UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM
~~FORM~~	10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2019~~2020



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number 001-34571





PEBBLEBROOK HOTEL TRUST
			(Exact Name of Registrant as Specified in Its Charter)



~~Maryland~~		~~27-1055421~~
~~(State of Incorporation~~ ~~or Organization)~~		~~(I.R.S. Employer~~ ~~Identification No.)~~

~~4747 Bethesda Avenue~~	~~1100~~
~~Bethesda,~~	~~Maryland~~	~~20814~~
~~(Address of Principal Executive Offices)~~		~~(Zip Code)~~



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



Maryland		27-1055421
(State of Incorporation or Organization)		(I.R.S. Employer Identification No.)

4747 Bethesda Avenue	Suite 1100
Bethesda,	Maryland	20814
(Address of Principal Executive Offices)		(Zip Code)


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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares, $0.01 par value per share

PEB

New York Stock Exchange

6.50% Series C Cumulative Redeemable Preferred Shares

PEB-PC

New York Stock Exchange

6.375% Series D Cumulative Redeemable Preferred Shares

PEB-PD

New York Stock Exchange

6.375% Series E Cumulative Redeemable Preferred Shares

PEB-PE

New York Stock Exchange

6.30% Series F Cumulative Redeemable Preferred Shares

PEB-PF

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

~~Large accelerated filer~~

☑

~~Accelerated filer~~

☐

Non-accelerated filer

☐

(do not check if a smaller reporting company)

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Class						Outstanding at October ~~21, 2019~~26, 2020
Common shares of beneficial interest ($0.01 par value per share)						~~130,634,135~~130,917,185


Pebblebrook Hotel Trust TABLE OF CONTENTS



			Page
			~~Page~~
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements.	3
	Consolidated Balance Sheets - ~~September~~ Se pte mber 30, ~~2019~~2020 (unaudited) and December 31, ~~2018~~2019	3
	Consolidated Statements of Operations and Comprehensive Income (unaudited) - Three and nine months ended September 30, ~~2019~~2020 and ~~2018~~2019	4
	Consolidated Statements of Equity (unaudited) - Three and nine months ended ~~September~~Se ptember 30, ~~2019~~2020 and ~~2018~~2019	6
	Consolidated Statements of Cash Flows (unaudited) - Nine months ended ~~September~~Septem ber 30, ~~2019~~2020 and ~~2018~~2019	9
	Notes to Consolidated Financial Statements (unaudited)	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	3331
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	4240
Item 4.	Controls and Procedures.	4341
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings.	4341
Item 1A.	Risk Factors.	4341
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	4341
Item 3.	Defaults Upon Senior Securities.	4441
Item 4.	Mine Safety Disclosures.	4442
Item 5.	Other Information.	4442
Item 6.	Exhibits.	4442

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Pebblebrook Hotel Trust
Consolidated Balance Sheets
(In thousands, except share data)
September 30,
2019 December 31,
2018
(Unaudited)
ASSETS
Investment in hotel properties, net $ 6,329,968
$ 6,534,193
Hotels held for sale 28,851
—
Ground lease asset, net —
199,745
Cash and cash equivalents 29,758
83,366
Restricted cash 27,048
24,445
Hotel receivables (net of allowance for doubtful accounts of $517 and $526, respectively) 70,990
59,897
Prepaid expenses and other assets 57,998
76,702
Total assets $ 6,544,613
$ 6,978,348
LIABILITIES AND EQUITY
Debt $ 2,229,728
$ 2,746,898
Accounts payable and accrued expenses 537,016
360,279
Deferred revenues 56,995
54,741
Accrued interest 5,674
2,741
Liabilities related to hotels held for sale 298
—
Distribution payable 58,436
43,759
Total liabilities 2,888,147
3,208,418
Commitments and contingencies (Note 11)

Shareholders’ equity:
Preferred shares of beneficial interest, $.01 par value (liquidation preference $510,000 at September 30, 2019 and at December 31, 2018), 100,000,000 shares authorized; 20,400,000 shares issued and outstanding at September 30, 2019 and December 31, 2018 204
204
Common shares of beneficial interest, $.01 par value, 500,000,000 shares authorized; 130,484,956 issued and outstanding at September 30, 2019 and 130,311,289 issued and outstanding at December 31, 2018 1,305
1,303
Additional paid-in capital 4,067,529
4,065,804
Accumulated other comprehensive income (loss) (36,672 ) 1,330
Distributions in excess of retained earnings (386,631 ) (308,806 )
Total shareholders’ equity 3,645,735
3,759,835
Non-controlling interests 10,731
10,095
Total equity 3,656,466
3,769,930
Total liabilities and equity $ 6,544,613
$ 6,978,348


Pebblebrook Hotel Trust Consolidated Balance Sheets (In thousands, except share and per-share data)
	September 30, 2020		December 31, 2019
	(Unaudited)
ASSETS
Investment in hotel properties, net	$	5,980,580	$	6,332,587

Cash and cash equivalents	204,553		30,098
Restricted cash	12,422		26,777
Hotel receivables (net of allowance for doubtful accounts of $388 and $738, respectively)	11,312		49,619
Prepaid expenses and other assets	56,922		59,474
Total assets	$	6,265,789	$	6,498,555
LIABILITIES AND EQUITY
Debt	$	2,354,066	$	2,229,220
Accounts payable, accrued expenses and other liabilities	247,623		260,166
Lease liabilities - operating leases	255,177		256,271
Deferred revenues	33,965		57,704
Accrued interest	5,533		4,694

Distribution payable	9,306		58,564
Total liabilities	2,905,670		2,866,619
Commitments and contingencies (Note 11)
Shareholders’ equity:
Preferred shares of beneficial interest, $.01 par value (liquidation preference $510,000 at September 30, 2020 and at December 31, 2019), 100,000,000 shares authorized; 20,400,000 shares issued and outstanding at September 30, 2020 and December 31, 2019	204		204
Common shares of beneficial interest, $.01 par value, 500,000,000 shares authorized; 130,673,300 shares issued and outstanding at September 30, 2020 and 130,484,956 shares issued and outstanding at December 31, 2019	1,307		1,305
Additional paid-in capital	4,092,602		4,069,410
Accumulated other comprehensive income (loss)	(69,663)		(24,715)
Distributions in excess of retained earnings	(671,667)		(424,996)
Total shareholders’ equity	3,352,783		3,621,208
Non-controlling interests	7,336		10,728
Total equity	3,360,119		3,631,936
Total liabilities and equity	$	6,265,789	$	6,498,555

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

Table of Contents


Pebblebrook Hotel Trust Consolidated Statements of Operations and Comprehensive Income (In thousands, except share and per-share data) (Unaudited)
	For the three months ended September 30,				For the nine months ended September 30,
	2020		2019		2020		2019
Revenues:
Room	$	51,337	$	296,622	$	239,279	$	851,899
Food and beverage	12,454		90,088		82,635		274,803
Other operating	13,189		36,842		46,765		106,102
Total revenues	76,980		423,552		368,679		1,232,804
Expenses:
Hotel operating expenses:
Room	15,835		71,878		75,390		209,707
Food and beverage	10,578		64,690		66,144		194,981
Other direct and indirect	44,538		110,922		171,456		330,617
Total hotel operating expenses	70,951		247,490		312,990		735,305
Depreciation and amortization	56,696		69,775		168,044		177,376
Real estate taxes, personal property taxes, property insurance, and ground rent	27,947		31,588		85,173		94,009
General and administrative	7,466		8,315		38,259		25,753
Transaction costs	10,339		4,035		10,474		7,576
Impairment loss	0		0		20,570		0
(Gain) loss on sale of hotel properties	47		0		(117,401)		0
(Gain) loss and other operating expenses	917		1,529		3,753		6,219
Total operating expenses	174,363		362,732		521,862		1,046,238
Operating income (loss)	(97,383)		60,820		(153,183)		186,566
Interest expense	(27,514)		(26,465)		(75,196)		(84,512)
Other	115		7		442		23
Income (loss) before income taxes	(124,782)		34,362		(227,937)		102,077
Income tax (expense) benefit	(5,778)		(4,382)		8,531		(5,924)
Net income (loss)	(130,560)		29,980		(219,406)		96,153
Net income (loss) attributable to non-controlling interests	(253)		89		(535)		254
Net income (loss) attributable to the Company	(130,307)		29,891		(218,871)		95,899
Distributions to preferred shareholders	(8,139)		(8,139)		(24,417)		(24,417)

Net income (loss) attributable to common shareholders	$	(138,446)	$	21,752	$	(243,288)	$	71,482
Net income (loss) per share available to common shareholders, basic	$	(1.06)	$	0.17	$	(1.86)	$	0.55
Net income (loss) per share available to common shareholders, diluted	$	(1.06)	$	0.17	$	(1.86)	$	0.55
Weighted-average number of common shares, basic	130,645,990		130,484,956		130,588,765		130,467,193
Weighted-average number of common shares, diluted	130,645,990		130,622,130		130,588,765		130,690,342

Table of Contents

Pebblebrook Hotel Trust
Consolidated Statements of Operations and Comprehensive Income
(In thousands, except share and per-share data)
(Unaudited)

For the three months ended September 30, For the nine months ended September 30,
2019 2018 2019 2018
Revenues:
Room $ 296,622
$ 146,907
$ 851,899
$ 411,396
Food and beverage 90,088
43,141
274,803
136,919
Other operating 36,842
15,432
106,102
44,721
Total revenues 423,552
205,480
1,232,804
593,036
Expenses:
Hotel operating expenses:
Room 71,878
34,675
209,707
99,540
Food and beverage 64,690
30,687
194,981
93,611
Other direct and indirect 110,922
54,301
330,617
160,663
Total hotel operating expenses 247,490
119,663
735,305
353,814
Depreciation and amortization 69,775
24,765
177,376
74,229
Real estate taxes, personal property taxes, property insurance, and ground rent 31,588
11,206
94,009
35,809
General and administrative 8,315
6,663
25,753
14,794
Transaction costs 4,035
3,188
7,576
5,545
(Gain) loss and other operating expenses 1,529
(357 ) 6,219
(11,376 )
Total operating expenses 362,732
165,128
1,046,238
472,815
Operating income (loss) 60,820
40,352
186,566
120,221
Interest expense (26,465 ) (12,647 ) (84,512 ) (33,274 )
Other 7
3,931
23
29,409
Income (loss) before income taxes 34,362
31,636
102,077
116,356
Income tax (expense) benefit (4,382 ) (1,719 ) (5,924 ) (3,628 )
Net income (loss) 29,980
29,917
96,153
112,728
Net income (loss) attributable to non-controlling interests 89
125
254
424
Net income (loss) attributable to the Company 29,891
29,792
95,899
112,304
Distributions to preferred shareholders (8,139 ) (4,023 ) (24,417 ) (12,070 )
Net income (loss) attributable to common shareholders $ 21,752
$ 25,769
$ 71,482
$ 100,234
Net income (loss) per share available to common shareholders, basic $ 0.17
$ 0.37
$ 0.55
$ 1.45
Net income (loss) per share available to common shareholders, diluted $ 0.17
$ 0.37
$ 0.55
$ 1.44
Weighted-average number of common shares, basic 130,484,956
68,912,185
130,467,193
68,900,402
Weighted-average number of common shares, diluted 130,622,130
69,255,858
130,690,342
69,267,098


Pebblebrook Hotel Trust Consolidated Statements of Operations and Comprehensive Income - Continued (In thousands, except share and per-share data) (Unaudited)	Pebblebrook Hotel Trust Consolidated Statements of Operations and Comprehensive Income - Continued (In thousands, except share and per-share data) (Unaudited)										Pebblebrook Hotel Trust Consolidated Statements of Operations and Comprehensive Income - Continued (In thousands, except share and per-share data) (Unaudited)

	For the three months ended September 30,					For the nine months ended September 30,						For the three months ended September 30,				For the nine months ended September 30,
	2019			2018		2019			2018			2020		2019		2020		2019

Comprehensive Income:											Comprehensive Income:
Net income (loss)	$	29,980		$	29,917	$	96,153		$	112,728	Net income (loss)	$	(130,560)	$	29,980	$	(219,406)	$	96,153
Other comprehensive income (loss):											Other comprehensive income (loss):
Unrealized gain (loss) on derivative instruments	(7,874		)	829		(38,002		)	8,119		Unrealized gain (loss) on derivative instruments	9,722		(7,874)		(44,948)		(38,002)
Comprehensive income (loss)	22,106			30,746		58,151			120,847		Comprehensive income (loss)	(120,838)		22,106		(264,354)		58,151
Comprehensive income (loss) attributable to non-controlling interests	66			128		146			452		Comprehensive income (loss) attributable to non-controlling interests	(187)		66		(624)		146
Comprehensive income (loss) attributable to the Company	$	22,040		$	30,618	$	58,005		$	120,395	Comprehensive income (loss) attributable to the Company	$	(120,651)	$	22,040	$	(263,730)	$	58,005

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

Pebblebrook Hotel Trust
Consolidated Statements of Equity
(In thousands, except share data)
(Unaudited)
Three Months Ended September 30, 2019
Preferred Shares Common Shares Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Distributions in Excess of Retained Earnings Total Shareholders' Equity Non-Controlling Interests Total Equity
Shares Amount Shares Amount
Balance at June 30, 2019 20,400,000
$ 204
130,484,956
$ 1,305
$ 4,065,672
$ (28,798 ) $ (358,615 ) $ 3,679,768
$ 10,506
$ 3,690,274
Share-based compensation —
—
—
—
1,857
—
—
1,857
277
2,134
Distribution on common shares/units —
—
—
—
—
—
(49,768 ) (49,768 ) (141 ) (49,909 )
Distribution on preferred shares —
—
—
—
—
—
(8,139 ) (8,139 ) —
(8,139 )
Other comprehensive income (loss):

Unrealized gain (loss) on derivative instruments —
—
—
—
—
(7,874 ) —
(7,874 ) —
(7,874 )
Net income (loss) —
—
—
—
—
—
29,891
29,891
89
29,980
Balance at September 30, 2019 20,400,000 $ 204
130,484,956 $ 1,305
$4,067,529 $ (36,672 ) $ (386,631 ) $ 3,645,735
$ 10,731
$ 3,656,466

Three Months Ended September 30, 2018
Preferred Shares Common Shares Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Distributions in Excess of Retained Earnings Total Shareholders' Equity Non-Controlling Interests Total Equity
Shares Amount Shares Amount
Balance at June 30, 2018 10,000,000
$100 68,912,185
$ 689
$1,684,638 $ 11,527
$ (169,600 ) 1,527,354 $ 5,280
1,532,634
Issuance of shares, net of offering costs —
—
—
—
(470 ) —
—
(470 ) —
(470 )
Share-based compensation —
—
—
—
2,362
—
—
2,362
276
2,638
Distribution on common shares/units —
—
—
—
—
—
(26,453 ) (26,453 ) (89 ) (26,542 )
Distribution on preferred shares —
—
—
—
—
—
(4,023 ) (4,023 ) —
(4,023 )
Other comprehensive income (loss):

Unrealized gain (loss) on derivative instruments —
—
—
—
—
829
—
829
—
829
Net income (loss) —
—
—
—
—
—
29,792 29,792
125
29,917
Balance at September 30, 2018 10,000,000 $100 68,912,185 $689 $1,686,530 $ 12,356
$(170,284) $1,529,391 $5,592 $1,534,983

Nine Months Ended September 30, 2019

Table of Contents


Pebblebrook Hotel Trust Consolidated Statements of Equity (In thousands, except share data) (Unaudited)

	Three Months Ended September 30, 2020
	Preferred Shares			Common Shares			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Distributions in Excess of Retained Earnings		Total Shareholders' Equity		Non-Controlling Interests		Total Equity
	Shares	Amount		Shares	Amount
Balance at June 30, 2020	20,400,000	$	204	130,564,060	$	1,306	$	4,077,497	$	(79,385)	$	(531,914)	$	3,467,708	$	21,038	$	3,488,746




Share-based compensation	—	—		0	—		1,660		—		—		1,660		—		1,660
Distributions on common shares/units	—	—		—	—		—		—		(1,307)		(1,307)		(3)		(1,310)
Distributions on preferred shares	—	—		—	—		—		—		(8,139)		(8,139)		—		(8,139)
Redemption of non-controlling interest LTIP units	—	—		109,240	1		13,445		—		—		13,446		(13,446)		—
Other comprehensive income (loss):
Unrealized gain (loss) on derivative instruments	—	—		—	—		—		9,722		—		9,722		—		9,722

Net income (loss)	—	—		—	—		—		—		(130,307)		(130,307)		(253)		(130,560)
Balance at September 30, 2020	20,400,000	$	204	130,673,300	$	1,307	$	4,092,602	$	(69,663)	$	(671,667)	$	3,352,783	$	7,336	$	3,360,119


	Three Months Ended September 30, 2019
	Preferred Shares			Common Shares			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Distributions in Excess of Retained Earnings		Total Shareholders' Equity		Non-Controlling Interests		Total Equity
	Shares	Amount		Shares	Amount
Balance at June 30, 2019	20,400,000	$	204	130,484,956	$	1,305	$	4,065,672	$	(28,798)	$	(358,615)	$	3,679,768	$	10,506	$	3,690,274




Share-based compensation	—	—		—	—		1,857		—		—		1,857		277		2,134
Distributions on common shares/units	—	—		—	—		—		—		(49,768)		(49,768)		(141)		(49,909)
Distributions on preferred shares	—	—		—	—		—		—		(8,139)		(8,139)		—		(8,139)

Other comprehensive income (loss):
Unrealized gain (loss) on derivative instruments	—	—		—	—		—		(7,874)		—		(7,874)		—		(7,874)

Net income (loss)	—	—		—	—		—		—		29,891		29,891		89		29,980
Balance at September 30, 2019	20,400,000	$	204	130,484,956	$	1,305	$4,067,529		$	(36,672)	$	(386,631)	$	3,645,735	$	10,731	$	3,656,466

Table of Contents


Pebblebrook Hotel Trust Consolidated Statements of Equity - Continued (In thousands, except share data) (Unaudited)																																Pebblebrook Hotel Trust Consolidated Statements of Equity - Continued (In thousands, except share data) (Unaudited)

																																				Nine Months Ended September 30, 2020
																																				Preferred Shares							Common Shares					Additional Paid-In Capital				Accumulated Other Comprehensive Income (Loss)			Distributions in Excess of Retained Earnings					Total Shareholders' Equity					Non-Controlling Interests					Total Equity
																																				Shares				Amount			Shares		Amount
Balance at December 31, 2019																																Balance at December 31, 2019				20,400,000				$	204		130,484,956		$	1,305				$	4,069,410							$	(24,715)				$	(424,996)				$	3,621,208				$	10,728			$	3,631,936
Issuance of shares, net of offering costs																																Issuance of shares, net of offering costs				—				—			—		—			(94)				—			—					(94)					—					(94)

Issuance of common shares for Board of Trustees compensation																																Issuance of common shares for Board of Trustees compensation				—				—			23,528		1			636				—			—					637					—					637
Repurchase of common shares																																Repurchase of common shares				—				—			(47,507)		(1)			(1,254)				—			—					(1,255)					—					(1,255)
Share-based compensation																																Share-based compensation				—				—			103,083		1			10,459				—			—					10,460					10,616					21,076
Distributions on common shares/units																																Distributions on common shares/units				—				—			—		—			—				—			(3,383)					(3,383)					(27)					(3,410)
Distributions on preferred shares																																Distributions on preferred shares				—				—			—		—			—				—			(24,417)					(24,417)					—					(24,417)
Redemption of non-controlling interest LTIP units																																Redemption of non-controlling interest LTIP units				—				—			109,240		1			13,445				—			—					13,446					(13,446)					—
Other comprehensive income (loss):																																Other comprehensive income (loss):
Unrealized gain (loss) on derivative instruments																																Unrealized gain (loss) on derivative instruments				—				—			—		—			—				(44,948)			—					(44,948)					—					(44,948)

Net income (loss)																																Net income (loss)				—				—			—		—			—				—			(218,871)					(218,871)					(535)					(219,406)
Balance at September 30, 2020																																Balance at September 30, 2020				20,400,000				$	204		130,673,300		$	1,307		$	4,092,602			$	(69,663)		$	(671,667)				$	3,352,783				$	7,336				$	3,360,119

																																				Nine Months Ended September 30, 2019
	Preferred Shares			Common Shares					Additional Paid-In Capital				Accumulated Other Comprehensive Income (Loss)				Distributions in Excess of Retained Earnings				Total Shareholders' Equity				Non-Controlling Interests				Total Equity							Preferred Shares							Common Shares					Additional Paid-In Capital				Accumulated Other Comprehensive Income (Loss)			Distributions in Excess of Retained Earnings					Total Shareholders' Equity					Non-Controlling Interests					Total Equity
	Shares	Amount		Shares		Amount																		Shares								Amount					Shares				Amount
Balance at December 31, 2018	20,400,000	$	204	130,311,289		$	1,303					$		4,065,804						$	1,330			$			(308,806	)				$	3,759,835		$	10,095		$	3,769,930	Balance at December 31, 2018		20,400,000		$	204		130,311,289						$	1,303		$	4,065,804				$	1,330				$	(308,806)				$	3,759,835			$	10,095			$	3,769,930
Issuance of shares, net of offering costs	—	—		—		—			(275		)		—				—				(275		)		—				(275		)	Issuance of shares, net of offering costs				—				—			—		—				(275)				—			—					(275)					—					(275)

Issuance of common shares for Board of Trustees compensation	—	—		25,282		1			739				—				—				740				—				740			Issuance of common shares for Board of Trustees compensation				—				—			25,282		1			739				—			—					740					—					740
Repurchase of common shares	—	—		(126,681	)	(1		)	(4,008		)		—				—				(4,009		)		—				(4,009		)	Repurchase of common shares				—				—			(126,681)		(1)			(4,008)				—			—					(4,009)					—					(4,009)
Share-based compensation	—	—		275,066		2			5,269				—				—				5,271				829				6,100			Share-based compensation				—				—			275,066		2			5,269				—			—					5,271					829					6,100
Distributions on common shares/units	—	—		—		—			—				—				(149,307		)		(149,307		)		(447		)		(149,754		)	Distributions on common shares/units				—				—			—		—			—				—			(149,307)					(149,307)					(447)					(149,754)
Distributions on preferred shares	—	—		—		—			—				—				(24,417		)		(24,417		)		—				(24,417		)	Distributions on preferred shares				—				—			—		—			—				—			(24,417)					(24,417)					—					(24,417)
Other comprehensive income (loss):
Unrealized gain (loss) on derivative instruments	—	—		—		—			—				(38,002		)		—				(38,002		)		—				(38,002		)
Net income (loss)	—	—		—		—			—				—				95,899				95,899				254				96,153
Balance at September 30, 2019	20,400,000	$	204	130,484,956		$	1,305		$	4,067,529			$	(36,672	)		$	(386,631	)		$	3,645,735			$	10,731			$	3,656,466

