This Annual Report on Form 10-K may contain registered trademarks, including Hampton Inn®, Hampton Inn and Suites®, Homewood Suites®, Embassy Suites®, DoubleTree® and Hilton Garden Inn®, which are the exclusive property of Hilton Worldwide, Inc.® and its subsidiaries and affiliates, Courtyard® by Marriott, Fairfield Inn and Suites®, TownePlace Suites®, SpringHill Suites®, Residence Inn® and Westin® which are the exclusive property of Marriott International, Inc.® or one of its affiliates, and Hyatt House® and Hyatt Place®, which are the exclusive property of Hyatt Hotels Corporation® or one of its affiliates, and Staybridge Suites®, which is the exclusive property of Intercontinental Hotels Group® or one of its affiliates. For convenience, the applicable trademark or service mark symbol has been omitted but will be deemed to be included wherever the above referenced terms are used.

Forward-Looking Statements

Certain statements included in this Annual Report on Form 10-K are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of Hospitality Investors Trust, Inc. (the "Company" "we" "our" “our company” or "us") and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as "may," "will," "seeks," "anticipates," "believes," "estimates," "expects," "plans," "intends," "should" or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.

The followingFurther, forward-looking statements speak only as of the date they are somemade, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.

These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of our control, which could cause actual results to differ materially from the results contemplated by the forward-looking statements. Some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:

All forward-looking statements should also be read in light of the risks identified in“Risk Factors” (Part I, Item 1A of this Annual Report on Form 10-K.10-K), and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part II, Item 7).

PART I

Item 1. Business.

Overview

Hospitality Investors Trust, Inc. is a self-managed real estate investment trust (“REIT”) that invests primarily in premium-branded select-service lodging properties in the United States. We were incorporated on July 25, 2013 as a Maryland corporation and elected to be taxed as a REIT beginning with the taxable year ended December 31, 2014. As of December 31, 20192020, we own or have an ownership interest in a total of 124101 hotels, with a total of 15,32412,673 guestrooms in 3329 states.

We believe in affiliating our hotels with premium brands owned by leading international franchisors such as Hilton Worldwide Holdings, Inc. ("Hilton"), Marriott International, Inc. ("Marriott") and Hyatt Hotels Corporation ("Hyatt"). These brands represent the delivery of consistently high-quality hotel accommodations with value-oriented pricing that we believe appeals to a wide range of customers, including both business and leisure travelers. As of December 31, 20192020, all but one of our hotels operated under a franchise or license agreement with a national brand owned by one of Hilton, Marriott Hyatt and Intercontinental Hotels Group ("IHG")Hyatt or one of their respective subsidiaries or affiliates. Our one unbranded hotel has a direct affiliation with a leading university in Atlanta.

We have primarily acquired lodging properties in the upscale select-service, upscale extended stay and upper midscale select-service chain scale segments located in secondary markets with strong demand generators, such as state capitals, major universities and hospitals, as well as corporate, leisure and retail attractions. We believe properties in these chain scale segments can be operated with fewer employees and provide more stable cash flows than full service hotels, and with less market volatility than similar hotels in primary market locations.

Coronavirus Pandemic

We have been significantly impacted by the effects of the coronavirus pandemic. The pandemic has caused a significant decline in travel and demand for hotels and guestrooms which continues to adversely impact our business, and we anticipate these conditions will continue and may worsen. The pandemic has also adversely impacted credit and capital market conditions, such that we have been unable to access these markets and this may continue until conditions normalize. We believe our concentration of hotels in “drive-to” markets has allowed our occupancy numbers to recover from the onset of the coronavirus pandemic in March and April of 2020, although occupancy and financial performance at our hotels remain substantially below pre-pandemic levels.  Since April 2020, our financial results have been significantly below normal historical levels and as a result for the last 12 months we have not generated sufficient cash from our operations to cover all of our obligations. During this period, we have utilized cash on hand to fund non-hotel expenses, such as interest on our debt obligations, payment of distributions on units of limited partner interests in our operating partnership entitled “Class C Units” (the “Class C Units”) and general and administrative expenses, as well as in certain months a portion of our hotel operating expenses, and we anticipate continuing to use cash on hand for these purposes. Moreover, as a result of the forbearance and loan modification agreements we have entered into with respect to our indebtedness, as well as the periodic debt yield and debt service coverage tests we remain subject to under our indebtedness, we do not expect that excess cash flows, if any, generated by our properties will be available to us for any other purpose for the foreseeable future. We estimate that without additional liquidity from a source other than property operations, we will no longer have sufficient cash on hand to continue to pay our current obligations during the first half of 2021. Accordingly, we will soon require additional liquidity from a source other than property operations, and to date we have not been able to identify an available source that can satisfy this requirement other than the Brookfield Investor.

Potential Restructuring

We have been engaged in ongoing discussions with Brookfield Strategic Real Estate Partners II Hospitality REIT II LLC (the “Brookfield Investor”) regarding our strategic and liquidity alternatives. As part of these ongoing discussions, during December 2020, we entered into an amendment (the “December LPA Amendment”) with the Brookfield Investor to the Amended and Restated Agreement of Limited Partnership (as amended, the “A&R LPA”) of our operating partnership, Hospitality Investors Trust Operating Partnership, L.P. (the “OP”), pursuant to which the cash distribution payable to the Brookfield Investor on December 31, 2020 was converted into a PIK Distribution (as defined below). The objective of the December LPA Amendment was to preserve at least in the short-term our cash position as we continued discussions with the Brookfield Investor regarding a holistic solution to our liquidity dilemma, but it did not address our long-term need for additional capital. As our discussions with the Brookfield Investor have continued during the first quarter of 2021, we are in ongoing discussions concerning the possibility of entering into a definitive and comprehensive agreement on the terms of a series of deleveraging or restructuring transactions (the “Restructuring Transactions”) that would include, among other things, filing by us and the OP of pre-packaged Chapter 11 cases under the U.S. Bankruptcy Code in the State of Delaware to implement the Restructuring Transactions pursuant to a plan of reorganization (a “Pre-Packaged Bankruptcy”).

On March 30, 2021, to address our short-term liquidity needs as our discussions with the Brookfield Investor regarding the Restructuring Transactions remain ongoing, we entered into another amendment to the A&R LPA (the “March LPA Amendment” and, together with the “December LPA Amendment,” the “LPA Amendments”) with the Brookfield Investor pursuant to which the cash distribution payable to the Brookfield Investor with respect to its Class C Units on March 31, 2021 was converted into a PIK Distribution. We have also received consent to a Pre-Packaged Bankruptcy from certain of our franchisors and are engaged in discussions with other stakeholders with respect to a possible Pre-Packaged Bankruptcy.

There can be no assurance, however, that our discussions with the Brookfield Investor will ultimately lead to a definitive restructuring support agreement (a “Restructuring Support Agreement”) on favorable terms, or at all. Moreover, even if we are able to enter into a Restructuring Support Agreement with the Brookfield Investor, the Restructuring Transactions will remain subject to significant conditions, including our obtaining consents from all of our lenders, our franchisors and other third parties in interest, and there will still be no assurance we will be able to complete the Restructuring Transactions, including a Pre-Packaged Bankruptcy, on their contemplated terms, or at all. A Pre-Packaged Bankruptcy, like any bankruptcy, is expected to place our common stockholders at significant risk of losing all or substantially all of the value of their investment in our common stock and materially and adversely affect us. Furthermore, even if we are able to complete the Restructuring Transactions, including a Pre-Packaged Bankruptcy, there can be no assurance that we will not once again need additional capital, which may or may not be available on favorable terms, or that we will be successful in executing our business plan post-emergence from bankruptcy and achieving our strategic goals.

Hotels

During 2019,, as part of our investment strategy to continue to pursue the sale of non-core hotels and reallocate capital into other corporate purposes, including debt reduction, we commenced marketing for sale a total of 45 hotels. As of December 31, 2019, 202020, 43 of these hotels have been sold, the pending sale of one hotel was terminated during October 2020 due to the buyer’s default and 21we were entitled to retain the non-refundable deposit as liquidated damages, and the final hotel was subject to a definitive sale agreementsagreement where the buyer has made a non-refundable deposit.deposit and closing is scheduled for July 2021.

The tables below include the following details for our hotel portfolio as of December 31, 20192020, measured by number of rooms:

⁽¹⁾ STR generally classifies hotel brands into one of the following six chain scale segments, ranked from highest average daily rate to lowest: luxury, upper upscale, upscale, upper midscale, midscale and economy.

(1) Albuquerque, NM and Birmingham, AL are two different markets and each includes two of our hotels and 1.6% of our total portfolio rooms.

⁽¹⁾ In February 2021, we defaulted on our Georgia Tech Hotel & Conference Center ground lease and entered into a forbearance agreement with the lenders under the related mortgage indebtedness, and, as a result of our default, the ground lessor has exercised its right to terminate the ground lease, effective as of March 31, 2021.  See Note 17 – Subsequent Events to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for more details. 

In order to maintain our qualification as a REIT, we cannot operate or manage our hotels. Accordingly, our hotels are operated by national and regional hotel management companies that are not affiliated with us. Our asset management activities seek to encourage and demand our third-party management companies to develop effective sales programs, operate hotels effectively, control costs and develop operational initiatives for our hotels that increase guest satisfaction.

We conducted our initial public offering ("IPO"), from January 2014 until November 2015 without listing shares of our common stock on a national securities exchange, and we have not subsequently listed our shares. There currently is no established trading market for our shares and there may never be one. We suspended paying distributions to our stockholders in connection with our entry into the SPA (as defined below) with Brookfield Strategic Real Estate Partners II Hospitality REIT II LLC (the “Brookfield Investor”) in January 2017. Currently, under the Brookfield Approval Rights (as defined below), prior approval is required before we can declare or pay any distributions or dividends to our common stockholders, except for cash distributions equal to or less than $0.525 per annum per share.

Estimated Per-Share NAV

We are required to annually publish a per share estimated value of our common stock (“Estimated Per-Share NAV”) pursuant to the rules and regulations of the Financial Industry Regulatory Authority ("FINRA"). On May 9, 2019,April 21, 2020, our board of directors unanimously approved and we published an updated Estimated Per-Share NAV equal to $9.21$8.35 based on an estimated fair value of our assets less the estimated fair value of our liabilities, divided by 39,134,62839,151,201 shares of our common stock outstanding on a fully diluted basis as of December 31, 20182019 (the “2019“2020 NAV”), and we published our 2019 NAV on May 13, 2019. We expect to publish our next annual Estimated Per-Share NAV update during the second quarter of 2020.. 

In September 2018,Moreover, as discussed in more detail elsewhere in this Annual Report on Form 10-K, we have been engaged in ongoing discussions with the Brookfield Investor regarding the terms of the Restructuring Transactions, which would include, among other things, a Pre-Packaged Bankruptcy. A Pre-Packaged Bankruptcy, like any bankruptcy, is expected to place our common stockholders at significant risk of losing all or substantially all of the value of their investment in our common stock. Moreover, seeking bankruptcy court protection could have a material adverse effect on our business, financial condition, results of operations and liquidity.

The 2020 NAV and the underlying estimates and assumptions are as of December 31, 2019, and have not been revised to reflect any potential negative impact on our company of the coronavirus pandemic, a Pre-Packaged Bankruptcy or any other transactions or events occurring subsequent to December 31, 2019.

While our board of directors adopted a Share Repurchase Program (“SRP”) pursuanthas approved the 2020 NAV, it has only done so for the sole purpose of allowing us to which we were offering, subject to certain terms and conditions, liquidity to stockholders by offering to make quarterly repurchasescomply with applicable rules of common stock at a price to be established by the board of directors. In February 2019, ourFINRA for use on customer account statements. Our board of directors suspendedbelieves the SRP. The suspension will remain2020 NAV is significantly above the current value of a share of common stock. Stockholders should not rely on the 2020 NAV in effect unlessrespect of any investment decisions relating to our company, including in making any decision to buy or sell shares of our common stock. 

For further information, see “Item 1A. Risk Factors — Our Estimated Per-Share NAV was determined as December 31, 2019 and untildoes not reflect any potential negative impact of the coronavirus pandemic after that date or any negative impact of  a Pre-Packaged Bankruptcy, which is expected to place our board takes further action to reactivatestockholders at significant risk of losing all or substantially all of the SRP. There can be no assurance the SRP will be reactivated on its current terms, different terms, or at all.value of their investment in our common stock and materially and adversely affect us.”

Brookfield Investment

On January 12, 2017, we, along with our operating partnership, Hospitality Investors Trust Operating Partnership, L.P. (the “OP”),OP, entered into a Securities Purchase, Voting and Standstill Agreement (the “SPA”) with the Brookfield Investor, pursuant to which the Brookfield Investor agreed to make capital investments in our company of up to $400 million by purchasing units of limited partner interest in the OP entitled “Class C Units” (“Class C Units”) through February 2019. The initial closing under the SPA (the “Initial Closing”) occurred on March 31, 2017, followed by subsequent closings on February 27, 2018 and February 27, 2019.   At the Initial Closing, in addition to Class C Units, the Brookfield Investor also purchased one share of a new series of preferred stock designated as the Redeemable Preferred Share, par value $0.01 per share (the "Redeemable Preferred Share"), for a nominal purchase price. Pursuant to the SPA, the Brookfield Investor made $379.7 million of capital investments in us by purchasing Class C Units, but the Brookfield Investor no longer has any obligations or rights to purchase additional Class C Units pursuant to the SPA or otherwise. As of December 31, 2019,2020, the total liquidation preference of the Class C Units (which includes quarterly PIK Distributions (as defined below) that are paid on the outstanding liquidation preference) was $411.8$441.4 million.

