x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Maryland
|
|
36-4219376
|
(State or other jurisdiction of
incorporation or organization)
|
|
(IRS Employer
Identification No.)
|
|
|
|
7550 Wisconsin Avenue, 10
th
Floor
Bethesda, Maryland
|
|
20814
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Large accelerated filer
|
x
|
|
Accelerated filer
|
¨
|
|
|
|
|
|
Non-accelerated filer
|
¨
(Do not check if a smaller reporting company)
|
|
Smaller reporting company
|
¨
|
|
|
|
|
|
|
|
|
Emerging growth company
|
¨
|
Class
|
|
Outstanding at April 19, 2017
|
|
Common Shares of Beneficial Interest ($0.01 par value)
|
|
113,219,482
|
|
7.5% Series H Cumulative Redeemable Preferred Shares ($0.01 par value)
|
|
2,750,000
|
|
6.375% Series I Cumulative Redeemable Preferred Shares ($0.01 par value)
|
|
4,400,000
|
|
6.3% Series J Cumulative Redeemable Preferred Shares ($0.01 par value)
|
|
6,000,000
|
|
PART I.
|
||
|
|
|
Item 1.
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 3.
|
||
|
|
|
Item 4.
|
||
|
|
|
|
|
|
PART II.
|
||
|
|
|
Item 1.
|
||
|
|
|
Item 1A.
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 3.
|
||
|
|
|
Item 4.
|
||
|
|
|
Item 5.
|
||
|
|
|
Item 6.
|
||
|
|
|
|
PART I.
|
Financial Information
|
Item 1.
|
Financial Statements
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
|
(unaudited)
|
|
|
||||
Assets:
|
|
|
|
||||
Investment in hotel properties, net (Note 3)
|
$
|
3,456,271
|
|
|
$
|
3,672,209
|
|
Property under development
|
15,128
|
|
|
21,078
|
|
||
Assets held for sale (Note 3)
|
36,241
|
|
|
23,283
|
|
||
Cash and cash equivalents
|
361,436
|
|
|
134,652
|
|
||
Restricted cash reserves (Note 5)
|
12,592
|
|
|
15,035
|
|
||
Hotel receivables (net of allowance for doubtful accounts of $296 and $279, respectively)
|
33,202
|
|
|
35,403
|
|
||
Debt issuance costs for borrowings under credit facilities, net
|
4,085
|
|
|
1,699
|
|
||
Deferred tax assets
|
6,992
|
|
|
1,902
|
|
||
Prepaid expenses and other assets
|
43,503
|
|
|
38,818
|
|
||
Total assets
|
$
|
3,969,450
|
|
|
$
|
3,944,079
|
|
Liabilities:
|
|
|
|
||||
Borrowings under credit facilities (Note 4)
|
$
|
0
|
|
|
$
|
0
|
|
Term loans, net of unamortized debt issuance costs (Note 4)
|
852,861
|
|
|
852,758
|
|
||
Bonds payable, net of unamortized debt issuance costs (Note 4)
|
42,461
|
|
|
42,455
|
|
||
Mortgage loan, net of unamortized debt issuance costs (Note 4)
|
223,732
|
|
|
223,494
|
|
||
Accounts payable and accrued expenses
|
143,638
|
|
|
171,965
|
|
||
Liabilities of assets held for sale (Note 3)
|
27,096
|
|
|
247
|
|
||
Advance deposits
|
31,973
|
|
|
33,232
|
|
||
Accrued interest
|
2,129
|
|
|
2,209
|
|
||
Distributions payable
|
56,419
|
|
|
56,360
|
|
||
Total liabilities
|
1,380,309
|
|
|
1,382,720
|
|
||
Commitments and contingencies (Note 5)
|
|
|
|
||||
Equity:
|
|
|
|
||||
Shareholders’ Equity:
|
|
|
|
||||
Preferred shares of beneficial interest, $0.01 par value (liquidation preference of $328,750), 40,000,000 shares authorized; 13,150,000 shares issued and outstanding (Note 6)
|
132
|
|
|
132
|
|
||
Common shares of beneficial interest, $0.01 par value, 200,000,000 shares authorized; 113,219,482 shares issued and outstanding, and 113,115,442 shares issued and 113,088,074 shares outstanding, respectively (Note 6)
|
1,132
|
|
|
1,131
|
|
||
Treasury shares, at cost (Note 6)
|
0
|
|
|
(739
|
)
|
||
Additional paid-in capital, net of offering costs of $85,223
|
2,830,724
|
|
|
2,830,740
|
|
||
Accumulated other comprehensive income (Note 4)
|
4,472
|
|
|
2,365
|
|
||
Distributions in excess of retained earnings
|
(250,660
|
)
|
|
(275,564
|
)
|
||
Total shareholders’ equity
|
2,585,800
|
|
|
2,558,065
|
|
||
Noncontrolling Interests:
|
|
|
|
||||
Noncontrolling interests in consolidated entities
|
17
|
|
|
17
|
|
||
Noncontrolling interests of common units in Operating Partnership (Note 6)
|
3,324
|
|
|
3,277
|
|
||
Total noncontrolling interests
|
3,341
|
|
|
3,294
|
|
||
Total equity
|
2,589,141
|
|
|
2,561,359
|
|
||
Total liabilities and equity
|
$
|
3,969,450
|
|
|
$
|
3,944,079
|
|
|
For the three months ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Revenues:
|
|
|
|
||||
Hotel operating revenues:
|
|
|
|
||||
Room
|
$
|
178,365
|
|
|
$
|
181,420
|
|
Food and beverage
|
52,304
|
|
|
56,347
|
|
||
Other operating department
|
20,367
|
|
|
20,643
|
|
||
Total hotel operating revenues
|
251,036
|
|
|
258,410
|
|
||
Other income
|
3,369
|
|
|
1,694
|
|
||
Total revenues
|
254,405
|
|
|
260,104
|
|
||
Expenses:
|
|
|
|
||||
Hotel operating expenses:
|
|
|
|
||||
Room
|
52,323
|
|
|
52,291
|
|
||
Food and beverage
|
39,148
|
|
|
42,908
|
|
||
Other direct
|
4,184
|
|
|
3,683
|
|
||
Other indirect (Note 8)
|
69,656
|
|
|
71,915
|
|
||
Total hotel operating expenses
|
165,311
|
|
|
170,797
|
|
||
Depreciation and amortization
|
47,263
|
|
|
47,628
|
|
||
Real estate taxes, personal property taxes and insurance
|
16,115
|
|
|
16,191
|
|
||
Ground rent (Note 5)
|
3,385
|
|
|
3,813
|
|
||
General and administrative
|
6,554
|
|
|
5,830
|
|
||
Other expenses
|
1,918
|
|
|
2,178
|
|
||
Total operating expenses
|
240,546
|
|
|
246,437
|
|
||
Operating income
|
13,859
|
|
|
13,667
|
|
||
Interest income
|
142
|
|
|
1,654
|
|
||
Interest expense
|
(9,827
|
)
|
|
(11,867
|
)
|
||
Loss from extinguishment of debt (Note 4)
|
(1,706
|
)
|
|
0
|
|
||
Income before income tax benefit
|
2,468
|
|
|
3,454
|
|
||
Income tax benefit (Note 9)
|
4,773
|
|
|
5,620
|
|
||
Income before gain on sale of properties
|
7,241
|
|
|
9,074
|
|
||
Gain on sale of properties (Note 3)
|
74,358
|
|
|
0
|
|
||
Net income
|
81,599
|
|
|
9,074
|
|
||
Noncontrolling interests of common units in Operating Partnership (Note 6)
|
(110
|
)
|
|
(15