	Nine Months Ended September 30, 2018
	Preferred Shares			Common Shares					Additional Paid-In Capital				Accumulated Other Comprehensive Income (Loss)				Distributions in Excess of Retained Earnings				Total Shareholders' Equity				Non-Controlling Interests				Total Equity
	Shares	Amount		Shares		Amount
Balance at December 31, 2017	10,000,000	$100		68,812,575		$688						$1,685,437				$3,689								$(191,013)								$	1,498,901		$4,625			$	1,503,526
Issuance of shares, net of offering costs	—	—		—		—			(470		)			—						—				(470			)		—				(470	)
Issuance of common shares for Board of Trustees compensation	—	—		17,410		1			661				—				—				662					—				662
Repurchase of common shares	—	—		(69,687	)	(1		)	(2,506		)		—				—				(2,507		)		—				(2,507		)
Share-based compensation	—	—		151,887		1			3,408				—				—				3,409				828				4,237
Distributions on common shares/units	—	—		—		—			—				—				(78,957		)		(78,957		)		(269		)		(79,226		)
Distributions on preferred shares	—	—		—		—			—				—				(12,070		)		(12,070		)		(16		)		(12,086		)
Other comprehensive income (loss):
Unrealized gain (loss) on derivative instruments	—	—		—		—			—				8,119				—				8,119				—				8,119
Cumulative effect adjustment from adoption of new accounting standard	—	—		—		—			—				548				(548		)		—				—				—
Net income (loss)	—	—		—		—			—				—				112,304				112,304				424				112,728
Balance at September 30, 2018	10,000,000	$	100	68,912,185		$	689		$	1,686,530			$	12,356			$	(170,284	)		$	1,529,391			$	5,592			$	1,534,983

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Other comprehensive income (loss):
Unrealized gain (loss) on derivative instruments	—	—		—	—		—		(38,002)		—		(38,002)		—		(38,002)

Net income (loss)	—	—		—	—		—		—		95,899		95,899		254		96,153
Balance at September 30, 2019	20,400,000	$	204	130,484,956	$	1,305	$	4,067,529	$	(36,672)	$	(386,631)	$	3,645,735	$	10,731	$	3,656,466

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

Pebblebrook Hotel Trust
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
For the nine months ended September 30,
2019 2018
Operating activities:
Net income (loss) $ 96,153
$ 112,728
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization 177,376
74,229
Share-based compensation 6,100
4,237
(Gain) loss on marketable securities —
(24,369 )
Amortization of deferred financing costs, non-cash interest and mortgage loan premiums 13,547
2,889
Non-cash ground rent 4,921
2,027
Other 2,301
1,807
Changes in assets and liabilities:
Hotel receivables (12,504 ) (7,019 )
Prepaid expenses and other assets 1,147
(4,582 )
Accounts payable and accrued expenses 23,791
10,254
Deferred revenues 3,269
(1,387 )
Net cash provided by (used in) operating activities 316,101
170,814
Investing activities:
Improvements and additions to hotel properties (117,989 ) (56,935 )
Proceeds from sales of hotel properties 437,871
—
Investment in marketable securities —
(356,180 )
Sale of marketable securities —
6,658
Payment for merger consideration —
(112,000 )
Purchase of corporate office equipment, software, and furniture (560 ) (34 )
Property insurance proceeds —
5,104
Net cash provided by (used in) investing activities 319,322
(513,387 )
Financing activities:
Payment of offering costs — common and preferred shares (275 ) (470 )
Payment of deferred financing costs (318 ) (15,724 )
Borrowings under revolving credit facilities 211,893
500,181
Repayments under revolving credit facilities (281,893 ) (151,181 )
Proceeds from debt —
100,000
Repayments of debt (451,831 ) (1,764 )
Repurchases of common shares (4,009 ) (2,507 )
Distributions — common shares/units (135,054 ) (79,403 )
Distributions — preferred shares (24,417 ) (12,070 )
Proceeds from refundable membership deposits —
30
Repayments of refundable membership deposits (524 ) (541 )
Net cash provided by (used in) financing activities (686,428 ) 336,551
Net change in cash and cash equivalents and restricted cash (51,005 ) (6,022 )
Cash and cash equivalents and restricted cash, beginning of year 107,811
32,533
Cash and cash equivalents and restricted cash, end of period $ 56,806
$ 26,511

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Pebblebrook Hotel Trust Consolidated Statements of Cash Flows (In thousands) (Unaudited)
	For the nine months ended September 30,
	2020		2019
Operating activities:
Net income (loss)	$	(219,406)	$	96,153
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	168,044		177,376
Share-based compensation	21,076		6,100

Amortization of deferred financing costs, non-cash interest and mortgage loan premiums	11,199		13,547
(Gain) loss on sale of hotel properties	(117,401)		0
Impairment loss	20,570		0
Non-cash ground rent	4,669		4,921
Other	(289)		2,301
Changes in assets and liabilities:
Hotel receivables	37,217		(12,504)
Prepaid expenses and other assets	(3,933)		1,147
Accounts payable and accrued expenses	(47,896)		23,791
Deferred revenues	(20,708)		3,269
Net cash provided by (used in) operating activities	(146,858)		316,101
Investing activities:


Improvements and additions to hotel properties	(110,443)		(117,989)

Proceeds from sales of hotel properties	375,131		437,871


Purchase of corporate office equipment, software, and furniture	0		(560)

Net cash provided by (used in) investing activities	264,688		319,322
Financing activities:


Payment of offering costs — common and preferred shares	(94)		(275)
Payment of deferred financing costs	(3,618)		(318)

Borrowings under revolving credit facilities	760,115		211,893
Repayments under revolving credit facilities	(635,115)		(281,893)
Proceeds from debt	12,965		0
Repayments of debt	(12,965)		(451,831)
Repurchases of common shares	(1,255)		(4,009)


Distributions — common shares/units	(52,649)		(135,054)
Distributions — preferred shares	(24,417)		(24,417)

Repayments of refundable membership deposits	(697)		(524)
Net cash provided by (used in) financing activities	42,270		(686,428)
Net change in cash and cash equivalents and restricted cash	160,100		(51,005)
Cash and cash equivalents and restricted cash, beginning of year	56,875		107,811
Cash and cash equivalents and restricted cash, end of period	$	216,975	$	56,806

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

PEBBLEBROOK HOTEL TRUST

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Organization

Pebblebrook Hotel Trust (the "Company") was formed as a Maryland real estate investment trust in October 2009 to opportunistically acquire and invest in hotel properties located primarily in major United States cities, with an emphasis on major gateway coastal markets.

As of September 30, ~~2019~~,2020, the Company owned 5753 hotels with a total of ~~14,112~~13,236 guest rooms. The hotels are located in the following markets: ~~Atlanta (Buckhead), Georgia;~~ Boston, Massachusetts; Chicago, Illinois; Key West, Florida; Miami (Coral Gables), Florida; Los Angeles, California (Beverly Hills, Santa Monica, and West Hollywood); Naples, Florida; ~~Nashville, Tennessee;~~ New York, New York; Philadelphia, Pennsylvania; Portland, Oregon; San Diego, California; San Francisco, California; Seattle, Washington; Stevenson, Washington; and Washington, D.C.

Substantially all of the Company’s assets are held by, and all of the Company's operations are conducted through, Pebblebrook Hotel, L.P. (the "Operating Partnership"). The Company is the sole general partner of the Operating Partnership. At September 30, ~~2019~~,2020, the Company owned ~~99.7~~%99.8% of the common limited partnership units issued by the Operating Partnership ("common units"). The remaining ~~0.3~~%0.2% of the common units are owned by the other limited partners of the Operating Partnership. For the Company to qualify as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"), it cannot operate the hotels it owns. Therefore, the Operating Partnership and its subsidiaries lease the hotel properties to subsidiaries of Pebblebrook Hotel Lessee, Inc. (collectively with its subsidiaries, "PHL") ~~and LaSalle Hotel Lessee Inc. (collectively with its subsidiaries, "LHL")~~, ~~the Company’s~~a taxable REIT ~~subsidiaries~~subsidiary ("~~TRSs"~~TRS"), which in turn engage third-party eligible independent contractors to manage the hotels. PHL ~~and LHL are~~is consolidated into the Company’s financial statements.

COVID-19 Operations and Liquidity Update

In March 2020, the World Health Organization declared the novel coronavirus ("COVID-19") to be a global pandemic and the virus has continued to spread throughout the United States and the world. As a result of this pandemic and subsequent government mandates and health official recommendations, hotel demand was nearly eliminated. Following the government mandates and health official recommendations, the Company temporarily suspended operations at a majority of its hotels and resorts and dramatically reduced staffing and expenses at the hotels that remained operational. Travel restrictions have slowly eased in a few markets and leisure demand began to recover late in the second quarter. As of September 30, 2020, 35 of the Company's hotels, listed below, were open, while the operations at the remaining 18 hotels were still temporarily suspended.

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	Property	Location
1.	L'Auberge Del Mar	Del Mar, CA
2.	Hotel Palomar Los Angeles Beverly Hills	Los Angeles, CA
3.	W Los Angeles - West Beverly Hills	Los Angeles, CA
4.	Mondrian Los Angeles	West Hollywood, CA
5.	Le Meridien Delfina Santa Monica	Santa Monica, CA
6.	Viceroy Santa Monica Hotel	Santa Monica, CA
7.	Le Parc Suite Hotel	West Hollywood, CA
8.	Montrose West Hollywood	West Hollywood, CA
9.	Chamberlain West Hollywood Hotel	West Hollywood, CA
10.	Grafton on Sunset	West Hollywood, CA
11.	Embassy Suites San Diego Bay - Downtown	San Diego, CA
12.	Paradise Point Resort & Spa	San Diego, CA
13.	San Diego Mission Bay Resort	San Diego, CA
14.	The Westin San Diego Gaslamp Quarter	San Diego, CA
15.	Hilton San Diego Gaslamp Quarter	San Diego, CA
16.	Solamar Hotel	San Diego, CA
17.	Hotel Spero	San Francisco, CA
18.	Hotel Zetta San Francisco	San Francisco, CA
19.	Chaminade Resort & Spa	Santa Cruz, CA
20.	Southernmost Beach Resort	Key West, FL
21.	The Marker Key West Harbor Resort	Key West, FL
22.	LaPlaya Beach Resort and Club	Naples, FL
23.	Hotel Colonnade Coral Gables, Autograph Collection	Miami, FL
24.	The Liberty, A Luxury Collection Hotel, Boston	Boston, MA
25.	Revere Hotel Boston Common	Boston, MA
26.	Hyatt Regency Boston Harbor	Boston, MA
27.	W Boston	Boston, MA
28.	The Westin Copley Place, Boston	Boston, MA
29.	George Hotel	Washington, DC
30.	Viceroy Washington DC	Washington, DC
31.	Skamania Lodge	Stevenson, WA
32.	Hotel Monaco Seattle	Seattle, WA
33.	The Nines, a Luxury Collection Hotel, Portland	Portland, OR
34.	Hotel Chicago Downtown, Autograph Collection	Chicago, IL
35.	Sofitel Philadelphia at Rittenhouse Square	Philadelphia, PA

Subsequent to September 30, 2020, the Company re-opened 4 additional hotels and anticipates re-opening additional hotels when demand recovers.

COVID-19 has had a significant negative impact on the Company's operations and financial results to date and the Company expects that the COVID-19 pandemic will continue to have a significant negative impact on the Company's results of operations, financial position and cash flow for the remainder of 2020 and into 2021. The Company cannot estimate when travel demand will recover. As a result of this uncertainty, in March 2020, the Company fully drew down on its $650.0 million unsecured revolving credit facility, reduced the quarterly cash dividend on its common shares to one penny, reduced planned capital expenditures, reduced the compensation of its executive officers, board of trustees and employees, and, working closely with its hotel operating partners, significantly reduced its hotels' operating expenses. On June 29, 2020, the Company amended its existing credit facilities, term loan facilities and senior notes. Among other things, the amendments extended the maturity of

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a significant portion of a $300.0 million term loan from November 2021 to November 2022, waived existing financial covenants through the end of the first quarter of 2021 and provided substantially less restrictive financial covenants through the end of the second quarter of 2022. Refer to "Note 5. Debt" for additional information regarding the amendments. Based on these amendments and the expense and cash flow reductions, the Company believes that it will have sufficient liquidity to meet its obligations for the next twelve months. The negative impact will result in a significant income tax loss in PHL. Given the continued negative impact of the COVID-19 pandemic on the Company's financial results and uncertainties about the Company's ability to utilize its net operating loss in future years, the Company recognized a valuation allowance of $10.0 million during the third quarter of 2020. As of September 30, 2020, the Company has a tax asset of $11.7 million attributable to the net operating loss carryback, which is included in prepaid expenses and other assets in the accompanying consolidated balance sheets.

The Company also adopted an optional remote-work policy and other physical distancing policies at its corporate office and the Company does not anticipate these policies to have any adverse impact on its ability to continue to operate its business. Transitioning to a remote-work environment has not had a material adverse impact on the Company's financial reporting system, internal controls or disclosure controls and procedures.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim consolidated financial statements and related notes have been prepared in accordance with U.S. ~~generally accepted accounting principles (“U.S. GAAP”)~~GAAP and in conformity with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) applicable to interim financial information. As such, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted in accordance with the rules and regulations of the SEC. These unaudited consolidated financial statements include all adjustments considered necessary for a fair presentation of the consolidated balance sheets, consolidated statements of operations and comprehensive income, consolidated statements of equity and consolidated statements of cash flows for the periods presented. Interim results are not necessarily indicative of full-year performance, as a result of the impact of seasonal and other short-term variations and the acquisitions and or dispositions of hotel properties. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

The Company and its subsidiaries are separate legal entities and maintain records and books of account separate and apart from each other. The consolidated financial statements include all of the accounts of the Company and its subsidiaries and are presented in accordance with U.S. GAAP. All significant intercompany balances and transactions have been eliminated in consolidation.

Certain reclassifications have been made to the prior ~~period’s~~period's financial statements to conform to the current year ~~presentation.~~presentation, including separate presentation of the Company's operating lease liabilities on the Company's consolidated balance sheets.

Use of Estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses. These estimates are prepared using management’s best judgment, after considering past, current and expected events and economic conditions. Actual results could differ from these estimates.

Fair Value Measurements

A fair value measurement is based on the assumptions that market participants would use in pricing an asset or liability in an orderly transaction. The hierarchy for inputs used in measuring fair value are as follows:


1.	~~Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.~~


2.	Level 2 – Inputs include quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, and model-derived valuations whose inputs are observable.


3.	~~Level 3 – Model-derived valuations with unobservable inputs.~~

1.Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

2.Level 2 – Inputs include quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, and model-derived valuations whose inputs are observable.

3.Level 3 – Model-derived valuations with unobservable inputs.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

The Company's financial instruments include cash and cash equivalents, restricted cash, accounts payable and accrued expenses. Due to their short maturities, the carrying amounts of these assets and liabilities approximate fair value. ~~Marketable securities are carried at fair value using Level 1 inputs.~~ See Note 5 to the accompanying consolidated financial statements for disclosures on the fair value of debt and derivative instruments.

Investment in Hotel Properties

Upon acquisition of a hotel property, the Company ~~allocates the purchase price based on~~measures and recognizes the fair value of the acquired land, land improvements, building, furniture, fixtures and equipment, identifiable intangible assets or liabilities, other assets and assumed liabilities. Identifiable intangible assets or liabilities typically arise from contractual arrangements in connection with the transaction, including terms that are above or below market compared to an estimated market agreement at the acquisition date. Acquisition-date fair values of assets and assumed liabilities are determined based on replacement costs, appraised values, and estimated fair values using methods similar to those used by independent appraisers and that use appropriate discount and/or capitalization rates and available market information. Hotel acquisitions are generally considered to be asset acquisitions defined by ASU 2017-01 and transaction costs related to asset acquisitions are capitalized. ~~Acquisition~~Transaction costs related to business combinations are expensed as incurred and ~~are~~ included in ~~transaction costs on~~ the consolidated statements of operations and comprehensive income.

Hotel renovations and replacements of assets that improve or extend the life of an asset are recorded at cost and depreciated over their estimated useful lives. Assets under capital leases are recorded at the present value of the minimum lease payments. Repair and maintenance costs are expensed as incurred.

Hotel properties are recorded at cost and depreciated using the straight-line method over an estimated useful life of 10 to 40 years for buildings, land improvements, and building improvements and 1 to 10 years for furniture, fixtures and equipment. Leasehold improvements are amortized over the shorter of the lease term or the useful lives of the related assets. Intangible assets arising from contractual arrangements are typically amortized over the life of the contract. The Company is required to make subjective assessments as to the useful lives and classification of properties for purposes of determining the amount of depreciation expense to reflect each year with respect to the assets. These assessments may impact the Company’s results of operations.

The Company reviews its investments in hotel properties for impairment whenever events or changes in circumstances indicate that the carrying value of the hotel properties may not be recoverable. Events or circumstances that may cause a review include, but are not limited to, when a hotel property experiences a current or projected loss from operations, when it becomes more likely than not that a hotel property will be sold before the end of its useful life, adverse changes in the demand for lodging at the properties due to declining national or local economic conditions and/or new hotel construction in markets where the hotels are located. When such conditions exist, the Company performs an analysis to determine if the estimated undiscounted future cash flows from operations and the proceeds from the ultimate disposition of a hotel exceed its carrying value. If the estimated undiscounted future cash flows are less than the carrying value of the asset, an adjustment to reduce the carrying value to the related hotel’s estimated fair market value is recorded and an impairment loss is recognized. In the evaluation of impairment of its hotel properties, the Company makes many assumptions and estimates including projected cash flows both from operations and eventual disposition, expected useful life and holding period, future required capital expenditures, and fair values, including consideration of capitalization rates, discount rates, and comparable selling prices. The Company will adjust its assumptions with respect to the remaining useful life of the hotel property when circumstances change or it is more likely than not that the hotel property will be sold prior to its previously expected useful life.

The Company will classify a hotel as held for sale and will cease recording depreciation expense when a binding agreement to sell the property has been signed under which the buyer has committed a significant amount of nonrefundable cash, approval of the Board of Trustees has been obtained, no significant financing contingencies exist, and the sale is expected to close within one year. If the fair value less costs to sell is lower than the carrying value of the hotel, the Company will record an impairment loss. The Company will classify the loss, together with the related operating results, as continuing or

discontinuing operations on the consolidated statements of operations and comprehensive income and classify the assets and related liabilities as held for sale on the consolidated balance sheets.

Revenue Recognition

Revenue consists of amounts derived from hotel operations, including the sales of rooms, food and beverage, and other ancillary services. Room revenue is recognized over the length of a customer's hotel stay. Revenue from food and beverage and other ancillary services is generated when a customer chooses to purchase goods or services separately from a hotel room and revenue is recognized on these distinct goods and services at the point in time or over the time period that goods or services

are provided to the customer. Certain ancillary services are provided by third parties and the Company assesses whether it is the principal or agent in these arrangements. If the Company is the agent, revenue is recognized based upon the commission earned from the third party. If the Company is the principal, the Company recognizes revenue based upon the gross sales price. Some contracts for rooms or food and beverage services require an upfront deposit which is recorded as deferred revenues (or contract liabilities) and recognized once the performance obligations are satisfied.

The Company recognizes revenue related to nonrefundable membership initiation fees and refundable membership initiation deposits over the expected life of an active membership. For refundable membership initiation deposits, the difference between the amount paid by the member and the present value of the refund obligation is deferred and recognized as other operating revenues on the consolidated statements of operations and comprehensive income over the expected life of an active membership. The present value of the refund obligation is recorded as a membership initiation deposit liability in the consolidated balance sheets and accretes over the nonrefundable term using the effective interest method using the Company's incremental borrowing rate. The accretion is included in interest expense.

Certain of the Company's hotels have retail spaces, restaurants or other spaces which the Company leases to third parties. ~~Lease~~When collection of substantially all lease payments during the lease term is considered probable, lease revenue is recognized on a straight-line basis over the life of the lease. When collection of substantially all lease ~~and~~payments during the lease term is not considered probable, revenue is recognized as the lesser of the amount under straight-line basis or cash received. Lease revenue is included in other operating revenues in the Company's consolidated statements of operations and comprehensive income.

The Company collects sales, use, occupancy and similar taxes at its hotels which are presented on a net basis on the consolidated statements of operations and comprehensive income. Accounts receivable primarily represents receivables from hotel guests who occupy hotel rooms and utilize hotel services. The Company maintains an allowance for doubtful accounts sufficient to cover estimated potential credit losses.

Income Taxes

To qualify as a REIT for federal income tax purposes, the Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90 percent of its adjusted taxable income to its shareholders. As a REIT, the Company generally is not subject to federal corporate income tax on that portion of its taxable income that is currently distributed to shareholders. The Company is subject to certain state and local taxes on its income and property, and to federal income and excise taxes on its undistributed taxable income. In addition, PHL, ~~and LHL, which leases~~whose subsidiaries lease the Company’s hotels from the Operating Partnership, is subject to federal and state income taxes. The Company accounts for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Valuation allowances are provided if, based upon the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Share-based Compensation

The Company has adopted an equity incentive plan that provides for the grant of common share options, share awards, share appreciation rights, performance units and other equity-based awards. Equity-based compensation is measured at the fair value of the award on the date of grant and recognized as an expense on a straight-line basis over the vesting period. Share-based compensation awards that contain a performance condition are reviewed at least quarterly to assess the achievement of the performance condition. Compensation expense will be adjusted when a change in the assessment of achievement of the specific performance condition level is determined to be probable. The determination of fair value of these awards is subjective and involves significant estimates and assumptions including expected volatility of the Company's shares, expected dividend yield, expected term and assumptions of whether these awards will achieve parity with other operating partnership units or achieve performance thresholds.

Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing the net income (loss) available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is computed by dividing net income (loss)

available to common shareholders, as adjusted for dilutive securities, by the weighted-average number of common shares outstanding plus dilutive securities. Any anti-dilutive securities are excluded from the diluted per-share calculation.

Recent Accounting Standards

In February 2016, the ~~FASB~~Financial Accounting Standards Board ("FASB") issued ~~ASU~~Accounting Standards Update ("ASU") 2016-02, Leases, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as

either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, to clarify how to apply certain aspects of the new leases standard. In July 2018, the FASB also issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, to give companies another option for transition and to provide lessors with a practical expedient to reduce the cost and complexity of implementing the new standard. The transition option allows companies to not apply the new leases standard in the comparative periods they present in their financial statements in the year of adoption. The Company adopted this standard on January 1, 2019. The Company elected the practical expedients allowed under the guidance and retained the original lease classification and historical accounting for initial direct costs for leases existing prior to the adoption date. The Company also elected not to restate prior periods for the impact of the adoption of the new standard. The adoption of this standard has resulted in the recognition of right-of-use assets and related liabilities to account for the Company's future obligations under the ground lease and corporate office arrangements for which the Company is the lessee. See Notes 4 and 11 below for additional disclosures of the adoption of this standard.

During the first quarter of 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

Note 3. ~~Business Combinations and~~ Acquisition and Disposition of Hotel Properties

~~Merger with LaSalle Hotel Properties~~

On November 30, 2018, the Company completed its merger with LaSalle Hotel Properties (“LaSalle”) pursuant to the Agreement and Plan of Merger, dated as of September 6, 2018, as amended on September 18, 2018 (the “Merger Agreement”), by and among the Company, the Operating Partnership, Ping Merger Sub, LLC (“Merger Sub”), Ping Merger OP, LP (“Merger OP”), LaSalle and LaSalle Hotel Operating Partnership, L.P. (“LaSalle OP”).

