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, 2022


☐			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: 001-35074

SUMMIT HOTEL PROPERTIES, INC.

(Exact name of registrant as specified in its charter)


Maryland						27-2962512
(State or other jurisdiction						(I.R.S. Employer Identification No.)
of incorporation or organization)

13215 Bee Cave Parkway, Suite B-300

Austin, TX 78738

(Address of principal executive offices, including zip code)

(512) 538-2300

(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 Stock, $0.01 par value

INN

New York Stock Exchange

Series E Cumulative Redeemable Preferred Stock, $0.01 par value

INN-PE

New York Stock Exchange

Series F Cumulative Redeemable Preferred Stock, $0.01 par value

INN-PF

New York Stock Exchange

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

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

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


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

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

As of ~~April~~July 22, 2022, the number of outstanding shares of common stock of Summit Hotel Properties, Inc. was ~~107,064,768.~~106,899,011.

TABLE OF CONTENTS


		Page
PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements	1

	Condensed Consolidated Balance Sheets — ~~March 31~~June 3 0 , ~~202~~2 2022 (Unaudited) and December 31, ~~202~~12021	1
	Condensed Consolidated Statements of Operations (Unaudited) — Three Mand Six ~~onths~~Months Ended ~~March 31,~~ June ~~202~~ 3 2 0 , 2022 and ~~202~~12021	2
	Condensed Consolidated Statements of Comprehensive Income (Loss )(Unaudited) — Three and Six Months Ended ~~March~~June 3 10 , ~~202~~2 2022 and ~~202~~12021	3
	Condensed Consolidated Statements of Changes in Equity and Redeemable Non-controlling Interests (Unaudited) — Three and Six Months Ended ~~March~~June 3 10 , ~~202~~2 2022 and ~~202~~12021	4
	Condensed Consolidated Statements of Cash Flows (Unaudited) — Three ~~Three Months~~and Six Months Ended ~~March~~June 3 10 , ~~202~~2 2022 and ~~202~~12021	56
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	67

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3229

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4748

Item 4.	Controls and Procedures	4749

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	4950

Item 1A.	Risk Factors	4950

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4950

Item 3.	Defaults Upon Senior Securities	4950

Item 4.	Mine Safety Disclosures	4950

Item 5.	Other Information	4950

Item 6.	Exhibits	5051

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Summit Hotel Properties, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share amounts)


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
		(Unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS
Investment in hotel properties, net	Investment in hotel properties, net	$	2,848,401	$	2,091,973	Investment in hotel properties, net	$	2,898,512	$	2,091,973

Undeveloped land	Undeveloped land	1,500		1,500		Undeveloped land	1,500		1,500
Assets held for sale, net	Assets held for sale, net	52,801		425		Assets held for sale, net	425		425
Cash and cash equivalents	Cash and cash equivalents	82,397		64,485		Cash and cash equivalents	109,999		64,485
Restricted cash	Restricted cash	32,836		32,459		Restricted cash	36,061		32,459

Right-of-use assets, net	Right-of-use assets, net	31,841		26,942		Right-of-use assets, net	31,453		26,942
Trade receivables, net	Trade receivables, net	28,202		14,476		Trade receivables, net	21,019		14,476
Prepaid expenses and other	Prepaid expenses and other	17,000		24,496		Prepaid expenses and other	15,914		24,496

Deferred charges, net	Deferred charges, net	7,832		4,347		Deferred charges, net	7,520		4,347

Other assets	Other assets	3,789		3,799		Other assets	2,274		3,799
Total assets	Total assets	$	3,106,599	$	2,264,902	Total assets	$	3,124,677	$	2,264,902
LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND EQUITY	LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND EQUITY					LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND EQUITY
Liabilities:	Liabilities:					Liabilities:
Debt, net of debt issuance costs	Debt, net of debt issuance costs	$	1,481,895	$	1,069,797	Debt, net of debt issuance costs	$	1,523,530	$	1,069,797
Lease liabilities, net	Lease liabilities, net	22,049		17,232		Lease liabilities, net	21,724		17,232
Accounts payable	Accounts payable	5,341		4,462		Accounts payable	8,332		4,462
Accrued expenses and other	Accrued expenses and other	75,699		66,219		Accrued expenses and other	85,803		66,219

Total liabilities	Total liabilities	1,584,984		1,157,710		Total liabilities	1,639,389		1,157,710
Commitments and contingencies (Note 11)	Commitments and contingencies (Note 11)	0		0		Commitments and contingencies (Note 11)	0		0
Redeemable non-controlling interests	Redeemable non-controlling interests	50,220		—		Redeemable non-controlling interests	50,223		—
Equity:	Equity:					Equity:
Preferred stock, $0.01 par value per share, 100,000,000 shares authorized:	Preferred stock, $0.01 par value per share, 100,000,000 shares authorized:					Preferred stock, $0.01 par value per share, 100,000,000 shares authorized:

6.25% Series E - 6,400,000 shares issued and outstanding at March 31, 2022 and December 31, 2021 (aggregate liquidation preference of $160,861 at March 31, 2022 and December 31, 2021)		64		64
5.875% Series F - 4,000,000 shares issued and outstanding at March 31, 2022 (aggregate liquidation preference of $100,506 at March 31, 2022 and December 31, 2021)		40		40
Common stock, $0.01 par value per share, 500,000,000 shares authorized, 106,960,863 and 106,337,724 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively		1,069		1,063
6.25% Series E - 6,400,000 shares issued and outstanding at June 30, 2022 and December 31, 2021 (aggregate liquidation preference of $160,861 at June 30, 2022 and December 31, 2021)						6.25% Series E - 6,400,000 shares issued and outstanding at June 30, 2022 and December 31, 2021 (aggregate liquidation preference of $160,861 at June 30, 2022 and December 31, 2021)	64		64
5.875% Series F - 4,000,000 shares issued and outstanding at June 30, 2022 (aggregate liquidation preference of $100,506 at June 30, 2022 and December 31, 2021)						5.875% Series F - 4,000,000 shares issued and outstanding at June 30, 2022 (aggregate liquidation preference of $100,506 at June 30, 2022 and December 31, 2021)	40		40
Common stock, $0.01 par value per share, 500,000,000 shares authorized, 106,894,011 and 106,337,724 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively						Common stock, $0.01 par value per share, 500,000,000 shares authorized, 106,894,011 and 106,337,724 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively	1,069		1,063
Additional paid-in capital	Additional paid-in capital	1,230,094		1,225,184		Additional paid-in capital	1,229,660		1,225,184
Accumulated other comprehensive loss		(4,903)		(15,639)
Accumulated other comprehensive income (loss)						Accumulated other comprehensive income (loss)	1,000		(15,639)
Accumulated deficit and distributions in excess of retained earnings	Accumulated deficit and distributions in excess of retained earnings	(275,018)		(262,639)		Accumulated deficit and distributions in excess of retained earnings	(267,159)		(262,639)
Total stockholders’ equity	Total stockholders’ equity	951,346		948,073		Total stockholders’ equity	964,674		948,073
Non-controlling interests in operating partnership		158,646		793
Non-controlling interests in joint venture		361,403		158,326

Non-controlling interests						Non-controlling interests	470,391		159,119
Total equity	Total equity	1,471,395		1,107,192		Total equity	1,435,065		1,107,192
Total liabilities, redeemable non-controlling interests and equity	Total liabilities, redeemable non-controlling interests and equity	$	3,106,599	$	2,264,902	Total liabilities, redeemable non-controlling interests and equity	$	3,124,677	$	2,264,902

See Notes to the Condensed Consolidated Financial Statements

Summit Hotel Properties, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(in thousands, except per share amounts)


		For the Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
			2022		2021				2022		2021		2022		2021
Revenues:	Revenues:							Revenues:
Room	Room		$	128,810	$	53,245		Room	$	166,804	$	79,995	$	295,614	$	133,240
Food and beverage	Food and beverage		5,662		1,003			Food and beverage	7,664		1,556		13,326		2,559
Other	Other		7,397		3,606			Other	8,780		4,973		16,177		8,579
Total revenues	Total revenues		141,869		57,854			Total revenues	183,248		86,524		325,117		144,378

Expenses:	Expenses:							Expenses:
Room			28,410		12,550
Food and beverage			4,114		556
Other hotel operating expenses			46,277		24,574
Room expense								Room expense	35,783		17,584		64,193		30,134
Food and beverage expense								Food and beverage expense	6,013		968		10,127		1,524
Hotel operating expenses								Hotel operating expenses	53,711		29,385		99,988		53,959
Property taxes, insurance and other	Property taxes, insurance and other		13,138		10,904			Property taxes, insurance and other	13,525		10,990		26,663		21,894
Management fees	Management fees		3,795		1,555			Management fees	5,042		2,314		8,837		3,869
Depreciation and amortization	Depreciation and amortization		36,274		27,297			Depreciation and amortization	38,058		26,586		74,332		53,883
Corporate general and administrative	Corporate general and administrative		9,137		5,678			Corporate general and administrative	8,074		6,506		17,211		12,184

Hotel acquisition and transaction costs								Hotel acquisition and transaction costs	681		3,849		681		3,849
Recoveries of credit losses								Recoveries of credit losses	(250)		—		(250)		—

Total expenses	Total expenses		141,145		83,114			Total expenses	160,637		98,182		301,782		181,296
Gain on disposal of assets, net	Gain on disposal of assets, net		—		50			Gain on disposal of assets, net	20,484		31		20,484		81

Operating income (loss)	Operating income (loss)		724		(25,210)			Operating income (loss)	43,095		(11,627)		43,819		(36,837)
Other income (expense):	Other income (expense):							Other income (expense):
Interest expense	Interest expense		(13,439)		(10,788)			Interest expense	(15,118)		(10,962)		(28,557)		(21,750)
Other income, net	Other income, net		1,742		3,232			Other income, net	1,773		2,295		3,515		5,527
Total other income (expense)	Total other income (expense)		(11,697)		(7,556)			Total other income (expense)	(13,345)		(8,667)		(25,042)		(16,223)
Loss from continuing operations before income taxes			(10,973)		(32,766)
Income tax benefit (expense) (Note 13)			2,000		(105)
Net loss			(8,973)		(32,871)
Less - Loss attributable to non-controlling interests:
Operating Partnership			482		54
Joint venture			82		1,452
Net loss attributable to Summit Hotel Properties, Inc.			(8,409)		(31,365)
Preferred stock dividends			(3,970)		(3,709)
Income (loss) from continuing operations before income taxes								Income (loss) from continuing operations before income taxes	29,750		(20,294)		18,777		(53,060)
Income tax expense (Note 13)								Income tax expense (Note 13)	(6,437)		(275)		(4,437)		(380)
Net income (loss) before amounts attributable to non-controlling interests								Net income (loss) before amounts attributable to non-controlling interests	23,313		(20,569)		14,340		(53,440)
Less - (Income) loss attributable to non-controlling interests								Less - (Income) loss attributable to non-controlling interests	(11,401)		1,877		(10,837)		3,383

Net loss attributable to common stockholders			$	(12,379)	$	(35,074)
Loss per share:
Basic and diluted			$	(0.12)	$	(0.34)

Net income (loss) attributable to Summit Hotel Properties, Inc. before preferred dividends								Net income (loss) attributable to Summit Hotel Properties, Inc. before preferred dividends	11,912		(18,692)		3,503		(50,057)
Less - Preferred dividends								Less - Preferred dividends	(3,968)		(3,709)		(7,938)		(7,418)

Net income (loss) attributable to common stockholders								Net income (loss) attributable to common stockholders	$	7,944	$	(22,401)	$	(4,435)	$	(57,475)

Income (loss) per share:								Income (loss) per share:
Basic								Basic	$	0.08	$	(0.21)	$	(0.04)	$	(0.55)
Diluted								Diluted	$	0.07	$	(0.21)	$	(0.04)	$	(0.55)
Weighted average common shares outstanding:	Weighted average common shares outstanding:							Weighted average common shares outstanding:
Basic and diluted			104,896		104,278

Basic								Basic	105,199		104,495		105,049		104,387
Diluted								Diluted	121,352		104,495		105,049		104,387

See Notes to the Condensed Consolidated Financial Statements

Summit Hotel Properties, Inc.

Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss)

(Unaudited)

(in thousands)


		For the Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
			2022		2021				2022		2021		2022		2021
Net loss			$	(8,973)	$	(32,871)
Net income (loss)								Net income (loss)	$	23,313	$	(20,569)	$	14,340	$	(53,440)
Other comprehensive income, net of tax:	Other comprehensive income, net of tax:							Other comprehensive income, net of tax:
Changes in fair value of derivative financial instruments	Changes in fair value of derivative financial instruments		12,113		6,203			Changes in fair value of derivative financial instruments	4,896		1,362		17,009		7,565
Comprehensive income (loss)	Comprehensive income (loss)		3,140		(26,668)			Comprehensive income (loss)	28,209		(19,207)		31,349		(45,875)
Less - Comprehensive income (loss) attributable to non-controlling interests:
Operating Partnership			(340)		44
Joint venture			82		1,452
Comprehensive (income) loss attributable to non-controlling interests								Comprehensive (income) loss attributable to non-controlling interests	(9,741)		1,875		(9,999)		3,371

Comprehensive income (loss) attributable to Summit Hotel Properties, Inc.	Comprehensive income (loss) attributable to Summit Hotel Properties, Inc.		2,882		(25,172)			Comprehensive income (loss) attributable to Summit Hotel Properties, Inc.	18,468		(17,332)		21,350		(42,504)
Preferred dividends	Preferred dividends		(3,970)		(3,709)			Preferred dividends	(3,968)		(3,709)		(7,938)		(7,418)

Comprehensive loss attributable to common stockholders			$	(1,088)	$	(28,881)
Comprehensive income (loss) attributable to common stockholders								Comprehensive income (loss) attributable to common stockholders	$	14,500	$	(21,041)	$	13,412	$	(49,922)

See Notes to the Condensed Consolidated Financial Statements

Summit Hotel Properties, Inc.

Condensed Consolidated Statements of Changes in Equity and Redeemable Non-controlling Interests

For the Three Months Ended ~~March 31,~~June 30, 2022 and 2021

(Unaudited)

(in thousands, except share amounts)


																																						Redeemable Non-controlling Interest						Shares of Preferred Stock			Preferred Stock				Shares of Common Stock		Common Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit and Distributions			Total Shareholders’ Equity			Non-controlling Interests			Total Equity
Balance at March 31, 2022																																		Balance at March 31, 2022				$	50,220					10,400,000			$	104			106,960,863		$	1,069		$	1,230,094		$	(4,903)		$	(275,018)		$	951,346		$	520,049		$	1,471,395

Adjustment of redeemable non-controlling interest to redemption value																																		Adjustment of redeemable non-controlling interest to redemption value				655						—			—				—		—			—			—			(655)			(655)			—			(655)

Contributions by non-controlling interest in joint venture																																		Contributions by non-controlling interest in joint venture				—						—			—				—		—			—			—			—			—			7,317			7,317

Dividends																																		Dividends				(652)						—			—				—		—			—			—			(4,051)			(4,051)			(83)			(4,134)
Distributions																																		Distributions				—						—			—				—		—			—			—			—			—			(66,633)			(66,633)
Equity-based compensation																																		Equity-based compensation				—						—			—				193,948		2			2,140			—			—			2,142			—			2,142
Shares acquired for employee withholding requirements																																		Shares acquired for employee withholding requirements				—						—			—				(260,800)		(2)			(2,453)			—			—			(2,455)			—			(2,455)
Other																																		Other				—						—			—				—		—			(121)			—			—			(121)			—			(121)
Other comprehensive income																																		Other comprehensive income				—						—			—				—		—			—			5,903			—			5,903			(1,007)			4,896
Net income																																		Net income				—						—			—				—		—			—			—			12,565			12,565			10,748			23,313
Balance at June 30, 2022																																		Balance at June 30, 2022				$	50,223					10,400,000			$	104			106,894,011		$	1,069		$	1,229,660		$	1,000		$	(267,159)		$	964,674		$	470,391		$	1,435,065

Balance at March 31, 2021																																		Balance at March 31, 2021				$	—					9,400,000			$	94			106,118,714		$	1,061		$	1,176,150		$	(24,523)		$	(213,999)		$	938,783		$	61,827		$	1,000,610
Common stock redemption of common units																																		Common stock redemption of common units				—						—			—				2,500		—			15			2			—			17			(17)			—

		Redeemable Non-controlling Interests				Shares of Preferred Stock	Preferred Stock			Shares of Common Stock	Common Stock				Additional Paid-In Capital			Accumulated Other Comprehensive Loss				Accumulated Deficit and Distributions in Excess of Retained Earnings				Total Stockholders’ Equity				Non-controlling Interests										Total Equity
													Operating Partnership							Joint Venture
Balance at December 31, 2021				$	—				10,400,000				$	104			106,337,724			$	1,063			$	1,225,184			$	(15,639)			$	(262,639)				$	948,073					$	793		$	158,326			$	1,107,192

Redeemable non-controlling interests in operating partnership issued for the acquisition of a portfolio of hotel properties		50,000				—	—			—	—				—			—				—				—				—					—					—
Adjustment of redeemable non-controlling interest to redemption value		220				—	—			—	—				—			—				(220)				(220)				—					—					(220)
Non-controlling interests in operating partnership issued for the acquisition of a portfolio of hotel properties		—				—	—			—	—				—			—				—				—				157,513					—					157,513
Sale of non-controlling interests in joint venture		—				—	—			—	—				—			—				—				—				—					674					674

Contributions by non-controlling interest in joint venture	Contributions by non-controlling interest in joint venture	—				—	—			—	—				1,218			—				—				1,218				—					202,485					203,703		Contributions by non-controlling interest in joint venture			—				—			—			—			—			16,444			—			—			16,444			69,229	85,673

Dividends	Dividends	—				—	—			—	—				—			—				(4,305)				(4,305)				—					—					(4,305)		Dividends			—				—			—			—			—			—			—			(3,709)			(3,709)			(45)	(3,754)

Equity-based compensation	Equity-based compensation	—				—	—			623,139	6				3,692			—				—				3,698									—					3,698		Equity-based compensation			—				—			—			295,101			3			2,393			—			—			2,396			4	2,400

Other comprehensive income	Other comprehensive income	—				—	—			—	—				—			10,736				—				10,736				1,377					—					12,113		Other comprehensive income			—				—			—			—			—			—			1,360			—			1,360			2	1,362
Net loss	Net loss	—				—	—			—	—				—			—				(7,854)				(7,854)				(1,037)					(82)					(8,973)		Net loss			—				—			—			—			—			—			—			(18,692)			(18,692)			(1,877)	(20,569)
Balance at March 31, 2022		$	50,220			10,400,000	$	104		106,960,863	$	1,069			$	1,230,094		$	(4,903)			$	(275,018)			$	951,346			$	158,646				$	361,403				$	1,471,395

Balance at December 31, 2020		$	—			9,400,000	$	94		105,708,787	$	1,057			$	1,197,320		$	(30,716)			$	(179,013)			$	988,742			$	1,111				$	62,210				$	1,052,063
Purchases of capped call options		—				—	—			—	—				(21,131)			—				—				(21,131)				—					—					(21,131)
Dividends		—				—	—			—	—				—			—				(3,621)				(3,621)				—					—					(3,621)
Equity-based compensation		—				—	—			565,532	6				1,561			—				—				1,567				2					—					1,569
Shares acquired for employee withholding requirements		—				—	—			(155,605)	(2)				(1,600)			—				—				(1,602)				—					—					(1,602)
Other comprehensive income		—				—	—			—	—				—			6,193				—				6,193				10					—					6,203
Net loss		—				—	—			—	—				—			—				(31,365)				(31,365)				(54)					(1,452)					(32,871)
Balance at March 31, 2021		$	—			9,400,000	$	94		106,118,714	$	1,061			$	1,176,150		$	(24,523)			$	(213,999)			$	938,783			$	1,069				$	60,758				$	1,000,610
Balance at June 30, 2021																																		Balance at June 30, 2021				$	—					9,400,000			$	94			106,416,315		$	1,064		$	1,195,002		$	(23,161)		$	(236,400)		$	936,599		$	129,123		$	1,065,722

See Notes to the Condensed Consolidated Financial Statements

Summit Hotel Properties, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2022 2021
OPERATING ACTIVITIES
Net loss (8,973) (32,871)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 36,274 27,297
Deferred finance cost amortization 1,412 1,011
Equity-based compensation 3,698 1,569
Gain on disposal of assets — (50)
Non-cash interest income (122) (257)
Debt transaction costs — 116
Other 69 143
Changes in operating assets and liabilities: 0
Trade receivables, net (13,726) (2,940)
Prepaid expenses and other (9,054) 1,180
Accounts payable 900 1,082
Accrued expenses 15,027 553
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 25,505 (3,167)
INVESTING ACTIVITIES
Acquisitions of hotel and other properties (272,556) —
Improvements and additions to hotel properties (10,347) (3,579)
Funding of real estate loans (1,915) (2,664)
NET CASH USED IN INVESTING ACTIVITIES (284,818) (6,243)
FINANCING ACTIVITIES
Proceeds from issuance of debt 410,000 317,500
Principal payments on debt (329,882) (264,485)
Proceeds from the sale of non-controlling interests 674 —
Purchases of capped calls for convertible senior notes — (21,131)
Financing fees on debt and other issuance costs (2,588) (8,671)
Dividends paid (4,305) (3,709)
Proceeds from contributions by joint venture partner 203,703 —
Repurchase of common shares for withholding requirements — (1,602)
NET CASH PROVIDED BY FINANCING ACTIVITIES 277,602 17,902
Net change in cash, cash equivalents and restricted cash 18,289 8,492
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Beginning of period 96,944 38,896
End of period $ 115,233 $ 47,388
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments for interest $ (11,213) $ (8,890)
Accrued acquisitions and improvements to hotel properties $ (3,749) $ (1,184)
Cash payments for income taxes, net of refunds $ 60 $ (39)
Debt assumed to complete acquisition of a portfolio of properties $ 335,205 $ —
Assumption of leases and other assets and liabilities in connection with the acquisition of a portfolio of properties $ 9,206 $ —
Non-controlling interests in operating partnership issued to complete acquisition of a portfolio of properties $ 157,513 $ —
Redeemable non-controlling interests in operating partnership issued to complete acquisition of a portfolio of properties $ 50,000 $ —
Summit Hotel Properties, Inc.

