x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Maryland
|
|
36-4219376
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(State or other jurisdiction of
incorporation or organization)
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(IRS Employer
Identification No.)
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|
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7550 Wisconsin Avenue, 10
th
Floor
Bethesda, Maryland
|
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20814
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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x
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Accelerated filer
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¨
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Emerging growth company
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¨
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Class
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Outstanding at November 1, 2018
|
|
Common Shares of Beneficial Interest ($0.01 par value)
|
|
110,397,737
|
|
6.375% Series I Cumulative Redeemable Preferred Shares ($0.01 par value)
|
|
4,400,000
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|
6.3% Series J Cumulative Redeemable Preferred Shares ($0.01 par value)
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6,000,000
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PART I.
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||
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Item 1.
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||
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Item 2.
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||
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Item 3.
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Item 4.
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PART II.
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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PART I.
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Financial Information
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Item 1.
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Financial Statements
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September 30,
2018 |
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December 31,
2017 |
||||
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(unaudited)
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|
|
||||
Assets:
|
|
|
|
||||
Investment in hotel properties, net (Note 3)
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$
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3,253,874
|
|
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$
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3,265,615
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Property under development
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18,681
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|
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49,459
|
|
||
Cash and cash equivalents
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248,164
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|
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400,667
|
|
||
Restricted cash reserves (Note 5)
|
14,996
|
|
|
14,262
|
|
||
Hotel receivables (net of allowance for doubtful accounts of $395 and $404, respectively)
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41,732
|
|
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35,916
|
|
||
Debt issuance costs for borrowings under credit facilities, net
|
2,456
|
|
|
3,274
|
|
||
Deferred tax assets
|
1,678
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|
|
2,136
|
|
||
Prepaid expenses and other assets
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77,870
|
|
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43,612
|
|
||
Total assets
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$
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3,659,451
|
|
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$
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3,814,941
|
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Liabilities:
|
|
|
|
||||
Borrowings under credit facilities (Note 4)
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$
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0
|
|
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$
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0
|
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Term loans, net of unamortized debt issuance costs (Note 4)
|
853,634
|
|
|
853,195
|
|
||
Bonds payable, net of unamortized debt issuance costs (Note 4)
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0
|
|
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42,494
|
|
||
Mortgage loan, net of unamortized debt issuance costs (Note 4)
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224,806
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|
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224,432
|
|
||
Accounts payable and accrued expenses
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152,183
|
|
|
134,216
|
|
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Advance deposits
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33,371
|
|
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26,625
|
|
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Accrued interest
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2,354
|
|
|
2,383
|
|
||
Distributions payable
|
4,116
|
|
|
55,135
|
|
||
Deferred deposit on Merger transaction (Note 1)
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112,000
|
|
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0
|
|
||
Total liabilities
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1,382,464
|
|
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1,338,480
|
|
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Commitments and contingencies (Note 5)
|
|
|
|
||||
Equity:
|
|
|
|
||||
Shareholders’ Equity:
|
|
|
|
||||
Preferred shares of beneficial interest, $0.01 par value (liquidation preference of $260,000), 40,000,000 shares authorized; 10,400,000 shares issued and outstanding (Note 6)
|
104
|
|
|
104
|
|
||
Common shares of beneficial interest, $0.01 par value, 200,000,000 shares authorized; 113,251,427 shares issued and 110,397,737 shares outstanding, and 113,251,427 shares issued and 113,209,392 shares outstanding, respectively (Note 6)
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1,132
|
|
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1,132
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|
||
Treasury shares, at cost (Note 6)
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(71,403
|
)
|
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(1,181
|
)
|
||
Additional paid-in capital, net of offering costs of $82,865 and $82,842, respectively
|
2,768,049
|
|
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2,767,924
|
|
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Accumulated other comprehensive income (Note 4)
|
23,242
|
|
|
10,880
|
|
||
Distributions in excess of retained earnings
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(447,478
|
)
|
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(305,708
|
)
|
||
Total shareholders’ equity
|
2,273,646
|
|
|
2,473,151
|
|
||
Noncontrolling Interests:
|
|
|
|
||||
Noncontrolling interests in consolidated entities
|
16
|
|
|
18
|
|
||
Noncontrolling interests of common units in Operating Partnership (Note 6)
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3,325
|
|
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3,292
|
|
||
Total noncontrolling interests
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3,341
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|
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3,310
|
|
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Total equity
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2,276,987
|
|
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2,476,461
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|
||
Total liabilities and equity
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$
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3,659,451
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|