Pursuant to the Merger Agreement, on November 30, 2018, Merger OP merged with and into LaSalle OP (the “Partnership Merger”) with LaSalle OP surviving as a subsidiary of the Operating Partnership. Immediately following the Partnership Merger, LaSalle merged with and into Merger Sub (the “Company Merger” and, together with the Partnership Merger, the “Mergers”) with Merger Sub surviving as a wholly owned subsidiary of the Company. On December 3, 2018, Merger Sub assigned all of its rights and obligations to the Company and was liquidated and dissolved.

Upon completion of the Company Merger and pursuant to the Merger Agreement, each issued and outstanding LaSalle common share of beneficial interest, $0.01 par value per share ("LaSalle common shares") (other than the 10.8 million LaSalle common shares held by the Company) was converted into the right to receive either (i) 0.92 of the Company's common shares and cash in lieu of fractional shares, if any; or (ii) $37.80 in cash, subject to certain adjustments and to any applicable withholding tax (the “Cash Consideration”). The maximum number of LaSalle common shares that were eligible to be converted into the right to receive the Cash Consideration was equal to 30% of the aggregate number of LaSalle common shares issued and outstanding immediately prior to completion of the Company Merger. The LaSalle common shares held by the Company were excluded from the cash election in the Company Merger and were cancelled. In addition, each issued and outstanding LaSalle 6.375% Series I cumulative redeemable preferred share was converted into the right to receive 1 of the Company's 6.375% Series E cumulative redeemable preferred shares and each issued and outstanding LaSalle 6.3% Series J cumulative redeemable preferred share was converted into the right to receive 1 of the Company's 6.3% Series F cumulative redeemable preferred shares.

Upon completion of the Partnership Merger and pursuant to the Merger Agreement, each common unit of LaSalle OP (a “LaSalle OP Common Unit”) that was issued and outstanding immediately prior to completion of the Partnership Merger, other than LaSalle OP Common Units held by LaSalle and its subsidiaries, was cancelled and converted into the right to receive 0.92 common units of the Operating Partnership, without interest. No fractional common shares or OP units were issued in the Mergers, and the value of any fractional interests was paid in cash.

~~The Company accounted for the Mergers under the acquisition method of accounting in~~ ~~ASC 805, Business Combinations. As a result of the Mergers, the Company acquired an ownership interest in the following 36 hotel properties:~~

Property Location Ownership Interest Guest Rooms
Villa Florence San Francisco on Union Square San Francisco, CA 100 % 189
Hotel Vitale San Francisco, CA 100 % 200
The Marker San Francisco San Francisco, CA 100 % 208
Hotel Spero San Francisco, CA 100 % 236
Chaminade Resort & Spa Santa Cruz, CA 100 % 156
Harbor Court Hotel San Francisco San Francisco, CA 100 % 131
Viceroy Santa Monica Hotel Santa Monica, CA 100 % 162
Le Parc Suite Hotel West Hollywood, CA 100 % 154
Montrose West Hollywood West Hollywood, CA 100 % 133
Chamberlain West Hollywood Hotel West Hollywood, CA 100 % 115
Grafton on Sunset West Hollywood, CA 100 % 108
The Westin Copley Place, Boston Boston, MA 100 % 803
The Liberty, A Luxury Collection Hotel, Boston Boston, MA 99.99 % 298
Hyatt Regency Boston Harbor Boston, MA 100 % 270
Sofitel Washington DC Lafayette Square Washington, DC 100 % 237
George Hotel Washington, DC 100 % 139
Mason & Rook Hotel Washington, DC 100 % 178
Donovan Hotel Washington, DC 100 % 193
Topaz Hotel
⁽⁷⁾
Washington, DC 100 % 99
Paradise Point Resort & Spa San Diego, CA 100 % 462
Hilton San Diego Gaslamp Quarter San Diego, CA 100 % 286
Solamar Hotel San Diego, CA 100 % 235
L'Auberge Del Mar Del Mar, CA 100 % 121
Hilton San Diego Resort & Spa San Diego, CA 100 % 357
The Heathman Hotel Portland, OR 100 % 151
Southernmost Beach Resort Key West, FL 100 % 262
The Marker Key West Key West, FL 100 % 96
The Roger New York New York, NY 100 % 194
Hotel Chicago Downtown, Autograph Collection Chicago, IL 100 % 354
The Westin Michigan Avenue Chicago Chicago, IL 100 % 752
Hotel Palomar Washington DC (1) Washington, DC 100 % 335
The Liaison Capitol Hill (2) Washington, DC 100 % 343
Onyx Hotel (3) Boston, MA 100 % 112
Hotel Amarano Burbank (4) Burbank, CA 100 % 132
Rouge Hotel (5) Washington, DC 100 % 137
Hotel Madera (6) Washington, DC 100 % 82
8,420

⁽¹⁾ ~~In February 2019, the Company sold this hotel property for $141.5 million.~~

⁽²⁾ ~~In February 2019, the Company sold this hotel property for $111.0 million.~~

⁽³⁾ ~~In May 2019, the Company sold this hotel property for $58.3 million.~~

⁽⁴⁾ ~~In July 2019, the Company sold this hotel property for $72.9 million.~~

⁽⁵⁾ ~~In September 2019, the Company sold this hotel property for $42.0 million.~~

⁽⁶⁾ ~~In September 2019, the Company sold this hotel property for $23.3 million.~~

⁽⁷⁾ ~~As of September 30, 2019, this hotel property was classified as held for sale.~~

The total consideration for the Mergers was approximately $4.1 billion, which included the Company's issuance of approximately 61.4 million common shares valued at $34.92 per share to LaSalle common shareholders, the Company's issuance of 4.4 million Series E Preferred Shares valued at $23.10 per share to former LaSalle Series I preferred shareholders and 6.0 million Series F Preferred Shares valued at $22.10 per share to former LaSalle Series J preferred shareholders, the Operating Partnership's issuance of approximately 0.1 million OP units valued at $34.92 per unit to former LaSalle limited partners, and cash. Additionally, the Company's investment of 10.8 million of LaSalle common shares valued at $346.5 million is included in the total consideration.

~~The total consideration, excluding the net working capital assumed, consisted of the following (in thousands):~~

Total Consideration
Common shares $ 2,144,057
Series E preferred shares 101,622
Series F preferred shares 132,600
OP units 4,665
Cash 1,719,150
Total consideration $ 4,102,094

~~The Company preliminarily allocated the purchase price as follows (in thousands):~~

November 30, 2018
Investment in hotel properties $ 4,120,370
Restricted cash reserves 14,784
Hotel and other receivables 34,669
Intangible assets 171,660
Prepaid expenses and other assets 47,808
Accounts payable and accrued expenses (258,036 )
Deferred revenues (23,816 )
Accrued interest (2,496 )
Distributions payable (2,744 )
Other (105 )
Total consideration $ 4,102,094

The estimated fair values for the assets acquired and the liabilities assumed are preliminary and are subject to change during the measurement period as additional information related to the inputs and assumptions used in determining the fair value of the assets and liabilities becomes available. These estimated fair values are based on a valuation prepared by the Company with assistance of a third-party valuation specialist. The Company reviewed the inputs used by the third-party specialist as well as the allocation of the purchase price to ensure reasonableness. The Company and the third party valuation specialist have prepared the fair value estimates for each of the hotel properties acquired, and continue reviewing the underlying inputs and assumptions; therefore, the purchase price and its allocation, in their entirety, are not yet complete as of the date of this filing.

During the quarter ended September 30, 2019, the Company recorded an adjustment to decrease the preliminary fair value of investment in hotel properties by $36.0 million, decrease intangible assets by $6.5 million and decrease accounts payable and accrued expenses by $42.5 million. The decrease in investment in hotel properties consisted of increasing allocation to land of $90.8 million, decreasing building by $189.8 million, increasing furniture, fixtures and equipment by $85.5 million and decreasing capital lease assets by $22.5 million. The changes were a result of additional accounting information identified by management. Additionally, based on additional information obtained by management, the Company re-evaluated and reduced the estimated useful lives of certain furniture, fixtures and equipment. As a result of the change in allocation and useful lives, additional depreciation expense of $12.0 million would have been recognized from the date of acquisition (November 30, 2018) to June 30, 2019. The Company believes that the information gathered to date provides a reasonable basis for estimating

the fair values of assets acquired and liabilities assumed but the Company is waiting for additional information necessary to finalize certain assumptions used in valuing the assumed ground and capital leases. The Company expects to complete the purchase accounting during the fourth quarter of 2019.

~~The Company used the following valuation methodologies, inputs, and assumptions to estimate the fair value of the assets acquired, the liabilities assumed, and the equity interests acquired:~~

Investment in hotel properties — The Company estimated the fair values of the land and improvements, buildings and improvements, and furniture, fixtures, and equipment at the hotel properties by using a combination of the market, cost, and income approaches. These valuation methodologies are based on significant Level 2 and Level 3 inputs in the fair value hierarchy, such as estimates of future income growth, capitalization rates, discount rates, capital expenditures, and cash flow projections at the respective hotel properties.

Intangible assets — The Company estimated the fair value of its lease intangible assets by calculating the present value of the difference between the contractual rental amounts paid according to the in-place lease agreements and the market rental rates for similar leased space, measured over a period equal to the remaining non-cancellable term of the lease. This valuation methodology is based on Level 2 and Level 3 inputs in the fair value hierarchy. The market lease intangible assets are amortized as adjustments to ground rent expense over the remaining terms of the respective leases.

•

Above market lease liabilities — The Company estimated the fair value of its above market lease liabilities by calculating the present value of the difference between the contractual rental amounts paid according to the in-place lease agreements and the market rental rates for similar leased space, measured over a period equal to the remaining non-cancellable term of the lease. This valuation methodology is based on Level 2 and Level 3 inputs in the fair value hierarchy. The above market lease liabilities were included in accounts payable and other liabilities in the accompanying consolidated balance sheet prior to the adoption of ASC 842 ~~Leases. The above market lease liabilities are amortized as adjustments to ground rent expense over the remaining terms of the respective leases.~~

Restricted cash reserves, hotel and other receivables, prepaid expenses and other assets, accounts payable and other liabilities, deferred revenues, accrued interest, and distributions payable — the carrying amounts of the assets acquired, the liabilities assumed, and the equity interests acquired approximate fair value because of their short term maturities.

For the hotel properties acquired during the Mergers, total revenues of $221.6 million and $641.6 million and operating income of $92.4 million and $261.8 million for the three and nine months ended September 30, 2019, respectively, are included in the accompanying consolidated statements of operations and comprehensive income.

There were no acquisitions of hotel properties during the three and nine months ended September 30, ~~2019. For the three months ended September 30, 2019, the Company incurred $0.3 million in transaction costs~~2020 and $3.7 million in integration costs in connection with the Mergers. For the nine months ended September 30, 2019, the Company incurred $0.6 million in transaction costs and $6.8 million in integration costs in connection with the Mergers. The transaction costs are primarily related to transfer taxes, financial advisory fees, loan commitment fees, legal, and other professional service fees in connection with the Mergers. The integration costs are primarily related to professional fees and employee-related costs. The merger-related costs noted above are included in transaction costs in the accompanying consolidated statements of operations and comprehensive income.

The following unaudited condensed pro forma financial information presents the results of operations as if the Mergers, excluding all dispositions after the Mergers, had taken place on January 1, 2017. The unaudited condensed pro forma financial information is not necessarily indicative of what the actual results of operations of the Company would have been assuming the Mergers had taken place on January 1, 2017, nor is it indicative of the results of operations for future periods. The unaudited condensed pro forma financial information is as follows (in thousands):

For the three months ended September 30, For the nine months ended September 30,
2019 2018 2019
2018

(unaudited)
Total revenues $ 423,552
$ 452,837
$ 1,232,804

$ 1,276,481
Operating income (loss) $ 60,820
$ 87,367
$ 186,566

$ 220,538
Net income (loss) attributable to common shareholders $ 21,752
$ 43,221
$ 71,482

$ 98,471
Net income (loss) per share available to common shareholders — basic $ 0.17
$ 0.33
$ 0.55

$ 0.75
Net income (loss) per share available to common shareholders — diluted $ 0.17
$ 0.33
$ 0.55

$ 0.75

~~Disposition of Hotel Properties~~2019.

The Company will report a disposed or held for sale hotel property or group of hotel properties in discontinued operations only if the disposal represents a strategic shift that has, or will have, a major effect on its operations and financial results. All other disposed hotel properties will have their operating results reflected within continuing operations on the Company's consolidated statements of operations and comprehensive income for all periods presented.

On The following table sets forth information regarding the Company's disposition transactions during the nine months ended September 30, 2020 and 2019 (in thousands):

Hotel Property Name

Location

Sale Date

Sale Price

Sofitel Washington DC Lafayette Square and InterContinental Buckhead Atlanta

Washington, DC / Buckhead, GA

March 6, 2020

331,000

Union Station Hotel Nashville, Autograph Collection

Nashville, TN

July 29, 2020

56,000

2020 Total

387,000

The Liaison Capitol Hill

Washington, D.C.

February 14, 2019

111,000

Hotel Palomar Washington DC

Washington, D.C.

February 22, 2019

141,450

Onyx Hotel

Boston, MA

May 29, 2019

58,255

Hotel Amarano Burbank

Burbank, CA

July 16, 2019

72,866

Rouge Hotel

Washington, DC

September 12, 2019

42,000

Hotel Madera

Washington, DC

September 26, 2019

23,250

2019 Total

448,821

For the three and nine months ended September 30, 2020, the Company ~~sold The Liaison Capitol Hill for $111.0~~recognized a gain on its dispositions of 0 and $117.4 million, ~~and recognized 0 gain or~~respectively, which is included in (gain) loss on sale of hotel properties, in the ~~disposition.~~

~~On February 22, 2019, the Company sold Hotel Palomar Washington DC for $141.5 million~~accompanying consolidated statements of operations and ~~recognized 0 gain or loss on the disposition.~~

~~On May 29, 2019, the Company sold Onyx Hotel for $58.3 million and recognized 0 gain or loss on the disposition.~~

~~On July 16, 2019, the Company sold Hotel Amarano Burbank for $72.9 million and recognized 0 gain or loss on the disposition.~~

~~On September 12, 2019, the Company sold Rouge Hotel for $42.0 million and recognized 0 gain or loss on the disposition.~~

~~On September 26, 2019, the Company sold Hotel Madera for $23.3 million and recognized 0 gain or loss on the disposition.~~

comprehensive income. For the three and nine months ended September 30, 2019, the ~~Company's~~Company recognized 0 gain or loss on these dispositions. For the three and nine months ended September 30, 2020, the accompanying consolidated statements of operations and comprehensive income included operating income (loss) ~~income~~ of ~~$0.7~~$(0.1) million and ~~$7.5~~ $4.9

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million, respectively, related to the hotel properties sold. For the three and nine months ended September 30, ~~2018,~~2019, the ~~Company's~~accompanying consolidated statements of operations and comprehensive income included operating income (loss) ~~income~~ of ~~$1.5~~$9.3 million and ~~$3.8~~$35.6 million, respectively, related to the hotel properties sold.

As of September 30, 2019, the Company had entered into an agreement to sell the Topaz Hotel for $33.0 million. This hotel was designated as held for sale as it met all of the Company's held for sale criteria. Accordingly, the Company classified all of the assets and liabilities related to this hotel as assets and liabilities held for sale in the accompanying consolidated balance sheets and ceased depreciating the assets. The Company expects the sale of Topaz Hotel to be completed during the fourth quarter of 2019, subject to customary closing conditions, although no assurances can be given that the sale will be completed on these terms, or if at all.

The sales of the hotel properties described above did not represent a strategic shift that had a major effect on the Company’s operations and financial results, and therefore, did not qualify as discontinued operations.

Note 4. Investment in Hotel Properties

Investment in hotel properties as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 consisted of the following (in thousands):


	September 30, 2020		December 31, 2019
Land	$	983,392	$	1,042,198
Buildings and improvements	4,865,065		4,998,108
Furniture, fixtures and equipment	510,552		522,631
Capital lease asset	134,063		134,063
Construction in progress	7,410		35,637
	$	6,500,482	$	6,732,637
Right-of-use asset, operating leases	322,185		335,272
Investment in hotel properties	$	6,822,667	$	7,067,909
Less: Accumulated depreciation	(842,087)		(735,322)
Investment in hotel properties, net	$	5,980,580	$	6,332,587

September 30,
2019 December 31, 2018
Land $ 1,046,510
$ 1,056,862
Buildings and improvements 5,021,865
5,440,513
Furniture, fixtures and equipment 540,848
462,620
Right-of-use asset, operating leases 342,576
—
Capital lease asset 65,382
91,985
Construction in progress 20,154
25,643
Investment in hotel properties $ 7,037,335
$ 7,077,623
Less: Accumulated depreciation (707,367 ) (543,430 )
Investment in hotel properties, net $ 6,329,968
$ 6,534,193

The Company reviews its investment in hotel properties for impairment whenever events or circumstances indicate potential impairment. As a result of the effects of the COVID-19 pandemic on our expected future operating cash flows, we determined certain impairment triggers had occurred and as a result, the Company assessed its investment in hotel properties for recoverability. Based on the analysis performed, for the nine months ended September 30, 2020 the Company recognized an impairment loss of $20.6 million related to a retail component of a hotel as a result of the fair value being lower than its carrying value. The impairment loss was determined using level 2 inputs under authoritative guidance for fair value measurements.

On January 1, 2019, the Company adopted ~~ASU~~ASC 842, Leases and applied it prospectively. At adoption, the Company also elected the practical expedients which permitted it to not reassess its prior conclusions about lease identification, classification and initial direct costs. Consequently on January 1, 2019, the Company recognized right-of-use assets and related liabilities related to its ground leases, all of which are operating leases. Since most of the Company's leases do not provide an implicit rate, the Company used incremental borrowing rates, which ranged from 5.5% to 7.6%. All of of these ground leases have long terms, ranging from 10 years to 88 years and the Company included the exercise of options to extend when it is reasonably certain the Company will exercise such option. See Note 11 for additional information about the ground leases. The right-of-use assets and liabilities are amortized to ground rent expense over the term of the underlying lease agreements. As of September 30, 2020, the Company's lease liabilities consisted of operating lease liabilities of $255.2 million and financing lease liabilities of $46.2 million. As of December 31, 2019, the Company's ~~right-of-use assets~~lease liabilities consisted of ~~$342.6~~operating lease liabilities of $256.3 million ~~which included favorable~~ and ~~unfavorable intangibles,~~financing lease liabilities of $45.6 million. The financing lease liabilities are included in ~~the investment in hotel properties and its related lease liabilities of $256.2 million are presented in~~ accounts payable, ~~and~~ accrued expenses inand other liabilities on the Company's consolidated balance sheets. The adoption of this standard had minimal impact on the Company's consolidated statements of operations and comprehensive income.

During the quarter ended September 30, 2019, the Company recorded adjustments to the preliminary fair value of investment in hotel properties related to its acquisition of the LaSalle hotel portfolio. See Note 3, "Business Combination and Acquisition and Disposition of Hotel Properties, above.

On September 10, 2017, Hotel Colonnade Coral Gables, Autograph Collection ("Hotel Colonnade") located in Coral Gables, Florida and LaPlaya Beach Resort and Club ("LaPlaya") located in Naples, Florida were impacted by Hurricane Irma. Hotel Colonnade did not suffer any material damage and remained open. LaPlaya was closed in anticipation of the storm and re-opened in stages beginning in the fourth quarter of 2017 and was fully reopened in January 2018.

The Company’s insurance policies provide coverage for property damage, business interruption, and reimbursement for other costs that were incurred relating to damages sustained during Hurricane Irma. Insurance proceeds are subject to deductibles. As of June 30, 2018, the Company reached a final agreement with the insurance carriers related to LaPlaya totaling $20.5 million, and the Company recognized gains of 0 and $13.1 million for the three and nine months ended September 30, 2018, respectively.

Note 5. Debt

On June 29, 2020, the Company amended its credit agreements and related documents governing the unsecured revolving credit facilities, term loan agreements and senior notes which:

•waived existing financial covenants through the end of the first quarter of 2021 and provided substantially less restrictive covenants through the end of the second quarter of 2022 ("waiver period");

•extended the maturity of $242.6 million of the Company’s Sixth Term Loan 2021 tranche of $300.0 million from November 2021 to November 2022;

•fixed the spread at the highest threshold through the end of the waiver period;

•increased the LIBOR floor from 0% to 0.25% for any debt not designated by the Company as being covered by an interest rate swap;

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•requires assets to be pledged as security, in the future, under certain circumstances;

•preserved the Company's ability to pay quarterly preferred equity dividend payments and a $0.01 per share quarterly common dividend (or higher if required to maintain REIT status) during the waiver period so long as the Company is in compliance with all loan agreements;

•provided the Company flexibility to complete new acquisitions and other investments during the waiver period;

•permit the Company to complete up to $90.0 million of capital improvements and redevelopment projects through the end of the waiver period; and

•provide limitations during the waiver period on common share repurchases and certain required prepayments following capital issuances or property dispositions.

The Company's debt consisted of the following as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 (dollars in thousands):


			Balance Outstanding as of
	Interest Rate	Maturity Date	September 30, 2020		December 31, 2019
Revolving credit facilities
Senior unsecured credit facility	Floating (1)	January 2022	$	290,000	$	165,000
PHL unsecured credit facility	Floating (2)	January 2022	0		0
Total revolving credit facilities			$	290,000	$	165,000

Unsecured term loans
First Term Loan	Floating (3)	January 2023	300,000		300,000
Second Term Loan	Floating (3)	April 2022	65,000		65,000
Fourth Term Loan	Floating (3)	October 2024	110,000		110,000
Sixth Term Loan
Tranche 2021	Floating (3)	November 2021	57,400		300,000
Tranche 2021 Extended	Floating (3)	November 2022	242,600		0
Tranche 2022	Floating (3)	November 2022	400,000		400,000
Tranche 2023	Floating (3)	November 2023	400,000		400,000
Tranche 2024	Floating (3)	January 2024	400,000		400,000
Total Sixth Term Loan			1,500,000		1,500,000
Total term loans at stated value			1,975,000		1,975,000
Deferred financing costs, net			(10,499)		(10,343)
Total term loans			$	1,964,501	$	1,964,657

Senior unsecured notes
Series A Notes	4.70%	December 2023	60,000		60,000
Series B Notes	4.93%	December 2025	40,000		40,000
Total senior unsecured notes at stated value			100,000		100,000
Deferred financing costs, net			(435)		(437)
Total senior unsecured notes			$	99,565	$	99,563
Total debt			$	2,354,066	$	2,229,220

Balance Outstanding as of
Interest Rate
Maturity Date
September 30, 2019
December 31, 2018
Revolving credit facilities
Senior unsecured credit facility
Floating ⁽¹⁾

January 2022
$ 100,000

$ 170,000
PHL unsecured credit facility
Floating ⁽²⁾

January 2022
—

—
Total revolving credit facilities $ 100,000
$ 170,000

Unsecured term loans

First Term Loan
Floating ⁽³⁾

January 2023
300,000

300,000
Second Term Loan
Floating ⁽³⁾

April 2022
65,000

65,000
Third Term Loan
Floating ⁽³⁾

January 2021
—

200,000
Fourth Term Loan
Floating ⁽³⁾
October 2024 110,000
110,000
Sixth Term Loan
Tranche 2020
Floating ⁽³⁾
December 2020 —
250,000
Tranche 2021
Floating ⁽³⁾
November 2021 300,000
300,000
Tranche 2022
Floating ⁽³⁾
November 2022 400,000
400,000
Tranche 2023
Floating ⁽³⁾
November 2023 400,000
400,000
Tranche 2024
Floating ⁽³⁾
January 2024 400,000
400,000
Total Sixth Term Loan 1,500,000
1,750,000
Total term loans at stated value

1,975,000

2,425,000
Deferred financing costs, net

(11,172 )
(15,716 )
Total term loans

$ 1,963,828

$ 2,409,284

Senior unsecured notes

Series A Notes 4.70%
December 2023
60,000

60,000
Series B Notes 4.93%
December 2025
40,000

40,000
Total senior unsecured notes at stated value

100,000

100,000
Deferred financing costs, net

(460 )
(531 )
Total senior unsecured notes

$ 99,540

$ 99,469

Mortgage loans

The Westin San Diego Gaslamp Quarter 3.69%
January 2020
66,376

68,207
Deferred financing costs, net

(16 )
(62 )
Total mortgage loans

$ 66,360

$ 68,145
Total debt

$ 2,229,728

$ 2,746,898

________________________

^{________________________}

⁽¹⁾Borrowings bear interest at floating rates equal to, at the Company's option, either (i) LIBOR plus an applicable margin or (ii) an Adjusted Base Rate (as defined in the applicable credit agreement) plus an applicable margin.