Condensed Consolidated Statements of Changes in Equity and Redeemable Non-controlling Interests

For the Six Months Ended June 30, 2022 and 2021

(Unaudited)

(in thousands, except share amounts)


	Redeemable Non-controlling Interest		Shares of Preferred Stock	Preferred Stock		Shares of Common Stock	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit and Distributions		Total Shareholders’ Equity		Non-controlling Interests		Total Equity
Balance at December 31, 2021	$	—	10,400,000	$	104	106,337,724	$	1,063	$	1,225,184	$	(15,639)	$	(262,639)	$	948,073	$	159,119	$	1,107,192
Redeemable non-controlling interests in operating partnership issued for the acquisition of a portfolio of hotel properties	50,000		—	—		—	—		—		—		—		—		—		—
Adjustment of redeemable non-controlling interest to redemption value	1,210		—	—		—	—		—		—		(1,210)		(1,210)		—		(1,210)
Non-controlling interests in operating partnership issued for the acquisition of a portfolio of hotel properties	—		—	—		—	—		—		—		—		—		157,513		157,513
Sale of non-controlling interests in joint venture	—		—	—		—	—		—		—		—		—		674		674
Contributions by non-controlling interest in joint venture	—		—	—		—	—		1,218		—		—		1,218		209,802		211,020


Dividends	(987)		—	—		—	—		—		—		(8,021)		(8,021)		(83)		(8,104)
Distributions	—		—	—		—	—		—		—		—		—		(66,633)		(66,633)
Equity-based compensation	—		—	—		817,087	8		5,832		—		—		5,840		—		5,840
Shares acquired for employee withholding requirements	—		—	—		(260,800)	(2)		(2,453)		—		—		(2,455)		—		(2,455)
Other	—		—	—		—	—		(121)		—		—		(121)		—		(121)
Other comprehensive income	—		—	—		—	—		—		16,639		—		16,639		370		17,009
Net income	—		—	—		—	—		—		—		4,711		4,711		9,629		14,340
Balance at June 30, 2022	$	50,223	10,400,000	$	104	106,894,011	$	1,069	$	1,229,660	$	1,000	$	(267,159)	$	964,674	$	470,391	$	1,435,065

Balance at December 31, 2020	$	—	9,400,000	$	94	105,708,787	$	1,057	$	1,197,320	$	(30,716)	$	(179,013)	$	988,742	$	63,321	$	1,052,063
Common stock redemption of common units	—		—	—		2,500	—		15		2		—		17		(17)		—
Purchase of capped call options	—		—	—		—	—		(21,131)		—		—		(21,131)		—		(21,131)



Contributions by non-controlling interest in joint venture	—		—	—		—	—		16,444		—		—		16,444		69,229		85,673


Dividends	—		—	—		—	—		—		—		(7,330)		(7,330)		(45)		(7,375)
Equity-based compensation	—		—	—		860,633	9		3,954		—		—		3,963		6		3,969
Shares acquired for employee withholding requirements	—		—	—		(155,605)	(2)		(1,600)		—		—		(1,602)		—		(1,602)
Other	—		—	—		—	—		—		—		—		—		—		—
Other comprehensive income	—		—	—		—	—		—		7,553		—		7,553		12		7,565
Net loss	—		—	—		—	—		—		—		(50,057)		(50,057)		(3,383)		(53,440)
Balance at June 30, 2021	$	—	9,400,000	$	94	106,416,315	$	1,064	$	1,195,002	$	(23,161)	$	(236,400)	$	936,599	$	129,123	$	1,065,722

See Notes to the Condensed Consolidated Financial Statements


Summit Hotel Properties, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands)
	Six Months Ended June 30,
	2022		2021
OPERATING ACTIVITIES
Net income (loss)	$	14,340	$	(53,440)
Adjustments to reconcile net income to net cash provided by operating activities:			0
Depreciation and amortization	74,332		53,883
Deferred finance cost amortization	2,825		2,124

Recoveries of credit losses	(250)		—
Equity-based compensation	5,840		3,969

Gain on disposal of assets	(20,484)		(81)

Non-cash interest income	(113)		(517)
Debt transaction costs	—		143
Other	42		234
Changes in operating assets and liabilities:	0		0

Trade receivables, net	(7,261)		(3,002)
Prepaid expenses and other	(7,882)		1,893
Accounts payable	(175)		720
Accrued expenses	25,689		8,904
NET CASH PROVIDED BY OPERATING ACTIVITIES	86,903		14,830
INVESTING ACTIVITIES
Acquisitions of hotel and other properties	(281,074)		—

Improvements and additions to hotel properties	(25,281)		(6,495)
Amounts drawn under note funding obligation	—		—
Proceeds from asset dispositions, net of closing costs	73,758		—

Escrow deposits for acquisitions	—		(825)
Funding of real estate loans	(2,167)		(5,222)


NET CASH USED IN INVESTING ACTIVITIES	(234,764)		(12,542)
FINANCING ACTIVITIES
Proceeds from issuance of debt	466,500		318,500
Principal payments on debt	(392,939)		(327,945)
Proceeds from the sale of non-controlling interests	674		—
Purchases of capped calls for convertible senior notes	—		(21,131)


Financing fees on debt and other issuance costs	(2,935)		(9,044)
Dividends paid	(9,308)		(7,463)
Contributions by joint venture partner to acquire a portfolio of hotels	204,073		85,673

Distributions to joint venture partner	(66,633)		—
Repurchase of common shares for withholding requirements	(2,455)		(1,602)

NET CASH PROVIDED BY FINANCING ACTIVITIES	196,977		36,988
Net change in cash, cash equivalents and restricted cash	49,116		39,276
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Beginning of period	96,944		38,896
End of period	$	146,060	$	78,172

See Notes to the Condensed Consolidated Financial Statements

SUMMIT HOTEL PROPERTIES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 - DESCRIPTION OF BUSINESS

General

Summit Hotel Properties, Inc. (the “Company”) is a self-managed hotel investment company that was organized on June 30, 2010 as a Maryland corporation. The Company holds both general and limited partnership interests in Summit Hotel OP, LP (the “Operating Partnership”), a Delaware limited partnership also organized on June 30, 2010. Unless the context otherwise requires, “we,” “us,” and “our” refer to the Company and its consolidated subsidiaries.

We focus on owning premium-branded hotel properties with efficient operating models primarily in the Upscale segment of the lodging industry. At ~~March 31,~~June 30, 2022, our portfolio consisted of ~~101~~102 hotel properties with a total of ~~15,228~~15,323 guestrooms located in 24 states. As of ~~March 31,~~June 30, 2022, we own 100% of the outstanding equity interests in 61 of our ~~101~~102 hotel properties. We own a 51% controlling interest in 4039 hotel properties through a joint ~~venture. Our joint~~ venture that was formed in July 2019 with GIC (the ~~“Joint~~“GIC Joint Venture”), Singapore’s sovereign wealth ~~fund, to acquire assets~~fund. We also own a 90% controlling interest in 2 hotel properties that ~~align with our current investment strategy and criteria. We serve as general partner and asset manager of the~~we acquired in June 2022 through another joint venture (the "Brickell Joint ~~Venture and we generally invest 51% of the equity capitalization of the limited partnership, with GIC investing the remaining 49%~~Venture"). ~~The Joint Venture typically finances assets with a 50% overall leverage target.~~

We have elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes. To qualify as a REIT, we cannot operate or manage our hotel properties. Accordingly, all of our hotel properties are leased to our taxable REIT subsidiaries (“TRS Lessees”).

During the ~~quarter~~six months ended ~~March 31,~~June 30, 2022, the Operating Partnership and the GIC Joint Venture closed on a transaction with

NewcrestImage Holdings, LLC, a Delaware limited liability company, and NewcrestImage Holdings II, LLC, a Delaware

limited liability company (together, “NewcrestImage”), to purchase from NewcrestImage a portfolio of 27 hotel properties,

containing an aggregate of 3,709 guestrooms, and 2 parking structures, containing 1,002 spaces ~~(such hotel properties and parking structures, the “Portfolio”),~~ and various financial incentives for an aggregate purchase price of $822.0 million (the "NCI Transaction"). In June 2022, the Operating Partnership exercised an option to acquire a 90% equity interest in the AC Hotel by Marriott and Element Miami Brickell Hotel in Miami, FL. (together the "AC/Element Hotel") based on a gross hotel option exercise price of $89.0 million (the "Brickell Transaction"). See ""Note 3 -Investment in Hotel Properties, ~~net - Acquisition of NewcrestImage Portfolio"~~net" for further information.

Risks and Uncertainties

~~The Company is subject to risks and uncertainties as a result of~~Beginning in March 2020, we experienced the negative effects of the novel coronavirus, designated as COVID-19 (“COVID-19”) and its variants ~~for at least~~(collectively, the ~~near future. The pandemic has~~"Pandemic"), which had a significant negative effect on the U.S. and global economies, including a rapid and sharp decline in all forms of travel, both domestic and international, and a significant decline in hotel demand. ~~These conditions resulted in~~As such, we experienced a substantial decline in our revenues, profitability and cash flows from operations ~~beginning~~during the years ended December 31, 2020 and 2021. Additionally, there has been a sharp increase in ~~March, 2020.~~

~~Beginning in March 2020,~~inflation and interest rates during the ~~Company took several actions to reduce costs and increase liquidity to mitigate the~~six months ended June 30, 2022. The extended effects of the ~~COVID-19 pandemic on the Company. We continue~~Pandemic and macroeconomic conditions may result in additional risks and uncertainties related to engage in certain steps to reduce costs while taking appropriate actions to maintain guest safety and satisfaction. For additional information concerning such actions taken in response to the effects of the COVID-19 pandemic on our business ~~please see~~and our ~~Annual Report on Form 10-K for the year ended December 31, 2021.~~ability to recover to pre-Pandemic levels and beyond.

During the three and six months ended ~~March 31,~~June 30, 2022, we ~~continued to experience~~experienced significant improvement in our business, ~~compared to earlier in the Pandemic,~~ driven primarily by leisure travel and to a lesser extent modest improvement in other demand segments, including corporate and group. The improvement was the result of a significant increase in the availability and administration of vaccines globally as well as the easing of government restrictions and guidance in most jurisdictions. We anticipate that continued improvement in operating trends will be dependent on continued strength in leisure travel and a recovery of business travel. More broadly, a return to normalized levels of operations is dependent upon a continuation in the recovery of our business, further dissipation of concerns related to the Pandemic, geopolitical stability, moderating inflation, a normalized labor market, and maintaining a high-quality portfolio aligned with evolving guest preferences.

For additional information related to the effects of the Pandemic on our business, please see our Annual Report on Form 10-K for the year ended December 31, 2021.

NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

We prepare our Condensed Consolidated Financial Statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Consolidated Financial Statements and reported amounts of revenues and expenses in the reporting period. Actual results could differ from those estimates. As interim statements, the Condensed Consolidated Financial Statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation in accordance with GAAP have been included. Results for the three and six months ended ~~March 31,~~June 30, 2022 may not be indicative of the results that may be expected for the full year of 2022. For further information, please read the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.

The accompanying Condensed Consolidated Financial Statements consolidate the accounts of all entities in which we have a controlling financial interest, as well as variable interest entities for which the Company is the primary beneficiary. All significant intercompany balances and transactions have been eliminated in the Condensed Consolidated Financial Statements.

We evaluate joint venture partnerships to determine if they should be consolidated based on whether the partners exercise joint control. For a joint venture where we exercise primary control and we also own a majority of the equity interests, we consolidate the joint venture partnership. We have consolidated the accounts of our ~~Joint Venture partnership with GIC~~joint venture partnerships in our accompanying Condensed Consolidated Financial Statements. See "Note 9 - Non-controlling Interests and Redeemable Non-controlling Interests" for further information.

~~Investment~~Non-controlling Interests

Non-controlling interests represent the portion of equity in ~~Hotel Properties~~

The Company allocates the purchase price of acquired hotel properties based on the fair value of the acquired land, land improvements, building, furniture, fixtures and equipment, identifiable intangible assets or liabilities, other assets and assumed liabilities. Intangible assets may include certain value associated with the on-going operations of the hotel business being acquired as part of the hotel property acquisition. Acquired intangible assets that derive their values from real property or an interest in real property, are inseparable from that real property or interest in real property, and do not produce or contribute to the production of incomea consolidated entity held by owners other than ~~consideration for~~ the ~~use or occupancy of space,~~consolidating parent. Non-controlling interests are ~~recorded as a component of~~reported in the ~~related real estate asset in our~~ Condensed Consolidated ~~Financial Statements. We allocate~~Balance Sheets within equity, separately from stockholders’ equity. Revenues, expenses and net income attributable to both the ~~purchase price~~Company and the non-controlling interests are reported in the Condensed Consolidated Statements of ~~acquired hotel properties to land, building and furniture, fixtures and equipment based on independent third-party determinations of fair value.~~

If substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset or group of similar identifiable assets, the asset or asset group is not considered a business. When we conclude that an acquisition meets this threshold, acquisition costs will be capitalized as part of our allocation of the purchase price of the acquired hotel properties.Operations.

Our hotel properties and related assets are recorded at cost, less accumulated depreciation. We capitalize hotel property development costs and the costs of significant additions and improvements that materially upgrade, increase the value or extend the useful life of the property. These costs mayCondensed Consolidated Financial Statements include ~~hotel property development, refurbishment, renovation, and remodeling expenditures, as well as certain indirect internal costs~~non-controlling interests related to ~~construction projects. If an asset requires a period~~common units of ~~time~~limited partnership interests (“Common Units”) in ~~which to carry out~~ the activities necessary to bring it to the condition necessary for its intended use, the interest cost incurred during that period as a result of expenditures for the asset is capitalized as part of the cost of the asset. We expense the cost of repairsOperating Partnership held by unaffiliated third parties and ~~maintenance as incurred.~~third-party minority ownership interests in our joint ventures.

~~On a limited basis, we provide financing~~Redeemable Non-controlling Interests

Redeemable non-controlling interests represent redeemable preferred units issued by our Operating Partnership ("Redeemable Preferred Units") in connection with the NCI Transaction (see "Note 3 - Investments in Hotel Properties, net" for additional information). The Redeemable Preferred Units are presented as temporary equity related to developers of hotel properties for development projects. We evaluate these arrangements to determine if we participate in residual profits of the hotel property through the loan provisions or other agreements. Where we conclude that these arrangements are more appropriately treated as an investment in the hotel property, we reflect the loan as Investment in hotel properties, net inour Operating Partnership on our Condensed Consolidated Balance ~~Sheets.~~Sheets under the caption of "Redeemable Non-controlling Interests." See "Note 9 - Non-controlling Interests and Redeemable Non-controlling Interests" for further information. We record Redeemable non-controlling interests at fair value on the issuance date of the securities. When the carrying value (the acquisition date fair value adjusted for the non-controlling interest’s share of net income (loss) and dividends) is less than the redemption value, we adjust the redeemable non-controlling interest to equal the redemption value with changes recognized as an adjustment to Accumulated deficit and distributions in excess of retained earnings. Any such adjustment, when necessary, is recorded as of the applicable balance sheet date.

We monitor events and changes in circumstances for indicators that the carrying value of a hotel property or undeveloped land may be impaired. Additionally, we perform at least annual reviews to monitor the factors that could trigger an impairment. Factors that we consider for an impairment analysis include, among others: i) significant underperformance relative to historical or anticipated operating results, ii) significant changes in the manner of use of a property or the strategy of our overall business, including changes in the estimated holding periods for hotel properties and land parcels, iii) a significant increase in competition, iv) a significant adverse change in legal factors or regulations, v) changes in values of comparable land or hotel property sales, and vi) significant negative industry or economic trends. When such factors are identified, we prepare an estimate of the undiscounted future cash flows of the specific property and determine if the carrying amount of the asset is recoverable. If an impairment is identified, we estimate the fair value of the property based on discounted cash flows or sales price if the property is under contract and an adjustment is made to reduce the carrying value of the property to its estimated fair value.

~~Intangible Assets~~

We amortize intangible assets with determined finite useful lives using the straight-line method. We do not amortize intangible assets with indefinite useful lives, but we evaluate these assets for impairment annually or at interim periods if events or circumstances indicate that the asset may be impaired.

