan and senior note facilities.
Our mortgage loans contain customary provisions regarding events of default, as well as customary cash management, cash trap and lockbox provisions. Cash trap provisions are triggered if the hotel's performance is below a certain threshold. Once triggered, all of the cash flow generated by the hotel is deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of our lender.
The mortgage loan associated with Estancia La Jolla Hotel & Spa triggered the cash trap provisions prior to our acquisition of this hotel property, and therefore excess cash flow from hotel operations from this hotel is being held by the lender in cash management accounts and is reflected as restricted cash in our consolidated balance sheets. Cash will be released from the lockbox once the hotel reaches profitability levels that terminate the cash trap or the loan is paid off. Cash held in the lockbox is not available for distribution for general corporate use or distribution to the shareholders. Margaritaville Hollywood Beach Resort also triggered cash trap provisions prior to our acquisition, but was released from this provision during the first quarter of 2022.
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Hotel, ground and finance lease obligations
Our properties that are subject to hotel, ground or finance leases, as noted in Note 11 , Commitment and Contingencies , to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, may require minimum fixed rent payments, percentage rent payments based on a percentage of revenues in excess of certain thresholds or rent payments equal to the greater of a minimum fixed rent or percentage rent. Minimum fixed rent may be adjusted annually by increases in consumer price index ("CPI") and may be subject to minimum and maximum increases.
Future fixed minimum payments associated with our hotel, ground and finance leases total $1.8 billion as of March 31, 2022, with $20.5 million payable within the next 12 months.
Purchase commitments
As of March 31, 2022, we had $5.3 million of outstanding purchase commitments, all of which will be paid within the next 12 months. These purchase commitments represent outstanding purchase orders and contracts that have been executed for capital and renovation projects at our properties. See Capital Investments for discussion on planned capital investments.
Preferred dividends
We expect to pay aggregate annual dividends of approximately $45.4 million on our outstanding Series E, Series F, Series G and Series H Cumulative Redeemable Preferred Shares within the next 12 months and in each future year until the shares are redeemed. For further discussion on our preferred shares, see Note 7. Equity , to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Sources and Uses of Cash
Our principal sources of cash are cash from operations, draws on our credit facilities, net proceeds from equity and debt offerings, and net proceeds from property sales. Our principal uses of cash are asset acquisitions, debt service payments, the redemption of equity securities, capital investments, operating costs, corporate expenses and dividends.
Operating Activities. Our net cash provided by (used in) operating activities was $38.8 million for the three months ended March 31, 2022 and $(7.1) million for the three months ended March 31, 2021. Fluctuations in our net cash provided by (used in) operating activities are primarily the result of changes in hotel revenues, operating cash requirements and corporate expenses. The increase in cash provided by (used in) operations in 2022 as compared to 2021 is due to the resumption of operations at our hotels, as 13 of our hotels' operations remained temporarily suspended throughout the first quarter of 2021.
Investing Activities. Our net cash provided by (used in) investing activities was $(20.0) million for the three months ended March 31, 2022 and $(9.7) million for the three months ended March 31, 2021. Fluctuations in our net cash provided by (used in) investing activities are primarily the result of acquisition and disposition activities, as well as capital improvements and additions to our properties.
• During the three months ended March 31, 2022, we invested $19.9 million in improvements to our hotel properties.
• During the three months ended March 31, 2021, we invested $9.6 million in improvements to our hotel properties.
Financing Activities. Our net cash provided by (used in) financing activities was $(15.2) million for the three months ended March 31, 2022 and $5.1 million for the three months ended March 31, 2021. Fluctuations in our net cash provided by (used in) financing activities are primarily the result of our issuance and repurchase of debt and equity securities and distributions paid on our preferred and common shares.
• During the three months ended March 31, 2022, we paid $12.7 million in preferred and common distributions.
• During the three months ended March 31, 2021, we borrowed $263.8 million in other debt; repaid $40.0 million of revolving credit facilities borrowings and $177.0 million in other debt; paid $9.5 million in preferred and common distributions; purchased $21.0 million in Capped Call Transactions; and paid $9.6 million in financing fees.
Capital Investments
We maintain and intend to continue maintaining all of our hotels in good repair and condition, in conformity with applicable laws and regulations, in accordance with franchisor standards when applicable and in accordance with agreed-upon requirements in our management agreements. Routine capital investments will be administered by the hotel management companies. However, we maintain approval rights over the capital investments as part of the annual budget process and as otherwise required from time to time.