⁽²⁾Borrowings bear interest at floating rates equal to, at the Company's option, either (i) LIBOR plus an applicable margin or (ii) an Eurocurrency Rate (as defined in the applicable credit agreement) plus an applicable margin.

⁽³⁾Borrowings under the term loan facilities bear interest at floating rates equal to, at the Company's option, either (i) LIBOR plus an applicable margin or (ii) a Base Rate plus an applicable margin. As of September 30, 2020, $1.6 billion of the borrowings under the term loan

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facilities bore an effective weighted-average fixed interest rate of 4.21%, after taking into account interest rate swap agreements, and $345.0 million bore a weighted-average floating interest rate of 2.46%. As of December 31, 2019, $1.6 billion of the borrowings under the term loan facilities bore a weighted-average fixed interest rate of 3.43%, after taking into account interest rate swap agreements, and $345.0 million bore a weighted-average floating interest rate of 3.32%.

Unsecured Revolving Credit Facilities

The Company has a $650.0 million senior unsecured revolving credit facility maturing in January 2022, with options to extend the maturity date to January 2023, pursuant to certain terms and conditions and payment of an extension fee. As of September 30, ~~2019,~~2020, the Company had ~~$100.0~~$290.0 million of outstanding borrowings, $6.8 million of outstanding letters of credit and ~~$550.0 million~~ borrowing capacity of $353.2 million remaining on its senior unsecured credit facility. Interest is paid on the periodic advances under the senior unsecured revolving credit facility at varying rates, based upon either LIBOR or the alternate base rate, plus an additional margin amount. The Company has the ability to further increase the aggregate borrowing capacity under the credit agreement to up to $1.3 billion, subject to lender approval. Borrowings on the revolving credit facility bear interest at LIBOR plus 1.45% to 2.25%, depending on the Company’s leverage ratio. As a result of the amended credit agreements and related documentation described above, the spread on the borrowings is fixed at 2.25% during the waiver period. Additionally, the Company is required to pay an unused commitment fee at an annual rate of 0.20% or 0.30% of the unused portion of the revolving credit facility, depending on the amount of borrowings outstanding. The credit agreement contains certain financial covenants, including a maximum leverage ratio, a minimum fixed charge coverage ratio, and a maximum percentage of secured debt to total asset value.

The Company also has a ~~$10.0~~$25.0 million unsecured revolving credit facility (the "PHL Credit Facility") to be used for PHL's working capital and general corporate purposes. This credit facility has substantially similar terms as the Company's senior unsecured revolving credit facility and matures in January 2022. Borrowings on the PHL Credit Facility bear interest at LIBOR plus 1.45% to 2.25%, depending on the Company's leverage ratio. As a result of the amendments described above, the spread of the borrowings is fixed at 2.25% during the waiver period. The PHL Credit Facility is subject to debt covenants substantially similar to the covenants under the Company's credit agreement that governs the Company's senior unsecured revolving credit facility. As of September 30, ~~2019,~~2020, the Company had 0 borrowings under the PHL Credit Facility and had ~~$10.0~~$25.0 million borrowing capacity remaining under the PHL Credit Facility.

Under the terms of the credit agreement for the unsecured revolving credit facility, one or more standby letters of credit, up to a maximum aggregate outstanding balance of $30.0 million, may be issued on behalf of the Company by the lenders under the unsecured revolving credit facility. The Company will incur a fee that shall be agreed upon with the issuing bank. Any outstanding standby letters of credit reduce the available borrowings on the senior unsecured revolving credit facility by a corresponding amount. Standby letters of credit of ~~$2.3~~$6.8 million and 0$2.8 million were outstanding as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

As of September 30, ~~2019,~~2020, the Company was in compliance with ~~the~~all debt covenants of the credit agreements that govern the unsecured revolving credit facilities.

Unsecured Term Loan Facilities

The Company has senior unsecured term loans with different maturities. Each unsecured term loan bears interest at a variable rate of a benchmark interest rate plus an applicable margin, depending on the Company's leverage ratio. Each of the term loan facilities is subject to debt covenants substantially similar to the covenants under the credit agreement that governs the revolving credit facility. During the nine months ended September 30, 2019, the Company repaid $450.0 million of term loans, consisting of the full repayment of the $200.0 million of the Company's third term loan and $250.0 million of the tranche maturing in 2020 of the Company's sixth term loan. As of September 30, ~~2019,~~2020, the Company was in compliance with all debt covenants of its term loan facilities. The Company entered into interest rate swap agreements to fix the LIBOR rate on a portion of these unsecured term loan facilities, see Derivative and Hedging Activities below.

Senior Unsecured Notes

The Company has outstanding $60.0 million of senior unsecured notes bearing a fixed interest rate of 4.70% per annum and maturing in December 2023 (the "Series A Notes") and $40.0 million of senior unsecured notes bearing a fixed interest rate of 4.93% per annum and maturing in December 2025 (the "Series B Notes"). The debt covenants of the Series A Notes and the Series B Notes are substantially similar to those of the Company's senior unsecured revolving credit facility. As of September 30, ~~2019,~~2020, the Company was in compliance with all such debt covenants.

~~Mortgage Debt~~

The Company’s sole mortgage loan is secured by a first mortgage lien on the underlying hotel property. The mortgage is non-recourse to the Company except for customary carve-outs such as fraud or misapplication of funds. The Company intends to refinance or repay with borrowings under its senior unsecured revolving credit facility the mortgage loan on the The Westin San Diego Gaslamp Quarter at or prior to the mortgage loan's maturity date.

Interest Expense

The components of the Company's interest expense consisted of the following (in thousands):

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For the three months ended September 30, For the nine months ended September 30,
2019 2018 2019 2018
Unsecured revolving credit facilities $ 903
$ 3,722
$ 2,927
$ 7,582
Unsecured term loan facilities 19,319
6,203
62,534
17,539
Senior unsecured notes 1,198
1,198
3,594
3,488
Mortgage debt 628
650
1,880
1,947
Amortization of deferred financing fees 2,002
548
5,903
1,590
Other 2,415
326
7,674
1,128
Total interest expense $ 26,465
$ 12,647
$ 84,512
$ 33,274


	For the three months ended September 30,				For the nine months ended September 30,
	2020		2019		2020		2019
Unsecured revolving credit facilities	$	2,557	$	903	$	8,226	$	2,927
Unsecured term loan facilities	19,694		19,319		53,330		62,534
Senior unsecured notes	1,198		1,198		3,594		3,594
Mortgage debt	0		628		0		1,880
Amortization of deferred financing fees	1,518		2,002		3,898		5,903
Other	2,547		2,415		6,148		7,674
Total interest expense	$	27,514	$	26,465	$	75,196	$	84,512

The Company estimates the fair value of its fixed rate debt by discounting the future cash flows of each instrument at estimated market rates, taking into consideration general market conditions and maturity of the debt with similar credit terms and is classified within Level 2 of the fair value hierarchy. The estimated fair value of the Company’s fixed rate debt (unsecured senior notes and mortgage loans) as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 was ~~$169.0~~$106.6 million and ~~$164.3~~$101.2 million, respectively.

Derivative and Hedging Activities

The Company enters into interest rate swap agreements to hedge against interest rate fluctuations. All of the Company's interest rate swaps are cash flow hedges. ~~On January 1, 2018, the Company adopted ASU No. 2017-12,~~ ~~Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities.~~ All unrealized gains and losses on these hedging instruments are reported in accumulated other comprehensive income (loss) and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

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The Company's interest rate swaps at September 30, ~~2019~~2020 and December 31, ~~2018~~2019 consisted of the following ~~(in~~(dollars in thousands):


				Notional Value as of
Hedge Type	Interest Rate		Maturity	September 30, 2020		December 31, 2019
Swap - cash flow	1.63%		January 2020	$	0	$	50,000
Swap - cash flow	1.63%		January 2020	0		50,000
Swap - cash flow	2.46%		January 2020	0		50,000
Swap - cash flow	2.46%		January 2020	0		50,000
Swap - cash flow	1.66%		January 2020	0		50,000
Swap - cash flow	1.66%		January 2020	0		50,000
Swap - cash flow	2.12%		December 2020	100,000		100,000
Swap - cash flow	2.12%		December 2020	100,000		100,000
Swap - cash flow	1.74%		January 2021	75,000		75,000
Swap - cash flow	1.75%		January 2021	50,000		50,000
Swap - cash flow	1.53%		January 2021	37,500		37,500
Swap - cash flow	1.53%		January 2021	37,500		37,500
Swap - cash flow	1.46%	(1)	January 2021	100,000		100,000
Swap - cash flow	1.47%	(1)	January 2021	47,500		47,500
Swap - cash flow	1.47%	(1)	January 2021	47,500		47,500
Swap - cash flow	1.47%	(1)	January 2021	47,500		47,500
Swap - cash flow	1.47%	(1)	January 2021	47,500		47,500
Swap - cash flow	2.60%		October 2021	55,000		55,000
Swap - cash flow	2.60%		October 2021	55,000		55,000
Swap - cash flow	1.78%	(1)	January 2022	100,000		100,000
Swap - cash flow	1.78%	(1)	January 2022	50,000		50,000
Swap - cash flow	1.79%	(1)	January 2022	30,000		30,000
Swap - cash flow	1.68%		April 2022	25,000		25,000
Swap - cash flow	1.68%		April 2022	25,000		25,000
Swap - cash flow	1.64%		April 2022	25,000		25,000
Swap - cash flow	1.64%		April 2022	25,000		25,000
Swap - cash flow	1.99%		November 2023	85,000		85,000
Swap - cash flow	1.99%		November 2023	85,000		85,000
Swap - cash flow	1.99%		November 2023	50,000		50,000
Swap - cash flow	1.99%		November 2023	30,000		30,000
Swap - cash flow	2.60%		January 2024	75,000		0
Swap - cash flow	2.60%		January 2024	50,000		0
Swap - cash flow	2.60%		January 2024	25,000		0
Swap - cash flow	2.60%		January 2024	75,000		0
Swap - cash flow	2.60%		January 2024	75,000		0
Total				$	1,630,000	$	1,630,000

Notional Value as of
Hedge Type Interest Rate Maturity September 30, 2019 December 31, 2018
Swap - cash flow 1.57%
⁽¹⁾
May 2019 $ —
$ 100,000
Swap - cash flow 1.57%
⁽¹⁾
May 2019 —
62,500
Swap - cash flow 1.57%
⁽¹⁾
May 2019 —
15,000
Swap - cash flow 1.63% January 2020 50,000
50,000
Swap - cash flow 1.63% January 2020 50,000
50,000
Swap - cash flow 2.46% January 2020 50,000
50,000
Swap - cash flow 2.46% January 2020 50,000
50,000
Swap - cash flow 1.66% January 2020 50,000
50,000
Swap - cash flow 1.66% January 2020 50,000
50,000
Swap - cash flow 2.12%
⁽⁴⁾
December 2020 100,000
—
Swap - cash flow 2.12%
⁽⁴⁾
December 2020 100,000
—
Swap - cash flow 1.74% January 2021 75,000
75,000
Swap - cash flow 1.75% January 2021 50,000
50,000
Swap - cash flow 1.53% January 2021 37,500
37,500
Swap - cash flow 1.53% January 2021 37,500
37,500
Swap - cash flow 1.46%
⁽¹⁾
January 2021 100,000
100,000
Swap - cash flow 1.47%
⁽¹⁾
January 2021 47,500
47,500
Swap - cash flow 1.47%
⁽¹⁾
January 2021 47,500
47,500
Swap - cash flow 1.47%
⁽¹⁾
January 2021 47,500
47,500
Swap - cash flow 1.47%
⁽¹⁾
January 2021 47,500
47,500
Swap - cash flow 2.60%
⁽²⁾
October 2021 55,000
55,000
Swap - cash flow 2.60%
⁽²⁾
October 2021 55,000
55,000
Swap - cash flow 1.78%
⁽¹⁾
January 2022 100,000
100,000
Swap - cash flow 1.78%
⁽¹⁾
January 2022 50,000
50,000
Swap - cash flow 1.79%
⁽¹⁾
January 2022 30,000
30,000
Swap - cash flow 1.68% April 2022 25,000
25,000
Swap - cash flow 1.68% April 2022 25,000
25,000
Swap - cash flow 1.64% April 2022 25,000
25,000
Swap - cash flow 1.64% April 2022 25,000
25,000
Swap - cash flow 2.60%
⁽³⁾
January 2024 75,000
75,000
Swap - cash flow 2.60%
⁽³⁾
January 2024 50,000
50,000
Swap - cash flow 2.60%
⁽³⁾
January 2024 25,000
25,000
Swap - cash flow 2.60%
⁽³⁾
January 2024 75,000
75,000
Swap - cash flow 2.60%
⁽³⁾
January 2024 75,000
75,000
Swap - cash flow 1.99%
⁽⁴⁾
November 2023 85,000
—
Swap - cash flow 1.99%
⁽⁴⁾
November 2023 85,000
—
Swap - cash flow 1.99%
⁽⁴⁾
November 2023 50,000
—
Swap - cash flow 1.99%
⁽⁴⁾
November 2023 30,000
—
Swap - cash flow 1.43%
⁽⁵⁾
February 2026 150,000
—
Swap - cash flow 1.44%
⁽⁵⁾
February 2026 50,000
—
Swap - cash flow 1.44%
⁽⁵⁾
February 2026 50,000
—
Swap - cash flow 1.44%
⁽⁵⁾
February 2026 40,000
—

________________________

^{________________________}

⁽¹⁾ Swaps assumed in connection with the Company's merger with LaSalle ~~merger~~Hotel Properties on November 30, 2018.

⁽²⁾ ~~Swaps became effective January 2019.~~

⁽³⁾ ~~Swaps~~In addition, as of September 30, 2020 and December 31, 2019, the Company had interest rates swaps for aggregate notional amounts of $290.0 million and $590.0 million, respectively, which will become effective ~~January 2020.~~

⁽⁴⁾ ~~Swaps became effective June 2019.~~

⁽⁵⁾~~Swaps will become effective February 2021.~~

in the future as current swaps mature. The Company records all derivative instruments at fair value in the accompanying consolidated balance sheets. Fair values of interest rate swaps are determined using the standard market methodology of netting the discounted future fixed cash receipts/

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payments and the discounted expected variable cash payments/receipts. Variable interest rates used in the calculation of projected receipts and payments on the swaps are based on an expectation of future interest rates derived from observable market interest rate curves (Overnight Index Swap curves) and volatilities (Level 2 inputs). Derivatives expose the Company to credit risk in the event of non-performance by the counterparties under the terms of the interest rate hedge agreements. The Company incorporates these counterparty credit risks in its fair value measurements. The Company believes it minimizes the credit risk by transacting with major creditworthy financial institutions.

As of September 30, ~~2019,~~2020, the Company's derivative instruments were in ~~both asset and~~ liability positions, with aggregate ~~asset and~~ liability fair values of ~~$0.7~~$66.2 million which are included in accounts payable, accrued expenses and ~~$28.4 million, respectively,~~other liabilities in the accompanying consolidated balance sheets. For the three and nine months ended September 30, 2020, there was $9.7 million and $(44.9) million in unrealized (loss) gain, respectively, recorded in accumulated other comprehensive income (loss). For the three and nine months ended September 30, 2019, there was $(7.9) million and $(38.0) million in unrealized (loss) gain, respectively, recorded in accumulated other comprehensive income (loss). For the three and nine months ended September 30, ~~2018, there was $0.8~~2020, the Company reclassified $7.6 million and ~~$8.1~~$15.6 million, ~~in unrealized (loss) gain,~~ respectively, ~~recorded in~~from accumulated other comprehensive income (loss). to interest expense. For the three and nine months ended September 30, 2019, the Company reclassified $(1.6) million and $(6.4) million, respectively, from accumulated other comprehensive income (loss) to interest expense. For the three and nine months ended September 30, 2018, the Company reclassified $(0.5) million and $(0.3) million, respectively, from accumulated other comprehensive income (loss) to interest expense. The Company expects approximately ~~$10.4~~$27.6 million will be reclassified from accumulated other comprehensive income (loss) to interest expense in the next 12 months.

Note 6. Revenue

The Company presents revenue on a disaggregated basis in the accompanying consolidated statements of operations and comprehensive income. The following table presents revenues by geographic location for the three and nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 (in thousands):


										For the three months ended September 30,			For the nine months ended September 30,
	For the three months ended September 30,				For the nine months ended September 30,						2020		2019		2020		2019
	2019		2018		2019		2018
San Diego, CA									San Diego, CA		$	31,641	$	71,572	$	79,135	$	191,711
San Francisco, CA	$	80,828	$	53,734	$	243,924	$	146,467	San Francisco, CA		1,591		80,828		64,594		243,924
Southern FL									Southern FL		13,801		18,222		55,736		87,253
Boston, MA	75,491		21,522		204,865		55,610		Boston, MA		10,714		75,491		48,621		204,865
San Diego, CA	71,572		18,010		191,711		52,134
Los Angeles, CA	53,249		32,759		155,295		95,224		Los Angeles, CA		7,648		53,249		43,937		155,295
Other⁽¹⁾	31,367		25,250		94,704		79,690
Washington DC	24,779		5,564		88,535		19,072
Southern FL	18,222		8,558		87,253		44,325
Other(1)									Other(1)		3,363		31,367		24,063		94,704
Portland, OR	33,367		29,881		80,655		74,787		Portland, OR		5,462		33,367		22,196		80,655
Chicago, IL	25,099		—		61,522		—		Chicago, IL		1,950		25,099		14,223		61,522
Washington, D.C.									Washington, D.C.		598		24,779		11,601		88,535
Seattle, WA	9,578		10,202		24,340		25,727		Seattle, WA		212		9,578		4,573		24,340
	$	423,552	$	205,480	$	1,232,804	$	593,036			$	76,980	$	423,552	$	368,679	$	1,232,804

⁽¹⁾ Other includes: Atlanta (Buckhead), GA, Minneapolis, MN, Nashville, TN, New York, ~~City,~~ NY, Philadelphia, PA and Santa Cruz, CA.

Payments from customers are primarily made when services are provided. Due to the short-term nature of the Company's contracts and the almost simultaneous receipt of payment, almost all of the contract liability balance at the beginning of the ~~year~~period is expected to be recognized as revenue over the following 12 months.

Note 7. Equity

Common Shares

The Company is authorized to issue up to 500,000,000 common shares of beneficial interest, ~~$0.01~~$0.01 par value per share (“common shares”). Each outstanding common share entitles the holder to one vote on each matter submitted to a vote of shareholders. Holders of the Company’s common shares are entitled to receive dividends when authorized by the Company's Board of Trustees.

On February 22, 2016, the Company announced that the Board of Trustees authorized a share repurchase program of up to $150.0 million of the Company's outstanding common shares. Under this program, the Company may repurchase its common shares from time to time in transactions on the open market or by private agreement. The Company may suspend or discontinue this program at any time. Upon repurchase by the Company, common shares cease to be outstanding and become authorized but unissued common shares. For the nine months ended September 30, ~~2019,~~2020, the Company had 0 repurchases

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under this program and as of September 30, ~~2019,~~2020, $56.6 million of common shares remained available for repurchase under this program.

On July 27, 2017, the Company announced that the Board of Trustees authorized a new share repurchase program of up to $100.0 million of the Company's outstanding common shares. Under this program, the Company may repurchase its common shares from time to time in transactions on the open market or by private agreement. The Company may suspend or discontinue this program at any time. This $100.0 million share repurchase program will commence upon completion of the Company's $150.0 million share repurchase program.

Common Dividends

The Company declared the following dividends on common shares/units for the nine months ended September 30, ~~2019~~:2020:

Dividend per
Share/Unit

For the Quarter
Ended
Record Date Payable Date
$ 0.38
March 31, 2019 March 29, 2019 April 15, 2019
$ 0.38
June 30, 2019 June 28, 2019 July 15, 2019
$ 0.38
September 30, 2019 September 30, 2019 October 15, 2019

Dividend per
Share/Unit

For the Quarter
Ended

Record Date

Payable Date

0.01

March 31, 2020

April 15, 2020

0.01

June 30, 2020

July 15, 2020

0.01

September 30, 2020

October 15, 2020

Preferred Shares

The Company is authorized to issue up to 100,000,000 preferred shares of beneficial interest, ~~$0.01~~$0.01 par value per share (“preferred shares”).

On November 30, 2018, in connection with the LaSalle merger, the Company issued 4,400,000 of its 6.375% Series E Cumulative Redeemable Preferred Shares ("Series E Preferred Shares") and 6,000,000 of its 6.30% Series F Cumulative Redeemable Preferred Shares ("Series F Preferred Shares").