Trade Receivables and Credit Policies

We grant credit to qualified customers, generally without collateral, in the form of trade accounts receivable. Trade receivables result from the rental of hotel guestrooms and the sales of food, beverage, and banquet services and are payable under normal trade terms. Trade receivables also include credit and debit card transactions that are in the process of being settled. Trade receivables are stated at the amount billed to the customer and do not accrue interest. We regularly review the collectability of our trade receivables. A provision for losses is determined on the basis of previous loss experience and current economic conditions. Our allowance for doubtful accounts was $0.1 million at ~~March 31,~~June 30, 2022 and $0.2 million at December 31, 2021. Bad debt expense was ~~$0.0 million and~~ $0.1 million for both the three months ended ~~March 31,~~June 30, 2022 and 2021, ~~respectively.~~

~~Leases~~

~~In accordance with ASU No. 2016-02,~~ ~~Leases (Topic 842), we record the financial liability~~ and ~~right-of-use assets that are inherent to leasing an asset on the balance sheet for all leases with a term of greater than 12 months regardless of their classification.~~

Several of our hotel properties lease retail or restaurant space to third-party tenants. The majority of our third-party tenants requested rent deferrals in prior years to ease the negative financial effects of the COVID-19 pandemic on their businesses. We primarily negotiated rent deferrals with these tenants that defer rent for a specified number of months$0.1 million and ~~require repayment of the deferred rent over a negotiated period of time. We have adopted a policy that the deferrals are not a change in the provisions of the lease. As such, we are accounting~~$0.2 million for the ~~concessions using the rights and obligations of the existing lease and recognizing a short-term lease receivable in the period that the cash payment is owed.~~

~~Notes Receivables~~

We selectively provide mezzanine financing to developers where we also have the opportunity to acquire the hotel property at or after the completion of the development project, and we also may provide seller financing under limited circumstances. We classify notes receivable as held-to-maturity and carry the notes receivable at cost less the unamortized discount, if any. In accordance with ASU No. 2016-13, ~~Financial Instruments - Credit Losses (Topic 326)~~, we measure financial assets (or a group of financial assets) at amortized cost and present them at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. We routinely evaluate our notes receivable and interest receivables for collectability. Probable losses on notes receivable are recognized in a valuation account that is deducted from the amortized cost basis of the notes receivable and recorded as Provision for credit losses in our Condensed Consolidated Statements of Operations. When we place notes receivable on non-accrual status, we suspend the recognition of interest income until cash interest payments are received. Generally, we return notes receivable to accrual status when all delinquent interest becomes current and collectability of interest is reasonably assured. We do not measure an allowance for credit losses for accrued interest receivable. Accrued interest receivable is written-off to bad debt expense when collection is not reasonably assured.

~~Cash and Cash Equivalents~~

~~We consider all highly liquid investments purchased with an original maturity of three~~six months ~~or less to be cash equivalents. At times, cash on deposit may exceed the federally insured limit. We maintain our cash with high credit quality financial institutions.~~

~~Restricted Cash~~

Restricted cash consists of certain funds maintained in escrow for property taxes, insurance, and certain capital expenditures. Funds may be disbursed from the account upon proof of expenditures and approval from the lender or other party requiring the restricted cash reserves.

~~Redeemable Non-controlling Interests~~

Redeemable non-controlling interests represent redeemable preferred units issued by our Operating Partnership ("Redeemable Preferred Units") in connection with the NCI Transaction. Redeemable non-controlling interests are recorded as temporary equity in a mezzanine presentation outside of Equity on our Condensed Consolidated Balance Sheets. We record Redeemable non-controlling interests at fair value on the issuance date of the securities. When the carrying value (the acquisition date fair value adjusted for the non-controlling interest’s share of net income (loss) and dividends) is less than the redemption value, we adjust the redeemable non-controlling interest to equal the redemption value with changes recognized as an adjustment to Accumulated deficit and distributions in excess of retained earnings. Any such adjustment, when necessary, is recorded as of the applicable balance sheet date.

~~Non-controlling Interests~~

Non-controlling interests represent the portion of equity in a consolidated entity held by owners other than the consolidating parent. Non-controlling interests are reported in the Condensed Consolidated Balance Sheets within equity, separately from stockholders’ equity. Revenue, expenses and net income attributable to both the Company and the non-controlling interests are reported in the Condensed Consolidated Statements of Operations.

Our Condensed Consolidated Financial Statements include non-controlling interests related to common units of limited partnership interests (“Common Units”) in the Operating Partnership held by unaffiliated third parties and third-party ownership of a 49% interest in the Joint Venture. Also, our Condensed Consolidated Financial Statements include Redeemable Preferred Units in the Operating Partnership issued to complete the NCI Transaction and held by unaffiliated third parties. These Redeemable Preferred Units are presented as temporary equity related to our Operating Partnership in a mezzanine position between liabilities and stockholders' equity on our Condensed Consolidated Balance Sheet as Redeemable Non-controlling Interests. See ~~"Note 9 - Non-controlling Interests and Redeemable Non-controlling Interests"~~ ~~for further information.~~

~~Revenue Recognition~~

In accordance with ASU No. 2014-09, revenues from the operation of our hotel properties are recognized when guestrooms are occupied, services have been rendered or fees have been earned. Revenues are recorded net of any discounts and sales and other taxes collected from customers. Revenues consist of room sales, food and beverage sales, and other hotel property revenues and are presented on a disaggregated basis on our Condensed Consolidated Statements of Operations.

Room revenue is generated through short-term contracts with customers whereby customers agree to pay a daily rate for the right to occupy hotel rooms for one or more nights. Our performance obligations are fulfilled at the end of each night that the customers have the right to occupy the rooms. Room revenues are recognized daily at the contracted room rate in effect for each room night.

Food and beverage revenues are generated when customers purchase food and beverage at a hotel property's restaurant, bar or other facilities. Our performance obligations are fulfilled at the time that food and beverage is purchased and provided to our customers.

Other revenues such as fees for parking, meeting space or communication services are recognized at the point in time or over the time period that the associated good or service is provided. Ancillary services such as parking at certain hotel properties are provided by third parties and we assess whether we are the principal or agent in such arrangements. If we are determined to be the agent, revenue is recognized based upon the commission paid to us by the third party for the services rendered to our customers. If we are determined to be the principal, revenues are recognized based upon the gross contract price of the service provided. Certain of our hotel properties have retail spaces, restaurants or other spaces that we lease to third parties. Lease revenues are recognized on a straight-line basis over the respective lease terms and are included in Other income on our Condensed Consolidated Statements of Operations.

~~Cash received prior to customer arrival is recorded as an advance deposit from the customer and is recognized as revenue at the time of occupancy.~~

~~Equity-Based Compensation~~

Our 2011 Equity Incentive Plan, which was amended and restated effective May 13, 2021 (as amended, the “Equity Plan”), provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, and other stock-based awards. We account for time-based and performance-based stock awards using the grant date fair value of those equity awards. Restricted stock awards with performance-based vesting conditions are market-based awards tied to total stockholder return and are valued using a Monte Carlo simulation model in accordance with ASC Topic 718, ~~Compensation — Stock Compensation~~. We expense the fair value of awards under the Equity Plan ratably over the vesting period and market-based awards are not adjusted for performance. The amount of stock-based compensation expense may be subject to adjustment in future periods due to a change in forfeiture assumptions or modification of previously granted awards.

~~Derivative Financial Instruments and Hedging~~

We use interest rate derivatives to hedge our risks on variable-rate debt. Interest rate derivatives could include swaps, caps, collars, and floors. We assess the effectiveness of each hedging relationship by comparing changes in fair value or cash flows of the derivative financial instrument with the changes in fair value or cash flows of the designated hedged item or transaction. All derivative financial instruments are recorded at fair value as a net asset or liability in our Condensed Consolidated Balance Sheets.

The change in the fair value of the hedging instruments is recorded in Other comprehensive income. Amounts deferred in Other comprehensive income will be reclassified to Interest expense in our Condensed Consolidated Statements of Operations in the period in which the hedged item affects earnings.

~~Income Taxes~~

We have elected to be taxed as a REIT under certain provisions of the Internal Revenue Code. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute annually to our stockholders at least 90% of our REIT taxable income, subject to certain adjustments and excluding any capital gain. As a REIT, we generally will not be subject to federal income tax (other than taxes paid by our TRSs at regular corporate income tax rates) to the extent we distribute 100% of our REIT taxable income to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate income tax rates and generally will be unable to re-elect REIT status until the fifth calendar year after the year in which we failed to qualify as a REIT, unless we satisfy certain relief provisions.

Substantially all of our assets are held by and all of our operations are conducted through our Operating Partnership or our subsidiary REITs. Partnerships are not subject to U.S. federal income taxes as revenues and expenses pass through to and are taxed on the owners. Generally, the states and cities where our partnerships operate follow the U.S. federal income tax treatment. However, there are a limited number of local and state jurisdictions that tax the taxable income of the Operating Partnership. Accordingly, we provide for income taxes in these jurisdictions for the Operating Partnership.

Taxable income related to our TRSs are subject to federal, state and local income taxes at applicable tax rates. Our consolidated income tax provision includes the income tax provision related to the operations of the TRSs as well as state and local income taxes related to the Operating Partnership.

Where required, we account for federal and state income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for: i) the future tax consequences attributable to differences between carrying amounts of existing assets and liabilities based on GAAP and the respective carrying amounts for tax purposes, and ii) operating losses and tax-credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date of the change in tax rates. However, deferred tax assets are recognized only to the extent that it is more likely than not they will be realized based on consideration of available evidence. 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.

We consider all available evidence, both positive and negative, to determine whether, based on the weight of that evidence, a valuation allowance for deferred tax assets is needed. Due to the effects of the COVID-19 pandemic, certain of our TRSs have incurred operating losses in the past and are expected to be in a cumulative loss for the foreseeable future. As such, the realizability of our deferred tax assets at March 31, 2022 is not reasonably assured. Therefore, we have recorded a valuation allowance against substantially all of our deferred tax assets at March 31, 2022.

~~We perform a quarterly review for any uncertain tax positions. The Company had no accruals for uncertain tax positions as of March 31,~~ended June 30, 2022 and ~~December 31, 2021.~~

~~Fair Value Measurement~~

~~Fair value measures are classified into a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:~~


~~Level 1:~~						~~Observable inputs such as quoted prices in active markets.~~
~~Level 2:~~						~~Directly or indirectly observable inputs, other than quoted prices in active markets.~~
~~Level 3:~~						~~Unobservable inputs in which there is little or no market information, which require a reporting entity to develop its own assumptions.~~

~~Assets and liabilities measured at fair value are based on one or more of the following valuation techniques:~~


~~Market approach:~~						~~Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.~~
~~Cost approach:~~						~~Amount required to replace the service capacity of an asset (replacement cost).~~
~~Income approach:~~						~~Techniques used to convert future amounts to a single amount based on market expectations (including present-value, option-pricing, and excess-earnings models).~~

Our estimates of fair value were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts. We classify assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement.

We have elected a measurement alternative for equity investments, such as our purchase option, that do not have readily determinable fair values. Under the alternative, our purchase option is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer, if any.2021, respectively.

Use of Estimates

Our Condensed Consolidated Financial Statements are prepared in conformity with GAAP, which requires us to make estimates based on assumptions about current and, for some estimates, future economic and market conditions that affect reported amounts and related disclosures in our Condensed Consolidated Financial Statements. Although our current estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could materially differ from our expectations, which could materially affect our expectations for our consolidated financial position and results of operations. ~~In particular, a number of estimates have been and will continue to be affected by the ongoing COVID-19 pandemic.~~

Reclassifications

Certain amounts at December 31, 2021 related to intangible assets totaling approximately $3.5 million and accumulated amortization of approximately $1.0 million have been reclassified within Investments in Hotel Properties, net to conform to the current period presentation.

New Accounting Standards

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848). ASU No. 2020-04 contains practical expedients for reference rate reform related activities that affect debt, leases, derivatives and other contracts. The guidance in ASU No. 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the year ended December 31, 2020, the Company 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~~implementation of ASU No. 2020-04 will not have a material effect on our consolidated financial position or results of ~~the guidance and may apply other elections as applicable as additional changes in the market occur.~~operations.

~~In August 2020, the FASB issued ASU No. 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) – Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The objective of ASU No. 2020-06 is to address issues identified as a result of the complexity associated with applying generally accepted accounting principles for certain financial instruments with characteristics of liabilities and equity.

The amendments in ASU No. 2020-06 reduce the number of accounting models for convertible debt instruments and convertible preferred stock. For convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, ~~Derivatives and Hedging~~, or that do not result in substantial premiums accounted for as paid-in capital, the embedded conversion features no longer are separated from the host contract. The amendments in ASU No. 2020-06 remove certain conditions that otherwise should be considered in the derivatives scope exception evaluation under Subtopic 815-40, ~~Derivatives and Hedging—Contracts in Entity’s Own Equity~~, and clarify the scope and certain requirements under Subtopic 815-40. The amendments also improve the guidance related to the disclosures and earnings-per-share (EPS) for convertible instruments and contracts in an entity’s own equity.

ASU No. 2020-06 is effective for fiscal years beginning after December 15, 2021. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. We elected to adopt ASU No. 2020-06 effective January 1, 2021 in connection with our Convertible Notes Offering closed on January 12, 2021 as described in "~~Note 5 – Debt~~." In accordance with the provisions of ASU No. 2020-06, we will account for the convertible notes issued in 2021 entirely as a liability and we will use the if-converted method for diluted share calculations.

NOTE 3 - INVESTMENT IN HOTEL PROPERTIES, NET

Investment in Hotel Properties, net

Investment in hotel properties, net is as follows (in thousands):


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
Hotel buildings and improvements	Hotel buildings and improvements	$	2,762,269	$	2,127,782	Hotel buildings and improvements	$	2,840,004	$	2,127,782
Land	Land	363,727		323,276		Land	378,105		323,276
Furniture, fixtures and equipment	Furniture, fixtures and equipment	242,165		167,245		Furniture, fixtures and equipment	253,936		167,245
Construction in progress	Construction in progress	26,669		18,321		Construction in progress	38,444		18,321
Intangible assets	Intangible assets	37,981		10,834		Intangible assets	39,954		10,834
Real estate development loan	Real estate development loan	29,632		27,595		Real estate development loan	—		27,595
		3,462,443		2,675,053			3,550,443		2,675,053
Less - accumulated depreciation and amortization		(614,042)		(583,080)
Less accumulated depreciation						Less accumulated depreciation	(651,931)		(583,080)
		$	2,848,401	$	2,091,973		$	2,898,512	$	2,091,973

~~We provided~~

During the year ended December 31, 2019, we executed a mezzanine loan to ~~fund up to $28.9~~provide financing of $29.9 million for a mixed-use development project that includes ~~a hotel property,~~the AC/Element Hotel with 264 guestrooms, retail space, and parking. ~~The hotel property is a 264 guestroom dual-branded AC Hotel by Marriott and Element Miami Brickell Hotel in Miami, FL.~~ In ~~December 2021, we modified the loan agreement to increase our funding commitment by $1.0 million. As of March 31, 2022, we funded $29.6 million of our total $29.9 million commitment under~~connection with the mezzanine ~~loan.~~loan, we had a purchase option to purchase a 90% equity interest in the AC/Element Hotel (the "Initial Purchase Option") upon completion of construction, which occurred in December 2021. The mezzanine loan was classified as Investment in hotel properties, net in our Condensed Consolidated Balance Sheets at ~~March 31, 2022 and~~ December 31, 2021. See "Note 4 - Investment in Real Estate Loans" for further information. In June 2022, the balance of the mezzanine loan was extinguished with the exercise of the Initial Purchase Option to acquire the AC/Element Hotel as part of the Brickell Transaction described below.

~~Acquisition of NewcrestImage Portfolio~~Brickell Transaction

On ~~November 2, 2021,~~June 10, 2022, we formed the Brickell Joint Venture (see "Note 9 - Non-controlling Interests and Redeemable Non-controlling Interests") to facilitate the exercise of our Initial Purchase Option to acquire a 90% equity interest in the AC/Element Hotel. The exercise price of the Initial Purchase Option was $89.0 million and primarily funded with the conversion of the mezzanine loan of $29.9 million to equity and $7.9 million in cash. We accounted for the acquisition of the AC/Element Hotel as an asset acquisition. The allocation of the purchase price to the assets acquired and liabilities assumed for the acquisition of the AC/Element Hotel is as follows (in thousands):


Assets and Liabilities Acquired			Net Cash Disbursed
Land	$	14,378	Purchase price (1)	$	94,522
Hotel buildings and improvements	75,113		Acquisition costs	593
Furniture, fixtures and equipment	5,624			$	95,115
Intangible assets	1,972
Total assets acquired	97,087		Cash	$	8,518
Debt assumed	(47,000)		Conversion of mezzanine loan	29,875
Other liabilities	(1,972)		Initial purchase option	2,800
Net assets acquired	$	48,115	Contribution by joint venture partner	6,922
			Debt assumed	47,000
				$	95,115

(1) The purchase price of the Brickell Transaction was based on the exercise price of the initial purchase option of $89.0 million. The transaction included the assumption of $47.0 million of debt resulting in a net consideration payment requirement of $42.0 million. We paid 90% of the required net consideration with the conversion of our $29.9 million mezzanine loan into equity and a cash payment of $7.9 million. The carrying amount of our Initial Purchase Option of $2.8 million is also included in the total amount allocated to the assets acquired. The Brickell Joint Venture partner’s non-controlling interest represents 10% of the fair value of the net assets on the transaction date of $6.9 million, determined by a third-party valuation expert based on discounted forecasted future cash flows of the net assets acquired. We also incurred $0.6 million of transaction costs. The result is a total amount allocated to the assets acquired of $95.1 million plus an intangible asset totaling $2.0 million related to the assumption of the franchises for the hotel properties and a related key money liability.

We also have an option to purchase the remaining 10% interest in the hotel property in December 2026 (the "Second Purchase Option"). The exercise price of the Second Purchase Option will be at its market value on the exercise date.

NCI Transaction

During the quarter ended March 31, 2022, the Operating Partnership and the GIC Joint Venture ~~entered into a Contribution and Purchase Agreement (the “Contribution and Purchase Agreement”) with NewcrestImage Holdings, LLC, a Delaware limited liability company, and~~

~~NewcrestImage Holdings II, LLC, a Delaware limited liability company (together, “NewcrestImage”), to purchase from~~

~~NewcrestImage a 100% interest in~~closed on the NCI Transaction for the acquisition of a portfolio of 27 hotel properties, containing an aggregate of 3,709 guestrooms, and 2 parking structures, containing 1,002 spaces, ~~(such hotel properties and parking structures, the “Portfolio”),~~ and various financial ~~and tax~~ incentives ~~for certain of the acquired properties,~~ for an aggregate purchase price of $822.0 ~~million.~~

On January 13, 2022, the Joint Venture completed the acquisition of the Portfolio except for one hotel property, the 176 guestroom Canopy New Orleans which was still under construction, for an aggregate purchase price of $766.0 million, paid in

the form of ~~15,314,494~~15,864,674 Common Units (deemed value of $10.0853 per unit), ~~1,958,429~~2,000,000 preferred units of limited partnership of

the Operating Partnership newly designated as 5.25% Series Z Cumulative Perpetual Preferred Units (Liquidation Preference ~~$25~~

$25 Per Unit) (the “Series Z Preferred Units”), ~~$382.0 million~~a cash draw of $410.0 million from a term loan entered into by subsidiaries of the Joint Venture, the assumption by a subsidiary of the Joint Venture of approximately $6.5 million in PACE loan debt, ~~and $5.9~~

$5.9 million of cash contributed to escrow in the prior year by GIC, as a limited partner in the Joint Venture, and approximately ~~$171.4~~

$185.2 million cash contributed by GIC at closing. GIC also contributed to the Joint Venture an additional $18.5 million in cash

for estimated pre-acquisition costs related to the NCI Transaction, a portion of which ~~will be~~was distributed to the Operating

Partnership as reimbursement for transaction costs paid by the Operating Partnership.

