UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM			10-Q


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

For the quarterly period ended ~~March 31,~~June 30, 2021


☐			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,	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, $0.01 par value

PEB-PC

New York Stock Exchange

~~6.375%~~ Series D Cumulative Redeemable Preferred Shares, $0.01 par value

PEB-PD

New York Stock Exchange

~~6.375%~~ Series E Cumulative Redeemable Preferred Shares, $0.01 par value

PEB-PE

New York Stock Exchange

~~6.30%~~ Series F Cumulative Redeemable Preferred Shares, $0.01 par value

PEB-PF

New York Stock Exchange

Series G Cumulative Redeemable Preferred Shares, $0.01 par value

PEB-PG

New York Stock Exchange

Series H Cumulative Redeemable Preferred Shares, $0.01 par value

PEB-PH

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 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

☐

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 ~~April 22,~~July 26, 2021
Common shares of beneficial interest ($0.01 par value per share)						~~131,385,258~~131,382,515


Pebblebrook Hotel Trust TABLE OF CONTENTS



		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements.	3
	Consolidated Balance Sheets - ~~March 31,~~June 3 0 , 2021 (unaudited) and December 31, 2020	3
	Consolidated Statements of Operations and Comprehensive Income (unaudited) - Three and six months ended ~~March 31,~~ June 3 0 , 2021 and 2020	4
	Consolidated Statements of Equity (unaudited) - Three and six months ended ~~March 31,~~June 3 0 , 2021 and 2020	6
	Consolidated Statements of Cash Flows (unaudited) - ~~Three~~Six months ended ~~March 31,~~June 30 , 2021 and 2020	810
	Notes to Consolidated Financial Statements (unaudited)	911
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	3840
Item 4.	Controls and Procedures.	3840
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings.	3840
Item 1A.	Risk Factors.	3940
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	3940
Item 3.	Defaults Upon Senior Securities.	3941
Item 4.	Mine Safety Disclosures.	3941
Item 5.	Other Information.	3941
Item 6.	Exhibits.	4041

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.


Pebblebrook Hotel Trust Consolidated Balance Sheets (In thousands, except share and per-share data)	Pebblebrook Hotel Trust Consolidated Balance Sheets (In thousands, except share and per-share data)					Pebblebrook Hotel Trust Consolidated Balance Sheets (In thousands, except share and per-share data)
		March 31, 2021		December 31, 2020
		(Unaudited)					June 30, 2021		December 31, 2020
							(Unaudited)
ASSETS	ASSETS					ASSETS
Investment in hotel properties, net	Investment in hotel properties, net	$	5,731,727	$	5,882,022	Investment in hotel properties, net	$	5,667,707	$	5,882,022
Hotel held for sale		90,384		0

Cash and cash equivalents	Cash and cash equivalents	113,338		124,274		Cash and cash equivalents	312,064		124,274
Restricted cash	Restricted cash	11,294		12,026		Restricted cash	10,946		12,026
Hotel receivables (net of allowance for doubtful accounts of $539 and $183, respectively)		16,647		10,225
Hotel receivables (net of allowance for doubtful accounts of $542 and $183, respectively)						Hotel receivables (net of allowance for doubtful accounts of $542 and $183, respectively)	27,476		10,225
Prepaid expenses and other assets	Prepaid expenses and other assets	45,519		47,819		Prepaid expenses and other assets	56,156		47,819
Total assets	Total assets	$	6,008,909	$	6,076,366	Total assets	$	6,074,349	$	6,076,366
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Debt	Debt	$	2,433,980	$	2,280,471	Debt	$	2,274,916	$	2,280,471
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	239,278		226,446		Accounts payable, accrued expenses and other liabilities	243,812		226,446
Lease liabilities - operating leases	Lease liabilities - operating leases	254,831		255,106		Lease liabilities - operating leases	254,569		255,106
Deferred revenues	Deferred revenues	41,202		36,057		Deferred revenues	47,120		36,057
Accrued interest	Accrued interest	9,087		4,653		Accrued interest	4,246		4,653
Liabilities related to hotel held for sale		2,293		0

Distribution payable	Distribution payable	9,082		9,307		Distribution payable	11,040		9,307
Total liabilities	Total liabilities	2,989,753		2,812,040		Total liabilities	2,835,703		2,812,040
Commitments and contingencies (Note 11)	Commitments and contingencies (Note 11)	0		0		Commitments and contingencies (Note 11)	0		0
Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Preferred shares of beneficial interest, $.01 par value (liquidation preference $510,000 at March 31, 2021 and December 31, 2020), 100,000,000 shares authorized; 20,400,000 shares issued and outstanding at March 31, 2021 and December 31, 2020		204		204
Common shares of beneficial interest, $.01 par value, 500,000,000 shares authorized; 130,812,917 shares issued and outstanding at March 31, 2021 and 130,673,300 shares issued and outstanding at December 31, 2020		1,308		1,307
Preferred shares of beneficial interest, $.01 par value (liquidation preference $740,000 and $510,000 at June 30, 2021 and December 31, 2020, respectively), 100,000,000 shares authorized; 29,600,000 shares issued and outstanding at June 30, 2021 and 20,400,000 shares issued and outstanding at December 31, 2020						Preferred shares of beneficial interest, $.01 par value (liquidation preference $740,000 and $510,000 at June 30, 2021 and December 31, 2020, respectively), 100,000,000 shares authorized; 29,600,000 shares issued and outstanding at June 30, 2021 and 20,400,000 shares issued and outstanding at December 31, 2020	296		204
Common shares of beneficial interest, $.01 par value, 500,000,000 shares authorized; 130,813,750 shares issued and outstanding at June 30, 2021 and 130,673,300 shares issued and outstanding at December 31, 2020						Common shares of beneficial interest, $.01 par value, 500,000,000 shares authorized; 130,813,750 shares issued and outstanding at June 30, 2021 and 130,673,300 shares issued and outstanding at December 31, 2020	1,308		1,307
Additional paid-in capital	Additional paid-in capital	4,038,860		4,169,870		Additional paid-in capital	4,263,473		4,169,870
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(43,917)		(60,071)		Accumulated other comprehensive income (loss)	(39,820)		(60,071)
Distributions in excess of retained earnings	Distributions in excess of retained earnings	(983,771)		(853,973)		Distributions in excess of retained earnings	(993,654)		(853,973)
Total shareholders’ equity	Total shareholders’ equity	3,012,684		3,257,337		Total shareholders’ equity	3,231,603		3,257,337
Non-controlling interests	Non-controlling interests	6,472		6,989		Non-controlling interests	7,043		6,989
Total equity	Total equity	3,019,156		3,264,326		Total equity	3,238,646		3,264,326
Total liabilities and equity	Total liabilities and equity	$	6,008,909	$	6,076,366	Total liabilities and equity	$	6,074,349	$	6,076,366

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

		For the three months ended March 31,					For the three months ended June 30,		For the six months ended June 30,
		2021		2020					2021		2020		2021		2020
Revenues:	Revenues:							Revenues:
Room	Room	$	53,463	$	177,141			Room	$	108,603	$	10,801	$	162,066	$	187,942
Food and beverage	Food and beverage	14,809		67,092				Food and beverage	31,514		3,089		46,323		70,181
Other operating	Other operating	15,371		24,874				Other operating	23,197		8,702		38,568		33,576
Total revenues	Total revenues	83,643		269,107				Total revenues	163,314		22,592		246,957		291,699
Expenses:	Expenses:							Expenses:
Hotel operating expenses:	Hotel operating expenses:							Hotel operating expenses:
Room	Room	16,710		54,125				Room	28,563		5,430		45,273		59,555
Food and beverage	Food and beverage	10,743		51,859				Food and beverage	22,453		3,707		33,196		55,566
Other direct and indirect	Other direct and indirect	45,228		95,470				Other direct and indirect	56,219		31,448		101,447		126,918
Total hotel operating expenses	Total hotel operating expenses	72,681		201,454				Total hotel operating expenses	107,235		40,585		179,916		242,039
Depreciation and amortization	Depreciation and amortization	55,443		55,828				Depreciation and amortization	54,701		55,520		110,144		111,348
Real estate taxes, personal property taxes, property insurance, and ground rent	Real estate taxes, personal property taxes, property insurance, and ground rent	28,590		29,766				Real estate taxes, personal property taxes, property insurance, and ground rent	29,436		27,460		58,026		57,226
General and administrative	General and administrative	7,646		22,577				General and administrative	9,724		8,216		17,370		30,793
Transaction costs	Transaction costs	111		36				Transaction costs	1		99		112		135
Impairment loss	Impairment loss	14,856		20,570				Impairment loss	0		0		14,856		20,570
(Gain) loss on sale of hotel properties	(Gain) loss on sale of hotel properties	0		(117,448)				(Gain) loss on sale of hotel properties	(64,558)		0		(64,558)		(117,448)
(Gain) loss and other operating expenses	(Gain) loss and other operating expenses	451		1,433				(Gain) loss and other operating expenses	520		1,403		971		2,836
Total operating expenses	Total operating expenses	179,778		214,216				Total operating expenses	137,059		133,283		316,837		347,499
Operating income (loss)	Operating income (loss)	(96,135)		54,891				Operating income (loss)	26,255		(110,691)		(69,880)		(55,800)
Interest expense	Interest expense	(25,331)		(23,591)				Interest expense	(24,804)		(24,091)		(50,135)		(47,682)
Other	Other	29		24				Other	29		303		58		327
Income (loss) before income taxes	Income (loss) before income taxes	(121,437)		31,324				Income (loss) before income taxes	1,480		(134,479)		(119,957)		(103,155)
Income tax (expense) benefit	Income tax (expense) benefit	(3)		10,744				Income tax (expense) benefit	(52)		3,565		(55)		14,309
Net income (loss)	Net income (loss)	(121,440)		42,068				Net income (loss)	1,428		(130,914)		(120,012)		(88,846)
Net income (loss) attributable to non-controlling interests	Net income (loss) attributable to non-controlling interests	(858)		119				Net income (loss) attributable to non-controlling interests	(102)		(401)		(960)		(282)
Net income (loss) attributable to the Company	Net income (loss) attributable to the Company	(120,582)		41,949				Net income (loss) attributable to the Company	1,530		(130,513)		(119,052)		(88,564)
Distributions to preferred shareholders	Distributions to preferred shareholders	(8,139)		(8,139)				Distributions to preferred shareholders	(10,094)		(8,139)		(18,233)		(16,278)

Net income (loss) attributable to common shareholders	Net income (loss) attributable to common shareholders	$	(128,721)	$	33,810			Net income (loss) attributable to common shareholders	$	(8,564)	$	(138,652)	$	(137,285)	$	(104,842)
Net income (loss) per share available to common shareholders, basic	Net income (loss) per share available to common shareholders, basic	$	(0.98)	$	0.26			Net income (loss) per share available to common shareholders, basic	$	(0.07)	$	(1.06)	$	(1.05)	$	(0.80)
Net income (loss) per share available to common shareholders, diluted	Net income (loss) per share available to common shareholders, diluted	$	(0.98)	$	0.26			Net income (loss) per share available to common shareholders, diluted	$	(0.07)	$	(1.06)	$	(1.05)	$	(0.80)
Weighted-average number of common shares, basic	Weighted-average number of common shares, basic	130,775,873		130,555,846				Weighted-average number of common shares, basic	130,813,521		130,563,831		130,794,801		130,559,838
Weighted-average number of common shares, diluted	Weighted-average number of common shares, diluted	130,775,873		130,678,908				Weighted-average number of common shares, diluted	130,813,521		130,563,831		130,794,801		130,559,838

Table of Contents


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 March 31,					For the three months ended June 30,		For the six months ended June 30,
		2021		2020					2021		2020		2021		2020

Comprehensive Income:	Comprehensive Income:							Comprehensive Income:
Net income (loss)	Net income (loss)	$	(121,440)	$	42,068			Net income (loss)	$	1,428	$	(130,914)	$	(120,012)	$	(88,846)
Other comprehensive income (loss):	Other comprehensive income (loss):							Other comprehensive income (loss):
Change in fair value of derivative instruments	Change in fair value of derivative instruments	9,736		(57,474)				Change in fair value of derivative instruments	(2,310)		(7,945)		7,426		(65,419)
Amounts reclassified from other comprehensive income	Amounts reclassified from other comprehensive income	6,418		3,209				Amounts reclassified from other comprehensive income	6,407		7,540		12,825		10,749
Comprehensive income (loss)	Comprehensive income (loss)	(105,286)		(12,197)				Comprehensive income (loss)	5,525		(131,319)		(99,761)		(143,516)
Comprehensive income (loss) attributable to non-controlling interests	Comprehensive income (loss) attributable to non-controlling interests	(752)		(35)				Comprehensive income (loss) attributable to non-controlling interests	(76)		(402)		(828)		(437)
Comprehensive income (loss) attributable to the Company	Comprehensive income (loss) attributable to the Company	$	(104,534)	$	(12,162)			Comprehensive income (loss) attributable to the Company	$	5,601	$	(130,917)	$	(98,933)	$	(143,079)

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

Table of Contents


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

		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		20,400,000	$	204	130,484,956	$	1,305			$	4,069,410					$	(24,715)					$	(424,996)				$	3,621,208		$	10,728			$	3,631,936

																													For the three months ended June 30, 2021

																													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 March 31, 2021																										Balance at March 31, 2021			20,400,000			$	204			130,812,917	$	1,308			$	4,038,860					$	(43,917)			$	(983,771)			$	3,012,684			$	6,472	$	3,019,156
Issuance of shares, net of offering costs	Issuance of shares, net of offering costs	—	—		—	—		(85)				—		—				(85)		—				(85)		Issuance of shares, net of offering costs			9,200,000			92				—	—		222,248				—		—				222,340				—				222,340