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Certain of our hotel properties may undergo renovations as a result of our decision to upgrade portions of the hotels, such as guest rooms, meeting space and restaurants, in order to better compete with other hotels in our markets. In addition, after we acquire a hotel property, we are often required by the franchisor or brand manager, if any, to complete a property improvement plan (“PIP”) in order to bring the hotel property up to the franchisor’s or brand’s standards. Generally, we expect to fund renovations and improvements with available cash, restricted cash, borrowings under our credit facility or proceeds from new debt or equity offerings.
For the three months ended March 31, 2022, we invested $19.9 million in capital investments to reposition and improve our properties, including the renovations of Hotel Vitale and Hotel Ziggy (formerly Grafton on Sunset).
Depending on market conditions, we expect to invest a total of $100.0 million to $120.0 million in capital investments in 2022, which includes approximately $50.0 million in redevelopment and repositioning projects at Hotel Vitale, Skamania Lodge, Solamar Hotel, Hilton San Diego Gaslamp Quarter and Jekyll Island Club Resort.
Common Share Repurchase Program and ATM Program
On February 22, 2016, we announced that our Board of Trustees authorized a share repurchase program of up to $150.0 million of the Company's outstanding common shares. Under this program, we may repurchase common shares from time to time in transactions on the open market or by private agreement. We may suspend or discontinue this program at any time. No common shares were repurchased by the Company under the share repurchase program during the three months ended March 31, 2022. As of March 31, 2022, $56.6 million of common shares remained available for repurchase under this program. The credit agreements governing our existing indebtedness prohibit us from repurchasing common shares until we have certified compliance with certain financial covenants through June 30, 2022.
On July 27, 2017, we announced that our Board of Trustees authorized a new share repurchase program of up to $100.0 million of the Company's outstanding common shares. Under this program, we may repurchase common shares from time to time in transactions on the open market or by private agreement. We may suspend or discontinue this program at any time. This $100.0 million share repurchase program will commence upon the completion of our $150.0 million share repurchase program.
On April 29, 2021, we filed a prospectus supplement with the SEC to sell up to $200.0 million of common shares under an "at the market" offering program (the "ATM program"). No common shares were issued or sold under the ATM program during the three months ended March 31, 2022. As of March 31, 2022, $200.0 million of common shares remained available for issuance under the ATM program.
Inflation
We rely on the performance of the hotels to increase revenues to keep pace with inflation. Generally, our hotel operators possess the ability to adjust room rates daily, except for group or corporate rates contractually committed to in advance, although competitive pressures may limit the ability of our operators to raise rates faster than inflation or even at the same rate.
Seasonality
Demand in the lodging industry is affected by recurring seasonal patterns which are greatly influenced by overall economic cycles, geographic locations, weather and customer mix at the hotels. Generally, our hotels have lower revenue, operating income and cash flow in the first quarter of each year and higher revenue, operating income and cash flow in the third quarter of each year. The historical trend has been disrupted as a result of COVID-19. We expect that our portfolio will return to more normal historical seasonality trends in 2022.
Derivative Instruments
In the normal course of business, we are exposed to the effects of interest rate changes. We may enter into derivative instruments including interest rate swaps, caps and collars to manage or hedge interest rate risk. Derivative instruments are subject to fair value reporting at each reporting date and the increase or decrease in fair value is recorded in net income (loss) or accumulated other comprehensive income (loss), based on the applicable hedge accounting guidance. Derivatives expose the Company to credit risk in the event of non-performance by the counter parties under the terms of the interest rate hedge agreements. We believe we minimize the credit risk by transacting with major credit-worthy financial institutions.
As of March 31, 2022, we have interest rate swap agreements with an aggregate notional amount of $1.1 billion to hedge variable interest rates on our unsecured term loans. We have designated these pay-fixed, receive-floating interest rate swap derivatives as cash flow hedges. For a further discussion of our derivative instruments see Note 5. Debt , to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Interest Rate Sensitivity
We are exposed to market risk from changes in interest rates. We seek to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs by closely monitoring our variable rate debt and converting such debt to fixed rates when we deem such conversion advantageous. From time to time, we may enter into interest rate swap agreements or other interest rate hedging contracts. While these agreements are intended to lessen the impact of rising interest rates, they also expose us to the risks that the other parties to the agreements will not perform, that we could incur significant costs associated with the settlement of the agreements, and that the agreements will be unenforceable and the underlying transactions will fail to qualify as highly effective cash flow hedges under guidance included in ASC 815 "Derivatives and Hedging."