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$
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3,814,941
|
|
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For the three months ended
|
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For the nine months ended
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||||||||||||
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September 30,
|
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September 30,
|
||||||||||||
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2018
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2017
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2018
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2017
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Hotel operating revenues (Note 8):
|
|
|
|
|
|
|
|
||||||||
Room
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$
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214,283
|
|
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$
|
209,019
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|
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$
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589,371
|
|
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$
|
609,769
|
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Food and beverage
|
51,212
|
|
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50,191
|
|
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151,821
|
|
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161,803
|
|
||||
Other operating department
|
26,915
|
|
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24,243
|
|
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71,543
|
|
|
66,728
|
|
||||
Total hotel operating revenues
|
292,410
|
|
|
283,453
|
|
|
812,735
|
|
|
838,300
|
|
||||
Other income
|
5,588
|
|
|
2,403
|
|
|
12,895
|
|
|
9,005
|
|
||||
Total revenues
|
297,998
|
|
|
285,856
|
|
|
825,630
|
|
|
847,305
|
|
||||
Expenses:
|
|
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|
|
|
|
|
||||||||
Hotel operating expenses:
|
|
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|
|
||||||||
Room
|
57,347
|
|
|
55,474
|
|
|
162,418
|
|
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163,068
|
|
||||
Food and beverage
|
37,574
|
|
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37,628
|
|
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111,655
|
|
|
116,908
|
|
||||
Other direct
|
3,683
|
|
|
2,793
|
|
|
10,055
|
|
|
9,631
|
|
||||
Other indirect (Note 9)
|
71,576
|
|
|
69,207
|
|
|
204,823
|
|
|
212,040
|
|
||||
Total hotel operating expenses
|
170,180
|
|
|
165,102
|
|
|
488,951
|
|
|
501,647
|
|
||||
Depreciation and amortization
|
46,318
|
|
|
43,355
|
|
|
138,490
|
|
|
134,684
|
|
||||
Real estate taxes, personal property taxes and insurance
|
17,600
|
|
|
16,663
|
|
|
49,936
|
|
|
46,867
|
|
||||
Ground rent (Note 5)
|
4,790
|
|
|
4,788
|
|
|
12,864
|
|
|
11,996
|
|
||||
General and administrative
|
6,313
|
|
|
6,475
|
|
|
19,496
|
|
|
19,946
|
|
||||
Costs related to the Mergers and unsolicited takeover offers (Note 1)
|
9,917
|
|
|
0
|
|
|
21,248
|
|
|
0
|
|
||||
Other expenses
|
1,351
|
|
|
3,179
|
|
|
4,160
|
|
|
6,656
|
|
||||
Total operating expenses
|
256,469
|
|
|
239,562
|
|
|
735,145
|
|
|
721,796
|
|
||||
Operating income
|
41,529
|
|
|
46,294
|
|
|
90,485
|
|
|
125,509
|
|
||||
Interest income
|
670
|
|
|
951
|
|
|
2,073
|
|
|
1,408
|
|
||||
Interest expense
|
(10,587
|
)
|
|
(10,026
|
)
|
|
(31,205
|
)
|
|
(29,276
|
)
|
||||
Loss from extinguishment of debt (Note 4)
|
0
|
|
|
0
|
|
|
0
|
|
|
(1,706
|
)
|
||||
Merger termination fee (Note 1)
|
(112,000
|
)
|
|
0
|
|
|
(112,000
|
)
|
|
0
|
|
||||
(Loss) income before income tax expense
|
(80,388
|
)
|
|
37,219
|
|
|
(50,647
|
)
|
|
95,935
|
|
||||
Income tax expense (Note 10)
|
(2,850
|
)
|
|
(1,978
|
)
|
|
(3,816
|
)
|
|
(2,208
|
)
|
||||
(Loss) income before gain on sale of properties
|
(83,238
|
)
|
|
35,241
|
|
|
(54,463
|
)
|
|
93,727
|
|
||||
Gain on sale of properties (Note 3)
|
0
|
|
|
31
|
|
|
0
|
|
|
85,545
|
|
||||
Net (loss) income
|
(83,238
|
)
|
|
35,272
|
|
|
(54,463
|
)
|
|
179,272
|
|
||||
Net income attributable to noncontrolling interests:
|
|
|
|
|
|
|
|
||||||||
Noncontrolling interests in consolidated entities
|
0
|
|
|
0
|
|
|
(8
|
)
|
|
(8
|
)
|
||||
Noncontrolling interests of common units in Operating Partnership (Note 6)
|
(55
|
)
|
|
(49
|
)
|
|
(114
|
)
|
|
(242
|
)
|
||||
Net income attributable to noncontrolling interests
|
(55
|
)
|
|
(49
|
)
|
|
(122
|
)
|
|
(250
|
)
|
||||
Net (loss) income attributable to the Company
|
(83,293
|
)
|
|
35,223
|
|
|
(54,585
|
)
|
|
179,022
|
|
||||
Distributions to preferred shareholders
|
(4,116
|
)
|
|
(4,116
|
)
|
|
(12,347
|
)
|
|
(13,908
|
)
|
||||
Issuance costs of redeemed preferred shares (Note 6)
|
0
|
|
|
0
|
|
|
0
|
|
|
(2,401
|
)
|
||||
Net (loss) income attributable to common shareholders
|
$
|
(87,409
|
)
|
|
$
|
31,107
|
|
|
$
|
(66,932
|
)
|
|
$
|
162,713
|
|
|
For the three months ended
|
|
For the nine months ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Earnings per Common Share - Basic (Note 12):
|
|
|
|
|
|
|
|
||||||||
Net (loss) income attributable to common shareholders excluding amounts attributable to unvested restricted shares
|
$
|
(0.79
|
)
|
|
$
|
0.27
|
|
|
$
|
(0.61
|
)
|
|
$
|
1.44
|
|
Earnings per Common Share - Diluted (Note 12):
|
|
|
|
|
|
|
|
||||||||
Net (loss) income attributable to common shareholders excluding amounts attributable to unvested restricted shares
|
$
|
(0.79
|
)
|
|
$
|
0.27
|
|
|
$
|
(0.61
|
)
|
|
$
|
1.43
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
110,124,868
|
|
|
113,007,475
|
|
|
110,793,969
|
|
|
112,961,365
|
|
||||
Diluted
|
110,124,868
|
|
|
113,383,360
|
|
|
110,793,969
|
|
|
113,343,711
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Comprehensive (Loss) Income:
|
|
|
|
|
|
|
|
||||||||
Net (loss) income
|
$
|
(83,238
|
)
|
|
$
|
35,272
|
|
|
$
|
(54,463
|
)
|
|
$
|
179,272
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
||||||||
Unrealized gain (loss) on interest rate derivative instruments (Note 4)
|
2,280
|
|
|
517
|
|
|
14,166
|
|
|
(34
|
)
|
||||
Reclassification adjustment for amounts recognized in net (loss) income (Note 4)
|
(1,078
|
)
|
|
547
|
|
|
(1,787
|
)
|
|
2,030
|
|
||||
|
(82,036
|
)
|
|
36,336
|
|
|
(42,084
|
)
|
|
181,268
|
|
||||
Comprehensive income attributable to noncontrolling interests:
|
|
|
|
|
|
|
|
||||||||
Noncontrolling interests in consolidated entities
|
0
|
|
|
0
|
|
|
(8
|
)
|
|
(8
|
)
|
||||
Noncontrolling interests of common units in Operating Partnership (Note 6)
|
(57
|
)
|
|
(51
|
)
|
|
(131
|
)
|
|
(245
|
)
|
||||
Comprehensive income attributable to noncontrolling interests
|
(57
|
)
|
|
(51
|
)
|
|
(139
|
)
|
|
(253
|
)
|
||||
Comprehensive (loss) income attributable to the Company
|
$
|
(82,093
|
)
|
|
$
|
36,285
|
|
|
$
|
(42,223
|
)
|
|
$
|
181,015
|
|
|
Preferred
Shares of Beneficial Interest |
|
Common
Shares of Beneficial Interest |
|
Treasury
Shares |
|
Additional
Paid-In Capital |
|
Accumulated Other Comprehensive 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, 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
|
|
|
3,776
|
|
|
(2,536
|
)
|
|
0
|
|
|
0
|
|
|
1,240
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
1,240
|
|
|||||||||||
Redemption of preferred shares
|
(28
|
)
|
|
0
|
|
|
0
|
|
|
(66,341
|
)
|
|
0
|
|
|
(2,401
|
)
|
|
(68,770
|
)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(68,770
|
)
|
|||||||||||
Repurchase of common shares into treasury
|
0
|
|
|
0
|
|
|
(4,241
|
)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(4,241
|
)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(4,241
|
)
|
|||||||||||
Deferred compensation, net
|
0
|
|
|
1
|
|
|
651
|
|
|
4,522
|
|
|
0
|
|
|
0
|
|
|
5,174
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
5,174
|
|
|||||||||||
Distributions on earned shares from share awards with market conditions
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(780
|
)
|
|
(780
|
)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(780
|
)
|
|||||||||||
Distributions on common shares/units ($1.35 per share/unit)
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(152,976
|
)
|
|
(152,976
|
)
|
|
0
|
|
|
(196
|
)
|
|
(196
|
)
|
|
(153,172
|
)
|
|||||||||||
Distributions on preferred shares
