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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM10-Q
 
☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024
OR
    
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to              .
Commission File Number 001-34571
PEBBLEBROOK HOTEL TRUST
(Exact Name of Registrant as Specified in Its Charter)

Maryland27-1055421
(State of Incorporation or Organization)(I.R.S. Employer Identification No.)
4747 Bethesda Avenue, Suite 1100, Bethesda, Maryland
20814
(Address of Principal Executive Offices)(Zip Code)

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

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


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☑Accelerated filer☐
Non-accelerated filer☐Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    ☑  No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
Outstanding at July 19, 2024
Common shares of beneficial interest ($0.01 par value per share)120,503,501



Pebblebrook Hotel Trust
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements.
Consolidated Balance Sheets - June 30, 2024 (unaudited) and December 31, 2023
Consolidated Statements of Operations and Comprehensive Income (unaudited) - Three and six months ended June 30, 2024 and 2023
Consolidated Statements of Equity (unaudited) - Three and six months ended June 30, 2024 and 2023
Consolidated Statements of Cash Flows (unaudited) - Six months ended June 30, 2024 and 2023
Notes to the Consolidated Financial Statements (unaudited)
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3.Quantitative and Qualitative Disclosures About Market Risk.
Item 4.Controls and Procedures.
PART II. OTHER INFORMATION
Item 1.Legal Proceedings.
Item 1A.Risk Factors.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3.Defaults Upon Senior Securities.
Item 4.Mine Safety Disclosures.
Item 5.Other Information.
Item 6.Exhibits.
2

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.

Pebblebrook Hotel Trust
Consolidated Balance Sheets
(in thousands, except share and per-share data)
June 30, 2024December 31, 2023
 (Unaudited) 
ASSETS
Investment in hotel properties, net$5,442,903 $5,490,776 
Cash and cash equivalents101,689 183,747 
Restricted cash9,489 9,894 
Hotel receivables (net of allowance for doubtful accounts of $343 and $689, respectively)
63,555 43,912 
Prepaid expenses and other assets86,716 96,644 
Total assets$5,704,352 $5,824,973 
LIABILITIES AND EQUITY
Debt$2,207,201 $2,319,801 
Accounts payable, accrued expenses and other liabilities238,429 238,644 
Lease liabilities - operating leases320,681 320,617 
Deferred revenues85,112 76,874 
Accrued interest6,637 6,830 
Distribution payable11,857 11,862 
Total liabilities2,869,917 2,974,628 
Commitments and contingencies (Note 11)
Shareholders’ equity:
Preferred shares of beneficial interest, $.01 par value (liquidation preference $690,000 at June 30, 2024 and December 31, 2023), 100,000,000 shares authorized; 27,600,000 shares issued and outstanding at June 30, 2024 and December 31, 2023
276 276 
Common shares of beneficial interest, $.01 par value, 500,000,000 shares authorized; 120,094,380 shares issued and outstanding at June 30, 2024 and 120,191,349 shares issued and outstanding at December 31, 2023
1,201 1,202 
Additional paid-in capital4,077,360 4,078,912 
Accumulated other comprehensive income (loss)29,281 24,374 
Distributions in excess of retained earnings(1,362,359)(1,341,264)
Total shareholders’ equity2,745,759 2,763,500 
Non-controlling interests88,676 86,845 
Total equity2,834,435 2,850,345 
Total liabilities and equity$5,704,352 $5,824,973 

The accompanying notes are an integral part of these financial statements.
3
Pebblebrook Hotel Trust
Consolidated Statements of Operations and Comprehensive Income
(in thousands, except share and per-share data)
(Unaudited)
 For the three months ended June 30,For the six months ended June 30,
 2024202320242023
Revenues:
Room$253,778 $250,934 $451,878 $447,308 
Food and beverage101,520 93,748 182,615 169,511 
Other operating41,812 39,661 76,686 73,243 
Total revenues397,110 384,343 711,179 690,062 
Expenses:
Hotel operating expenses:
Room65,003 64,690 120,026 121,114 
Food and beverage70,921 68,985 131,935 127,657 
Other direct and indirect111,733 112,354 211,752 211,568 
Total hotel operating expenses247,657 246,029 463,713 460,339 
Depreciation and amortization57,296 57,957 114,505 116,326 
Real estate taxes, personal property taxes, property insurance, and ground rent25,002 29,571 57,407 58,475 
General and administrative11,946 11,202 24,123 21,190 
Gain on sale of hotel properties— (23,584)— (30,219)
Business interruption insurance income(7,301)(14,015)(11,281)(22,104)
Other operating expenses1,539 2,377 3,120 6,047 
Total operating expenses336,139 309,537 651,587 610,054 
Operating income (loss)60,971 74,806 59,592 80,008 
Interest expense(27,939)(29,544)(54,360)(56,974)
Other217 952 543 1,135 
Income (loss) before income taxes33,249 46,214 5,775 24,169 
Income tax (expense) benefit(1,010)(31)(1,056)(31)
Net income (loss)32,239 46,183 4,719 24,138 
Net income (loss) attributable to non-controlling interests1,303 1,458 2,133 2,341 
Net income (loss) attributable to the Company30,936 44,725 2,586 21,797 
Distributions to preferred shareholders(10,632)(10,987)(21,263)(21,975)
Net income (loss) attributable to common shareholders$20,304 $33,738 $(18,677)$(178)
Net income (loss) per share available to common shareholders, basic$0.17 $0.27 $(0.16)$— 
Net income (loss) per share available to common shareholders, diluted$0.16 $0.24 $(0.16)$— 
Weighted-average number of common shares, basic120,094,380 121,696,400 120,089,803 123,581,926 
Weighted-average number of common shares, diluted149,744,864 151,238,955 120,089,803 123,581,926 

4
Pebblebrook Hotel Trust
Consolidated Statements of Operations and Comprehensive Income - Continued
(in thousands, except share and per-share data)
(Unaudited)
For the three months ended June 30,For the six months ended June 30,
2024202320242023
Comprehensive Income:
Net income (loss)$32,239 $46,183 $4,719 $24,138 
Other comprehensive income (loss):
Change in fair value of derivative instruments4,168 21,120 17,244 21,074 
Amounts reclassified from other comprehensive income(5,969)(6,938)(12,304)(12,763)
Comprehensive income (loss)30,438 60,365 9,659 32,449 
Comprehensive income (loss) attributable to non-controlling interests1,288 1,575 2,166 2,420 
Comprehensive income (loss) attributable to the Company$29,150 $58,790 $7,493 $30,029 