On March 31, 2017, the initial closing under the SPA (the “Initial Closing”) occurred and various transactions and agreements contemplated by the SPA were consummated and executed, including but not limited to:

On February 27, 2018, the second closing under the SPA (the “Second Closing”) occurred, pursuant to which we sold 1,694,915.25 additional Class C Units to the Brookfield Investor, for a purchase price of $14.75 per Class C Unit, or $25.0 million in the aggregate.

On February 27, 2019, the third and final closing under the SPA (the “Final Closing”) occurred, pursuant to which we sold 14,898,060.78 additional Class C Units to the Brookfield Investor, for a purchase price of $14.75 per Class C Unit, or $219.7 million in the aggregate. 

Substantially all of our business is conducted through the OP. We are a general partner and hold all of the units of limited partner interest in the OP entitled “OP Units” ("OP Units"). The Brookfield Investor holds all the issued and outstanding Class C Units, which rank senior in payment of distributions and in the distribution of assets to the OP Units held by us. BSREP II Hospitality II Special GP, OP LLC (the “Special General Partner”), an affiliate of the Brookfield Investor, is the special general partner of the OP, with certain non-economic rights that apply if we fail to redeem the Class C Units when required to do so, including the ability to commence selling the OP’s assets until the Class C Units have been fully redeemed. Holders of Class C Units are entitled to receive, with respect to each Class C Unit, fixed, quarterly cumulative cash distributions at a rate of 7.50% per annum and are also entitled to receive, with respect to each Class C Unit, a fixed, quarterly, cumulative distribution payable in Class C Units at a rate of 5% per annum ("PIK Distributions"). As of December 31, 2019, the total liquidation preference of the Class C Units was $411.8 million.

The Class C Units are convertible into OP Units, which may be redeemed for shares of our common stock or, at our option, the cash equivalent. As of the date of this Annual Report on Form 10-K, the Brookfield Investor owns or controls 41.7%43.4% of the voting power of our common stock on an as-converted basis. The SPA also contains certain standstill and voting restrictions applicable to the Brookfield Investor and certain of its affiliates.

Without obtaining the prior approval of the majority of the then outstanding Class C Units, the OP is restricted from taking certain actions including equity issuances, debt incurrences, payment of dividends or other distributions, redemptions or repurchases of securities, property acquisitions and property sales and dispositions. In addition, pursuant to the terms of the Redeemable Preferred Share, the Brookfield Investor has elected and has a continuing right to elect two directors (each, a "Redeemable Preferred Director") to our board of directors and has other governance and board rights, and we are similarly restricted from taking those actions requiring approval of the Class C Units without the prior approval of at least one of the Redeemable Preferred Directors. Prior approval of at least one of the Redeemable Preferred Directors is also required for our annual business plan (including the annual operating and capital budget) required under the terms of the Redeemable Preferred Share (the "Annual Business Plan"), hiring and compensation decisions related to certain key personnel (including our executive officers) and various matters related to the structure and composition of our board of directors. These restrictions (collectively referred to herein as the “Brookfield Approval Rights”) are subject to certain exceptions and conditions.

See Note 3 -We have been engaged in ongoing discussions with the Brookfield Investment toInvestor regarding our accompanying consolidated financial statements includedstrategic and liquidity alternatives. As our discussions with the Brookfield Investor have continued during the first quarter of 2021, we are in this Annual Reportongoing discussions concerning the possibility of entering into a definitive and comprehensive agreement on Form 10-K for additional information regarding the terms of the Redeemable Preferred Share,Restructuring Transactions that would include, among other things, filing a Pre-Packaged Bankruptcy. As part of these ongoing discussions, we entered the Class C UnitsDecember LPA Amendment and the Brookfield Approval Rights.

Transition to Self-Management

Prior to the Initial Closing, we had no employees,March LPA Amendment in December 2020 and we depended on our former external advisor, American Realty Capital Hospitality Advisors, LLC (the “Former Advisor”), to manage certain aspects of our affairs on a day-to-day basisMarch 2021, pursuant to our advisory agreement with the Former Advisor. In connection with, and as a conditionwhich cash distributions payable to the Brookfield Investor's investment in us at the Initial Closing, the advisory agreement was terminated and certain employees of the Former Advisor or its affiliates (including, at that time, Crestline Hotels & Resorts, LLC (“Crestline”)) who had been involved in the management of our day-to-day operations, including all of our executive officers, became our employees. As of Investor on December 31, 2019, we had 29 full-time employees.2020 and March 31, 2021 was or will be converted into PIK Distributions. 

Investment ObjectiveSee “Item 13. Certain Relationships and Strategies

Our primary business objective is to maximize stockholder valueRelated Transactions, and position ourselvesDirector Independence” for a liquidity event, such as a listing on a national securities exchange, a merger or a sale, within two to four years, depending on capital markets and macroeconomic conditions. Subject tofurther information regarding our relationship with the Brookfield Approval Rights, including the requirement that at least one Redeemable Preferred Director approve our Annual Business Plan, we have pursuedInvestor and will continue to pursue this objective through the following investment strategies:related transactions.

Property Management Agreements

We contract directly or indirectly, through our taxable REIT subsidiaries, with third-party property management companies to manage our hotel properties.

As of December 31, 20192020, 7372 of our hotels were managed by Crestline and 5129 of our hotels were managed by the following other property managers: Hampton Inns Management LLC and Homewood Suites Management LLC, affiliates of Hilton (27(11 hotels), InnVentures IVI, LP (2 hotels)(one hotel), and McKibbon Hotel Management, Inc. (18 hotels) and LBA Hospitality (4(17 hotels).

With few exceptions, our management agreements with Crestline are long-term (initial term of 20 years) and are generally terminable by us only for performance related reasons (i.e., failure of the hotel to achieve certain performance thresholds). In connection with the Initial Closing, we agreed with Crestline, which was then an affiliate of the Former Advisor, to the following additional termination rights in connection with a sale of the applicable hotel:

During 2019, and 2020, we transitioned management of a total of fourfourteen hotels to Crestline from our other property managers to replace Crestline-managed hotels that we sold during 2019these years pursuant to the replacement right described above, and we transitioned an additional ten hotels to Crestline from our other property managers to replace Crestline-managed hotels that we have sold or expect to sell during 2020. We expect to similarly transition management of additional hotels to Crestline to the extent we continue to sell Crestline-managed hotels under our hotel sale program.above. 

Our management agreements with our other property managers are short-term and generally range from one to five-year initial terms with continuous renewal options but are terminable by us with or without cause and without payment of a fee or penalty on short notice (generally 60-90 days).

For their services under these hotel management agreements, our property managers receive a base property management fee and are also, in some cases, eligible to receive an incentive management fee if hotel operating profit exceeds certain thresholds.

We pay a base property management fee of generally up to 3.0% of the monthly gross receipts from the properties to the applicable property manager. We reimburse the costs and expenses incurred by the property manager on our behalf pursuant to its duties in accordance with the management agreement.

Franchise Agreements

All but one of our hotels operate under a franchise or license agreement with a national brand that is separate from the agreement with the property manager pursuant to which the operations of the hotel are managed. Our franchise agreements grant us the right to the use of the brand name, systems and marks with respect to specified hotels and establish various management, operational, record-keeping, accounting, reporting and marketing standards and procedures with which the licensed hotel must comply. In addition, the franchisor establishes requirements for the quality and condition of the hotel and its furniture, fixtures and equipment, and we are obligated to expend such funds as may be required to maintain the hotel in compliance with those requirements. We are required to make related escrow reserve deposits for these expenditures under our indebtedness.

Typically, our franchise agreements provide for a license fee, or royalty, of 5% to 6% of gross room revenues. In addition, we generally pay 1.5% to 4.3% of gross room revenues as a program fee for the system-wide benefit of brand hotels.

Our typical franchise agreement provides for an initial term of 15 to 20 years, although some have shorter terms. As of December 31, 20192020, the weighted average remaining term of our franchise agreements was approximately 10.79.5 years. The agreements typically provide no renewal or extension rights and are not assignable. If we breach one of these agreements, in addition to losing the right to use the brand name for the applicable hotel, we may be liable, under certain circumstances, for liquidated damages.

Financing Strategies and Policies

As of December 31, 20192020, we had $1.5$1.3 billion in outstanding indebtedness. All of our properties serve as collateral under our indebtedness. See “Item 2. Properties - Debt.”

As of December 31, 2019, $411.82020, $441.4 million liquidation preference of Class C Units were issued and outstanding and owned by the Brookfield Investor. The Brookfield Investor may redeem such Class C Units at any time on or after March 31, 2022 for a redemption price equal to the liquidation preference and also has certain other redemption rights if we fail to maintain REIT status or if we materially breach the terms of the Class C Units. The Class C Units are classified as temporary equity for financial accounting purposes due to these contingent redemption features. 

As of December 31, 20192020, our loan-to-value ratio was 66.164.9%%. This leverage percentage does not include the Class C Units as indebtedness and is calculated based on total cost of real estate assets before accumulated depreciation and amortization.  The market value of our real estate assets may be materially lower.

Pursuant to the Brookfield Approval Rights, prior approval of any debt incurrence is required except as specifically set forth in the Annual Business Plan and for the refinancing of existing debt in a principal amount not greater than the amount to be refinanced and on terms no less favorable to us. We are also subject to certain covenants, such as debt service coverage ratios and negative pledges, in our existing indebtedness that restrict our ability to make future borrowings.

The form of our indebtedness may be long term or short term, secured or unsecured, fixed or floating rate or in the form of a revolving credit facility, repurchase agreements or warehouse lines of credit. We will seek to obtain financing on the most favorable terms available.

Except with respect to certain borrowing limits contained in our charter, we may reevaluate and change our debt policy in the future without a stockholder vote. The covenants in our existing indebtedness may not be changed without consent of our lenders. The Brookfield Approval Rights generally cannot be changed without the approval of the Brookfield Investor as well as, with respect to the terms of the Redeemable Preferred Share, a stockholder vote. Factors that we would consider when reevaluating or changing our debt policy include: then-current economic conditions, the relative cost and availability of debt and equity capital, any investment opportunities, the ability of our properties and other investments to generate sufficient cash flow to cover debt service requirements and other similar factors.

Tax Status

We elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"), commencing with our taxable year ended December 31, 2014. We intend to operate in such a manner as to continue to qualify for taxation as a REIT under the Code. However, no assurance can be given that we will operate in a manner so as to continue to qualify as a REIT. We generally, with the exception of our taxable REIT subsidiaries, will not be subject to federal corporate income tax to the extent that we distribute annually all of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP) determined without regards to the deduction for dividends paid and excluding net capital gain, to our stockholders and comply with various other requirements applicable to REITs. Even if we qualify as a REIT, we may be subject to certain state and local taxes on our income and property, and federal income and excise taxes on our undistributed income, and our taxable REIT subsidiaries will be subject to tax.

Competition

The hotel industry is highly competitive. This competition could reduce occupancy levels and operating income at our properties, which would adversely affect our operations. We face competition from many sources. We face competition from other hotels both in the immediate vicinity and the geographic market where our hotels are located. New construction of hotels in the markets in which we operate may increase the number of rooms available and may decrease occupancy and room rates. In addition, increases in labor and other operating costs due to inflation and other factors may not be offset by increased room rates. We also face competition from nationally recognized hotel brands with which we are not associated, as well as from other hotels associated with nationally recognized hotel brands with which we are associated. In addition to competing with traditional hotels and lodging facilities, we compete with alternative lodging companies, including third-party providers of short-term rental properties and serviced apartments, such as Airbnb. We compete based on a number of factors, including room rates, quality of accommodations, service levels, convenience of location, reputation, reservation systems, brand recognition, loyalty programs and supply and availability of alternative lodging.

We compete with many other entities engaged in real estate investment activities, including individuals, corporations, bank and insurance company investment accounts, private investment funds, other REITs, real estate limited partnerships, and other entities engaged in real estate investment activities, many of which have greater resources than we do. In addition, affiliates of the Brookfield Investor are or may be in the business of making investments in, and have or may have investments in, other businesses similar to, and that may compete with, our business.

Regulations

Our investments are subject to various federal, state and local laws, ordinances and regulations, including, among other things, accessibility, zoning regulations, land use controls, environmental controls relating to air and water quality and noise pollution. We obtain all permits and approvals that we believe are necessary under current law to operate our investments.

Environmental

As an owner of real property, we are subject to various federal, state and local laws and regulations regarding environmental, health and safety matters. These laws and regulations address, among other things, asbestos, polychlorinated biphenyls, fuel, oil management, wastewater discharges, air emissions, radioactive materials, medical wastes, and hazardous wastes, and in certain cases, the costs of complying with these laws and regulations and the penalties for non-compliance can be substantial. Even with respect to properties that we do not operate or manage, we may be held primarily or jointly and severally liable for costs relating to the investigation and clean-up of any property from which there is or has been an actual or threatened release of a regulated material and any other affected properties, regardless of whether we knew of or caused the release. Such costs typically are not limited by law or regulation and could exceed the property's value. In addition, we may be liable for certain other costs, such as governmental fines and injuries to persons, property or natural resources, as a result of any such actual or threatened release.

We did not make any material capital expenditures in connection with environmental, health, and safety laws, ordinances and regulations in 2019,2020, and we do not expect that we will be required to make any such material capital expenditures during 2020.2021.

EmployeesHuman Capital Resources

As of December 31, 2019,2020, we had 29 full-time24 full time employees. Our human capital management objectives are to strive to attract, develop, and promote talent that renders a strong, diverse, and successful workforce. We strive to achieve these objectives by grooming our talent for high performing roles and providing leadership opportunities, providing a competitive pay and benefit structure, promoting cultural diversity, and continuing to update our technological systems to remain competitive amongst our peers.