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(13,908
|
)
|
|
(13,908
|
)
|
|
(8
|
)
|
|
0
|
|
|
(8
|
)
|
|
(13,916
|
)
|
|||||||||||
Net income
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
179,022
|
|
|
179,022
|
|
|
8
|
|
|
242
|
|
|
250
|
|
|
179,272
|
|
|||||||||||
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
Unrealized loss on interest rate derivative instruments
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(34
|
)
|
|
0
|
|
|
(34
|
)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(34
|
)
|
|||||||||||
Reclassification adjustment for amounts recognized in net income
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
2,027
|
|
|
0
|
|
|
2,027
|
|
|
0
|
|
|
3
|
|
|
3
|
|
|
2,030
|
|
|||||||||||
Balance, September 30, 2017
|
$
|
104
|
|
|
$
|
1,132
|
|
|
$
|
(553
|
)
|
|
$
|
2,766,385
|
|
|
$
|
4,358
|
|
|
$
|
(266,607
|
)
|
|
$
|
2,504,819
|
|
|
$
|
17
|
|
|
$
|
3,326
|
|
|
$
|
3,343
|
|
|
$
|
2,508,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
Balance, December 31, 2017
|
$
|
104
|
|
|
$
|
1,132
|
|
|
$
|
(1,181
|
)
|
|
$
|
2,767,924
|
|
|
$
|
10,880
|
|
|
$
|
(305,708
|
)
|
|
$
|
2,473,151
|
|
|
$
|
18
|
|
|
$
|
3,292
|
|
|
$
|
3,310
|
|
|
$
|
2,476,461
|
|
Issuance of shares, net of offering costs
|
0
|
|
|
0
|
|
|
1,729
|
|
|
(1,195
|
)
|
|
0
|
|
|
0
|
|
|
534
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
534
|
|
|||||||||||
Repurchase of common shares into treasury
|
0
|
|
|
0
|
|
|
(75,846
|
)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(75,846
|
)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(75,846
|
)
|
|||||||||||
Deferred compensation, net
|
0
|
|
|
0
|
|
|
3,895
|
|
|
1,320
|
|
|
0
|
|
|
0
|
|
|
5,215
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
5,215
|
|
|||||||||||
Distributions on earned shares from share awards with market conditions
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(262
|
)
|
|
(262
|
)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(262
|
)
|
|||||||||||
Distributions on common shares/units ($0.68 per share/unit)
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(74,576
|
)
|
|
(74,576
|
)
|
|
0
|
|
|
(98
|
)
|
|
(98
|
)
|
|
(74,674
|
)
|
|||||||||||
Distributions on preferred shares
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(12,347
|
)
|
|
(12,347
|
)
|
|
(10
|
)
|
|
0
|
|
|
(10
|
)
|
|
(12,357
|
)
|
|||||||||||
Net loss
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(54,585
|
)
|
|
(54,585
|
)
|
|
8
|
|
|
114
|
|
|
122
|
|
|
(54,463
|
)
|
|||||||||||
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
Unrealized gain on interest rate derivative instruments
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
14,147
|
|
|
0
|
|
|
14,147
|
|
|
0
|
|
|
19
|
|
|
19
|
|
|
14,166
|
|
|||||||||||
Reclassification adjustment for amounts recognized in net loss
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(1,785
|
)
|
|
0
|
|
|
(1,785
|
)
|
|
0
|
|
|
(2
|
)
|
|
(2
|
)
|
|
(1,787
|
)
|
|||||||||||
Balance, September 30, 2018
|
$
|
104
|
|
|
$
|
1,132
|
|
|
$
|
(71,403
|
)
|
|
$
|
2,768,049
|
|
|
$
|
23,242
|
|
|
$
|
(447,478
|
)
|
|
$
|
2,273,646
|
|
|
$
|
16
|
|
|
$
|
3,325
|
|
|
$
|
3,341
|
|
|
$
|
2,276,987
|
|
|
For the nine months ended
|
||||||
|
September 30,
|
||||||
|
2018
|
|
2017
|
||||
|
|
|
As Adjusted
(Note 2)
|
||||
|
|
|
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net (loss) income
|
$
|
(54,463
|
)
|
|
$
|
179,272
|
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
138,490
|
|
|
134,684
|
|
||
Amortization of debt issuance costs
|
1,884
|
|
|
2,098
|
|
||
Loss from extinguishment of debt
|
0
|
|
|
1,706
|
|
||
Gain on sale of properties
|
0
|
|
|
(85,545
|
)
|
||
Amortization of deferred compensation
|
5,215
|
|
|
5,174
|
|
||
Deferred income tax expense
|
458
|
|
|
172
|
|
||
Allowance for doubtful accounts
|
(9
|
)
|
|
118
|
|
||
Other
|
164
|
|
|
1,352
|
|
||
Business interruption insurance proceeds
|
3,337
|
|
|
1,399
|
|
||
Deferred deposit on Merger transaction
|
112,000
|
|
|
0
|
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Assets held for sale
|
0
|
|
|
(1,500
|
)
|
||
Hotel receivables
|
(5,807
|
)
|
|
(13,114
|
)
|
||
Prepaid expenses and other assets
|
(27,453
|
)
|
|
(16,548
|
)
|
||
Accounts payable and accrued expenses
|
21,754
|
|
|
7,088
|
|
||
Advance deposits
|
6,746
|
|
|
2,772
|
|
||
Accrued interest
|
(29
|
)
|
|
10
|
|
||
Net cash provided by operating activities
|
202,287
|
|
|
219,138
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Additions to properties
|
(96,351
|
)
|
|
(67,023
|
)
|
||
Improvements to properties
|
(2,604
|
)
|
|
0
|
|
||
Purchase of office furniture and equipment
|
(68
|
)
|
|
(14
|
)
|
||
Proceeds from sale of properties
|
0
|
|
|
402,400
|
|
||
Insurance proceeds received for damage of property
|
1,826
|
|
|
1,336
|
|
||
Net cash (used in) provided by investing activities
|
(97,197
|
)
|
|
336,699
|
|
||
Cash flows from financing activities:
|
|
|
|
||||
Repayment of bonds payable
|
(42,500
|
)
|
|
0
|
|
||
Payment of debt issuance costs
|
(247
|
)
|
|
(4,626
|
)
|
||
Purchase of treasury shares
|
(75,846
|
)
|
|
(4,241
|
)
|
||
Payment of common offering costs
|
(24
|
)
|
|
0
|
|
||
Distributions on earned shares from share awards with market conditions
|
(262
|
)
|
|
(780
|
)
|
||
Redemption of preferred shares
|
0
|
|
|
(68,750
|
)
|
||
Distributions on preferred shares
|
(12,357
|
)
|
|
(15,205
|
)
|
||
Distributions on common shares/units
|
(125,623
|
)
|
|
(152,983
|
)
|
||
Net cash used in financing activities
|
(256,859
|
)
|
|
(246,585
|
)
|
||
Net change in cash and cash equivalents and restricted cash reserves
|
(151,769
|
)
|
|
309,252
|
|
||
Cash and cash equivalents and restricted cash reserves, beginning of period
|
414,929
|
|
|
149,687
|
|
||
Cash and cash equivalents and restricted cash reserves, end of period
|
$
|
263,160
|
|
|
$
|
458,939
|
|
1.
|
Organization
|
2.
|
Summary of Significant Accounting Policies
|
3.
|
Investment in Hotel Properties
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
Land
|
$
|
624,922
|
|
|
$
|
624,843
|
|
Buildings and improvements
|
3,310,339
|
|
|
3,271,473
|
|
||
Furniture, fixtures and equipment
|
849,439
|
|
|
762,150
|
|
||
Investment in hotel properties, gross
|
4,784,700
|
|
|
4,658,466
|
|
||
Accumulated depreciation
|
(1,530,826
|
)
|
|
(1,392,851
|
)
|
||
Investment in hotel properties, net
|
$
|
3,253,874
|
|
|
$
|
3,265,615
|
|
4.
|
Long-Term Debt
|
|
|
|
|
|
|
Balance Outstanding as of
|
||||||
Debt
|
|
Interest
Rate |
|
Maturity
Date |
|
September 30,
2018 |
|
December 31,
2017 |
||||
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
|
|
|
|
|
|
(1,366
|
)
|
|
(1,805
|
)
|
||
Total term loans, net of unamortized debt issuance costs
|
|
|
|
853,634
|
|
|
853,195
|
|
||||
Massport Bonds
|
|
|
|
|
|
|
|
|
||||
Hyatt Regency Boston Harbor (taxable)
|
|
Floating
(d)
|
|
-
(d)
|
|
0
|
|
|
5,400
|
|
||
Hyatt Regency Boston Harbor (tax exempt)
|
|
Floating
(d)
|
|
-
(d)
|
|
0
|
|
|
37,100
|
|
||
Debt issuance costs, net
|
|
|
|
|
|
0
|
|
|
(6
|
)
|
||
Total bonds payable, net of unamortized debt issuance costs
|
|
|
|
0
|
|
|
42,494
|
|
||||
Mortgage loan
|
|
|
|
|
|
|
|
|
||||
Westin Copley Place
|
|
Floating
(e)
|
|
August 2019
(e)
|
|
225,000
|
|
|
225,000
|
|
||
Debt issuance costs, net
|
|
|
|
|
|
(194
|
)
|
|
(568
|
)
|
||
Total mortgage loan, net of unamortized debt issuance costs
|
|
|
|
224,806
|
|
|
224,432
|
|
||||
Total debt
|
|
|
|
|
|
$
|
1,078,440
|
|
|
$
|
1,120,121
|
|
(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
September 30, 2018
and
December 31, 2017
. 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
September 30, 2018
and
December 31, 2017
. 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
September 30, 2018
and
December 31, 2017
, the Company had interest rate swaps on the full amounts outstanding. See “Derivative and Hedging Activities” below. At
September 30, 2018
and
December 31, 2017
, the fixed all-in interest rates for the First Term Loan and Second Term Loan were
3.23%
and
2.95%
, respectively, at the Company’s current leverage ratio (as defined in the swap agreements).
|
(d)
|
The Company repaid the Massport Bonds on their maturity date, March 1, 2018, with available cash. The bonds bore interest based on weekly floating rates. The interest rates as of
December 31, 2017
were
1.70%
and
1.78%
for the
$5,400
and
$37,100
bonds, respectively.