|
)
|
||
Net income attributable to the Company
|
81,489
|
|
|
9,059
|
|
||
Distributions to preferred shareholders
|
(5,405
|
)
|
|
(3,042
|
)
|
||
Net income attributable to common shareholders
|
$
|
76,084
|
|
|
$
|
6,017
|
|
|
For the three months ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Earnings per Common Share - Basic (Note 11):
|
|
|
|
||||
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares
|
$
|
0.67
|
|
|
$
|
0.05
|
|
Earnings per Common Share - Diluted (Note 11):
|
|
|
|
||||
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares
|
$
|
0.67
|
|
|
$
|
0.05
|
|
Weighted average number of common shares outstanding:
|
|
|
|
||||
Basic
|
112,923,719
|
|
|
112,748,492
|
|
||
Diluted
|
113,306,209
|
|
|
113,108,158
|
|
||
|
|
|
|
||||
Comprehensive Income (Loss):
|
|
|
|
||||
Net income
|
$
|
81,599
|
|
|
$
|
9,074
|
|
Other comprehensive income (loss):
|
|
|
|
||||
Unrealized gain (loss) on interest rate derivative instruments (Note 4)
|
1,124
|
|
|
(14,252
|
)
|
||
Reclassification adjustment for amounts recognized in net income (Note 4)
|
985
|
|
|
1,780
|
|
||
|
83,708
|
|
|
(3,398
|
)
|
||
Noncontrolling interests of common units in Operating Partnership (Note 6)
|
(112
|
)
|
|
1
|
|
||
Comprehensive income (loss) attributable to the Company
|
$
|
83,596
|
|
|
$
|
(3,397
|
)
|
|
Preferred
Shares of Beneficial Interest |
|
Common
Shares of Beneficial Interest |
|
Treasury
Shares |
|
Additional
Paid-In Capital |
|
Accumulated Other Comprehensive (Loss) Income
|
|
Distributions
in Excess of Retained Earnings |
|
Total
Shareholders’ Equity |
|
Noncontrolling
Interests in Consolidated Entities |
|
Noncontrolling Interests of Common Units in Operating Partnership
|
|
Total Noncontrolling Interests
|
|
Total Equity
|
||||||||||||||||||||||
Balance, December 31, 2015
|
$
|
72
|
|
|
$
|
1,131
|
|
|
$
|
(4,798
|
)
|
|
$
|
2,684,010
|
|
|
$
|
(97
|
)
|
|
$
|
(306,051
|
)
|
|
$
|
2,374,267
|
|
|
$
|
18
|
|
|
$
|
3,198
|
|
|
$
|
3,216
|
|
|
$
|
2,377,483
|
|
Issuance of shares, net of offering costs
|
0
|
|
|
0
|
|
|
1,584
|
|
|
(1,183
|
)
|
|
0
|
|
|
0
|
|
|
401
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
401
|
|
|||||||||||
Repurchase of common shares into treasury
|
0
|
|
|
0
|
|
|
(1,240
|
)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(1,240
|
)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(1,240
|
)
|
|||||||||||
Deferred compensation, net
|
0
|
|
|
0
|
|
|
3,021
|
|
|
(1,207
|
)
|
|
0
|
|
|
0
|
|
|
1,814
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
1,814
|
|
|||||||||||
Distributions on earned shares from share awards with market conditions
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(151
|
)
|
|
(151
|
)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(151
|
)
|
|||||||||||
Distributions on common shares/units ($0.45 per share/unit)
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(50,924
|
)
|
|
(50,924
|
)
|
|
0
|
|
|
(65
|
)
|
|
(65
|
)
|
|
(50,989
|
)
|
|||||||||||
Distributions on preferred shares
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(3,042
|
)
|
|
(3,042
|
)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(3,042
|
)
|
|||||||||||
Net income
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
9,059
|
|
|
9,059
|
|
|
0
|
|
|
15
|
|
|
15
|
|
|
9,074
|
|
|||||||||||
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
Unrealized loss on interest rate derivative instruments
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(14,234
|
)
|
|
0
|
|
|
(14,234
|
)
|
|
0
|
|
|
(18
|
)
|
|
(18
|
)
|
|
(14,252
|
)
|
|||||||||||
Reclassification adjustment for amounts recognized in net income
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
1,778
|
|
|
0
|
|
|
1,778
|
|
|
0
|
|
|
2
|
|
|
2
|
|
|
1,780
|
|
|||||||||||
Balance, March 31, 2016
|
$
|
72
|
|
|
$
|
1,131
|
|
|
$
|
(1,433
|
)
|
|
$
|
2,681,620
|
|
|
$
|
(12,553
|
)
|
|
$
|
(351,109
|
)
|
|
$
|
2,317,728
|
|
|
$
|
18
|
|
|
$
|
3,132
|
|
|
$
|
3,150
|
|
|
$
|
2,320,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
Balance, December 31, 2016
|
$
|
132
|
|
|
$
|
1,131
|
|
|
$
|
(739
|
)
|
|
$
|
2,830,740
|
|
|
$
|
2,365
|
|
|
$
|
(275,564
|
)
|
|
$
|
2,558,065
|
|
|
$
|
17
|
|
|
$
|
3,277
|
|
|
$
|
3,294
|
|
|
$
|
2,561,359
|
|
Issuance of shares, net of offering costs
|
0
|
|
|
0
|
|
|
2,397
|
|
|
(1,157
|
)
|
|
0
|
|
|
0
|
|
|
1,240
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
1,240
|
|
|||||||||||
Repurchase of common shares into treasury
|
0
|
|
|
0
|
|
|
(2,223
|
)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(2,223
|
)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(2,223
|
)
|
|||||||||||
Deferred compensation, net
|
0
|
|
|
1
|
|
|
565
|
|
|
1,141
|
|
|
0
|
|
|
0
|
|
|
1,707
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
1,707
|
|
|||||||||||
Distributions on earned shares from share awards with market conditions
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(190
|
)
|
|
(190
|
)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(190
|
)
|
|||||||||||
Distributions on common shares/units ($0.45 per share/unit)
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(50,990
|
)
|
|
(50,990
|
)
|
|
0
|
|
|
(65
|
)
|
|
(65
|
)
|
|
(51,055
|
)
|
|||||||||||
Distributions on preferred shares
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(5,405
|
)
|
|
(5,405
|
)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(5,405
|
)
|
|||||||||||
Net income
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
81,489
|
|
|
81,489
|
|
|
0
|
|
|
110
|
|
|
110
|
|
|
81,599
|
|
|||||||||||
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
Unrealized gain on interest rate derivative instruments
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