The staff at our hotels are employed by our third-party hotel managers or professional hotel staffing companies engaged by such managers.

Prior to the Initial Closing, we had no employees, and we depended on our former external advisor, American Realty Capital Hospitality Advisors, LLC (the “Former Advisor”), to manage certain aspects of our affairs on a day-to-day basis pursuant to our advisory agreement with the Former Advisor. In connection with, and as a condition to, the Brookfield Investor's investment in us at the Initial Closing, the advisory agreement was terminated and certain employees of the Former Advisor or its affiliates (including, at that time, Crestline Hotels & Resorts, LLC (“Crestline”)) who had been involved in the management of our day-to-day operations, including all of our executive officers, became our employees. We now conduct our operations independently of the Former Advisor and its affiliates, with which we have no ongoing affiliation.

We have entered into an annually renewable shared services agreement with Crestline pursuant to which Crestline provides us with certain accounting, tax related,and treasury information technology and other administrative services.

Available Information

We electronically file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and all amendments to those filings with the SEC. The SEC maintains a website at http://www.sec.gov that contains reports, proxy statements and information statements, and other information, which you may obtain free of charge. In addition, copies of our filings with the SEC may be obtained from our website at www.HITREIT.com. Access to these filings is free of charge. We are not incorporating our website or any information from the website into this Form 10-K.

Item 1A. Risk Factors.

Set forth below are the risk factors that we believe are material to our investors.investors and a summary thereof. The occurrence of any of the risks discussed in this Annual Report on Form 10-K could have a material adverse effect on our business, financial condition, results of operations, our ability to pay distributions (although we are not currently paying distributions) and the value of an investment in our common stock.

Summary Risk Factors

Risks Related to an Investment in Hospitality Investors Trust, Inc.

We have a history of operating losses and cannot assure our stockholders that we will achieve profitability.

Since inception in July 2013 through December 31, 2019, we have incurred net losses (calculated in accordance with GAAP) equal to $502.1 million. The extent of our future operating losses and the timing of our achieving profitability are highly uncertain, and we may never achieve or sustain profitability.

Because no public trading market for our shares currently exists and our share repurchase program has been suspended, it is difficult for our stockholders to sell their shares of our common stock.

There is no established trading market for shares of our common stock and there can be no assurance one will develop. Our charter does not require our directors to seek stockholder approval to liquidate our assets by a specified date, nor does our charter require our directors to list our shares for trading on a national securities exchange by a specified date. We currently have no plans to list our shares on a national securities exchange. While there is a secondary market for shares of common stock, we believe the volume of those trades is small in relation to the number of shares outstanding. Until our shares are listed, if ever, stockholders may not sell their shares unless the buyer meets the applicable suitability and minimum purchase standards. In addition, our charter prohibits the ownership of more than 4.9% in value of the aggregate of outstanding shares of capital stock or more than 4.9% in value or number of shares, whichever is more restrictive, of any class or series of our stock, unless exempted by our board of directors, which may inhibit large investors from purchasing our stockholders' shares.

In September 2018, our board of directors adopted the SRP pursuant to which we were offering, subject to certain terms and conditions, liquidity to stockholders by offering to make quarterly repurchases of common stock at a price to be established by the board of directors. In February 2019, our board of directors suspended the SRP. The suspension will remain in effect unless and until our board takes further action to reactivate the SRP. There can be no assurance the SRP will be reactivated on its current terms, different terms or at all. Therefore, it is difficult for stockholders to sell their shares. If a stockholder is able to sell his or her shares, it may only be at a substantial discount to Estimated Per-Share NAV.

Any pandemic or outbreak of a highly infectious or contagious disease could reduce travel and adversely affect hotel demand, and the recent novel coronavirus pandemic has already had these effects and has begun to adversely impactimpacted our business, a trend we anticipate will continue and likelymay worsen.

Our business is sensitive to the willingness and ability of our customers to travel. Any pandemic or outbreak of a highly infectious or contagious diseases may result in decreases in travel and economic activity, including due to severe disruptions in flights, trains and other modes of transport and cancellations or avoidance of travel-related activities. Decreases in travel and economic activity, particularly in the areas in which we operate, could lead to a decline in hotel demand and the number of guests visiting our hotels, which could adversely affect our business and financial results.   

The recent novel coronavirus pandemic has already had these effects and has begun to adversely impactimpacted our business. In early March 2020, we started to seeexperience softening of demand and revenue weakness across our portfolio triggered by direct guest cancellations at our hotels as well as cancellations of business and industry conventions and meetings in certain of our markets. These conditions havesignificantly worsened over the course of the month and have continued through the remainder of 2020 and into the first quarter of 2021 as the level of overall business and leisure travel has declined significantly due to concerns about the coronavirus pandemic and we anticipate they will continueactions taken by governments, businesses and likely worsen furtherother organizations to contain the coronavirus that have included restrictions on travel and the operations of many businesses as governmentswell as event cancellations and businesses takesocial distancing measures. We saw gradual recovery in occupancy levels at our hotels primarily from leisure travel in the summer and into the fall followed by some slowing of the recovery as an additional actionswave of the pandemic developed in the late fall.  Overall, the number of guests at our hotels continues to respondbe substantially lower than historical levels due to the risksongoing impact of the coronavirus pandemic. We are working closely withanticipate that demand from business travelers will remain muted at least until there has been adequate production and widespread distribution of the recently developed coronavirus vaccines.      

We anticipate this trend of substantially lower guest demand and revenue at our third party property managers to respond to these developmentshotels will continue and to implement various cost reduction and other liquidity preservation measures which have included temporary hotel staff reductions and temporarily closing certain hotels. We have also begun to reach out to various contract counterparties, such as lenders and ground lessors, about payment waivers and deferrals, as well as other liquidity preservation measures. These efforts are expected to continue, although there can be no assurance all or any of them will be successful. Thethe extent to which the coronavirus outbreakspandemic will impact our financial results will depend on future developments, which are unknown and cannot be predicted, including the duration and ultimate scope ofhow long the pandemic continues and its severity, new information which may emerge concerning the severitycoronavirus, the efficacy and acceptance of any vaccines or other remedies that have been or may be developed as well as the coronavirusproduction and distribution thereof,  actions taken to contain the coronavirus pandemic or its impact, consumer preferences and the duration of governmental and business restrictions on travel, among others. Additional waves of the coronavirus pandemic could lead to new travel restrictions and reductions in economic activity resulting in further disruptions to our operations and cash flows. The coronavirus pandemic has also triggered a decrease in global economic activity that has resulted in a global recession and the sustained downturn in the U.S. economy has caused an economic recession in the U.S. The continuation of the economic downturn and relative weakness in any recovery could have further adverse impacts on our business.   

We cannot predict how the coronavirus pandemic may impact the prospects for the Companyour company and our business generally when conditions normalize. For example, some of the current reduction in travel and consequently guest demand at our hotels may persist due to potentially permanent changes in the hotel use patterns and willingness to travel of our guests.  We may also experience higher cost structures due to factors such as new brand standards and increasing guest and staff concerns about cleanliness. 

We are subject to periodic debt yield and debt service coverage tests underMany or all facets of our indebtedness.  Failure to satisfy these tests, although not an event of default underbusiness have been or could be impacted by the indebtedness, could cause cash flows from the properties financed after debt service, certain property operating expenses and loan reserves to be divertedcoronavirus pandemic. In addition to the lender, as additional loan collateral untilimpacts on us described above, the tests have been satisfied or we prepay sufficient principal to satisfy the applicable test.  The decline in our financial results caused by the recent coronavirus pandemic could result in our failure to satisfy the coverage tests under our indebtedness, which could have a material adverse effect on our liquidity. 

The recent coronavirus pandemic has also begunimpacted us in other ways and has led us to adversely impact credit and capital market conditions andpursue the Restructuring Transactions, including a Pre-Packaged Bankruptcy. 

Moreover, many risk factors set forth in this Annual Report on Form 10-K for the year ended December 31, 2020 should be interpreted as heightened risks as a result of these developments we may be unable to access these markets until conditions normalize.  During 2020, we have two debt obligations scheduled to mature: $10.5 million principal amountthe impact of mortgage debt secured by the Hilton Garden Inn Blacksburg, VA hotel (a joint venture in which we own a 56.5% interest) which is scheduled to mature in June and $232.0 million principal amountcoronavirus pandemic. 

Due to the uncertainties with regard toimpact of the coronavirus pandemic including as to its duration and severity,on our business, we cannot predict whetherexpect we will be able to access the credit markets and refinance these debt obligations in a timely manner, and, accordingly weno longer have requested extensions of these debt obligations. There can be no assurance we will be able to obtain these extensions on favorable terms, or at all. If credit market conditions improve, we may instead seek to refinance these debt obligations.  We cannot provide any assurances our efforts to extend or refinance these debt obligations in a timely manner or on favorable terms will be successful.   

Any of these events could have a material adverse effect on us and the value of your investment in us.

We may require funds, which may not be available on favorable terms or at all, in addition to our operating cash flow andsufficient cash on hand to meetcontinue to pay our capital requirements.current obligations during the first half of 2021 and the additional liquidity from a source other than property operations we require may only be available from the Brookfield Investor. 

Based on our current projected cash burn rate, which is based on various assumptions (including that we do not obtain additional liquidity from a source other than property operations) and subject to all the uncertainties surrounding the ongoing impact of the coronavirus pandemic on the United States economy, the lodging industry, our hotels and our results of operations, we expect we will no longer have sufficient cash on hand to continue to pay our current obligations during the first half of 2021. If we do not meet our future non-hotel obligations, a variety of materially adverse consequences could ensue. Our major capital requirements currentlylenders may pursue any and all available rights and remedies, including declaring our debt obligations to be immediately due and payable, appointing a receiver to take possession and administer one or more of our hotel properties serving as collateral, and commencing foreclosure proceedings on one or more of such properties. If there is a material breach of the A&R LPA, which may include PIPs and other hotel capital expenditures and related lender reserve deposits, interest and principal payments under our indebtedness andany failure by us to pay the full amount of cash distributions payable with respect toon Class C Units. Beginning in March 2022,Units to the Brookfield Investor on any quarterly distribution date, or if we may also befail to complete a PIK Redemption (as defined below) if required to fund redemptions ofdo so because we have not entered into a Restructuring Support Agreement by April 30, 2021 (or if a Restructuring Support Agreement is entered into and then terminated), it would give rise to the Brookfield Investor’s right to redeem the Class C Units at a significant premium and, if we fail to complete such redemption, other severe consequences, such as the optionactivation of rights that would allow the holder.Brookfield Investor to appoint a majority of our board of directors and commence selling our assets until the Class C Units have been fully redeemed. 

We intendAccordingly, we will soon require additional liquidity from a source other than property operations, and to either extend or refinance our indebtedness at maturity, whendate we have not been able to identify an available source that can satisfy this requirement other than the principal payments are due, and we believe our cash on hand andBrookfield Investor. Certain potential sources of additional liquidity which are primarily comprised of operating cash flow andsuch as proceeds from refinancings and asset sales, are not currently available to us in any material amount, and may continue not to be available to us, due to the impact of the coronavirus pandemic. Moreover, the Restructuring Transactions or any other transactions pursuant to which we could obtain additional capital will be subject to conditions and could also include proceeds from borrowings or equity issuances, will allow us to meet our ongoing existing capital requirements. However, there can be no assurance the amounts on hand and actually generated will be sufficient for these purposes. Accordingly, we may require additional liquidity to meet our capital requirements. Any additional borrowings or equity issuances mayterms that would not be available on favorable termsto us or at all.our other stockholders. Borrowings (as well as certain refinancing transactions) and equity issuances pursuant to any transactions that, unlike the Restructuring Transactions, do not have the support of the Brookfield Investor are also subject to the Brookfield Approval Rights, and, if we seek additional capital from another source, there can be no assurance this prior approval will be provided when requested, or at all.

In order to obtain the additional liquidity we require, we have been engaged in ongoing discussions with the Brookfield Investor regarding the Restructuring Transactions, including a Pre-Packaged Bankruptcy, but there can be no assurance these efforts will be successful, and, even if we are able to enter into a Restructuring Support Agreement with the Brookfield Investor, the Restructuring Transactions will remain subject to significant conditions.

We have been engaged in ongoing discussions with the Brookfield Investor regarding the terms of the Restructuring Transactions, which would include, among other things, a Pre-Packaged Bankruptcy. There can be no assurance, however, that our ongoing discussions with the Brookfield Investor will lead to a Restructuring Support Agreement on favorable terms, or at all.

Moreover, to the extent we are able to enter into a Restructuring Support Agreement with the Brookfield Investor, the Restructuring Transactions will remain subject to significant conditions and requirements, including filing a Pre-Packaged Bankruptcy, obtaining confirmation of the related plan of reorganization and obtaining any required consents from of our lenders, our franchisors and other third parties in interest. There can be no assurance that we will be able to meet these, or any other conditions to the Restructuring Transactions. Obtaining confirmation of the plan of reorganization is subject to significant requirements under the bankruptcy laws and approval by the bankruptcy court. Obtaining all required third-party approvals for the Restructuring Transactions requires the cooperation and agreement of third parties.

To the extent we are able to enter into amendments to our loans and other agreements with third parties in interest that provide for consent to the Restructuring Transactions, including a Pre-Packaged Bankruptcy, coupled with other relief conditioned on the effectiveness of a Pre-Packaged Bankruptcy, we will not receive the benefit of the relief if the Pre-Packaged Bankruptcy does not become effective, thereby adversely affecting our business, results of operations and liquidity, unless a Pre-Packaged Bankruptcy becomes effective.