The Joint Venture acquired the Canopy New Orleans on March 23, 2022 upon completion of its construction, for a purchase price of $56.0 million, which was paid in the form of 550,180 Common Units, 41,571 Series Z Preferred Units, $13.8 million cash contributed by GIC, as a limited partner in the Joint Venture, and $28.0 million cash proceeds from a draw on the term loan entered into by subsidiaries of the Joint Venture.

1310

We valued the Common Units and Series Z Preferred Units at fair market value on the closing dates of the NCI Transaction,

which resulted in us recording the issued Common Units and Series Z Preferred Units at $157.5 million and $50.0 million,

respectively. The Common Units were recorded at the closing prices of our Common Stock on the closing dates since the

Common Units are redeemable for shares of our Common Stock on a 1:1 basis. We estimated the fair value of the Series Z

Preferred Units based on the features and stated dividend coupon of the Series Z Preferred Units relative to similar securities

with more readily determinable market values. We recorded the Series Z Preferred Units at their redemption value of ~~$50.0~~

$50.0 million which approximates fair value on the closing dates.

Our Joint Venture assumed $335.2 million of debt in connection with the NCI Transaction and immediately repaid ~~$328.7~~

$328.7 million of the assumed debt on the closing date using proceeds from borrowings on the Joint Venture Term Loan (as ~~defined~~

described below). We recorded debt assumed in connection with the NCI Transaction at its face amount, which approximated fair market value on the closing date.

Our Joint Venture recorded the NCI Transaction as an asset acquisition and allocated the aggregate purchase price paid for the NCI Transaction to the net assets acquired based on their relative estimated fair values. The allocation of the aggregate purchase price to the fair value of the assets and liabilities acquired for the NCI Transaction is as follows (in thousands):


Assets and Liabilities Acquired			Net Cash Disbursed
Land	$	52,797	Purchase price (1)	$	823,056
Hotel buildings and improvements	676,607		Acquisition costs	3,027
Furniture, fixtures and equipment	76,729		Deferred financing fees	4,625
Incentives and other intangibles	23,670			$	830,708
Other assets (2)	5,318
Total assets acquired	835,121		Cash	$	208,819
Debt assumed	(335,205)		Preferred Operating Partnership Units	50,000
Other liabilities (3)	(9,361)		Common Units (1)	157,513
Net assets acquired	$	490,555	Debt	414,376
				$	830,708

(1) The contractual purchase price for the NCI Transaction was $822.0 million based on the issuance of Common OP Units totaling $160.0 million on the contract date. However, the fair value of the Common OP Units on the closing dates totaled $157.5 million based on the closing prices of our Common Stock on January 13, 2022 and March 23, 2022 of $9.94 and $9.61 per share, respectively. As such, the purchase price has been adjusted to reflect the fair value of the Common Units issued on the closing dates of the NCI Transaction plus additional costs incurred to close the transaction.

(2) Amount includes right-of-use assets related to assumed leases totaling approximately $5.3 million.

(3) Amount includes assumed key money liabilities of approximately $3.9 million, lease liabilities of approximately $5.1 million, and other liabilities of approximately $0.4 million.

Incentives and other intangibles include tax incentives totaling approximately $19.8 million associated with certain of the acquired hotel properties in the NCI Transaction and are being amortized over a weighted average amortization period of approximately 9.1 years, which is the period in which we expect to meet the requirements to receive payment of the tax incentives. Other intangible assets totaling approximately $3.9 million are related to key money associated with certain of the hotel properties acquired in the NCI Transaction and are being amortized over a weighted average amortization period of approximately 19.7 years, which is the remaining ~~the~~ key money contract period with the franchisor.

1411

Intangible assets, net is as follows (in thousands):


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
Indefinite-lived intangible assets:
Indefinite-lived Intangible assets:						Indefinite-lived Intangible assets:
Air rights	Air rights	$	10,754	$	10,754	Air rights	$	10,754	$	10,754
Other	Other	80		80		Other	80		80
		10,834		10,834			10,834		10,834
Finite-lived intangible assets:	Finite-lived intangible assets:					Finite-lived intangible assets:

Tax incentives	Tax incentives	19,750		—		Tax incentives	19,750		—
Key money	Key money	7,397		—		Key money	9,370		—
		27,147		—
		37,981		10,834
Less - accumulated amortization		(2,015)		—
							29,120		—
Intangible assets						Intangible assets	39,954		10,834
Less accumulated amortization						Less accumulated amortization	(3,067)		—
Intangible assets, net	Intangible assets, net	$	35,966	$	10,834	Intangible assets, net	$	36,887	$	10,834

We recorded amortization expense related to intangible assets of approximately ~~$1.0~~$1.1 million and ~~$0.05~~$2.0 million for the three and six months ended ~~March 31,~~June 30, 2022, respectively. We did 0t record any amortization expense related to intangible assets for the three and ~~2021, respectively.~~ six months ended June 30, 2021.

Future amortization expense related to intangible assets is as follows (in thousands):


2022	2022	$	4,290	2022	$	2,165
2023	2023	4,252		2023	4,331
2024	2024	3,541		2024	4,296
2025	2025	1,546		2025	1,625
2025		1,546
2026				2026	1,625
Thereafter	Thereafter	9,957		Thereafter	12,011
		$	25,132		$	26,053

We ~~also acquired in~~did not acquire any hotel properties during the NCI Transaction a limited liability corporation with an historical tax credit (the "HTC Entity"). The third-party member in the HTC Entity (the "HTC Partner") that owns the majority interest in the HTC Entity is entitled to the value of the historical tax credit. The recapture period related to the historical tax credit expires in October 2022. We have a call option to purchase the HTC Partner's entire interest in the HTC Entity (the "HTC Call Option") commencing on the last day of the recapture period and continuing for 180 days thereafter for $2.6 million plus certain additional costs, estimated to be approximately $0.1 million. If we do not exercise the HTC Call Option, the HTC Partner has a put option to require us to purchase its interest in the HTC Entity upon expiration of the HTC Call Option and continuing for six months thereafter for the same amount as the Call Option exercise price. We have a note receivable from NewcrestImage for $2.7 million that is payable upon our exercise of the HTC Call Option. We have entered into an agreement with NewcrestImage to timely exercise the HTC Call Option. As a result, we have recorded a note receivable of $2.7 million from NewcrestImage and a liability at March 31, 2022 of $2.7 million related to our obligation to exercise the HTC Call Option.ended June 30, 2021.

~~Assets Held for Sale~~Asset Sales

~~Assets held for~~In May 2022, the GIC Joint Venture completed the sale ~~at March 31, 2022 include~~of a ~~land parcel in Flagstaff, AZ and the 169 guestroom~~169-guestroom Hilton Garden Inn San Francisco Airport North in San Francisco, CA ~~which is expected to close in the second quarter of 2022~~ for a gross selling price of $75.0 million. The sale of this property resulted in a net gain of $20.5 million to the GIC Joint Venture during the three months ended June 30, 2022.

Assets Held for Sale

Assets Held for Sale at June 30, 2022 and December 31, 2021 include a land parcel in Flagstaff, AZ.

~~Assets held for sale were as follows (in thousands):~~

March 31, December 31,
2022 2021
Hotel buildings and improvements $ 43,078 $ —
Land 12,771 425
Furniture, fixtures and equipment 3,199 —
59,048 425
Less - accumulated depreciation and amortization (6,247) —
$ 52,801 $ 425

NOTE 4 — INVESTMENT IN REAL ESTATE LOANS

Investment in real estate loans, net is as follows (in thousands):


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
Real estate loans	Real estate loans	$	2,350	$	2,350	Real estate loans	$	2,100	$	2,350
Allowance for credit losses						Allowance for credit losses	(2,100)		(2,350)

Allowance for credit losses		(2,350)		(2,350)
Investment in real estate loans, net		$	—	$	—
							$	—	$	—

The amortized cost bases of our Investment in real estate loans, net approximate their fair values.

Real Estate Development Loans

During the year ended December 31, 2019, we ~~provided~~executed a mezzanine loan to fund up to $28.9 million for a mixed-use

development project that includes the ACAC/Element Hotel, ~~by Marriott and Element Miami Brickell Hotel in Miami, FL,~~ retail space, and parking. ~~The loan closed in the third quarter of 2019 and has a stated interest rate of 9%. In November 2020, we extended the maturity date of the loan from February 15, 2022 to May 15, 2022.~~ In December 2021, we modified the loan agreement to increase ~~the Company's~~our funding commitment by $1.0 million. ~~The loan is secured by a second mortgage on~~During the ~~development project and a pledge of the equity in the project owner. As of March 31,~~six months ended June 30, 2022, we ~~funded $29.6 million~~completed the funding of our ~~total~~entire $29.9 million commitment.

~~We have an option~~ The loan was converted to ~~purchase~~equity in June 2022 upon the exercise of our Initial Purchase Option to acquire a 90% equity interest in the ~~AC Hotel by Marriott and~~ AC/Element Miami Brickell Hotel in Miami, FL (the “Initial Purchase Option”). We also have the right to purchase the remaining interest in the hotel property five years after the completion of construction. In December 2021, construction of the hotel propertyHotel. The loan was ~~completed. We have issued a $10.0 million letter of credit under our senior revolving credit facility to secure the exercise of the Initial Purchase Option. As such, we have classified the loan~~recorded as Investment in hotel properties, net on our Consolidated Balance Sheets at ~~March 31, 2022 and~~ December 31, 2021. Interest income on the mezzanine loan is recorded in our Consolidated Statement of Operations as it is earned. We have recorded the aggregate estimated fair value of the Initial Purchase Option totaling $2.8 million in Other assets and as a contra-asset to Investment in hotel properties, net. The contra-asset will be amortized as a component of non-cash interest income over the term of the real estate development loan using the straight-line method, which approximates the interest method. During each of the three months ended March 31, 2022 and 2021, we amortized $0.1 million and $0.3 million, respectively, as non-cash interest income. Including the amortization of the contra-asset, the current effective interest rate on this loan is approximately 11.4%.

In April 2022, we exercised the Initial Purchase Option to acquire a 90% equity interest in the AC Hotel by Marriott and Element Miami Brickell Hotel in Miami, FL containing an aggregate 264 guestrooms. The option price was based on a gross hotel valuation of $89.0 million determined prior to commencement of the development project. We expect to fund our estimated equity requirement with the proceeds from the payment in full of our outstanding mezzanine loan to the developer of the project, which is expected to be $29.9 million at closing, the assumption of senior debt on the development project of approximately $47.0 million, and $7.9 million in cash. We expect to close the transaction in June 2022.

~~For additional information regarding our real estate development loans, please see our Annual Report on Form 10-K filed on February 23, 2022.~~

Seller-Financing Loans

On June 29, 2018, we sold the Holiday Inn in Duluth, GA and the Hilton Garden Inn in Duluth, GA for an aggregate selling

price of $24.9 million. We provided seller financing totaling $3.6 million on the sale of these properties under 2, 3.5 year

second mortgage notes with a blended interest rate of 7.38% that are further collateralized by a personal guarantee from the

principal of the borrower. ~~As of March 31, 2022, there was $2.4 million outstanding on the seller-financing loans.~~ During

the year ended December 31, 2020, we recorded an allowance for credit losses in an amount equal to the outstanding balance of

the loans due to a borrower default caused by the negative effects of the ~~pandemic.~~

Pandemic. On June 1, 2021, we amended the terms of the seller-financing loans and extended the maturity date of each loan to December

31, 2022. Interest is accruing at a rate of 9.00% monthly, including 5.00% payable in cash and 4.00% paid-in-kind. Semiannual

principal payments of $0.3 million began on April 15, 2022. At June 30, 2022, the outstanding principal balance of the notes of $2.1 million is fully reserved.

NOTE 5 - DEBT

At ~~March 31,~~June 30, 2022, our indebtedness was comprised of borrowings under our 2018 Senior Credit Facility (as defined below), the 2018 Term Loan (as defined below), the ~~2017 Term Loan (as defined below), the~~GIC Joint Venture Credit Facility (as defined below), the GIC Joint Venture Term Loan (as defined below), the PACE Loan (as defined below), the Brickell Mortgage Loan (as defined below), the Convertible Notes (as defined below), and other indebtedness secured by first priority mortgage liens on various hotel properties. The weighted average interest rate, after giving effect to our interest rate derivatives, for all borrowings was ~~3.34%~~3.95% at ~~March 31,~~June 30, 2022 and 3.35% at December 31, 2021.

Debt, net of debt issuance costs, is as follows (in thousands):


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
Revolving debt	Revolving debt	$	68,500	$	68,500	Revolving debt	$	125,000	$	68,500
Term loans	Term loans	972,000		562,000		Term loans	910,000		562,000
Convertible notes	Convertible notes	287,500		287,500		Convertible notes	287,500		287,500
Mortgage loans	Mortgage loans	168,640		163,315		Mortgage loans	214,582		163,315
		1,496,640		1,081,315			1,537,082		1,081,315
Unamortized debt issuance costs	Unamortized debt issuance costs	(14,745)		(11,518)		Unamortized debt issuance costs	(13,552)		(11,518)
Debt, net of debt issuance costs	Debt, net of debt issuance costs	$	1,481,895	$	1,069,797	Debt, net of debt issuance costs	$	1,523,530	$	1,069,797

We have entered into interest rate swaps to ~~partially~~ fix the interest rates on a portion of our variable interest rate indebtedness. See "Note 7 - Derivative Financial Instruments and Hedging" to the Condensed Consolidated Financial Statements for additional information. Our total fixed-rate and variable-rate debt, after considering our interest rate derivative agreements that are currently effective, is as follows (in thousands):


		March 31, 2022		Percentage	December 31, 2021		Percentage		June 30, 2022		Percentage	December 31, 2021		Percentage
Fixed-rate debt		$	848,249	57%	$	842,858	78%
Fixed-rate debt¹								Fixed-rate debt¹	$	847,258	55%	$	842,858	78%
Variable-rate debt	Variable-rate debt	648,391		43%	238,457		22%	Variable-rate debt	689,824		45%	238,457		22%
		$	1,496,640		$	1,081,315			$	1,537,082		$	1,081,315

¹ Debt related our wholly-owned properties coupled with our pro rata share of debt related to our our joint ventures results in fixed-rate debt of approximately 70% when including the effect of interest rate swaps.

Information about the fair value of our fixed-rate debt that is not recorded at fair value is as follows (in thousands):


		March 31, 2022				December 31, 2021						June 30, 2022				December 31, 2021
		Carrying Value		Fair Value		Carrying Value		Fair Value		Valuation Technique		Carrying Value		Fair Value		Carrying Value		Fair Value		Valuation Technique
Convertible notes	Convertible notes	$	287,500	$	303,003	$	287,500	$	300,384	Level 1 - Market approach	Convertible notes	$	287,500	$	245,525	$	287,500	$	300,384	Level 1 - Market approach
Fixed-rate mortgage loans	Fixed-rate mortgage loans	160,749		154,852		155,358		155,765		Level 2 - Market approach	Fixed-rate mortgage loans	159,758		158,798		155,358		155,765		Level 2 - Market approach
		$	448,249	$	457,855	$	442,858	$	456,149			$	447,258	$	404,323	$	442,858	$	456,149

At ~~March 31,~~June 30, 2022 and December 31, 2021, we had $400.0 million of debt with variable interest rates that had been converted to fixed interest rates through derivative financial instruments which are carried at fair value. Differences between carrying value and fair value of our fixed-rate debt are primarily due to changes in interest rates. Inherently, fixed-rate debt is subject to fluctuations in fair value as a result of changes in the current market rate of interest on the valuation date. For additional information on our use of derivatives as interest rate hedges, refer to "Note 7 - Derivative Financial Instruments and Hedging."

$600 Million Senior Credit and Term Loan Facility

On December 6, 2018, the Operating Partnership, as borrower, the Company, as parent guarantor, and each party executing the loan documentation as a subsidiary guarantor, entered into a $600.0 million senior credit facility (the “2018 Senior Credit Facility”) with Deutsche Bank AG New York Branch, as administrative agent, and a syndicate of lenders. The 2018 Senior Credit Facility is comprised of a $400.0 million revolver (the "$400 Million Revolver") and a $200.0 million term loan facility (the “$200 Million Term Loan”). At ~~March 31,~~June 30, 2022, we had $200.0 million borrowed ~~an outstanding letter of credit of $10.0 million securing the exercise of the Initial Purchase Option,~~ and ~~$340.0~~$400.0 million available to ~~borrow plus an additional $50.0~~borrow. On July 21, 2022, Bank of America, N.A. entered into successor administrative agent documentation to succeed Deutsche Bank AG New York Branch as administrative agent on the 2018 Senior Credit Facility.

Amendments to the 2018 Senior Credit Facility

Between May 2020 and July 2022, the Company entered into several amendments to the 2018 Senior Credit Facility (the “Credit Facility Amendments”). We entered into the most recent amendment to the 2018 Senior Credit Facility on July 21, 2022 (the "Amendment"). Under the Amendment, the requirement that we grant first lien mortgages and assignments of leases on the unencumbered assets upon any advance that would cause the total amount outstanding under the revolving credit facility to exceed $350.0 million ~~available to borrow subject~~was eliminated in its entirety. The Amendment also provides improvements to certain ~~security requirements to be provided to~~of the ~~lender.~~ key financial covenants including eliminating the minimum liquidity covenant.

At ~~March 31,~~June 30, 2022, we had no borrowings outstanding on the $400 Million Revolver. Under the amendment executed on July 21, 2022, the $400 Million Revolver and $200 Million Term Loan each now have 2 additional six-month extension options available, subject to certain conditions, that result in a fully extended maturity date of March 31, 2025 for the $400 Million Revolver and April 1, 2025, for the $200 Million Term Loan.

~~Amendments to $600.0 Million Senior Credit Facility~~

~~Between May 2020 and November 2021,~~On July 21, 2022, the ~~Company entered into several amendments to the Credit Agreement of~~interest rate on the 2018 Senior Credit Facility ~~(the “Credit Facility Amendments”).~~

As of March 31, 2022, the cumulative effect of the Credit Facility Amendments resulted in the waiver or adjustment of certain financial and other covenants under the 2018 Senior Credit Facility, for the periods described below:

•~~Waivers of key financial and certain other covenants in the 2018 Senior Credit Facility for the period April 1, 2020 through March 31, 2022; and~~

•~~Beginning on April 1, 2022, adjustments to certain of the key financial covenants have gone into effect as follows:~~

◦~~Reduction of the Minimum Consolidated Fixed Charge Coverage Ratio;~~

◦~~Increase of the Maximum Unsecured Leverage Ratio;~~

◦~~Reduction of the Minimum Unsecured Interest Coverage Ratio; and~~

◦~~Increases~~was transitioned from LIBOR to the ~~Maximum Leverage Ratio, that adjusts down through calendar year 2023.~~

Secured Overnight Financing Rate (“SOFR”). The interest rate on the 2018 Senior Credit Facility is based on a pricing grid ranging from 140 basis points to 240 basis points plus ~~the the London Interbank Offered Rate ("LIBOR")~~SOFR plus a 10 basis point credit spread adjustment for the $400 Million Revolver and 135 basis points to 235 basis points plus ~~LIBOR~~SOFR plus a 10 basis point credit spread adjustment for the $200 Million Term Loan, depending ~~upon~~on the Company's leverage ratio. ~~The pricing grid was modified under~~For purposes of the Credit Facility Amendments such that during the period ending December 31, 2021, or earlier at the Company's election subject to certain requirements (the "Amendment Period"), the applicable margin was at Pricing Level VII, as defined in$400 Million Revolver and the 2018 Senior Credit Facility, ~~documents. The applicable margin~~SOFR is ~~currently set at Pricing Level VIII. The interest rate at March 31, 2022 for the $200 Million Term Loan was 2.80%. The 2018 Senior Credit Facility has been amended~~subject to ~~accommodate the transition from LIBOR to the~~ ~~Secured Overnight Financing Rate ("SOFR"), when LIBOR is no longer available.~~a floor of 25 basis points.