The following Preferred Shares were outstanding as of September 30, ~~2019~~2020 and December 31, ~~2018:~~2019:

Security Type As of September 30, 2019 As of December 31, 2018
6.50% Series C 5,000,000
5,000,000
6.375% Series D 5,000,000
5,000,000
6.375% Series E 4,400,000
4,400,000
6.30% Series F 6,000,000
6,000,000
20,400,000
20,400,000


	As of September 30,	As of December 31,
Security Type	2020	2019
6.50% Series C	5,000,000	5,000,000
6.375% Series D	5,000,000	5,000,000
6.375% Series E	4,400,000	4,400,000
6.30% Series F	6,000,000	6,000,000
	20,400,000	20,400,000

The Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares and Series F Preferred Shares (collectively, the “Preferred Shares”) rank senior to the common shares and on parity with each other with respect to payment of distributions. The Preferred Shares are cumulative redeemable preferred shares, do not have any maturity date and are not subject to mandatory redemption. The Company could not redeem the Series C Preferred Shares prior to March 18, 2018, may not redeem the Series D Preferred Shares prior to June 9, 2021, could not redeem the Series E Preferred Shares prior to March 4, 2018 and may not redeem the Series F Preferred Shares prior to May 25, 2021, except in limited circumstances relating to the Company’s continuing qualification as a REIT or as discussed below. On or after May 25, 2021 and June 9, 2021, the Company may, at its option, redeem the Series F Preferred Shares and Series D Preferred Shares, respectively, and at any time the Company may, at its option, redeem the Series C Preferred Shares or the Series E Preferred Shares, or both, in each case in whole or from time to time in part, by payment of ~~$25.00~~$25.00 per share, plus any accumulated, accrued and unpaid distributions

through the date of redemption. Upon the occurrence of a change of control, as defined in the Company's declaration of trust, the result of which the Company’s common shares and the common securities of the acquiring or surviving entity are not listed on the New York Stock Exchange, the NYSE MKT or NASDAQ, or any successor exchanges, the Company may, at its option, redeem the Preferred Shares in whole or in part within 120 days following the change of control by paying ~~$25.00~~$25.00 per share, plus any accrued and unpaid distributions through the date of redemption. If the Company does not exercise its right to redeem the Preferred Shares upon a change of control, the holders of the Preferred Shares have the right to convert some or all of their shares into a number of the Company’s common shares based on defined formulas subject to share caps. The share cap on each Series C Preferred Share is 2.0325 common shares, on each Series D Preferred Share is 1.9794 common shares, on each Series E Preferred Share is 1.9372 common shares and on each Series F Preferred Share is 2.0649 common shares.

Preferred Dividends

The Company declared the following dividends on preferred shares for the nine months endedSeptember 30, ~~2019~~:2020:

Security Type
Dividend per
Share/Unit

For the Quarter
Ended
Record Date Payable Date
6.50% Series C $ 0.41
March 31, 2019 March 29, 2019 April 15, 2019
6.50% Series C $ 0.41
June 30, 2019 June 28, 2019 July 15, 2019
6.50% Series C $ 0.41
September 30, 2019 September 30, 2019 October 15, 2019
6.375% Series D $ 0.40
March 31, 2019 March 29, 2019 April 15, 2019
6.375% Series D $ 0.40
June 30, 2019 June 28, 2019 July 15, 2019
6.375% Series D $ 0.40
September 30, 2019 September 30, 2019 October 15, 2019
6.375% Series E $ 0.40
March 31, 2019 March 29, 2019 April 15, 2019
6.375% Series E $ 0.40
June 30, 2019 June 28, 2019 July 15, 2019
6.375% Series E $ 0.40
September 30, 2019 September 30, 2019 October 15, 2019
6.30% Series F $ 0.39
March 31, 2019 March 29, 2019 April 15, 2019
6.30% Series F $ 0.39
June 30, 2019 June 28, 2019 July 15, 2019
6.30% Series F $ 0.39
September 30, 2019 September 30, 2019 October 15, 2019

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Security Type

Dividend per
Share/Unit

For the Quarter
Ended

Record Date

Payable Date

6.50% Series C

0.41

March 31, 2020

April 15, 2020

6.50% Series C

0.41

June 30, 2020

July 15, 2020

6.50% Series C

0.41

September 30, 2020

October 15, 2020

6.375% Series D

0.40

March 31, 2020

April 15, 2020

6.375% Series D

0.40

June 30, 2020

July 15, 2020

6.375% Series D

0.40

September 30, 2020

October 15, 2020

6.375% Series E

0.40

March 31, 2020

April 15, 2020

6.375% Series E

0.40

June 30, 2020

July 15, 2020

6.375% Series E

0.40

September 30, 2020

October 15, 2020

6.30% Series F

0.39

March 31, 2020

April 15, 2020

6.30% Series F

0.39

June 30, 2020

July 15, 2020

6.30% Series F

0.39

September 30, 2020

October 15, 2020

Non-controlling Interest of Common Units in Operating Partnership

Holders of Operating Partnership units have certain redemption rights that enable the unit holders to cause the Operating Partnership to redeem their units in exchange for, at the Company’s option, cash per unit equal to the market price of the Company’s common shares at the time of redemption or the Company’s common shares on a ~~one-for-one~~one-for-one basis. The number of shares issuable upon exercise of the redemption rights will be adjusted upon the occurrence of share splits, mergers, consolidations or similar pro-rata share transactions, which otherwise would have the effect of diluting the ownership interests of the Operating Partnership's limited partners or the Company's shareholders.

As of September 30, ~~2019~~ ~~and December 31, 2018,~~2020, the Operating Partnership had ~~236,351~~2 classes of long-term incentive partnership units (“("LTIP") units, LTIP ~~units”) outstanding. Of~~Class A units and LTIP Class B units. All of the outstanding LTIP units are held by officers of the Company.

On February 12, 2020, the Board of Trustees granted 415,818 LTIP Class B units to its executive officers. These LTIP units were to vest ratably on January 1, 2023, 2024, 2025 and 2026. In March 2020, the Company cancelled this grant and as a result accelerated and recognized the full expense of $10.5 million.

On July 24, 2020, 109,240 LTIP Class B units were converted to common shares.

As of September 30, 2020 and December 31, 2019, the Operating Partnership had 127,111 and 236,351 LTIP units outstanding, at respectively. As of September 30, ~~2019, 190,975~~2020, all of such LTIP units outstanding have vested. ~~Only vested~~Vested LTIP units may be converted to common units of the Operating Partnership, which in turn can be ~~tendered~~redeemed for ~~redemption~~common shares or cash as described above.

On November 30, 2018, in connection with the merger with LaSalle ~~merger,~~Hotel Properties ("LaSalle"), the Company issued 133,605 OP units in the Operating Partnership to third-party limited partners of ~~LaSalle OP.~~LaSalle's operating partnership. As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Operating Partnership had ~~133,605 and~~ 133,605 OP units held by third parties, ~~respectively,~~ excluding LTIP units.

Note 8. Share-Based Compensation Plan

The Company maintains the 2009 Equity Incentive Plan, as amended and restated (as amended, the "Plan"), to attract and retain independent trustees, executive officers and other key employees and service providers. The Plan provides for the grant of options to purchase common shares, share awards, share appreciation rights, performance units and other equity-based awards. Share awards under the Plan vest over a period determined by the Board of Trustees, generally over three to five ~~years, with certain awards vesting over periods of up to six~~ years. The Company pays or accrues for dividends on share-based awards. All share awards are subject to full or partial accelerated vesting upon a change in control and upon death or disability or certain other employment termination events as set forth in the award agreements. As of September 30, ~~2019~~,2020, there were ~~1,035,985~~895,291 common shares available for issuance under the Plan, assuming performance-based equity awards vest at target.

Service Condition Share Awards

From time to time, the Company awards restricted common shares under the Plan to members of the Board of Trustees, officers and employees. These shares generally vest over three to five years based on continued service or employment.

The following table provides a summary of service condition restricted share activity as of September 30, ~~2019~~:

2020:

Shares
Weighted-Average
Grant Date
Fair Value
Unvested at December 31, 2018 127,732
$ 32.22
Granted 88,355
$ 32.64
Vested (66,276 ) $ 30.20
Forfeited (707 ) $ 32.70
Unvested at September 30, 2019 149,104
$ 33.37

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	Shares	Weighted-Average Grant Date Fair Value








Unvested at December 31, 2019	149,179	$	33.37
Granted	332,920	$	25.53
Vested	(72,824)	$	33.13
Forfeited	(5,429)	$	27.41
Cancelled	(217,083)	$	25.53
Unvested at September 30, 2020	186,763	$	28.77

The fair value of each of these service condition restricted share awards is determined based on the closing price of the Company’s common shares on the grant date and compensation expense is recognized on a straight-line basis over the vesting period. In March 2020, the Company cancelled the February 2020 service condition share award (retention grant) and as a result accelerated and recognized an expense of $5.5 million. For the three and nine months ended September 30, 2020, the Company recognized approximately $0.6 million and $7.4 million, respectively, of share-based compensation expense related to these service condition restricted shares in the accompanying consolidated statements of operations and comprehensive income. For the three and nine months ended September 30, 2019, the Company recognized approximately $0.6 million and $1.7 million, respectively, of share-based compensation expense related to these service condition restricted shares in the accompanying consolidated statements of operations and comprehensive income. For the three and nine months ended September 30, 2018, the Company recognized approximately $0.5 million and $1.5 million, respectively, of share-based compensation expense related to these service condition restricted shares in the accompanying consolidated statements of operations and comprehensive income. As of September 30, ~~2019,~~2020, there was ~~$3.3~~$3.6 million of total unrecognized share-based compensation expense related to unvested restricted shares. The unrecognized share-based compensation expense is expected to be recognized over the weighted-average remaining vesting period of ~~1.9~~1.8 years.

Performance-Based Equity Awards

On December 13, 2013, the Board of Trustees approved a target award of 252,088 performance-based equity awards to officers and employees of the Company. The awards ~~vest~~vested ratably, if at all, on January 1, 2016, 2017, 2018, 2019 and 2020. The actual number of common shares that ~~ultimately vest will range from 0% to 200% of the target award and will be determined~~vested was based on ~~each vesting date based upon~~ the two performance criteria defined in the award agreements for the period of performance beginning on the grant date and ending on the applicable vesting date. In January 2016, the Company issued 25,134 of common shares which represented achieving 49% of the 50,418 target number of shares for that measurement period. In January 2017, the Company issued 12,285 of common shares which represented achieving 25% of the 49,914 target number of shares for that measurement period. In January 2018, the Company issued 72,236 of common shares which represented achieving 145% of the 49,914 target number of shares for that measurement period. In January 2019, the Company issued 35,471 of common shares which represented achieving 71% of the 49,914 target number of shares for that measurement period.

On In February ~~4, 2014, the Board of Trustees approved a target award of 66,483 performance-based equity awards to officers and employees of the Company. In January 2017, these awards vested and~~2020, the Company issued ~~112,782 and 25,619 common shares to officers and non-executive management employees, respectively. The actual number~~27,881 of common shares which represented achieving 56% of the 49,914 target number of shares for that ~~ultimately vested was based on the three performance criteria defined in the award agreements for the period of performance from January 1, 2014 through December 31, 2016.~~measurement period.

On February 11, 2015, the Board of Trustees approved a target award of 44,962 performance-based equity awards to officers and employees of the Company. In January 2018, these awards vested and the Company issued 14,089 and 2,501 common shares to officers and non-executive management employees, respectively. The actual number of common shares that ~~ultimately~~ vested was based on the three performance criteria defined in the award agreements for the period of performance from January 1, 2015 through December 31, 2017.

On July 27, 2015, a target award of 771 performance-based equity awards was granted to an employee of the Company. In January 2018, these awards vested and the Company issued 1,079 common shares to the employee. The actual number of common shares that ~~ultimately~~ vested was based on the three performance criteria defined in the award agreements for the period of performance from January 1, 2016 through December 31, 2017.

On February 10, 2016, the Board of Trustees approved a target award of 100,919 performance-based equity awards to officers and employees of the Company. In January 2019, these awards vested and the Company issued 142,173 and 31,146 common shares to officers and employees, respectively. The actual number of common shares that ~~ultimately~~ vested was based

on the three performance criteria defined in the award agreements for the period of performance from January 1, 2016 through December 31, 2018.

On February 15, 2017, the Board of Trustees approved a target award of 81,939 performance-based equity awards to officers and employees of the Company. ~~These~~In January 2020, these awards ~~will vest, if at all, in 2020.~~vested and the Company issued 1,972 and 405 common shares to officers and employees, respectively. The actual number of common shares that ~~ultimately vest will range from 0% to 200% of the target award and will be determined in 2020~~vested was based on the two performance criteria defined in the award agreements for the period of performance from January 1, 2017 through December 31, 2019.

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On February 14, 2018, the Board of Trustees approved a target award of 78,918 performance-based equity awards to officers and employees of the Company. These awards will vest, if at all, in 2021. The actual number of common shares that ultimately vest will ~~range~~be from 0% to 200% of the target award and will be determined in 2021 based on the two performance criteria defined in the award agreements for the period of performance from January 1, 2018 through December 31, 2020.

On February 13, 2019, the Board of Trustees approved a target award of 126,891 performance-based equity awards to officers and employees of the Company. These awards will vest, if at all, in 2022. The actual number of common shares that ultimately vest will ~~range~~be from 0% to 200% of the target award and will be determined in 2022 based on the two performance criteria defined in the award agreements for the period of performance from January 1, 2019 through December 31, 2021.

On February 12, 2020, the Board of Trustees approved a target award of 161,777 performance-based equity awards to officers and employees of the Company. These awards will vest, if at all, in 2023. The actual number of common shares that ultimately vest will be from 0% to 200% of the target award and will be determined in 2023 based on the performance criteria defined in the award agreements for the period of performance from January 1, 2020 through December 31, 2022.

The grant date fair value of the performance awards, with market conditions, were determined using a Monte Carlo simulation method with the following ~~assumptions:~~assumptions (dollars in millions):

Performance Award Grant Date Percentage of Total Award Grant Date Fair Value by Component ($ in millions) Volatility Interest Rate Dividend Yield
December 13, 2013
Relative Total Shareholder Return 50.00% $4.7 29.00% 0.34% - 2.25% 2.40%
Absolute Total Shareholder Return 50.00% $2.9 29.00% 0.34% - 2.25% 2.40%

February 4, 2014
Relative Total Shareholder Return 30.00% $0.7 29.00% 0.62% 2.40%
Absolute Total Shareholder Return 30.00% $0.5 29.00% 0.62% 2.40%
EBITDA Comparison 40.00% $0.8 29.00% 0.62% 2.40%

February 11, 2015
Relative Total Shareholder Return 30.00% $0.9 22.00% 1.02% 2.50%
Absolute Total Shareholder Return 40.00% $0.7 22.00% 1.02% 2.50%
EBITDA Comparison 30.00% $0.7 22.00% 1.02% 2.50%

July 27, 2015
Relative Total Shareholder Return 30.00% —
⁽¹⁾
22.00% 0.68% 2.50%
Absolute Total Shareholder Return 40.00% —
⁽¹⁾
22.00% 0.68% 2.50%
EBITDA Comparison 30.00% —
⁽¹⁾
22.00% 0.68% 2.50%

February 10, 2016
Relative Total Shareholder Return 70.00% $1.6 25.00% 0.71% 3.00%
Absolute Total Shareholder Return 15.00% $0.2 25.00% 0.71% 3.00%
EBITDA Comparison 15.00% $0.4 25.00% 0.71% 3.00%

February 15, 2017
Relative and Absolute Total Shareholder Return 65.00% / 35.00% $2.7 28.00% 1.27% 5.60%

February 14, 2018
Relative and Absolute Total Shareholder Return 65.00% / 35.00% $3.5 28.00% 2.37% 4.70%

February 13, 2019
Relative and Absolute Total Shareholder Return 65.00% / 35.00% $4.5 26.00% 2.52% 4.20%

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Performance Award Grant Date		Percentage of Total Award	Grant Date Fair Value by Component ($ in millions)		Volatility	Interest Rate	Dividend Yield
December 13, 2013
	Relative Total Shareholder Return	50.00%	$4.7		29.00%	0.34% - 2.25%	2.40%
	Absolute Total Shareholder Return	50.00%	$2.9		29.00%	0.34% - 2.25%	2.40%

February 11, 2015
	Relative Total Shareholder Return	30.00%	$0.9		22.00%	1.02%	2.50%
	Absolute Total Shareholder Return	40.00%	$0.7		22.00%	1.02%	2.50%
	EBITDA Comparison	30.00%	$0.7		22.00%	1.02%	2.50%

July 27, 2015
	Relative Total Shareholder Return	30.00%	$0	(1)	22.00%	0.68%	2.50%
	Absolute Total Shareholder Return	40.00%	$0	(1)	22.00%	0.68%	2.50%
	EBITDA Comparison	30.00%	$0	(1)	22.00%	0.68%	2.50%

February 10, 2016
	Relative Total Shareholder Return	70.00%	$1.6		25.00%	0.71%	3.00%
	Absolute Total Shareholder Return	15.00%	$0.2		25.00%	0.71%	3.00%
	EBITDA Comparison	15.00%	$0.4		25.00%	0.71%	3.00%

February 15, 2017
	Relative and Absolute Total Shareholder Return	65.00% / 35.00%	$2.7		28.00%	1.27%	5.60%

February 14, 2018
	Relative and Absolute Total Shareholder Return	65.00% / 35.00%	$3.5		28.00%	2.37%	4.70%

February 13, 2019
	Relative and Absolute Total Shareholder Return	65.00% / 35.00%	$4.5		26.00%	2.52%	4.20%

February 12, 2020
	Relative Total Shareholder Return	100%	$4.9		23.40%	1.41%	0%

⁽¹⁾Amounts round to zero.

In the table above, the Relative Total Shareholder Return and Absolute Total Shareholder Return components are market conditions as defined by ASC 718. The EBITDA Comparison component is a performance condition as defined by ASC 718, and, therefore, compensation expense related to this component will be reassessed at each reporting date based on the

Company's estimate of the probable level of achievement, and the accrual of compensation expense will be adjusted as appropriate.

Dividends on unvested performance-based equity awards accrue over the vesting period and will be paid on the actual number of shares that vest at the end of the applicable period. The Company recognizes compensation expense on a ~~straight-line~~straight-

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line basis through the vesting date. As of September 30, ~~2019~~,2020, there was approximately ~~$5.6~~$5.9 million of unrecognized compensation expense related to these performance-based equity awards which will be recognized over the weighted-average remaining vesting period of 1.8 years. For the three and nine months ended September 30, ~~2019,~~2020, the Company recognized ~~$1.2~~$1.0 million and ~~$3.5~~$3.1 million, respectively, in expense related to these awards. For the three and nine months ended September 30, ~~2018,~~2019, the Company recognized ~~$1.8~~$1.2 million and ~~$1.9~~$3.5 million, respectively, in expense related to these awards.

Long-Term Incentive Partnership Units

LTIP units, which are also referred to as profits interest units, may be issued to eligible participants for the performance of services to or for the benefit of the Operating Partnership. LTIP units are a class of partnership unit in the Operating Partnership and receive, whether vested or not, the same per-unit profit distributions as the other outstanding units in the Operating Partnership, which equal per-share distributions on common shares. LTIP units are allocated their pro-rata share of the Company's net income (loss). Vested LTIP units may be converted by the holder, at any time, into an equal number of common Operating Partnership units and thereafter will possess all of the rights and interests of a common Operating Partnership unit, including the right to redeem the common Operating Partnership unit for a common share in the Company or cash, at the option of the Operating Partnership.

As of September 30, ~~2019~~,2020, the Operating Partnership had 2 classes of LTIP units, LTIP Class A units and LTIP Class B units. All of the outstanding LTIP units are held by officers of the Company.

On December 13, 2013, the Board of Trustees approved a grant of 226,882 LTIP Class B units to executive officers of the Company. These LTIP units are subject to time-based vesting in five equal annual installments beginning January 1, 2016 and ending on January 1, 2020. The fair value of each award was determined based on the closing price of the Company’s common shares on the grant date of $29.19 per unit. The aggregate grant date fair value of the LTIP Class B units was $6.6 million.

On February 12, 2020, the Board of Trustees granted 415,818 LTIP Class B units to executive officers. These LTIP units were to vest ratably on January 1, 2023, 2024, 2025 and 2026. In March 2020, the Company cancelled this grant and as a result accelerated and recognized the full expense of $10.5 million.

On July 24, 2020, 109,240 LTIP Class B units were converted to common shares.

As of September 30, ~~2019~~,2020, the Company had ~~236,351~~127,111 LTIP units outstanding. ~~All unvested~~As of September 30, 2020, all of such LTIP units ~~will vest upon a change in control. As of~~ outstanding have vested.

For the three and nine months ended September 30, ~~2019, of~~2020, the ~~236,351~~ ~~units outstanding,~~ ~~190,975~~Company recognized 0 and $10.6 million, respectively, in expense related to these LTIP ~~units have vested.~~

units. For the three and nine months ended September 30, 2019, the Company recognized $0.3 million and $0.8 million, respectively, in expense related to these LTIP units. ~~For the three and nine months ended~~As of September 30, ~~2018, the Company recognized $0.3 million and $0.8 million, respectively, in expense related to these LTIP units. As of~~ ~~September 30, 2019~~,2020, there was ~~$0.2 million of total~~0 unrecognized share-based compensation expense related to LTIP units. ~~This unrecognized share-based compensation expense is expected to be recognized over the weighted-average remaining vesting period of 0.2 years.~~ The aggregate expense related to the LTIP unit grants is presented as non-controlling interest in the Company’s accompanying consolidated balance sheets.

Note 9. Income Taxes

~~The Company's TRSs,~~ PHL ~~and LHL, are~~is subject to federal and state corporate income taxes at statutory tax rates. The Company has estimated its ~~TRSs'~~ income tax expense (benefit) of PHL for the nine months ended September 30, ~~2019~~2020 using an estimated combined federal and state ~~statutory~~blended tax rate of ~~30.0%~~27.5%.

Given the continued negative impact of the COVID-19 pandemic on the Company's financial results and uncertainties about the Company's ability to utilize its net operating loss in future years, the Company recognized a valuation allowance of $10.0 million during the third quarter of 2020. As of September 30, 2020, the Company has a tax asset of $11.7 million attributable to the net operating loss carryback, which is included in prepaid expenses and other assets in the accompanying consolidated balance sheets.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal, state and local jurisdictions, where applicable. As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the statute of limitations remains open for all major jurisdictions for tax years dating back to ~~2014.~~2015.