1,123
|
|
|
0
|
|
|
1,123
|
|
|
0
|
|
|
1
|
|
|
1
|
|
|
1,124
|
|
|||||||||||
Reclassification adjustment for amounts recognized in net income
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
984
|
|
|
0
|
|
|
984
|
|
|
0
|
|
|
1
|
|
|
1
|
|
|
985
|
|
|||||||||||
Balance, March 31, 2017
|
$
|
132
|
|
|
$
|
1,132
|
|
|
$
|
0
|
|
|
$
|
2,830,724
|
|
|
$
|
4,472
|
|
|
$
|
(250,660
|
)
|
|
$
|
2,585,800
|
|
|
$
|
17
|
|
|
$
|
3,324
|
|
|
$
|
3,341
|
|
|
$
|
2,589,141
|
|
|
For the three months ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
81,599
|
|
|
$
|
9,074
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
47,263
|
|
|
47,628
|
|
||
Amortization of debt issuance costs
|
765
|
|
|
878
|
|
||
Loss from extinguishment of debt
|
1,706
|
|
|
0
|
|
||
Gain on sale of properties
|
(74,358
|
)
|
|
0
|
|
||
Amortization of deferred compensation
|
1,707
|
|
|
1,814
|
|
||
Deferred income tax benefit
|
(5,090
|
)
|
|
(5,907
|
)
|
||
Allowance for doubtful accounts
|
17
|
|
|
337
|
|
||
Other
|
361
|
|
|
154
|
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Restricted cash reserves
|
61
|
|
|
3,053
|
|
||
Hotel receivables
|
(880
|
)
|
|
(2,451
|
)
|
||
Prepaid expenses and other assets
|
(7,127
|
)
|
|
(1,425
|
)
|
||
Accounts payable and accrued expenses
|
2,288
|
|
|
3,867
|
|
||
Advance deposits
|
2,649
|
|
|
3,426
|
|
||
Accrued interest
|
(80
|
)
|
|
(791
|
)
|
||
Net cash provided by operating activities
|
50,881
|
|
|
59,657
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Additions to properties
|
(12,674
|
)
|
|
(27,025
|
)
|
||
Improvements to properties
|
0
|
|
|
(9,343
|
)
|
||
Purchase of office furniture and equipment
|
0
|
|
|
(4
|
)
|
||
Restricted cash reserves
|
(383
|
)
|
|
(734
|
)
|
||
Proceeds from sale of properties
|
251,960
|
|
|
0
|
|
||
Property insurance proceeds
|
283
|
|
|
780
|
|
||
Net cash provided by (used in) investing activities
|
239,186
|
|
|
(36,326
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Borrowings under credit facilities
|
0
|
|
|
378,990
|
|
||
Repayments under credit facilities
|
0
|
|
|
(56,990
|
)
|
||
Repayments of mortgage loans
|
0
|
|
|
(286,294
|
)
|
||
Payment of debt issuance costs
|
(4,510
|
)
|
|
0
|
|
||
Purchase of treasury shares
|
(2,223
|
)
|
|
(1,240
|
)
|
||
Payment of common offering costs
|
0
|
|
|
(19
|
)
|
||
Distributions on earned shares from share awards with market conditions
|
(190
|
)
|
|
(151
|
)
|
||
Distributions on preferred shares
|
(5,405
|
)
|
|
(3,042
|
)
|
||
Distributions on common shares/units
|
(50,955
|
)
|
|
(50,898
|
)
|
||
Net cash used in financing activities
|
(63,283
|
)
|
|
(19,644
|
)
|
||
Net change in cash and cash equivalents
|
226,784
|
|
|
3,687
|
|
||
Cash and cash equivalents, beginning of period
|
134,652
|
|
|
5,700
|
|
||
Cash and cash equivalents, end of period
|
$
|
361,436
|
|
|
$
|
9,387
|
|
1.
|
Organization
|
2.
|
Summary of Significant Accounting Policies
|
3.
|
Investment in Hotel Properties
|
|
March 31, 2017
|
|
December 31, 2016
|
||||
Land
|
$
|
659,873
|
|
|
$
|
727,176
|
|
Buildings and improvements
|
3,356,637
|
|
|
3,531,280
|
|
||
Furniture, fixtures and equipment
|
730,609
|
|
|
769,671
|
|
||
Investment in hotel properties, gross
|
4,747,119
|
|
|
5,028,127
|
|
||
Accumulated depreciation
|
(1,290,848
|
)
|
|
(1,355,918
|
)
|
||
Investment in hotel properties, net
|
$
|
3,456,271
|
|
|
$
|
3,672,209
|
|
4.
|
Long-Term Debt
|
|
|
|
|
|
|
Balance Outstanding as of
|
||||||
Debt
|
|
Interest
Rate |
|
Maturity
Date |
|
March 31,
2017 |
|
December 31,
2016 |
||||
Credit facilities
|
|
|
|
|
|
|
|
|
||||
Senior unsecured credit facility
|
|
Floating
(a)
|
|
January 2021
(a)
|
|
$
|
0
|
|
|
$
|
0
|
|
LHL unsecured credit facility
|
|
Floating
(b)
|
|
January 2021
(b)
|
|
0
|
|
|
0
|
|
||
Total borrowings under credit facilities
|
|
|
|
|
|
0
|
|
|
0
|
|
||
Term loans
|
|
|
|
|
|
|
|
|
||||
First Term Loan
|
|
Floating/Fixed
(c)
|
|
January 2022
|
|
300,000
|
|
|
300,000
|
|
||
Second Term Loan
|
|
Floating/Fixed
(c)
|
|
January 2021
|
|
555,000
|
|
|
555,000
|
|
||
Debt issuance costs, net
|
|
|
|
|
|
(2,139
|
)
|
|
(2,242
|
)
|
||
Total term loans, net of unamortized debt issuance costs
|
|
|
|
852,861
|
|
|
852,758
|
|
||||
Massport Bonds
|
|
|
|
|
|
|
|
|
||||
Hyatt Regency Boston Harbor (taxable)
|
|
Floating
(d)
|
|
March 2018
|
|
5,400
|
|
|
5,400
|
|
||
Hyatt Regency Boston Harbor (tax exempt)
|
|
Floating
(d)
|
|
March 2018
|
|
37,100
|
|
|
37,100
|
|
||
Debt issuance costs, net
|
|
|
|
|
|
(39
|
)
|
|
(45
|
)
|
||
Total bonds payable, net of unamortized debt issuance costs
|
|
|
|
42,461
|
|
|
42,455
|
|
||||
Mortgage loan
|
|
|
|
|
|
|
|
|
||||
Westin Copley Place
|
|
Floating
(e)
|
|
August 2018
(e)
|
|
225,000
|
|
|
225,000
|
|
||
Debt issuance costs, net
|
|
|
|
|
|
(1,268
|
)
|
|
(1,506
|
)
|
||
Total mortgage loan, net of unamortized debt issuance costs
|
|
|
|
223,732
|
|
|
223,494
|
|
||||
Total debt
|
|
|
|
|
|
$
|
1,119,054
|
|
|
$
|
1,118,707
|
|
(a)
|
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 credit agreement) plus an applicable margin. There were
no
borrowings outstanding at
March 31, 2017
and
December 31, 2016
. The Company has the option, pursuant to certain terms and conditions, to extend the maturity date for
two
six
-month extensions.
|
(b)
|
Borrowings bear interest at floating rates equal to, at LHL’s option, either (i) LIBOR plus an applicable margin, or (ii) an Adjusted Base Rate (as defined in the credit agreement) plus an applicable margin. There were
no
borrowings outstanding at
March 31, 2017
and
December 31, 2016
. LHL has the option, pursuant to certain terms and conditions, to extend the maturity date for
two
six
-month extensions.