The accompanying notes are an integral part of these financial statements.
5
Pebblebrook Hotel Trust
Consolidated Statements of Equity
(in thousands, except share data)
(Unaudited)
For the three months ended June 30, 2024
Preferred SharesCommon SharesAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Distributions in Excess of Retained EarningsTotal Shareholders' EquityNon-Controlling InterestsTotal Equity
SharesAmountSharesAmount
Balance at March 31, 2024
27,600,000$276 120,094,380 $1,201 $4,074,898 $31,067 $(1,381,450)$2,725,992 $87,517 $2,813,509 
Share-based compensation—— — — 2,462 — — 2,462 1,061 3,523 
Distributions on common shares/units—— — — — — (1,213)(1,213)(26)(1,239)
Distributions on preferred shares/units—— — — — — (10,632)(10,632)(1,164)(11,796)
Other comprehensive income (loss):
Change in fair value of derivative instruments—— — — — 4,183 — 4,183 (15)4,168 
Amounts reclassified from other comprehensive income—— — — — (5,969)— (5,969)— (5,969)
Net income (loss)—— — — — — 30,936 30,936 1,303 32,239 
Balance at June 30, 2024
27,600,000$276 120,094,380$1,201 $4,077,360 $29,281 $(1,362,359)$2,745,759 $88,676 $2,834,435 

For the three months ended June 30, 2023
Preferred SharesCommon SharesAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Distributions in Excess of Retained EarningsTotal Shareholders' EquityNon-Controlling InterestsTotal Equity
SharesAmountSharesAmount
Balance at March 31, 2023
28,600,000 $286 123,632,667 $1,236 $4,142,491 $29,891 $(1,258,275)$2,915,629 $88,482 $3,004,111 
Repurchase of common shares— — (3,574,923)(35)(49,973)— — (50,008)— (50,008)
Share-based compensation— — — — 2,162 — — 2,162 870 3,032 
Distributions on common shares/units— — — — — — (1,211)(1,211)(26)(1,237)
Distributions on preferred shares/units— — — — — — (10,987)(10,987)(1,164)(12,151)
Other comprehensive income (loss):
Change in fair value of derivative instruments— — — — — 21,003 — 21,003 117 21,120 
Amounts reclassified from other comprehensive income— — — — — (6,938)— (6,938)— (6,938)
Net income (loss)— — — — — — 44,725 44,725 1,458 46,183 
Balance at June 30, 2023
28,600,000 $286 120,057,744 $1,201 $4,094,680 $43,956 $(1,225,748)$2,914,375 $89,737 $3,004,112 


6
Pebblebrook Hotel Trust
Consolidated Statements of Equity - Continued
(in thousands, except share data)
(Unaudited)
For the six months ended June 30, 2024
Preferred SharesCommon SharesAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Distributions in Excess of Retained EarningsTotal Shareholders' EquityNon-Controlling InterestsTotal Equity
SharesAmountSharesAmount
Balance at December 31, 2023
27,600,000$276 120,191,349 $1,202 $4,078,912 $24,374 $(1,341,264)$2,763,500 $86,845 $2,850,345 
Issuance of common shares for Board of Trustees compensation—— 47,497 1 744 — — 745 — 745 
Repurchase of common shares—— (387,651)(4)(6,847)— — (6,851)— (6,851)
Share-based compensation—— 243,185 2 4,551 — — 4,553 2,030 6,583 
Distributions on common shares/units—— — — — — (2,418)(2,418)(37)(2,455)
Distributions on preferred shares/units—— — — — — (21,263)(21,263)(2,328)(23,591)
Other comprehensive income (loss):
Change in fair value of derivative instruments—— — — — 17,211 — 17,211 33 17,244 
Amounts reclassified from other comprehensive income—— — — — (12,304)— (12,304)— (12,304)
Net income (loss)—— — — — — 2,586 2,586 2,133 4,719 
Balance at June 30, 2024
27,600,000$276 120,094,380$1,201 $4,077,360 $29,281 $(1,362,359)$2,745,759 $88,676 $2,834,435 

For the six months ended June 30, 2023
Preferred SharesCommon SharesAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Distributions in Excess of Retained EarningsTotal Shareholders' EquityNon-Controlling InterestsTotal Equity
SharesAmountSharesAmount
Balance at December 31, 2022
28,600,000 $286 126,345,293 $1,263 $4,182,359 $35,724 $(1,223,117)$2,996,515 $88,028 $3,084,543 
Issuance of common shares for Board of Trustees compensation— — 55,480 1 753 — — 754 — 754 
Repurchase of common shares— — (6,578,436)(65)(92,688)— — (92,753)— (92,753)
Share-based compensation— — 235,407 2 4,256 — — 4,258 1,653 5,911 
Distributions on common shares/units— — — — — — (2,453)(2,453)(36)(2,489)
Distributions on preferred shares/units— — — — — — (21,975)(21,975)(2,328)(24,303)
Other comprehensive income (loss):
Change in fair value of derivative instruments— — — — — 20,995 — 20,995 79 21,074 
Amounts reclassified from other comprehensive income— — — — — (12,763)— (12,763)— (12,763)
Net income (loss)— — — — — — 21,797 21,797 2,341 24,138 
Balance at June 30, 2023
28,600,000$286 120,057,744$1,201 $4,094,680 $43,956 $(1,225,748)$2,914,375 $89,737 $3,004,112 

The accompanying notes are an integral part of these financial statements.
7
Pebblebrook Hotel Trust
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
 For the six months ended June 30,
 20242023
Operating activities:
Net income (loss)$4,719 $24,138 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization114,505 116,326 
Share-based compensation6,583 5,911 
Amortization of deferred financing costs, non-cash interest and other amortization6,685 5,874 
Gain on sale of hotel properties— (30,219)
Non-cash ground rent4,924 4,951 
Other adjustments(2,783)(6,186)
Changes in assets and liabilities:
Hotel receivables(19,297)(6,181)
Prepaid expenses and other assets10,419 (12,542)
Accounts payable and accrued expenses(5,843)7,654 
Deferred revenues9,759 10,496 
Net cash provided by (used in) operating activities129,671 120,222 
Investing activities:
Improvements and additions to hotel properties(82,672)(97,674)
Proceeds from sales of hotel properties— 224,384 
Property insurance proceeds21,529 11,388 
Other investing activities(560)(2,760)
Net cash provided by (used in) investing activities(61,703)135,338 
Financing activities:
Payment of deferred financing costs(5,509)(298)
Repayments of debt(110,859)(994)
Repurchases of common shares(6,851)(92,753)
Distributions — common shares/units(2,444)(2,541)
Distributions — preferred shares/units(23,591)(24,303)
Other financing activities(1,177)(649)
Net cash provided by (used in) financing activities(150,431)(121,538)
Net change in cash and cash equivalents and restricted cash(82,463)134,022 
Cash and cash equivalents and restricted cash, beginning of year193,641 52,269 
Cash and cash equivalents and restricted cash, end of period$111,178 $186,291 