Furthermore, even if we are able to complete the Restructuring Transactions, including a Pre-Packaged Bankruptcy, there can be no assurance that we will not once again need additional capital, which may or may not be available on favorable terms, or that we will be successful in executing our business plan post-emergence from bankruptcy and achieving our strategic goals.

If obtained,we are not able to negotiate and execute a Restructuring Support Agreement, we expect we will file for Chapter 11 bankruptcy without the support or consent of the Brookfield Investor or our lenders, franchisors, property managers and ground lessors. Any such bankruptcy would be subject to a significantly greater degree of uncertainty than a Pre-Packaged Bankruptcy, including the high likelihood that any additional or alternative debt or equity capital could be onrestructuring and recapitalization pursuant to such a bankruptcy would take a significant amount of time to negotiate and implement and that the ultimate terms thatof any such restructuring and recapitalization would not be favorable to us or our stockholders, including high interest rates, in the case of debt, and substantial dilution, in the case of issuing equity or convertible debt securities.

Furthermore, our ability to identify and consummate a potential transaction with a source of equity or debt capital is dependent upon a number of factors that may be beyond our control, including market conditions, industry trends and the interest of third parties in our business and assets. In addition, any potential transaction may be subject to conditions, such as obtaining consents from our lenders and franchisors, which we might not be able to meet, and the process of seeking alternative sources of capital is time-consuming, causes our management to divert its focus from our day-to-day business and results in our incurring expenses outside the normal course of operations.stockholders.

A Pre-Packaged Bankruptcy, like any bankruptcy, is expected to place our stockholders at significant risk of losing all or substantially all of the value of their investment in our common stock and materially and adversely affect us.

A Pre-Packaged Bankruptcy, like any Chapter 11 bankruptcy, is expected to place our stockholders at significant risk of losing all or substantially all of the value of their investment in our common stock. If we are unable to negotiate and confirm a Chapter 11 plan of reorganization, we could be required to liquidate in a Chapter 7 bankruptcy in which case our common stock would be worthless.

Moreover, seeking bankruptcy court protection could have a material adverse effect on our business, financial condition, results of operations and liquidity. During any Chapter 11 proceeding, our senior management would be required to spend a significant amount of time and effort dealing with the reorganization instead of focusing on our business operations. Other significant risks associated with filing for bankruptcy include:

Even if a plan of reorganization is consummated and becomes effective, we may continue to face a number of risks, such as the continued impacts of the coronavirus pandemic, decreases in travel and economic activity,  and other changes that could result in lower demand for our hotel rooms and increasing expenses, as well as potential difficulties obtaining any additional capital we need to fund our on-going operations and achieving our strategic goals. Some of these risks may become more acute as a result of our involvement in a Chapter 11 bankruptcy.

The negotiations regarding the Restructuring Transactions have consumed and will continue to consume a substantial portion of the time and attention of our management.

Our management has spent, and will continue to be required to spend, a significant amount of time and effort focusing on the Restructuring Transactions. This diversion of attention may have a material adverse effect on the conduct of our business, and, as a result, on our financial condition and results of operations, particularly if the time it takes to implement the Restructuring Transactions, including a Pre-Packaged Bankruptcy, becomes more protracted. During the period while we work to finalize the terms of the Restructuring Transactions and, if we are able to do so, during the pendency of the Restructuring Transactions, including a Pre-Packaged Bankruptcy, our employees will continue to face considerable distraction and uncertainty, and we may experience increased levels of employee attrition. A loss of key personnel or material erosion of employee morale could adversely affect our business and results of operations. The failure to retain or attract members of our management team and other key personnel could impair our ability to execute our strategy and implement operational initiatives, thereby having a material adverse effect on our financial condition and results of operations. Likewise, we could experience disruptions to our relationships with our property managers, franchisors and other third parties necessary to the success and growth of our business who may be concerned about our ongoing long-term viability.

The interests of the Brookfield Investor may conflict with our interests and the interests of our stockholders, and the Brookfield Investor has significant governance and other rights that could be used to control or influence our decisions or actions.

As the holder of all of the issued and outstanding Class C Units, the Brookfield Investor has interests that are different from our interests and the interests of our stockholders. Moreover, as the holder of the Redeemable Preferred Share and all of the issued and outstanding Class C Units, the Brookfield Investor has the Brookfield Approval Rights, the ability to elect two of the seven directors on our board of directors and approve two independent directors, the right to convert Class C Units into shares of our common stock and other rights, including the redemption and distribution rights associated with the Class C Units, that are significant. These rights can be used, in isolation or in combination, to control or influence, directly or indirectly, various corporate, financial or operational decisions or actions we might otherwise take, or decide not to take, as well as any matter requiring approval of our stockholders.

Under the Brookfield Approval Rights, without obtaining the prior approval of the majority of the then outstanding Class C Units, subject to certain exceptions, the OP is restricted from taking certain actions including equity issuances, debt incurrences, payments of dividends or other distributions, redemptions or repurchases of securities, property acquisitions and property sales. In addition, pursuant to the terms of the Redeemable Preferred Share, we are similarly restricted from taking those actions without the prior approval of at least one of the Redeemable Preferred Directors. Prior approval of at least one of the Redeemable Preferred Directors is also required to approve the Annual Business Plan, as well as hiring and compensation decisions related to certain key personnel (including our executive officers).

As the holder of the Redeemable Preferred Share, for so long as it remains outstanding, the Brookfield Investor has the right to elect two Redeemable Preferred Directors (each of whom may be removed and replaced with or without cause at any time by the Brookfield Investor), as well as to approve (such approval not to be unreasonably withheld, conditioned or delayed) two additional independent directors to be recommended and nominated by our board of directors for election by our stockholders at each annual meeting (each, an "Approved Independent Director"). Prior approval of at least one Redeemable Preferred Directors is also required to approve increasing or decreasing the number of directors on our board of directors and nominating or appointing the chairperson of our board of directors.

As of the date of this Annual Report on Form 10-K, an affiliate of the Brookfield Investor owns 25,64437,620 restricted shares of our common stock ("restricted shares"). Except for such restricted shares and except to the extent of the one vote the holder of the Redeemable Preferred Share has as part of a single class with the holders of our common stock at any annual or special meeting of stockholders and the separate class vote of the Redeemable Preferred Share required for any action, including any amendment to our charter, that would alter the terms of the Redeemable Preferred Share or the rights of its holder, the Brookfield Investor does not own or control any shares of our common stock, and, as such, cannot directly participate in the outcome of matters requiring approval of our stockholders. However, including the restricted shares and giving effect to the immediate conversion of all 27,920,953.4829,923,330.52 Class C Units held by the Brookfield Investor as of the date of this Annual Report on Form 10-K into OP Units which are subsequently redeemed for shares of our common stock in accordance with the terms of the limited partnership agreement of the OP entered into at the Initial Closing (the "AA&R LPA"),LPA, the Brookfield Investor, on an as-converted basis, would own or control approximately 41.7%43.4% of the voting power of our common stock. Any such redemption may also be made in cash instead of shares of our common stock, at our option. We have granted the Brookfield Investor and its affiliates an exemption from the prohibition in our charter on the ownership of more than 4.9% in value of the aggregate of outstanding shares of capital stock or more than 4.9% in value or number of shares, whichever is more restrictive, of any class or series of our stock and a waiver permitting the Brookfield Investor and its affiliates to own up to 49.9% in value of the aggregate of the outstanding shares of our stock or up to 49.9% (in value or in number of shares, whichever is more restrictive) of any class or series of shares of our stock.

Pursuant to the SPA, the Brookfield Investor, together with certain of its affiliates, is currently subject to certain restrictions that limit its ability to use any ownership of shares of our common stock to control or influence our management or policies. These restrictions include customary standstill restrictions related to, among other things, acquisition proposals, proxy solicitations and attempts to elect or remove members of our board of directors, as well as a requirement to vote any shares of our common stock in excess of 35% of the total number of shares of our common stock in accordance with the recommendations of our board of directors. In addition, at the Initial Closing, as contemplated by and pursuant to the SPA, we granted the Brookfield Investor and its affiliates a waiver of the aggregate share ownership limits, and permitted the Brookfield Investor and its affiliates to own up to 49.9% in the aggregate of the outstanding shares of our common stock. However, these restrictions are generally of limited duration and remain subject to other conditions and exceptions, and there can be no assurance that the Brookfield Investor will not otherwise be able to use its ownership of our common stock, in isolation or in combination with the Brookfield Approval Rights or its other rights as the sole holder of the Redeemable Preferred Share and Class C Units, to control or influence our management or policies, as well as matters required to be submitted to our stockholders for approval.exceptions.

The Brookfield Investor may have an interest in our pursuing acquisitions, divestitures and other transactions that, in its judgment, could enhance the value of its investment in us, even though such transactions might involve risks to our stockholders, or in preventing us from pursuing a transaction that might otherwise be beneficial to our stockholders. The scope and potential impact of the exercise of the redemption rights of holders of Class C Units may also have a significant impact on our decision-making in certain circumstances, including whether or not we pursue a liquidation, sale of all or substantially all of the assets, dissolution or winding-up, whether voluntary or involuntary, sale, merger, reorganization, reclassification or recapitalization or other similar event (each, a “Fundamental Sale Transaction”).

Moreover, the Brookfield Investor and its affiliates engage in a broad spectrum of business and investment activities, which may include activities where their interests conflict with ours or those of our stockholders, including activities related to additional investments they may make in companies in the hospitality and related industries. In addition, Bruce G. Wiles, our chairman and a Redeemable Preferred Director, serves as a senior advisor for Brookfield Property Group’s lodging investment platform, a subsidiary of Brookfield Asset Management, Inc. (“BAM”), and an affiliate of the Brookfield Investor. The articles supplementary governing the Redeemable Preferred Share provide that none of the Brookfield Investor or any of its affiliates, or any of their respective directors, executive officers, employees, agents, representatives, incorporators, stockholders, equityholders, controlling persons, principals, managers, advisors, managing members, members, general partners, limited partners or portfolio companies has any obligation to refrain from competing with us, making investments in or having relationships with competing businesses. Under the articles supplementary, we have agreed to renounce any interest or expectancy, or right to be offered an opportunity to participate in, any business opportunity or corporate opportunity presented to the Brookfield Investor or its affiliates (which may include, without limitation, any Redeemable Preferred Director).affiliates. The Brookfield Investor or its affiliates also may pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may be unavailable to us.

To the extent the interests of the Brookfield Investor conflict with our interests or the interests of our stockholders, this conflict may not be resolved in our favor or in favor of our stockholders due to the significant governance and other rights of the Brookfield Investor. Moreover, the rights and interests of the Brookfield Investor will limit or preclude the ability of our other stockholders to influence corporate matters.

The Brookfield Approval Rights, including the requirement that we conduct our operations in accordance with the Annual Business Plan approved by at least one Redeemable Preferred Director, restrict our operational and financial flexibility and could prevent us from taking actions that we believe would be in the best interest of our business.

In general, the Brookfield Approval Rights restrict us from taking various financial and operational actions without the prior approval of a majority of the then outstanding Class C Units as well the prior approval of at least one Redeemable Preferred Director. The prior approval of at least one Redeemable Preferred Director is also required for our board of directors to approve the Annual Business Plan. The Annual Business Plan with respect to each fiscal year is required to include projections for such year with respect to revenues, operating expenses and property-level capital expenditures, as well as any plans for asset sales or dispositions and a liquidity plan.

If the proposed Annual Business Plan (or any portion thereof) is rejected, we will work with the Redeemable Preferred Directors in good faith to resolve the objections, and we are permitted to continue to operate in accordance with the Annual Business Plan then in effect for the prior fiscal year. However, there is no assurance we will be able to resolve any objection on terms that are favorable to us, or our stockholders. During February 2020, our board of directors, including the Redeemable Preferred Directors, unanimously approved the 2020 Annual Business Plan.

The restrictions with respect to the Annual Business Plan reduce our flexibility in conducting our operations and could prevent us from taking actions that we believe would be in the best interest of our business. Failure to comply with the Annual Business Plan or otherwise comply with the Brookfield Approval Rights could result in a material breach under the A&R LPA, which, if not cured or waived, could give rise to a right for the holders of Class C Units to require us to redeem any Class C Units submitted for redemption for an amount equivalent to what the holders of Class C Units would have been entitled to receive in a Fundamental Sale Transaction if the date of redemption were the date of the consummation of the Fundamental Sale Transaction. These amounts are set forth under “Risks Related to Our Corporate Structure - The amount we would be required to pay holders of Class C Units in a Fundamental Sale Transaction may discourage a third party from acquiring us in a manner that might otherwise result in a premium price to our stockholders.”

Financial and operating covenants in the agreements governing our indebtedness may also limit our operational and financial flexibility, and failure to comply with these covenants could cause an event of default under our indebtedness.

We may not be successful in achieving our business objective and executing our investment strategies.

Our primary business objective is to maximize stockholder value and position ourselves for a liquidity event, such as a listing on a national securities exchange, a merger or a sale, within two to four years, depending on capital markets and macroeconomic conditions. Our ability to successfully achieve this objective also depends on the success of our investment strategies. Our investment strategies include selling hotels we determine are non-core to our portfolio and reallocating that capital into other corporate purposes, including debt reduction, that we believe will produce more attractive stockholder returns and the continued investment in our hotels through our ongoing PIP program. Our ability to fund these strategies, to a certain extent, depends on our ability to generate additional capital, which is not assured for a variety of reasons, including the ongoing impact of the coronavirus pandemic on credit and capital market conditions, and may not be available on favorable terms, or at all. Moreover, prior approval of the Brookfield Investor is required for several elements of our strategies, and there can be no assurance any required prior approval would be obtained when requested, or at all. There are many other risks and challenges related to our achieving the expected benefits associated with these strategies, and there can be no assurance we will be successful in doing so. These risks and challenges include the following:

Because no public trading market for our shares currently exists and our share repurchase program has been suspended, it is difficult for our stockholders to sell their shares of our common stock.