|
(e)
|
On June 11, 2018, the Company exercised its first available option to extend the maturity date to August 14, 2019. There are
two
remaining 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). Effective the second quarter of 2018 through August 14, 2019, the mortgage loan bears interest at a variable rate of LIBOR plus
1.75%
. The interest rate as of
September 30, 2018
was LIBOR plus
1.75%
, which equaled
3.91%
. The interest rate as of
December 31, 2017
was LIBOR plus
1.75%
, which equaled
3.23%
. The mortgage loan allows for prepayments without penalty, subject to certain terms and conditions.
|
2018
|
$
|
0
|
|
2019
|
225,000
|
|
|
2020
|
0
|
|
|
2021
|
555,000
|
|
|
2022
|
300,000
|
|
|
Total debt
|
$
|
1,080,000
|
|
|
|
Amount of Gain Recognized in OCI on Derivative Instruments
|
|
Location of (Gain) Loss Reclassified from AOCI into Net (Loss) Income
|
|
Amount of (Gain) Loss Reclassified from AOCI into Net (Loss) Income
|
|
Total Amount of Interest Expense Line Item Presented in the Statement of Operations
|
||||||||||||||||||||
|
|
For the three months ended
|
|
|
|
|
For the three months ended
|
|
For the three months ended
|
|||||||||||||||||||
|
|
September 30,
|
|
|
|
|
September 30,
|
|
September 30,
|
|||||||||||||||||||
|
|
2018
|
|
2017
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|||||||||||||
Derivatives in cash flow hedging relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Interest rate swaps
|
|
$
|
2,280
|
|
|
$
|
517
|
|
|
Interest expense
|
|
$
|
(1,078
|
)
|
—
|
|
$
|
547
|
|
|
$
|
10,587
|
|
|
$
|
10,026
|
|
|
|
Amount of Gain (Loss) Recognized in OCI on Derivative Instruments
|
|
Location of (Gain) Loss Reclassified from AOCI into Net (Loss) Income
|
|
Amount of (Gain) Loss Reclassified from AOCI into Net (Loss) Income
|
|
Total Amount of Interest Expense Line Item Presented in the Statement of Operations
|
|||||||||||||||||||
|
|
For the nine months ended
|
|
|
|
|
For the nine months ended
|
|
For the nine months ended
|
||||||||||||||||||
|
|
September 30,
|
|
|
|
|
September 30,
|
|
September 30,
|
||||||||||||||||||
|
|
2018
|
|
2017
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||
Derivatives in cash flow hedging relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Interest rate swaps
|
|
$
|
14,166
|
|
|
$
|
(34
|
)
|
|
Interest expense
|
|
$
|
(1,787
|
)
|
|
$
|
2,030
|
|
|
$
|
31,205
|
|
|
$
|
29,276
|
|
5.
|
Commitments and Contingencies
|
Lease Properties
|
|
Lease Type
|
|
Lease Expiration Date
|
Southernmost Beach Resort Key West (Restaurant facility)
|
|
Ground lease
|
|
April 2029
(1)
|
Hyatt Regency Boston Harbor
|
|
Ground lease
|
|
April 2077
|
The Hilton San Diego Resort and Spa
|
|
Ground lease
|
|
July 2068
(2)
|
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
|
2018
|
$
|
2,890
|
|
2019
|
11,730
|
|
|
2020
|
12,160
|
|
|
2021
|
12,256
|
|
|
2022
|
12,320
|
|
|
Thereafter
|
557,096
|
|
|
|
$
|
608,452
|
|
6.
|
Equity
|
Dividend per
Share/Unit (1) |
|
For the Quarter Ended
|
|
Record Date
|
|
Date Paid
|
||
$
|
0.45
|
|
|
December 31, 2017
|
|
December 29, 2017
|
|
January 16, 2018
|
$
|
0.45
|
|
|
March 31, 2018
|
|
March 29, 2018
|
|
April 16, 2018
|
$
|
0.23
|
|
|
June 30, 2018
|
|
June 29, 2018
|
|
July 16, 2018
|
Security Type
|
|
Number of
Shares |
|
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
|
||
6.375% Series I
|
|
$
|
0.40
|
|
|
December 31, 2017
|
|
December 29, 2017
|
|
January 16, 2018
|
6.3% Series J
|
|
$
|
0.39
|
|
|
December 31, 2017
|
|
December 29, 2017
|
|
January 16, 2018
|
6.375% Series I
|
|
$
|
0.40
|
|
|
March 31, 2018
|
|
March 29, 2018
|
|
April 16, 2018
|
6.3% Series J
|
|
$
|
0.39
|
|
|
March 31, 2018
|
|
March 29, 2018
|
|
April 16, 2018
|
6.375% Series I
|
|
$
|
0.40
|
|
|
June 30, 2018
|
|
June 29, 2018
|
|
July 16, 2018
|
6.3% Series J
|
|
$
|
0.39
|
|
|
June 30, 2018
|
|
June 29, 2018
|
|
July 16, 2018
|
7.
|
Equity Incentive Plan
|
|
Number of
Shares |
|
Weighted -
Average Grant Date Fair Value |
|||
Nonvested at January 1, 2018
|
170,414
|
|
|
$
|
28.95
|
|
Granted
|
156,447
|
|
|
25.46
|
|
|
Vested
|
(55,380
|
)
|
|
31.08
|
|
|
Forfeited
|
(4,732
|
)
|
|
26.73
|
|
|
Nonvested at September 30, 2018
|
266,749
|
|
|
$
|
26.50
|
|
•
|
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.
|
|
Volatility
|
|
Interest
Rates |
|
Dividend
Yield |
|
Stock
Beta |
|
Fair Value of
Components of Award |
|
Weighting
of Total Awards |
||||||
March 21, 2018 Awards (performance period starting January 1, 2018)
|
|
|
|
|
|||||||||||||
Target amounts
|
27.70
|
%
|
|
2.46
|
%
|
|
N/A
|
|
N/A
|
|
|
$
|
20.00
|
|
|
33.40
|
%
|
Return on invested capital
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
N/A
|
|
|
$
|
25.46
|
|
|
33.30
|
%
|
Peer companies
|
27.70
|
%
|
|
2.46
|
%
|
|
N/A
|
|
1.105
|
|
|
$
|
21.43
|
|
|
33.30
|
%
|
March 21, 2018 Awards (performance period starting July 1, 2018)
|
|
|
|
|
|||||||||||||
Target amounts
|
27.70
|
%
|
|
2.46
|
%
|
|
N/A
|
|
N/A
|
|
|
$
|
24.11
|
|
|
33.40
|
%
|
Return on invested capital
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
N/A
|
|
|
$
|
25.46
|
|
|
33.30
|
%
|
Peer companies
|
27.70
|
%
|
|
2.46
|
%
|
|
N/A
|
|
1.105
|
|
|
$
|
23.67
|
|
|
33.30
|
%
|
|
Share Awards (Target Number
of Shares)
|
|
Weighted-
Average Grant
Date Fair Value
|
|||
Nonvested at January 1, 2018
|
263,948
|
|
|
$
|
27.04
|
|
Granted
|
156,455
|
|
|
23.75
|
|
|
Vested
|
(45,454
|
)
|
|
36.88
|
|
|
Forfeited
|
(8,202
|
)
|
|
36.26
|
|
|
Nonvested at September 30, 2018
|
366,747
|
|
|
$
|
24.65
|
|
8.