|
(c)
|
Term loans bear interest at floating rates equal to LIBOR plus an applicable margin. The Company entered into interest rate swaps to effectively fix the interest rates for the First Term Loan (as defined below) and the Second Term Loan (as defined below). At
March 31, 2017
and
December 31, 2016
, the Company had interest rate swaps on the full amounts outstanding. See “Derivative and Hedging Activities” below. At
March 31, 2017
, the fixed all-in interest rates for the First Term Loan and Second Term Loan were
2.23%
and
2.95%
, respectively, at the Company’s current leverage ratio (as defined in the swap agreements). At
December 31, 2016
, the fixed all-in interest rates for the First Term Loan and Second Term Loan were
2.38%
and
2.95%
, respectively, at the Company’s current leverage ratio (as defined in the swap agreements).
|
(d)
|
The Massport Bonds are secured by letters of credit issued by U.S. Bank National Association that expire in September 2017. The letters of credit have a
one
-year extension option through September 2018 and are secured by the Hyatt Regency Boston Harbor, however, the letters of credit will not be extended beyond the Massport Bonds’ maturity date. The bonds bear interest based on weekly floating rates. The interest rates as of
March 31, 2017
were
1.00%
and
0.94%
for the
$5,400
and
$37,100
bonds, respectively. The interest rates as of
December 31, 2016
were
0.75%
and
0.76%
for the
$5,400
and
$37,100
bonds, respectively. The Company incurs an annual letter of credit fee of
1.35%
.
|
(e)
|
The mortgage loan matures on August 14, 2018 with
three
options to extend the maturity date to January 5, 2021, pursuant to certain terms and conditions. The interest-only mortgage loan bears interest at a variable rate ranging from LIBOR plus
1.75%
to LIBOR plus
2.00%
, depending on Westin Copley Place’s net cash flow (as defined in the loan agreement). The interest rate as of
March 31, 2017
was LIBOR plus
1.75%
, which equaled
2.67%
. The interest rate as of
December 31, 2016
|
2017
|
$
|
0
|
|
2018
|
267,500
|
|
|
2019
|
0
|
|
|
2020
|
0
|
|
|
2021
|
555,000
|
|
|
Thereafter
|
300,000
|
|
|
Total debt
|
$
|
1,122,500
|
|
|
For the three months ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Interest Expense:
|
|
|
|
||||
Interest incurred
|
$
|
9,140
|
|
|
$
|
11,184
|
|
Amortization of debt issuance costs
|
765
|
|
|
878
|
|
||
Capitalized interest
|
(78
|
)
|
|
(195
|
)
|
||
Interest expense
|
$
|
9,827
|
|
|
$
|
11,867
|
|
|
|
|
|
||||
Weighted Average Interest Rates for Unswapped Variable Rate Debt:
|
|
|
|||||
Senior unsecured credit facility
|
N/A
|
|
|
2.13
|
%
|
||
LHL unsecured credit facility
|
N/A
|
|
|
2.13
|
%
|
||
Massport Bonds
|
0.70
|
%
|
|
0.11
|
%
|
||
Mortgage loan (Westin Copley Place)
|
2.54
|
%
|
|
2.17
|
%
|
5.
|
Commitments and Contingencies
|
Lease Properties
|
|
Lease Type
|
|
Lease Expiration Date
|
Southernmost Beach Resort Key West (Restaurant facility)
|
|
Ground lease
|
|
April 2019
(1)
|
Hyatt Regency Boston Harbor
|
|
Ground lease
|
|
March 2026
(2)
|
The Hilton San Diego Resort and Spa
|
|
Ground lease
|
|
December 2045
|
San Diego Paradise Point Resort and Spa
|
|
Ground lease
|
|
May 2050
|
Hotel Vitale
|
|
Ground lease
|
|
March 2056
(3)
|
Viceroy Santa Monica
|
|
Ground lease
|
|
September 2065
|
Westin Copley Place
(4)
|
|
Air rights lease
|
|
December 2077
|
The Liberty Hotel
|
|
Ground lease
|
|
May 2080
|
Hotel Solamar
|
|
Ground lease
|
|
December 2102
|
Lease Properties
|
|
Estimated Present Value of Remaining Rent Payments
(1)
|
|
Lease Expiration Date
|
||
The Roger
|
|
$
|
4,892
|
|
|
December 2044
|
Harbor Court Hotel
|
|
$
|
18,424
|
|
|
April 2048
|
Hotel Triton
|
|
$
|
25,625
|
|
|
December 2049
|
2017
|
$
|
9,812
|
|
2018
|
13,212
|
|
|
2019
|
13,189
|
|
|
2020
|
13,562
|
|
|
2021
|
13,713
|
|
|
Thereafter
|
587,067
|
|
|
|
$
|
650,555
|
|
6.
|
Equity
|
Dividend per
Share/Unit |
|
For the Quarter Ended
|
|
Record Date
|
|
Date Paid
|
||
$
|
0.45
|
|
|
December 31, 2016
|
|
December 30, 2016
|
|
January 17, 2017
|
Security Type
|
|
Number of
Shares |
|
7.5% Series H Preferred Shares
(1)
|
|
2,750,000
|
|
6.375% Series I Preferred Shares
|
|
4,400,000
|
|
6.3% Series J Preferred Shares
|
|
6,000,000
|
|
Security Type
|
|
Dividend per Share
(1)
|
|
For the Quarter Ended
|
|
Record Date
|
|
Date Paid
|
||
7.5% Series H
|
|
$
|
0.47
|
|
|
December 31, 2016
|
|
December 30, 2016
|
|
January 17, 2017
|
6.375% Series I
|
|
$
|
0.40
|
|
|
December 31, 2016
|
|
December 30, 2016
|
|
January 17, 2017
|
6.3% Series J
|
|
$
|
0.39
|
|
|
December 31, 2016
|
|
December 30, 2016
|
|
January 17, 2017
|
7.
|
Equity Incentive Plan
|
|
Number of
Shares |
|
Weighted -
Average Grant Date Fair Value |
|||
Nonvested at January 1, 2017
|
236,759
|
|
|
$
|
30.78
|
|
Granted
|
122,816
|
|
|
29.03
|
|
|
Vested
|
(87,983
|
)
|
|
29.38
|
|
|
Forfeited
|
0
|
|
|
0.00
|
|
|
Nonvested at March 31, 2017
|
271,592
|
|
|
$
|
30.05
|
|
•
|
Factors associated with the underlying performance of the Company’s share price and shareholder returns over the term of the awards including total share return volatility and risk-free interest.
|
•
|
Factors associated with the relative performance of the Company’s share price and shareholder returns when compared to those companies which compose the index including beta as a means to breakdown total volatility into market-related and company specific volatilities.
|
•
|
The valuation has been performed in a risk-neutral framework.
|
•
|
Return on invested capital is a performance condition award measurement. The estimated value was calculated based on the initial face value at the date of grant. The valuation will be adjusted on a periodic basis as the estimated number of awards expected to vest is revised.
|
|
Number of
Shares
|
|
Weighted-
Average Grant
Date Fair Value
|
|||
Nonvested at January 1, 2017
|
276,183
|
|
|
$
|
27.36
|
|
Granted
(1)
|
134,433
|
|
|
29.22
|
|
|
Vested
|
(67,975
|
)
|
|
33.32
|
|
|
Forfeited
|
0
|
|
|
0.00
|
|
|
Nonvested at March 31, 2017
|
342,641
|
|
|
$
|
29.27
|
|
(1)
|
Amount includes an additional
9,907
shares issued on February 24, 2017 from the March 20, 2014 grant, which were earned in excess of the target amount.
|
8.