Issuance of common shares for Board of Trustees compensation		—	—		23,528	1		636				—		—				637		—				637
Repurchase of common shares		—	—		(47,507)	(1)		(1,254)				—		—				(1,255)		—				(1,255)

Share-based compensation	Share-based compensation	—	—		102,249	1		7,020				—		—				7,021		10,616				17,637		Share-based compensation			—			—				833	—		2,365				—		—				2,365				698				3,063
Distributions on common shares/units	Distributions on common shares/units	—	—		—	—		—				—		(764)				(764)		(4)				(768)		Distributions on common shares/units			—			—				—	—		—				—		(1,319)				(1,319)				(25)				(1,344)
Distributions on preferred shares	Distributions on preferred shares	—	—		—	—		—				—		(8,139)				(8,139)		—				(8,139)		Distributions on preferred shares			—			—				—	—		—				—		(10,094)				(10,094)				—				(10,094)

Other comprehensive income (loss):	Other comprehensive income (loss):																									Other comprehensive income (loss):
Change in fair value of derivative instruments	Change in fair value of derivative instruments	—	—		—	—		—				(57,474)		—				(57,474)		—				(57,474)		Change in fair value of derivative instruments			—			—				—	—		—				(2,310)		—				(2,310)				—				(2,310)
Amounts reclassified from other comprehensive income	Amounts reclassified from other comprehensive income	—	—		—	—		—				3,209		—				3,209		—				3,209		Amounts reclassified from other comprehensive income			—			—				—	—		—				6,407		—				6,407				—				6,407

Net income (loss)	Net income (loss)	—	—		—	—		—				—		41,949				41,949		119				42,068		Net income (loss)			—			—				—	—		—				—		1,530				1,530				(102)				1,428
Balance at March 31, 2020		20,400,000	$	204	130,563,226	$	1,306	$	4,075,727			$	(78,980)	$	(391,950)			$	3,606,307	$	21,459			$	3,627,766
Balance at June 30, 2021																										Balance at June 30, 2021			29,600,000			$	296			130,813,750	$	1,308	$	4,263,473			$	(39,820)	$	(993,654)			$	3,231,603			$	7,043			$	3,238,646

Table of Contents


		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					For the three months ended June 30, 2020
		Shares	Amount		Shares	Amount														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
Balance at December 31, 2020		20,400,000	$	204	130,673,300	$	1,307			$	4,169,870					$	(60,071)				$			(853,973)			$	3,257,337		$	6,989	$	3,264,326
																														Shares		Amount				Shares						Amount						Additional Paid-In Capital				Accumulated Other Comprehensive Income (Loss)			Distributions in Excess of Retained Earnings			Total Shareholders' Equity	Non-Controlling Interests	Total Equity
Balance at March 31, 2020																												Balance at March 31, 2020		20,400,000		$	204		130,563,226			$	1,306
Issuance of shares, net of offering costs	Issuance of shares, net of offering costs	—	—		—	—		(10)				—		—				(10)				—			(10)			Issuance of shares, net of offering costs		—		—			—			—			(9)			—			—				(9)			—			(9)

Issuance of common shares for Board of Trustees compensation		—	—		27,711	1		515				—		—				516				—			516
Repurchase of common shares		—	—		(38,310)	(1)		(719)				—		—				(720)				—			(720)

Share-based compensation	Share-based compensation	—	—		150,216	1		3,278				—		—				3,279				349			3,628			Share-based compensation		—		—			834			—			1,779			—			—			1,779			—			1,779
Distributions on common shares/units	Distributions on common shares/units	—	—		—	—		—				—		(1,077)				(1,077)				(8)			(1,085)			Distributions on common shares/units		—		—			—			—			—			—			(1,312)			(1,312)			(20)			(1,332)
Distributions on preferred shares	Distributions on preferred shares	—	—		—	—		—				—		(8,139)				(8,139)				—			(8,139)			Distributions on preferred shares		—		—			—			—			—			—			(8,139)			(8,139)			—			(8,139)

Cumulative effect adjustment from adoption of new accounting standard		—	—		—	—		(113,099)				—		—				(113,099)				—			(113,099)
Purchases of capped calls in connection with convertible senior notes		—	—		—	—		(20,975)				—		—				(20,975)				—			(20,975)

Other comprehensive income (loss):	Other comprehensive income (loss):																											Other comprehensive income (loss):
Change in fair value of derivative instruments	Change in fair value of derivative instruments	—	—		—	—		—				9,736		—				9,736				—			9,736			Change in fair value of derivative instruments		—		—			—			—			—			(7,945)			—			(7,945)			—			(7,945)
Amounts reclassified from other comprehensive income	Amounts reclassified from other comprehensive income	—	—		—	—		—				6,418		—				6,418				—			6,418			Amounts reclassified from other comprehensive income		—		—			—			—			—			7,540			—			7,540			—			7,540

Net income (loss)	Net income (loss)	—	—		—	—		—				—		(120,582)				(120,582)				(858)			(121,440)			Net income (loss)		—		—			—			—			—			—			(130,513)			(130,513)			(401)			(130,914)
Balance at March 31, 2021		20,400,000	$	204	130,812,917	$	1,308	$	4,038,860			$	(43,917)	$	(983,771)			$	3,012,684			$	6,472		$	3,019,156
Balance at June 30, 2020																												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

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	For the six months ended June 30, 2021
	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, 2020	20,400,000	$	204	130,673,300	$	1,307	$	4,169,870	$	(60,071)	$	(853,973)	$	3,257,337	$	6,989	$	3,264,326
Issuance of shares, net of offering costs	9,200,000	92		—	—		222,238		—		—		222,330		—		222,330

Issuance of common shares for Board of Trustees compensation	—	—		27,711	1		515		—		—		516		—		516
Repurchase of common shares	—	—		(38,310)	(1)		(719)		—		—		(720)		—		(720)
Share-based compensation	—	—		151,049	1		5,643		—		—		5,644		1,047		6,691
Distributions on common shares/units	—	—		—	—		—		—		(2,396)		(2,396)		(33)		(2,429)
Distributions on preferred shares	—	—		—	—		—		—		(18,233)		(18,233)		—		(18,233)

Cumulative effect adjustment from adoption of new accounting standard	—	—		—	—		(113,099)		—		—		(113,099)		—		(113,099)
Purchases of capped calls in connection with convertible senior notes	—	—		—	—		(20,975)		—		—		(20,975)		—		(20,975)
Other comprehensive income (loss):
Change in fair value of derivative instruments	—	—		—	—		—		7,426		—		7,426		—		7,426
Amounts reclassified from other comprehensive income	—	—		—	—		—		12,825		—		12,825		—		12,825

Net income (loss)	—	—		—	—		—		—		(119,052)		(119,052)		(960)		(120,012)
Balance at June 30, 2021	29,600,000	$	296	130,813,750	$	1,308	$	4,263,473	$	(39,820)	$	(993,654)	$	3,231,603	$	7,043	$	3,238,646

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	For the six months ended June 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	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	—	—		—	—		(94)		—		—		(94)		—		(94)

Issuance of common shares for Board of Trustees compensation	—	—		23,528	1		636		—		—		637		—		637
Repurchase of common shares	—	—		(47,507)	(1)		(1,254)		—		—		(1,255)		—		(1,255)
Share-based compensation	—	—		103,083	1		8,799		—		—		8,800		10,616		19,416
Distributions on common shares/units	—	—		—	—		—		—		(2,076)		(2,076)		(24)		(2,100)
Distributions on preferred shares	—	—		—	—		—		—		(16,278)		(16,278)		—		(16,278)




Change in fair value of derivative instruments	—	—		—	—		—		(65,419)		—		(65,419)		—		(65,419)
Amounts reclassified from other comprehensive income	—	—		—	—		—		10,749		—		10,749		—		10,749

Net income (loss)	—	—		—	—		—		—		(88,564)		(88,564)		(282)		(88,846)
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

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

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Pebblebrook Hotel Trust Consolidated Statements of Cash Flows (In thousands) (Unaudited)	Pebblebrook Hotel Trust Consolidated Statements of Cash Flows (In thousands) (Unaudited)					Pebblebrook Hotel Trust Consolidated Statements of Cash Flows (In thousands) (Unaudited)
		For the three months ended March 31,					For the six months ended June 30,
		2021		2020					2021		2020
Operating activities:	Operating activities:							Operating activities:
Net income (loss)	Net income (loss)	$	(121,440)	$	42,068			Net income (loss)	$	(120,012)	$	(88,846)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:	Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:							Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	Depreciation and amortization	55,443		55,828				Depreciation and amortization	110,144		111,348
Share-based compensation	Share-based compensation	2,182		17,637				Share-based compensation	5,244		19,416

Amortization of deferred financing costs, non-cash interest and mortgage loan premiums	Amortization of deferred financing costs, non-cash interest and mortgage loan premiums	4,744		3,594				Amortization of deferred financing costs, non-cash interest and mortgage loan premiums	9,068		7,178
(Gain) loss on sale of hotel properties	(Gain) loss on sale of hotel properties	0		(117,448)				(Gain) loss on sale of hotel properties	(64,558)		(117,448)
Impairment loss	Impairment loss	14,856		20,570				Impairment loss	14,856		20,570
Non-cash ground rent	Non-cash ground rent	1,521		1,574				Non-cash ground rent	3,041		3,129
Other	Other	69		146				Other	(52)		92
Changes in assets and liabilities:	Changes in assets and liabilities:							Changes in assets and liabilities:
Hotel receivables	Hotel receivables	(6,800)		23,386				Hotel receivables	(17,610)		39,350
Prepaid expenses and other assets	Prepaid expenses and other assets	1,686		(5,200)				Prepaid expenses and other assets	7,315		(1,311)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	35,110		(26,326)				Accounts payable and accrued expenses	38,765		(60,770)
Deferred revenues	Deferred revenues	5,493		(14,337)				Deferred revenues	11,516		(19,290)
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	(7,136)		1,492				Net cash provided by (used in) operating activities	(2,283)		(86,582)
Investing activities:	Investing activities:							Investing activities:

Improvements and additions to hotel properties	Improvements and additions to hotel properties	(9,623)		(50,099)				Improvements and additions to hotel properties	(26,984)		(89,636)

Proceeds from sales of hotel properties	Proceeds from sales of hotel properties	0		320,036				Proceeds from sales of hotel properties	171,988		320,036

Deposits on hotel properties								Deposits on hotel properties	(17,148)		0
Purchase of corporate office equipment, software, and furniture	Purchase of corporate office equipment, software, and furniture	(47)		0				Purchase of corporate office equipment, software, and furniture	(64)		0

Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	(9,670)		269,937				Net cash provided by (used in) investing activities	127,792		230,400
Financing activities:	Financing activities:							Financing activities:

Gross proceeds from issuance of preferred shares								Gross proceeds from issuance of preferred shares	230,000		0
Payment of offering costs — common and preferred shares	Payment of offering costs — common and preferred shares	(10)		(85)				Payment of offering costs — common and preferred shares	(7,670)		(94)
Payment of deferred financing costs	Payment of deferred financing costs	(9,576)		0				Payment of deferred financing costs	(9,611)		(3,618)

Borrowings under revolving credit facilities	Borrowings under revolving credit facilities	0		760,115				Borrowings under revolving credit facilities	0		760,115
Repayments under revolving credit facilities	Repayments under revolving credit facilities	(40,000)		(281,947)				Repayments under revolving credit facilities	(40,000)		(535,115)
Proceeds from debt	Proceeds from debt	263,750		0				Proceeds from debt	268,599		12,965
Repayments of debt	Repayments of debt	(177,000)		0				Repayments of debt	(338,000)		(12,965)
Purchases of capped calls for convertible senior notes	Purchases of capped calls for convertible senior notes	(20,975)		0				Purchases of capped calls for convertible senior notes	(20,975)		0
Repurchases of common shares	Repurchases of common shares	(720)		(1,255)				Repurchases of common shares	(720)		(1,255)

Distributions — common shares/units	Distributions — common shares/units	(1,312)		(50,027)				Distributions — common shares/units	(2,634)		(51,338)
Distributions — preferred shares	Distributions — preferred shares	(8,139)		(8,139)				Distributions — preferred shares	(16,278)		(16,278)

Repayments of refundable membership deposits	Repayments of refundable membership deposits	(880)		(198)				Repayments of refundable membership deposits	(1,510)		(273)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	5,138		418,464				Net cash provided by (used in) financing activities	61,201		152,144
Net change in cash and cash equivalents and restricted cash	Net change in cash and cash equivalents and restricted cash	(11,668)		689,893				Net change in cash and cash equivalents and restricted cash	186,710		295,962
Cash and cash equivalents and restricted cash, beginning of year	Cash and cash equivalents and restricted cash, beginning of year	136,300		56,875				Cash and cash equivalents and restricted cash, beginning of year	136,300		56,875
Cash and cash equivalents and restricted cash, end of period	Cash and cash equivalents and restricted cash, end of period	$	124,632	$	746,768			Cash and cash equivalents and restricted cash, end of period	$	323,010	$	352,837

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

810

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 ~~March 31,~~June 30, 2021, the Company owned 5351 hotels with a total of ~~13,236~~12,626 guest rooms. The hotels are located in the following markets: Boston, Massachusetts; Chicago, Illinois; Key West, Florida; Miami (Coral Gables), Florida; Los Angeles, California (Beverly Hills, Santa Monica, and West Hollywood); Naples, Florida; ~~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 ~~March 31,~~June 30, 2021, the Company owned 99.3% of the common limited partnership units issued by the Operating Partnership ("common units"). The remaining 0.7% of the common units are owned by the other limited partners of the Operating Partnership. For the Company to maintain its qualification as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"), it cannot operate the hotels it owns. Therefore, the Operating Partnership and its subsidiaries lease the hotel properties to subsidiaries of Pebblebrook Hotel Lessee, Inc. (collectively with its subsidiaries, "PHL"), a taxable REIT subsidiary ("TRS"), which in turn engage third-party eligible independent contractors to manage the hotels. PHL is consolidated into the Company’s financial statements.