|
Revenues
|
|
For the three months ended September 30, 2018
|
||||||||||||||
|
Room
|
|
Food and beverage
|
|
Other operating department
|
|
Total hotel operating revenues
|
||||||||
Boston
|
$
|
39,709
|
|
|
$
|
12,505
|
|
|
$
|
3,029
|
|
|
$
|
55,243
|
|
Chicago
|
18,723
|
|
|
4,471
|
|
|
1,106
|
|
|
$
|
24,300
|
|
|||
Key West
|
7,060
|
|
|
2,136
|
|
|
1,326
|
|
|
$
|
10,522
|
|
|||
Los Angeles
|
17,939
|
|
|
2,499
|
|
|
2,030
|
|
|
$
|
22,468
|
|
|||
New York
|
25,929
|
|
|
1,089
|
|
|
3,975
|
|
|
$
|
30,993
|
|
|||
San Diego Downtown
|
10,151
|
|
|
2,053
|
|
|
1,030
|
|
|
$
|
13,234
|
|
|||
San Francisco
|
39,547
|
|
|
6,432
|
|
|
4,066
|
|
|
$
|
50,045
|
|
|||
Washington, DC
|
24,110
|
|
|
5,883
|
|
|
3,213
|
|
|
$
|
33,206
|
|
|||
Other
(1)
|
31,115
|
|
|
14,144
|
|
|
7,140
|
|
|
$
|
52,399
|
|
|||
|
$
|
214,283
|
|
|
$
|
51,212
|
|
|
$
|
26,915
|
|
|
$
|
292,410
|
|
|
For the nine months ended September 30, 2018
|
||||||||||||||
|
Room
|
|
Food and beverage
|
|
Other operating department
|
|
Total hotel operating revenues
|
||||||||
Boston
|
$
|
99,019
|
|
|
$
|
37,606
|
|
|
$
|
8,443
|
|
|
$
|
145,068
|
|
Chicago
|
45,641
|
|
|
11,326
|
|
|
3,096
|
|
|
$
|
60,063
|
|
|||
Key West
|
28,202
|
|
|
7,606
|
|
|
4,150
|
|
|
$
|
39,958
|
|
|||
Los Angeles
|
49,166
|
|
|
7,159
|
|
|
5,205
|
|
|
$
|
61,530
|
|
|||
New York
|
70,248
|
|
|
4,064
|
|
|
11,390
|
|
|
$
|
85,702
|
|
|||
San Diego Downtown
|
28,346
|
|
|
5,664
|
|
|
2,554
|
|
|
$
|
36,564
|
|
|||
San Francisco
|
107,851
|
|
|
17,876
|
|
|
11,352
|
|
|
$
|
137,079
|
|
|||
Washington, DC
|
84,388
|
|
|
20,067
|
|
|
7,930
|
|
|
$
|
112,385
|
|
|||
Other
(1)
|
76,510
|
|
|
40,453
|
|
|
17,423
|
|
|
$
|
134,386
|
|
|||
|
$
|
589,371
|
|
|
$
|
151,821
|
|
|
$
|
71,543
|
|
|
$
|
812,735
|
|
(1)
|
For the
three and nine months ended
September 30, 2018
, other includes Chaminade Resort and Conference Center in Santa Cruz, CA, Embassy Suites Philadelphia - Center City in Philadelphia, PA, L’Auberge Del Mar in Del Mar, CA, San Diego Paradise Point Resort and Spa and The Hilton San Diego Resort and Spa in San Diego, CA and The Heathman Hotel in Portland, OR.
|
|
For the three months ended September 30, 2017
|
||||||||||||||
|
Room
|
|
Food and beverage
|
|
Other operating department
|
|
Total hotel operating revenues
|
||||||||
Boston
|
$
|
37,866
|
|
|
$
|
11,633
|
|
|
$
|
2,718
|
|
|
$
|
52,217
|
|
Chicago
|
17,567
|
|
|
3,950
|
|
|
1,340
|
|
|
$
|
22,857
|
|
|||
Key West
|
5,485
|
|
|
1,592
|
|
|
993
|
|
|
$
|
8,070
|
|
|||
Los Angeles
|
19,411
|
|
|
2,651
|
|
|
1,880
|
|
|
$
|
23,942
|
|
|||
New York
|
26,266
|
|
|
1,420
|
|
|
3,476
|
|
|
$
|
31,162
|
|
|||
San Diego Downtown
|
9,921
|
|
|
2,359
|
|
|
748
|
|
|
$
|
13,028
|
|
|||
San Francisco
(1)
|
35,390
|
|
|
5,152
|
|
|
4,026
|
|
|
$
|
44,568
|
|
|||
Washington, DC
|
26,636
|
|
|
6,701
|
|
|
2,175
|
|
|
$
|
35,512
|
|
|||
Other
(2)
|
30,477
|
|
|
14,733
|
|
|
6,887
|
|
|
$
|
52,097
|
|
|||
|
$
|
209,019
|
|
|
$
|
50,191
|
|
|
$
|
24,243
|
|
|
$
|
283,453
|
|
|
For the nine months ended September 30, 2017
|
||||||||||||||
|
Room
|
|
Food and beverage
|
|
Other operating department
|
|
Total hotel operating revenues
|
||||||||
Boston
|
$
|
99,349
|
|
|
$
|
37,762
|
|
|
$
|
7,367
|
|
|
$
|
144,478
|
|
Chicago
|
44,048
|
|
|
11,236
|
|
|
3,654
|
|
|
$
|
58,938
|
|
|||
Key West
|
28,205
|
|
|
6,787
|
|
|
3,651
|
|
|
$
|
38,643
|
|
|||
Los Angeles
|
53,417
|
|
|
7,928
|
|
|
4,552
|
|
|
$
|
65,897
|
|
|||
New York
|
68,502
|
|
|
4,346
|
|
|
9,711
|
|
|
$
|
82,559
|
|
|||
San Diego Downtown
|
28,143
|
|
|
6,248
|
|
|
2,117
|
|
|
$
|
36,508
|
|
|||
San Francisco
(1)
|
103,855
|
|
|
16,093
|
|
|
10,349
|
|
|
$
|
130,297
|
|
|||
Washington, DC
|
95,071
|
|
|
22,587
|
|
|
6,254
|
|
|
$
|
123,912
|
|
|||
Other
(2)
|
89,179
|
|
|
48,816
|
|
|
19,073
|
|
|
$
|
157,068
|
|
|||
|
$
|
609,769
|
|
|
$
|
161,803
|
|
|
$
|
66,728
|
|
|
$
|
838,300
|
|
(1)
|
Includes Hotel Triton which was sold on April 11, 2017.
|
(2)
|
For the
three and nine months ended
September 30, 2017
, other includes Chaminade Resort and Conference Center in Santa Cruz, CA, Embassy Suites Philadelphia - Center City in Philadelphia, PA, L’Auberge Del Mar in Del Mar, CA, San Diego Paradise Point Resort and Spa and The Hilton San Diego Resort and Spa in San Diego, CA and The Heathman Hotel in Portland, OR. Other also includes the disposition properties of Alexis Hotel (sold on March 31, 2017) and Hotel Deca (sold on January 19, 2017) in Seattle, WA, Westin Philadelphia (sold on June 29, 2017) in Philadelphia, PA and Lansdowne Resort (sold on March 22, 2017) in Lansdowne, VA.
|
9.
|
LHL
|
|
For the three months ended
|
|
For the nine months ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
General and administrative
|
$
|
24,006
|
|
|
$
|
23,325
|
|
|
$
|
70,739
|
|
|
$
|
72,885
|
|
Sales and marketing
|
16,820
|
|
|
16,246
|
|
|
49,819
|
|
|
51,813
|
|
||||
Repairs and maintenance
|
9,256
|
|
|
9,115
|
|
|
27,089
|
|
|
28,073
|
|
||||
Management and incentive fees
|
10,086
|
|
|
9,962
|
|
|
26,675
|
|
|
28,131
|
|
||||
Utilities and insurance
|
8,275
|
|
|
7,807
|
|
|
22,517
|
|
|
22,912
|
|
||||
Franchise fees
|
2,236
|
|
|
2,084
|
|
|
6,045
|
|
|
6,422
|
|
||||
Other expenses
|
897
|
|
|
668
|
|
|
1,939
|
|
|
1,804
|
|
||||
Total other indirect expenses
|
$
|
71,576
|
|
|
$
|
69,207
|
|
|
$
|
204,823
|
|
|
$
|
212,040
|
|
|
|
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 Vitale
|
|
San Francisco, CA
|
9.
|
|
Park Central San Francisco
|
|
San Francisco, CA
|
10.
|
|
Hotel Spero (formerly Serrano Hotel)
|
|
San Francisco, CA
|
11.