|
LHL
|
|
For the three months ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
General and administrative
|
$
|
24,591
|
|
|
$
|
24,601
|
|
Sales and marketing
|
17,944
|
|
|
18,581
|
|
||
Repairs and maintenance
|
9,758
|
|
|
9,836
|
|
||
Management and incentive fees
|
7,226
|
|
|
7,631
|
|
||
Utilities and insurance
|
7,843
|
|
|
8,233
|
|
||
Franchise fees
|
1,837
|
|
|
2,277
|
|
||
Other expenses
|
457
|
|
|
756
|
|
||
Total other indirect expenses
|
$
|
69,656
|
|
|
$
|
71,915
|
|
|
|
Hotel Properties
|
|
Location
|
1.
|
|
Hotel Amarano Burbank
|
|
Burbank, CA
|
2.
|
|
L’Auberge Del Mar
|
|
Del Mar, CA
|
3.
|
|
Hilton San Diego Gaslamp Quarter
|
|
San Diego, CA
|
4.
|
|
Hotel Solamar
|
|
San Diego, CA
|
5.
|
|
San Diego Paradise Point Resort and Spa
|
|
San Diego, CA
|
6.
|
|
The Hilton San Diego Resort and Spa
|
|
San Diego, CA
|
7.
|
|
Harbor Court Hotel
|
|
San Francisco, CA
|
8.
|
|
Hotel Triton
(1)
|
|
San Francisco, CA
|
9.
|
|
Hotel Vitale
|
|
San Francisco, CA
|
10.
|
|
Park Central San Francisco
|
|
San Francisco, CA
|
11.
|
|
Serrano Hotel
|
|
San Francisco, CA
|
12.
|
|
The Marker San Francisco
|
|
San Francisco, CA
|
13.
|
|
Villa Florence
|
|
San Francisco, CA
|
14.
|
|
Chaminade Resort and Conference Center
|
|
Santa Cruz, CA
|
15.
|
|
Viceroy Santa Monica
|
|
Santa Monica, CA
|
16.
|
|
Chamberlain West Hollywood
|
|
West Hollywood, CA
|
17.
|
|
Le Montrose Suite Hotel
|
|
West Hollywood, CA
|
18.
|
|
Le Parc Suite Hotel
|
|
West Hollywood, CA
|
19.
|
|
The Grafton on Sunset
|
|
West Hollywood, CA
|
20.
|
|
Hotel George
|
|
Washington, DC
|
21.
|
|
Hotel Madera
|
|
Washington, DC
|
22.
|
|
Hotel Palomar, Washington, DC
|
|
Washington, DC
|
23.
|
|
Hotel Rouge
|
|
Washington, DC
|
24.
|
|
Mason & Rook Hotel
|
|
Washington, DC
|
25.
|
|
Sofitel Washington, DC Lafayette Square
|
|
Washington, DC
|
26.
|
|
The Donovan
|
|
Washington, DC
|
27.
|
|
The Liaison Capitol Hill
|
|
Washington, DC
|
28.
|
|
Topaz Hotel
|
|
Washington, DC
|
29.
|
|
Southernmost Beach Resort Key West
|
|
Key West, FL
|
30.
|
|
The Marker Waterfront Resort
|
|
Key West, FL
|
31.
|
|
Hotel Chicago
|
|
Chicago, IL
|
32.
|
|
Westin Michigan Avenue
|
|
Chicago, IL
|
33.
|
|
Hyatt Regency Boston Harbor
|
|
Boston, MA
|
34.
|
|
Onyx Hotel
|
|
Boston, MA
|
35.
|
|
The Liberty Hotel
|
|
Boston, MA
|
36.
|
|
Westin Copley Place
|
|
Boston, MA
|
37.
|
|
Gild Hall
|
|
New York, NY
|
38.
|
|
The Roger
|
|
New York, NY
|
39.
|
|
Park Central Hotel New York (shared lease with WestHouse Hotel New York)
|
|
New York, NY
|
40.
|
|
WestHouse Hotel New York
|
|
New York, NY
|
41.
|
|
The Heathman Hotel
|
|
Portland, OR
|
42.
|
|
Embassy Suites Philadelphia - Center City
|
|
Philadelphia, PA
|
43.
|
|
Westin Philadelphia
|
|
Philadelphia, PA
|
9.
|
Income Taxes
|
|
For the three months ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
LHL’s income tax benefit
|
$
|
(5,071
|
)
|
|
$
|
(5,873
|
)
|
Operating Partnership’s income tax expense
|
298
|
|
|
253
|
|
||
Total income tax benefit
|
$
|
(4,773
|
)
|
|
$
|
(5,620
|
)
|
10.
|
Fair Value Measurements
|
|
|
|
|
Fair Value Measurements at
|
||||||
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
||||
|
|
|
|
Using Significant Other Observable
|
||||||
|
|
|
|
Inputs (Level 2)
|
||||||
Description
|
|
Consolidated Balance Sheet Location
|
|
|
|
|
||||
Derivative interest rate instruments
|
|
Prepaid expenses and other assets
|
|
$
|
4,745
|
|
|
$
|
3,295
|
|
Derivative interest rate instruments
|
|
Accounts payable and accrued expenses
|
|
$
|
268
|
|
|
$
|
927
|
|
|
March 31, 2017
|
|
December 31, 2016
|
||||||||||||
|
Carrying Value
|
|
Estimated Fair Value
|
|
Carrying Value
|
|
Estimated Fair Value
|
||||||||
Borrowings under credit facilities
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Term loans
|
$
|
855,000
|
|
|
$
|
856,302
|
|
|
$
|
855,000
|
|
|
$
|
857,224
|
|
Bonds payable
|
$
|
42,500
|
|
|
$
|
42,500
|
|
|
$
|
42,500
|
|
|
$
|
42,500
|
|
Mortgage loan
|
$
|
225,000
|
|
|
$
|
225,225
|
|
|
$
|
225,000
|
|
|
$
|
225,224
|
|
11.
|
Earnings Per Common Share
|
|
For the three months ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Numerator:
|
|
|
|
||||
Net income attributable to common shareholders
|
$
|
76,084
|
|
|
$
|
6,017
|
|
Dividends paid on unvested restricted shares
|
(122
|
)
|
|
(133
|
)
|
||
Undistributed earnings attributable to unvested restricted shares
|
(37
|
)
|
|
0
|
|
||
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares
|
$
|
75,925
|
|
|
$
|
5,884
|
|
Denominator:
|
|
|
|
||||
Weighted average number of common shares - basic
|
112,923,719
|
|
|
112,748,492
|
|
||
Effect of dilutive securities:
|
|
|
|
||||
Compensation-related shares
|
382,490
|
|
|
359,666
|
|
||
Weighted average number of common shares - diluted
|
113,306,209
|
|
|
113,108,158
|
|
||
Earnings per Common Share - Basic:
|
|
|
|
||||
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares
|
$
|
0.67
|
|
|
$
|
0.05
|
|
Earnings per Common Share - Diluted:
|
|
|
|
||||
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares
|
$
|
0.67
|
|
|
$
|
0.05
|
|
12.