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

PEBBLEBROOK HOTEL TRUST
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Organization
Pebblebrook Hotel Trust (the "Company") is an internally managed hotel investment company, formed as a Maryland real estate investment trust in October 2009 to opportunistically acquire and invest in hotel properties located primarily in major U.S. cities and resort properties located near our primary target urban markets and select destination resort markets, with an emphasis on major gateway coastal markets.
As of June 30, 2024, the Company owned interests in 46 hotels with a total of 11,933 guest rooms. The hotel properties are located in: Boston, Massachusetts; Chicago, Illinois; Hollywood, Florida; Jekyll Island, Georgia; Key West, Florida; Los Angeles, California (Beverly Hills, Santa Monica, and West Hollywood); Naples, Florida; Newport, Rhode Island; Portland, Oregon; San Diego, California; San Francisco, California; Santa Cruz, California; Stevenson, Washington; and Washington, D.C.
Substantially all of the Company’s assets are held by, and all of the Company's operations are conducted through, Pebblebrook Hotel, L.P. (the "Operating Partnership"). The Company is the sole general partner of the Operating Partnership. As of June 30, 2024, the Company owned 99.2% of the common limited partnership units issued by the Operating Partnership ("common units"). The remaining 0.8% of the common units are owned by the other limited partners of the Operating Partnership. For the Company to maintain its qualification as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"), it cannot operate the hotels it owns. Therefore, the Operating Partnership and its subsidiaries lease the hotel properties to subsidiaries of Pebblebrook Hotel Lessee, Inc. (collectively with its subsidiaries, "PHL"), a taxable REIT subsidiary ("TRS"), which in turn engage third-party eligible independent contractors to manage the hotels. PHL is consolidated into the Company’s financial statements.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and in conformity with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) applicable to interim financial information. As such, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted in accordance with the rules and regulations of the SEC. These unaudited consolidated financial statements include all adjustments considered necessary for a fair presentation of the consolidated balance sheets, consolidated statements of operations and comprehensive income, consolidated statements of equity and consolidated statements of cash flows for the periods presented. Interim results are not necessarily indicative of full-year performance, as a result of the impact of seasonal and other short-term variations and the acquisitions and or dispositions of hotel properties. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
The Company and its subsidiaries are separate legal entities and maintain records and books of account separate and apart from each other. The consolidated financial statements include all of the accounts of the Company and its subsidiaries and are presented in accordance with U.S. GAAP. All significant intercompany balances and transactions have been eliminated in consolidation. Investments in entities that the Company does not control, but over which the Company has the ability to exercise significant influence regarding operating and financial policies, are accounted for under the equity method.
Certain reclassifications have been made to the prior period's financial statements to conform to the current year presentation.
Use of Estimates
The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses. These estimates are prepared using management’s best judgment, after considering past, current and expected events and economic conditions. Actual results could differ from these estimates.
9
Risks and Uncertainties
The state of the overall economy can significantly impact hotel operational performance and thus the Company's financial position. Global events as well as national and local events may impact travel trends and the operations of the Company's hotels. In addition, inflation and interest rates may also impact the overall economy as well as the availability of debt. A decline in travel or a significant increase in costs may impact the Company's cash flow and ability to service debt or meet other financial obligations.
New Accounting Pronouncements
Disclosure Improvements
In October 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative ("ASU 2023-06"). ASU 2023-06 incorporates 14 of the 27 disclosure requirements published in SEC Release No. 33-10532 - Disclosure Update and Simplification into various topics within the Accounting Standards Codification ("ASC"). ASU 2023-06's amendments represent clarifications to, or technical corrections of, current requirements. For SEC registrants, the effective date for each amendment will vary based on the date on which the SEC removes that related disclosure from its rules. If the SEC does not act to remove its related requirement by June 30, 2027, any related FASB amendments will be removed from the ASC and will not be effective. Early adoption is prohibited. The Company is currently assessing the potential impacts of ASU 2023-06 and does not expect it to have a material effect on its consolidated financial statements and disclosures.
Segment Reporting
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"). ASU 2023-07 expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. All disclosure requirements under ASU 2023-07 are also required for public entities with a single reportable segment. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently assessing the impacts of adopting ASU 2023-07 on its consolidated financial statements and disclosures.
Income Taxes
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should be applied on a prospective basis, with the option to apply retrospectively. The Company is currently assessing the impacts of adopting ASU 2023-09 on its consolidated financial statements and disclosures.
Stock Compensation
In March 2024, the FASB issued ASU 2024-01, Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards (“ASU 2024-01”), to clarify the scope application of profits interest and similar awards by adding illustrative guidance in ASC 718, Compensation—Stock Compensation ("ASC 718"). ASU 2024-01 clarifies how to determine whether profits interest and similar awards should be accounted for as a share-based payment arrangement (ASC 718) or as a cash bonus or profit-sharing arrangement (ASC 710, Compensation—General, or other guidance) and applies to all reporting entities that account for profits interest awards as compensation to employees or non-employees. In addition to adding the illustrative guidance, ASU 2024-01 modified the language in paragraph 718-10-15-3 to improve its clarity and operability without changing the guidance. ASU 2024-01 is effective for fiscal years beginning after December 15, 2024, including interim periods within those annual periods. Early adoption is permitted. The amendments should be applied either retrospectively to all prior periods presented in the financial statements, or prospectively to profits interests and similar awards granted or modified on or after the adoption date. The Company is currently assessing the impacts of adopting ASU 2024-01 on its consolidated financial statements and disclosures.