|
|
The Marker San Francisco
|
|
San Francisco, CA
|
12.
|
|
Villa Florence
|
|
San Francisco, CA
|
13.
|
|
Chaminade Resort and Conference Center
|
|
Santa Cruz, CA
|
14.
|
|
Viceroy Santa Monica
|
|
Santa Monica, CA
|
15.
|
|
Chamberlain West Hollywood
|
|
West Hollywood, CA
|
16.
|
|
Montrose West Hollywood (formerly Le Montrose Suite Hotel)
|
|
West Hollywood, CA
|
17.
|
|
Le Parc Suite Hotel
|
|
West Hollywood, CA
|
18.
|
|
The Grafton on Sunset
|
|
West Hollywood, CA
|
19.
|
|
Hotel George
|
|
Washington, DC
|
20.
|
|
Hotel Madera
|
|
Washington, DC
|
21.
|
|
Hotel Palomar, Washington, DC
|
|
Washington, DC
|
22.
|
|
Hotel Rouge
|
|
Washington, DC
|
23.
|
|
Mason & Rook Hotel
|
|
Washington, DC
|
24.
|
|
Sofitel Washington, DC Lafayette Square
|
|
Washington, DC
|
25.
|
|
The Donovan
|
|
Washington, DC
|
26.
|
|
The Liaison Capitol Hill
|
|
Washington, DC
|
27.
|
|
Topaz Hotel
|
|
Washington, DC
|
28.
|
|
Southernmost Beach Resort Key West
|
|
Key West, FL
|
29.
|
|
The Marker Waterfront Resort
|
|
Key West, FL
|
30.
|
|
Hotel Chicago
|
|
Chicago, IL
|
31.
|
|
Westin Michigan Avenue
|
|
Chicago, IL
|
32.
|
|
Hyatt Regency Boston Harbor
|
|
Boston, MA
|
33.
|
|
Onyx Hotel
|
|
Boston, MA
|
34.
|
|
The Liberty Hotel
|
|
Boston, MA
|
35.
|
|
Westin Copley Place
|
|
Boston, MA
|
36.
|
|
Gild Hall
|
|
New York, NY
|
37.
|
|
The Roger
|
|
New York, NY
|
38.
|
|
Park Central Hotel New York (shared lease with WestHouse Hotel New York)
|
|
New York, NY
|
39.
|
|
WestHouse Hotel New York
|
|
New York, NY
|
40.
|
|
The Heathman Hotel
|
|
Portland, OR
|
41.
|
|
Embassy Suites Philadelphia - Center City
|
|
Philadelphia, PA
|
10.
|
Income Taxes
|
|
For the three months ended
|
|
For the nine months ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
LHL’s income tax expense
|
$
|
2,742
|
|
|
$
|
1,530
|
|
|
$
|
3,361
|
|
|
$
|
1,398
|
|
Operating Partnership’s income tax expense
|
108
|
|
|
448
|
|
|
455
|
|
|
810
|
|
||||
Total income tax expense
|
$
|
2,850
|
|
|
$
|
1,978
|
|
|
$
|
3,816
|
|
|
$
|
2,208
|
|
11.
|
Fair Value Measurements
|
|
|
|
|
Fair Value Measurements at
|
||||||
|
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
|
|
|
|
Using Significant Other Observable
|
||||||
|
|
|
|
Inputs (Level 2)
|
||||||
Description
|
|
Consolidated Balance Sheet Location
|
|
|
|
|
||||
Derivative interest rate instruments
|
|
Prepaid expenses and other assets
|
|
$
|
23,272
|
|
|
$
|
10,893
|
|
Derivative interest rate instruments
|
|
Accounts payable and accrued expenses
|
|
$
|
0
|
|
|
$
|
0
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||||||||||
|
Carrying Value
|
|
Estimated Fair Value
|
|
Carrying Value
|
|
Estimated Fair Value
|
||||||||
Borrowings under credit facilities
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Term loans
|
$
|
855,000
|
|
|
$
|
858,271
|
|
|
$
|
855,000
|
|
|
$
|
857,577
|
|
Bonds payable
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
42,500
|
|
|
$
|
42,500
|
|
Mortgage loan
|
$
|
225,000
|
|
|
$
|
224,774
|
|
|
$
|
225,000
|
|
|
$
|
224,429
|
|
12.
|
Earnings Per Common Share
|
|
For the three months ended
|
|
For the nine months ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net (loss) income attributable to common shareholders
|
$
|
(87,409
|
)
|
|
$
|
31,107
|
|
|
$
|
(66,932
|
)
|
|
$
|
162,713
|
|
Dividends paid on unvested restricted shares
|
0
|
|
|
(97
|
)
|
|
(179
|
)
|
|
(339
|
)
|
||||
Undistributed earnings attributable to unvested restricted shares
|
0
|
|
|
0
|
|
|
0
|
|
|
(19
|
)
|
||||
Net (loss) income attributable to common shareholders excluding amounts attributable to unvested restricted shares
|
$
|
(87,409
|
)
|
|
$
|
31,010
|
|
|
$
|
(67,111
|
)
|
|
$
|
162,355
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted average number of common shares - basic
|
110,124,868
|
|
|
113,007,475
|
|
|
110,793,969
|
|
|
112,961,365
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
||||||||
Compensation-related shares
|
0
|
|
|
375,885
|
|
|
0
|
|
|
382,346
|
|
||||
Weighted average number of common shares - diluted
|
110,124,868
|
|
|
113,383,360
|
|
|
110,793,969
|
|
|
113,343,711
|
|
||||
Earnings per Common Share - Basic:
|
|
|
|
|
|
|
|
||||||||
Net (loss) income attributable to common shareholders excluding amounts attributable to unvested restricted shares
|
$
|
(0.79
|
)
|
|
$
|
0.27
|
|
|
$
|
(0.61
|
)
|
|
$
|
1.44
|
|
Earnings per Common Share - Diluted:
|
|
|
|
|
|
|
|
||||||||
Net (loss) income attributable to common shareholders excluding amounts attributable to unvested restricted shares
|
$
|
(0.79
|
)
|
|
$
|
0.27
|
|
|
$
|
(0.61
|
)
|
|
$
|
1.43
|
|
13.
|
Supplemental Information to Statements of Cash Flows
|
|
For the nine months ended
|
||||||
|
September 30,
|
||||||
|
2018
|
|
2017
|
||||
Interest paid, net of capitalized interest
|
$
|
29,350
|
|
|
$
|
27,168
|
|
Interest capitalized
|
325
|
|
|
375
|
|
||
Income taxes (refunded) paid, net
|
(2,844
|
)
|
|
633
|
|
||
(Decrease) increase in distributions payable on common shares
|
(51,019
|
)
|
|
63
|
|
||
Decrease in distributions payable on preferred shares
|
0
|
|
|
(1,288
|
)
|
||
Write-off of fully depreciated furniture, fixtures and equipment
|
0
|
|
|
618
|
|
||
Write-off of fully amortized debt issuance costs
|
3,552
|
|
|
5,119
|
|
||
(Decrease) increase in accrued capital expenditures
|
(3,322
|
)
|
|
5,089
|
|
||
Grant of nonvested shares and awards to employees and executives, net
|
7,832
|
|
|
8,313
|
|
||
Issuance of common shares for Board of Trustees compensation
|
557
|
|
|
1,240
|
|
||
In conjunction with the sale of properties, the Company disposed of the following assets and liabilities:
|
|
|
|
||||
Sale proceeds, net of closing costs
|
$
|
0
|
|
|
$
|
398,178
|
|
Other assets
|
0
|
|
|
10,847
|
|
||
Liabilities
|
0
|
|
|
(6,625
|
)
|
||
Proceeds from sale of properties
|
$
|
0
|
|
|
$
|
402,400
|
|
14.