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, health official recommendations, corporate policy changes and individual responses, hotel demand was dramatically reduced. In response, the Company implemented significant cost controls, salary reductions and temporarily suspended operations at 47 of its hotels and resorts. In addition, to improve liquidity, the Company raised capital by issuing convertible notes and additional preferred shares. As demand ~~has~~ returned over the past ~~year,~~several months, the result of an increase in vaccinations and corresponding lifting of governmental restrictions and recommendations, the Company reopened ~~the majority of~~ its hotels and resorts. As of ~~March 31,~~June 30, 2021, 4049 of the Company's hotels and resorts were open, with operations remaining suspended at Villa Florence San Francisco on Union Square and Hotel Vitale. Subsequent to June 30, 2021, the Company reopened Villa Florence San Francisco on Union Square and commenced a renovation of Hotel Vitale with the intent to reopen the property at the ~~remaining 13 hotels listed below still temporarily suspended. The Company anticipates reopening additional hotels as demand returns.~~

Property Location
1. Argonaut Hotel (1) San Francisco, CA
2. Harbor Court Hotel San Francisco (1) San Francisco, CA
3. Hotel Vitale San Francisco, CA
4. Hotel Zelos San Francisco (1) San Francisco, CA
5. Hotel Zephyr Fisherman's Wharf (1) San Francisco, CA
6. Hotel Zeppelin San Francisco (1) San Francisco, CA
7. Hotel Zoe Fisherman's Wharf (1) San Francisco, CA
8. The Marker San Francisco (1) San Francisco, CA
9. Sir Francis Drake (2) San Francisco, CA
10. Villa Florence San Francisco on Union Square San Francisco, CA
11. Revere Hotel Boston Common (1) Boston, MA
12. The Westin Michigan Avenue Chicago Chicago, IL
13. The Roger New York New York, NY

~~(1)~~ ~~Hotel reopened~~completion of the renovation in ~~April~~the fourth quarter of 2021.

~~(2)~~ ~~Hotel was sold in April 2021.~~

The COVID-19 pandemic has had a significant negative impact on the Company's operations and financial results to date and the Company expects that it will continue to have a significant negative impact on the Company's results of operations, financial position and cash flow in 2021. The Company cannot estimate when travel demand will fully recover.

~~Table~~ However, leisure travel as a result of ~~Contents~~

pent-up leisure demand has exceeded expectations, particularly at the Company's warmer weather and resort properties.

In February 2021, the Company issued, at a 5.5% premium to par, an additional $250.0 million aggregate principal amount of ~~its~~the convertible notes originally issued in December 2020. In connection with the pricing of the convertible notes, the Company entered into privately negotiated capped call transactions with certain of the underwriters, their respective affiliates and/or other counterparties. The ~~Company used the~~ net proceeds were used to reduce amounts outstanding under the ~~Company’s~~Company's senior unsecured revolving credit facility, ~~and~~ unsecured term loans and for general corporate purposes.

In February 2021, the Company amended the agreements governing its existing credit facilities, term loan facilities and senior notes to, among other items, waive financial covenants through the end of the first quarter of 2022, except for the minimum fixed charge coverage and minimum unsecured interest coverage ratio which were extended through December 31, 2021, and to increase the interest rate spread. ~~Refer to "Note 5. Debt" for~~For additional information regarding these amendments and the convertible ~~notes.~~ notes, see Note 5, Debt.

In May 2021, the Company issued 9,200,000 6.375% Series G Cumulative Redeemable Preferred Shares (the “Shares”) at a public offering price of $25.00 per share for net proceeds of $222.6 million. The Company used the net proceeds to reduce amounts outstanding under the Company’s unsecured term loans and for general corporate purposes.

Based on ~~these~~the amendments ~~and~~described above, expense and cash burn rate reductions, and the ability to raise additional liquidity through equity issuances, the Company believes ~~that~~ it has sufficient liquidity to meet its obligations for the next twelve months.

The Company adopted a staggered return-to-work policy and other physical distancing policies at its corporate office and does not anticipate these policies to have any adverse impact on its ability to continue to operate its business. Transitioning to a hybrid 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. 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, 2020.

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 financial statements to conform to the current year presentation.

Use of Estimates

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

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.

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. See Note 5, Debt, to the accompanying consolidated financial statements for disclosures on the fair value of debt and derivative instruments.

Investment in Hotel Properties

Upon acquiring a business or hotel property, the Company 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 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, including hotel revenues and net operating income, at the respective hotel properties.

Transaction costs ~~related to~~are expensed for acquisitions that are considered business combinations ~~are expensed as incurred~~ and ~~included on the consolidated statements of operations and comprehensive income.~~capitalized for asset acquisitions.

Hotel renovations and replacements of assets that improve or extend the life of the asset are recorded at cost and depreciated over their estimated useful lives. Furniture, fixtures and equipment under finance 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 estimated holding period, future required capital expenditures, and fair values, including consideration of expected terminal 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 Company's board of trustees (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 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.

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.

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. 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 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 REIT taxable income (determined without regard to the deduction for dividends paid and excluding net capital gains) 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, the Company's TRS lessees are 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 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

During the first quarter of 2020, the Financial Accounting Standards Board (" 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.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40), which, among other things, simplifies the accounting for convertible instruments by eliminating the requirement to separate conversion features from the host contract. The new guidance eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. As a result, in more cases, convertible debt will be accounted for as a single instrument. The guidance also removes certain conditions for equity classification related to contracts in an entity’s own equity and requires the application of the if-converted method for calculating diluted earnings per share. Early adoption is permitted for fiscal years beginning after December 15, 2020, including interim periods. The Company early adopted ASU 2020-06 on January 1, 2021. As such, on January 1, 2021, the Company reclassified its equity component of the convertible debt to the liability. Convertible debt is now recorded entirely as a single liability with no portion of the proceeds from the issuance of the convertible debt instrument recorded as attributable to the conversion feature. In addition, the Company ceased recording non-cash interest expense associated with amortization of the debt discount and calculates earnings per share using the if-converted method to the extent those shares are not anti-dilutive.

Note 3. Acquisition and Disposition of Hotel Properties

There were no acquisitions of hotel properties during the three and six months ended ~~March 31,~~June 30, 2021 and 2020.

~~As of March 31, 2021, the Company had entered into an agreement to sell the Sir Francis Drake for $157.6 million. This hotel was designated as held for sale as it met all of~~

The following table sets forth information regarding 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. On April 1, 2021, the Company completed the sale of the Sir Francis Drake.

~~There were no dispositions of hotel properties~~disposition transactions during the ~~three~~six months ended ~~March 31, 2021. During the three months ended March 31,~~June 30, 2021 and 2020 ~~the Company sold 2 hotel properties in a single transaction for an aggregate sales price of $331.0 million.~~ (in thousands):

Hotel Property Name

Location

Sale Date

Sale Price

Sir Francis Drake

San Francisco, CA

April 1, 2021

157,625

The Roger New York

New York, NY

June 10, 2021

19,000

2021 Total

176,625

Sofitel Washington DC Lafayette Square and InterContinental Buckhead Atlanta

Washington, DC / Buckhead, GA

March 6, 2020

331,000

2020 Total

331,000

For the three and six months ended ~~March 31, 2020,~~June 30, 2021, the Company recognized a gain on its dispositions of ~~$117.4~~$64.6 million, which is included in (gain) loss on sale of hotel properties in the accompanying consolidated statements of operations and comprehensive income. For the three and six months ended ~~March 31,~~June 30, 2020, the Company recognized a gain on its dispositions of 0 and $117.4 million, respectively, which is included in (gain) loss on sale of hotel properties in the accompanying consolidated statements of operations and comprehensive income.

For the three and six months ended June 30, 2021 the accompanying consolidated statements of operations and comprehensive income included operating income (loss) of $0.2 million and $(1.3) million, respectively, related to the hotel properties sold. For the three and six months ended June 30, 2020, the accompanying consolidated statements of operations and comprehensive income included operating income (loss) of ~~$4.3~~$(1.0) million and $5.7 million, respectively, related to the hotel properties sold.

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.

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Note 4. Investment in Hotel Properties

Investment in hotel properties as of ~~March 31,~~June 30, 2021 and December 31, 2020 consisted of the following (in thousands):


		March 31, 2021		December 31, 2020			June 30, 2021		December 31, 2020
Land	Land	$	947,263	$	973,848	Land	$	947,275	$	973,848
Buildings and improvements	Buildings and improvements	4,759,264		4,849,644		Buildings and improvements	4,768,376		4,849,644
Furniture, fixtures and equipment	Furniture, fixtures and equipment	499,810		515,975		Furniture, fixtures and equipment	501,386		515,975
Finance lease asset	Finance lease asset	114,835		114,835		Finance lease asset	91,181		114,835
Construction in progress	Construction in progress	4,546		5,443		Construction in progress	4,913		5,443
		$	6,325,718	$	6,459,745		$	6,313,131	$	6,459,745
Right-of-use asset, operating leases	Right-of-use asset, operating leases	318,944		320,564		Right-of-use asset, operating leases	317,322		320,564
Investment in hotel properties	Investment in hotel properties	$	6,644,662	$	6,780,309	Investment in hotel properties	$	6,630,453	$	6,780,309
Less: Accumulated depreciation	Less: Accumulated depreciation	(912,935)		(898,287)		Less: Accumulated depreciation	(962,746)		(898,287)
Investment in hotel properties, net	Investment in hotel properties, net	$	5,731,727	$	5,882,022	Investment in hotel properties, net	$	5,667,707	$	5,882,022

The Company reviews its investment in hotel properties for impairment whenever events or circumstances indicate potential impairment. As a result of the ongoing effects of the COVID-19 pandemic on its expected future operating cash flows and estimated hold periods for certain properties, the Company determined certain impairment triggers had occurred and therefore, the Company assessed its investment in hotel properties for recoverability. Based on the analyses performed, for the ~~three~~six months ended ~~March 31,~~June 30, 2021, the Company recognized an impairment loss of $14.9 million related to 1 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 using information from current marketing efforts for this property. For the ~~three~~six months ended ~~March 31,~~June 30, 2020, the Company recognized an impairment loss of $20.6 million related to a retail

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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.

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 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, Commitments and Contingencies, for additional information about the ground leases. The right-of-use assets and liabilities are amortized to ground rent expense over the term of the underlying lease agreements. As of ~~March 31,~~June 30, 2021, the Company's lease liabilities consisted of operating lease liabilities of ~~$254.8~~$254.6 million and financing lease liabilities of ~~$46.5~~$41.7 million. As of December 31, 2020, the Company's lease liabilities consisted of operating lease liabilities of $255.1 million and financing lease liabilities of $46.4 million. The financing lease liabilities are included in accounts payable, accrued expenses and other liabilities on the Company's accompanying consolidated balance sheets.

Note 5. Debt

On February 18, 2021, the Company amended its credit agreements and related documents governing its unsecured revolving credit facilities, term loan agreements and senior notes, which:

•extended the waiver period for financial covenants through the end of the first quarter of 2022 except for the minimum fixed charge coverage and the minimum unsecured interest coverage ratio which are extended through December 31, 2021. The covenants are substantially less restrictive through a phase-in period;

•extended the majority of the remaining balance of the Company's Sixth Term Loan 2021 tranche, from November 2021 to November 2022;

•increased the spread on the unsecured revolving credit facility to LIBOR plus 2.4% and unsecured term loans to LIBOR plus 2.35%;

•increased the fixed rate on the Senior Unsecured Notes by 0.45% during the waiver period; and

•extended other terms through the waiver period.