Note 10. Earnings Per Share

The following is a reconciliation of basic and diluted earnings per common share (in thousands, except share and per-share data):

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For the three months ended September 30, For the nine months ended September 30,
2019 2018 2019 2018
Numerator:
Net income (loss) attributable to common shareholders $ 21,752
$ 25,769
$ 71,482
$ 100,234
Less: dividends paid on unvested share-based compensation (74 ) (83 ) (220 ) (249 )
Undistributed earnings attributable to share-based compensation —
—
—
(67 )
Net income (loss) available to common shareholders $ 21,678
$ 25,686
$ 71,262
$ 99,918
Denominator:
Weighted-average number of common shares — basic 130,484,956
68,912,185
130,467,193
68,900,402
Effect of dilutive share-based compensation 137,174
343,673
223,149
366,696
Weighted-average number of common shares — diluted 130,622,130
69,255,858
130,690,342
69,267,098

Net income (loss) per share available to common shareholders — basic $ 0.17
$ 0.37
$ 0.55
$ 1.45
Net income (loss) per share available to common shareholders — diluted $ 0.17
$ 0.37
$ 0.55
$ 1.44


	For the three months ended September 30,				For the nine months ended September 30,
	2020		2019		2020		2019
Numerator:
Net income (loss) attributable to common shareholders	$	(138,446)	$	21,752	$	(243,288)	$	71,482
Less: dividends paid on unvested share-based compensation	(2)		(74)		(6)		(220)

Net income (loss) available to common shareholders	$	(138,448)	$	21,678	$	(243,294)	$	71,262
Denominator:
Weighted-average number of common shares — basic	130,645,990		130,484,956		130,588,765		130,467,193
Effect of dilutive share-based compensation	0		137,174		0		223,149
Weighted-average number of common shares — diluted	130,645,990		130,622,130		130,588,765		130,690,342

Net income (loss) per share available to common shareholders — basic	$	(1.06)	$	0.17	$	(1.86)	$	0.55
Net income (loss) per share available to common shareholders — diluted	$	(1.06)	$	0.17	$	(1.86)	$	0.55

For the three and nine months ended September 30, 2020, 547,203 of unvested service condition restricted shares and performance-based equity awards were excluded from diluted weighted-average common shares, as their effect would have been anti-dilutive. For the three and nine months ended September 30, 2019, 128,563 and 37,137, respectively, of unvested service condition restricted shares and performance-based equity awards were excluded from diluted weighted-average common shares, as their effect would have been anti-dilutive. There were 0 and 4,212 unvested service condition restricted shares and performance-based equity awards excluded from diluted weighted-average common shares for the three and nine months ended September 30, 2018, respectively, as their effect would have been anti-dilutive. The LTIP and OP units held by the non-controlling interest holders have been excluded from the denominator of the diluted earnings per share as there would be no effect on the amounts since the limited partners' share of income (loss) would also be added or subtracted to derive net income (loss) available to common shareholders.

Note 11. Commitments and Contingencies

Management Agreements

The Company’s hotel properties are operated pursuant to management agreements with various management companies. The terms of these management agreements range from 1 year to 22 years, not including renewals, and 1 year to 52 years, including renewals. Many of the Company’s management agreements are terminable at will by the Company upon paying a termination fee and some are terminable by the Company upon sale of the property, with, in some cases, the payment of termination fees. Most of the agreements also provide the Company the ability to terminate based on failure to achieve defined operating performance thresholds. Termination fees range from 0 to up to 7 times the annual base management and incentive management fees, depending on the agreement and the reason for termination. Certain of the Company’s management agreements are non-terminable except upon the manager’s breach of a material representation or the manager’s failure to meet performance thresholds as defined in the management agreement.

The management agreements require the payment of a base management fee generally between 1% and 4% of hotel revenues. Under certain management agreements, the management companies are also eligible to receive an incentive management fee if hotel operating income, cash flows or other performance measures, as defined in the agreements, exceed certain performance thresholds. The incentive management fee is generally calculated as a percentage of hotel operating income after the Company has received a priority return on its investment in the hotel. ~~Com~~For the three and nine months ended September 30, 2020, combined base and incentive management fees were ~~$10.5~~ $1.5 million and ~~$33.3~~$8.0 million, ~~for~~respectively. For the three and nine months ended September 30, 2019, ~~respectively,~~combined base and ~~$6.0~~incentive management fees were $10.5 million and ~~$17.4~~$33.3 million, ~~for the three and nine months ended September 30, 2018,~~ respectively. Base and incentive management fees are included in other direct and indirect expenses in the Company's accompanying consolidated statements of operations and comprehensive income.

Reserve Funds

Certain of the Company’s agreements with its hotel managers, franchisors and lenders have provisions for the Company to provide funds, typically 4.0% of hotel revenues, sufficient to cover the cost of (a) certain non-routine repairs and maintenance to the hotels and (b) replacements and renewals to the hotels’ furniture, fixtures and equipment.

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Restricted Cash

At September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company had ~~$27.0~~$12.4 million and ~~$24.4~~$26.8 million, respectively, in restricted cash, which consisted of reserves for replacement of furniture and fixtures or reserves to pay for real estate taxes or property insurance under certain hotel management agreements or loan agreements.

Ground and Hotel Leases

As of September 30, ~~2019,~~2020, the following hotels were subject to leases as follows:

Lease Properties

Lease Type

Lease Expiration Date

Hotel Monaco Washington DC

Operating lease

November 2059

Argonaut Hotel

Operating lease

December 2059

Hotel Zelos San Francisco

Operating lease

June 2097

Hotel Zephyr Fisherman's Wharf

Operating lease

February 2062

Hotel Palomar Los Angeles Beverly Hills

Operating lease

January 2107

⁽¹⁾

~~Union Station Hotel Nashville, Autograph Collection~~

~~Operating lease~~

~~December 2105~~

Restaurant at Southernmost Beach Resort

Operating lease

April 2029

Hyatt Regency Boston Harbor

Operating lease

April 2077

~~Hilton~~ San Diego Mission Bay Resort ~~& Spa~~

Operating lease

July 2068

Paradise Point Resort & Spa

Operating lease

May 2050

Hotel Vitale

Operating lease

March 2056

⁽²⁾

Viceroy Santa Monica Hotel

Operating lease

September 2065

The Westin Copley Place, Boston

Operating lease

December 2077

⁽³⁾

The Liberty, A Luxury Collection Hotel, Boston

Operating lease

May 2080

Hotel Zeppelin San Francisco

Operating and capital lease

June 2059

⁽⁴⁾

Harbor Court Hotel San Francisco

Capital lease

August 2052

The Roger New York

Capital lease

December 2044

⁽¹⁾ The expiration date assumes the exercise of all 19 five-year extension options.

⁽²⁾ The Company has the option, subject to certain terms and conditions, to extend the ground lease for 14 years to 2070.

⁽³⁾ No payments are required through maturity.

⁽⁴⁾ The Company has ~~the~~an option, subject to certain terms and conditions, to extend the ground lease for 30 years to 2089.

The Company's leases may require minimum fixed rent payments, percentage rent payments based on a percentage of revenues in excess of certain thresholds or rent payments equal to the greater of a minimum fixed rent or percentage rent. Minimum fixed rent may be adjusted annually by increases in consumer price index ("CPI") and may be subject to minimum and maximum increases. Some leases also contain certain restrictions on modifications that can be made to the hotel structures due to their status as national historic landmarks.

The Company records expense on a straight-line basis for leases that provide for minimum rental payments that increase in pre-established amounts over the remaining terms of the leases. Ground rent expense was $8.9 million and $24.3 million for the three and nine months ended September 30, 2019, respectively, and $3.6 million and $10.1 million for the three and nine months ended September 30, 2018, respectively. For the three and nine months ended September 30, 2019, fixed ground rent expense was $4.3 million and $12.8 million, respectively, and variable ground rent expense was $4.6 million and $11.5 million, respectively. Ground rent expense is included in real estate taxes, personal property taxes, property insurance and ground rent in the Company's accompanying consolidated statements of operations and comprehensive income. The components of ground rent expense for the three and nine months ended September 30, 2020 and 2019 are as follows (in thousands):


	For the three months ended September 30,				For the nine months ended September 30,
	2020		2019		2020		2019
Fixed ground rent	$	4,314	$	4,262	$	12,907	$	12,786
Variable ground rent	1,072		4,651		3,816		11,534
Total ground lease rent	$	5,386	$	8,913	$	16,723	$	24,320

In January 2019, the Company acquired the ground lease underlying the land of the Solamar Hotel for $6.9 million.

Litigation

~~Maturity~~

Table of ~~lease liabilities for~~Contents

The nature of the operations of hotels exposes the Company's ~~operating leases~~hotels, the Company and the Operating Partnership to the risk of claims and litigation in the normal course of their business. The Company has insurance to cover certain potential material losses. The Company is ~~as follows (in thousands):~~not presently subject to any material litigation nor, to the Company’s knowledge, is any material litigation threatened against the Company.

Year ending December 31,
2019 (excluding the nine months ended September 30, 2019) $ 4,297
2020 17,924
2021 18,608
2022 18,921
2023 18,107
Thereafter 1,168,805
Total lease payments $ 1,246,662
Less: Imputed interest (990,495 )
Present value of lease liabilities $ 256,167

Future minimum annual rental payments, including capital lease payments, assuming fixed rent for all periods and excludes percentage rent and CPI adjustments, prior to adoption of ASC 842 is as follows as of December 31, 2018 (in thousands):

Year ending December 31,
2019 $ 18,882
2020 19,091
2021 19,223
2022 19,325
2023 19,429
Thereafter 1,219,303
Total $ 1,315,253

Note 12. Supplemental Information to Statements of Cash Flows


	For the nine months ended September 30,
	2020		2019

	(in thousands)
Interest paid, net of capitalized interest	$	66,252	$	69,680
Interest capitalized	$	1,247	$	0
Income taxes paid	$	3,369	$	2,569
Non-Cash Investing and Financing Activities:
Distributions payable on common shares/units	$	1,748	$	50,878
Distributions payable on preferred shares	$	7,558	$	7,558
Issuance of common shares for Board of Trustees compensation	$	637	$	740
Issuance of common shares for LTIP unit redemption	$	2,831	$	0
Accrued additions and improvements to hotel properties	$	7,842	$	6,754
Right of use assets obtained in exchange for lease liabilities	$	0	$	257,167
Purchase of ground lease	$	0	$	16,604

Write-off of deferred financing financing costs	$	0	$	2,697

For the nine months ended September 30,
2019 2018

(in thousands)
Interest paid, net of capitalized interest $ 69,680
$ 29,389
Income taxes paid $ 2,569
$ 2,288
Non-Cash Investing and Financing Activities ⁽¹⁾:

Distributions payable on common shares/units $ 50,878
$ 28,205
Distributions payable on preferred shares $ 7,558
$ 3,442
Issuance of common shares for Board of Trustees compensation $ 740
$ 662
Accrued additions and improvements to hotel properties $ 6,754
$ 593
Right of use assets obtained in exchange for lease liabilities $ 257,167
$ —
Purchase of ground lease $ 16,604
$ —
Write-off of deferred financing costs $ 2,697
$ —

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⁽¹⁾ ~~Refer to Note 3, Merger with LaSalle Hotel Properties, for information related to the non-cash investing and financing activities related to the acquisition of LaSalle.~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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

FORWARD-LOOKING STATEMENTS

This report, together with other statements and information publicly disseminated by us, contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words "may", "will", "should", "potential", "could", "seek", "assume", "forecast", "believe", "expect", "intend", "anticipate", "estimate", "project" or similar expressions. Forward-looking statements in this report include, among others, statements about our business strategy, including acquisition and development strategies, industry trends, estimated revenues and expenses, estimated costs and durations of renovation or restoration projects, estimated insurance recoveries, our ability to realize deferred tax assets and expected liquidity needs and sources (including capital expenditures and our ability to obtain financing or raise capital). You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control and which could materially affect actual results, performance or achievements. ~~Factors that may cause actual results to differ materially from current expectations~~These factors include, but are not limited ~~to:~~to, the following:

•

•the COVID-19 pandemic has had, and is expected to continue to have, a significant impact on our financial condition and operations, which impacts our ability to obtain acceptable financing to fund resulting reductions in cash from operations. The current and uncertain future impact of the COVID-19 pandemic, including its effect on the ability or desire of people to travel, is expected to continue to impact our results, operations, outlooks, plans, goals, growth, reputation, cash flows, liquidity and share price;

•as a result of the COVID-19 pandemic, we suspended operations at some of our hotels and resorts, and if we are unable to recommence operations in the near-term, we may become out of compliance with maintenance covenants in certain of our debt facilities;

•world events impacting the ability or desire of people to travel may lead to a decline in demand for hotels;

•risks associated with the hotel industry, including competition, changes in visa and other travel policies by the U.S. government making it less convenient, more difficult or less desirable for international travelers to enter the U.S.,increases in employment costs, energy costs and other operating costs, or decreases in demand caused by events beyond our control including, without limitation, actual or threatened terrorist attacks, cyber attacks, any type of flu or disease-related pandemic, or downturns in general and local economic conditions;

•increases in employment costs, energy costs and other operating costs, or decreases in demand caused by events beyond our control including, without limitation, actual or threatened terrorist attacks, cyber attacks, any type of flu or disease-related pandemic, or downturns in general and local economic conditions;

the availability and terms of financing and capital and the general volatility of securities markets;

•our dependence on third-party managers of our hotels, including our inability to implement strategic business decisions directly;

•risks associated with the global economy and real estate industry, including environmental contamination and costs of complying with the Americans with Disabilities Act and similar laws;

•interest rate increases;

•our possible failure to qualify as a REIT under the Code and the risk of changes in laws affecting REITs;

•the timing and availability of potential hotel acquisitions and our ability to identify and complete hotel acquisitions or dispositions in accordance with our business strategy;

•the possibility of uninsured losses;

•risks associated with redevelopment and repositioning projects, including delays and cost overruns; and

•the other factors discussed under the heading "Risk Factors" in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019 and under Item 8.01 of our Current Report on Form 8-K filed with the SEC on March 24, 2020.

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Accordingly, there is no assurance that our expectations will be realized. Except as otherwise required by the federal securities laws, we disclaim any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Overview

~~On November 30, 2018, we completed our merger with LaSalle Hotel Properties. The combined company, headquartered in Bethesda, Maryland, continues~~In March 2020, the World Health Organization declared the novel coronavirus ("COVID-19") to be ~~led by~~a global pandemic and the ~~senior management team leading us immediately~~virus has continued to spread throughout the United States and the world. As a result of this pandemic and subsequent government mandates and health official recommendations, hotel demand was nearly eliminated. Following the government mandates and health official recommendations, we temporarily suspended operations at a majority of our hotels and resorts and dramatically reduced staffing and expenses at the hotels that remain operational. Throughout the summer months, hotel industry demand improved from its historical lows seen in the second quarter, particularly as leisure customers sought to escape the confines of their homes and travel to safe, clean and trustworthy drive-to hotels and resorts that offer more space and outdoor experiences. In the third quarter, our properties benefited from this trend, and we saw weekly improvements in hotel revenues, excluding Independence Day and Labor Day holiday weeks, which experienced outsized increases and meaningful rate increases over the prior year period. We will continue to monitor business travel demand, which has seen a slight uptick in recent weeks, as we still anticipate group demand will be the ~~merger.~~slowest to return until there is clarity around a health and immunity solution for the country. As of September 30, ~~2019, the Company owned 57 hotels with a total~~2020, 35 of ~~14,112 guest rooms.~~

~~During the third quarter, our overall performance versus our expectations was impacted by weaker performance in San Diego, Los Angeles, San Francisco and Washington, D.C. We also lost business at~~ our hotels were open with operations of the remaining 18 hotels still temporarily suspended. Subsequent to September 30, 2020, we re-opened 4 additional hotels and ~~resorts located in South Florida, due~~anticipate re-opening additional hotels when demand recovers.

COVID-19 has had a negative impact on our operations and financial results to date and we expect that the ~~threat of Hurricane Dorian in early September. Despite the moderating demand growth environment, our teams~~COVID-19 pandemic will continue to ~~limit expense growth~~have a significant negative impact on our results of operations, financial position and ~~find creative~~cash flow for the remainder of 2020 and ~~sustainable ways~~into 2021. We cannot estimate when travel demand will recover. As a result of this uncertainty, in March 2020, we fully drew down on our $650.0 million unsecured revolving credit facility, reduced the quarterly cash dividend on our common shares to ~~increase efficiencies and productivity and take advantage~~one penny, reduced planned capital expenditures, reduced the compensation of our ~~larger scale~~executive officers, board of trustees and employees, and, working closely with our hotel operating partners, significantly reduced our hotels' operating expenses. On June 29, 2020, we amended our existing credit facilities, term loan facilities and senior notes. Among other things, the amendments extended the maturity of a significant portion of a $300.0 million term loan from November 2021 to November 2022, waived existing financial covenants through ~~executing~~the end of the first quarter of 2021 and provided substantially less restrictive financial covenants through the end of the second quarter of 2022. Refer to "Note 5. Debt" for additional information regarding the amendments. Based on ~~new portfolio-wide initiatives. We expect~~these amendments and the expense and cash flow reductions, we believe that we will have sufficient liquidity to ~~steadily execute on~~meet our ~~portfolio-wide initiatives program to generate additional expense savings and operating synergies and create long-term value.~~

obligations for the next twelve months.

During the nine months ended September 30, ~~2019, we had the following transactions:~~2020, other significant transactions included:

On•Sold three hotel properties for an aggregate sales price of $387.0 million and recognized a gain of $117.4 million.

•Recognized an impairment loss of $20.6 million for a retail component of a hotel.

•Incurred expenses of approximately $10.7 million in connection with suspensions of operations at our hotels.

•Cancelled LTIP Class B units and time-based service condition awards granted in February ~~14, 2019, we sold The Liaison Capitol Hill for $111.0~~2020 and incurred full compensation expense of $16.0 million.

~~On February 22, 2019, we sold Hotel Palomar Washington DC for $141.5 million.~~

~~On May 29, 2019, we sold Onyx Hotel for $58.3 million.~~

~~On July 16, 2019, we sold Hotel Amarano Burbank for $72.9 million.~~

~~On September 12, 2019, we sold Rouge Hotel for $42.0 million.~~

~~On September 26, 2019, we sold Hotel Madera for $23.3 million.~~

~~We repaid $450.0 million of our term loans, consisting of the full repayment of the $200.0 million of term loan three and $250.0 million of the tranche maturing in 2020 of the sixth term loan.~~

~~We acquired the ground lease underlying the land of the Solamar Hotel.~~


•	~~As of~~ ~~September 30, 2019, we entered into an agreement to sell Topaz Hotel for $33.0 million, which we expect to close during the fourth quarter of 2019 but can give no assurances that such closing will occur.~~

While we do not operate our hotel properties, both our asset management team and our executive management team monitor and work cooperatively with our hotel managers by advising and making recommendations in all aspects of our hotels’ operations, including property positioning and repositioning, revenue and expense management, operations analysis, physical design, renovation and capital improvements, guest experience and overall strategic direction. Through these efforts, we seek to improve property efficiencies, lower costs, maximize revenues and enhance property operating margins, which we expect will enhance returns to our shareholders.

Key Indicators of Financial Condition and Operating Performance

We measure hotel results of operations and the operating performance of our business by evaluating financial and non-financial metrics such as room revenue per available room ("RevPAR"); total revenue per available room ("Total RevPAR"); average daily rate ("ADR"); occupancy rate ("Occupancy"); funds from operations ("FFO"); earnings before interest, income taxes, depreciation and amortization ("EBITDA"); and EBITDA for real estate ("EBITDAre"). We evaluate individual hotel and company-wide performance with comparisons to budgets, prior periods and competing properties. ADR, occupancy and RevPAR may be impacted by macroeconomic factors as well as regional and local economies and events. See "Non-GAAP Financial Matters" for further discussion of FFO, EBITDA and EBIDTAre.

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Hotel Operating Statistics

The following table represents the key same-property hotel operating statistics for our hotels for the three and nine months ended September 30, ~~2019~~2020 and ~~2018.~~2019.


	For the three months ended September 30,						For the nine months ended September 30,
	2020			2019			2020			2019

Same-Property Occupancy	19.5		%	87.5		%	26.5		%	83.3		%
Same-Property ADR	$	215.95		$	262.63		$	242.19		$	261.61
Same-Property RevPAR	$	42.17		$	229.75		$	64.15		$	218.01
Same-Property Total RevPAR	$	63.22		$	327.44		$	98.28		$	315.98

For the three months ended September 30, For the nine months ended September 30,
2019 2018 2019 2018

Same-Property Occupancy 87.2 % 88.6 % 83.1 % 83.9 %
Same-Property ADR $ 259.96
$ 261.57
$ 258.95
$ 254.09
Same-Property RevPAR $ 226.67
$ 231.73
$ 215.28
$ 213.29
Same-Property Total RevPAR $ 323.82
$ 327.07
$ 311.83
$ 306.86

~~This~~While the operations of many of our hotels were temporarily suspended beginning in March 2020, the above schedule of hotel results for the three ~~months ended September 30 includes information from all of the hotels we owned as of September 30, 2019. This schedule of hotel results for the~~and nine months ended September 30 includes information from all ~~of the~~ hotels we owned as of September 30, ~~2019 and excludes Onyx Hotel~~2020, except, for the first and second quarters in both 2020 and ~~third~~2019, Hotel Zena Washington DC, formerly known as Donovan Hotel, because it was closed during the first and second quarters of ~~both 2019~~2020 for renovation and ~~2018 due to its sale in the second quarter of 2019 as well as Hotel Amarano Burbank, Rouge Hotel and Hotel Madera~~ for the third quarter in both 2020 and 2019, ~~and 2018 due to their sales~~Union Station Hotel Nashville, Autograph Collection, because it was sold in the third quarter of ~~2019. These hotel results for the respective periods may include information reflecting operational performance prior to the Company's ownership of the hotels.~~2020.

Non-GAAP Financial Measures

Non-GAAP financial measures are measures of our historical or future financial performance that are different from measures calculated and presented in accordance with U.S. GAAP. We report FFO, EBITDA and EBITDAre, which are non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance.

We calculate FFO in accordance with standards established by Nareit, formerly known as the National Association of Real Estate Investment Trusts, which defines FFO as net income (calculated in accordance with U.S. GAAP), excluding real estate related depreciation and amortization, gains (losses) from sales of real estate, impairments of real estate assets (including impairment of real estate related joint ventures), the cumulative effect of changes in accounting principles and adjustments for unconsolidated partnerships and joint ventures. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. By excluding the effect of real estate related depreciation and amortization including our share of the joint venture depreciation and amortization, gains (losses) from sales of real estate and impairments of real estate assets (including impairment of real estate related joint ventures), all of which are based on historical cost accounting and which may be of lesser significance in evaluating current performance, we believe that FFO provides investors a useful financial measure to evaluate our operating performance.

The following table reconciles net income (loss) to FFO and FFO available to common share and unit holders for the three and nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 (in thousands):


	For the three months ended September 30,						For the nine months ended September 30,							For the three months ended September 30,			For the nine months ended September 30,
	2019			2018			2019			2018					2020		2019		2020		2019
Net income (loss)	$	29,980		$	29,917		$	96,153		$	112,728		Net income (loss)		$	(130,560)	$	29,980	$	(219,406)	$	96,153
Adjustments:													Adjustments:
Depreciation and amortization	69,712			24,713			177,195			74,072			Depreciation and amortization		56,587		69,712		167,716		177,195
(Gain) loss on sale of hotel properties													(Gain) loss on sale of hotel properties		47		—		(117,401)		—
Impairment loss													Impairment loss		—		—		20,570		—
FFO	$	99,692		$	54,630		$	273,348		$	186,800		FFO		$	(73,926)	$	99,692	$	(148,521)	$	273,348
Distribution to preferred shareholders	(8,139		)	(4,023		)	(24,417		)	(12,070		)	Distribution to preferred shareholders		(8,139)		(8,139)		(24,417)		(24,417)
FFO available to common share and unit holders	$	91,553		$	50,607		$	248,931		$	174,730		FFO available to common share and unit holders		$	(82,065)	$	91,553	$	(172,938)	$	248,931

EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. The white paper issued by Nareit entitled “Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate” defines EBITDAre as net income or loss (computed in accordance with U.S. GAAP), excluding interest expense, income tax, depreciation and amortization, gains or losses on the disposition of depreciated property (including gains or losses on change of control),

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impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate, and after comparable adjustments for our portion of these items related to unconsolidated affiliates. We believe that EBITDA and EBITDAre provide investors useful financial measures to evaluate our operating performance, excluding the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization).