The Credit Facility Amendments require the borrower and certain subsidiaries to pledge to the secured parties all of the equity interests in the entities that own all properties included in the unencumbered asset pool supporting the facility (“Unencumbered Properties”), as well as the equity interests in the TRS lessees related to such Unencumbered Properties until the borrower meets certain conditions for their release. The Credit Facility Amendments also permitted the Company to complete the Convertible Notes Offering (defined below), the Series F preferred shares offering (defined below), and close on the NCI Transaction and enter into equity transactions and indebtedness related thereto.

The Credit Facility Amendments allow the borrower to advance up to $350 million on the $400 Million Revolver. Furthermore, the Credit Facility Amendments permit the borrower to advance an additional $50 million, in addition to the $350 million advance described in the preceding sentence, upon filing mortgages and related security agreements on all Unencumbered Properties, with such security documents to be released upon the borrower meeting certain conditions for their release.

The Credit Facility Amendments revise the restrictions that were previously placed on certain investments in assets, equity offerings and securing of permitted indebtedness to permit the borrower and Company to take such actions, provided that (i) portions of the proceeds from such events will be used to pay down the balance of the 2018 Senior Credit Facility, the 2018 Term Loan (defined below) and 2017 Term Loan (defined below) in accordance with the terms of the Credit Facility Amendments, and (ii) the borrower and Company comply with the other conditions to taking such actions, including maintaining a minimum of $150 million in liquidity.

Certain other typical limitations and conditions for credit facilities of this nature include, among other provisions, limitations on the use of revolving facility advances, certain restrictions on payments of dividends and establishment of a minimum liquidity requirement as indicated above. At March 31, 2022, we were in compliance with all financial covenants.

The 2018 Senior Credit Facility has an accordion feature which ~~will allow~~allows the Company to increase the total commitments by an aggregate of up to $300.0 million. The $400 Million Revolver will mature on March 31, 2023 and can be extended to March 31, ~~2024~~2025 at the Company’s option, subject to certain conditions. The $200 Million Term Loan will mature on April 1, ~~2024.~~2024, and can be extended to April 1, 2025 at the Company’s option, subject to certain conditions.

Term Loans

2018 Term Loan

On February 15, 2018, our Operating Partnership, as borrower, the Company, as parent guarantor, and each party executing the term loan documentation as a subsidiary guarantor, entered into a ~~new~~ $225.0 million term loan (the “2018 Term Loan”) with KeyBank National Association, as administrative agent, and a syndicate of lenders listed in the loan documentation, which is fully drawn as of ~~March 31,~~June 30, 2022. The 2018 Term Loan has an accordion feature that allows us to increase the total commitments by $150.0 million prior to the maturity date of February 14, 2025, subject to certain conditions.

Amendments to ~~$225.0 Million~~the 2018 Term Loan

Between May 2020 and ~~November 2021,~~July 2022, the Company entered into several amendments to the First Amended and Restated Credit Agreement (the “2018 Term Loan Amendments”). ~~As of March 31, 2022, the cumulative effect of the changes~~The amendments to the 2018 Term Loan ~~effected by~~are substantially the same as the Amendments described above related to the 2018 Senior Credit Facility. There was no modification to the maturity date of the 2018 Term ~~Loan Amendments are substantially similar to the changes described above effected by the Credit Facility Amendments.~~Loan.

We pay interest on advances at varying rates, based upon, at our option, either (i) daily, 1-~~, 2-~~, 3-, or 6-month ~~LIBOR,~~SOFR (subject to a floor of 25 basis points), plus a ~~LIBOR~~SOFR adjustment equal to 10 basis points and an applicable margin between 1.35% and ~~1.95%~~2.15%, depending upon our leverage ratio (as defined in the loan documents). ~~The pricing grid was modified under the 2018 Term Loan Amendments such that during the Amendment Period the applicable margin was set at Pricing Level VII, as defined in the 2018 Term Loan documents.~~ We are required to pay other fees, including customary arrangement and administrative fees. The interest rate at ~~March 31,~~June 30, 2022 was ~~2.60%~~3.94%. ~~The 2018 Term Loan has been~~

~~amended to accommodate the transition from LIBOR to SOFR, when LIBOR is no longer available.~~

Financial and Other Covenants. We are required to comply with various financial and other covenants to draw and maintain borrowings under the 2018 Term Loan. The 2018 Term Loan Amendments provide that certain financial and other covenants under the 2018 Term Loan were waived or ~~adjusted, which~~adjusted. The waivers and adjustments are the same as under the amendments to the Company’s 2018 Senior Credit Facility. At ~~March 31,~~June 30, 2022, we were in compliance with all financial covenants.

Unencumbered Assets. The 2018 Term Loan Amendments require the borrower and certain subsidiaries to pledge to the secured parties all of the equity interests in the entities that own the Unencumbered Properties, as well as the equity interests in the TRS lessees related to such Unencumbered Properties until the borrower meets certain conditions for the release of such pledges. During the period that the pledges are in place, as well as at all other times during the term of the facility, borrowings under the 2018 Term Loan are limited by the value of the Unencumbered Assets.

2017 Term Loan

On September 26, 2017, our Operating Partnership, as borrower, the Company, as parent guarantor, and each party executing the term loan documentation as a subsidiary guarantor, entered into a $225.0 million term loan (the "2017 Term Loan") with KeyBank National Association, as administrative agent, and a syndicate of lenders listed in the loan ~~documentation, which~~documentation. The 2017 Term Loan ~~has a principal~~had an original maturity date of November 2022. During the three months ended June 30, 2022, we repaid in full the balance of ~~$62.0 million as of March 31, 2022.~~

~~Amendments to $225.0 Million 2017 Term Loan~~

~~Between May 2020 and November 2021, the Company entered into various amendments to~~ the 2017 Term Loan ~~(the “2017 Term Loan Amendments”). As~~ of ~~March 31, 2022, the cumulative effect~~$62.0 million with our share of the ~~changes to~~proceeds from the ~~2017 Term Loan effected by the 2017 Term Loan Amendments are substantially similar to the changes described above effected by the Credit Facility Amendments.~~

The 2017 Term Loan has an accordion feature which allows us to increase the total commitments by an aggregate of $175.0 million prior to the maturity date, subject to certain conditions. The 2017 Term Loan matures on November 25, 2022.

We pay interest on advances at varying rates, based upon, at our option, either (i) 1-, 2-, 3-, or 6-month LIBOR, plus a LIBOR margin between 1.45% and 2.25%, depending upon our leverage ratio (as defined in the loan documents). The pricing grid was modified under the 2017 Term Loan Amendments such that during the Amendment Period the applicable margin was set at Pricing Level VI, as defined in the 2017 Term Loan documents. We are required to pay other fees, including customary arrangement and administrative fees. The interest rate at March 31, 2022 was 2.90%. The 2017 Term Loan has been

~~amended to accommodate the transition from LIBOR to SOFR, when LIBOR is no longer available.~~

~~Financial and Other Covenants~~. We are required to comply with a series of financial and other covenants to draw and maintain borrowings under the 2017 Term Loan. The 2017 Term Loan Amendments provide that certain financial and other covenants under the 2017 Term Loan were waived or adjusted, which waivers and adjustments are the same as under the Credit Facility Amendments. At March 31, 2022, we were in compliance with all financial covenants.

~~Unencumbered Assets. The 2017 Term Loan Amendments require the borrower and certain subsidiaries to pledge to the secured parties all~~sale of the ~~equity interests~~169-guestroom Hilton Garden Inn San Francisco Airport North in San Francisco, CA, along with cash on hand, and formally terminated the entities that own the Unencumbered Properties, as well as the equity interests in the TRS lessees related to such Unencumbered Properties until the borrower meets certain conditions for the release of such pledges. During the period that the pledges are in place, as well as at all other times during the term of the facility, borrowings under the 2017 Term Loan are limited by the value of the Unencumbered Assets.facility.

Convertible Senior Notes and Capped Call Options

On January 7, 2021, we entered into an underwriting agreement (the “Convertible Notes Offering”) pursuant to which the Company agreed to offer and sell $287.5 million aggregate principal amount of ~~the Company’s~~ 1.50% convertible senior notes due 2026 (the “Convertible Notes"). The net proceeds from the Convertible Notes Offering, after deducting underwriting discounts and commissions and offering expenses payable by the Company (including net proceeds from the full exercise by the underwriters of their over-allotment option to purchase additional Convertible Notes), were approximately $280.0 million before consideration of the Capped Call Transactions (as ~~defined~~described below). These proceeds were used to pay the cost of the Capped Call Transactions and to partially repay outstanding obligations under the 2018 Senior Credit Facility and 2017 Term Loan.

The Convertible Notes bear interest at a rate of 1.50% per year, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2021. The Convertible Notes will mature on February 15, 2026 (the “Maturity Date”), unless earlier converted, purchased or redeemed. Prior to August 15, 2025, the Convertible Notes will be convertible only upon certain circumstances and during certain periods. On or after August 15, 2025 and through the Maturity Date, holders may convert any of their Convertible Notes into shares of the Company’s common stock, at the applicable conversion rate at any time prior to the close of business on the second scheduled trading day prior to the Maturity Date, unless the Convertible Notes have been previously purchased or redeemed by the Company. During the three months ended ~~March 31,~~June 30, 2022 and 2021, the Company recorded coupon interest expense of ~~$1.0~~$1.1 million for each period. For the six months ended June 30, 2022 and 2021, the Company recorded coupon interest expense of $2.1 million and ~~$0.9~~$2.0 million, ~~respectively,~~respectively. Additionally, for the three months ended June 30, 2022 and 2021, the Company amortized $0.4 million for each period and ~~$0.4~~for the six months ended June 30, 2022 and 2021 the Company amortized $0.7 million ~~respectively,~~for each period of the $7.6 million debt issuance costs related to the Convertible Notes Offering. Including the amortization of the debt issuance costs, the current effective interest rate on the Convertible Notes is approximately 2.00%. for the six months ended June 30, 2022 and 2021.

The initial conversion rate of the Convertible Notes is 83.4028 shares of common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of $11.99 per share of common stock based on the 37.5% base conversion premium on the reference price of $8.72 per share. In no event will the conversion rate exceed 114.6788 shares of common stock per $1,000 principal amount of Convertible Notes, subject to certain adjustments defined in the Convertible Notes Offering.

On January 7, 2021, in connection with the pricing of the Convertible Notes, and on January 8, 2021, in connection with the full exercise by the Underwriters of their option to purchase additional Convertible Notes pursuant to the Underwriting Agreement, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain of the underwriters or their respective affiliates and another financial institution (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 shares of common stock underlying the Convertible Notes. The Capped Call Transactions are generally expected to reduce the potential dilution to holders of shares of common stock upon conversion of the Convertible Notes 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 or offset subject to a cap.

The effective strike price of the Capped Call Transactions is initially $15.26, which represents a premium of 75.0% over the last reported sale price of ~~the~~our common stock on the New York Stock Exchange on January 7, 2021, and is subject to certain adjustments under the terms of the Capped Call transactions.

MetaBank Loan

On June 30, 2017, we entered into a $47.6 million secured, non-recourse loan with MetaBank (the "MetaBank Loan"). The MetaBank Loan provides for a fixed interest rate of 4.44%, amortizes over 25 years, and matures on July 1, 2027. The MetaBank Loan is secured by 3 hotel properties and is subject to a prepayment penalty if prepaid prior to April 1, 2027. On May 1, 2020, MetaBank waived the annual minimum debt service covenant ratio for the year ended December 31, 2020, and on April 12, 2021, MetaBank extended such waiver for the year ended December 31, 2021. The next covenant measurement date is December 31, 2022.

Mortgage Loans

At ~~March 31,~~June 30, 2022 and December 31, 2021, we had mortgage loans totaling ~~$162.2~~$214.6 million and $163.3 million, respectively, that are secured primarily by first mortgage liens on 1719 and 16 hotel properties, respectively.

GIC Joint Venture Credit Facility

On October 8, 2019, a subsidiary of the GIC Joint Venture, Summit JV MR 1, LLC (the “Borrower”), as borrower, and Summit Hospitality JV, LP (the “Parent”), as parent (which is the GIC Joint Venture), and each party executing the credit facility documentation as a subsidiary guarantor, entered into a $200.0 million credit facility (the ~~“Joint~~“GIC Joint Venture Credit Facility”) with Bank of America, N.A., as administrative agent and sole initial lender, and BofA Securities, Inc., as sole lead arranger and sole bookrunner.

~~The Parent is the joint venture between the Operating Partnership and an affiliate of GIC, Singapore's sovereign wealth fund. See "Note 9 – Non-controlling Interests and Redeemable Non-controlling interests" for additional information.~~ The Operating Partnership and the Company are not borrowers or guarantors of the GIC Joint Venture Credit Facility. The GIC Joint Venture Credit Facility is guaranteed by all of the Borrower’s existing and future subsidiaries, subject to certain exceptions.

The GIC Joint Venture Credit Facility is comprised of a $125.0 million revolving credit facility (the “$125 Million Revolver”) and a $75.0 million term loan (the “$75 Million Term Loan”). The GIC Joint Venture Credit Facility has an accordion feature which ~~will allow~~allows us to increase the total commitments by up to $300.0 million, for aggregate potential borrowings of up to $500.0 million on the GIC Joint Venture Credit Facility. At ~~March 31,~~June 30, 2022, we had ~~$68.5~~$125.0 million outstanding under the $125 Million Revolver.

The $125 Million Revolver and the $75 Million Term Loan will mature on October 8, 2023. Each can be extended for a single ~~consecutive~~ twelve-month period at the Borrower's option, subject to certain conditions.

Interest is paid on revolving credit advances at varying rates based upon, at the Borrower's option, either (i) 1-, 2-, 3-, or 6-month LIBOR, plus a margin of 2.15% for Eurodollar rate advances, or (ii) LIBOR, plus a margin of 2.15% for LIBOR floating rate advances. The interest rate at ~~March 31,~~June 30, 2022 was 2.75%. The applicable margin for a term loan advance shall be 5 basis points less than revolving credit advances referenced above. The GIC Joint Venture Credit Facility has been amended to

accommodate the transition from LIBOR to SOFR, when LIBOR is no longer available. At ~~March 31,~~June 30, 2022, we were in compliance with all financial covenants.

Amendments to $200 Million GIC Joint Venture Credit Facility

On June 18, 2020, the Company entered into a Second Amendment to Credit Agreement ~~concerning~~related to the GIC Joint Venture Credit Facility (“Second Amendment”). The Second Amendment resulted in waivers or adjustments to certain financial and other covenants under the GIC Joint Venture Credit Facility, which are described in the Current Report on Form 8-K filed by the Company on June 24, 2020.

On April 29, 2021, the Borrower, Parent, and each party executing the credit facility documentation as a subsidiary guarantor, entered into a Third Amendment to Credit Agreement concerning the GIC Joint Venture Credit Facility (the ~~“Joint~~“GIC Joint Venture Amendment”).

Certain financial and other covenants under the GIC Joint Venture Credit Facility were waived or adjusted as follows:

• Increase of the Maximum Leverage Ratio through the initial maturity date;

• ~~Reduction of the Fixed Charge Coverage Ratio through March 31, 2022;~~

• Increase of the Borrowing Base Leverage through the initial maturity date;

~~• Reduction of the Minimum Borrowing Base Interest Coverage Ratio through March 1, 2022~~

During the covenant waiver period, the applicable margin was increased to 230 basis points and 225 basis points for the $125 million Revolver and $75 million Term Loan, respectively. ~~After the~~The covenant waiver period has expired so the applicable margin ~~will revert~~has reverted to 215 basis points and 210 basis points for the $125 million Revolver and $75 million Term Loan, respectively.

The GIC Joint Venture Amendment provides that the Borrower may make additional advances on the $125 Million Revolver, subject to certain financial covenant limitations. Certain other ~~typical~~similar limitations and conditions for credit facilities of this nature were included among the provisions in the amendments including, among other provisions, limitations on the use of revolving facility advances, certain restrictions on payments of dividends and limitations on investments and dispositions. We retain the right to opt out of certain additional restrictive covenants upon demonstration of compliance with the required financial covenants.

Borrowing Base Assets. The GIC Joint Venture Credit Facility is secured primarily by a first priority pledge of the Borrower's equity interests in the subsidiaries that hold ~~the initial five borrowing base~~11 assets financed by the facility, and the related TRS entities, which wholly own the TRS Lessees that lease each of the borrowing base assets. There are currently 511 hotel properties deemed borrowing base assets and an additional 7 hotel properties that may be contributed to the borrowing base to increase borrowing availability.

GIC Joint Venture Term Loan

In connection with the NCI Transaction, on January 13, 2022, certain subsidiaries of the GIC Joint Venture, Summit JV MR 2, LLC, Summit JV MR 3, LLC and Summit NCI NOLA BR 184, LLC (collectively, the “Borrowers”), the GIC Joint Venture, as parent guarantor, and each party executing the credit facility documentation as a subsidiary guarantor, entered into a $410.0 million senior secured term loan facility (the ~~“Joint~~“GIC Joint Venture Term ~~loan”~~Loan”) with Bank of America, N.A., as administrative agent and initial lender, Wells Fargo Bank, National Association, as syndication agent and an initial lender, and BofA Securities, Inc. and Wells Fargo Securities, LLC, as joint lead arrangers and joint bookrunners.

Neither the Operating Partnership nor the Company are borrowers or guarantors of the GIC Joint Venture Term Loan. The GIC Joint Venture Term Loan is guaranteed by the GIC Joint Venture and all of the Borrowers’ existing and future subsidiaries, subject to certain exceptions.

The GIC Joint Venture Term Loan provides for a $410.0 million term loan. The GIC Joint Venture Term Loan has an accordion feature which ~~will permit~~permits an increase in the total commitments by up to $190.0 million, for aggregate potential borrowings of up to $600.0 million. The GIC Joint Venture Term Loan will mature on January 13, 2026 and can be extended for one 12-month period at the ~~Company’s~~ option of the GIC Joint Venture, subject to certain conditions.

As of ~~March 31,~~June 30, 2022, we had $410.0 million outstanding on the GIC Joint Venture Term Loan bearing interest at a floating rate of SOFR plus 2.86%. The interest rate at ~~March 31,~~June 30, 2022 was ~~3.15%~~4.55%.

Borrowing Base Assets

The GIC Joint Venture Term Loan is secured primarily by a first priority pledge of the Borrowers’ equity interests in the subsidiaries that hold a direct or indirect interest in the 27 hotel properties and 2 parking facilities purchased in the NCI Transaction that constitute borrowing base assets. The GIC Joint Venture Term Loan contains terms, conditions and covenants for typical for similar credit facilities.

For additional information concerning the GIC Joint Venture Term Loan, please see our Current Report on Form 8-K filed on January 14, 2022.

PACE Loan

As part of the NCI Transaction, a subsidiary of the GIC Joint Venture assumed a PACE loan of approximately ~~$6.4~~$6.5 million. The loan bears fixed interest at 6.10%, has an amortization period of 20 years, and matures on July 31, 2040. The PACE loan is secured by an assessment lien imposed by the County of Tarrant, Texas for the benefit of the lender.