|
Supplemental Information to Statements of Cash Flows
|
|
For the three months ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Interest paid, net of capitalized interest
|
$
|
9,142
|
|
|
$
|
11,780
|
|
Interest capitalized
|
78
|
|
|
195
|
|
||
Income taxes (refunded) paid, net
|
(57
|
)
|
|
208
|
|
||
Increase in distributions payable on common shares
|
59
|
|
|
45
|
|
||
Write-off of fully amortized debt issuance costs
|
5,057
|
|
|
563
|
|
||
Increase (decrease) in accrued capital expenditures
|
433
|
|
|
(5,341
|
)
|
||
Grant of nonvested shares and awards to employees and executives, net
|
7,180
|
|
|
4,926
|
|
||
Issuance of common shares for Board of Trustees compensation
(1)
|
1,240
|
|
|
480
|
|
||
In conjunction with the sale of properties, the Company disposed of the following assets and liabilities:
|
|
|
|
||||
Sale proceeds, net of closing costs
|
$
|
252,407
|
|
|
$
|
0
|
|
Other assets
|
5,803
|
|
|
0
|
|
||
Liabilities
|
(6,250
|
)
|
|
0
|
|
||
Proceeds from sale of properties
|
$
|
251,960
|
|
|
$
|
0
|
|
13.
|
Subsequent Events
|
Security Type
|
|
Dividend per Share/Unit
(1)
|
|
For the Quarter Ended
|
|
Record Date
|
|
Date Paid
|
||
Common Shares/Units
|
|
$
|
0.45
|
|
|
March 31, 2017
|
|
March 31, 2017
|
|
April 17, 2017
|
7.5% Series H Preferred Shares
|
|
$
|
0.47
|
|
|
March 31, 2017
|
|
March 31, 2017
|
|
April 17, 2017
|
6.375% Series I Preferred Shares
|
|
$
|
0.40
|
|
|
March 31, 2017
|
|
March 31, 2017
|
|
April 17, 2017
|
6.3% Series J Preferred Shares
|
|
$
|
0.39
|
|
|
March 31, 2017
|
|
March 31, 2017
|
|
April 17, 2017
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
risks associated with the hotel industry, including competition for guests and meetings from other hotels and alternative lodging companies, increases in wages, energy costs and other operating costs, potential unionization or union disruption, actual or threatened terrorist attacks, any type of flu or disease-related pandemic and downturns in general and local economic conditions;
|
•
|
the availability and terms of financing and capital and the general volatility of securities markets;
|
•
|
the Company’s dependence on third-party managers of its hotels, including its inability to implement strategic business decisions directly;
|
•
|
risks associated with the real estate industry, including environmental contamination and costs of complying with the Americans with Disabilities Act of 1990, as amended, and similar laws;
|
•
|
interest rate increases;
|
•
|
the possible failure of the Company to maintain its qualification as a real estate investment trust (“REIT”) as defined in the Internal Revenue Code of 1986, as amended (the “Code”) and the risk of changes in laws affecting REITs;
|
•
|
the possibility of uninsured losses;
|
•
|
risks associated with redevelopment and repositioning projects, including delays and cost overruns;
|
•
|
the risk of a material failure, inadequacy, interruption or security failure of the Company’s or the hotel managers’ information technology networks and systems; and
|
•
|
the risk factors discussed in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2016
, as updated elsewhere in this report.
|
•
|
the issuance of the 6.3% Series J Cumulative Redeemable Preferred Shares (the “Series J Preferred Shares”) in May 2016;
|
•
|
the sale of Indianapolis Marriott Downtown in July 2016;
|
•
|
the sale of Mezzanine Loan in July 2016;
|
•
|
the sale of Hotel Deca in January 2017; and
|
•
|
positive operating results from the hotel properties.
|
|
|
For the three months ended
|
||||||
|
|
March 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Net income attributable to common shareholders
|
|
$
|
76,084
|
|
|
$
|
6,017
|
|
Depreciation
|
|
47,131
|
|
|
47,494
|
|
||
Amortization of deferred lease costs
|
|
79
|
|
|
80
|
|
||
Noncontrolling interests of common units in Operating Partnership
|
|
110
|
|
|
15
|
|
||
Less: Gain on sale of properties
|
|
(74,358
|
)
|
|
0
|
|
||
FFO attributable to common shareholders and unitholders
|
|
$
|
49,046
|
|
|
$
|
53,606
|
|
Weighted average number of common shares and units outstanding:
|
|
|
|
|
||||
Basic
|
|
113,068,942
|
|
|
112,893,715
|
|
||
Diluted
|
|
113,451,432
|
|
|
113,253,381
|
|
|
|
For the three months ended
|
||||||
|
|
March 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Net income attributable to common shareholders
|
|
$
|
76,084
|
|
|
$
|
6,017
|
|
Interest expense
|
|
9,827
|
|
|
11,867
|
|
||
Loss from extinguishment of debt
|
|
1,706
|
|
|
0
|
|
||
Income tax benefit
|
|
(4,773
|
)
|
|
(5,620
|
)
|
||
Depreciation and amortization
|
|
47,263
|
|
|
47,628
|
|
||
Noncontrolling interests of common units in Operating Partnership
|
|
110
|
|
|
15
|
|
||
Distributions to preferred shareholders
|
|
5,405
|
|
|
3,042
|
|
||
EBITDA
(1)
|
|
$
|
135,622
|
|
|
$
|
62,949
|
|
(a)
|
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 credit agreement) plus an applicable margin. There were
no
borrowings outstanding at
March 31, 2017
and
December 31, 2016
. The Company has the option, pursuant to certain terms and conditions, to extend the maturity date for
two
six
-month extensions.
|
(b)
|
Borrowings bear interest at floating rates equal to, at LHL’s option, either (i) LIBOR plus an applicable margin, or (ii) an Adjusted Base Rate (as defined in the credit agreement) plus an applicable margin. There were
no
borrowings outstanding at
March 31, 2017
and
December 31, 2016
. LHL has the option, pursuant to certain terms and conditions, to extend the maturity date for
two
six
-month extensions.
|
(c)
|
Term loans bear interest at floating rates equal to LIBOR plus an applicable margin. The Company entered into interest rate swaps to effectively fix the interest rates for the First Term Loan (as defined below) and the Second Term Loan (as defined below). At
March 31, 2017
and
December 31, 2016
, the Company had interest rate swaps on the full amounts outstanding. See “Derivative and Hedging Activities” below. At
March 31, 2017
, the fixed all-in interest rates for the First Term Loan and Second Term Loan were
2.23%
and
2.95%
, respectively, at the Company’s current leverage ratio (as defined in the swap agreements). At
December 31, 2016
, the fixed all-in interest rates for the First Term Loan and Second Term Loan were
2.38%
and
2.95%
, respectively, at the Company’s current leverage ratio (as defined in the swap agreements).
|
(d)
|
The Massport Bonds are secured by letters of credit issued by U.S. Bank National Association that expire in September 2017. The letters of credit have a
one
-year extension option through September 2018 and are secured by the Hyatt Regency Boston Harbor, however, the letters of credit will not be extended beyond the Massport Bonds’ maturity date. The bonds bear interest based on weekly floating rates. The interest rates as of
March 31, 2017
were
1.00%
and
0.94%
for the
$5,400
and
$37,100
bonds, respectively. The interest rates as of
December 31, 2016
were
0.75%
and
0.76%
for the
$5,400
and
$37,100
bonds, respectively. The Company incurs an annual letter of credit fee of
1.35%
.