Note 3. Acquisition and Disposition of Hotel Properties
Acquisitions
There were no acquisitions of hotel properties during the six months ended June 30, 2024.
10
Dispositions
There were no dispositions of hotel properties during the six months ended June 30, 2024.
The following table summarizes disposition transactions during 2023 (in thousands):
Hotel Property NameLocationSale DateSale Price
The Heathman HotelPortland, ORFebruary 22, 2023$45,000 
Retail at The Westin Michigan Avenue Chicago
Chicago, ILMarch 17, 202327,300 
Hotel Colonnade Coral GablesCoral Gables, FLMarch 28, 202363,000 
Hotel Monaco SeattleSeattle, WAMay 9, 202363,250 
Hotel Vintage SeattleSeattle, WAMay 24, 202333,700 
Hotel Zoe Fisherman's WharfSan Francisco, CANovember 14, 202368,500 
Marina City Retail at Hotel Chicago Downtown, Autograph Collection
Chicago, ILDecember 21, 202330,000 
2023 Total
$330,750 
For the three and six months ended June 30, 2023, the accompanying consolidated statements of operations and comprehensive income included operating loss of $0.5 million and $1.8 million, respectively, excluding impairment loss and gain on sale of hotel properties related to the hotel properties sold or held for sale. There was no impact for the three and six months ended June 30, 2024.
The sales of the hotel properties described above did not represent a strategic shift that had a major effect on the Company’s operations and financial results, and therefore, did not qualify as discontinued operations.
Note 4. Investment in Hotel Properties
Investment in hotel properties as of June 30, 2024 and December 31, 2023 consisted of the following (in thousands):
June 30, 2024December 31, 2023
Land$810,789 $810,633 
Buildings and improvements5,070,893 5,005,894 
Furniture, fixtures and equipment527,365 511,451 
Finance lease asset91,181 91,181 
Construction in progress16,865 27,123 
$6,517,093 $6,446,282 
Right-of-use asset, operating leases355,954 360,761 
Investment in hotel properties$6,873,047 $6,807,043 
Less: Accumulated depreciation(1,430,144)(1,316,267)
Investment in hotel properties, net$5,442,903 $5,490,776 
Hurricane Ian
On September 27, 2022, LaPlaya Beach Resort & Club ("LaPlaya") located in Naples, Florida, was impacted by the effects of Hurricane Ian. LaPlaya was closed in anticipation of the storm and required remediation and repairs from the damage and remained closed. In 2023, LaPlaya began to reopen in stages as the buildings and facilities were repaired and was substantially complete in the first quarter of 2024.
The Company’s insurance policies provide coverage for property damage, business interruption and reimbursement for other costs that were incurred relating to damages sustained during Hurricane Ian and the Company has recorded a receivable for the expenditures to date which it anticipates to collect from the insurance providers in excess of the deductibles.
For the six months ended June 30, 2024 and 2023, the Company incurred $0.2 million and $4.1 million, respectively, of costs related to payroll, repair and claims administration for which reimbursement from insurance policies is uncertain and therefore is included in other operating expenses in the Company's consolidated statements of operations and comprehensive income. Through June 30, 2024, the Company received a total of $117.5 million in preliminary advances from the insurance providers. The Company continues to work with the insurance providers on the settlement of the property and business interruption claims.
11
Impairment
The Company reviews its investment in hotel properties for impairment whenever events or circumstances indicate potential impairment. The Company periodically adjusts its estimate of future operating cash flows and estimated hold periods for certain properties. As a result of this review, the Company may identify an impairment trigger has occurred and assess its investment in hotel properties for recoverability.
During the six months ended June 30, 2024 and 2023, no impairment losses were incurred.
Right-of-use Assets and Lease Liabilities
The Company recognized right-of-use assets and related liabilities related to its ground leases, all of which are operating leases. When the rate implicit in the lease could not be determined, the Company used incremental borrowing rates, which ranged from 4.7% to 7.6%. In addition, the term used includes any options to exercise extensions when it is reasonably certain the Company will exercise such option. See Note 11. Commitments and Contingencies for additional information about the ground leases.
The right-of-use assets and liabilities are amortized to ground rent expense over the term of the underlying lease agreements. As of June 30, 2024, the Company's lease liabilities consisted of operating lease liabilities of $320.7 million and financing lease liabilities of $43.7 million. As of December 31, 2023, the Company's lease liabilities consisted of operating lease liabilities of $320.6 million and financing lease liabilities of $43.4 million. The financing lease liabilities are included in accounts payable, accrued expenses and other liabilities on the Company's accompanying consolidated balance sheets.
Note 5. Debt
On October 13, 2022, the Company entered into the Fifth Amended and Restated Credit Agreement with Bank of America, N.A., as administrative agent and certain other agents and lenders ("Credit Agreement"). The Credit Agreement provides for a $650.0 million senior unsecured revolving credit facility and three $460.0 million unsecured term loan facilities totaling $1.38 billion. The Company may request additional lender commitments to increase the aggregate borrowing capacity under the Credit Agreement up to an additional $970.0 million.
On January 3, 2024, the Company entered into the First Amendment to the Credit Agreement which extended the maturity date of $356.7 million borrowed under Term Loan 2024 to January 2028. This extended indebtedness is referred to as Term Loan 2028. In connection with the extension, the Company also repaid $60.0 million of its borrowings under Term Loan 2024 with available cash. The remaining $43.3 million of Term Loan 2024's balance will continue to mature in October 2024 and will be paid with available cash or borrowings under the revolving credit facility at maturity. On January 3, 2024, the Company also repaid $50.0 million of its outstanding Term Loan 2025 obligation with available cash.
12
The Company's debt consisted of the following as of June 30, 2024 and December 31, 2023 (dollars in thousands):
   Balance Outstanding as of
 