1416

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The Company's debt consisted of the following as of ~~March 31,~~June 30, 2021 and December 31, 2020 (dollars in thousands):


						Balance Outstanding as of								Balance Outstanding as of
		Interest Rate		Maturity Date		March 31, 2021		December 31, 2020			Interest Rate		Maturity Date	June 30, 2021		December 31, 2020
Revolving credit facilities	Revolving credit facilities									Revolving credit facilities
Senior unsecured credit facility	Senior unsecured credit facility	Floating	(1)	January 2022		$	0	$	40,000	Senior unsecured credit facility	Floating	(1), (2)	January 2022	$	0	$	40,000
PHL unsecured credit facility	PHL unsecured credit facility	Floating	(2)	January 2022		0		0		PHL unsecured credit facility	Floating	(3)	January 2022	0		0
Total revolving credit facilities	Total revolving credit facilities					$	0	$	40,000	Total revolving credit facilities				$	0	$	40,000

Unsecured term loans	Unsecured term loans									Unsecured term loans
First Term Loan	First Term Loan	Floating	(3)	January 2023		300,000		300,000		First Term Loan	Floating	(4)	January 2023	300,000		300,000
Second Term Loan	Second Term Loan	Floating	(3)	April 2022		45,000		65,000		Second Term Loan	Floating	(4)	April 2022	32,126		65,000
Fourth Term Loan	Fourth Term Loan	Floating	(3)	October 2024		110,000		110,000		Fourth Term Loan	Floating	(4)	October 2024	110,000		110,000
Sixth Term Loan	Sixth Term Loan									Sixth Term Loan
Tranche 2021	Tranche 2021	Floating	(3)	November 2021	(4)	6,720		40,966		Tranche 2021	Floating	(4)	November 2021	4,798		40,966
Tranche 2021 Extended	Tranche 2021 Extended	Floating	(3)	November 2022		140,280		173,034		Tranche 2021 Extended	Floating	(4)	November 2022	100,148		173,034
Tranche 2022	Tranche 2022	Floating	(3)	November 2022		196,000		286,000		Tranche 2022	Floating	(4)	November 2022	139,928		286,000
Tranche 2023	Tranche 2023	Floating	(3)	November 2023		400,000		400,000		Tranche 2023	Floating	(4)	November 2023	400,000		400,000
Tranche 2024	Tranche 2024	Floating	(3)	January 2024		400,000		400,000		Tranche 2024	Floating	(4)	January 2024	400,000		400,000
Total Sixth Term Loan	Total Sixth Term Loan					1,143,000		1,300,000		Total Sixth Term Loan				1,044,874		1,300,000
Total term loans at stated value	Total term loans at stated value					1,598,000		1,775,000		Total term loans at stated value				1,487,000		1,775,000
Deferred financing costs, net	Deferred financing costs, net					(8,248)		(8,455)		Deferred financing costs, net				(6,822)		(8,455)
Total term loans	Total term loans					$	1,589,752	$	1,766,545	Total term loans				$	1,480,178	$	1,766,545

Convertible senior notes	Convertible senior notes									Convertible senior notes
Convertible senior notes	Convertible senior notes	1.75%		December 2026		750,000		500,000		Convertible senior notes	1.75%		December 2026	750,000		500,000
Debt premium (discount), net	Debt premium (discount), net					13,360		(113,099)		Debt premium (discount), net				12,775		(113,099)
Deferred financing costs, net	Deferred financing costs, net					(18,645)		(12,568)		Deferred financing costs, net				(17,835)		(12,568)
Total convertible senior notes	Total convertible senior notes					$	744,715	$	374,333	Total convertible senior notes				$	744,940	$	374,333

Senior unsecured notes	Senior unsecured notes									Senior unsecured notes
Series A Notes	Series A Notes	5.15%	(5)	December 2023		60,000		60,000		Series A Notes	5.15%	(5)	December 2023	47,600		60,000
Series B Notes	Series B Notes	5.38%	(6)	December 2025		40,000		40,000		Series B Notes	5.38%	(6)	December 2025	2,400		40,000
Total senior unsecured notes at stated value	Total senior unsecured notes at stated value					100,000		100,000		Total senior unsecured notes at stated value				50,000		100,000
Deferred financing costs, net	Deferred financing costs, net					(487)		(407)		Deferred financing costs, net				(202)		(407)
Total senior unsecured notes	Total senior unsecured notes					$	99,513	$	99,593	Total senior unsecured notes				$	49,798	$	99,593
Total debt	Total debt					$	2,433,980	$	2,280,471	Total debt				$	2,274,916	$	2,280,471

~~________________________~~______________________

(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) The Company has the option to extend the maturity date to January 2023, pursuant to certain terms and conditions and payment of an extension fee.

(3) 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)~~(4) 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 ~~March 31,~~June 30, 2021, $1.4 billion of the borrowings under the term loan facilities bore an effective weighted-average fixed interest rate of ~~4.13%~~4.12%, after taking into account interest rate swap agreements, and ~~$168.0~~$57.0 million bore an effective weighted-average floating interest rate of ~~2.62%~~2.67%. As of December 31, 2020, $1.4 billion of the borrowings under the term loan facilities bore a weighted-average fixed interest rate of 4.19%, after taking into account interest rate swap agreements, and $345.0 million bore a weighted-average floating interest rate of 2.46%.

(4) ~~In February 2021, the majority of the remaining balance was extended to November 2022.~~

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(5) In February 2021, the interest rate increased from 4.70% to 5.15%. The increased interest rate is effective through the end of the waiver period.

(6) In February 2021, the interest rate increased from 4.93% to 5.38%. The increased interest rate is effective through the end of the waiver ~~period.~~period.

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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 ~~March 31,~~June 30, 2021, the Company had 0 outstanding borrowings, ~~$6.8~~$5.8 million of outstanding letters of credit and borrowing capacity of ~~$643.2~~$644.2 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, or spread. The Company has the ability to further increase the aggregate borrowing capacity under the credit agreement 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 amendments to the credit agreements and related documentation described above, the spread on the borrowings is fixed at 2.40% 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 $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 2.40% 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 ~~March 31,~~June 30, 2021, the Company had 0 borrowings under the PHL Credit Facility and had $25.0 million borrowing capacity remaining available 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 $5.8 million and $6.8 million were outstanding as of ~~March 31,~~June 30, 2021 and December 31, ~~2020.~~2020, respectively.

As of ~~March 31,~~June 30, 2021, the Company was in compliance with 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. Upon completion of the convertible notes offering in February 2021, the Company repaid $177.0 million of the Company's second and sixth term loans. Upon completion of the preferred equity offering in May 2021, the Company repaid $111.0 million of the Company's second and sixth term loans. As of ~~March 31,~~June 30, 2021, 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.

Convertible Senior Notes

In December 2020, the Company issued $500.0 million aggregate principal amount of 1.75% Convertible Senior Notes due December 2026 (the "Convertible Notes"). The net proceeds from this offering of the Convertible Notes were approximately $487.3 million after deducting the underwriting fees and other expenses paid by the Company.

In February 2021, the Company issued an additional $250.0 million aggregate principal amount of Convertible Notes. These additional Convertible Notes were sold at a 5.5% premium to par and generated net proceeds of approximately $257.2 million after deducting the underwriting fees and other expenses paid by the Company of $6.5 million, which was offset by a premium received in the amount of $13.8 million.

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mature on December 15, 2026. The Company recorded coupon interest expense of ~~$2.8~~$3.3 million and $6.1 million for the three and six months ended ~~March 31,~~June 30, 2021.

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The Company separated the Convertible Notes issued in December 2020 into liability and equity components. The initial carrying amount of the liability component was $386.1 million and was calculated using a discount rate of 6.25%. The discount rate was based on the terms of debt instruments that were similar to the Convertible Notes. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the principal amount of such Convertible Notes, or $113.9 million. The amount recorded in equity was not subject to remeasurement or amortization. The $113.9 million also represented the initial discount recorded on the Convertible Notes. The Company early adopted ASU 2020-06 on January 1, 2021. As a result, the Convertible Notes are now recorded as a single liability with no portion recorded in equity. The Company also ceased recording non-cash interest expense associated with amortization of the debt discount.

Prior to June 15, 2026, the Convertible Notes will be convertible only upon certain circumstances. On and after June 15, 2026, holders may convert any of their Convertible Notes into the Company’s common shares of beneficial interest (“common shares”) at the applicable conversion rate at any time at their election two days prior to the maturity date. The initial conversion rate is 39.2549 common shares per $1,000 principal amount of Convertible Notes, which represents an initial conversion price of approximately $25.47 per share. The conversion rate is subject to adjustment in certain circumstances. As of ~~March 31,~~June 30, 2021 and December 31, 2020, the if-converted value of the Convertible Notes did not exceed the principal amount.

The Company may redeem for cash all or a portion of the Convertible Notes, at its option, on or after December 20, 2023 upon certain circumstances. The redemption price will be equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If certain make-whole fundamental changes occur, the conversion rate for the Convertible Notes may be increased.

In connection with the Convertible Notes issuances, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain of the underwriters of the offerings of the Convertible Notes or their respective affiliates and other financial institutions (the “Capped Call Counterparties”). The Capped Call Transactions initially cover, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes, the number of common shares underlying the Convertible Notes. The Capped Call Transactions are expected generally to reduce the potential dilution to holders of common shares upon conversion of the Convertible Notes and/or offset the potential cash payments that the Company could be required to make in excess of the principal amount of any converted Convertible Notes upon conversion thereof, with such reduction and/or offset subject to a cap. The upper strike price of the Capped Call Transactions is $33.0225 per share. The cost of the Capped Call Transactions entered into in December 2020 and February 2021 was $38.3 million and $21.0 million, respectively, and was recorded within additional paid-in capital.

Senior Unsecured Notes

The Company has ~~$60.0~~$47.6 million of senior unsecured notes outstanding bearing a fixed interest rate of 4.70% per annum and maturing in December 2023 (the "Series A Notes") and ~~$40.0~~$2.4 million of senior unsecured notes outstanding bearing a fixed interest rate of 4.93% per annum and maturing in December 2025 (the "Series B Notes"). As a result of the amendments described above, the interest rates of the Series A Notes and the Series B Notes are fixed at 5.15% and 5.38%, respectively, for the duration of the waiver period. 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 ~~March 31,~~June 30, 2021, the Company was in compliance with all such debt covenants.

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Interest Expense

The components of the Company's interest expense consisted of the following for the three and six months ended June 30, 2021 and 2020 (in thousands):


		For the three months ended March 31,				For the three months ended June 30,		For the six months ended June 30,
		2021		2020				2021		2020		2021		2020
Unsecured revolving credit facilities	Unsecured revolving credit facilities	$	561	$	2,305		Unsecured revolving credit facilities	$	507	$	3,364	$	1,068	$	5,669
Unsecured term loan facilities	Unsecured term loan facilities	15,909		17,152			Unsecured term loan facilities	15,632		16,484		31,541		33,636
Convertible senior notes	Convertible senior notes	2,819		0			Convertible senior notes	3,280		0		6,099		0
Senior unsecured notes	Senior unsecured notes	1,252		1,198			Senior unsecured notes	1,020		1,198		2,272		2,396

Amortization of deferred financing fees	Amortization of deferred financing fees	2,659		1,190			Amortization of deferred financing fees	2,709		1,190		5,368		2,380
Other	Other	2,131		1,746			Other	1,656		1,855		3,787		3,601
Total interest expense	Total interest expense	$	25,331	$	23,591		Total interest expense	$	24,804	$	24,091	$	50,135	$	47,682

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

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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 convertible senior notes) as of ~~March 31,~~June 30, 2021 and December 31, 2020 was ~~$684.3~~$642.4 million and $491.8 million, respectively.

Derivative and Hedging Activities

The Company enters into interest rate swap agreements to hedge against interest rate fluctuations. All of the Company's interest rate swaps are cash flow hedges. All unrealized gains and losses on these hedging instruments are reported in accumulated other comprehensive income (loss) and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

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The Company's interest rate swaps at ~~March 31,~~June 30, 2021 and December 31, 2020 consisted of the following, by maturity date (dollars in thousands):

Notional Value as of
Hedge Type Interest Rate Maturity March 31, 2021 December 31, 2020
Swap - cash flow 1.74% January 2021 0 75,000
Swap - cash flow 1.75% January 2021 0 50,000
Swap - cash flow 1.53% January 2021 0 37,500
Swap - cash flow 1.53% January 2021 0 37,500
Swap - cash flow 1.46% January 2021 0 100,000
Swap - cash flow 1.47% January 2021 0 47,500
Swap - cash flow 1.47% January 2021 0 47,500
Swap - cash flow 1.47% January 2021 0 47,500
Swap - cash flow 1.47% January 2021 0 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% January 2022 100,000 100,000
Swap - cash flow 1.78% January 2022 50,000 50,000
Swap - cash flow 1.79% 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 0.17% January 2023 100,000 0
Swap - cash flow 0.17% January 2023 50,000 0
Swap - cash flow 0.17% January 2023 25,000 0
Swap - cash flow 0.17% January 2023 25,000 0
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 75,000
Swap - cash flow 2.60% January 2024 50,000 50,000
Swap - cash flow 2.60% January 2024 25,000 25,000
Swap - cash flow 2.60% January 2024 75,000 75,000
Swap - cash flow 2.60% January 2024 75,000 75,000
Swap - cash flow 1.43% February 2026 150,000 0
Swap - cash flow 1.44% February 2026 50,000 0
Swap - cash flow 1.44% February 2026 50,000 0
Swap - cash flow 1.44% February 2026 40,000 0
Total $ 1,430,000 $ 1,430,000


			Aggregate Notional Value as of
Hedge Type	Interest Rate Range	Maturity	June 30, 2021		December 31, 2020
Swap-cash flow	1.46% - 1.75%	January 2021	$	0	$	490,000
Swap-cash flow	2.60%	October 2021	110,000		110,000
Swap-cash flow	1.78% - 1.79%	January 2022	180,000		180,000
Swap-cash flow	1.64% - 1.68%	April 2022	100,000		100,000
Swap-cash flow	0.17%	January 2023	200,000		0
Swap-cash flow	1.99%	November 2023	250,000		250,000
Swap-cash flow	2.60%	January 2024	300,000		300,000
Swap-cash flow	1.43% - 1.44%	February 2026	290,000		0
Total			$	1,430,000	$	1,430,000

During the ~~three~~six months ended ~~March 31,~~June 30, 2021, the Company had interest ~~rates~~rate swaps for an aggregate notional amount of $490.0 million that became effective as other interest rate swaps matured. As of ~~March 31,~~June 30, 2021, there are no additional interest rate swaps outstanding that will become effective in the future. 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/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

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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.

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As of ~~March 31,~~June 30, 2021, the Company's derivative instruments were in both asset and liability positions, with aggregate asset and liability fair values of $0.1 million and ~~$42.6~~$38.9 million, respectively, which are included in prepaid expenses and other assets and accounts payable, accrued expenses and other liabilities, respectively, in the accompanying consolidated balance sheets. The Company expects approximately ~~$22.7~~$20.6 million will be reclassified from accumulated other comprehensive income (loss) to interest expense within the next 12 months.