The following table reconciles net income (loss) to EBITDA and EBITDAre for the three and nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 (in thousands):


	For the three months ended September 30,				For the nine months ended September 30,					For the three months ended September 30,			For the nine months ended September 30,
	2019		2018		2019		2018				2020		2019		2020		2019
Net income (loss)	$	29,980	$	29,917	$	96,153	$	112,728	Net income (loss)		$	(130,560)	$	29,980	$	(219,406)	$	96,153
Adjustments:									Adjustments:
Interest expense	26,465		12,647		84,512		33,274		Interest expense		27,514		26,465		75,196		84,512
Income tax expense (benefit)	4,382		1,719		5,924		3,628		Income tax expense (benefit)		5,778		4,382		(8,531)		5,924
Depreciation and amortization	69,775		24,765		177,376		74,229		Depreciation and amortization		56,696		69,775		168,044		177,376
EBITDA and EBITDAre	$	130,602	$	69,048	$	363,965	$	223,859
EBITDA									EBITDA		$	(40,572)	$	130,602	$	15,303	$	363,965
(Gain) loss on sale of hotel properties									(Gain) loss on sale of hotel properties		47		—		(117,401)		—
Impairment loss									Impairment loss		—		—		20,570		—
EBITDAre									EBITDAre		$	(40,525)	$	130,602	$	(81,528)	$	363,965

FFO, EBITDA and EBITDAre do not represent cash generated from operating activities as determined by U.S. GAAP and should not be considered as alternatives to U.S. GAAP net income (loss), as indications of our financial performance, or to U.S.

GAAP cash flow from operating activities, as measures of liquidity. In addition, FFO, EBITDA and EBITDAre are not indicative of funds available to fund cash needs, including the ability to make cash distributions.

Results of Operations

At September 30, ~~2019~~2020 and ~~2018,~~2019, we had 5753 and ~~28,~~57, respectively, wholly owned properties and leasehold interests. All properties owned during these periods have been included in our results of operations during the respective periods since their dates of acquisition and through the dates of disposition, as applicable. Based on when a property was acquired or disposed, operating results for certain properties are not comparable for the three ~~and nine~~ months ended September 30, ~~2019~~2020 and ~~2018.~~2019. The properties listed in the table below are hereinafter referred to as "non-comparable properties" for the periods indicated and all other properties are referred to as "comparable properties":

Property

Location

Disposition Date

~~Property~~

~~Location~~

~~Acquisition/Disposition Date~~

~~Non-comparable property for the three months ended September 30, 2019 and 2018~~

~~Non-comparable property for the nine months ended September 30, 2019 and 2018~~

~~LaSalle portfolio~~

⁽¹⁾

~~Various~~

~~November 30, 2018~~

~~The Grand Hotel Minneapolis~~

~~Minneapolis, MN~~

~~December 4, 2018~~

The Liaison Capitol Hill

Washington, DCD.C.

February 14, 2019

Hotel Palomar Washington DC

Washington, DCD.C.

February 22, 2019

Onyx Hotel

Boston, MA

May 29, 2019

Hotel Amarano Burbank

Burbank, CA

July 16, 2019

Rouge Hotel

Washington, DCD.C.

September 12, 2019

Hotel Madera

Washington, DCD.C.

September 26, 2019

Topaz Hotel

Washington, D.C.

November 22, 2019

InterContinental Buckhead Atlanta

Buckhead, GA

March 6, 2020

Sofitel Washington DC Lafayette Square

Washington, D.C.

March 6, 2020

Union Station Hotel Nashville, Autograph Collection

Nashville, TN

July 29, 2020

⁽¹⁾ As a result of our merger with LaSalle, we acquired a portfolio of 36 properties. We subsequently sold The Liaison Capitol Hill on February 14, 2019, Hotel Palomar Washington DC on February 22, 2019, Onyx Hotel on May 29, 2019, Hotel Amarano Burbank on July 16, 2019, Rouge Hotel on September 12, 2019 and Hotel Madera on September 26, 2019.

Comparison of the three months ended September 30, ~~2019~~2020 to the three months ended September 30, ~~2018~~2019

Revenues — Total hotel revenues ~~increased~~decreased by ~~$218.1~~$346.6 million, ~~all~~ of which $25.0 million was ~~contributed by~~due to the non-comparable ~~properties.~~properties and the remaining decline was due to the decline in demand and suspension of operations since March 2020 as a result of the COVID-19 pandemic.

Hotel operating expenses — Total hotel operating expenses ~~increased~~decreased by ~~$127.8~~$176.5 million, of which ~~$0.8~~$15.2 million was ~~contributed by~~due to the ~~comparable~~non-comparable properties and the ~~balance~~remaining decline was ~~contributed by~~due to the ~~non-comparable properties.~~decline in demand and suspension of operations since March 2020 as a result of the COVID-19 pandemic.

Depreciation and amortization — Depreciation and amortization expense ~~increased~~decreased by ~~$45.0~~$13.1 million due primarily to a decrease in assets resulting from the ~~majority~~sales of ~~which was a result of the acquisition of the LaSalle portfolio as part of the merger with LaSalle.~~hotels.

Real estate taxes, personal property taxes, property insurance and ground rent — Real estate taxes, personal property taxes, property insurance and ground rent ~~increased~~decreased by ~~$20.4~~$3.6 million primarily due to ~~the acquisition~~a decline in percentage ground rent which is based on a percentage of ~~the LaSalle portfolio as part of the merger with LaSalle.~~revenues.

General and administrative — General and administrative expenses ~~increased~~decreased by ~~$1.7~~$0.8 million primarily due to ~~additional employee and~~a decline in share-based compensation costs ~~relating~~and reductions in compensation and other administrative costs as a result of the cost-cutting program put in place in response to the ~~merger with LaSalle.~~COVID-19 pandemic. General and administrative expenses consist of employee compensation costs, legal and professional fees, ~~costs related to strategic transactions,~~ insurance ~~state franchise taxes~~ and other expenses.

Transaction costs — Transaction costs increased by ~~$0.8~~$6.3 million ~~as a result of integration costs incurred in 2019 related~~due to ~~the merger with LaSalle. Transaction costs consist of~~additional transfer taxes ~~and financial advisory, legal and other professional service fees~~paid in connection with the ~~merger with~~ LaSalle ~~and integration costs related to professional fees and employee-related costs, including compensation for transition employees.~~merger.

(Gain) loss and other operating expenses — (Gain) loss and other operating expenses ~~changed from a $0.4~~decreased $0.6 million ~~gain to a $1.5 million loss~~primarily due to ~~the business interruption and property damage insurance claims relating to Hurricane Irma at LaPlaya in 2018. In 2019, the Company incurred~~ $0.8 million in hotel management transition ~~expenses.~~expenses incurred in 2019 with so such expenses incurred in 2020.

Interest expense — Interest expense increased by ~~$13.8~~$1.0 million as a result of ~~higher debt balances.~~increased borrowings compared to the same period in the prior year.

Other — Other income ~~decreased~~increased by ~~$3.9~~$0.1 million due to ~~unrealized gain~~interest income from ~~marketable securities in 2018.~~higher cash balances from the drawdown on the unsecured revolving credit facility to enhance liquidity.

Income tax (expense) benefit — Income tax expense increased by ~~$2.7~~$1.4 million due primarily to a valuation allowance recognized on our deferred tax assets in 2020. As a result of the uncertainty around estimating future taxable income of our TRS, we have placed a valuation allowance on the net operating losses that are no longer more likely than not to be utilized.

Non-controlling interests — Non-controlling interests represent the allocation of income or loss of our Operating Partnership to the common units held by the LTIP and OP unit holders.

Comparison of the nine months ended September 30, 2020 to thenine months ended September 30, 2019

Revenues — Total hotel revenues decreased by $864.1 million, of which $80.9 million was due to the non-comparable properties and the remaining decline was due to the decline in demand and suspension of operations since March 2020 as a result of the COVID-19 pandemic.

Hotel operating expenses — Total hotel operating expenses decreased by $422.3 million, of which $48.4 million was due to the non-comparable properties and the remaining decline was due to the decline in demand and suspension of operations since March 2020 as a result of the COVID-19 pandemic offset by an increase of $10.7 million in expenses related to the suspended operations at the hotels.

Depreciation and amortization — Depreciation and amortization expense decreased by $9.3 million due to a decrease in assets resulting from sold hotels.

Real estate taxes, personal property taxes, property insurance and ground rent — Real estate taxes, personal property taxes, property insurance and ground rent decreased by $8.8 million primarily due to a decline in percentage ground rent which is based on a percentage of revenues.

General and administrative — General and administrative expenses increased by $12.5 million primarily due to $16.0 million in share-based compensation costs relating to the cancellation of the retention LTIP unit awards and time-based service condition awards, offset by the cost cutting program put in place in response to COVID-19. General and administrative expenses consist of employee compensation costs, legal and professional fees, insurance and other expenses.

Transaction costs — Transaction costs increased by $2.9 million due to additional transfer taxes paid in connection with the LaSalle merger.

Impairment loss — We recognized an impairment loss of $20.6 million related to a retail component of a hotel. There was no comparable transaction in 2019.

(Gain) loss on sale of hotel properties — (Gain) loss on sale of hotel properties increased by $117.4 millionfrom the sale of three properties. There was no comparable (gain) loss from disposed properties in 2019.

(Gain) loss and other operating expenses — (Gain) loss and other operating expenses decreased by $2.5 million due primarily to the $4.8 million in hotel management transition expense incurred in 2019.

Interest expense — Interest expense decreased by $9.3 million as a result of using proceeds from property sales to reduce outstanding debt since September 30, 2019 in addition to a decrease in interest rates in 2020.

Other — Other income increased by $0.4 million due to interest income from higher cash balances from the drawdown on the unsecured revolving credit facility to enhance liquidity.

Income tax (expense) benefit — Income tax (expense) benefit changed from an expense of $(5.9) million to a benefit of $8.5 million due primarily to an increase in taxable ~~income~~losses of our ~~TRSs~~TRS as a result of suspended operations at our hotels during the ~~quarter~~nine months ended September 30, 2020 compared to the same period in the prior year.

Non-controlling interests — Non-controlling interests represent the allocation of income or loss of our Operating Partnership to the common units held by the LTIP and OP unit holders.

~~Comparison of the nine months ended September 30, 2019 to thenine months ended September 30, 2018~~

~~Revenues —~~ Total hotel revenues increased by $639.8 million, of which $8.1 million was contributed by the comparable properties and $631.7 million was contributed by the non-comparable properties. LaPlaya contributed to the comparable properties increases as it was under renovation for a part of 2018.

~~Hotel operating expenses —~~ ~~Total hotel operating expenses increased by $381.5 million, of which $7.8 million was contributed by the comparable properties and the balance was contributed by the non-comparable properties.~~

~~Depreciation and amortization —~~ ~~Depreciation and amortization expense increased by $103.1 million, the majority of which was a result of the acquisition of the LaSalle portfolio as part of the merger with LaSalle.~~

~~Real estate taxes, personal property taxes, property insurance and ground rent —~~ ~~Real estate taxes, personal property taxes, property insurance and ground rent increased by $58.2 million due to the acquisition of the LaSalle portfolio as part of the merger with LaSalle.~~

~~General and administrative —~~ General and administrative expenses increased by $11.0 million primarily due to additional employee and share-based compensation costs relating to the merger with LaSalle. General and administrative expenses consist of employee compensation costs, legal and professional fees, costs related to strategic transactions, insurance, state franchise taxes and other expenses.

~~Transaction costs —~~ Transaction costs increased by $2.0 million as a result of the merger with LaSalle. Transaction costs consist of transfer taxes and financial advisory, legal and other professional service fees in connection with the merger with LaSalle and integration costs related to professional fees and employee-related costs, including compensation for transition employees.

~~(Gain) loss and other operating expenses —~~ (Gain) loss and other operating expenses changed from a $11.4 million gain to a $6.2 million loss due to the $13.1 million gain from insurance settlement of business interruption claim for the Hurricane Irma costs and lost profits at LaPlaya in 2018. In 2019, the Company incurred $4.8 million in hotel management transition expenses.

~~Interest expense —~~ ~~Interest expense increased by $51.2 million as a result of higher debt balances.~~

~~Other —~~ ~~Other income decreased by $29.4 million due to unrealized gain from marketable securities in 2018.~~

~~Income tax (expense) benefit —~~ ~~Income tax expense increased by $2.3 million due primarily to an increase in taxable income of our TRSs during the nine months ended September 30, 2019 compared to the same period in the prior year.~~

~~Non-controlling interests —~~ ~~Non-controlling interests represent the allocation of income or loss of our Operating Partnership to the common units held by the LTIP unit holders.~~

Critical Accounting Policies

Our consolidated financial statements have been prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period. While we do not believe the reported amounts would be materially different, application of these policies involves the exercise of judgment and the use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on experience and on various other assumptions that are believed to be reasonable under the circumstances. All of our significant accounting policies, including certain critical accounting policies, are disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

Recent Accounting Standards

See Note 2, “Summary of Significant Accounting Policies,” to our consolidated interim financial statements for additional information relating to recently issued accounting pronouncements.

New Accounting Pronouncements Not Yet Implemented

See Note 2, “Summary of Significant Accounting Policies,” to our consolidated interim financial statements for additional information relating to recently issued accounting pronouncements.

Liquidity and Capital Resources

~~We expect~~In March 2020, the World Health Organization declared the novel coronavirus ("COVID-19") to ~~meet our short-term liquidity requirements through net cash provided by operations, existing cash balances~~be a global pandemic and ~~if necessary, short-term borrowings under our senior unsecured revolving credit facilities. We expect our existing cash balances~~the virus has continued to spread throughout the United States and ~~cash provided by operations will be adequate to fund operating requirements, service debt and fund dividends in accordance with~~ the ~~REIT requirements of the federal income tax laws.~~

We expect to meet our long-term liquidity requirements, such as hotel property acquisitions, property redevelopment, investments in new joint ventures, and debt principal payments and debt maturities, through the net proceeds from additional issuances of common shares, additional issuances of preferred shares, issuances of units of limited partnership interest in our Operating Partnership, secured and unsecured borrowings, hotel property sales and cash provided by operations. The success of our business strategy may depend in part on our ability to access additional capital through issuances of debt and equity securities, which is dependent on favorable market conditions.

~~We strive to maintain prudent debt leverage and intend to opportunistically enhance our capital position.~~

world. As a result of this pandemic and subsequent government mandates and health official recommendations, hotel demand was nearly eliminated. Following the ~~approximately 61.5~~government mandates and health official recommendations, we temporarily suspended operations at a majority of our hotels and resorts and dramatically reduced staffing and expenses at the hotels that remained operational. As travel demand slowly recovered during the third quarter, as of September 30, 2020, 35 of our hotels were open, while operations at the remaining 18 hotels were still temporarily suspended.

COVID-19 has had a negative impact on our operations and financial results to date and we expect that the COVID-19 pandemic may ultimately have a significant impact on our results of operations, financial position and cash flow for the remainder of 2020. As a result, in March 2020, we fully drew down on our $650.0 million unsecured revolving credit facility, reduced the quarterly cash dividend on our common shares to one penny, reduced planned capital expenditures, reduced the compensation of our executive officers, board of trustees and ~~units issued on November 30, 2018 in connection~~employees, and, working closely with our ~~merger with LaSalle,~~hotel operating partners, significantly reduced our hotels' operating expenses. On June 29, 2020, we ~~anticipate an increase in~~amended our existing credit facilities, term loan facilities and senior notes. Among other things, the amendments extended the maturity of a significant portion of a $300.0 million term loan from November 2021 to November 2022, waived existing financial covenants through the end of the first quarter of 2021 and provided substantially less restrictive financial covenants through the end of the second quarter of 2022. Refer to "Note 5. Debt" for additional information regarding the amendments. Based on these amendments and the expense and cash ~~outflows due~~flow reductions, we believe that we will have sufficient liquidity to meet our obligations for the ~~increased dividend payment requirements. We expect to fund the dividends from increased cash flows generated from the hotel properties acquired in the merger.~~next twelve months.

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Our debt consisted of the following as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 (dollars in thousands):


			Balance Outstanding as of									Balance Outstanding as of
	Interest Rate	Maturity Date	September 30, 2019			December 31, 2018				Interest Rate	Maturity Date	September 30, 2020		December 31, 2019
Revolving credit facilities									Revolving credit facilities
Senior unsecured credit facility	Floating ⁽¹⁾	January 2022	$	100,000		$	170,000		Senior unsecured credit facility	Floating (1)	January 2022	$	290,000	$	165,000
PHL unsecured credit facility	Floating⁽²⁾	January 2022	—			—			PHL unsecured credit facility	Floating (2)	January 2022	—		—
Total revolving credit facilities			$	100,000		$	170,000		Total revolving credit facilities			$	290,000	$	165,000

Unsecured term loans									Unsecured term loans
First Term Loan	Floating ⁽³⁾	January 2023	300,000			300,000			First Term Loan	Floating (3)	January 2023	300,000		300,000
Second Term Loan	Floating ⁽³⁾	April 2022	65,000			65,000			Second Term Loan	Floating (3)	April 2022	65,000		65,000
Third Term Loan	Floating ⁽³⁾	January 2021	—			200,000
Fourth Term Loan	Floating ⁽³⁾	October 2024	110,000			110,000			Fourth Term Loan	Floating (3)	October 2024	110,000		110,000
Sixth Term Loan:									Sixth Term Loan:
Tranche 2020	Floating ⁽³⁾	December 2020	—			250,000
Tranche 2021	Floating ⁽³⁾	November 2021	300,000			300,000			Tranche 2021	Floating (3)	November 2021	57,400		300,000
Tranche 2021 Extended									Tranche 2021 Extended	Floating (3)	November 2022	242,600		—
Tranche 2022	Floating ⁽³⁾	November 2022	400,000			400,000			Tranche 2022	Floating (3)	November 2022	400,000		400,000
Tranche 2023	Floating ⁽³⁾	November 2023	400,000			400,000			Tranche 2023	Floating (3)	November 2023	400,000		400,000
Tranche 2024	Floating ⁽³⁾	January 2024	400,000			400,000			Tranche 2024	Floating (3)	January 2024	400,000		400,000
Total Sixth Term Loan			1,500,000			1,750,000			Total Sixth Term Loan			1,500,000		1,500,000
Total term loans at stated value			1,975,000			2,425,000			Total term loans at stated value			1,975,000		1,975,000
Deferred financing costs, net			(11,172		)	(15,716		)	Deferred financing costs, net			(10,499)		(10,343)
Total term loans			$	1,963,828		$	2,409,284		Total term loans			$	1,964,501	$	1,964,657

Senior unsecured notes									Senior unsecured notes
Series A Notes	4.70%	December 2023	60,000			60,000			Series A Notes	4.70%	December 2023	60,000		60,000
Series B Notes	4.93%	December 2025	40,000			40,000			Series B Notes	4.93%	December 2025	40,000		40,000
Total senior unsecured notes at stated value			100,000			100,000			Total senior unsecured notes at stated value			100,000		100,000
Deferred financing costs, net			(460		)	(531		)	Deferred financing costs, net			(435)		(437)
Total senior unsecured notes			$	99,540		$	99,469		Total senior unsecured notes			$	99,565	$	99,563

Mortgage loans
The Westin San Diego Gaslamp Quarter	3.69%	January 2020	66,376			68,207
Deferred financing costs, net			(16		)	(62		)
Total mortgage loans			$	66,360		$	68,145
Total debt			$	2,229,728		$	2,746,898		Total debt			$	2,354,066	$	2,229,220

__________

⁽¹⁾ Borrowings bear interest at floating rates equal to, at our option, either (i) LIBOR plus an applicable margin or (ii) an Adjusted Base Rate (as defined in the applicable credit agreement) plus an applicable margin.

⁽²⁾Borrowings bear interest at floating rates equal to, at our option, either (i) LIBOR plus an applicable margin or (ii) a Eurocurrency Rate (as defined in the applicable credit agreement) plus an applicable margin.

⁽³⁾ Borrowings under the term loan facilities bear interest at floating rates equal to, at our option, either (i) LIBOR plus an applicable margin or (ii) a Base Rate plus an applicable margin. As of September 30, 2020, approximately $1.6 billion of the borrowings under the term loan facilities bore an effective weighted-average fixed interest rate of 4.21%, after taking into account interest rate swap agreements, and approximately $345.0 million bore a weighted-average floating interest rate of 2.46%. As of December 31, 2019, approximately $1.6 billion of the borrowings under the term loan facilities bore a weighted-average fixed interest rate of 3.43%, after taking into account interest rate swap agreements, and approximately $345.0 million bore a weighted-average floating interest rate of 3.32%.

Unsecured Revolving Credit Facilities

We are party to a $650.0 million senior unsecured revolving credit facility maturing in January 2022, with options to extend the maturity date to January 2023, pursuant to certain terms and conditions and payment of an extension fee. In March 2020, as part of our plans to enhance liquidity due to the actual and anticipated impact of the COVID-19 pandemic, we fully drew down on this revolving credit facility. As

of September 30, ~~2019,~~2020, we had ~~$100.0~~$290.0 million of outstanding borrowings and ~~$550.0 million~~ borrowing capacity of $353.2 million remaining on our senior unsecured revolving credit facility. Interest is paid on the periodic advances under the senior unsecured revolving credit facility at varying rates, based upon either LIBOR or the alternate

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base rate, plus an additional margin amount. The interest rate depends upon our leverage ratio pursuant to the provisions of the credit facility agreement. As a result of the amendments described in "Note 5. Debt", the spread of the borrowings is fixed at 2.25% during the waiver period. We have the ability to increase the aggregate borrowing capacity of our senior unsecured revolving credit facility to up to $1.3 billion, subject to lender approval. We intend to repay indebtedness incurred under the senior unsecured revolving credit facility from time to time out of cash flows from operations and, as market conditions permit, from the net proceeds of issuances of additional equity and debt securities and from the net proceeds of dispositions of hotel properties.

We also have a ~~$10.0~~$25.0 million unsecured revolving credit facility (the "PHL Credit Facility") to be used for PHL's working capital and general corporate purposes. This credit facility has substantially similar terms as our senior unsecured revolving credit facility and matures in January 2022. Borrowings under the PHL Credit Facility bear interest at LIBOR plus an applicable margin, depending on our leverage ratio. As a result of the amendments described in "Note 5. Debt", the spread of the borrowings is fixed at 2.25% during the waiver period. As of September 30, ~~2019,~~2020, we had no borrowings under the PHL Credit Facility.

Unsecured Term Loan Facilities

We are party to senior unsecured term loans with different maturities. Each unsecured term loan bears interest at a variable rate of a benchmark interest rate plus an applicable margin, depending on our leverage ratio. We entered into interest rate swap agreements to fix the LIBOR rate on a portion of these unsecured term loans. Information about our senior unsecured term loans is found in the table above and Note 5 to the accompanying consolidated financial statements.