Interest Rate at June 30, 2024
Maturity DateJune 30, 2024December 31, 2023
Revolving credit facilities
Senior unsecured credit facility—
(1)(2)
October 2026$— $— 
PHL unsecured credit facility—
(1)
October 2026— — 
Total revolving credit facilities$— $— 
Unsecured term loans
Term Loan 20247.63%
(1)
October 202443,348 460,000 
Term Loan 20254.82%
(1)
October 2025410,000 460,000 
Term Loan 20275.61%
(1)
October 2027460,000 460,000 
Term Loan 20287.63%
(1)
January 2028356,652 — 
Term loan principal$1,270,000 $1,380,000 
Convertible senior notes principal1.75%December 2026$750,000 $750,000 
Senior unsecured notes principal4.93%December 2025$2,400 $2,400 
Mortgage loans
Margaritaville Hollywood Beach Resort7.04%
(3)
September 2026140,000 140,000 
Estancia La Jolla Hotel & Spa5.07%September 202856,638 57,497 
Mortgage loans principal$196,638 $197,497 
Total debt principal$2,219,038 $2,329,897 
Unamortized debt premiums, discount and deferred financing costs, net(11,837)(10,096)
Debt, net$2,207,201 $2,319,801 
______________________
(1)    Borrowings bear interest at floating rates. Interest rate at June 30, 2024 gives effect to interest rate hedges.
(2)    The Company has the option to extend the maturity date for up to two six-month periods, pursuant to certain terms and conditions and payment of an extension fee.
(3)    This loan bears interest at a floating rate equal to daily SOFR plus a spread of 3.75%. The interest rate at June 30, 2024 gives effect to an interest rate swap. The Company has the option to extend the maturity date for up to two one-year periods, pursuant to certain terms and conditions and payment of an extension fee.
Unsecured Revolving Credit Facilities
The $650.0 million senior unsecured revolving credit facility provided for in the Credit Agreement matures in October 2026 and provides for two six-month extension options, subject to certain terms and conditions and payment of an extension fee. All borrowings under the senior unsecured revolving credit facility bear interest at a rate per annum equal to, at the option of the Company, (i) the Secured Overnight Financing Rate ("SOFR") plus 0.10% (the “SOFR Adjustment”) plus a margin that is based upon the Company’s leverage ratio or (ii) the Base Rate (as defined by the Credit Agreement) plus a margin that is based on the Company’s leverage ratio. The margins for revolving credit facility loans range in amount from 1.45% to 2.50% for SOFR-based loans and 0.45% to 1.50% for Base Rate-based loans, depending on the Company’s leverage ratio. As of June 30, 2024, the Company had no outstanding borrowings, $13.7 million of outstanding letters of credit and a borrowing capacity of $636.3 million remaining on the senior unsecured revolving credit facility. The Company is required to pay an unused commitment fee at an annual rate of 0.20% or 0.30% of the unused portion of the senior unsecured revolving credit facility, depending on the amount of borrowings outstanding. The credit agreement contains certain financial covenants, including a maximum leverage ratio, a minimum fixed charge coverage ratio and a maximum percentage of secured debt to total asset value. 
Under the terms of the Credit Agreement, one or more standby letters of credit, up to a maximum aggregate outstanding balance of $30.0 million, may be issued on behalf of the Company by the lenders under the senior unsecured revolving facility. The Company pays a fee for outstanding standby letters of credit at a rate per annum equal to the applicable margin based upon the Company's leverage ratio. Any outstanding standby letters of credit reduce the available borrowings on the senior unsecured revolving credit facility by a corresponding amount. Standby letters of credit of $13.7 million and $13.6 million were outstanding as of June 30, 2024 and December 31, 2023, respectively.
13
As of June 30, 2024, the Company also has a $20.0 million unsecured revolving credit facility (the "PHL Credit Facility") to be used for PHL's working capital and general corporate purposes. On October 13, 2022, PHL amended and restated the agreement governing the PHL Credit Facility to extend the maturity to October 2026. The PHL Credit Facility has substantially similar terms as the Company's senior unsecured revolving credit facility. Borrowings on the PHL Credit Facility bear interest at a rate per annum equal to, at the option of the Company, (i) SOFR plus the SOFR Adjustment plus a margin that is based upon the Company’s leverage ratio or (ii) the Base Rate (as defined by the Credit Agreement) plus a margin that is based on the Company’s leverage ratio. The PHL Credit Facility is subject to debt covenants substantially similar to the covenants under the Credit Agreement, which governs the Company's senior unsecured revolving credit facility. As of June 30, 2024, the Company had no borrowings under the PHL Credit Facility and had $20.0 million borrowing capacity remaining available under the PHL Credit Facility.
As of June 30, 2024, the Company was in compliance with all debt covenants of the credit agreements that govern the unsecured revolving credit facilities.
Unsecured Term Loan Facilities
As of June 30, 2024, the term loans provided for in the Credit Agreement will mature as follows: $43.3 million in October 2024 (Term Loan 2024), $410.0 million in October 2025 (Term Loan 2025), $460.0 million in October 2027 (Term Loan 2027) and $356.7 million in January 2028 (Term Loan 2028). The term loans bear interest at a rate per annum equal to, at the option of the Company, (i) SOFR plus the SOFR Adjustment plus a margin that is based upon the Company’s leverage ratio or (ii) the Base Rate (as defined by the Credit Agreement) plus a margin that is based on the Company’s leverage ratio. The margins for term loans range in amount from 1.40% to 2.45% for SOFR-based loans and 0.40% to 1.45% for Base Rate-based loans, depending on the Company's leverage ratio. The term loans are subject to the debt covenants in the Credit Agreement. As of June 30, 2024, the Company was in compliance with all debt covenants of its term loans.
The Company entered into interest rate swap agreements to fix the SOFR rate on a portion of these unsecured term loan facilities. See Derivative and Hedging Activities for further discussion on the interest rate swaps.
Convertible Senior Notes
In December 2020, the Company issued $500.0 million aggregate principal amount of 1.75% Convertible Senior Notes due December 2026 (the "Convertible Notes"). The net proceeds from the offering of the Convertible Notes were approximately $487.3 million after deducting the underwriting fees and other expenses paid by the Company.
In February 2021, the Company issued an additional $250.0 million aggregate principal amount of Convertible Notes. These additional Convertible Notes were sold at a 5.5% premium to par and generated net proceeds of approximately $257.2 million after deducting the underwriting fees and other expenses paid by the Company of $6.5 million, which was offset by a premium received in the amount of $13.8 million.
The Convertible Notes are governed by an indenture (the “Base Indenture”) between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee. The Convertible Notes bear interest at a rate of 1.75% per annum, payable semi-annually in arrears on June 15th and December 15th of each year, beginning on June 15, 2021. The Convertible Notes will mature on December 15, 2026.
Prior to June 15, 2026, the Convertible Notes will be convertible upon certain circumstances. On and after June 15, 2026, holders may convert any of their Convertible Notes into the Company’s common shares of beneficial interest (“common shares”) at the applicable conversion rate at any time at their election two days prior to the maturity date. The initial conversion rate is 39.2549 common shares per $1,000 principal amount of Convertible Notes, which represents an initial conversion price of approximately $25.47 per share. The conversion rate is subject to adjustment in certain circumstances. As of June 30, 2024 and December 31, 2023, the if-converted value of the Convertible Notes did not exceed the principal amount.