|
Subsequent Events
|
Security Type
|
|
Dividend per Share
(1)
|
|
For the Quarter Ended
|
|
Record Date
|
|
Date Paid
|
||
6.375% Series I Preferred Shares
|
|
$
|
0.40
|
|
|
September 30, 2018
|
|
October 1, 2018
|
|
October 15, 2018
|
6.3% Series J Preferred Shares
|
|
$
|
0.39
|
|
|
September 30, 2018
|
|
October 1, 2018
|
|
October 15, 2018
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
the ability to obtain the requisite shareholder approvals required to consummate the Mergers;
|
•
|
the satisfaction or waiver of other conditions to closing in the Merger Agreement (as defined below) or the failure of the Mergers to close for any other reason;
|
•
|
the occurrence of any change, effect, event, circumstance, occurrence or state of facts that could give rise to the termination of the Merger Agreement;
|
•
|
the outcome of the legal proceedings that may be instituted against the Company and others related to the Mergers and the Merger Agreement;
|
•
|
unanticipated difficulties or expenditures relating to the Mergers, the response of business partners, hotel operators and competitors to the announcement and pendency of the Mergers, and potential difficulties in employee retention as a result of the announcement and pendency of the Mergers;
|
•
|
the Company’s exclusive remedy against the counterparties to the Merger Agreement with respect to any breach of the Merger Agreement being to seek payment of the parent termination fee, which may not be adequate to cover the Company’s damages;
|
•
|
the Company’s restricted ability to pay dividends to its common shareholders pursuant to the Merger Agreement;
|
•
|
the response of activist investors to the Mergers;
|
•
|
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, 2017
, as updated elsewhere in this report.
|
|
|
For the three months ended
|
|
For the nine months ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net (loss) income
|
|
$
|
(83,238
|
)
|
|
$
|
35,272
|
|
|
$
|
(54,463
|
)
|
|
$
|
179,272
|
|
Depreciation
|
|
46,139
|
|
|
43,205
|
|
|
137,988
|
|
|
134,264
|
|
||||
Amortization of deferred lease costs
|
|
135
|
|
|
104
|
|
|
378
|
|
|
274
|
|
||||
Gain on sale of properties
|
|
0
|
|
|
(31
|
)
|
|
0
|
|
|
(85,545
|
)
|
||||
FFO
(1)
|
|
$
|
(36,964
|
)
|
|
$
|
78,550
|
|
|
$
|
83,903
|
|
|
$
|
228,265
|
|
Distributions to preferred shareholders
|
|
(4,116
|
)
|
|
(4,116
|
)
|
|
(12,347
|
)
|
|
(13,908
|
)
|
||||
Issuance costs of redeemed preferred shares
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(2,401
|
)
|
||||
FFO attributable to common shareholders and unitholders
(1)
|
|
$
|
(41,080
|
)
|
|
$
|
74,434
|
|
|
$
|
71,556
|
|
|
$
|
211,956
|
|
Weighted average number of common shares and units outstanding:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
110,270,091
|
|
|
113,152,698
|
|
|
110,939,192
|
|
|
113,106,588
|
|
||||
Diluted
|
|
110,270,091
|
|
|
113,528,583
|
|
|
111,373,605
|
|
|
113,488,934
|
|
|
|
For the three months ended
|
|
For the nine months ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net (loss) income
|
|
$
|
(83,238
|
)
|
|
$
|
35,272
|
|
|
$
|
(54,463
|
)
|
|
$
|
179,272
|
|
Interest expense
|
|
10,587
|
|
|
10,026
|
|
|
31,205
|
|
|
29,276
|
|
||||
Income tax expense
|
|
2,850
|
|
|
1,978
|
|
|
3,816
|
|
|
2,208
|
|
||||
Depreciation and amortization
|
|
46,318
|
|
|
43,355
|
|
|
138,490
|
|
|
134,684
|
|
||||
EBITDA
(1)
|
|
$
|
(23,483
|
)
|
|
$
|
90,631
|
|
|
$
|
119,048
|
|
|
$
|
345,440
|
|
Gain on sale of properties
|
|
0
|
|
|
(31
|
)
|
|
0
|
|
|
(85,545
|
)
|
||||
EBITDA
re
(1)
|
|
$
|
(23,483
|
)
|
|
$
|
90,600
|
|
|
$
|
119,048
|
|
|
$
|
259,895
|
|
|
|
|
|
|
|
Balance Outstanding as of
|
||||||
Debt
|
|
Interest
Rate |
|
Maturity
Date |
|
September 30,
2018 |
|
December 31,
2017 |
||||
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
|
|
|
|
|
|
(1,366
|
)
|
|
(1,805
|
)
|
||
Total term loans, net of unamortized debt issuance costs
|
|
|
|
853,634
|
|
|
853,195
|
|
||||
Massport Bonds
|
|
|
|
|
|
|
|
|
||||
Hyatt Regency Boston Harbor (taxable)
|
|
Floating
(d)
|
|
-
(d)
|
|
0
|
|
|
5,400
|
|
||
Hyatt Regency Boston Harbor (tax exempt)
|
|
Floating
(d)
|
|
-
(d)
|
|
0
|
|
|
37,100
|
|
||
Debt issuance costs, net
|
|
|
|
|
|
0
|
|
|
(6
|
)
|
||
Total bonds payable, net of unamortized debt issuance costs
|
|
|
|
0
|
|
|
42,494
|
|
||||
Mortgage loan
|
|
|
|
|
|
|
|
|
||||
Westin Copley Place
|
|
Floating
(e)
|
|
August 2019
(e)
|
|
225,000
|
|
|
225,000
|
|
||
Debt issuance costs, net
|
|
|
|
|
|
(194
|
)
|
|
(568
|
)
|
||
Total mortgage loan, net of unamortized debt issuance costs
|
|
|
|
224,806
|
|
|
224,432
|
|
||||
Total debt
|
|
|
|
|
|
$
|
1,078,440
|
|
|
$
|
1,120,121
|
|
(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
September 30, 2018
and
December 31, 2017
. 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
September 30, 2018
and
December 31, 2017
. 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
September 30, 2018
and
December 31, 2017
, the Company had interest rate swaps on the full amounts outstanding. See “Derivative and Hedging Activities” below. At
September 30, 2018
and December 31, 2017, the fixed all-in interest rates for the First Term Loan and Second Term Loan were
3.23%
and
2.95%
, respectively, at the Company’s current leverage ratio (as defined in the swap agreements).
|
(d)
|
The Company repaid the Massport Bonds on their maturity date, March 1, 2018, with available cash. The bonds bore interest based on weekly floating rates. The interest rates as of
December 31, 2017
were
1.70%
and
1.78%
for the
$5,400
and
$37,100
bonds, respectively.
|
(e)
|
On June 11, 2018, the Company exercised its first available option to extend the maturity date to August 14, 2019. There are
two
remaining 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). Effective the second quarter of 2018 through August 14, 2019, the mortgage loan bears interest at a variable rate of LIBOR plus
1.75%
. The interest rate as of
September 30, 2018
was LIBOR plus
1.75%
, which equaled
3.91%
. The interest rate as of
December 31, 2017
was LIBOR plus
1.75%
, which equaled
3.23%
. The mortgage loan allows for prepayments without penalty, subject to certain terms and conditions.