Note 6. Revenue

The Company presents revenue on a disaggregated basis in the accompanying consolidated statements of operations and comprehensive income. The following table presents revenues by geographic location for the three and six months ended ~~March 31,~~June 30, 2021 and 2020 (in thousands):


		For the three months ended March 31,				For the three months ended June 30,		For the six months ended June 30,
		2021		2020				2021		2020		2021		2020
Southern FL	Southern FL	$	35,244	$	35,191		Southern FL	$	38,729	$	6,744	$	73,973	$	41,935
San Diego, CA	San Diego, CA	14,678		41,679			San Diego, CA	41,466		5,815		56,144		47,494
Boston, MA	Boston, MA	9,757		35,942			Boston, MA	23,455		1,965		33,212		37,907
Los Angeles, CA	Los Angeles, CA	8,040		34,788			Los Angeles, CA	21,741		1,501		29,781		36,289
Portland, OR	Portland, OR	5,782		15,648			Portland, OR	12,142		1,086		17,924		16,734
San Francisco, CA							San Francisco, CA	9,176		2,963		12,129		63,003
Other(1)	Other(1)	2,975		20,311			Other(1)	6,629		389		9,604		20,700
San Francisco, CA		2,953		60,040
Washington, D.C.	Washington, D.C.	1,902		10,909			Washington, D.C.	4,264		94		6,166		11,003
Chicago, IL	Chicago, IL	1,824		10,273			Chicago, IL	4,274		2,000		6,098		12,273
Seattle, WA	Seattle, WA	488		4,326			Seattle, WA	1,438		35		1,926		4,361
		$	83,643	$	269,107			$	163,314	$	22,592	$	246,957	$	291,699

(1) Other includes: Atlanta (Buckhead), GA, Nashville, TN, New York, 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 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 par value per share (“common shares”).~~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 ~~three~~six months ended ~~March 31,~~June 30, 2021, the Company had 0 repurchases under this program and as of ~~March 31,~~June 30, 2021, $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.

On April 29, 2021, the Company filed a prospectus supplement with the SEC to sell up to $200.0 million of common shares under an "at the market" offering program (the "ATM program"). NaN common shares were issued or sold under the ATM program during the six months ended June 30, 2021. As of June 30, 2021, $200.0 million of common shares remained available for issuance under the ATM program.

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Common Dividends

The Company declared the following dividends on common shares/units for the ~~three~~six months ended ~~March 31,~~June 30, 2021:

Dividend per
Share/Unit

For the Quarter
Ended

Record Date

Payable Date

0.01

March 31, 2021

April 15, 2021

0.01

June 30, 2021

July 15, 2021

Preferred Shares

The Company is authorized to issue up to 100,000,000 preferred shares of beneficial interest, $0.01 par value per share (“preferred shares”). In May 2021, we issued 9,200,000 6.375% Series G Cumulative Redeemable Preferred Shares at a public offering price of $25.00 per share for net proceeds of $222.6 million.

The following Preferred Shares were outstanding as of ~~March 31,~~June 30, 2021 and December 31, 2020:


Security Type	Security Type	March 31, 2021	December 31, 2020	Security Type	June 30, 2021	December 31, 2020
6.50% Series C	6.50% Series C	5,000,000	5,000,000	6.50% Series C	5,000,000	5,000,000
6.375% Series D	6.375% Series D	5,000,000	5,000,000	6.375% Series D	5,000,000	5,000,000
6.375% Series E	6.375% Series E	4,400,000	4,400,000	6.375% Series E	4,400,000	4,400,000
6.30% Series F	6.30% Series F	6,000,000	6,000,000	6.30% Series F	6,000,000	6,000,000
6.375% Series G				6.375% Series G	9,200,000	0
		20,400,000	20,400,000		29,600,000	20,400,000

The Series C Preferred Shares, Series D Preferred Shares, Series E Preferred Shares, Series F Preferred Shares and Series FG 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~~could 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~~could not redeem the Series F Preferred Shares prior to May 25, 2021, and may not redeem the Series G Preferred Shares prior to May 13, 2026, 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,~~13, 2026, the Company may, at its option, redeem the Series FG Preferred Shares, ~~and Series D Preferred Shares, respectively,~~ and at any time the Company may, at its option, redeem the Series C Preferred Shares, orthe Series D Preferred Shares, the Series E Preferred Shares ~~or both,~~and the Series F Preferred Shares, in each case in whole or from time to time in part, by payment of $25.00 per share, plus any accumulated, accrued and unpaid distributions through the date of redemption. Upon the occurrence of a change of control, as defined in the Company's declaration of trust, the result of which the ~~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 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, and on each Series G Preferred Share is 2.1231 common shares.

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Preferred Dividends

The Company declared the following dividends on preferred shares for the ~~three~~six months ended ~~March 31,~~June 30, 2021:

Security Type

Dividend per
Share/Unit

For the Quarter
Ended

Record Date

Payable Date

6.50% Series C

0.41

March 31, 2021

April 15, 2021

6.50% Series C

0.41

June 30, 2021

July 15, 2021

6.375% Series D

0.40

March 31, 2021

April 15, 2021

6.375% Series D

0.40

June 30, 2021

July 15, 2021

6.375% Series E

0.40

March 31, 2021

April 15, 2021

6.375% Series E

0.40

June 30, 2021

July 15, 2021

6.30% Series F

0.39

March 31, 2021

April 15, 2021

6.30% Series F

0.39

June 30, 2021

July 15, 2021

The initial dividend for the 6.375% Series G Preferred Shares will be paid in October 2021.

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 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 ~~March 31,~~June 30, 2021, the Operating Partnership had 2 classes of long-term incentive partnership units ("LTIP") units, LTIP Class A units and LTIP Class B units. All of the outstanding LTIP units are held by officers of the Company.

On February 12, 2020, the Board of Trustees granted 415,818 LTIP Class B units to executive officers of the Company. 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.

On February 18, 2021, the Board of Trustees granted an aggregate of 600,097 LTIP Class B units to executive officers of the Company. These LTIP units will vest ratably on January 1, 2023, 2024, 2025 and 2026 contingent upon continued employment with the Company.

As of ~~March 31,~~June 30, 2021 and December 31, 2020, the Operating Partnership had 727,208 and 127,111 LTIP units outstanding, respectively. Of the 727,208 LTIP units outstanding at ~~March 31,~~June 30, 2021, 127,111 LTIP units have vested. Only vested LTIP units may be converted to common units of the Operating Partnership, which in turn can be tendered for redemption as described above.

On November 30, 2018, in connection with the merger with LaSalle Hotel Properties ("LaSalle"), the Company issued 133,605 OP units in the Operating Partnership to third-party limited partners of LaSalle's operating partnership. As of ~~March 31,~~June 30, 2021 and December 31, 2020, the Operating Partnership had 133,605 OP units held by third parties, excluding LTIP units.

Note 8. Share-Based Compensation Plan

Available Shares

The Company maintains the 2009 Equity Incentive Plan, as amended and restated (as amended, the "Plan"), to attract and retain independent trustees, executive officers and other key employees and service providers. ~~The~~On May 19, 2021, the Company’s shareholders approved an amendment to the Plan ~~provides for~~which increased the ~~grant~~aggregate number of ~~options to purchase~~ common shares that may be issued under the Plan as share awards, performance units, options, share appreciation rights ~~performance units~~ and other equity-based ~~awards. Share~~ awards ~~under the Plan vest over a period determined~~ by ~~the Board of Trustees, generally over~~ ~~three~~ to five years. The Company pays or accrues for dividends on share-based awards. All 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.1,675,000. As of ~~March 31,~~June 30, 2021, there were ~~130,439~~1,812,875 common shares available for issuance under the Plan.

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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 ~~March 31,~~June 30, 2021:


		Shares	Weighted-Average Grant Date Fair Value			Shares	Weighted-Average Grant Date Fair Value

Unvested at December 31, 2020	Unvested at December 31, 2020	242,727	$	24.94	Unvested at December 31, 2020	242,727	$	24.94
Granted	Granted	410,838	$	22.69	Granted	410,838	$	22.69
Vested	Vested	(80,758)	$	30.39	Vested	(81,591)	$	30.41
Forfeited	Forfeited	(466)	$	28.17	Forfeited	(7,902)	$	23.33

Unvested at March 31, 2021		572,341	$	22.55
Unvested at June 30, 2021					Unvested at June 30, 2021	564,072	$	22.53

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 six months ended ~~March 31,~~June 30, 2021, ~~and 2020,~~ the Company recognized approximately ~~$0.8~~$1.1 million and ~~$6.1~~$1.9 million, respectively, of share-based compensation expense related to these ~~service condition restricted shares~~awards in the accompanying consolidated statements of operations and comprehensive income. As of March 31, 2021, there was $12.1 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 3.6 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 that were eligible for vesting in January 2016, 2017, 2018, 2019 and 2020. The actual number of common shares that vested was based on 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. Based upon the extent to which the performance criteria had been met, the Company issued 25,134, 12,285, 72,236, 35,471 and 27,881 common shares in January 2016, 2017, 2018, 2019 and 2020, respectively.

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 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. In January 2020, these awards vested and the Company issued 1,972 and 405 common shares to officers and employees, respectively. The actual number of common shares that 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.

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. In January 2021, none of these awards vested and the Company issued no common shares to officers or employees. The actual number of common shares that vested was 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 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.

On February 18, 2021, the Board of Trustees approved a target award of 189,348 performance-based equity awards to officers and employees of the Company. These awards will vest, if at all, in 2024. The actual number of common shares that

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ultimately vest will be from 0% to 200% of the target award and will be determined in 2024 based on the performance criteria defined in the award agreements for the period of performance from January 1, 2021 through December 31, 2023.

~~The grant date fair value~~For the three and six months ended June 30, 2021, the Company recognized approximately $1.3 million and $2.3 million, respectively, of ~~the performance awards, with market conditions, were determined using a Monte Carlo simulation method with the following assumptions (dollars in millions):~~

Performance Award Grant Date Percentage of Total Award Grant Date Fair Value by Component 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 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 100.00% $4.9 23.40% 1.41% 0%
February 18, 2021
Relative Total Shareholder Return 100.00% $6.0 56.00% 0.19% 0%

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,share-based 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~~in the ~~vesting period~~accompanying consolidated statements of operations 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 basis through the vesting date. As of March 31, 2021, there was approximately $9.7 million of unrecognized compensation expense related to these performance-based equity awards which will be recognized over the weighted-average remaining vesting period of 2.2 years. For the three months ended March 31, 2021 and 2020, the Company recognized approximately $1.0 million and $0.9 million, respectively, in expense related to these awards.comprehensive income.

Long-Term Incentive Partnership (LTIP) 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

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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 ~~March 31,~~June 30, 2021, 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 were 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 redeemed for common shares.~~

On February 18, 2021, the Board of Trustees granted 600,097 LTIP Class B units to executive officers of the Company. These LTIP units vest ratably on January 1, 2023, 2024, 2025 and 2026. The fair value of each award was determined based on the closing price of the Company’s common shares on the grant date of $22.69 per unit. The aggregate grant date fair value of the LTIP Class B units was $13.6 million.

For the three and six months ended ~~March 31,~~June 30, 2021, ~~and 2020,~~ the Company recognized approximately ~~$0.3~~$0.7 million and ~~$10.6~~$1.0 million, respectively, in expense related to these ~~LTIP units. As of March 31, 2021, there was $13.3 million of unrecognized share-based compensation expense related to~~ LTIP units. The aggregate expense related to the LTIP unit grants is presented as non-controlling interest in the Company’s accompanying consolidated balance sheets.

Note 9. Income Taxes

PHL is subject to federal and state corporate income taxes at statutory tax rates. Given the continued 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 has recorded a valuation allowance on its income tax benefit for the three and six months ended ~~March 31,~~June 30, 2021, and has recorded a valuation allowance on all deferred tax assets.

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 ~~March 31,~~June 30, 2021 and December 31, 2020, the statute of limitations remains open for all major jurisdictions for tax years dating back to 2016.

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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):


		For the three months ended March 31,				For the three months ended June 30,		For the six months ended June 30,
		2021		2020				2021		2020		2021		2020
Numerator:	Numerator:						Numerator:
Net income (loss) attributable to common shareholders	Net income (loss) attributable to common shareholders	$	(128,721)	$	33,810		Net income (loss) attributable to common shareholders	$	(8,564)	$	(138,652)	$	(137,285)	$	(104,842)
Less: dividends paid on unvested share-based compensation	Less: dividends paid on unvested share-based compensation	(12)		(2)			Less: dividends paid on unvested share-based compensation	(12)		(2)		(23)		(4)
Undistributed earnings attributable to share-based compensation		0		(48)

Net income (loss) available to common shareholders	Net income (loss) available to common shareholders	$	(128,733)	$	33,760		Net income (loss) available to common shareholders	$	(8,576)	$	(138,654)	$	(137,308)	$	(104,846)
Denominator:	Denominator:						Denominator:
Weighted-average number of common shares — basic	Weighted-average number of common shares — basic	130,775,873		130,555,846			Weighted-average number of common shares — basic	130,813,521		130,563,831		130,794,801		130,559,838
Effect of dilutive share-based compensation	Effect of dilutive share-based compensation	0		123,062			Effect of dilutive share-based compensation	0		0		0		0
Weighted-average number of common shares — diluted	Weighted-average number of common shares — diluted	130,775,873		130,678,908			Weighted-average number of common shares — diluted	130,813,521		130,563,831		130,794,801		130,559,838

Net income (loss) per share available to common shareholders — basic	Net income (loss) per share available to common shareholders — basic	$	(0.98)	$	0.26		Net income (loss) per share available to common shareholders — basic	$	(0.07)	$	(1.06)	$	(1.05)	$	(0.80)
Net income (loss) per share available to common shareholders — diluted	Net income (loss) per share available to common shareholders — diluted	$	(0.98)	$	0.26		Net income (loss) per share available to common shareholders — diluted	$	(0.07)	$	(1.06)	$	(1.05)	$	(0.80)

For the three and six months ended ~~March 31,~~June 30, 2021, ~~and 2020, 1,041,130 and 203,152, respectively,~~1,030,676 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 six months ended ~~March 31,~~June 30, 2020, 558,769 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 six months ended June 30, 2021, 29,441,175 common shares underlying the Convertible Notes have been excluded from diluted shares 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. The majority 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 6 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. For the three and six months ended ~~March 31,~~June 30, 2021, combined base and incentive management fees were $4.4 million and $6.7 million, respectively. For the three and six months ended June 30, 2020, combined base and incentive management fees were ~~$2.3~~$(0.4) million and ~~$6.9~~$6.5 million, 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.