There is no established trading market for shares of our common stock and there can be no assurance one will develop. Our charter does not require our directors to seek stockholder approval to liquidate our assets by a specified date, nor does our charter require our directors to list our shares for trading on a national securities exchange by a specified date. We currently have no plans to list our shares on a national securities exchange. While there is a secondary market for shares of common stock, we believe the volume of those trades is small in relation to the number of shares outstanding. Until our shares are listed, if ever, stockholders may not sell their shares unless the buyer meets the applicable suitability and minimum purchase standards. In addition, our charter prohibits the ownership of more than 4.9% in value of the aggregate of outstanding shares of capital stock or more than 4.9% in value or number of shares, whichever is more restrictive, of any class or series of our stock, unless exempted by our board of directors, which may inhibit large investors from purchasing our stockholders' shares.

In September 2018, our board of directors adopted the SRP pursuant to which we were offering, subject to certain terms and conditions, liquidity to stockholders by offering to make quarterly repurchases of common stock at a price to be established by the board of directors. In February 2019, our board of directors suspended the SRP. The suspension will remain in effect unless and until our board takes further action to reactivate the SRP, which will not occur prior to the potential filing of a Pre-Packaged Bankruptcy we are currently contemplating. Therefore, it is difficult for stockholders to sell their shares. If a stockholder is able to sell his or her shares, it may only be at a substantial discount to Estimated Per-Share NAV.

Our hotel assets have been and may continue to be subject to impairment charges.

We are required to make subjective assessments as to whether there are any impairments in the value of our assets. Upon the occurrence of certain “triggering events” under GAAP, we are required to test our hotel investments for impairment. These triggering events may include thethe initiation of marketing an asset for sale, significant declines in market value of the asset, significant declines in operating performance and significant adverse changes in economic conditions. A property’s value is considered to be impaired if the estimate of the future undiscounted cash flows is less than the carrying value of the property. In our estimate of cash flows, we consider factors such as trends and prospects and the effects of demand and competition on expected future operating income. If we are evaluating the potential sale of an asset, the undiscounted future cash flows consider the most likely course of action as of the balance sheet date based on current plans, intended holding periods and available market information. Additionally, we recorded goodwill in connection with the consummation of the transactions pursuant to the Framework Agreement at the Initial Closing, and we are also required to annually assess this goodwill for impairment. We have incurred impairment charges, which have an immediate direct impact on our earnings, including $114.6 million$27.6 million of impairment charges on our long-lived assets and $0.9 $3.1 million of goodwill impairment during the year ended December 31, 2020, $114.6 million of impairment charges on our long-lived assets and $0.9 million of goodwill impairment during the year ended December 31, 2019,, and $26.4 million of impairment on our long-lived assets and $3.4 million of goodwill impairment during the year ended December 31, 2018.2018. There can be no assurance that we will not take additional charges in the future. Any future impairment could have a material adverse effect on our results in the period in which the charge is taken.

The loss of a brand license for any reason, including due to our failure to make required capital expenditures or to comply with other brand requirements, could adversely affect our financial condition and results of operations.

All but one of our hotels operate under licensed brands pursuant to franchise agreements with hotel brand companies.companies (i.e., Hilton, Marriott and Hyatt). As of December 31, 2020, the weighted average remaining term of our franchise agreements was approximately 9.5 years. The agreements typically provide no renewal or extension rights and are not assignable. The maintenance of the brand licenses for our hotels is subject to the hotel brand companies’ operating standards and other terms and conditions, including the requirement for us to make capital expenditures pursuant to PIPs. PIPs were required in connection with the acquisition of substantially all of our hotels and, likely, will be required in connection with the acquisition of any additional hotels in the future. In conjunction with actions taken by our franchisors temporarily suspending obligations of hotel owners to perform capital improvements and fund capital reserves, we determined to delay most of the PIP projects that had been scheduled for 2020 and all of the PIP projects that had been scheduled for 2021. Continued deferral of capital improvements at our hotels could adversely affect their performance and if the deferrals continue beyond extended deadlines imposed by the franchisors could result in further negotiations with such franchisors as to brand compliance. As of December 31, 2019,2020, we have substantially completed work on 9281 of the 12198 hotels that are part of our PIP program, including 13two hotels with PIP work completed during 2019.2020 and 11 hotels with PIP work completed during 2019.

In addition to PIP obligations, we are required under our franchise agreements to perform periodic capital improvements to bring the physical condition of our hotels into compliance with the specifications and standards the hotel franchisor or hotel brand has developed. We refer to these obligations as cyclical renovations and they normally apply to soft goods (such as carpeting, bedspreads, artwork and upholstery) and case goods (furniture and fixtures such as armoires, chairs, beds, desks, tables, mirrors and lighting fixtures). Moreover, upon regular inspection of our hotels or in connection with any future revisions to our franchise or hotel management agreements or a refinancing of our indebtedness, franchisors may determine that additional renovations are required by us.

We may need to seek additional debt or equity capital to fund PIPs and other hotel capital expenditures and related lender reserve deposits, which may not be available on favorable terms or at all, and may only be obtained subject to the Brookfield Approval Rights.

If we default on a franchise agreement as a result of our failure to comply with the PIP or other requirements, the franchisor may have the right to terminate the applicable agreement, we may be required to pay the franchisor liquidated damages, and we may also be in default under the applicable indebtedness encumbering the hotel. In addition, if we do not have enough reserves or access to capital to supply needed funds for capital improvements throughout the life of the investment in a property and there is insufficient cash available from our operations, we may be required to defer necessary improvements to a property, which may cause that property to suffer from a greater risk of obsolescence, a decline in value, or decreased cash flow. To manage our liquidity, we have and expect to continue to defer certain capital expenditures. We believe such deferrals are prudent in light of our liquidity position and the expected return on investments. However, these decisions could adversely affect the performance of the applicable hotels and could result in further negotiations with the franchisors as to compliance with brand standards.

If we were to lose a brand license for any reason, including failure to meet the requirements of our PIPs, we would be required to re-brand the affected hotel. As a result, theincome and/or underlying value of the affected hotel could decline significantly from the loss of associated name recognition, marketing support, participation in guest loyalty programs and the centralized system provided by the franchisor, which, among other things, could reduce income from the affected hotel and require us to recognize an impairment charge on the hotel.franchisor. Furthermore, the loss of a franchise license at a particular hotel could harm our relationship with the hotel brand company, which could impede our ability to operate other hotels under the same brand, limit our ability to obtain new franchise licenses from the franchisor in the future on favorable terms, or at all, and cause us to incur significant costs to obtain a new franchise license for the particular hotel (including(which license could be from a likelylower rated franchisor and include the requirement of a property improvement plan for the new brand, a portion of the costs of which would be related solely to the change in brand rather than substantively improving the property).

Moreover, the loss of a franchise license could also be an event of default under our indebtedness that secures the property if we are unable to find a suitable replacement. Additionally, we are required pursuant to the terms of our existing indebtedness to make periodic PIP reserve deposits to cover a portion of the estimated costs of the PIPs. We estimateAs of January 31, 2021, we are required to make an aggregate of $12.4 of $1.0 million in periodic PIP reserve deposits during 2020,2021, and we will also be required to make additional PIP reserve payments during future periods. Any failure to make PIP reserve deposits when required could lead to a default under the related indebtedness.

We no longer pay distributions and there can be no assurance we will resume paying distributions in the future.

We have not paid cash distributions to our stockholders since 2016. Currently, under the Brookfield Approval Rights, prior approval is required before we can declare or pay any distributions or dividends to our common stockholders, except for cash distributions equal to or less than $0.525 per annum per share. There can be no assurance that we will resume paying distributions in cash or shares of common stock in the future. Our ability to make future cash distributions will depend on our future cash flows and may be dependent on our ability to obtain additional liquidity, which may not be available on favorable terms, or at all.

To the extent we pay cash distributions in the future, they may be funded from sources other than cash flow from operations. Funding distributions from any of sources other than cash flow from operations may negatively impact the value of an investment in our common stock. We funded all of our cash distributions from our inception in July 2013 through the suspension of cash distributions in March 2016 using proceeds from our IPO or our DRIP, which reduced the capital available for other purposes that could increase the value of an investment in our common stock. Funding distributions from borrowings could restrict the amount we can borrow for investments, which may affect our profitability. Funding distributions with the sale of assets may affect our ability to generate additional operating cash flows. Funding distributions from the sale of additional securities could dilute each stockholder's interest in us if we sell shares of our common stock or securities that are convertible or exercisable into shares of our common stock to third-party investors. We also may not have sufficient cash from operations to make a distribution required to qualify for or maintain our REIT status.

We are dependent on Crestline, which manages a large number of hotels in our portfolio pursuant to long-term management agreements, in various aspects of our business.

As of December 31, 2019,2020, Crestline managed 7372 of our 124101 hotels.  Thus, a substantial portion of our revenues is generated by hotels managed by Crestline.  Further, most of our management agreements with Crestline have an initial term of 20 years and are generally only terminable by us prior to expiration for performance-related reasons, except, until March 31, 2023, we have an "on-sale" termination right if we replace the sold hotel with a comparable hotel not then managed by Crestline, and beginning on April 1, 2021, we will have an “on-sale” termination right upon payment of a fee. This significant concentration of operational risk in one hotel management company makes us more vulnerable economically than if our hotel management was more evenly diversified among several hotel management companies, or if our management agreements with Crestline included broader termination rights. We also have also entered into an annually renewable shared services agreement with Crestline pursuant to which Crestline provides us with certain  accounting, tax related,and treasury information technology and other administrative services, and an annually renewable joint occupancy agreement pursuant to which we share office space with Crestline.services. We cannot provide assurance that Crestline will satisfy its obligations to us or effectively and efficiently operate our hotel properties. Any adverse developments (including developments related to the ongoing impact of the coronavirus pandemic) in Crestline’s business, financial strength or the failure or inability of Crestline to satisfy its obligations to us or effectively and efficiently operate our hotel properties could adversely affect our financial position, results of operations and cash flows.

Our rights and the rights of our stockholders to recover claims against our officers, directors and the Former Advisor are limited, which could reduce our stockholders’ and our recovery against them if they cause us to incur losses.

Maryland law provides that a director has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in the corporation’s best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. In addition, subject to certain limitations set forth therein or under Maryland law, our charter provides that no director or officer will be liable to us or our stockholders for monetary damages and requires us to indemnify our directors, our officers and the Former Advisor and the Former Advisor’s affiliates and permits us to indemnify our employees and agents. We have entered into an indemnification agreement with each of our directors and officers, as well as the Former Advisor and certain of its affiliates and certain former directors and officers, providing for indemnification of such indemnitees consistent with the provisions of our charter. While the Advisory Agreementadvisory agreement and all our other agreements with the Former Advisor and its affiliates have now terminated, the Framework Agreement we have entered into with the Former Advisor and certain of its affiliates provides that existing indemnification rights under our organizational documents, the Advisory Agreement, certain property management agreements and the existing indemnification agreement between the Company, its directors and officers, and the Former Advisor and certain of its affiliates will survivesurvived the Initial Closing solely with respect to claims from third parties. We and our stockholders also may have more limited rights against our directors, officers, employees and agents, and the Former Advisor and its affiliates than might otherwise exist under common law, which could reduce our stockholders’ and our recovery against them. At the Initial Closing, we entered into a general mutual waiver and release with the Former Advisor and certain of its affiliates, which generally provides that we have released the Former Advisor and its affiliates from all claims arising prior to the Initial Closing (whether known or unknown), except for certain claims related to the termination of our arrangements with the Former Advisor and transition to self-management. Pursuant to thesethe aforementioned indemnification arrangements, we have funded defense costs incurred by certain of our current and former directors, officers and the Former Advisor and its affiliates, and we may become obligated to fund additional such costs in the future.  During September 2020, as part of the settlement of a pending derivative lawsuit brought by one of our stockholders and a class action brought by another stockholder, we received cash and stock consideration in exchange for the release of the Former Advisor and its affiliates, as well as certain of our current and former directors and officers, from any claims included in or otherwise related to such matters. 

Our Estimated Per-Share NAV was determined as December 31, 2019 and does not reflect any potential negative impact of the coronavirus pandemic after that date or any negative impact of a Pre-Packaged Bankruptcy, which is based upon subjective judgments, assumptionsexpected to place our stockholders at significant risk of losing all or substantially all of the value of their investment in our common stock and opinions about future events.materially and adversely affect us.

On May 9, 2019,April 21, 2020, our board of directors approved and we published the 2020 NAV, an updated Estimated Per-Share NAV equal to $9.21$8.35 as of December 31, 2018,2019. The 2020 NAV and the underlying estimates and assumptions are as of December 31, 2019, and have not been revised to reflect any potential negative impact on our company of the coronavirus pandemic or any other transactions or events occurring subsequent to December 31, 2019. While our board of directors has approved the 2020 NAV, it has only done so for the sole purpose of allowing us to comply with applicable rules of FINRA for use on customer account statements.