The Company may redeem for cash all or a portion of the Convertible Notes, at its option, after December 20, 2023, upon certain circumstances. The redemption price will be equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If certain make-whole fundamental changes occur, the conversion rate for the Convertible Notes may be increased.
In connection with the Convertible Notes issuances, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain of the underwriters of the offerings of the Convertible Notes or their respective affiliates and other financial institutions. The Capped Call Transactions initially cover, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes, the number of common shares underlying the Convertible Notes. The Capped Call Transactions are expected generally to reduce the potential dilution to holders of common shares upon conversion of the Convertible Notes and/or offset the potential cash payments that the Company could be required to make in excess of the principal amount of any converted Convertible Notes upon conversion thereof, with such reduction and/or offset subject to a cap. The upper strike price of the Capped Call Transactions is $33.0225 per share.
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Senior Unsecured Notes
The Company has $2.4 million of senior unsecured notes outstanding bearing a fixed interest rate of 4.93% per annum maturing in December 2025. The debt covenants of these notes are substantially similar to those of the Company's senior unsecured revolving credit facility. As of June 30, 2024, the Company was in compliance with all such debt covenants.
Mortgage Loans
On September 23, 2021, the Company assumed a $161.5 million loan secured by a first-lien mortgage on the leasehold interest of Margaritaville Hollywood Beach Resort ("Margaritaville"). On September 7, 2023, the Company paid down $21.5 million of this loan and refinanced the remaining $140.0 million balance. The new loan requires interest-only payments based on a floating rate equal to daily SOFR plus a spread of 3.75%. This loan matures on September 7, 2026 and may be extended for up to two one-year periods, subject to certain terms and conditions and payment of an extension fee.
On December 1, 2021, the Company assumed a $61.7 million loan secured by a first-lien mortgage on the leasehold interest of Estancia La Jolla Hotel & Spa ("Estancia"). The loan requires both principal and interest monthly payments based on a fixed interest rate of 5.07%. The loan matures on September 1, 2028.
The Company's mortgage loans associated with Margaritaville and Estancia are non-recourse to the Company except for customary carve-outs to the general non-recourse liability. The loans contain customary provisions regarding events of default, as well as customary cash management, cash trap and lockbox provisions. Cash trap provisions are triggered if the hotel's performance is below a certain threshold. Once triggered, all of the cash flow generated by the hotel is deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of the lender. These properties are not in a cash trap and no event of default has occurred under the loan documents.
Interest Expense
The components of the Company's interest expense consisted of the following for the three and six months ended June 30, 2024 and 2023 (in thousands):
For the three months ended June 30,For the six months ended June 30,
2024202320242023
Unsecured revolving credit facilities$497 $498 $995 $1,066 
Unsecured term loan facilities19,215 18,422 38,127 34,973 
Convertible senior notes3,282 3,282 6,563 6,563 
Senior unsecured notes29 589 59 1,178 
Mortgage debt3,218 3,808 6,443 7,343 
Amortization of deferred financing fees, (premiums) and discounts1,537 1,880 4,608 3,731 
Other161 1,065 (2,435)2,120 
Total interest expense$27,939 $29,544 $54,360 $56,974 
Fair Value
The Company estimates the fair value of its fixed rate debt by discounting the future cash flows of each instrument at estimated market rates, taking into consideration general market conditions and maturity of the debt with similar credit terms and is classified within Level 2 of the fair value hierarchy. The estimated fair value of the Company’s fixed rate debt (unsecured senior notes, convertible senior notes and the Estancia mortgage loan) as of June 30, 2024 and December 31, 2023 was $691.6 million and $686.3 million, respectively.
Derivative and Hedging Activities
The Company enters into interest rate swap agreements to hedge against interest rate fluctuations. All of the Company's interest rate swaps are cash flow hedges. All unrealized gains and losses on these hedging instruments are reported in accumulated other comprehensive income (loss) and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.
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The Company's interest rate swaps at June 30, 2024 and December 31, 2023 consisted of the following, by maturity date (dollars in thousands):
Aggregate Notional Value as of
Hedge TypeInterest Rate Range (SOFR)MaturityJune 30, 2024December 31, 2023
Swap-cash flow
2.47% - 2.50%
January 2024$— $300,000 
Swap-cash flow
3.22% - 3.25%
October 2025200,000 200,000 
Swap-cash flow
1.33% - 1.36%
February 2026290,000 290,000 
Swap-cash flow
3.02% - 3.03%
October 2026200,000 200,000 
Swap-cash flow
3.29%
October 2027165,000 165,000 
Total$855,000 $1,155,000 
The Company records all derivative instruments at fair value in the accompanying consolidated balance sheets. Fair values of interest rate swaps and caps are determined using the standard market methodology of netting the discounted future fixed cash receipts/payments and the discounted expected variable cash payments/receipts. Variable interest rates used in the calculation of projected receipts and payments on the swaps are based on an expectation of future interest rates derived from observable market interest rate curves (Overnight Index Swap curves) and volatilities (Level 2 inputs). Derivatives expose the Company to credit risk in the event of non-performance by the counterparties under the terms of the interest rate hedge agreements. The Company incorporates these counterparty credit risks in its fair value measurements. The Company believes it minimizes the credit risk by transacting with major creditworthy financial institutions.
As of June 30, 2024, the Company's derivative instruments were in an asset position with an aggregate fair value of $29.5 million. None of the Company's derivative instruments was in a liability position as of June 30, 2024. Derivative assets are included in prepaid expenses and other assets and derivative liabilities are included in accounts payable, accrued expenses and other liabilities in the accompanying consolidated balance sheets. The Company expects approximately $19.9 million will be reclassified from accumulated other comprehensive income (loss) to interest expense within the next 12 months.
Note 6. Revenue
The Company presents revenue on a disaggregated basis in the accompanying consolidated statements of operations and comprehensive income. The following table presents revenues by geographic location for the three and six months ended June 30, 2024 and 2023 (in thousands):
For the three months ended June 30,For the six months ended June 30,
2024202320242023
San Diego, CA$84,983 $76,921 $156,478 $143,768 
Southern Florida/Georgia68,934 58,980 149,891 130,009 
Boston, MA79,958 76,587 125,878 119,258 
Los Angeles, CA48,599 49,783 92,808 93,142 
San Francisco, CA32,874 37,515 63,419 69,329 