Brickell Mortgage Loan

In June 2022, the Company entered into a joint venture (the "Brickell Joint Venture") with C-F Brickell, LLC, a Delaware limited liability company that was the developer of the AC/Element Hotel ("C-F Brickell"), to facilitate the exercise of the Initial Purchase Option to acquire a 90% equity interest in the Brickell Joint Venture, which owned a 100% interest in the AC/Element Hotel. On June 10, 2022, the Brickell Joint Venture entered into a $47.0 million mortgage loan and non-recourse guaranty with City National Bank of Florida to finance the dual-branded 264-guestroom AC/Element Hotel. The City National Bank Loan provides for an interest rate equal to one-month term SOFR plus 300 basis points. Payment terms include an interest-only period through June 30, 2024 and the loan will amortize based on a 25-year schedule from July 1, 2024 through the maturity date of June 30, 2025. The City National Bank Loan is prepayable at any time without penalty.

NOTE 6 - LEASES

The Company has operating leases related to the land under certain hotel properties, conference centers, parking spaces, automobiles, our corporate office and other miscellaneous office equipment. These leases have remaining terms of 1 year to 77 years, some of which include options to extend the leases for additional years. The exercise of lease renewal options is at our sole discretion. Certain leases also include options to purchase the leased property. Leases with an initial term of 12 months or less are not recorded on the balance ~~sheet; we~~sheet. We recognize lease expense for these leases on a straight-line basis over the lease term.

Certain of our lease agreements include rental payments based on a percentage of revenue over contractual levels and others include rental payments adjusted periodically for inflation. Our lease agreements do not contain any material residual value guarantees or restrictive covenants that materially affect our business. In addition, we ~~rent or sublease~~lease certain owned real estate to third parties. We recorded gross third-party tenant income of ~~$2.3~~$2.1 million and ~~$0.6~~$0.5 million during the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively, and $4.4 million and $1.1 million for the six months ended June 30, 2022 and 2021, respectively, which were recorded in Other income in the Condensed Consolidated Statement of Operations.

On January 1, 2019, the Company adopted ASC No. 842, Leases, and recognized right-of-use ~~lease~~ assets and related liabilities. The right-of-use assets and related liabilities include renewal options reasonably certain to be exercised. We base our lease calculations on our estimated incremental borrowing rate. As of ~~March 31,~~June 30, 2022, our weighted average incremental borrowing rate was 4.76%.

During the three months ended ~~March 31,~~June 30, 2022 and 2021, the Company's total operating lease cost was $1.0 million and $0.8 million, respectively, and the operating cash ~~outflows~~outflow from operating leases was $0.9 million and $0.7 million, respectively. During the six months ended June 30, 2022 and 2021, the Company's total operating lease cost was $1.9 million and $1.6 million, respectively, and the operating cash outflow from operating leases was $1.8 million and $1.4 million, respectively. As of ~~March 31,~~June 30, 2022, the weighted average operating lease term was ~~36.5~~36.6 years.

Operating lease maturities as of ~~March 31,~~June 30, 2022 are as follows (in thousands):


2022	2022	$	1,574	2022	$	998
2023	2023	1,264		2023	1,264
2024	2024	1,205		2024	1,205
2025	2025	1,209		2025	1,209
2026	2026	1,222		2026	1,222
Thereafter	Thereafter	37,808		Thereafter	37,808
Total lease payments (1)	Total lease payments (1)	44,282		Total lease payments (1)	43,706
Less interest	Less interest	(22,233)		Less interest	(21,982)
Total	Total	$	22,049	Total	$	21,724

(1)Certain payments above include future increases to the minimum fixed rent based on the Consumer Price Index in effect at the initial measurement of the lease balances.

2319

NOTE 7 - DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING

Information about our derivative financial instruments at ~~March 31,~~June 30, 2022 and December 31, 2021 is as follows (dollars in thousands):


						Notional Amount				Fair Value									Notional Amount				Fair Value
Contract date	Contract date	Effective Date	Expiration Date	Average Annual Effective Fixed Rate		March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021		Contract date	Effective Date	Expiration Date	Average Annual Effective Fixed Rate		June 30, 2022		December 31, 2021		June 30, 2022		December 31, 2021
October 2, 2017	October 2, 2017	January 29, 2018	January 31, 2023	1.98	%	$	100,000	$	100,000	$	(310)	$	(1,617)	October 2, 2017	January 29, 2018	January 31, 2023	1.98	%	$	100,000	$	100,000	$	482	$	(1,617)
October 2, 2017	October 2, 2017	January 29, 2018	January 31, 2023	1.98	%	100,000		100,000		(319)		(1,629)		October 2, 2017	January 29, 2018	January 31, 2023	1.98	%	100,000		100,000		476		(1,629)
June 11, 2018	June 11, 2018	September 28, 2018	September 30, 2024	2.87	%	75,000		75,000		(794)		(3,831)		June 11, 2018	September 28, 2018	September 30, 2024	2.87	%	75,000		75,000		299		(3,831)
June 11, 2018	June 11, 2018	December 31, 2018	December 31, 2025	2.93	%	125,000		125,000		(2,187)		(8,646)		June 11, 2018	December 31, 2018	December 31, 2025	2.93	%	125,000		125,000		30		(8,646)
						$	400,000	$	400,000	$	(3,610)	$	(15,723)						$	400,000	$	400,000	$	1,287	$	(15,723)

In July 2022, we entered into 2 new interest rate swap agreements. One interest rate swap agreement has a notional amount of $100.0 million and an effective date of January 31, 2023 with a term of six years. Regions Bank is the counterparty and the swap provides for a fixed rate of 2.5625%. The second interest rate swap has a notional amount of $100.0 million and an effective date of January 31, 2023 with a term of four years. Capital One Bank, N.A. is the counterparty and the swap provides for a fixed rate of 2.6%.

Our interest rate swaps have been designated as cash flow hedges and are valued using a market approach, which is a Level 2 valuation technique. At ~~March 31,~~June 30, 2022, ~~and~~our 4 interest rate swaps were in an asset position. At December 31, 2021, all of our interest rate swaps were in a liability position. The ~~liability~~substantial change in value related to our interest rate swaps ~~has decreased substantially~~ during the first ~~quarter~~and second quarters of 2022 was due to increases in interest rates. ~~Our~~Derivative assets related to our interest rate swaps are recorded in Other assets, and other and derivative liabilities are included in Accrued expenses and other in our Condensed Consolidated Balance Sheets. We are not required to post any collateral related to these agreements and are not in breach of any financial provisions of the agreements.

Changes in the fair value of the hedging instruments are deferred in Other comprehensive income and are reclassified to Interest expense in our Condensed Consolidated Statements of Operations in the period in which the hedged item affects earnings. In the next twelve months, we estimate that ~~$2.3~~$1.4 million will be reclassified from Other comprehensive income and recorded as an ~~increase~~decrease to Interest expense.

The table below details the location in the financial statements of the realized and unrealized gain or loss ~~recognized on~~related to derivative financial instruments designated as cash flow hedges (in thousands):

For the
Three Months Ended
March 31,
2022 2021
Gain recognized in Other comprehensive income on derivative financial instruments $ 9,813 $ 3,885
Loss reclassified from Other comprehensive income to Interest expense $ (2,300) $ (2,318)
Total Interest expense in which the effects of cash flow hedges are recorded $ (13,439) $ (10,788)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Unrealized gain (loss) recorded in Other comprehensive income on derivative financial instruments	$	3,211	$	(1,004)	$	13,024	$	2,881
Loss reclassified from Other comprehensive income to Interest expense	$	(1,685)	$	(2,366)	$	(3,985)	$	(4,684)
Total interest expense in which the effects of cash flow hedges are recorded	$	(15,118)	$	(10,962)	$	(28,557)	$	(21,750)

NOTE 8 - EQUITY

Common Stock

The Company is authorized to issue up to 500,000,000 shares of common stock, $0.01 par value per share (the "Common Stock"). Each outstanding share of our Common Stock entitles the holder to 1 vote on all matters submitted to a vote of stockholders, including the election of directors and, except as may be provided with respect to any other class or series of stock, the holders of such shares possess the exclusive voting power.

On May ~~25, 2017,~~9, 2022, the Company and the Operating Partnership entered into ~~separate sales agreements (collectively, the “Sales Agreements”~~an equity distribution agreement (the “Equity Distribution Agreement”) with ~~several~~a group of underwriters ~~(the “Sales Agents”), pursuant to which~~as sales agents for the Company, ~~may sell our~~principals and/or, with certain exceptions, forward sellers (in any such capacity, each a “Manager” and, collectively, the “Managers”) and certain banks as forward purchasers (in such capacity, each a “Forward Purchaser” and, collectively, the “Forward Purchasers”), providing for the offer and sale of shares of the Company’s Common Stock, ~~(the “Shares”) from time to time through the Sales Agents, each acting as~~having a ~~sales agent and/or principal (the "2017 ATM Program"). The 2017 ATM Program was updated in 2019 to allow us to sell Shares having an~~maximum aggregate offering price of up to ~~$110.0 million.~~ $200,000,000 through or to the Managers, as the Company’s sales agents or, if applicable, as forward sellers, or directly to the Managers, as principals (the “2022 ATM Program”).To date, we have not sold any shares of our Common Stock under the ~~2017~~2022 ATM Program.

Changes in Common Stock during the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021 were as follows:


		For the Three Months Ended March 31,			For the Six Months Ended June 30,
		2022	2021		2022	2021
Beginning common shares outstanding	Beginning common shares outstanding	106,337,724	105,708,787	Beginning common shares outstanding	106,337,724	105,708,787

Common Unit redemptions				Common Unit redemptions	—	2,500
Grants under the Equity Plan	Grants under the Equity Plan	626,312	626,355	Grants under the Equity Plan	735,371	860,910

Annual grants to independent directors				Annual grants to independent directors	84,889	60,546

Performance share and other forfeitures	Performance share and other forfeitures	(3,173)	(60,823)	Performance share and other forfeitures	(3,173)	(60,823)
Shares retained for employee tax withholding requirements	Shares retained for employee tax withholding requirements	—	(155,605)	Shares retained for employee tax withholding requirements	(260,800)	(155,605)
Ending common shares outstanding	Ending common shares outstanding	106,960,863	106,118,714	Ending common shares outstanding	106,894,011	106,416,315

Preferred Stock

The Company is authorized to issue up to 100,000,000 shares of preferred stock, $0.01 par value per share, of which 89,600,000 is currently undesignated, 6,400,000 shares have been designated as 6.25% Series E Cumulative Redeemable Preferred Stock (the "Series E preferred shares") and 4,000,000 shares have been designated as 5.875% Series F Cumulative Redeemable Preferred Stock (the "Series F preferred shares").

The Company's outstanding shares of preferred stock (collectively, “Preferred Shares”) rank senior to our ~~common stock~~Common Stock and on parity with each other with respect to the payment of dividends and distributions of assets in the event of a liquidation, dissolution, or winding up. The Preferred Shares do not have any maturity date and are not subject to mandatory redemption or sinking fund requirements. The Company may not redeem the Series E or Series F preferred shares prior to November 13, 2022 and August 12, 2026, respectively, except in limited circumstances relating to the Company’s continuing qualification as a REIT or in connection with certain changes in control. After those dates, the Company may, at its option, redeem the applicable Preferred Shares, in whole or from time to time in part, by payment of $25 per share, plus any accumulated, accrued and unpaid distributions up to, but not including, the date of redemption. If the Company does not exercise its rights to redeem the Preferred Shares upon certain changes in 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~~Common Stock based on a defined formula, subject to a share cap, or alternative consideration. The share cap on each Series E preferred share is 3.1686 shares of ~~common stock~~Common Stock and each Series F preferred share is 5.8275 shares of ~~common stock,~~Common Stock, all subject to certain adjustments.

The Company pays dividends at an annual rate of $1.5625 for each Series E preferred share and $1.46875 for each Series F preferred share. Dividend payments are made quarterly in arrears on or about the last day of February, May, August and November of each year.

NOTE 9 - NON-CONTROLLING INTERESTS AND REDEEMABLE NON-CONTROLLING INTERESTS

Non-controlling Interests in Operating Partnership

Pursuant to the limited partnership agreement of our Operating Partnership, the unaffiliated third parties who hold Common Units in our Operating Partnership have the right to cause us to redeem their Common Units in exchange for cash based upon the fair value of an equivalent number of our shares of Common Stock at the time of redemption; however, the Company has the option to redeem Common Units with shares of our Common Stock on a 1-for-one basis. The number of shares of our Common Stock issuable upon redemption of Common Units may be adjusted upon the occurrence of certain events such as share dividend payments, share subdivisions or combinations. On January 13, 2022 and March 23, 2022, in connection with the NCI Transaction, the Operating Partnership issued 15,864,674 Common Units as partial consideration for the purchase.

At ~~March 31,~~June 30, 2022 and December 31, 2021, NewcrestImage and other unaffiliated third parties owned 15,989,471 and 124,797 of Common Units of the Operating Partnership, respectively, representing approximately 13% and less than 1% of the Common Units of the Operating Partnership for each period.

We classify outstanding Common Units held by unaffiliated third parties as ~~Non-controlling~~non-controlling interests in the Operating Partnership, a component of equity in the Company’s Condensed Consolidated Balance Sheets. The portion of net income (loss) allocated to these Common Units is ~~reported~~included on the Company’s Condensed Consolidated Statements of Operations as Net income (loss) attributable to non-controlling ~~interests of the Operating Partnership.~~

interests.

Non-controlling Interests in Joint Ventures

At June 30, 2022, the Company is a partner with a majority equity interest in 2 joint ventures as described below. We classify the non-controlling interests in our joint ventures as a component of equity in the Company’s Condensed Consolidated Balance Sheets. The portion of net income (losses) allocated to these non-controlling interests is included on the Company’s Condensed Consolidated Statements of Operations as Net income (losses) attributable to non-controlling interests.

GIC Joint Venture

In July 2019, the Company entered into a joint venture agreement with GIC, Singapore’s sovereign wealth fund, to acquire assets that align with the Company’s current investment strategy and criteria. The Company serves as general partner and asset manager of the GIC Joint Venture and intends to invest 51% of the equity capitalization of the limited partnership, with GIC investing the remaining 49%. The Company earns fees for providing services to the GIC Joint Venture and will have the potential to earn incentive fees based on the GIC Joint Venture achieving certain return thresholds. As of ~~March 31,~~June 30, 2022, the GIC Joint Venture owns the 4039 hotel properties ~~totaling 5,583~~containing 5,414 guestrooms in 9 states.

The GIC Joint Venture owns the hotel ~~proeprties~~properties through master real estate investment trusts (“Master REIT”) and subsidiary REITs (“Subsidiary REIT”). All of the hotel properties owned by the GIC Joint Venture are leased to taxable REIT subsidiaries of the Subsidiary REITs (“Subsidiary REIT TRSs”). To qualify as a REIT, the Master REIT and each Subsidiary REIT must meet all of the REIT requirements ~~summarized under~~ ~~“Note 2 - Basis of Presentation and Significant Accounting Policies - Income Taxes.”~~provided in the the Internal Revenue Code. Taxable income related to the Subsidiary REIT TRSs is subject to federal, state and local income taxes at applicable tax rates.

~~We classify~~Brickell Joint Venture

In June 2022, the ~~Non-controlling interests~~Company entered into the Brickell Joint Venture to facilitate the exercise of the Initial Purchase Option to acquire a 90% equity interest in the AC/Element Hotel. Our joint venture partner, C-F Brickell, owns the remaining 10% equity interest in the Brickell Joint Venture. The Company has an option to purchase the remaining 10% equity interest in the Brickell Joint Venture ~~as a component~~from C-F Brickell in December 2026 pursuant to the exercise of ~~equity in~~ the ~~Company’s Condensed Consolidated Balance Sheets. The portion of net income (losses) allocated to these non-controlling interests is reported~~Second Purchase Option at its market value on the ~~Company’s Condensed Consolidated Statements~~exercise date. The Company serves as the managing member of ~~Operations as Net income (losses) attributable to non-controlling interests of~~ the Brickell Joint Venture.

Redeemable Non-controlling Interests

In connection with the NCI Transaction, Summit Hotel GP, LLC, a wholly-owned subsidiary of the Company and the sole general partner of the Operating Partnership, on its own behalf as general partner of the Operating Partnership and on behalf of the limited partners of the Operating Partnership, on January 13, 2022, entered into the Tenth Amendment (the “Tenth Amendment”) to the First Amended and Restated Agreement of Limited Partnership of the Operating Partnership, to provide for the issuance of up to 2,000,000 Series Z Preferred Units. The Series Z Preferred Units rank on a parity with the Operating

Partnership’s Series E and Series F Preferred Units and holders will receive quarterly distributions at a rate of 5.25% per year. From issuance until the tenth anniversary of their issuance, the Series Z Preferred Units will be redeemable at the holder’s request at any time, or in connection with a change of control of the Company, for, at the Company’s election, cash or shares of the Company’s 5.25% Series Z Cumulative Perpetual Preferred Stock (which will be designated and authorized following notice of redemption by holder of the Series Z Preferred Units) on a 1-for-one basis. After the fifth anniversary of their issuance, the Company may redeem the Series Z Preferred Units for cash at a redemption amount of $25 per unit. For a 90-day period immediately following both the tenth and the eleventh anniversaries of their issuance or in connection with a change of control of the Company, the Series Z Preferred Units will be redeemable at the holder’s request for cash at a redemption amount of $25 per unit. On January 13, 2022 and March 23, 2022, in connection with the NCI Transaction, the Operating Partnership issued 2,000,000 Series Z Preferred Units as partial consideration for the purchase. At ~~March 31,~~June 30, 2022, the redeemable Series Z Preferred Units issued in connection with the NCI Transaction are recorded as temporary equity ~~of the Operating Partnership~~ and reflected as Redeemable non-controlling interests ~~in a mezzanine position presentation outside of Equity in~~on our Consolidated Condensed Balance ~~Sheet as of March 31, 2022.~~Sheet.

NOTE 10 - FAIR VALUE MEASUREMENT

The following table presents information about our financial instruments measured at fair value on a recurring basis at ~~March 31,~~June 30, 2022 and December 31, 2021. In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, we classify assets and liabilities based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Disclosures concerning financial instruments measured at fair value are as follows (in thousands):


		Fair Value Measurements at March 31, 2022 using									Fair Value Measurements at June 30, 2022 using
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Interest rate swaps										Interest rate swaps	$	—	$	1,287	$	—	$	1,287

Purchase options related to real estate loans		$	—	$	—	$	2,800	$	2,800

Liabilities:
Interest rate swaps		—		3,610		—		3,610


		Fair Value Measurements at December 31, 2021 using									Fair Value Measurements at December 31, 2021 using
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:

Purchase options related to real estate loans		$	—	$	—	$	2,800	$	2,800
Purchase option related to real estate loans										Purchase option related to real estate loans	$	—	$	—	$	2,800	$	2,800
Liabilities:	Liabilities:									Liabilities:
Interest rate swaps	Interest rate swaps	—		15,723		—		15,723		Interest rate swaps	—		15,723		—		15,723

~~Our~~The original fair value of the Initial Purchase Option ~~relates~~was estimated using the Black-Scholes model. The Initial Purchase Option related to ~~real estate loans~~the acquisition of the AC/Element Hotel and ~~does~~did not have a readily determinable fair ~~values. The original fair~~ value ofat December 31, 2021. As such, the Initial Purchase Option was recorded at historical cost that was estimated using the Black-Scholes model.

NOTE 11 - COMMITMENTS AND CONTINGENCIES

Franchise Agreements

We expensed fees related to our franchise agreements of ~~$10.1~~$12.9 million and ~~$4.1~~$5.9 million for the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively, and $23.0 million and $10.0 million for the six months ended June 30, 2022, and 2021, respectively.