As discussed in more detail elsewhere in this Annual Report on Form 10-K, we have been engaged in ongoing discussions with the Brookfield Investor regarding the terms of the Restructuring Transactions, which was publishedwould include, among other things, a Pre-Packaged Bankruptcy. A Pre-Packaged Bankruptcy, like any bankruptcy, is expected to place our stockholders at significant risk of losing all or substantially all of the value of their investment in our common stock. Moreover, seeking bankruptcy court protection could have a material adverse effect on May 13, 2019. Itour business, financial condition, results of operations and liquidity.

Our board of directors believes the 2020 NAV is currently anticipated that we willsignificantly above the current value of a share of common stock. Stockholders should not rely on the 2020 NAV in respect of any investment decisions relating to our company, including in making any decision to buy or sell shares of our common stock. 

We are required to annually publish an updated Estimated Per-Share NAV no less frequently than once each calendar year.NAV.  In connection with theseany future determinations, we will engage an independent valuer to perform appraisals of our real estate assets in accordance with valuation guidelines established by our board of directors. As with any methodology used to estimate value, the valuation methodologies that will be used by any independent valuer to value our properties involve subjective judgments concerning factors such as comparable sales, projected future revenue and expenses, capitalization and discount rates, and projections of future cash flows.

Under our valuation guidelines, our independent valuer estimates the market value of our principal real estate and real estate-related assets, and we determine the net value of our real estate and real estate-related assets and liabilities taking into consideration such estimate provided by the independent valuer. We review the valuation provided by the independent valuer for consistency with its determinations of value and our valuation guidelines and the reasonableness of the independent valuer's conclusions. Our board of directors reviews the appraisals and valuations and makes a final determination of the Estimated Per-Share NAV. Although the valuations of our real estate assets by the independent valuer are reviewed by us and approved by our board of directors, neither we nor our board of directors will independently verify the appraised value of our properties. Therefore, these valuations do not necessarily represent the price at which we would be able to sell an asset, and the appraised value of a particular property may be greater or less than its potential realizable value.

Our Estimated Per-Share NAV may differ significantly from our actual net asset value of a share of our common stock at any given time and does not reflect the price that shares of our common stock would trade at if listed on a national securities exchange, the price that shares would trade in secondary markets or the price a third party would pay to acquire us.

Estimated Per-Share NAV is determined annually and therefore does not reflect changes occurring subsequent to the date of valuation.

On May 9, 2019, our board of directors approved an updated Estimated Per-Share NAV equal to $9.21 as of December 31, 2018, which was published on May 13, 2019. It is currently anticipated that we will publish an updated Estimated Per-Share NAV no less frequently than once each calendar year.

Because valuations will only occur periodically, Estimated Per-Share NAV may not accurately reflect material events that would impact our actual net asset value and may suddenly change materially if the appraised values of our properties change materially or the actual operating results differ from what we originally budgeted.budgeted, such as a result of the existing and anticipated future impact of the coronavirus pandemic. In connection with any annual valuation, our estimate of the value of our real estate and real estate-related assets will be partly based on appraisals of our properties by an independent valuer, which we expect will only be appraised in connection with anysuch valuation. Any changes in value that may have occurred since the most recent periodic valuation will not be reflected in Estimated Per-Share NAV, and there may be a sudden change in the Estimated Per-Share NAV when new appraisals and other material events are reflected. If our actual operating results cause our actual net asset value to change, such change will only be reflected in our Estimated Per-Share NAV when anthe next annual valuation is completed.

Additionally, the proceeds from some of the hotels we have sold during 2019 and 2020 as part of our hotel sale program were below, and we expect that the proceeds from certain of the additional hotels for which we have entered into definitive sale agreements will be below, the corresponding estimated value of such hotel included in our Estimated Per-Share NAV as of December 31, 2018,  which could negatively impact Estimated Per-Share NAV as of December 31, 2019. Unless the value of our assets grows in excess of the PIK Distributions we pay to the holders of the Class C Units, continued accrual of PIK Distributions will have a negative impact on the value of shares of our common stock. Our Estimated Per-Share NAV may differ significantly from theour actual net asset value of a share of our common stock at any given time and does not reflect the price that shares of our common stock would trade at if listed on a national securities exchange, the price that shares would trade in secondary markets, or the price a third party would pay to acquire us.us or the value a share of our common stock would have if we are able to complete the potential transactions we are currently negotiating with the Brookfield Investor.

Our business could suffer in the event we, our property managers or any other party that provides us with services essential to our operations experiences system failures or cyber-incidents or a deficiency in cybersecurity.

Despite system redundancy, the implementation of security measures and the existence of a disaster recovery plan, ourOur internal information technology networks and related systems and those of our property managers and other parties that provide us with services essential to our operations are vulnerable to damages from any number of sources, including computer viruses, unauthorized access, energy blackouts, natural disasters, terrorism, war and telecommunication failures. Any system failure or accident that causes interruptions in our operations could result in a material disruption to our business.

A cyber-incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of information resources. More specifically, a cyber-incident is an intentional attack or an unintentional event that can result in third parties gaining unauthorized access to systems to disrupt operations, corrupt data or steal confidential information. As our reliance on technology has increased, so have the risks posed to our systems and those of our property managers and other parties that provide us with services essential to our operations. In addition, the risk of a cyber-incident, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Even

As a result of the most well protected information, networks,coronavirus pandemic, we are subject to increased risks resulting from remote work arrangements and other operational changes implemented by us and our property managers, including the potential effects on our financial reporting systems and facilities remain potentially vulnerable becauseinternal controls and procedures, cybersecurity risks and increased vulnerability to security breaches, information technology disruptions and other similar events. During the techniques usedsecond quarter of 2020, one of our property managers experienced a ransomware incident, which incident led to a temporary disruption of access in such attempted attackscertain areas of our information technology environment. There is no evidence that any of our information was misappropriated, and intrusions evolvewe recently transitioned to a new information technology platform which we believe has increased security. While this incident had no material adverse impact on our business or operations, including our confidential data, there can be no assurance that a similar incident will not occur in the future, which could materially and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected.adversely affect us.

The remediation costs and lost revenues experienced by a victim of a cyber-incident may be significant and significant resources may be required to repair system damage, protect against the threat of future security breaches or to alleviate problems, including reputational harm, loss of revenues and litigation, caused by any breaches. In addition, a security breach or other significant disruption involving our information technology networks and related systems or those of our property managers or any other party that provides us with services essential to our operations could:

Although we, our property managers and other parties that provide us with services essential to our operations intend to continue to implement industry-standard security measures, there can be no assurance that those measures will be sufficient, and any material adverse effect experienced by us, our property managers and other parties that provide us with services essential to our operations could, in turn, have an adverse impact on us.

We no longer pay distributions, and we will not resume payment of distributions prior to a Pre-Packaged Bankruptcy.

We have not paid cash distributions to our stockholders since 2016. Currently, under the Brookfield Approval Rights, prior approval is required before we can declare or pay any distributions or dividends to our common stockholders, except for cash distributions equal to or less than $0.525 per annum per share. Moreover, we are currently negotiating the terms of the Restructuring Transactions, including a Pre-Packaged Bankruptcy, with the Brookfield Investor, and we do not intend to resume payment of distributions while our negotiations with the Brookfield Investor are ongoing prior to filing a Pre-Packaged Bankruptcy.

Risks Related to Our Corporate Structure

We depend on the OP and its subsidiaries for cash flow and are effectively structurally subordinated in right of payment to their obligations, which include distribution and redemption obligations to holders of Class C Units.

We are a holding company with no business operations of our own. Our only significant assets are and will be OP Units, representing substantially all the equity interests in the OP other than Class C Units. We conduct, and intend to continue to conduct, all of our business operations through the OP. Accordingly, our only source of cash to pay our obligations is distributions from the OP and its subsidiaries of their net earnings and cash flows. The Class C Units rank senior to the OP Units and all other equity interests in the OP with respect to priority in payment of distributions and in the distribution of assets in the event of the liquidation, dissolution or winding-up of the OP, whether voluntary or involuntary and including any Chapter 11 cases under the U.S. Bankruptcy Code, or any other distribution of the assets of the OP among its equity holders for the purpose of winding up its affairs.

Each of our OP’s subsidiaries is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from such entities. Our stockholders’ claims as stockholders are structurally subordinated to all existing and future liabilities and obligations of the OP and its subsidiaries, including distribution and redemption obligations to the holders of Class C Units and property-level obligations to lenders and trade creditors. Therefore, in the event of our bankruptcy, liquidation or reorganization, our assets and those of the OP and its subsidiaries will be available to satisfy our stockholders’ claims as stockholders only after all of our liabilities and obligations and the liabilities and obligations of the OP and its subsidiaries have been paid in full. As of December 31, 2019,2020, our outstanding obligations that would be senior to any claims by our stockholders in the event of our bankruptcy, liquidation or reorganization included $411.8$441.4 million in liquidation preference of Class C Units and $1.5$1.3 billion in principal outstanding under outstanding mortgage and mezzanine debt.

We are not currently paying cash distributions to our common stockholders, and we will not resume payment of distributions while our abilitynegotiations with the Brookfield Investor are ongoing prior to make future cash distributions will depend on our future cash flows and may be dependent on our ability to obtain additional liquidity, which may not be available on favorable terms, or at all.filing a Pre-Packaged Bankruptcy. Moreover, under the Brookfield Approval Rights, prior approval is required before we can declare or pay any distributions or dividends to our common stockholders, except for cash distributions equal to or less than $0.525 per annum per share. Our ability to pay cash distributions is also subject to the seniority of Class C Units with respect to all distributions by the OP, and we will not be able to make any cash distributions to our common stockholders if we are not able to meet our quarterly distributions obligations to the holders of Class C Units. We are also required to make periodic payments of interest to our lenders that have priority over any cash distributions to holders of our common stock.

Our stockholders’ interests in us will be diluted to the extent we issue additional Class C Units as PIK Distributions.

As of December 31, 2019,2020, approximately $411.8$441.4 million in liquidation preference of Class C Units was outstanding. Pursuant to the A&R LPA, Class C Units are convertible into OP Units at an initial conversion price of $14.75, subject to anti-dilution and other adjustments upon the occurrence of certain events and transactions, and OP Units are, in turn, generally redeemable for shares of our common stock on a one-for-one-basis or the cash value of a corresponding number of shares, at our election.

Further dilution could also occur with respect to additional Class C Units we issue in the future. Although the Brookfield Investor no longer has any obligations or rights to purchase additional Class C Units pursuant to the SPA or otherwise, it has received and is entitled to continue to receive, with respect to each Class C Unit it holds, quarterly PIK Distributions payable in Class C Units at a rate of 5% per annum.  Moreover, if we fail to pay the quarterly cash distributions on Class C Units when due, the per annum rate for cash distributions will increase to 10% until all accrued and unpaid distributions required to be paid in cash are reduced to zero. Any accrued and unpaid distributions would be part of the liquidation preference of Class C Units that are convertible into OP Units and subsequently redeemable for shares of our common stock.

Subject to the Brookfield Approval Rights, we may also conduct future offerings of common stock or equity securities that are senior to our common stock for purposes of dividend distributions or upon liquidation. We also have issued, and expect tomay continue to issue, share-based awards to our directors, officers and employees. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. To the extent we issue additional equity interests, our stockholders’ percentage ownership interest in us will be diluted. In addition, depending upon the terms and pricing of any additional offerings and the value of our real estate investments, our investors may also experience dilution in the book value and fair value of their shares.

Additionally, any convertible, exercisable or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common stock and may result in dilution to owners of our common stock. Holders of our common stock are not entitled to preemptive rights or other protections against dilution.

The amount we would be required to pay holders of Class C Units in a Fundamental Sale Transaction may discourage a third party from acquiring us in a manner that might otherwise result in a premium price to our stockholders.

The amount we would be required to pay holders of Class C Units upon the consummation of any Fundamental Sale Transaction, which would generally include any merger or acquisition transaction whereby all shares of our common stock or substantially all of our assets would be sold to a third party, prior to March 31, 2022, would include a substantial premium to the liquidation preference. Upon the consummation of a Fundamental Sale Transaction, the holders of Class C Units are entitled to receive, prior to and in preference to any distribution of any of theour assets or surplus funds of the Company to the holders of any other limited partnership interests in the OP:

The premium required to be paid to redeem the Class C Units upon consummation of a Fundamental Sale Transaction may have the effect of delaying, deferring or preventing a transaction that might otherwise provide a premium price for holders of our common stock. In addition, subject to the Brookfield Approval Rights, we could issue preferred stock with terms and conditions that could have a priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock.

If we are unable to obtain the financing required to redeem any Class C Units when required to do so, the Brookfield Investor will be able to elect a majority of our board of directors and may cause us, through the exercise of the rights of the Special General Partner, to commence selling our assets until the Class C Units have been fully redeemed.

As of December 31, 2019,2020, approximately $411.8$441.4 million in liquidation preference of Class C Units was outstanding. Although the Brookfield Investor no longer has any obligations or rights to purchase additional Class C Units, future quarterly PIK Distributions will increase the liquidation preference of the outstanding Class C Units.