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On April 30, 2021, the Company provided a notice of default to sbe concerning the hotel management agreement of the Mondrian Los Angeles. Sbe is refuting the Company’s notice of default and has requested arbitration to cure the alleged default.

Reserve Funds

Certain of the Company’s agreements with its hotel managers, franchisors, ground lessors 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.

Restricted Cash

At ~~March 31,~~June 30, 2021 and December 31, 2020, the Company had ~~$11.3~~$10.9 million and $12.0 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 ~~March 31,~~June 30, 2021, 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)

Restaurant at Southernmost Beach Resort

Operating lease

April 2029

Hyatt Regency Boston Harbor

Operating lease

April 2077

San Diego Mission Bay Resort

Operating lease

July 2068

Paradise Point Resort & Spa

Operating lease

May 2050

Hotel Vitale

Operating lease

March 2070

(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 finance lease

June 2089

(4)

Harbor Court Hotel San Francisco

Finance lease

August 2052

~~The Roger New York~~

~~Finance lease~~

~~December 2044~~

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

(2) The expiration date assumes the exercise of a 14-year extension option.

(3) No payments are required through maturity.

(4) The expiration date assumes the exercise of a 30-year extension option.

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 the 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.

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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 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 six months ended ~~March 31,~~June 30, 2021 and 2020 are as follows (in thousands):


		For the three months ended March 31,				For the three months ended June 30,		For the six months ended June 30,
		2021		2020				2021		2020		2021		2020
Fixed ground rent	Fixed ground rent	$	4,313	$	4,289		Fixed ground rent	$	4,290	$	4,304	$	8,603	$	8,593
Variable ground rent	Variable ground rent	1,496		2,048			Variable ground rent	1,862		696		3,358		$	2,744
Total ground lease rent	Total ground lease rent	$	5,809	$	6,337		Total ground lease rent	$	6,152	$	5,000	$	11,961	$	11,337

Future maturities of lease liabilities for the Company's operating leases at ~~March 31,~~June 30, 2021 were as follows (in thousands):


2021	2021	$	13,903	2021	$	9,278
2022	2022	18,849		2022	18,849
2023	2023	18,034		2023	18,034
2024	2024	18,119		2024	18,119
2025	2025	18,203		2025	18,203
Thereafter	Thereafter	1,127,864		Thereafter	1,127,864
Total lease payments	Total lease payments	$	1,214,972	Total lease payments	$	1,210,347
Less: Imputed interest	Less: Imputed interest	(960,141)		Less: Imputed interest	(955,778)
Present value of lease liabilities	Present value of lease liabilities	$	254,831	Present value of lease liabilities	$	254,569

Litigation

The nature of the operations of hotels exposes the Company's 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 not presently subject to any material litigation nor, to the Company’s knowledge, is any material litigation threatened against the Company.

Note 12. Supplemental Information to Statements of Cash Flows


		For the three months ended March 31,				For the six months ended June 30,
		2021		2020				2021		2020

		(in thousands)				(in thousands)
Interest paid, net of capitalized interest	Interest paid, net of capitalized interest	$	17,438	$	20,300		Interest paid, net of capitalized interest	$	43,373	$	44,184
Interest capitalized	Interest capitalized	$	0	$	680		Interest capitalized	$	0	$	1,247
Income taxes paid (refunded)	Income taxes paid (refunded)	$	(21)	$	(4)		Income taxes paid (refunded)	$	74	$	865
Non-Cash Investing and Financing Activities:	Non-Cash Investing and Financing Activities:						Non-Cash Investing and Financing Activities:
Convertible debt discount adjustment	Convertible debt discount adjustment	$	113,099	$	0		Convertible debt discount adjustment	$	113,099	$	0
Distributions payable on common shares/units	Distributions payable on common shares/units	$	1,524	$	1,746		Distributions payable on common shares/units	$	1,527	$	1,750
Distributions payable on preferred shares	Distributions payable on preferred shares	$	7,558	$	7,558		Distributions payable on preferred shares	$	9,513	$	7,558
Issuance of common shares for Board of Trustees compensation	Issuance of common shares for Board of Trustees compensation	$	516	$	637		Issuance of common shares for Board of Trustees compensation	$	516	$	637
Issuance of common shares for executive and employee bonuses	Issuance of common shares for executive and employee bonuses	$	1,446	$	0		Issuance of common shares for executive and employee bonuses	$	1,446	$	0

Accrued additions and improvements to hotel properties	Accrued additions and improvements to hotel properties	$	1,242	$	7,124		Accrued additions and improvements to hotel properties	$	292	$	4,405

Write-off of deferred financing costs	Write-off of deferred financing costs	$	2,817	$	0		Write-off of deferred financing costs	$	4,516	$	0

Note 13. Subsequent Events

On July 22, 2021, the Company acquired the 200-room Jekyll Island Club Resort located in Jekyll Island, Georgia for $94.0 million.

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On July 27, 2021, the Company issued 10,000,000 of 5.70% Series H Cumulative Redeemable Preferred Shares at a public offering price of $25.00 per share for net proceeds of approximately $242.0 million after underwriting discounts and other offering-related costs.

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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. These factors include, but are not limited 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,~~resorts. Operations have recommenced and are improving, however, if ~~we are unable to recommence operations in the near-term,~~continued improvement is interrupted, 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, natural disasters, 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 U.S. and global economies, the cyclical nature of hotel properties and the real estate industry, including environmental contamination and costs of complying with new or existing laws, including 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 and our ability to complete hotel 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

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•the other factors discussed under the heading "Risk Factors" in Part II, Item 1A of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 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

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, health official recommendations, corporate policy changes and individual responses, hotel demand was dramatically reduced. In response, we implemented significant cost controls and salary reductions and temporarily suspended operations at 47 of our hotels and resorts. In addition, to improve liquidity, we raised capital by issuing convertible notes and additional preferred shares. As demand ~~has~~ returned over the past ~~year,~~several months, the result of an increase in vaccinations and corresponding lifting of governmental restrictions and recommendations, we have reopened ~~the majority of~~ our hotels and resorts. As of ~~March 31,~~June 30, 2021, 4049 of our hotels and resorts were open, with operations remaining suspended at Villa Florence San Francisco on Union Square and Hotel Vitale. Subsequent to June 30, 2021, we re-opened Villa Florence San Francisco on Union Square and commenced a renovation of Hotel Vitale with the intent to reopen the property at the ~~remaining 13 hotels still temporarily suspended. In April 2021, we reopened an additional eight hotels~~completion of the renovation in the fourth quarter of 2021.

The COVID-19 pandemic has had a significant negative impact on our operations and financial results to date and we ~~anticipate reopening additional hotels~~expect that it will continue to have a significant negative impact on our results of operations, financial position and cash flow in 2021. We cannot estimate when travel demand will fully recover. However, leisure travel as a result of pent-up leisure demand ~~returns.~~has exceeded expectations, particularly at our warmer weather and resort properties.

In February 2021, we issued, at a 5.5% premium to par, an additional $250.0 million aggregate principal amount of ~~our 1.75% Convertible Senior Notes due 2026, which we initially~~the convertible notes originally issued in December 2020. In connection with the pricing of the convertible notes, we entered into privately negotiated capped call transactions with certain of the underwriters, their respective affiliates and/or other counterparties. ~~We used the~~The net proceeds were used to reduce amounts outstanding under our senior unsecured revolving credit facility, unsecured term loans and for general corporate purposes.

In February 2021,we amended the agreements governing our existing credit facilities, term loan facilities and senior notes to, among other ~~things, increase the interest rate spread and~~items, waive financial covenants through the end of the first quarter of 2022, except for the minimum fixed charge coverage and minimum unsecured interest coverage ratio which were extended through December 31, ~~2021. Refer~~2021, and to ~~"Note 5. Debt" for~~increase the interest rate spread. For additional information regarding these amendments and the convertible notes, see Note 5, Debt, of the notes to our ~~convertible notes.~~ unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

In May 2021, we issued 9,200,000 6.375% Series G Cumulative Redeemable Preferred Shares at a public offering price of $25.00 per share for net proceeds of $222.6 million. We used the net proceeds to reduce amounts outstanding under our unsecured term loans and for general corporate purposes.

Based on ~~these~~the amendments ~~and~~to our credit agreements described in Note 1, Organization, of the notes to our unaudited financial statements of this Quarterly Report on Form 10-Q, expense and cash burn rate reductions, and our ability to raise additional liquidity through equity issuances, we believe ~~that~~ we ~~will~~ have sufficient liquidity to meet our obligations for the next twelve months.

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" in Part I, Item 2 of this Quarterly Report on Form 10-Q 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 six months ended ~~March 31,~~June 30, 2021 and 2020.

For the three months ended March 31,
2021 2020
Same-Property Occupancy 18.8 % 56.7 %
Same-Property ADR $ 240.27 $ 249.64
Same-Property RevPAR $ 45.28 $ 141.43
Same-Property Total RevPAR $ 70.83 $ 213.13

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	For the three months ended June 30,						For the six months ended June 30,
	2021			2020			2021			2020

Same-Property Occupancy	38.6		%	3.5		%	28.5		%	30.7		%
Same-Property ADR	$	247.46		$	264.01		$	245.05		$	250.45
Same-Property RevPAR	$	95.55		$	9.36		$	69.95		$	76.98
Same-Property Total RevPAR	$	143.59		$	19.45		$	106.54		$	118.61

While the operations of many of our hotels were temporarily suspended beginning in March 2020, the above schedule of hotel results for the three and six months ended ~~March 31,~~June 30, 2021 and 2020 includes information from all hotels owned as of ~~March 31,~~June 30, 2021, except for Hotel Zena Washington DC (formerly Donovan Hotel) ~~for the first quarter in both 2021 and 2020,~~, which was excluded because it was closed during the first and second quarters of 2020 for ~~renovations~~renovations. Sir Francis Drake and The Roger New York were also excluded from the above schedule due to our disposition of these hotels in the ~~first~~second quarter of ~~2020.~~2021.

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 six months ended ~~March 31,~~June 30, 2021 and 2020 (in thousands):


		For the three months ended March 31,				For the three months ended June 30,	For the six months ended June 30,
		2021		2020					2021		2020		2021		2020
Net income (loss)	Net income (loss)	$	(121,440)	$	42,068			Net income (loss)	$	1,428	$	(130,914)	$	(120,012)	$	(88,846)
Adjustments:	Adjustments:							Adjustments:
Depreciation and amortization	Depreciation and amortization	55,333		55,717				Depreciation and amortization	54,589		55,412		109,922		111,129
(Gain) loss on sale of hotel properties	(Gain) loss on sale of hotel properties	—		(117,448)				(Gain) loss on sale of hotel properties	(64,558)		—		(64,558)		(117,448)
Impairment loss	Impairment loss	14,856		20,570				Impairment loss	—		—		14,856		20,570
FFO	FFO	$	(51,251)	$	907			FFO	$	(8,541)	$	(75,502)	$	(59,792)	$	(74,595)
Distribution to preferred shareholders	Distribution to preferred shareholders	(8,139)		(8,139)				Distribution to preferred shareholders	(10,094)		(8,139)		(18,233)		(16,278)
FFO available to common share and unit holders	FFO available to common share and unit holders	$	(59,390)	$	(7,232)			FFO available to common share and unit holders	$	(18,635)	$	(83,641)	$	(78,025)	$	(90,873)

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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), 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).

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The following table reconciles net income (loss) to EBITDA and EBITDAre for the three and six months ended ~~March 31,~~June 30, 2021 and 2020 (in thousands):


		For the three months ended March 31,				For the three months ended June 30,	For the six months ended June 30,
		2021		2020					2021		2020		2021		2020
Net income (loss)	Net income (loss)	$	(121,440)	$	42,068			Net income (loss)	$	1,428	$	(130,914)	$	(120,012)	$	(88,846)
Adjustments:	Adjustments:							Adjustments:
Interest expense	Interest expense	25,331		23,591				Interest expense	24,804		24,091		50,135		47,682
Income tax expense (benefit)	Income tax expense (benefit)	3		(10,744)				Income tax expense (benefit)	52		(3,565)		55		(14,309)
Depreciation and amortization	Depreciation and amortization	55,443		55,828				Depreciation and amortization	54,701		55,520		110,144		111,348
EBITDA	EBITDA	$	(40,663)	$	110,743			EBITDA	$	80,985	$	(54,868)	$	40,322	$	55,875
(Gain) loss on sale of hotel properties	(Gain) loss on sale of hotel properties	—		(117,448)				(Gain) loss on sale of hotel properties	(64,558)		—		(64,558)		(117,448)
Impairment loss	Impairment loss	14,856		20,570				Impairment loss	—		—		14,856		20,570
EBITDAre	EBITDAre	$	(25,807)	$	13,865			EBITDAre	$	16,427	$	(54,868)	$	(9,380)	$	(41,003)

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 ~~March 31,~~June 30, 2021 and 2020, we had 5351 and 54, 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 six months ended ~~March 31,~~June 30, 2021 and 2020. 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

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

Sir Francis Drake

San Francisco, CA

April 1, 2021

The Roger New York

New York, NY

June 10, 2021

Comparison of the three months ended ~~March 31,~~June 30, 2021 to the three months ended ~~March 31,~~June 30, 2020

Revenues — Total hotel revenues ~~decreased~~increased by ~~$185.5~~$140.7 million ~~of which $16.2 million was~~primarily due to an increase in leisure travel demand during the ~~non-comparable properties and the remaining decline was due to the decline~~summer travel season. This increase in demand ~~which began~~was the result of an increase in COVID-19 vaccination rates and corresponding decreases in infection rates and easing of governmental restrictions. Most of our hotels suspended operations in March 2020 ~~as a result of~~and operations remained suspended throughout the COVID-19 pandemic. The decline was partially offset by increases at Southermost Beach Resort, The Marker Key West Harbor Resort and Chaminade Resort & Spa and an increase at Hotel Zena Washington DC (formerly Donovan Hotel), which was closed during the firstsecond quarter of ~~2020 for renovation.~~2020.