|
(e)
|
The mortgage loan matures on August 14, 2018 with
three
options to extend the maturity date to January 5, 2021, pursuant to certain terms and conditions. The interest-only mortgage loan bears interest at a variable rate ranging from LIBOR plus
1.75%
to LIBOR plus
2.00%
, depending on Westin Copley Place’s net cash flow (as defined in the loan agreement). The interest rate as of
March 31, 2017
was LIBOR plus
1.75%
, which equaled
2.67%
. The interest rate as of
December 31, 2016
was LIBOR plus
1.75%
, which equaled
2.46%
. The mortgage loan allows for prepayments without penalty, subject to certain terms and conditions.
|
|
For the three months ended
|
||||||
|
March 31,
|
||||||
|
2017
|
|
2016
|
||||
Interest Expense:
|
|
|
|
||||
Interest incurred
|
$
|
9,140
|
|
|
$
|
11,184
|
|
Amortization of debt issuance costs
|
765
|
|
|
878
|
|
||
Capitalized interest
|
(78
|
)
|
|
(195
|
)
|
||
Interest expense
|
$
|
9,827
|
|
|
$
|
11,867
|
|
|
|
|
|
||||
Weighted Average Interest Rates for Unswapped Variable Rate Debt:
|
|
|
|||||
Senior unsecured credit facility
|
N/A
|
|
|
2.13
|
%
|
||
LHL unsecured credit facility
|
N/A
|
|
|
2.13
|
%
|
||
Massport Bonds
|
0.70
|
%
|
|
0.11
|
%
|
||
Mortgage loan (Westin Copley Place)
|
2.54
|
%
|
|
2.17
|
%
|
|
|
|
|
Fair Value Measurements at
|
||||||
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
||||
|
|
|
|
Using Significant Other Observable
|
||||||
|
|
|
|
Inputs (Level 2)
|
||||||
Description
|
|
Consolidated Balance Sheet Location
|
|
|
|
|
||||
Derivative interest rate instruments
|
|
Prepaid expenses and other assets
|
|
$
|
4,745
|
|
|
$
|
3,295
|
|
Derivative interest rate instruments
|
|
Accounts payable and accrued expenses
|
|
$
|
268
|
|
|
$
|
927
|
|
|
March 31, 2017
|
|
December 31, 2016
|
||||||||||||
|
Carrying Value
|
|
Estimated Fair Value
|
|
Carrying Value
|
|
Estimated Fair Value
|
||||||||
Borrowings under credit facilities
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Term loans
|
$
|
855,000
|
|
|
$
|
856,302
|
|
|
$
|
855,000
|
|
|
$
|
857,224
|
|
Bonds payable
|
$
|
42,500
|
|
|
$
|
42,500
|
|
|
$
|
42,500
|
|
|
$
|
42,500
|
|
Mortgage loan
|
$
|
225,000
|
|
|
$
|
225,225
|
|
|
$
|
225,000
|
|
|
$
|
225,224
|
|
|
|
Total
Amounts Committed |
|
Amount of Commitment Expiration Per Period
|
||||||||||||||||
Obligations and Commitments
|
|
|
Less than
1 year |
|
1 to 3 years
|
|
4 to 5 years
|
|
Over 5 years
|
|||||||||||
Mortgage loan
|
|
$
|
225,000
|
|
|
$
|
0
|
|
|
$
|
225,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Mortgage loan interest
(1)
|
|
8,861
|
|
|
6,091
|
|
|
2,770
|
|
|
0
|
|
|
0
|
|
|||||
Borrowings under credit facilities
(2)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|||||
Credit facilities interest
(2)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|||||
Ground rents
(3)
|
|
650,555
|
|
|
13,104
|
|
|
26,486
|
|
|
27,348
|
|
|
583,617
|
|
|||||
Massport Bonds
(2)
|
|
42,500
|
|
|
42,500
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|||||
Massport Bonds interest
(2)
|
|
369
|
|
|
369
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|||||
Term loans
(4)
|
|
855,000
|
|
|
0
|
|
|
0
|
|
|
855,000
|
|
|
0
|
|
|||||
Term loans interest
(4)
|
|
94,429
|
|
|
23,399
|
|
|
45,987
|
|
|
25,043
|
|
|
0
|
|
|||||
Purchase commitments
(5)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchase orders and letters of commitment
|
|
23,652
|
|
|
23,652
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|||||
Total obligations and commitments
|
|
$
|
1,900,366
|
|
|
$
|
109,115
|
|
|
$
|
300,243
|
|
|
$
|
907,391
|
|
|
$
|
583,617
|
|
(1)
|
Interest expense is calculated based on the variable rate as of
March 31, 2017
for Westin Copley Place.
|
(2)
|
Interest expense, if applicable, is calculated based on the variable rate as of
March 31, 2017
.
|
(3)
|
Amounts calculated based on the annual minimum future lease payments that extend through the term of the lease. Ground rents may be subject to adjustments based on future interest rates and hotel performance.
|
(4)
|
The term loans bear interest at floating rates equal to LIBOR plus applicable margins. The Company entered into separate interest rate swap agreements for the First Term Loan, resulting in a fixed all-in interest rate of
2.23%
, at the Company’s current leverage ratio (as defined in the agreements) through August 2, 2017, the interest rate swaps’ maturity date. The Company entered into separate interest rate swap agreements for the Second Term Loan, resulting in a fixed all-in interest rate of
2.95%
at the Company’s current leverage ratio (as defined in the agreements). The $377.5 million portion of the Second Term Loan is fixed through its maturity date of January 29, 2021 and the $177.5 million portion of the Second Term Loan is fixed through May 16, 2019, the interest rate swaps’ maturity date. It is assumed that the outstanding debt as of
March 31, 2017
will be repaid upon maturity with fixed interest-only payments through the swapped periods and interest calculated based on the variable rate as of
March 31, 2017
for the unswapped period of the term loans.
|
(5)
|
As of
March 31, 2017
, purchase orders and letters of commitment totaling approximately
$23.7 million
had been issued for renovations at the properties. The Company has committed to these projects and anticipates making similar arrangements in the future with the existing properties or any future properties that it may acquire.
|
|
|
For the three months ended
|
|||||||||
|
|
March 31,
|
|||||||||
|
|
2017
|
|
2016
|
|
Variance
|
|||||
Occupancy
|
|
77.7
|
%
|
|
77.6
|
%
|
|
0.2
|
%
|
||
ADR
|
|
$
|
228.39
|
|
|
$
|
225.69
|
|
|
1.2
|
%
|
RevPAR
|
|
$
|
177.56
|
|
|
$
|
175.03
|
|
|
1.4
|
%
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Period
|
|
Total Number of Shares Purchased
(1)
|
|
Average Price Paid per Share
(1)
|
|
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
(2)
|
||||||
January 1, 2017 - January 31, 2017
|
|
54,410
|
|
|
$
|
30.47
|
|
|
—
|
|
|
$
|
—
|
|
February 1, 2017 - February 28, 2017
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
March 1, 2017 - March 31, 2017
|
|
19,374
|
|
|
$
|
29.19
|
|
|
—
|
|
|
$
|
—
|
|
Total
|
|
73,784
|
|
|
$
|
30.13
|
|
|
—
|
|
|
$
|
569,807,000
|
|
(1)
|
Reflects shares surrendered to the Company for payment of tax withholding obligations in connection with the vesting of restricted shares. The average price paid reflects the average market value of shares withheld for tax purposes.