As of March 31, 2022, $454.6 million of our aggregate indebtedness (18.5% of total indebtedness) was subject to variable interest rates, excluding amounts outstanding under the term loan facilities that have been effectively swapped into fixed rates. If interest rates on our variable rate debt increase or decrease by 0.1 percent, our annual interest expense will increase or decrease by approximately $0.5 million, respectively.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.
Changes in Internal Control Over Financial Reporting
There have been no changes to our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

29
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The nature of the operations of our hotels exposes the hotels and us to the risk of claims and litigation in the normal course of business. We are not presently subject to any material litigation nor, to our knowledge, is any litigation threatened against us, other than routine actions for negligence or other claims and administrative proceedings arising in the ordinary course of business, some of which are expected to be covered by liability insurance and all of which collectively are not expected to have a material adverse effect on our liquidity, results of operations or our financial condition.
Item 1A. Risk Factors.
There have been no material changes from the risk factors disclosed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Issuer Purchases of Equity Securities
Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
January 1, 2022 - January 31, 2022 — $ — — —
February 1, 2022 - February 28, 2022 — $ — — —
March 1, 2022 - March 31, 2022 — $ — — —
Total — $ — — $ 56,600,000
______________________
(1) On February 22, 2016, the Company announced its Board of Trustees authorized a share repurchase program of up to $150.0 million of the Company's outstanding common shares. Under this program, the Company may repurchase its common shares from time to time in transactions on the open market or by private agreement. The Company may suspend or discontinue this program at any time. The amount in this column does not include the approximate dollar value of shares that may yet be purchased under the $100.0 million share repurchase program that was announced on July 27, 2017, which will commence upon the completion of the Company's $150.0 million share repurchase program. See Note 7. Equity , to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information about the $100.0 million share repurchase program.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits.
Exhibit Number Description of Exhibit
Fifth Amendment to the Second Amended and Restated Agreement of Limited Partnership of Pebblebrook Hotel, L.P., dated as of July 23, 2021 (incorporated by reference to Exhibit 3.2 to Pebblebrook Hotel Trust’s Current Report on Form 8‑K filed with the SEC on July 27, 2021 (File No. 001‑34571)).
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. (1)
101.SCH
Inline XBRL Taxonomy Extension Schema Document (1)
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document (1)
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document (1)
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document (1)
104
Cover Page Interactive Date File (embedded within the Inline XBRL document) (1)
________________
†    Filed herewith.
††    Furnished herewith.
(1) Submitted electronically herewith. Attached as Exhibit 101 to this report are the following documents formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations and Comprehensive Income; (iii) Consolidated Statements of Equity; (iv) Consolidated Statements of Cash Flows; (v) Notes to Consolidated Financial Statements; and (vi) Cover Page (in connection with Exhibit 104).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PEBBLEBROOK HOTEL TRUST
Date: April 26, 2022
/s/ J ON E. B ORTZ
Jon E. Bortz
Chairman, President and Chief Executive Officer
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TABLE OF CONTENTS
Part I. Financial InformationItem 1. Financial StatementsNote 1. OrganizationNote 2. Summary Of Significant Accounting PoliciesNote 1, Organization,Note 3. Acquisition and Disposition Of Hotel PropertiesNote 4. Investment in Hotel PropertiesNote 11. Commitments and ContingenciesNote 5. DebtNote 6. RevenueNote 7. EquityNote 8. Share-based Compensation PlanNote 7, EquityNote 9. Income TaxesNote 10. Earnings (loss) Per ShareNote 12. Supplemental Information To Statements Of Cash Flows (in Thousands)Note 12. Supplemental Information To Statements Of Cash FlowsNote 13. Subsequent EventsItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsNote 2. Summary Of Significant Accounting Policies,Item 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II. Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits

Exhibits

3.1 Fifth Amendment to the Second Amended and Restated Agreement of Limited Partnership of Pebblebrook Hotel, L.P., dated as of July 23, 2021 (incorporated by reference to Exhibit 3.2 to Pebblebrook Hotel Trusts Current Report on Form 8K filed with the SEC on July 27, 2021 (File No. 00134571)). 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.