Management Agreements

Our hotel properties operate pursuant to management agreements with various professional third-party management companies. The terms of our management agreements range from month-to-month to twenty-five years with various extension provisions. Each management company receives a base management fee, which is a percentage of total hotel property revenues. In some

cases there are also monthly fees for certain services, such as accounting, based on the number of guestrooms. Generally, there

are also incentive fees based on attaining certain financial thresholds. Management fee expenses were ~~$3.8~~$5.0 million and ~~$1.6~~$2.3 million for the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively, and $8.8 million and $3.9 million for the six months ended June 30, 2022, and 2021, respectively.

Litigation

We are involved from time to time in litigation arising in the ordinary course of business. There are currently no pending legal actions that we believe would have a material effect on our financial position or results of operations.

NOTE 12 - EQUITY-BASED COMPENSATION

Our currently outstanding equity-based awards were issued under the Equity Plan which provides for the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, and other equity-based awards or incentive awards.

Stock options granted may be either incentive stock options or non-qualified stock options. Vesting terms may vary with each grant, and stock option terms are generally five to ten years. WeAt June 30, 2022, we only have outstanding ~~equity-based awards in the form of~~ restricted stock awards. All of our outstanding equity-based awards are classified as equity awards.

Time-Based Restricted Stock Awards Made Pursuant to Our Equity Plan

The following table summarizes time-based restricted stock award activity under our Equity Plan for the ~~three~~six months ended ~~March 31,~~June 30, 2022:


		Number of Shares	Weighted Average Grant Date Fair Value		Aggregate Current Value			Number of Shares	Weighted Average Grant Date Fair Value		Aggregate Current Value
			(per share)		(in thousands)				(per share)		(in thousands)
Non-vested at December 31, 2021	Non-vested at December 31, 2021	605,470	$	9.98	$	5,909	Non-vested at December 31, 2021	605,470	$	9.98	$	5,909
Granted	Granted	316,643	9.83				Granted	316,643	9.83
Vested	Vested	(227,153)	(9.70)				Vested	(259,044)	(10.05)
Forfeited	Forfeited	(3,173)	(10.29)				Forfeited	(3,173)	(10.29)
Non-vested at March 31, 2022		691,787	$	9.85	$	6,890
Non-vested at June 30, 2022							Non-vested at June 30, 2022	659,896	$	9.85	$	4,797

The awards granted to our non-executive employees prior to 2022 vest over a four-year period based on continuous service (20% on the first, second and third anniversary of the grant date and 40% on the fourth anniversary of the grant date). The awards granted to our non-executive employees in 2022 vest over a three-year period based on continuous service (25% on the first and second anniversary of the grant date and 50% on the third anniversary of the grant date).

The awards granted to our executive officers generally vest over a three-year period based on continuous service (25% on the first and second anniversary of the grant date and 50% on the third anniversary of the grant date) or in certain circumstances upon a change in control.

The holders of these awards have the right to vote ~~the related~~their unvested restricted shares of common stock and receive all dividends declared and paid whether or not vested. The fair value of time-based restricted stock awards granted is calculated based on the market value of our common stock on the date of grant.

Performance-Based Restricted Stock Awards Made Pursuant to Our Equity Plan

The following table summarizes performance-based restricted stock activity under the Equity Plan for the ~~three~~six months ended ~~March 31,~~June 30, 2022:


		Number of Shares	Weighted Average Grant Date Fair Value (1)		Aggregate Current Value			Number of Shares	Weighted Average Grant Date Fair Value (1)		Aggregate Current Value
			(per share)		(in thousands)				(per share)		(in thousands)
Non-vested at December 31, 2021	Non-vested at December 31, 2021	1,002,866	$	11.92	$	9,788	Non-vested at December 31, 2021	1,002,866	$	11.92	$	9,788
Granted	Granted	306,435	9.83				Granted	306,435	9.83
Vested	Vested	(302,327)	(12.81)				Vested	(302,327)	(12.81)
Forfeited		—	—
Non-vested at March 31, 2022		1,006,974	$	11.76	$	10,029

Non-vested at June 30, 2022							Non-vested at June 30, 2022	1,006,974	$	11.76	$	7,321

(1) The amounts included in this column represent the expected future value of the performance-based restricted stock awards calculated using the Monte Carlo simulation valuation model.

2824

Our performance-based restricted stock awards are market-based awards and are accounted for based on the fair value of our common stock on the grant date. The fair value of the performance-based restricted stock awards granted was estimated using a Monte Carlo simulation valuation model. These awards cliff vest on the third anniversary of the grants based on our percentile ranking within the SNL U.S. REIT Hotel Index at the end of the period or upon a change in control. The awards require ~~continued~~continuous service during the measurement period and are subject to the other conditions described in the Equity Plan or award document.

The number of shares the executive officers may earn under these awards range from zero shares to twice the number of shares granted based on our percentile ranking within the index at the end of the measurement period. In addition, a portion of the performance-based shares may be earned based on the Company's absolute total shareholder return calculated during the performance period.

The holders of these grants have the right to vote the granted shares of ~~common stock~~Common Stock and any dividends declared ~~will be accumulated~~accrue and will be subject to the same vesting conditions as the awards. Further, if additional shares are earned based on our percentile ranking within the index, dividend payments will be issued as if the additional shares had been held throughout the measurement period.

Equity-Based Compensation Expense

Equity-based compensation expense included in Corporate general and administrative expenses in the Condensed Consolidated Statements of Operations for the three and ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021 was 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,
		2022		2021				2022		2021		2022		2021
Time-based restricted stock	Time-based restricted stock	$	992	$	665		Time-based restricted stock	$	651	$	843	$	1,645	$	1,508
Performance-based restricted stock	Performance-based restricted stock	2,674		904			Performance-based restricted stock	720		974		3,393		1,878

Director stock	Director stock	32		—			Director stock	770		583		802		583
		$	3,698	$	1,569			$	2,141	$	2,400	$	5,840	$	3,969

We recognize equity-based compensation expense ratably over the vesting periods. The amount of expense may be subject to adjustment in future periods due to a change in the forfeiture assumptions. ~~In January~~During the six months ended June 30, 2022, we granted a new member of our Board of Directors 3,234 shares of fully vested shares of our Common Stock at $9.94 per share and we granted members of our Board of Directors 81,655 shares of fully vested shares of our Common stock at $9.43 per share.

Unrecognized equity-based compensation expense for all non-vested awards pursuant to our Equity Plan was ~~$12.3~~$10.9 million at ~~March 31,~~June 30, 2022 and will be recorded as follows (in thousands):


		Total		2022		2023		2024		2025			Total		2022		2023		2024		2025
Time-based restricted stock	Time-based restricted stock	$	5,877	$	1,954	$	2,334	$	1,396	$	193	Time-based restricted stock	$	5,225	$	1,302	$	2,334	$	1,396	$	193
Performance-based restricted stock	Performance-based restricted stock	6,378		2,159		2,552		1,458		209		Performance-based restricted stock	5,658		1,439		2,552		1,458		209
		$	12,255	$	4,113	$	4,886	$	2,854	$	402		$	10,883	$	2,741	$	4,886	$	2,854	$	402

The Company's former Executive Vice President and Chief Operating Officer retired in March 2022. The Company recorded $1.3 million of additional stock-based compensation expense during the ~~three months ended March 31, 2022~~period related to the modification of certain stock award agreements. This amount was comprised of $0.4 million related to time-based restricted stock awards and $0.9 million related to performance-based restricted stock awards.

NOTE 13 - INCOME TAXES

As a REIT, we generally will not be subject to U.S. federal income tax on ordinary income and capital gains income generated by our REIT activities that we distribute to our stockholders. We are subject to federal and state income taxes on the earnings of our TRS Lessees. In addition, our Operating Partnership is subject to tax in a limited number of local and state jurisdictions.

The Company recorded ~~an income tax benefit of $2.0 million and~~ income tax expense of ~~$0.1~~$6.4 million and $0.3 million for the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively. The Company recorded income tax expense of $4.4 million and $0.4 million for the six months ended June 30, 2022 and 2021, respectively. Due to the effects of the Pandemic, certain of our TRS Lessees have incurred operating losses in the past and are expected to be in a cumulative loss for the foreseeable future. A cumulative loss is significant negative evidence that the realizability of our deferred tax assets at ~~March 31,~~June 30, 2022 is not reasonably assured. Therefore, we have recorded a valuation allowance against substantially all our deferred tax assets at ~~March 31,~~June 30, 2022.

We had no unrecognized tax benefits at ~~March 31,~~June 30, 2022. We expect no significant changes in unrecognized tax benefits within the next year.

NOTE 14 - EARNINGS PER SHARE

We apply the two-class method of computing earnings per share, which requires the calculation of separate earnings per share amounts for our non-vested time-based restricted stock awards with non-forfeitable dividends and for our common stock. Our non-vested time-based restricted stock awards with non-forfeitable rights to dividends are considered securities which participate in undistributed earnings with common stock. Under the two-class computation method, net losses are not allocated to participating securities unless the holder of the security has a contractual obligation to share in the losses. Our non-vested time-based restricted stock awards with non-forfeitable dividends do not have such an obligation so they are not allocated losses.

Below is a summary of the components used to calculate basic ~~and~~earnings per share (in thousands, except per share amounts):


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Numerator:
Net income before amounts allocable to non-controlling interests and participating securities	$	23,313	$	(20,569)	$	14,340	$	(53,440)
Less:
Preferred dividends	(3,968)		(3,709)		(7,938)		(7,418)
Dividends paid on additional performance shares earned	(83)		—		(83)		—
Preferred distributions	(655)		—		(1,210)		—
(Income) loss allocable to participating securities	(1,310)		—		—		—
(Income) loss attributable to non-controlling interest in Operating Partnership	—		34		(678)		88
(Income) loss attributable to non-controlling interest in joint ventures	(9,031)		1,843		(8,949)		3,295
Net income (loss) attributable to common stockholders	$	8,266	$	(22,401)	$	(4,518)	$	(57,475)
Denominator:
Weighted average common shares outstanding - basic	105,199		104,495		105,049		104,387

Net income (loss) per share available to common stockholders - basic	$	0.08	$	(0.21)	$	(0.04)	$	(0.55)

Below is a summary of the components used to calculate diluted earnings per share (in thousands, except per ~~share)~~share amounts):


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Numerator:
Net income (loss) per share attributable to common stockholders	$	8,266	$	(22,401)	$	(4,518)	$	(57,475)

Denominator:
Weighted average common shares outstanding - basic	105,199		104,495		105,049		104,387
Dilutive effect of equity-based compensation awards	164		—		—		—
Dilutive effect of Common Units of Operating Partnership	15,989		—		—		—
Weighted average common shares outstanding - diluted	121,352		104,495		105,049		104,387

Net income (loss) per share available to common stockholders - diluted	$	0.07	$	(0.21)	$	(0.04)	$	(0.55)

For the
Three Months Ended
March 31,
2022 2021
Numerator:
Net loss $ (8,973) $ (32,871)
Less: Preferred dividends (3,970) (3,709)
Attributable to non-controlling interest in Operating Partnership 482 54
Attributable to non-controlling interests in Joint Venture 82 1,452
Net loss attributable to common stockholders, net of amount allocated to participating securities $ (12,379) $ (35,074)
Denominator:
Weighted average common shares outstanding - basic and diluted 104,896 104,278
Loss per share:
Basic and diluted $ (0.12) $ (0.34)

The Common Units held by the non-controlling interest holders have been excluded from the denominator of the diluted earnings per share calculation as there would be no effect on the amounts since the limited partners' share of income would also be added to derive net income attributable to common stockholders. Our unvested performance-based restricted stock awards and outstanding convertible notes have been excluded from the denominator of the diluted earnings per share calculation as their inclusion would be antidilutive.

NOTE 15 - SUPPLEMENTAL CASH FLOW INFORMATION

We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Restricted cash consists of certain funds maintained in escrow for property taxes, insurance, and certain capital expenditures.

Funds may be disbursed from the account upon proof of expenditures and approval from the lender or other party requiring the

restricted cash reserves.

Supplemental cash flow information for the six months ended June 30, 2022 and 2021 is as follows:


	Six Months Ended June 30,
	2022		2021

Cash payments for interest	$	23,395	$	18,184
Accrued acquisitions and improvements to hotel properties	$	9,381	$	1,804

Cash payments for income taxes, net of refunds	$	2,268	$	214
Debt assumed to complete acquisition of properties	$	382,205	$	—
Assumption of leases and other assets and liabilities in connection with the acquisition of a portfolio of properties	$	9,206	$	—
Conversion of a mezzanine loan to complete acquisition of hotel properties	$	29,875	$	—
Exercise of purchase option to complete acquisition of hotel properties	$	2,800	$	—
Non-controlling contribution to complete an acquisition of hotel properties	$	6,922	$	—
Non-controlling interests in operating partnership issued to complete acquisition of a portfolio of properties	$	157,513	$	—
Redeemable non-controlling interests in operating partnership issued to complete acquisition of a portfolio of properties	$	50,000	$	—

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NOTE 1516 - SUBSEQUENT EVENTS

Dividends

On ~~April 29,~~August 2, 2022, our Board of Directors declared cash dividends of $0.390625 per share of 6.25% Series E Cumulative Redeemable Preferred Stock and $0.3671875 per share of 5.875% Series F Cumulative Redeemable Preferred Stock. The Board of Directors also declared on behalf of the Operating Partnership, a cash dividend of $0.328125 per share of the Operating Partnership's unregistered 5.25% Series Z Cumulative Perpetual Preferred ~~Units that were issued~~Units.

On August 2, 2022, our Board of Directors also reinstated and declared a quarterly cash dividend of $0.04 per share on ~~January 13, 2022~~our Common Stock and ~~$0.249660~~ per ~~unit for the units issued on March 23, 2022 as part~~Common Unit of the ~~NCI Transaction.~~Operating Partnership.

These dividends are payable ~~May~~on August 31, 2022 to ~~stockholders~~holders of record ~~on May 22,~~as of August 17, 2022.

~~Exercise~~Amendments to the 2018 Senior Credit Facility

In July 2022, we executed certain modifications to our 2018 Senior Credit Facility which adjusted certain of ~~Purchase Option~~the key financial covenants, changed the benchmark rate from LIBOR to SOFR, and provided for 2-six month extension options applicable to each of the $400 million Revolver and the $200 million Term Loan. In July 2022, Bank of America, N.A. entered into successor administrative agent documentation to succeed Deutsche Bank AG New York Branch as administrative agent on the 2018 Senior Credit Facility. See “Note 5 – Debt” for additional information.

Interest Rate Swaps

In ~~April~~July 2022, we ~~exercised the Initial Purchase Option to acquire~~entered into 2 new interest rate swap agreements. One interest rate swap agreement has a ~~90% equity interest in the AC Hotel by Marriott and Element Miami Brickell Hotel in Miami, FL. The option price was based on a gross hotel valuation~~notional amount of $89.0 million determined prior to commencement of the development project. We expect to fund our estimated equity requirement with the proceeds from the payment in full of our outstanding mezzanine loan to the developer of the project, which is expected to be $29.9 million at closing, the assumption of senior debt on the development project of approximately $47.0$100.0 million and ~~$7.9 million in cash. We expect to close~~an effective date of January 31, 2023 with a term of six years. Regions Bank is the ~~transaction in June 2022. Although we currently do not have an estimate of~~counterparty and the fair value of the Initial Purchase Option, we expect to the adjust the Initial Purchase Option to its estimated fair value during the second quarter of 2022 based on the estimated fair value of the hotel property on the closing date.

~~Disposition of Hotel Property~~

~~On March 23, 2022, our Joint Venture entered into an agreement to sell the entity that holds our Hilton Garden Inn San Francisco Airport North in San Francisco, CA containing 169 guestrooms~~swap provides for a ~~gross selling price~~fixed rate of ~~$75~~2.5625%. The second interest rate swap has a notional amount of $100.0 million ~~which will result in~~and an ~~approximate gain on~~effective date of January 31, 2023 with a term of four years. Capital One Bank, N.A. is the ~~sale~~counterparty and the swap provides for a fixed rate of $20.5 million. We have received $7.5 million of nonrefundable earnest money from the buyer and we expect the transaction to close during the second quarter of 2022. As such, we have classified this property as Held for sale at March 31, 2022.2.6%.

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PART I - FINANCIAL INFORMATION

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

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our audited Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the year ended December 31, 2021 and our unaudited interim Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Unless stated otherwise or the context otherwise requires, references in this report to “we,” “our,” “us,” “our company” or “the company” mean Summit Hotel Properties, Inc. and its consolidated subsidiaries.

Cautionary Statement about Forward-Looking Statements

This report 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,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “forecast,” “project,” “potential,” “continue,” “likely,” “will,” “would” 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, ability to realize deferred tax assets and expected liquidity needs and sources (including capital expenditures and the 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, performances or achievements. Factors that may cause actual results to differ materially from current expectations include, but are not limited to:

•the effects of COVID-19 and its variants (the "Pandemic") and other infectious disease outbreaks;

•potential changes in operations as a result of regulations or changes in brand standards imposed in connection with, or changes in consumer behavior in response to, the Pandemic;

•financing risks, including the risk of leverage and the corresponding risk of default on our existing indebtedness and potential inability to refinance or extend the maturities of our existing indebtedness;

•default by borrowers to which we lend or provide seller financing;

•global, national, regional and local economic and geopolitical conditions and events, including wars or other hostilities;

•supply and demand factors in our markets or ~~sub-markets.~~sub-markets, or a potential recessionary environment.

•levels of spending for business and leisure travel, travel costs affected by changes in energy prices, and consumer confidence;

•the effect of alternative accommodations on our business;

•adverse changes in occupancy, average daily rate (“ADR”) and revenue per available room (“RevPAR”) and other hotel property operating metrics;

•hostilities, including future terrorist attacks, or fear of hostilities that affect travel;

•financial condition of, and our relationships with, third-party property managers and franchisors;

•the degree and nature of our competition;

•increased interest rates;

•increased operating costs, including but not limited to labor costs;

•increased renovation costs, which may cause actual renovation costs to exceed our current estimates;

•supply-chain disruption, which may reduce access to operating supplies or construction materials and increase related costs;

•changes in zoning laws;

•increases in real property taxes that are significantly higher than our expectations;

•risks associated with hotel ~~proeprty~~property acquisitions, including the ability to ramp up and stabilize newly acquired hotel properties with limited or no operating history or that require substantial amounts of capital improvements for us to earn economic returns consistent with our expectations at the time of acquisition;

•risks associated with dispositions of hotel properties, including our ability to successfully complete the sale of hotel properties under contract to be sold, including the risk that the purchaser may not have access to the capital needed to complete the purchase;

•the nature of our structure and transactions such that our federal and state taxes are complex and there is risk of successful challenges to our tax positions by the Internal Revenue Service ("IRS") or other federal and state taxing authorities;

3229

•the recognition of taxable gains from the sale of hotel properties as a result of the inability to complete certain like-kind exchanges in accordance with Section 1031 of the Internal Revenue Code of 1986, as amended (the “IRC”);

•availability of and the abilities of our property managers and us to retain qualified personnel at our hotel ~~proeprties~~properties and corporate offices;

•our failure to maintain our qualification as a real estate investment trust ("REIT") under the IRC;

•changes in our business or investment strategy;

•availability, terms and deployment of capital;

•general volatility of the capital markets and the market price of our common stock;

•environmental uncertainties and risks related to natural disasters;

•our ability to recover fully under third party indemnities or our existing insurance policies for insurable losses and our ability to maintain adequate or full replacement cost “all-risk” property insurance policies on our properties on commercially reasonable terms;

•the effect of a data breach or significant disruption of hotel property operator information technology networks as a result of cyber-attacks that are greater than insurance coverages or indemnities from service providers;

•the effect on our interest rates as LIBOR is replaced with the Secured Overnight Financing Rate ("SOFR") which may perform differently than LIBOR;

•our ability to effectively manage our ~~Joint Venture~~joint ventures with our ~~Joint Venture partner;~~joint venture partners;

•current and future changes to the IRC;

•our ability to manage inflationary pressures related to commodities, labor and other costs of our business as well as consumer purchasing power and overall behavior;

•our ability to continue to effectively enhance our Environmental, Social and Governance ("ESG") program to achieve expected social, environment and governance objectives and goals; and

•the other factors discussed under the heading "Risk Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Accordingly, there is no assurance that our expectations will be realized. Except as otherwise required by the federal securities laws, we disclaim any obligation 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

Summit Hotel Properties, Inc. is a self-managed hotel investment company that was organized in June 2010 and completed its initial public offering in February 2011. We focus on owning primarily premium-branded, select-service hotel properties. At ~~March 31,~~June 30, 2022, our portfolio consisted of ~~101~~102 hotel properties with a total of ~~15,228~~15,323 guestrooms located in 24 states. We own our hotel properties in fee simple, except for seven hotel properties which are subject to ground leases or subleases. As of ~~March 31,~~June 30, 2022, we own 100% of the outstanding equity interests in 61 of our ~~101~~102 hotel properties. We own a 51% controlling interest in 4039 hotel properties through ~~the~~a joint venture that was formed in July 2019 with GIC (the “GIC Joint ~~Venture.~~Venture”), Singapore’s sovereign wealth fund. We also own a 90% controlling interest in two hotel properties that we acquired in June 2022 through another joint venture (the "Brickell Joint Venture"). Our hotel properties are typically located in markets with multiple demand generators such as corporate offices and headquarters, retail centers, airports, state capitols, convention centers, and leisure attractions.