|
(2)
|
On August 29, 2011, the Company announced its Board of Trustees had authorized the Repurchase Program to acquire up to $100.0 million of the Company’s common shares of beneficial interest. On February 22, 2017, the Company announced the Board of Trustees authorized an expansion of the Repurchase Program to acquire up to an additional $500.0 million of the Company’s common shares of beneficial interest. The Company cumulatively repurchased $30.2 million of common shares of beneficial interest pursuant to the Repurchase Program through March 31, 2017. As of March 31, 2017, the Company had availability under the Repurchase Program to acquire up to $569.8 million of common shares of beneficial interest. The authorization did not include specific price targets or an expiration date. The timing, manner, price and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, market conditions, and other corporate liquidity requirements and priorities. The Repurchase Program may be suspended, modified or terminated at any time for any reason without prior notice. The Repurchase Program does not obligate the Company to acquire any specific number of shares, and all open market repurchases will be made in accordance with applicable rules and regulations setting forth certain restrictions on the method, timing, price and volume of open market share repurchases.
|
Item 3.
|
Defaults Upon Senior Securities
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Other Information
|
Item 6.
|
Exhibits
|
Exhibit
Number
|
|
Description of Exhibit
|
|
|
|
10.1
|
|
Second Amended and Restated Senior Unsecured Credit Agreement, dated January 10, 2017, among LaSalle Hotel Operating Partnership, L.P., LaSalle Hotel Properties, and Citibank, N.A., as Administrative Agent, and the other lenders named therein
(1)
|
|
|
|
10.2
|
|
Amended and Restated Senior Unsecured Term Loan Agreement, dated as of January 10, 2017, among LaSalle Hotel Operating Partnership, L.P., LaSalle Hotel Properties, and Citibank, N.A., as Administrative Agent, and the other lenders named therein
(1)
|
|
|
|
10.3
|
|
Form of Performance-Based Share Award Agreement
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002
|
|
|
|
32.1
|
|
Certification of Chief Executive Officer and 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
|
|
The following financial statements from LaSalle Hotel Properties’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed on April 19, 2017, formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) Consolidated Statements of Equity, (iv) Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements
|
|
|
|
(1)
|
Previously filed as an exhibit to the Company’s Annual Report on Form 10-K filed with the SEC on February 22, 2017 and incorporated herein by reference.
|
|
|
|
|
LASALLE HOTEL PROPERTIES
|
|
|
|
|
|
Date:
|
April 19, 2017
|
|
BY:
|
/s/ KENNETH G. FULLER
|
|
|
|
|
Kenneth G. Fuller
|
|
|
|
|
Executive Vice President
and Chief Financial Officer (Principal Financial Officer
and Principal Accounting Officer)
|
Exhibit
Number
|
|
Description of Exhibit
|
|
|
|
10.1
|
|
Second Amended and Restated Senior Unsecured Credit Agreement, dated January 10, 2017, among LaSalle Hotel Operating Partnership, L.P., LaSalle Hotel Properties, and Citibank, N.A., as Administrative Agent, and the other lenders named therein
(1)
|
|
|
|
10.2
|
|
Amended and Restated Senior Unsecured Term Loan Agreement, dated as of January 10, 2017, among LaSalle Hotel Operating Partnership, L.P., LaSalle Hotel Properties, and Citibank, N.A., as Administrative Agent, and the other lenders named therein
(1)
|
|
|
|
10.3
|
|
Form of Performance-Based Share Award Agreement
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002
|
|
|
|
32.1
|
|
Certification of Chief Executive Officer and 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
|
|
The following financial statements from LaSalle Hotel Properties’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed on April 19, 2017, formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) Consolidated Statements of Equity, (iv) Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements
|
|
|
|
(1)
|
Previously filed as an exhibit to the Company’s Annual Report on Form 10-K filed with the SEC on February 22, 2017 and incorporated herein by reference.
|
Company’s Ranking within the Peer Group Based on Return on Invested Capital:
|
Sixth, Seventh or Eighth (Least Return on Invested Capital)
|
Fifth
|
Fourth
|
Third
|
First (Greatest Return on Invested Capital) or Second
|
Percent Earned (of the 33-1/3% of the Award Determined by Section 2(c)):
|
0%
|
50%
|
100%
|
150%
|
200%
|
Company’s Ranking within the Peer Group Based on Return on Invested Capital:
|
Fifth, Sixth or Seventh (Least Return on Invested Capital)
|
Fourth
|
Third
|
First (Greatest Return on Invested Capital) or Second
|
Percent Earned (of the 33-1/3% of the Award Determined by Section 2(c)):
|
0%
|
100%
|
150%
|
200%
|
Company’s Ranking within the Peer Group Based on Return on Invested Capital:
|
Sixth (Least Return on Invested Capital) or Fifth
|
Fourth
|
Third
|
Second or First (Greatest Return on Invested Capital) or Second
|
Percent Earned (of the 33-1/3% of the Award Determined by Section 2(c)):
|
0%
|
100%
|
150%
|
200%
|
Company’s Ranking within the Peer Group Based on Return on Invested Capital:
|
Fifth (Least Return on Invested Capital)
|
Fourth
|
Third
|
Second
|
First (Greatest Return on Invested Capital)
|
Percent Earned (of the 33-1/3% of the Award Determined by Section 2(c)):
|
0%
|
50%
|
100%
|
150%
|
200%
|
Company’s Ranking within the Peer Group Based on Total Return:
|
Sixth, Seventh or Eighth (Least Total Return)
|
Fifth
|
Fourth
|
Third
|
First (Greatest Total Return) or Second
|
Percent Earned (of the 33-1/3% of the Award Determined by Section 2(d)):
|
0%
|
50%
|
100%
|
150%
|
200%
|
Company’s Ranking within the Peer Group Based on Total Return:
|
Fifth, Sixth or Seventh (Least Total Return)
|
Fourth
|
Third
|
First (Greatest Total Return) or Second
|
Percent Earned (of the 33-1/3% of the Award Determined by Section 2(d)):
|
0%
|
100%
|
150%
|
200%
|
Company’s Ranking within the Peer Group Based on Total Return:
|
Sixth (Least Total Return) or Fifth
|
Fourth
|
Third
|
Second or First (Greatest Total Return) or Second
|
Percent Earned (of the 33-1/3% of the Award Determined by Section 2(d)):
|
0%
|
100%
|
150%
|
200%
|
Company’s Ranking within the Peer Group Based on Total Return:
|
Fifth (Least Total Return)
|
Fourth
|
Third
|
Second
|
First (Greatest Total Return)
|
Percent Earned (of the 33-1/3% of the Award Determined by Section 2(d)):
|
0%
|
50%
|
100%
|
150%
|
200%
|
Company’s Total Return:
|
Less than 15.76%
|
15.76%
|
25.97%
|
40.49% or greater
|
Percent Earned (of the 33-1/3% of the Award Determined by Section 2(e)):
|
0%
|
50%
|
100%
|
200%
|
1.
|
I have reviewed this quarterly report on Form 10-Q of LaSalle Hotel Properties;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ MICHAEL D. BARNELLO
|
Michael D. Barnello
|
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of LaSalle Hotel Properties;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ KENNETH G. FULLER
|
Kenneth G. Fuller
|
Executive Vice President
and Chief Financial Officer
|
(1)
|
the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of LHO.
|
/s/ MICHAEL D. BARNELLO
|
Michael D. Barnello
|
President and Chief Executive Officer
|
|
/s/ KENNETH G. FULLER
|
Kenneth G. Fuller
|
Executive Vice President
and Chief Financial Officer
|