Hotel operating expenses — Total hotel operating expenses ~~decreased~~increased by ~~$128.8~~$66.7 million ~~of which $10.9 million was~~primarily due to ~~the non-comparable~~resuming operations at our comparable properties and returning demand in the remaining decline was due to the decline in demand which began in March 2020 as a result of the COVID-19 pandemic. The decline was partially offset by increases at Southermost Beach Resort, The Marker Key West Harbor Resort and Chaminade Resort & Spa and an increase at Hotel Zena Washington DC (formerly Donovan Hotel), which was closed during the firstsecond quarter of ~~2020 for renovation.~~

~~Depreciation and amortization —~~ Depreciation and amortization expense decreased by $0.4 million due primarily to a decrease in assets resulting from the sales of three hotels in 2020, partially offset by an increase in depreciation and amortization expense related to recently renovated hotels.2021.

Real estate taxes, personal property taxes, property insurance and ground rent — Real estate taxes, personal property taxes, property insurance and ground rent ~~decreased~~increased by ~~$1.2~~$2.0 million primarily due to ~~the sales of three hotels in 2020 and a decline~~an increase in percentage ground rent, which is based on a percentage of revenues.

General and administrative — General and administrative expenses ~~decreased~~increased by ~~$14.9~~$1.5 million primarily due to ~~$16.0 million~~an increase in share-based compensation ~~costs relating to the cancellation~~expense of ~~the retention LTIP unit awards and time-based service~~

~~condition awards in 2020.~~$1.3 million. General and administrative expenses consist of employee compensation costs, legal and professional fees, insurance and other expenses.

~~Transaction costs —~~ ~~Transaction costs remained consistent compared to the prior year.~~

~~Impairment loss —~~ Impairment loss decreased by $5.7 million. For the three months ended March 31, 2021, we recognized an impairment loss of $14.9 million related to one hotel. For the three months ended March 31, 2020, we recognized an impairment loss of $20.6 million related to a retail component of a hotel.

(Gain) loss on sale of hotel properties — Gain on sale of hotel properties was $117.4 million in 2020 as a result of the sale of the InterContinental Buckhead Atlanta and Sofitel Washington DC Lafayette Square hotels in the first quarter of 2020. There were no property sales in the first quarter of 2021.

~~(Gain) loss and other operating expenses —~~ ~~(Gain) loss and other operating expenses decreased $1.0~~increased by $64.6 million primarily due to ~~reductions~~the sale of Sir Francis Drake in ~~pre-opening and hotel management transition expenses.~~the second quarter of 2021.

Interest expense — Interest expense increased by ~~$1.7~~$0.7 million primarily due to ~~an increase in~~ the ~~effective interest rate and the increase in amortization~~write-off of deferred financing ~~costs~~fees associated with ~~unsecured~~the partial repayment of certain of the term ~~loans.~~

~~Other —~~ ~~Other income remained consistent compared to~~loans during the ~~prior year.~~second quarter of 2021.

Income tax (expense) benefit — Income tax (expense) benefit ~~decreased from a benefit of $10.7 million in 2020 to an~~is immaterial ~~expense~~ in 2021 as a result of the taxable REIT subsidiary continuing to incur a loss and a valuation allowance being recognized ~~resulting from~~offsetting the ~~uncertainty of utilizing net operating losses in future periods.~~deferred tax asset.

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 six months ended June 30, 2021 to thesix months ended June 30, 2020

Revenues — Total hotel revenues decreased by $44.7 million, of which $29.3 million was due to the non-comparable properties and the balance was due to lower demand in the first quarter of 2021 compared to the prior year offset by an increase in revenues in the second quarter of 2021 as hotels reopened and leisure demand returned particularly at the resort properties.

Hotel operating expenses — Total hotel operating expenses decreased by $62.1 million, of which $21.7 million was due to the non-comparable properties and the balance was correlated to the decline in revenue noted above.

Depreciation and amortization — Depreciation and amortization expense decreased by $1.2 million primarily due to a decrease in assets resulting from the sales of three hotels in 2020 and two hotels in 2021. The decrease was partially offset by an increase in depreciation and amortization expense related to recently renovated hotels, including Hotel Zena Washington DC (formerly Donovan Hotel).

General and administrative — General and administrative expenses decreased by $13.4 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 in 2020. General and administrative expenses consist of employee compensation costs, legal and professional fees, insurance and other expenses.

Impairment loss — We recognized an impairment loss of $14.9 million in 2021 related to one hotel. We recognized an impairment loss of $20.6 million in 2020 related to the retail component of a hotel.

(Gain) loss on sale of hotel properties — We recognized a net gain on sale of $64.6 million in 2021 primarily due to the sale of Sir Francis Drake. We recognized a net gain on sale of $117.4 million in 2020 primarily due to the sale of Sofitel Washington DC Lafayette Square and InterContinental Buckhead Atlanta.

(Gain) loss and other operating expenses — (Gain) loss and other operating expenses decreased by $1.9 million primarily due to reductions in pre-opening, hotel management transition and franchise tax expenses.

Interest expense — Interest expense increased by $2.5 million primarily due to increased amortization and write-off of deferred financing fees as a result of the partial repayment of certain of the term loans during 2021.

Income tax (expense) benefit — Income tax (expense) benefit was a benefit of $14.3 million in 2020 which was due to the deferred tax asset recognized in 2020 on the taxable REIT subsidiary's estimated loss. In 2021, the Company has recognized a valuation allowance offsetting the deferred tax asset on the current year taxable REIT subsidiary's loss due to the uncertainty of utilizing the deferred tax asset in the future.

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.

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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, 2020.

Recent Accounting Standards

See Note 2, ~~“Summary~~Summary of Significant Accounting Policies,” to our unaudited consolidated ~~interim~~ financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information relating to recently issued accounting pronouncements.

New Accounting Pronouncements Not Yet Implemented

See Note 2, ~~“Summary~~Summary of Significant Accounting Policies,” to our unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information relating to recently issued accounting pronouncements.

Liquidity and Capital Resources

In March 2020, the World Health Organization declared 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, health official recommendations corporate travel policy changes and individual responses, hotel demand was dramatically reduced. As of March 31, 2021, 40 of our hotels and resorts were open with operations of the remaining 13 hotels still temporarily suspended. This has had a material impact on the Company's liquidity. In April 2021, we reopened an additional eight hotels and we anticipate reopening additional hotels as demand returns. As of March 31,June 30, 2021, we had liquidity of ~~$767.8~~$967.2 million, which includes cash and cash equivalents, restricted cash and the amount available on our senior unsecured revolving credit facility. ~~On April 1, 2021, we sold~~For further discussion on our liquidity and the ~~Sir Francis Drake Hotel and received net proceeds from the sale~~impact of ~~$157.6 million which further improved our liquidity. Refer to the~~COVID-19, see Overview included in Part I, Item ~~7., "Management’s Discussion and Analysis~~2 of ~~Financial Condition and Results of Operations," for additional information.~~this Quarterly Report on Form 10-Q.

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Debt

Our debt consisted of the following as of ~~March 31,~~June 30, 2021 and December 31, 2020 (dollars in thousands):


						Balance Outstanding as of								Balance Outstanding as of
		Interest Rate		Maturity Date		March 31, 2021		December 31, 2020			Interest Rate		Maturity Date	June 30, 2021		December 31, 2020
Revolving credit facilities	Revolving credit facilities									Revolving credit facilities
Senior unsecured credit facility	Senior unsecured credit facility	Floating	(1)	January 2022		$	—	$	40,000	Senior unsecured credit facility	Floating	(1), (2)	January 2022	$	—	$	40,000
PHL unsecured credit facility	PHL unsecured credit facility	Floating	(2)	January 2022		—		—		PHL unsecured credit facility	Floating	(3)	January 2022	—		—
Total revolving credit facilities	Total revolving credit facilities					$	—	$	40,000	Total revolving credit facilities				$	—	$	40,000

Unsecured term loans	Unsecured term loans									Unsecured term loans
First Term Loan	First Term Loan	Floating	(3)	January 2023		300,000		300,000		First Term Loan	Floating	(4)	January 2023	300,000		300,000
Second Term Loan	Second Term Loan	Floating	(3)	April 2022		45,000		65,000		Second Term Loan	Floating	(4)	April 2022	32,126		65,000
Fourth Term Loan	Fourth Term Loan	Floating	(3)	October 2024		110,000		110,000		Fourth Term Loan	Floating	(4)	October 2024	110,000		110,000
Sixth Term Loan:	Sixth Term Loan:									Sixth Term Loan:
Tranche 2021	Tranche 2021	Floating	(3)	November 2021	(4)	6,720		40,966		Tranche 2021	Floating	(4)	November 2021	4,798		40,966
Tranche 2021 Extended	Tranche 2021 Extended	Floating	(3)	November 2022		140,280		173,034		Tranche 2021 Extended	Floating	(4)	November 2022	100,148		173,034
Tranche 2022	Tranche 2022	Floating	(3)	November 2022		196,000		286,000		Tranche 2022	Floating	(4)	November 2022	139,928		286,000
Tranche 2023	Tranche 2023	Floating	(3)	November 2023		400,000		400,000		Tranche 2023	Floating	(4)	November 2023	400,000		400,000
Tranche 2024	Tranche 2024	Floating	(3)	January 2024		400,000		400,000		Tranche 2024	Floating	(4)	January 2024	400,000		400,000
Total Sixth Term Loan	Total Sixth Term Loan					1,143,000		1,300,000		Total Sixth Term Loan				1,044,874		1,300,000
Total term loans at stated value	Total term loans at stated value					1,598,000		1,775,000		Total term loans at stated value				1,487,000		1,775,000
Deferred financing costs, net	Deferred financing costs, net					(8,248)		(8,455)		Deferred financing costs, net				(6,822)		(8,455)
Total term loans	Total term loans					$	1,589,752	$	1,766,545	Total term loans				$	1,480,178	$	1,766,545

Convertible senior notes	Convertible senior notes									Convertible senior notes
Convertible senior notes	Convertible senior notes	1.75%		December 2026		750,000		500,000		Convertible senior notes	1.75%		December 2026	750,000		500,000
Debt premium (discount), net	Debt premium (discount), net					13,360		(113,099)		Debt premium (discount), net				12,775		(113,099)
Deferred financing costs, net	Deferred financing costs, net					(18,645)		(12,568)		Deferred financing costs, net				(17,835)		(12,568)
Total convertible senior notes	Total convertible senior notes					$	744,715	$	374,333	Total convertible senior notes				$	744,940	$	374,333

Senior unsecured notes	Senior unsecured notes									Senior unsecured notes
Series A Notes	Series A Notes	5.15%	(5)	December 2023		60,000		60,000		Series A Notes	5.15%	(5)	December 2023	47,600		60,000
Series B Notes	Series B Notes	5.38%	(6)	December 2025		40,000		40,000		Series B Notes	5.38%	(6)	December 2025	2,400		40,000
Total senior unsecured notes at stated value	Total senior unsecured notes at stated value					100,000		100,000		Total senior unsecured notes at stated value				50,000		100,000
Deferred financing costs, net	Deferred financing costs, net					(487)		(407)		Deferred financing costs, net				(202)		(407)
Total senior unsecured notes	Total senior unsecured notes					$	99,513	$	99,593	Total senior unsecured notes				$	49,798	$	99,593
Total debt	Total debt					$	2,433,980	$	2,280,471	Total debt				$	2,274,916	$	2,280,471

(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) The Company has the option to extend the maturity date to January 2023, pursuant to certain terms and conditions and payment of an extension fee.

(3) 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)~~(4) 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 ~~March 31,~~June 30, 2021, approximately $1.4 billion of the borrowings under the term loan facilities bore an effective weighted-average fixed interest rate of ~~4.13%~~4.12%, after taking into account interest rate swap agreements, and approximately ~~$168.0~~$57.0 million bore a weighted-average floating interest rate of ~~2.62%~~2.67%. As of December 31, 2020, approximately $1.4 billion of the borrowings under the term loan facilities bore an effective weighted-average fixed interest rate of 4.19%, after taking into account interest rate swap agreements, and approximately $345.0 million bore a weighted-average floating interest rate of 2.46%.

~~(4)~~ ~~In February 2021, the majority of the remaining balance was extended to November 2022.~~

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(5) In February 2021, the interest rate increased from 4.70% to 5.15%. The increased interest rate is effective through the end of the waiver period.

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(6) In February 2021, the interest rate increased from 4.93% to 5.38%. The increased interest rate is effective through the end of the waiver period.

We intend to repay indebtedness incurred under our revolving credit facilities, unsecured term loans, convertible senior notes and senior unsecured notes out of our cash flows from operations and, as market conditions permit, from the net proceeds from issuances of additional equity or debt securities and dispositions of hotel properties.