From time to time on or after March 31, 2022, the fifth anniversary of the Initial Closing, and at any time following the rendering of a judgment enjoining or otherwise preventing the holders of Class C Units, the Brookfield Investor or the Special General Partner from exercising their respective rights, any holder of Class C Units may, at its election, require us to redeem any or all of its Class C Units for an amount in cash equal to the liquidation preference. In addition, upon the occurrence of certain events related to our failure to qualify as a REIT or the occurrence of a material breach by us of certain provisions of the A&R LPA, including, subject to certain exceptions, our failure to pay quarterly cash distributions to the Brookfield Investor, or if we fail to complete a PIK Redemption if required to do so because we have not entered into a Restructuring Support Agreement by April 30, 2021 (or if a Restructuring Support Agreement is entered into and then terminated), in each case, subject to certain notice and cure rights, holders of Class C Units have the right to require us to redeem any Class C Units submitted for redemption for an amount equivalent to what the holders of Class C Units would have been entitled to receive in a Fundamental Sale Transaction if the date of redemption were the date of the consummation of the Fundamental Sale Transaction. These amounts are set forth under “-The amount we would be required to pay holders of Class C Units in a Fundamental Sale Transaction may discourage a third party from acquiring us in a manner that might otherwise result in a premium price to our stockholders.”

Three months after the failure of the OP to redeem Class C Units when required to do so:

Any exercise of these rights following our failure to redeem any Class C Units when required to do so could have a material and adverse effect on our business and results of operations, as well as the value of shares of our common stock. There can be no assurance that we will be able to obtain the financing required to redeem any Class C Units when required to do so on favorable terms, or at all. Moreover, such financing may be subject to the Brookfield Approval Rights, and there can be no assurance this prior approval will be obtained when requested, or at all.

The limit on the number of shares a person may own may discourage a takeover that could otherwise result in a premium price to our stockholders.

Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. Unless exempted by our board of directors, no person may own more than 4.9% in value of the aggregate of our outstanding shares of stock or more than 4.9% (in value or in number of shares, whichever is more restrictive) of any class or series of shares of our stock. This restriction may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all our assets) that might provide a premium price for holders of our common stock. At the Initial Closing, as contemplated by and pursuant to the SPA, we granted the Brookfield Investor and its affiliates a waiver of these aggregate share ownership limits, and permitted the Brookfield Investor and its affiliates to own up to 49.9% in value of the aggregate of the outstanding shares of our stock or up to 49.9% (in value or in number of shares, whichever is more restrictive) of any class or series of shares of our stock, subject to certain terms and conditions.limits.

Provisions of Maryland law prohibits certain business combinations, which may make it more difficult for us to be acquired and may limit our stockholder’sthe ability of a third party to exit the investment.

Under Maryland law, “business combinations” between a Maryland corporation and an interested stockholder or an affiliateacquire control of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested stockholder is defined as:

A person is not an interested stockholder under the statute ifus by requiring our board of directors approvedor stockholders to approve proposals to acquire our company or effect a change in advancecontrol.

Certain provisions of the transaction by whichMaryland General Corporation Law (the “MGCL”) applicable to Maryland corporations may have the personeffect of inhibiting a third party from making a proposal to acquire us or of impeding a change in control under circumstances that otherwise would have become an interested stockholder. However, in approvingcould provide our stockholders with the opportunity to realize a transaction,premium over the then-prevailing market price of such shares, including “business combination” and “control share” provisions.

By resolution of our board of directors, may providewe have provided that its approval is subject to compliance, at or after the time of the approval, with any terms and conditions determined by our board of directors.

After the five-year prohibition, any such business combination between the Maryland corporation and an interested stockholder generally must be recommended by our board of directors and approved by the affirmative vote of at least:

These super-majority vote requirements do not apply if the corporation’s common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares. The business combination statute permits various exemptions from its provisions, including business combinations that are exempted by our board of directors prior to the time that the interested stockholder becomes an interested stockholder. Pursuant to the statute, our board of directors has exempted any business combination involving the Brookfield Investor and certain affiliates of the Brookfield Investor. Consequently, the five-year prohibition and the super-majority vote requirements will not apply to business combinations between us and the Brookfield Investor and certain affiliates of the Brookfield Investor. As a result,Investor is exempt from the Brookfield Investor and certain affiliates of the Brookfield Investor may be able to enter into business combinations with us that may not be in the best interest of our stockholders, without compliance with the super-majority vote requirements and the othercombination provisions of the statute. The business combination statuteMGCL. In addition, pursuant to a provision in our bylaws, we have opted out of the control share provisions of the MGCL. However, our board of directors may, discourage others from trying to acquire control of us and increase the difficulty of consummating any offer to acquire us.

Maryland law limits the ability of a third party to buy a large stake in us and exercise voting power in electing directors, which may discourage a takeover that could otherwise result in a premium priceby amendment to our stockholders.

The Maryland Control Share Acquisition Act provides that a holder of “control shares” of a Maryland corporation acquiredbylaws, opt in a “control share acquisition” has no voting rights with respect to such shares except to the extent approved by the affirmative vote of stockholders entitled to cast two-thirdscontrol share provisions of the votes entitled to be cast on the matter. Shares of stock owned by the acquirer, by officers of the corporation or by employees who are directors of the corporations, are also excluded from shares entitled to vote on the matter. “Control shares” are voting shares of stock which, if aggregated with all other shares of stock owned by the acquirer or in respect of which the acquirer can exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting power in electing directors within specified ranges of voting power. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval or shares acquired directly from the corporation. A “control share acquisition” means, subject to certain exceptions, the acquisition of issued and outstanding control shares. The control share acquisition statute does not apply (a) to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction, or (b) to acquisitions approved or exempted by the charter or bylaws of the corporation. Our bylaws contain a provision exempting from the Maryland Control Share Acquisition Act any and all acquisitions of our stock by any person. There can be no assurance that this provision will not be amended or eliminated at any timeMGCL in the future.

Our stockholders have limited voting rights under our charter and Maryland law.

Pursuant to Maryland law and our charter, our stockholders are entitled to vote only on the following matters without concurrence of our board of directors: (a) election or removal of directors; (b) amendment of our charter, as provided in Article XIII of our charter; (c) our dissolution; and (d) to the extent required under Maryland law our merger or consolidation with another entity or the sale or other disposition of all or substantially all of our assets. With respect to all other matters, our board of directors must first adopt a resolution declaring that a proposed action is advisable and direct that such matter be submitted to our stockholders for approval or ratification. Certain matters our board of directors may otherwise direct to be submitted to our stockholders for approval or ratification may also be subject to the Brookfield Approval Rights such that stockholder approval or ratification may not be sufficient for the matter to be decided or become effective. These limitations on voting rights may limit our stockholders’ ability to influence decisions regarding our business.

Subject to the Brookfield Approval Rights, our board of directors may change our investment policies without stockholder approval, which could alter the nature of our stockholders’ investments.

Our charter requires that our independent directors review our investment policies at least annually to determine that the policies we are following are in the best interest of the stockholders. These policies may change over time. The methods of implementing our investment policies also may vary as the commercial debt markets change, new real estate development trends emerge and new investment techniques are developed. Our investment policies, the methods for their implementation, and our other objectives, policies and procedures may be altered by our board of directors without the approval of our stockholders subject to the Brookfield Approval Rights. We may make adjustments to our portfolio based on real estate market conditions and investment opportunities, and we may change our targeted investments and investment guidelines at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier than, our current investments. As a result, the nature of our stockholders’ investments could change without their consent. A change in our investments or investment guidelines may increase our exposure to interest rate risk, default risk and real estate market fluctuations.

Risks Related to Investments in Real Estate

Our operating results will beand the value of our properties are affected by economic, regulatory and regulatory changesenvironmental conditions that have an adverse impact on the real estate market in general and we may not be profitable or realize growth inother risks generally incident to the valueownership of our properties.real estate.

Our operating results We own real estate and are therefore subject to risks generally incident to the ownership of real estate adversely affect our operating results and the value of our properties, including:

These and other reasons may prevent us from being profitable or from realizing growth or maintaining the value of our properties.

A prolonged economic slowdown, a lengthy or severe recession or declining real estate values could harm our investments.

Our investments may be susceptible to economic slowdowns or recessions, which could lead to financial losses and a decrease in revenues, earnings and assets. An economic slowdown or recession, in addition to other non-economic factorsconditions, such as an excess supply of properties, could have a material negative impact on the values of our investments. Declining real estate values will reduceongoing economic downturn resulting from the value of our properties, as well as our abilitycoronavirus pandemic, particularly due to refinance our properties and use the value of our existing properties to support the purchase or investment in additional properties. A severe weakening of the economy or a recession could also lead to lower occupancy, which could create an oversupply of rooms resulting in reduced rates to maintain occupancy. There can be no assurancefact that our real estate investments will not be adversely impacted by a severe slowing of the economy or a recession. Because we primarily own older hotels, we are more susceptible to declines in consumer demand, the impact of increases in hotel supply and downturns in economic conditions. Fluctuationsconditions because we primarily own older hotels;

We have obtained only limited warranties when we purchase properties and have only limited recourse if our due diligence did not identify any issues that lower the value

Our real estate investments are relatively illiquid and subject to some restrictions on sale, and therefore we may not be able to dispose of properties at the time of our choosing or on favorable terms.

The real estate market is affected by many factors, such as general economic conditions, availability of financing, interest rates and other factors, including supply and demand, that are beyond our control. We cannot predict whether we will be able to sell any property for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We cannot predict the length of time needed to find a willing purchaser and to close the sale of a property. We may be required to expend funds to correct defects or to make improvements before a property can be sold. We cannot assure our stockholders that we will have funds available to correct such defects or to make such improvements. In addition, all of our properties serve as collateral under our indebtedness and we have agreed to restrictions under our indebtedness that prohibit the sale of certain of our properties at all or unless certain conditions have been met, including the payment of release prices, the maintenance of financial ratios and/or the payment of yield maintenance premiums. We may agree to similar restrictions, or other restrictions, such as a limitation on the amount of debt that can be placed or repaid on a property, with respect to other properties in the future. Our inability to sell a property when we desire to do so may cause us to reduce our selling price for the property. Moreover, most dispositions we could make would be subject to the Brookfield Approval Rights and there can be no assurance this prior approval will be obtained when requested, or at all. We have agreed in the A&R LPA that, three months after the failure of the OP to redeem Class C Units when required to do so, the Special General Partner will have certain rights to sell the assets or properties of the OP for cash upon engaging a reputable, national third party sales broker or investment bank to conduct an auction or similar process designed to maximize the sales price, but there can be no assurance this process will be successful in achieving the intended outcome. Moreover, the proceeds from sales of assets or properties by the Special General Partner must be used first to make any and all payments or distributions due or past due with respect to the Class C Units, regardless of the impact of such payments or distributions on the Company or the OP.

Upon sales of properties or assets, we may become subject to contractual indemnity obligations and incur material liabilities and expenses, including tax liabilities, change of control costs, prepayment penalties, required debt repayments, transfer taxes and other transaction costs. For example, most of our management agreements with Crestline are only terminable in connection with a sale prior to March 31, 2023 if we replace the sold hotel with a comparable hotel determined by historical revenue or, beginning in April 2021, if we pay Crestline a termination fee. In addition, the payment of any release price and repayment of mortgage indebtedness will reduce the net proceeds we receive from any asset sales. Any delay in our receipt of proceeds, or diminishment of proceeds, from the sale of a property could adversely impact us.

We have financed and may in the future finance properties with restrictive covenants, which may limit our ability to sell and refinance properties, which could have an adverse effect on our stockholders’ investments.

Our existing indebtedness includes customary restrictive covenants which limit our ability to freely sell and refinance properties. For example, these provisions may require us to pay a yield maintenance premium or a release price to the lender and satisfy other financial or other covenants in order to release the property from the lender’s liens. Therefore, these provisions affect our ability to turn our investments into cash. They could also impair our ability to take actions during the loan term that could be in the best interests of our stockholders and, therefore, may have an adverse impact on the value of our shares, relative to the value that would result if the restrictive covenants did not exist. In particular, the restrictive covenants could preclude us from participating in major transactions that could result in a disposition of our assets or a change in control even though that disposition or change in control might be in the best interests of our stockholders.

If we are found to be in breach of a ground lease or are unable to renew a ground lease, we could be materially and adversely affected.

As of December 31, 2019,2020, a total of nineseven hotels in our portfolio are on land subject to ground leases or their equivalent. For these hotels, we only own a long-term leasehold or similar interest, and we have no economic interest in the land or buildings at the expiration of the ground lease and will not share in the income stream derived from the lease or in any increase in value of the land associated with the underlying property. All but one of our ground leases has a remaining term of at least 10 years (including renewal options).

If we are found to be in breach of a ground lease, we could lose the right to use the hotel. Failure to pay ground rent obligations which are fixed and, in some cases, material could result in a default of the ground lease and loss of our leasehold interest in the hotel.  We could also be in default under the applicable indebtedness. In February 2021, we defaulted on our Georgia Tech Hotel & Conference Center ground lease and entered into a forbearance agreement with the lenders under the related mortgage indebtedness, and, as a result of our default, the ground lessor has exercised its right to terminate the ground lease, effective as of March 31, 2021. See Note 17 – Subsequent Events to our accompanying consolidated financial statements included in this Annual Report on Form 10-K for more details.

In addition, unless we can purchase a fee interest in the underlying land and improvements or extend the terms of these leases before their expiration, as to which no assurance can be given, we will lose our right to operate these properties and our interest in the improvements upon expiration of the leases. Our ability to exercise any extension options relating to our ground leases is subject to the conditionvarious conditions such as that we are not in default under the terms of the ground lease at the time that we exercise such options, and we can provide no assurances that we will be able to exercise any available options at such time. Furthermore, we can provide no assurances that we will be able to renew any ground lease upon its expiration, and any renewal would be subject to the Brookfield Approval Rights and conditions contained in the applicable indebtedness. If we were to lose the right to use a hotel due to a breach or non-renewal of the ground lease, we would be unable to derive income from such hotel and would be required to purchase an interest in another hotel to attempt to replace that income.hotel.

Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on the financial condition of co-venturers and disputes between us and our co-venturers.