Washington, D.C.22,102 21,109 36,904 34,804 
Portland, OR21,528 22,332 34,527 36,972 
Chicago, IL23,172 24,246 31,520 34,803 
Seattle, WA— 2,131 — 5,551 
Other(1)
14,960 14,739 19,754 22,426 
Total Revenues$397,110 $384,343 $711,179 $690,062 
______________________
(1)     Other includes: Newport, RI and Santa Cruz, CA.
Payments from customers are primarily made when services are provided. Due to the short-term nature of the Company's contracts and the almost simultaneous receipt of payment, almost all of the contract liability balance at the beginning of the period is expected to be recognized as revenue over the following 12 months.
Note 7. Equity
Common Shares
The Company is authorized to issue up to 500,000,000 common shares. Each outstanding common share entitles the holder to one vote on each matter submitted to a vote of shareholders. Holders of common shares are entitled to receive dividends when authorized by the Board of Trustees.
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Common Share Repurchase Programs
On July 27, 2017, the Company's Board of Trustees authorized a share repurchase program of up to $100.0 million of common shares. Under this program, the Company could repurchase common shares from time to time in transactions on the open market or by private agreement. As of June 30, 2023, no common shares remained available for repurchase under this program.
On February 17, 2023, the Company's Board of Trustees authorized a share repurchase program of up to $150.0 million of common shares. Under this program, the Company may repurchase common shares from time to time in transactions on the open market or by private agreement. The Company may suspend or discontinue this program at any time. Common shares repurchased by the Company cease to be outstanding and become authorized but unissued common shares.
During the six months ended June 30, 2024, the Company repurchased 318,269 common shares for an aggregate purchase price of $5.0 million, or an average of approximately $15.71 per share. As of June 30, 2024, $141.0 million of common shares remained available for repurchase under this program.
Common Dividends
The Company declared the following dividends on common shares/units for the six months ended June 30, 2024:
Dividend per Share/UnitFor the Quarter EndedRecord DatePayable Date
$0.01 March 31, 2024March 29, 2024April 15, 2024
$0.01 June 30, 2024June 28, 2024July 15, 2024
Preferred Shares
The Company is authorized to issue up to 100,000,000 preferred shares of beneficial interest, $0.01 par value per share (“preferred shares”).
The following preferred shares were outstanding as of June 30, 2024 and December 31, 2023:
Security TypeJune 30, 2024December 31, 2023
6.375% Series E
4,400,000 4,400,000 
6.30% Series F
6,000,000 6,000,000 
6.375% Series G
9,200,000 9,200,000 
5.70% Series H
8,000,000 8,000,000 
27,600,000 27,600,000 
The Series E, Series F, Series G and Series H Cumulative Redeemable Preferred Shares (collectively, the “Preferred Shares”) rank senior to the common shares and on parity with each other with respect to payment of distributions. The Preferred Shares do not have any maturity date and are not subject to mandatory redemption. The Company may redeem the Series E and Series F Preferred Shares at any time. The Series G and Series H Preferred Shares may not be redeemed prior to May 13, 2026 and July 27, 2026, respectively, except in limited circumstances relating to the Company’s continuing qualification as a REIT or as discussed below. On or after such dates, the Company may, at its option, redeem the Preferred Shares, in each case in whole or from time to time in part, by payment of $25.00 per share, plus any accumulated, accrued and unpaid distributions through the date of redemption. Upon the occurrence of a change of control, as defined in the Company's declaration of trust, the result of which the common shares and the common securities of the acquiring or surviving entity are not listed on the New York Stock Exchange, the NYSE American or Nasdaq, or any successor exchanges, the Company may, at its option, redeem the Preferred Shares in whole or in part within 120 days following the change of control by paying $25.00 per share, plus any accrued and unpaid distributions through the date of redemption. If the Company does not exercise its right to redeem the Preferred Shares upon a change of control, the holders of the Preferred Shares have the right to convert some or all of their shares into a number of common shares based on defined formulas subject to share caps. The share cap on each Series E Preferred Share is 1.9372 common shares, on each Series F Preferred Share is 2.0649 common shares, on each Series G Preferred Share is 2.1231 common shares, and on each Series H Preferred Share is 2.2311 common shares.
Preferred Share Repurchase Program
On February 17, 2023, the Company's Board of Trustees authorized a share repurchase program of up to $100.0 million of the Preferred Shares. Under the terms of the program, the Company may repurchase up to an aggregate of $100.0 million of our 6.375% Series E Cumulative Redeemable Preferred Shares, 6.30% Series F Cumulative Redeemable Preferred Shares, 6.375% Series G Cumulative Redeemable Preferred Shares and 5.70% Series H Cumulative Redeemable Preferred Shares from time to time in transactions on the open market or by private agreement.
During the six months ended June 30, 2024, no Preferred Shares were repurchased under this program. As of June 30, 2024, $84.2 million of Preferred Shares remained available for repurchase under this program.
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The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will depend on a variety of factors, including legal requirements, price, liquidity and economic considerations, and market conditions. The program does not require the Company to repurchase any specific number of Preferred Shares. The program does not have an expiration date and may be suspended, modified or discontinued at any time.
Preferred Dividends
The Company declared the following dividends on preferred shares for the six months ended June 30, 2024:
Security TypeDividend per Share/UnitFor the Quarter EndedRecord DatePayable Date
6.375% Series E
$0.40 March 31, 2024March 29, 2024April 15, 2024
6.375% Series E
$0.40 June 30, 2024June 28, 2024July 15, 2024
6.30% Series F
$0.39 March 31, 2024March 29, 2024April 15, 2024
6.30% Series F
$0.39 June 30, 2024June 28, 2024July 15, 2024
6.375% Series G
$0.40 March 31, 2024March 29, 2024April 15, 2024
6.375% Series G
$0.40 June 30, 2024June 28, 2024July 15, 2024
5.70% Series H
$0.36 March 31, 2024March 29, 2024April 15, 2024
5.70% Series H
$0.36 June 30, 2024June 28, 2024July 15, 2024
Non-controlling Interest of Common Units in Operating Partnership
Holders of Operating Partnership units ("OP units") have certain redemption rights that enable OP unit holders to cause the Operating Partnership to redeem their units in exchange for, at the Company’s option, cash per unit equal to the market price of common shares at the time of redemption or common shares on a one-for-one basis. The number of shares issuable upon exercise of the redemption rights will be adjusted upon the occurrence of share splits, mergers, consolidations or similar pro-rata share transactions, which otherwise would have the effect of diluting the ownership interests of the Operating Partnership's limited partners or the Company's shareholders.
On November 30, 2018, in connection with the merger with LaSalle Hotel Properties ("LaSalle"), the Company issued 133,605 OP units in the Operating Partnership to third-party limited partners of LaSalle's operating partnership. In December 2023, these OP units were redeemed for common shares on a one-for-one basis.