For further discussion on the components of our overall debt, see Note 5, Debt, to our unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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. As of ~~March 31,~~June 30, 2021, we had no outstanding borrowings, $5.8 million of outstanding letters of credit and borrowing capacity of ~~$643.2~~$644.2 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 base rate, plus an additional margin amount, or spread. 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,"~~5, Debt, to our unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, the spread on the borrowings is fixed at 2.40% during the waiver period. We have the ability to increase the aggregate borrowing capacity of our senior unsecured revolving credit facility 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 $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,"~~5, Debt, to our unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, the spread on the borrowings is fixed at 2.40% during the waiver period. As of ~~March 31,~~June 30, 2021, 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~~For further discussion on our ~~senior~~ unsecured term ~~loans is found in the table above and~~loan facilities, see Note ~~5. "Debt"~~5, Debt, to ~~the accompanying~~our unaudited consolidated financial ~~statements.~~statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Convertible Senior Notes

The Convertible Notes are governed by an indenture (the “Base Indenture”) between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee. The Convertible Notes bear interest at a rate of 1.75% per annum, payable semi-annually in arrears on June 15th and December 15th of each year, beginning on June 15, 2021. The Convertible Notes will mature on December 15, 2026. The Company recorded coupon interest expense of ~~$2.8~~$3.3 million and $6.1 million, respectively, for the three and six months ended ~~March 31,~~June 30, 2021.

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subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes, the number of common shares underlying the Convertible Notes. The Capped Call Transactions are expected generally to reduce the potential dilution to holders of common shares upon conversion of the Convertible Notes and/or offset the potential cash payments that the Company could be required to make in excess of the principal amount of any converted Convertible Notes upon conversion thereof, with such reduction and/or offset subject to a cap. The upper strike price of the Capped Call Transactions is $33.0225 per share. The cost of the Capped Call Transactions entered into in December 2020 and February 2021 was $38.3 million and $21.0 million, respectively, and was recorded within additional paid-in capital.

Senior Unsecured Notes

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 ~~three~~six months ended ~~March 31,~~June 30, 2021. As of ~~March 31,~~June 30, 2021, $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.

On April 29, 2021, we filed a prospectus supplement with the SEC to sell up to $200.0 million of common shares under an "at the market" offering program (the "ATM program"). No common shares were issued or sold under the ATM program during the six months ended June 30, 2021. As of June 30, 2021, $200.0 million of common shares remained available for issuance under the ATM program.

In May 2021, we issued 9,200,000 6.375% Series G Cumulative Redeemable Preferred Shares (the “Shares”) at a public offering price of $25.00 per share for net proceeds of $222.6 million. The Shares may be redeemed, at the Company’s option, on or after May 13, 2026, in whole or from time to time in part, by payment of $25.00 per share, plus any accumulated, accrued and unpaid distributions through the date of redemption.

For further discussion on our shares of beneficial interest, see Note 7, Equity, to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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, debt 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 ~~$7.1~~$2.3 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021. Our cash from operations includes the operating activities of the 5351 hotels we owned as of ~~March 31,~~June 30, 2021, offset by corporate expenses. Our cash used in operating activities was $86.6 million for the six months ended June 30, 2020. Our cash from operations includes the operating activities of the 54 hotels we owned as of June 30, 2020, offset by corporate expenses. The negative cash flow from operations during the ~~quarter~~six months ended June 30, 2021 and ~~decline from the prior year~~2020 is due to the reduced operations at our hotels as a result of COVID-19, including carrying costs on hotels that ~~are~~were temporarily suspended. ~~Our cash provided by operating activities was $1.5 million for the three months ended March 31, 2020. Our cash from operations includes the operating activities~~

Table of ~~the 54 hotels we owned as of March 31, 2020, offset by corporate expenses.~~Content

Cash ~~(Used in) and~~ Provided by Investing Activities. Our cash ~~used in~~provided by investing activities was ~~$9.7~~$127.8 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021. During the ~~three~~six months ended ~~March 31,~~June 30, 2021, we invested ~~$9.6~~$27.0 million in improvements to our hotel properties, received $172.0 million from sales of hotel properties and placed deposits totaling $17.1 million on two hotel properties. Our cash provided by investing activities was ~~$269.9~~$230.4 million for the ~~three~~six months ended ~~March 31,~~June 30, 2020. During the ~~three~~six months ended ~~March 31,~~June 30, 2020, we invested ~~$50.1~~$89.6 million in improvements to our hotel properties and received $320.0 million from sales of hotel properties.

Cash Provided by Financing Activities. Our cash provided by financing activities was ~~$5.1~~$61.2 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021. During the ~~three~~six months ended ~~March 31,~~June 30, 2021, we repaid $40.0 million under the revolving credit facilities, received gross proceeds from the issuance of preferred shares of $230.0 million, paid $7.7 million in offering costs, received proceeds from the issuance of convertible notes and other debt of ~~$263.8~~$268.6 million, repaid ~~$177.0~~$338.0 million in other debt, purchased $21.0 million in Capped Call Transactions, repurchased $0.7 million of common shares for tax withholding purposes in connection with vested share-based equity awards, paid ~~$9.5~~$18.9 million in distributions, paid $9.6 million in financing fees, and paid ~~$0.9~~$1.5 million in other transactions. ~~For the three months ended March 31, 2020,~~Our cash provided by financing activities was ~~$418.5 million.~~$152.1 million for the six months ended June 30, 2020. During the ~~three~~six months ended ~~March 31,~~June 30, 2020, we borrowed $760.1 million under the revolving credit facilities, repaid ~~$281.9~~$535.1 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 ~~$58.2~~$67.6 million in distributions, paid $3.6 million in financing fees related to the credit agreement amendments and paid ~~$0.2~~$0.3 million in other transactions.

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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 debt or equity offerings.

For the ~~three~~six months ended ~~March 31,~~June 30, 2021, we invested ~~$9.6~~$27.0 million in capital investments to reposition and improve our properties, primarily the renovation of the L'Auberge Del Mar.

Depending on market conditions, we expect to invest an additional ~~$60.0~~$40.0 million to ~~$80.0~~$60.0 million in capital investments during the remainder of ~~2021.~~ 2021, including a $25.0 million transformation of Hotel Vitale. The redevelopment is expected to be completed at year-end, at which time the hotel will reopen as 1 Hotel San Francisco. We also commenced a $15.0 million renovation at Southernmost Beach Resort, which we expect will be completed in the fourth quarter.

However, as fundamentals improve, we will evaluate commencing additional previously planned major renovations and repositioning projects later in 2021.

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Contractual Obligations and Off-Balance Sheet Arrangements

The table below summarizes our contractual obligations as of ~~March 31,~~June 30, 2021 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

Term loans (2)	Term loans (2)	$	1,732,527	$	67,896	$	1,552,924	$	111,707	$	—	Term loans (2)	$	1,601,865	$	94,549	$	1,396,402	$	110,914	$	—
Convertible senior notes (1)	Convertible senior notes (1)	828,739		13,114		26,250		26,250		763,125		Convertible senior notes (1)	822,188		13,125		26,250		26,250		756,563
Unsecured notes (1)	Unsecured notes (1)	118,957		5,167		69,846		43,944		—		Unsecured notes (1)	56,369		2,581		51,211		2,577		—
Borrowings under credit facilities (3)	Borrowings under credit facilities (3)	—		—		—		—		—		Borrowings under credit facilities (3)	—		—		—		—		—
Hotel and ground leases (4)	Hotel and ground leases (4)	1,240,360		17,240		34,639		35,012		1,153,469		Hotel and ground leases (4)	1,236,192		17,270		34,702		35,121		1,149,099
Finance lease obligation	Finance lease obligation	64,702		1,337		2,733		2,825		57,807		Finance lease obligation	52,341		904		1,867		1,951		47,619
Refundable membership initiation deposits (5)	Refundable membership initiation deposits (5)	28,380		203		—		—		28,177		Refundable membership initiation deposits (5)	27,690		203		—		—		27,487
Purchase commitments (6)	Purchase commitments (6)	3,683		3,683		—		—		—		Purchase commitments (6)	8,523		8,523		—		—		—
Corporate office leases	Corporate office leases	15,262		1,840		3,153		2,330		7,939		Corporate office leases	14,807		1,852		2,997		2,346		7,612
Total	Total	$	4,032,610	$	110,480	$	1,689,545	$	222,068	$	2,010,517	Total	$	3,819,975	$	139,007	$	1,513,429	$	179,159	$	1,988,380

(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 ~~March 31,~~June 30, 2021. 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 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.

Off-Balance Sheet Arrangements

As of ~~March 31,~~June 30, 2021, we had no off-balance sheet arrangements.

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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. The historical trend has been disrupted as a result of COVID-19.

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~~

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We have interest rate swap agreements with an aggregate notional amount of $1.4 billion to hedge variable interest rates on our unsecured term loans.

We have designated these pay-fixed, receive-floating interest rate swap derivatives as cash flow hedges.

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 ~~March 31,~~June 30, 2021, ~~$168.0~~$57.0 million of ~~the Company's~~our aggregate indebtedness ~~(6.9%~~(2.5% 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 ~~$0.2~~$0.1 million, respectively.

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

~~Table of Contents~~

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” section of our Annual Report on Form 10-K for the year ended December 31, 2020.

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)
January 1, 2021 - January 31, 2021 38,310 $ 18.80 — —
February 1, 2021 - February 28, 2021 — $ — — —
March 1, 2021 - March 31, 2021 — $ — — —
Total 38,310 $ 18.80 — $ 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)
April 1, 2021 - April 30, 2021	—	$	—	—	—
May 1, 2021 - May 31, 2021	—	$	—	—	—
June 1, 2021 - June 30, 2021	—	$	—	—	—
Total	—	$	—	—	$	56,600,000

Table of Content

(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, Equity, to ~~the accompanying~~our unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information about the $100.0 million share repurchase program.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.


Exhibit Number						Description of Exhibit
~~10.1†~~3.1†						~~Fourth Amendment to Fourth Amended and Restated Credit Agreement, dated as~~Declaration of ~~October 13, 2017, among Pebblebrook Hotel, L.P., as the borrower,~~Trust of Pebblebrook Hotel Trust, as ~~the parent REIT~~amended and a guarantor, certain subsidiaries of the borrower, as guarantors, Bank of America, N.A., as administrative agent, swing line lender and L/C issuer, and the other lenders party thereto, dated as of February 18,supplemented through July 23, 2021.
~~10.2†~~						Third Amendment to Amended and Restated Credit Agreement, dated as of October 13, 2017, among Pebblebrook Hotel, L.P., as the borrower, Pebblebrook Hotel Trust, as the parent REIT and a guarantor, certain subsidiaries of the borrower, as guarantors, U.S. Bank National Association, as administrative agent, and the other lenders party thereto, dated as of February 18, 2021.
~~10.3†~~						Third Amendment to Credit Agreement, dated as of October 13, 2017, among Pebblebrook Hotel, L.P., as the borrower, Pebblebrook Hotel Trust, as the parent REIT and a guarantor, certain subsidiaries of the borrower, as guarantors, Capital One, National Association, as administrative agent, and the other lenders party thereto, dated as of February 18, 2021.
~~10.4†~~						Fourth Amendment to Note Purchase Agreement, dated as of November 12, 2015, among Pebblebrook Hotel Trust, Pebblebrook Hotel, L.P., Massachusetts Mutual Life Insurance Company, MassMutual Asia Limited, Allianz Life Insurance Company of North America and The Guardian Life Insurance Company of America, dated as of February 18, 2021.
~~10.5†~~						Third Amendment to Credit Agreement, dated as of October 31, 2018, among Pebblebrook Hotel L.P., as the borrower, Pebblebrook Hotel Trust, as the parent REIT and a guarantor, certain subsidiaries of the borrower, as guarantors, Bank of America, N.A., as administrative agent, and the other lenders party thereto, dated as of February 18, 2021.
~~10.6*†~~						~~Form of LTIP Class B Unit Vesting Agreement – retention award.~~
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.SCH XBRL~~						~~Inline 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.

4041

Table of ~~Contents~~Content

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:	~~April~~July 29, 2021	/s/ JON E. BORTZ
		Jon E. Bortz
		Chairman, President and Chief Executive Officer

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			Notional Value as of
Hedge Type	Interest Rate	Maturity	March 31, 2021		December 31, 2020
Swap - cash flow	1.74%	January 2021	0		75,000
Swap - cash flow	1.75%	January 2021	0		50,000
Swap - cash flow	1.53%	January 2021	0		37,500
Swap - cash flow	1.53%	January 2021	0		37,500
Swap - cash flow	1.46%	January 2021	0		100,000
Swap - cash flow	1.47%	January 2021	0		47,500
Swap - cash flow	1.47%	January 2021	0		47,500
Swap - cash flow	1.47%	January 2021	0		47,500
Swap - cash flow	1.47%	January 2021	0		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%	January 2022	100,000		100,000
Swap - cash flow	1.78%	January 2022	50,000		50,000
Swap - cash flow	1.79%	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	0.17%	January 2023	100,000		0
Swap - cash flow	0.17%	January 2023	50,000		0
Swap - cash flow	0.17%	January 2023	25,000		0
Swap - cash flow	0.17%	January 2023	25,000		0
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		75,000
Swap - cash flow	2.60%	January 2024	50,000		50,000
Swap - cash flow	2.60%	January 2024	25,000		25,000
Swap - cash flow	2.60%	January 2024	75,000		75,000
Swap - cash flow	2.60%	January 2024	75,000		75,000
Swap - cash flow	1.43%	February 2026	150,000		0
Swap - cash flow	1.44%	February 2026	50,000		0
Swap - cash flow	1.44%	February 2026	50,000		0
Swap - cash flow	1.44%	February 2026	40,000		0
Total			$	1,430,000	$	1,430,000


Performance Award Grant Date		Percentage of Total Award	Grant Date Fair Value by Component	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 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	100.00%	$4.9	23.40%	1.41%	0%

February 18, 2021
	Relative Total Shareholder Return	100.00%	$6.0	56.00%	0.19%	0%