We own two of our hotels through joint venture arrangements and, subject to the Brookfield Approval Rights, may enter into other joint ventures, partnerships and other co-ownership arrangements (including preferred equity investments) for the purpose of making investments in existing or new hotels. In such event, we would not be in a position to exercise sole decision-making authority regarding the joint venture. Investments in joint ventures may, under certain circumstances, involve risks not present were a third party not involved, including the possibility that partners or co-venturers might become bankrupt or fail to fund their required capital contributions. Co-venturers may have economic or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives. Such investments may also have the potential risk of impasses on decisions, such as a sale, because neither we nor the co-venturer would have full control over the joint venture. In addition, to the extent our participation represents a minority interest, which is the case with one of the two hotels we have invested in through joint venture arrangements and could be the case for any future joint venture arrangements, a majority of the participants may be able to take actions which are not in our best interests because of our lack of full control. Disputes between us and co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business. Consequently, actions by or disputes with co-venturers might result in subjecting properties owned by the joint venture to additional risk. In addition, we may in certain circumstances be liable for the actions of our co-venturers.

We may not be able to offset increased hotel operating costs, including labor costs, with higher room rates or other expense reduction measures.

Certain of the expenses associated with operating our hotels, such as essential hotel staff, real estate taxes and insurance, are relatively fixed. They do not necessarily decrease directly with a reduction in revenue at the hotels and may be subject to increases that are not related to the performance of our hotels or the increase in the rate of inflation.

Additionally, certain costs, such as expenses for hotel staff related to housekeeping and room operations, reservation systems, room supplies, linen and laundry services, are not fixed and may increase in the future. In the event of a significant decrease in demand, our hotel managers may not be able to reduce the size of hotel work forces in order to decrease compensation costs.

Moreover, increases in labor costs increased during 2017, 2018have adversely affected the profitability of our hotels in the past, and 2019, primarily duemay continue to U.S. labor market tightening, job creation and government regulations surrounding wages, healthcare and other benefits, and we anticipate this trend will continue during 2020. Ourdo so. During these periods, our managers have not been, and may continue not to be, able to fully offset any fixed or increased expenses with higher room rates. Any initiative to achieve higher room rates is subject to a variety of risks and uncertainties, including that higher room rates may reduce occupancy. There can be no assurance any other initiatives that may be pursued to grow revenues will be successful. Moreover, any of our efforts to reduce operating costs also could adversely affect the future growth of our business and the value of our hotel properties.

Our real properties are subject to property taxes that may increase in the future, which could adversely affect our cash flow.

Our real properties are subject to real property taxes that may increase as tax rates change and as the real properties are assessed or reassessed by taxing authorities. If we fail to pay any such taxes, the applicable taxing authority may place a lien on the real property and the real property may be subject to a tax sale.

Uninsured losses relating to real property or excessively expensive premiums for insurance coverage could reduce our cash flows.

Our general liability coverage, property insurance coverage and umbrella liability coverage on all our properties may not be adequate to insure against liability claims and provide for the costs of defense. Similarly, we may not have adequate coverage against the risk of direct physical damage or to reimburse us on a replacement cost basis for costs incurred to repair or rebuild each property. Moreover, there are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters, that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. Insurance risks associated with such catastrophic events could sharply increase the premiums we pay for coverage against property and casualty claims.

This risk is particularly relevant with respect to potential acts of terrorism. The Terrorism Risk Insurance Act of 2002 (the "TRIA"), under which the U.S. federal government bears a significant portion of insured losses caused by terrorism, will expire on December 31, 2027, and there can be no assurance that Congress will act to renew or replace the TRIA following its expiration. In the event that the TRIA is not renewed or replaced, terrorism insurance may become difficult or impossible to obtain at reasonable costs or at all, which may result in adverse impacts and additional costs to us.

Changes in the cost or availability of insurance due to the non-renewal of the TRIA or for other reasons could expose us to uninsured casualty losses. If any of our properties incurs a casualty loss that is not fully insured, the value of our assets will be reduced by any such uninsured loss, which may reduce the value of our stockholders’ investments. In addition, other than any working capital reserve or other reserves we may establish, we have no source of funding to repair or reconstruct any uninsured property. Also, to the extent we must pay unexpectedly large amounts for insurance, we could suffer reduced earnings.

Additionally, mortgage lenders insist in some cases that commercial property owners purchase coverage against terrorism as a condition for providing mortgage loans. Accordingly, to the extent terrorism risk insurance policies are not available at reasonable costs, if at all, our ability to finance or refinance our properties could be impaired. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. We may not have adequate, or any, coverage for such losses.

Terrorist attacks and other acts of violence, civilian unrest or war may affect the markets in which we operate our business and our profitability.

Our properties are located in major metropolitan areas as well as densely populated sub-markets that are susceptible to terrorist attack. In addition, any kind of terrorist activity or violent criminal acts, including terrorist acts against public institutions or buildings or modes of public transportation (including airlines, trains or buses) could have a negative effect on our business.

More generally, any terrorist attack, other act of violence or war, including armed conflicts, could result in increased volatility in, or damage to, the worldwide financial markets and economy. Increased economic volatility could adversely affect our properties' ability to conduct their operations profitably or our ability to borrow money or issue capital stock at acceptable prices.

Damage from catastrophic weather and other natural events and climate change could result in losses to us.

Certain of our properties are located in areas that may experience catastrophic weather and other natural events from time to time, including hurricanes or other severe weather, flooding, fires, snow or ice storms, windstorms or, earthquakes. These adverse weather and natural events could cause substantial damages or losses to our properties which could exceed our insurance coverage. In the event of a loss in excess of insured limits, we could lose our capital invested in the affected property, as well as anticipated future revenue from that property. We could also continue to be obligated to repay any mortgage indebtedness or other obligations related to the property. Any such loss could materially and adversely affect our business and our financial condition and results of operations.

To the extent that significant changes in the climate occur, we may experience extreme weather and changes in precipitation and temperature and rising sea levels, all of which may result in physical damage to or a decrease in demand for properties located in these areas or affected by these conditions. Should the impact of climate change be material in nature, including destruction of our properties, or occur for lengthy periods of time, our financial condition or results of operations may be adversely affected.

In addition, changes in federal and state legislation and regulation on climate change could result in increased capital expenditures to improve the energy efficiency of our existing properties or to protect them from the consequence of climate change.

Competition with third parties in acquiring investments may reduce our profitability and the return on our stockholders' investments.

We compete with many other entities engaged in real estate investment activities, including individuals, corporations, bank and insurance company investment accounts, private investment funds, other REITs, real estate limited partnerships, and other entities engaged in real estate investment activities, many of which have greater resources than we do. In addition, affiliates of the Brookfield Investor are or may be in the business of making investments in, and have or may have investments in, other businesses similar to, and that may compete with, our business. Larger REITs may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. In addition, the number of entities and the amount of funds competing for suitable investments may increase. Any such increase would result in increased demand for these assets and therefore increased prices paid for them. If we pay higher prices for properties, our profitability will be reduced and our stockholders may experience a lower return on their investments.

Acquiring or attempting to acquire multiple properties in a single transaction may adversely affect our operations.

Our hotel portfolio was acquired in a series of portfolio transactions covering multiple properties. We may again attempt to acquire multiple properties in a single transaction, subject to the Brookfield Approval Rights. Portfolio acquisitions are more complex and expensive than single-property acquisitions, and the risk that a multiple-property acquisition does not close may be greater than in a single-property acquisition. Portfolio acquisitions also may result in us owning investments in geographically dispersed markets, placing additional demands on our ability to manage the properties in the portfolio. In addition, a seller may require that a group of properties be purchased as a package even though we may not want to purchase one or more properties in the portfolio. In these situations, if we are unable to identify another person or entity to acquire the unwanted properties, we may be required to operate or attempt to dispose of these properties. We may be required to accumulate a large amount of cash in order to acquire multiple properties in a single transaction. We would expect the returns that we earn on such cash to be less than the ultimate returns in real property. Any of the foregoing events may have an adverse effect on our operations.

Our property managers may fail to integrate their subcontractors into their operations in an efficient manner.

Our property managers may rely on multiple subcontractors for on-site property management of our properties. If our property managers are unable to integrate these subcontractors into their operations in an efficient manner, they may have to expend substantial time and money coordinating with these subcontractors, which could have a negative impact on the revenues generated from such properties.

Discovery of previously undetected environmentally hazardous conditions may adversely affect our operating results.

We are subject to various federal, state and local laws and regulations that (a) regulate certain activities and operations that may have environmental or health and safety effects, such as the management, generation, release or disposal of regulated materials, substances or wastes, (b) impose liability for the costs of cleaning up, and damages to natural resources from, past spills, waste disposals on and off-site, or other releases of hazardous materials or regulated substances, and (c) regulate workplace safety. Compliance with these laws and regulations could increase our operational costs. Violation of these laws may subject us to significant fines, penalties or disposal costs, which could negatively impact our results of operations, financial position and cash flows. Under various federal, state and local environmental laws, a current or previous owner or operator of real property may be liable for the cost of removal or remediation of hazardous or toxic substances on, under or in such property. The costs of removal or remediation could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Certain environmental laws and common law principles could be used to impose liability for release of and exposure to hazardous substances, including asbestos-containing materials into the air, and third parties may seek recovery from owners or operators of real properties for personal injury or property damage associated with exposure to released hazardous substances. In addition, when excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Concern about indoor exposure to mold has been increasing, as exposure to mold may cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of significant mold at any of our properties could require us to undertake a costly remediation program to contain or remove the mold from the affected property.

Accordingly, we may incur significant costs to defend against claims of liability, to comply with environmental regulatory requirements, to remediate any contaminated property, or to pay personal injury claims.

Moreover, environmental laws also may impose liens on property or other restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us or our property managers from operating such properties. Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require us to incur material expenditures. Future laws, ordinances or regulations or the discovery of currently unknown conditions or non-compliance may impose material liability under environmental laws.

Costs associated with complying with the Americans with Disabilities Act of 1990 may decrease our cash flows.

Our properties are subject to the Americans with Disabilities Act of 1990, as amended (the “Disabilities Act”). Under the Disabilities Act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. We believe the properties in our portfolio substantially comply with the present requirements of the Disabilities Act. However, we have not conducted a comprehensive audit or investigation of all of our properties to determine our compliance, and we will continue to assess our properties and to make alterations as appropriate in this respect. If one or more of the hotels in our portfolio is not in compliance with the Disabilities Act, we may be required to make significant unanticipated expenditures to bring the hotel into compliance and we might incur damages or governmental fines.

Risks Related to the Lodging Industry

Our hotels are subject to all the risks common to the hotel industry and subject to market conditions that affect all hotel properties.

All of the properties we own are hotels, subject to all the risks of the hotel industry. Adverse trends in the hotel industry could adversely affect hotel occupancy and the rates that can be charged for hotel rooms as well as hotel operating expenses, and generally include:

We do not have control over the market and business conditions that affect the value of our lodging properties. HotelOur hotel properties are subject to varying degrees of risk generally common to the ownership of hotels, many of which are beyond our control, including the following:

The hotel business is seasonal, which affects our results of operations from quarter to quarter.

The hotel industry is seasonal in nature. This seasonality can cause quarterly fluctuations in our financial condition and operating results. Generally, occupancy rates and hotel revenues are greater in the second and third quarters than in the first and fourth quarters. We can provide no assurances that our cash flows will be sufficient to offset any shortfalls that occur as a result of these fluctuations.

We do notare dependent upon third-party property managers to operate our lodging properties.

We cannot and do not directly or indirectly operate our lodging properties and, as a result, we depend on the ability of third-party property managers, to operate our hotel properties successfully. Because of certain REIT qualification rules, we cannot directly operate any lodging properties we own or actively participate in the decisions affecting their daily operations. As a result, we depend on the ability of third-party property managers, to operate our hotel properties successfully. Thus, even if we believe our lodging properties are being operated inefficiently or in a manner that does not result in satisfactory operating results, we may not be able to require the management company to change their method of operation of our lodging properties. Any negative publicity or other adverse developments (including developments related to the ongoing impact of the coronavirus pandemic) that affect that operator and/or its affiliated brands generally may adversely affect our results of operations, financial condition, and consequently cash flows thereby impacting our ability to meet our capital requirements. There can be no assurance that any management company we engage will manage any lodging properties we acquire in an efficient and satisfactory manner.

We rely on third-party property managers to establish and maintain adequate internal controls over financial reporting at our lodging properties. In doing so, each property manager has policies and procedures in place that allow it to effectively monitor and report to us the operating results of our lodging properties which ultimately are included in our consolidated financial statements. Because the operations of our lodging properties ultimately become a component of our consolidated financial statements, we evaluate the effectiveness of the internal controls over financial reporting at all our lodging properties, in connection with the certifications we provide in our quarterly and annual reports on Form 10-Q and Form 10-K, respectively, pursuant to the Sarbanes-Oxley Act of 2002. If such controls are not effective, the accuracy of the results of our operations that we report could be affected. Accordingly, our ability to conclude that, as a company, our internal controls are effective is significantly dependent upon the effectiveness of internal controls that the property managers implement at our lodging properties. It is possible that we could have a significant deficiency or material weakness as a result of the ineffectiveness of the internal controls at one or more of our lodging properties.

If we replace or terminate any property manager, we may be required by the terms of the relevant management agreement to pay substantial termination fees, and we may experience significant disruptions at the affected lodging properties. We may not be able to make arrangements with a management company with substantial prior lodging experience in the future. If we experience such disruptions, it may adversely affect our results of operations, financial condition and our cash flows, including our ability to meet our capital requirements.

Our use