|
|
|
Amount of Gain Recognized in OCI on Derivative Instruments
|
|
Location of (Gain) Loss Reclassified from AOCI into Net (Loss) Income
|
|
Amount of (Gain) Loss Reclassified from AOCI into Net (Loss) Income
|
|
Total Amount of Interest Expense Line Item Presented in the Statement of Operations
|
||||||||||||||||||||
|
|
For the three months ended
|
|
|
|
|
For the three months ended
|
|
For the three months ended
|
|||||||||||||||||||
|
|
September 30,
|
|
|
|
|
September 30,
|
|
September 30,
|
|||||||||||||||||||
|
|
2018
|
|
2017
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|||||||||||||
Derivatives in cash flow hedging relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Interest rate swaps
|
|
$
|
2,280
|
|
|
$
|
517
|
|
|
Interest expense
|
|
$
|
(1,078
|
)
|
—
|
|
$
|
547
|
|
|
$
|
10,587
|
|
|
$
|
10,026
|
|
|
|
Amount of Gain (Loss) Recognized in OCI on Derivative Instruments
|
|
Location of (Gain) Loss Reclassified from AOCI into Net (Loss) Income
|
|
Amount of (Gain) Loss Reclassified from AOCI into Net (Loss) Income
|
|
Total Amount of Interest Expense Line Item Presented in the Statement of Operations
|
|||||||||||||||||||
|
|
For the nine months ended
|
|
|
|
|
For the nine months ended
|
|
For the nine months ended
|
||||||||||||||||||
|
|
September 30,
|
|
|
|
|
September 30,
|
|
September 30,
|
||||||||||||||||||
|
|
2018
|
|
2017
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||
Derivatives in cash flow hedging relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Interest rate swaps
|
|
$
|
14,166
|
|
|
$
|
(34
|
)
|
|
Interest expense
|
|
$
|
(1,787
|
)
|
|
$
|
2,030
|
|
|
$
|
31,205
|
|
|
$
|
29,276
|
|
|
|
|
|
Fair Value Measurements at
|
||||||
|
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
|
|
|
|
Using Significant Other Observable
|
||||||
|
|
|
|
Inputs (Level 2)
|
||||||
Description
|
|
Consolidated Balance Sheet Location
|
|
|
|
|
||||
Derivative interest rate instruments
|
|
Prepaid expenses and other assets
|
|
$
|
23,272
|
|
|
$
|
10,893
|
|
Derivative interest rate instruments
|
|
Accounts payable and accrued expenses
|
|
$
|
0
|
|
|
$
|
0
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||||||||||
|
Carrying Value
|
|
Estimated Fair Value
|
|
Carrying Value
|
|
Estimated Fair Value
|
||||||||
Borrowings under credit facilities
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Term loans
|
$
|
855,000
|
|
|
$
|
858,271
|
|
|
$
|
855,000
|
|
|
$
|
857,577
|
|
Bonds payable
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
42,500
|
|
|
$
|
42,500
|
|
Mortgage loan
|
$
|
225,000
|
|
|
$
|
224,774
|
|
|
$
|
225,000
|
|
|
$
|
224,429
|
|
|
|
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
|
|
|
$
|
225,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Mortgage loan interest
(1)
|
|
8,480
|
|
|
8,480
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|||||
Borrowings under credit facilities
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|||||
Credit facilities interest
(2)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|||||
Capital and operating leases
(3)
|
|
608,452
|
|
|
11,676
|
|
|
24,295
|
|
|
24,673
|
|
|
547,808
|
|
|||||
Term loans
|
|
855,000
|
|
|
0
|
|
|
555,000
|
|
|
300,000
|
|
|
0
|
|
|||||
Term loans interest
(4)
|
|
72,999
|
|
|
26,887
|
|
|
43,389
|
|
|
2,723
|
|
|
0
|
|
|||||
Purchase commitments
(5)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchase orders and letters of commitment
|
|
16,054
|
|
|
16,054
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|||||
Total obligations and commitments
|
|
$
|
1,785,985
|
|
|
$
|
288,097
|
|
|
$
|
622,684
|
|
|
$
|
327,396
|
|
|
$
|
547,808
|
|
(1)
|
Interest expense is calculated based on the variable rate as of
September 30, 2018
for Westin Copley Place.
|
(2)
|
Interest expense, if applicable, is calculated based on the variable rate as of
September 30, 2018
.
|
(3)
|
Amounts calculated based on the annual minimum future lease payments that extend through the term of the lease, including available extension options. Rents on ground leases 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
3.23%
, at the Company’s current leverage ratio (as defined in the agreements) through January 10, 2022, the First Term Loan’s 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
September 30, 2018
will be repaid upon maturity with fixed interest-only payments through the swapped periods and interest calculated based on the variable rate as of
September 30, 2018
for the unswapped period of the Second Term Loan.
|
(5)
|
As of
September 30, 2018
, purchase orders and letters of commitment totaling approximately
$16.1 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
|
|
For the nine months ended
|
||||||||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||||||||
|
|
2018
|
|
2017
|
|
Variance
|
|
2018
|
|
2017
|
|
Variance
|
||||||||||
Occupancy
|
|
90.1
|
%
|
|
89.0
|
%
|
|
1.2
|
%
|
|
84.5
|
%
|
|
85.0
|
%
|
|
(0.6
|
%)
|
||||
ADR
|
|
$
|
247.43
|
|
|
$
|
243.77
|
|
|
1.5
|
%
|
|
$
|
244.53
|
|
|
$
|
244.42
|
|
|
0.0
|
%
|
RevPAR
|
|
$
|
222.84
|
|
|
$
|
216.95
|
|
|
2.7
|
%
|
|
$
|
206.55
|
|
|
$
|
207.79
|
|
|
(0.6
|
%)
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
•
|
market reaction to the announcement of the Mergers and the prospects of the combined company;
|
•
|
changes in the respective businesses, operations, assets, liabilities and prospects of the Company and Pebblebrook;
|
•
|
changes in market assessments of the business, operations, financial position and prospects of either company or the combined company;
|
•
|
market assessments of the likelihood that the Mergers will be completed;
|
•
|
interest rates, general market and economic conditions and other factors generally affecting the market prices of the Company’s common shares and Pebblebrook’s common shares;
|
•
|
federal, state and local legislation, governmental regulation and legal developments in the businesses in which the Company and Pebblebrook operate; and
|
•
|
other factors beyond the control of the Company and Pebblebrook, including those described or referred to elsewhere in this “Risk Factors” section.
|
•
|
If all of the Company’s shareholders elect to receive the maximum amount of Cash Consideration, then Pebblebrook shareholders will own approximately 52.8% and former shareholders of the Company will own approximately 47.2%; and
|
•
|
If all of the Company’s shareholders elect to receive Pebblebrook common shares, then Pebblebrook shareholders will own approximately 42.7% and former shareholders of the Company will own approximately 57.3%.
|
•
|
the inability to successfully combine the businesses of the Company and Pebblebrook in a manner that permits the combined company to achieve the cost savings anticipated to result from the Mergers, which would result in the anticipated benefits of the Mergers not being realized in the timeframe currently anticipated or at all;
|
•
|
the complexities associated with managing the combined businesses and integrating personnel from the two companies;
|
•
|
the additional complexities of combining two companies with different histories, cultures, markets and third-party hotel management companies;
|
•
|
potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the Mergers; and
|
•
|
performance shortfalls as a result of the diversion of management’s attention caused by completing the Mergers and integrating the companies’ operations.
|
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
(2)
|
|
Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
(2)
|
||||||
July 1, 2018 - July 31, 2018
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
August 1, 2018 - August 31, 2018
|
|
13,826
|
|
|
$
|
34.35
|
|
|
—
|
|
|
$
|
—
|
|
September 1, 2018 - September 30, 2018
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Total
|
|
13,826
|
|
|
$
|
34.35
|
|
|
—
|
|
|
$
|
495,351,256
|
|
(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. 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. The Company cumulatively repurchased
$104.6 million
of common shares pursuant to the Repurchase Program through
September 30, 2018
. As of
September 30, 2018
, the Company had availability under the Repurchase Program to acquire up to
$495.4 million
of common shares. The authorization did not include specific price targets or an expiration date. Subject to the restrictions under the Merger Agreement, 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
|
Item 3.
|
Defaults Upon Senior Securities
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Other Information
|
Item 6.
|
Exhibits
|
Exhibit
Number
|
|
Description of Exhibit
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
101
|
|
The following financial statements from LaSalle Hotel Properties’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, filed on November 1, 2018, formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive (Loss) Income, (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 Current Report on Form 8-K filed with the SEC on September 6, 2018 and incorporated herein by reference.
|
(2)
|
Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on September 19, 2018 and incorporated herein by reference.
|
|
|
|
|
LASALLE HOTEL PROPERTIES
|
|
|
|
|
|
Date:
|
November 1, 2018
|
|
BY:
|
/s/ KENNETH G. FULLER
|
|
|
|
|
Kenneth G. Fuller
|
|
|
|
|
Executive Vice President
and Chief Financial Officer (Principal Financial Officer
and Principal Accounting 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/ 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
|