Senior Unsecured Notes

We have two unsecured notes outstanding, $60.0 million of senior unsecured notes bearing a fixed interest rate of 4.70% per annum and maturing in December 2023 (the "Series A Notes") and $40.0 million of senior unsecured notes bearing a fixed interest rate of 4.93% per annum and maturing in December 2025 (the "Series B Notes"). The terms of the Series A Notes and the Series B Notes are substantially similar to those of our senior unsecured revolving credit facility, as amended and restated.

Issuance of Shares of Beneficial Interest

On February 22, 2016, we announced that our board of trustees authorized a share repurchase program of up to $150.0 million of the Company's outstanding common shares. Under this program, we may repurchase common shares from time to time in transactions on the open market or by private agreement. We may suspend or discontinue this program at any time. No common shares were repurchased by the Company under the share repurchase program during the nine months ended September 30, ~~2019.~~2020. As of September 30, ~~2019,~~2020, $56.6 million of common shares remained available for repurchase under this program.

On July 27, 2017, we announced that our board of trustees authorized a new share repurchase program of up to $100.0 million of the Company's outstanding common shares. Under this program, we may repurchase common shares from time to time in transactions on the open market or by private agreement. We may suspend or discontinue this program at any time. This $100.0 million share repurchase program will commence upon the completion of our $150.0 million share repurchase program.

Sources and Uses of Cash

Our principal sources of cash are cash from operations, borrowings under mortgage financings and other debt, draws on our credit facilities, proceeds from offerings of our equity securities and hotel property sales. Our principal uses of cash are asset acquisitions, debt service, capital investments, operating costs, corporate expenses and dividends.

Cash (Used in) and Provided by Operations. Our cash used in operating activities was $(146.9) million for the nine months ended September 30, 2020. Our cash from operations includes the operating activities of the 53 hotels we owned as of September 30, 2020, offset by corporate expenses. Our cash provided by operating activities was $316.1 million for the nine months ended September 30, 2019. Our cash from operations includes the operating activities of the 57 hotels we owned as of September 30, 2019, offset by corporate ~~expenses and merger-related transaction~~ expenses.

Cash Provided by Investing Activities. Our cash provided by ~~operating~~investing activities was ~~$170.8~~$264.7 million for the nine months ended September 30, ~~2018. Our cash from operations includes~~2020. During the ~~operating activities of the 28 hotels we wholly owned as of~~nine months ended September 30, ~~2018.~~

~~Cash Provided by~~2020, we invested $110.4 million in improvements to our hotel properties and ~~Used In Investing Activities.~~received $375.1 million from sales of hotel properties. Our cash provided by investing activities was $319.3 million for the nine months ended September 30, 2019. During the nine months ended September 30, 2019, we invested $118.0 million in improvements to our hotel properties and received $437.9 million from sales of hotel properties. Our cash used in investing activities was $513.4 million for the nine months ended September 30, 2018. During the nine months ended September 30, 2018, we invested $56.9 million in improvements to our hotel properties, purchased $356.2 million in marketable securities, sold $6.7 million in marketable securities, paid the $112.0 million termination fee on LaSalle's behalf related to their previous merger agreement and received $5.1 million in property insurance proceeds.

Cash Provided by and Used In Financing Activities. Our cash ~~used in~~provided by financing activities was ~~$686.4~~$42.3 million for the nine months ended September 30, ~~2019.~~2020. During the nine months ended September 30, 2020, we borrowed $760.1 million

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under the revolving credit facilities, repaid $635.1 million under the revolving credit facilities, borrowed and repaid $13.0 million in other debt, repurchased $1.3 million of common shares for tax withholding purposes in connection with vested share-based equity awards, paid $77.1 million in distributions, paid $3.6 million in financing fees related to the debt amendments and paid $0.7 million in other transactions. For the nine months ended September 30, 2019, cash used in financing activities was $686.4 million. During the nine months ended September 30, 2019, we borrowed $211.9 million under the revolving credit facilities, repaid $281.9 million under the revolving credit facilities, repaid $451.8 million of debt, repurchased $4.0 million of common shares for tax withholding purposes in connection with vested share-based equity awards, paid $159.5 million in distributions and paid $1.1 million in other transactions. For the nine months ended September 30, 2018, cash provided by financing activities was $336.6 million. During the nine months ended September 30, 2018, we borrowed $500.2 million under the revolving credit facilities, repaid $151.2 million under the revolving credit facilities, borrowed $100.0 million under our fifth term loan, repaid $1.8 million of debt, repurchased $2.5 million of common shares for tax withholding purposes in connection with vested share-based equity awards, paid $91.5 million in distributions and paid $15.7 million in financing costs.

Capital Investments

We maintain and intend to continue maintaining all of our hotels, including each hotel that we acquire in the future, in good repair and condition and in conformity with applicable laws and regulations and when applicable, in accordance with the franchisor’s standards and the agreed-upon requirements in our management agreements. Routine capital investments will be administered by the hotel management companies. However, we maintain approval rights over the capital investments as part of the annual budget process and as otherwise required from time to time.

From time to time, certain of our hotel properties may undergo renovations as a result of our decision to upgrade portions of the hotels, such as guestrooms, meeting space and restaurants, in order to better compete with other hotels in our markets. In addition, after we acquire a hotel property, we are often required by the franchisor or brand manager, if there is one, to complete a property improvement plan (“PIP”) in order to bring the hotel property up to the franchisor’s or brand’s standards. Generally, we expect to fund renovations and improvements with available cash, restricted cash, borrowings under our credit facility, or proceeds from new mortgage debt or equity offerings.

For the nine months endedSeptember 30, ~~2019~~,2020, we invested ~~$118.0~~$110.4 million in capital investments to reposition and improve our properties. Since the ~~properties~~beginning of 2020, we ~~own.~~ have completed the transformational redevelopments of several hotels and resorts that were part of the LaSalle legacy portfolio acquired in late 2018, including Chaminade Resort & Spa, San Diego Mission Bay Resort (formerly Hilton San Diego Resort & Spa), Viceroy Washington DC (formerly Mason & Rook), Hotel Zena Washington DC (formerly Donovan Hotel), Viceroy Santa Monica Hotel and Le Parc Suite Hotel.

We expect total capital investments to ~~invest~~be approximately ~~$45.0~~$15.0 million to ~~$65.0~~$20.0 million ~~in capital investments~~ for ~~our hotels through~~ the remainder of 2019, including a $16.0 million renovation at The Westin San Diego Gaslamp Quarter and a $16.0 million renovation at Embassy Suites San Diego Bay - Downtown, both of which are expected to be completed in the first quarter of 2020. We will also commence a $25.0 million renovation at Donovan Hotel upon its closure in November 2019. This renovation is expected to be completed during the second quarter of 2020 at which time the hotel will be relaunched with our "Unofficial Z Collection" proprietary brand.

Contractual Obligations and Off-Balance Sheet Arrangements

The table below summarizes our contractual obligations as of September 30, ~~2019~~2020 and the effect such obligations are expected to have on our liquidity and cash flow in future periods (in thousands):


												Payments due by period
	Payments due by period											Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years
	Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years
Mortgage loans⁽¹⁾	$	67,202	$	67,202	$	—	$	—	$	—
Term loans ⁽²⁾	2,228,542		69,677		497,391		1,551,101		110,373		Term loans (2)	$	2,146,833	$	70,668	$	1,158,304	$	917,861	$	—
Unsecured notes ⁽¹⁾	125,508		4,792		9,584		68,174		42,958		Unsecured notes (1)	120,716		4,792		9,584		65,354		40,986
Borrowings under credit facilities ⁽³⁾	108,481		3,704		104,777		—		—		Borrowings under credit facilities (3)	299,506		7,351		292,155		—		—
Hotel and ground leases ⁽⁴⁾	1,235,016		16,793		33,744		33,957		1,150,522		Hotel and ground leases (4)	1,214,049		16,801		33,760		34,039		1,129,449
Capital lease obligation	65,511		1,243		2,596		2,683		58,989		Capital lease obligation	64,818		1,302		2,678		2,759		58,079
Refundable membership initiation deposits ⁽⁵⁾	30,765		243		—		—		30,522		Refundable membership initiation deposits (5)	29,914		223		—		—		29,691
Purchase commitments ⁽⁶⁾	14,786		14,786		—		—		—		Purchase commitments (6)	4,291		4,291		—		—		—
Corporate office lease	17,145		1,239		4,089		2,481		9,336
Corporate office leases											Corporate office leases	15,977		1,628		3,461		2,517		8,371
Total	$	3,892,956	$	179,679	$	652,181	$	1,658,396	$	1,402,700	Total	$	3,896,104	$	107,056	$	1,499,942	$	1,022,530	$	1,266,576

____________________

⁽¹⁾

(1)Amounts include principal and interest.

(2)Amounts include principal and interest. Borrowings under the term loan facilities bear interest at floating rates equal to, at our option, either (i) LIBOR plus an applicable margin or (ii) a Base Rate plus an applicable margin.

(3)Amounts include principal and interest under the two revolving credit facilities. Interest expense is calculated based on the weighted-average interest rate for all outstanding credit facility borrowings as of September 30, 2020. It is assumed that the outstanding borrowings will be repaid upon maturity with fixed interest-only payments until then.

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(4)Our leases may require minimum fixed rent payments, percentage rent payments based on a percentage of revenues in excess of certain thresholds or rent payments equal to the greater of a minimum fixed rent or percentage rent. Minimum fixed rent may be adjusted annually by increases in consumer price index ("CPI") and may be subject to minimum and maximum increases. The table above reflects only minimum fixed rent for all periods presented and does not include assumptions for CPI adjustments.

(5)Represents refundable initiation membership deposits from club members at LaPlaya Beach Resort and Club.

(6)Amounts represent purchase orders and contracts that have been executed for renovation projects at the properties. We are committed to these purchase orders and contracts and anticipate making similar arrangements in the future with the existing properties or any future properties that we may acquire.

~~Amounts include principal and interest.~~


⁽²⁾	Amounts include principal and interest. Borrowings under the term loan facilities bear interest at floating rates equal to, at our option, either (i) LIBOR plus an applicable margin or (ii) a Base Rate plus an applicable margin.


⁽³⁾	Amounts include principal and interest under the two revolving credit facilities. Interest expense is calculated based on the weighted-average interest rate for all outstanding credit facility borrowings as of September 30, 2019. It is assumed that the outstanding borrowings will be repaid upon maturity with fixed interest-only payments until then.

⁽⁴⁾

Our leases may require minimum fixed rent payments, percentage rent payments based on a percentage of revenues in excess of certain thresholds or rent payments equal to the greater of a minimum fixed rent or percentage rent. Minimum fixed rent may be adjusted annually by increases in consumer price index ("CPI") and may be subject to minimum and maximum increases. The table above reflects only minimum fixed rent for all periods presented and does not include assumptions for CPI adjustments.


⁽⁵⁾	~~Represents refundable initiation membership deposits from club members at LaPlaya.~~


⁽⁶⁾	Amounts represent purchase orders and contracts that have been executed for renovation projects at the properties. We are committed to these purchase orders and contracts and anticipate making similar arrangements in the future with the existing properties or any future properties that we may acquire.

Off-Balance Sheet Arrangements

As of September 30, ~~2019,~~2020, we had no off-balance sheet arrangements.

Inflation

We rely on the performance of the hotels to increase revenues to keep pace with inflation. Generally, our hotel operators possess the ability to adjust room rates daily, except for group or corporate rates contractually committed to in advance, although competitive pressures may limit the ability of our operators to raise rates faster than inflation or even at the same rate.

Seasonality

Demand in the lodging industry is affected by recurring seasonal patterns which are greatly influenced by overall economic cycles, geographic locations, weather and customer mix at the hotels. Generally, our hotels have lower revenue, operating income and cash flow in the first quarter of each year and higher revenue, operating income and cash flow in the third quarter of each year.

Derivative Instruments

In the normal course of business, we are exposed to the effects of interest rate changes. We may enter into derivative instruments including interest rate swaps, caps and collars to manage or hedge interest rate risk. Derivative instruments are subject to fair value reporting at each reporting date and the increase or decrease in fair value is recorded in net income (loss) or accumulated other comprehensive income (loss), based on the applicable hedge accounting guidance. Derivatives expose the Company to credit risk in the event of non-performance by the counter parties under the terms of the interest rate hedge agreements. The Company believes it minimizes the credit risk by transacting with major credit-worthy financial institutions.

The Company has interest rate swap agreements with an aggregate notional amount of ~~$2.2~~$1.6 billion to hedge variable interest rates on our unsecured term loans. In addition, as of September 30, 2020, the Company had interest rates swaps for an aggregate notional amount of $290.0 million which will become effective in the future as current swaps mature.

We have designated these pay-fixed, receive-floating interest rate swap derivatives as cash flow hedges. For the three and nine months ended September 30, 2020, there was $9.7 million and $(44.9) million in unrealized (loss) gain, respectively, recorded in accumulated other comprehensive income (loss). For the three and nine months ended September 30, 2019, there was $(7.9) million and $(38.0) million in unrealized (loss) gain, respectively, recorded in accumulated other comprehensive income (loss). ~~For the three and nine months ended September 30, 2018, there was $0.8 million and $8.1 million in unrealized (loss) gain, respectively, recorded in accumulated other comprehensive income (loss).~~

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Interest Rate Sensitivity

We are exposed to market risk from changes in interest rates. We seek to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs by closely monitoring our variable rate debt and converting such debt to fixed rates when we deem such conversion advantageous. From time to time, we may enter into interest rate swap agreements or other interest rate hedging contracts. While these agreements are intended to lessen the impact of rising interest rates, they also expose us to the risks that the other parties to the agreements will not perform, that we could incur significant costs associated with the settlement of the agreements, and that the agreements will be unenforceable and the underlying transactions will fail to qualify as highly effective cash flow hedges under guidance included in ASC 815 "Derivatives and Hedging."

As of September 30, ~~2019, $445.0~~2020, $635.0 million of the Company's aggregate indebtedness ~~(20.0%~~(27.0% of total indebtedness) was subject to variable interest rates, excluding amounts outstanding under the term loan facilities that have been effectively swapped into fixed rates. If interest rates on our variable rate debt increase or decrease by 0.1 percent, our annual interest expense will increase or decrease by approximately ~~$0.4~~$0.6 million, respectively.

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Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There have been no changes to our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

The nature of the operations of our hotels exposes the hotels and us to the risk of claims and litigation in the normal course of business. We are not presently subject to any material litigation nor, to our knowledge, is any litigation threatened against us, other than routine actions for negligence or other claims and administrative proceedings arising in the ordinary course of business, some of which are expected to be covered by liability insurance and all of which collectively are not expected to have a material adverse effect on our liquidity, results of operations or our financial condition.

Item 1A. Risk Factors.

There have been no material changes from the risk factors disclosed in the ~~"Risk Factors"~~“Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019, other than the addition of the risk factor set forth under Item 8.01 of our Current Report on Form 8-K filed with the SEC on March 24, 2020. However, as a result of the COVID-19 pandemic and its pervasive direct and indirect impacts throughout the world, the United States and the markets in which our hotel properties are located, as well as on the Company itself, many risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2019 that relate to a decrease in revenues, a tightening of credit markets or a reduction in capital market activity are more likely to occur and may be exacerbated.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ⁽¹⁾
July 1, 2019 - July 31, 2019 —
$ —
—
—
August 1, 2019 - August 31, 2019 —
$ —
—
—
September 1, 2019 - September 30, 2019 —
$ —
—
—
Total —
$ —
—
$ 56,600,000


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
July 1, 2020 - July 31, 2020	—	$	—	—	—
August 1, 2020 - August 31, 2020	—	$	—	—	—
September 1, 2020 - September 30, 2020	—	$	—	—	—
Total	—	$	—	—	$	56,600,000

_____________________________

⁽¹⁾On February 22, 2016, the Company announced its Board of Trustees authorized a share repurchase program of up to $150.0 million of the Company's outstanding common shares. Under this program, the Company may repurchase its common shares from time to time in transactions on the open market or by private agreement. The Company may suspend or discontinue this

program at any time. The amount in this column does not include the approximate dollar value of shares that may yet be purchased under the $100.0 million share repurchase program that was announced on July 27, 2017, which will commence upon the completion of the Company's $150.0 million share repurchase program. See Note 7 to the accompanying financial statements for more information about the $100.0 million share repurchase program.

Table of Contents

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.



Exhibit Number		Description of Exhibit
31.1†		Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2†		Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1††		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2††		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
~~101.INS~~101.SCH XBRL		~~Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the~~ Inline XBRL ~~document.~~
~~101.SCH XBRL~~	Taxonomy Extension Schema Document
101.CAL XBRL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB XBRL		Inline XBRL Taxonomy Extension Label Linkbase Document
101.DEF XBRL		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.PRE XBRL		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Date File (embedded within the Inline XBRL document)

________________


*	~~Management agreement or compensatory plan or arrangement.~~


†	† Filed herewith.


††	~~Furnished herewith.~~

†† Furnished herewith.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			PEBBLEBROOK HOTEL TRUST

Date:		October 29, 2020	~~PEBBLEBROOK HOTEL TRUST~~

~~Date:~~	~~October 24, 2019~~	/s/ JON E. BORTZ
			Jon E. Bortz
			Chairman, President and Chief Executive Officer

4543



Pebblebrook Hotel Trust Consolidated Balance Sheets (In thousands, except share data)
	September 30, 2019			December 31, 2018
	(Unaudited)
ASSETS
Investment in hotel properties, net	$	6,329,968		$	6,534,193
Hotels held for sale	28,851			—
Ground lease asset, net	—			199,745
Cash and cash equivalents	29,758			83,366
Restricted cash	27,048			24,445
Hotel receivables (net of allowance for doubtful accounts of $517 and $526, respectively)	70,990			59,897
Prepaid expenses and other assets	57,998			76,702
Total assets	$	6,544,613		$	6,978,348
LIABILITIES AND EQUITY
Debt	$	2,229,728		$	2,746,898
Accounts payable and accrued expenses	537,016			360,279
Deferred revenues	56,995			54,741
Accrued interest	5,674			2,741
Liabilities related to hotels held for sale	298			—
Distribution payable	58,436			43,759
Total liabilities	2,888,147			3,208,418
Commitments and contingencies (Note 11)
Shareholders’ equity:
Preferred shares of beneficial interest, $.01 par value (liquidation preference $510,000 at September 30, 2019 and at December 31, 2018), 100,000,000 shares authorized; 20,400,000 shares issued and outstanding at September 30, 2019 and December 31, 2018	204			204
Common shares of beneficial interest, $.01 par value, 500,000,000 shares authorized; 130,484,956 issued and outstanding at September 30, 2019 and 130,311,289 issued and outstanding at December 31, 2018	1,305			1,303
Additional paid-in capital	4,067,529			4,065,804
Accumulated other comprehensive income (loss)	(36,672		)	1,330
Distributions in excess of retained earnings	(386,631		)	(308,806		)
Total shareholders’ equity	3,645,735			3,759,835
Non-controlling interests	10,731			10,095
Total equity	3,656,466			3,769,930
Total liabilities and equity	$	6,544,613		$	6,978,348



Property		Location	Ownership Interest		Guest Rooms
Villa Florence San Francisco on Union Square		San Francisco, CA	100	%	189
Hotel Vitale		San Francisco, CA	100	%	200
The Marker San Francisco		San Francisco, CA	100	%	208
Hotel Spero		San Francisco, CA	100	%	236
Chaminade Resort & Spa		Santa Cruz, CA	100	%	156
Harbor Court Hotel San Francisco		San Francisco, CA	100	%	131
Viceroy Santa Monica Hotel		Santa Monica, CA	100	%	162
Le Parc Suite Hotel		West Hollywood, CA	100	%	154
Montrose West Hollywood		West Hollywood, CA	100	%	133
Chamberlain West Hollywood Hotel		West Hollywood, CA	100	%	115
Grafton on Sunset		West Hollywood, CA	100	%	108
The Westin Copley Place, Boston		Boston, MA	100	%	803
The Liberty, A Luxury Collection Hotel, Boston		Boston, MA	99.99	%	298
Hyatt Regency Boston Harbor		Boston, MA	100	%	270
Sofitel Washington DC Lafayette Square		Washington, DC	100	%	237
George Hotel		Washington, DC	100	%	139
Mason & Rook Hotel		Washington, DC	100	%	178
Donovan Hotel		Washington, DC	100	%	193
Topaz Hotel	⁽⁷⁾	Washington, DC	100	%	99
Paradise Point Resort & Spa		San Diego, CA	100	%	462
Hilton San Diego Gaslamp Quarter		San Diego, CA	100	%	286
Solamar Hotel		San Diego, CA	100	%	235
L'Auberge Del Mar		Del Mar, CA	100	%	121
Hilton San Diego Resort & Spa		San Diego, CA	100	%	357
The Heathman Hotel		Portland, OR	100	%	151
Southernmost Beach Resort		Key West, FL	100	%	262
The Marker Key West		Key West, FL	100	%	96
The Roger New York		New York, NY	100	%	194
Hotel Chicago Downtown, Autograph Collection		Chicago, IL	100	%	354
The Westin Michigan Avenue Chicago		Chicago, IL	100	%	752
Hotel Palomar Washington DC	(1)	Washington, DC	100	%	335
The Liaison Capitol Hill	(2)	Washington, DC	100	%	343
Onyx Hotel	(3)	Boston, MA	100	%	112
Hotel Amarano Burbank	(4)	Burbank, CA	100	%	132
Rouge Hotel	(5)	Washington, DC	100	%	137
Hotel Madera	(6)	Washington, DC	100	%	82
					8,420



	Total Consideration
Common shares	$	2,144,057
Series E preferred shares	101,622
Series F preferred shares	132,600
OP units	4,665
Cash	1,719,150
Total consideration	$	4,102,094



	November 30, 2018
Investment in hotel properties	$	4,120,370
Restricted cash reserves	14,784
Hotel and other receivables	34,669
Intangible assets	171,660
Prepaid expenses and other assets	47,808
Accounts payable and accrued expenses	(258,036		)
Deferred revenues	(23,816		)
Accrued interest	(2,496		)
Distributions payable	(2,744		)
Other	(105		)
Total consideration	$	4,102,094



Security Type	As of September 30, 2019	As of December 31, 2018
6.50% Series C	5,000,000	5,000,000
6.375% Series D	5,000,000	5,000,000
6.375% Series E	4,400,000	4,400,000
6.30% Series F	6,000,000	6,000,000
	20,400,000	20,400,000



	Shares		Weighted-Average Grant Date Fair Value
Unvested at December 31, 2018	127,732		$	32.22
Granted	88,355		$	32.64
Vested	(66,276	)	$	30.20
Forfeited	(707	)	$	32.70
Unvested at September 30, 2019	149,104		$	33.37



Year ending December 31,
2019 (excluding the nine months ended September 30, 2019)	$	4,297
2020	17,924
2021	18,608
2022	18,921
2023	18,107
Thereafter	1,168,805
Total lease payments	$	1,246,662
Less: Imputed interest	(990,495		)
Present value of lease liabilities	$	256,167



Year ending December 31,
2019	$	18,882
2020	19,091
2021	19,223
2022	19,325
2023	19,429
Thereafter	1,219,303
Total	$	1,315,253