On May 11, 2022, in connection with the acquisition of Inn on Fifth in Naples, Florida, the Company issued 16,291 OP units in the Operating Partnership.
As of June 30, 2024 and December 31, 2023, the Operating Partnership had 16,291 OP units held by third parties, excluding LTIP units.
As of June 30, 2024, the Operating Partnership had two classes of long-term incentive partnership units ("LTIP units"), LTIP Class A units and LTIP Class B units. All of the outstanding LTIP units are held by officers of the Company.
On February 17, 2023, the Board of Trustees granted 131,276 LTIP Class B units to executive officers.
On February 15, 2024, the Board of Trustees granted 136,353 LTIP Class B units to executive officers.
As of June 30, 2024, the Operating Partnership had 994,837 LTIP units outstanding, of which 470,920 LTIP units have vested. As of December 31, 2023, the Operating Partnership had 858,484 LTIP units outstanding, of which 277,136 LTIP units have vested. Only vested LTIP units may be converted to OP units, which in turn can be tendered for redemption as described above.
Non-controlling Interest of Preferred Units in Operating Partnership
On May 11, 2022, in connection with the acquisition of Inn on Fifth, the Company issued 3,104,400 preferred units in the Operating Partnership, designated as 6.0% Series Z Cumulative Perpetual Preferred Units ("Series Z Preferred Units"). The Series Z Preferred Units rank senior to the OP units and on parity with the Operating Partnership's Series E, Series F, Series G and Series H Preferred Units. Holders of Series Z Preferred Units are entitled to receive quarterly distributions at an annual rate of 6.0% of the liquidation preference value of $25.00 per share.
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At any time, holders of Series Z Preferred Units may elect to convert some or all of their units into any other series of the Operating Partnership’s preferred units outstanding at that time. After the second anniversary of the issuance of the Series Z Preferred Units, holders may elect to redeem some or all of their units for, at the Company’s election, cash, common shares having an equivalent value or preferred shares on a one-for-one basis. After the fifth anniversary of their issuance, the Company may redeem the Series Z Preferred Units for cash, common shares having an equivalent value or preferred shares on a one-for-one basis. At any time following a change of control of the Company, holders of Series Z Preferred Units may elect to redeem some or all of their units for, at the Company’s election, cash or common shares having an equivalent value.
As of June 30, 2024, the Operating Partnership had 3,104,400 Series Z Preferred Units outstanding.
Note 8. Share-Based Compensation Plan
Available Shares
The Company maintains the 2009 Equity Incentive Plan, as amended and restated (as amended, the "Plan"), to attract and retain independent trustees, executive officers and other key employees and service providers. The Plan provides for the grant of options to purchase common shares, share awards, share appreciation rights, performance units and other equity-based awards. Share awards under the Plan vest over a period determined by the Board of Trustees, generally over three to five years. The Company pays or accrues for dividends on share-based awards. All outstanding share awards are subject to full or partial accelerated vesting upon a change in control and upon death or disability or certain other employment termination events as set forth in the award agreements.
As of June 30, 2024, there were 1,176,163 common shares available for issuance under the Plan.
Service Condition Share Awards
From time to time, the Company awards restricted common shares under the Plan to members of the Board of Trustees, officers and employees. These shares generally vest over three to five years based on continued service or employment. The following table provides a summary of service condition restricted share activity during the six months ended June 30, 2024:
SharesWeighted-Average
Grant Date
 Fair Value
Unvested at December 31, 2023
443,549 $19.88 
Granted138,520 $16.13 
Vested(171,508)$21.20 
Forfeited(1,440)$15.92 
Unvested at June 30, 2024
409,121 $18.07 
For the three and six months ended June 30, 2024, the Company recognized approximately $0.9 million and $1.7 million, respectively, of share-based compensation expense related to these awards in the accompanying consolidated statements of operations and comprehensive income.
For the three and six months ended June 30, 2023, the Company recognized approximately $0.7 million and $1.6 million, respectively, of share-based compensation expense related to these awards in the accompanying consolidated statements of operations and comprehensive income.
Performance-Based Equity Awards
On February 15, 2024, the Board of Trustees approved a target award of 322,950 performance-based equity awards to officers and employees of the Company. These awards will vest, if at all, in 2027. The actual number of common shares that ultimately vest will be from 0% to 200% of the target award and will be determined in 2027 based on the performance criteria defined in the award agreements for the period of performance from January 1, 2024 through December 31, 2026.
For the three and six months ended June 30, 2024, the Company recognized approximately $1.6 million and $2.9 million, respectively, of share-based compensation expense related to performance-based equity awards in the accompanying consolidated statements of operations and comprehensive income.
For the three and six months ended June 30, 2023, the Company recognized approximately $1.4 million and $2.6 million, respectively, of share-based compensation expense related to performance-based equity awards in the accompanying consolidated statements of operations and comprehensive income.
Long-Term Incentive Partnership Units
As of June 30, 2024, the Operating Partnership had two classes of LTIP units, LTIP Class A units and LTIP Class B units. All of the outstanding LTIP units are held by officers of the Company.
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On February 15, 2024, the Board of Trustees granted 136,353 LTIP Class B units to executive officers. These LTIP units will vest ratably on January 1, 2025, 2026 and 2027, contingent upon continued employment with the Company. The fair value of each award was determined based on the closing price of the Company’s common shares on the grant date of $16.13 per unit with an aggregate grant date fair value of $2.2 million.
As of June 30, 2024, the Operating Partnership had 994,837 LTIP units outstanding, of which 470,920 LTIP units have vested. As of December 31, 2023, the Operating Partnership had 858,484 LTIP units outstanding, of which 277,136 LTIP units have vested. Only vested LTIP units may be converted to OP units, which in turn can be tendered for redemption as described in Note 7. Equity.
For the three and six months ended June 30, 2024, the Company recognized approximately $1.0 million and $2.0 million, respectively, in expense related to these LTIP units. The aggregate expense related to the LTIP unit grants is presented as non-controlling interest in the Company’s accompanying consolidated balance sheets.
For the three and six months ended June 30, 2023, the Company recognized approximately $0.9 million and $1.7 million, respectively, in expense related to these LTIP units. The aggregate expense related to the LTIP unit grants is presented as non-controlling interest in the Company’s accompanying consolidated balance sheets.
Note 9. Income Taxes
PHL is subject to federal and state corporate income taxes at statutory tax rates. Given the continued uncertainties about the Company's ability to utilize its net operating loss in future years, the Company has recorded a valuation allowance on all deferred tax assets.