Our hotels operate under premium franchise brands owned by Marriott® International, Inc. (“Marriott”), Hilton® Worldwide (“Hilton”), Hyatt® Hotels Corporation (“Hyatt”) and InterContinental® Hotels Group (“IHG”).

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We have elected to be taxed as a REIT for federal income tax purposes commencing with our short taxable year ended December 31, 2011. To qualify as a REIT, we cannot operate or manage our hotel properties. Accordingly, all of our hotel properties are leased to our taxable REIT subsidiaries ("TRS Lessees"). All of our hotel properties are operated pursuant to hotel property management agreements between our TRS Lessees and professional third-party hotel property management companies that are not affiliated with us as follows:


Management Company	Management Company	Number of Properties	Number of Guestrooms	Management Company	Number of Properties	Number of Guestrooms
Affiliates of Aimbridge Hospitality, including Interstate Management Company, LLC	Affiliates of Aimbridge Hospitality, including Interstate Management Company, LLC	62	9,166	Affiliates of Aimbridge Hospitality, including Interstate Management Company, LLC	62	9,166
OTO Development, LLC	OTO Development, LLC	15	2,164	OTO Development, LLC	15	2,164
Stonebridge Realty Advisors, Inc. and affiliates	Stonebridge Realty Advisors, Inc. and affiliates	9	1,312	Stonebridge Realty Advisors, Inc. and affiliates	8	1,143
Affiliates of Marriott, including Courtyard Management Corporation, SpringHill SMC Corporation and Residence Inn by Marriott, Inc.	Affiliates of Marriott, including Courtyard Management Corporation, SpringHill SMC Corporation and Residence Inn by Marriott, Inc.	6	973	Affiliates of Marriott, including Courtyard Management Corporation, SpringHill SMC Corporation and Residence Inn by Marriott, Inc.	6	973

Crestline Hotels & Resorts, LLC	Crestline Hotels & Resorts, LLC	4	570	Crestline Hotels & Resorts, LLC	4	570
White Lodging Services Corporation	White Lodging Services Corporation	2	453	White Lodging Services Corporation	2	453
Hersha Hospitality Management	Hersha Hospitality Management	2	338	Hersha Hospitality Management	2	338

Concord Hospitality Enterprises				Concord Hospitality Enterprises	2	264
InterContinental Hotel Group Resources, Inc., an affiliate of IHG	InterContinental Hotel Group Resources, Inc., an affiliate of IHG	1	252	InterContinental Hotel Group Resources, Inc., an affiliate of IHG	1	252

Total	Total	101	15,228	Total	102	15,323

Our typical hotel property management agreement requires us to pay a base fee to our hotel property manager calculated as a percentage of hotel property revenues. In addition, our hotel property management agreements generally provide that the hotel property manager can earn an incentive fee for revenue or Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") over certain thresholds or based on a return over our required preferred return. Our TRS Lessees may employ other hotel property managers in the future. We do not, and will not, have any ownership or economic interest in any of the hotel property management companies engaged by our TRS Lessees.

Our revenues are derived from hotel property operations and consist of room revenue, food and beverage revenue and other hotel property operations revenue. Revenues from our other hotel property operations consist of ancillary revenues related to meeting rooms and other customer services provided at certain of our hotel properties.

Industry Trends and Outlook

Room-night demand in the U.S. lodging industry is generally correlated to certain macroeconomic trends. Key drivers of lodging demand include changes in gross domestic product, corporate profits, capital investments, employment and more recently, travel-related health and safety restrictions and concerns. Volatility in the economy and risks arising from global and domestic political or economic conditions may cause slowing economic growth, which would have an adverse effect on lodging demand. The global and U.S. economies, and the travel and lodging industries, ~~have~~ experienced a significant downturn as a result of the ~~Pandemic.~~Pandemic during the years ended December 31, 2020 and 2021. During the three and six months ended ~~March 31,~~June 30, 2022, we ~~continued to experience~~have experienced a significant recovery in hotel demand driven primarily by leisure travelers. Corporate and group demand remain below historical levels and are recovering more slowly; however, we have recently begun to experience an increase in demand related to these segments as return to work trends continue to accelerate and travel restrictions are reduced or eliminated.

Effects of the Pandemic on Our Business

~~The~~Beginning in March 2020, we experienced the negative effects of the Pandemic, ~~and the restrictions implemented in response to the Pandemic have~~which had a significant negative effect on the U.S. and global economies, including a rapid and sharp decline in all forms of travel, both domestic and international, and a significant decline in hotel demand. ~~These conditions resulted in~~As such, we experienced a substantial decline ~~from pre-Pandemic levels~~ in our revenues, profitability and cash flows from ~~operations.~~operations during the years ended December 31, 2020 and 2021. Additionally, there has been a sharp increase in inflation and interest rates during the six months June 30, 2022. The extended effects of the Pandemic and macroeconomic conditions may result in additional risk and uncertainties related to our business and our ability to recover to pre-Pandemic levels.

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During the three and six months ended ~~March 31,~~June 30, 2022, we ~~continued to experience~~have experienced significant improvement in our business, ~~compared to earlier in the Pandemic,~~ driven primarily by leisure travel and to a lesser extent modest improvement in other demand segments, including corporate and group. The improvement was the result of a significant increase in the availability and administration of vaccines globally as well as the easing of government restrictions and guidance in most jurisdictions. We anticipate that continued improvement in operating trends will be dependent on continued strength in leisure travel and a recovery of business travel. More broadly, a return to normalized levels of operations is dependent upon a continuation in the recovery of our business, further dissipation of concerns related to the Pandemic, geopolitical stability, moderating inflation and maintaining a high-quality portfolio aligned with evolving guest preferences.

~~Health and Well-being~~

~~All~~For additional information related to the effects of the Pandemic on our ~~hotel properties are licensed with national franchise brands and we have worked closely with~~business, please see our ~~brand partners to develop and implement comprehensive protocols~~Annual Report on Form 10-K for the safety and well-being of employees and guests to address a broad spectrum of pathogens and viruses, including COVID-19 and variants thereof. We continue to apply advanced cleaning procedures developed during the Pandemic to all of our hotel properties.year ended December 31, 2021.

Forward-looking Information and Use of Estimates

~~The~~Our full recovery from the effects of the Pandemic ~~and its variants on our Company~~ will depend on future developments, such as ~~the ultimate duration and scope of the outbreak, its effect on our customers, brands and business partners,~~ the rate at which normal economic conditions, operations, and the demand for lodging resume, and the magnitude of the recessionary conditions in any of our markets. ~~Accordingly, the full effects of the Pandemic on our Company cannot be determined at this time.~~ While the potential magnitude and duration of the business and economic effects of the Pandemic are uncertain, we believe that the recovery in our business that began during 2020 and has continued through the three and six months ended ~~March 31,~~June 30, 2022 will continue through ~~2022 and we~~the remainder of 2022. We expect that operating performance will improve gradually over a multi-year period before reaching prior peak performance levels. We believe that a recovery in business conditions resulting in positive operating cash flows, together with cash on hand, and the current availability under our credit facilities, will provide sufficient liquidity to fund operations for at least the next twelve months. There can be no assurance that the assumptions used to evaluate the carrying amounts of our assets or to estimate our liquidity requirements will be correct. For additional information ~~on the current and potential future effects of the Pandemic,~~ please see Item 1A. Risk ~~Factors.~~Factors.

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Our Hotel Property Portfolio

At ~~March 31,~~June 30, 2022, our portfolio consisted of ~~101~~102 hotel properties with a total of ~~15,228~~15,323 guestrooms. According to current chain scales as defined by STR, Inc., six of our hotel properties with a total of ~~952~~953 guestrooms are categorized as Upper-upscale hotels, 8081 of our hotel properties with a total of ~~12,184~~12,279 guestrooms are categorized as Upscale hotels and 15 of our hotel properties with a total of 2,091 guestrooms are categorized as Upper-midscale hotels. Information about our hotel properties as of ~~March 31,~~June 30, 2022 is as follows:


Franchise/Brand	Franchise/Brand	Number of Hotel Properties	Number of Guestrooms	Franchise/Brand	Number of Hotel Properties	Number of Guestrooms
Marriott	Marriott			Marriott
Courtyard by Marriott	Courtyard by Marriott	17	3,049	Courtyard by Marriott	17	3,049
Residence Inn by Marriott	Residence Inn by Marriott	15	2,136	Residence Inn by Marriott	15	2,136
SpringHill Suites by Marriott	SpringHill Suites by Marriott	7	983	SpringHill Suites by Marriott	7	983
AC Hotel by Marriott	AC Hotel by Marriott	5	870	AC Hotel by Marriott	6	1,026
TownePlace Suites	TownePlace Suites	2	225	TownePlace Suites	2	225
Element by Marriott				Element by Marriott	1	108
Fairfield Inn & Suites by Marriott	Fairfield Inn & Suites by Marriott	1	140	Fairfield Inn & Suites by Marriott	1	140
Four Points by Sheraton	Four Points by Sheraton	1	101	Four Points by Sheraton	1	101
Marriott	Marriott	1	165	Marriott	1	165
Total Marriott	Total Marriott	49	7,669	Total Marriott	51	7,933
Hilton	Hilton			Hilton
Hilton Garden Inn	Hilton Garden Inn	10	1,460	Hilton Garden Inn	9	1,291
Hampton Inn & Suites	Hampton Inn & Suites	8	1,162	Hampton Inn & Suites	8	1,162

Homewood Suites	Homewood Suites	3	369	Homewood Suites	3	369
Canopy Hotel	Canopy Hotel	2	326	Canopy Hotel	2	326
Embassy Suites	Embassy Suites	2	346	Embassy Suites	2	346
DoubleTree by Hilton	DoubleTree by Hilton	1	210	DoubleTree by Hilton	1	210
Total Hilton	Total Hilton	26	3,873	Total Hilton	25	3,704
Hyatt	Hyatt			Hyatt
Hyatt Place	Hyatt Place	17	2,419	Hyatt Place	17	2,419
Hyatt House	Hyatt House	3	466	Hyatt House	3	466
Total Hyatt	Total Hyatt	20	2,885	Total Hyatt	20	2,885
IHG	IHG			IHG
Holiday Inn Express & Suites	Holiday Inn Express & Suites	4	564	Holiday Inn Express & Suites	4	564

Hotel Indigo	Hotel Indigo	1	116	Hotel Indigo	1	116
Staybridge Suites	Staybridge Suites	1	121	Staybridge Suites	1	121
Total IHG	Total IHG	6	801	Total IHG	6	801

Total	Total	101	15,228	Total	102	15,323

Hotel Property Portfolio Activity

We continually consider ways in which to refine our portfolio to drive growth and create value. In the normal course of business, we evaluate opportunities to acquire additional properties that meet our investment criteria and opportunities to recycle capital through the disposition of properties. As such, the composition and size of our portfolio of properties may change materially over time. Significant changes to our portfolio of properties could have a material effect on our Condensed Consolidated Financial Statements.

On June 10, 2022, we exercised a purchase option (the "Initial Purchase Option") to acquire a 90% equity interest in the AC/Element Hotel (as defined in Note 3 - Investments in Hotel Properties, net" of the accompanying Condensed Consolidated Financial Statements). The exercise price of the Initial Purchase Option was based on a gross hotel option exercise price of $89.0 million. The exercise price was funded with the conversion of the mezzanine loan for the development of the AC/Element Hotel of $29.9 million and a cash payment of $7.9 million at closing (the "Brickell Transaction").

In May 2022, the GIC Joint Venture completed the sale of a 169-guestroom Hilton Garden Inn San Francisco Airport North in San Francisco, CA for a gross selling price of $75.0 million. The sale of this property resulted in a net gain of $20.5 million to the GIC Joint Venture during the three months ended June 30, 2022.

On January 13, 2022 and March 23, 2022, the GIC Joint Venture completed the purchase from NewcrestImage Holdings, LLC, a Delaware limited liability company, and NewcrestImage Holdings II, LLC, a Delaware limited liability company (together, “NewcrestImage”), a portfolio of 27 hotel properties, containing an aggregate of 3,709 guestrooms, and two parking structures, containing 1,002 spaces ~~(such hotel properties and parking structures, the “Portfolio”),~~ and various financial incentives for an aggregate purchase price of $822.0 million (the "NCI Transaction").

See "Note 3 - Investments in Hotel Properties, net" of the accompanying Condensed Consolidated Financial Statements for further information related to hotel property acquisitions and dispositions.

Results of Operations

The comparisons that follow should be reviewed in conjunction with the unaudited interim Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.

Comparison of the Three Months Ended ~~March 31,~~June 30, 2022 with the Three Months Ended ~~March 31,~~June 30, 2021

The following table contains key operating metrics for our total portfolio for the three months ended ~~March 31,~~June 30, 2022 compared with the three months ended ~~March 31,~~June 30, 2021 (dollars in thousands, except ADR and RevPAR).


		For the Three Months Ended March 31,												Quarter-over-Quarter				Quarter-over-Quarter					For the Three Months Ended June 30,												Quarter-over-Quarter					Quarter-over-Quarter
		2022						2021						Dollar Change				Percentage Change					2022						2021						Dollar Change					Percentage Change
		Total Portfolio (101 hotels)			Same-Store Portfolio (72 hotels)			Total Portfolio (72 hotels)			Same-Store Portfolio (72 hotels)			Total Portfolio (101/72 hotels)		Same-Store Portfolio (72 hotels)		Total Portfolio (101/72 hotels)		Same-Store Portfolio (72 hotels)			Total Portfolio (102 hotels)			Same-Store Portfolio (71 hotels)			Total Portfolio (72 hotels)			Same-Store Portfolio (71 hotels)			Total Portfolio (102/72 hotels)			Same-Store Portfolio (71 hotels)		Total Portfolio (102/72 hotels)		Same-Store Portfolio (71 hotels)
Revenues:	Revenues:																					Revenues:
Room	Room	$	128,810		$	99,868		$	53,245		$	53,245		$	75,565	$	46,623	141.9	%	87.6	%	Room	$	166,804		$	128,959		$	79,995		$	79,251		$	86,809		$	49,708	108.5	%	62.7	%
Food and beverage	Food and beverage	5,662			2,878			1,003			1,003			4,659		1,875		464.5	%	186.9	%	Food and beverage	7,664			3,898			1,556			1,530			6,108			2,368		392.5	%	154.8	%
Other	Other	7,397			5,539			3,606			3,606			3,791		1,933		105.1	%	53.6	%	Other	8,780			6,569			4,973			4,900			3,807			1,669		76.6	%	34.1	%
Total	Total	$	141,869		$	108,285		$	57,854		$	57,854		$	84,015	$	50,431	145.2	%	87.2	%	Total	$	183,248		$	139,426		$	86,524		$	85,681		$	96,724		$	53,745	111.8	%	62.7	%

Expenses:	Expenses:																					Expenses:
Room	Room	$	28,410		$	22,340		$	12,550		$	12,550		$	15,860	$	9,790	126.4	%	78.0	%	Room	$	35,783		$	27,328		$	17,584		$	17,389		$	18,199		$	9,939	103.5	%	57.2	%
Food and beverage	Food and beverage	4,114			2,136			556			556			3,558		1,580		639.9	%	284.2	%	Food and beverage	6,013			2,849			968			946			5,045			1,903		521.2	%	201.2	%
Other hotel operating expenses	Other hotel operating expenses	46,277			35,921			24,574			24,574			21,703		11,347		88.3	%	46.2	%	Other hotel operating expenses	53,711			40,407			29,385			29,021			24,326			11,386		82.8	%	39.2	%
Total	Total	$	78,801		$	60,397		$	37,680		$	37,680		$	41,121	$	22,717	109.1	%	60.3	%	Total	$	95,507		$	70,584		$	47,937		$	47,356		$	47,570	47570000	$	23,228	99.2	%	49.0	%

Operational Statistics:	Operational Statistics:																					Operational Statistics:
Occupancy	Occupancy	64.2		%	63.2		%	50.3		%	50.3		%	n/a		n/a		27.6	%	25.6	%	Occupancy	74.2		%	75.4		%	64.9		%	65.1		%	n/a			n/a		14.3	%	15.8	%
ADR	ADR	$	152.79		$	155.63		$	104.12		$	104.12		$	48.67	$	51.51	46.7	%	49.5	%	ADR	$	162.68		$	169.01		$	120.05		$	120.36		$	42.63		$	48.65	35.5	%	40.4	%
RevPAR	RevPAR	$	98.05		$	98.30		$	52.41		$	52.41		$	45.64	$	45.89	87.1	%	87.6	%	RevPAR	$	120.64		$	127.44		$	77.88		$	78.32		$	42.76		$	49.12	54.9	%	62.7	%

Changes from the three months ended ~~March 31,~~June 30, 2022 compared with the three months ended ~~March 31,~~June 30, 2021 were due to the following:

•Revenues and RevPAR. The increase in total revenues and RevPAR for our total portfolio during the ~~first~~second quarter of 2022 compared to the ~~first~~second quarter of 2021 was due to continued strength in leisure travel as well improving corporate and group demand resulting in steady improvement in both weekend and weekday results. Additionally, revenues increased due to the NCI Transaction, which significantly expanded the size of our ~~portfolio with the acquisition of 27 hotel properties and two parking garages.~~portfolio. Our increased exposure to the Sunbelt, focused revenue management, and property management initiatives related to the portfolio acquired in the NCI Transaction also contributed to significant revenue growth during the period. On a same store basis, the improvements in our business resulted in an increase of approximately ~~25.6%~~15.8% in occupancy and ~~49.5%~~40.4% in average daily rate in the ~~first~~second quarter of 2022, which resulted in an ~~87.6%~~62.7% increase in same-store RevPAR. For the total portfolio, we experienced an increase of approximately ~~27.6%~~14.3% in our occupancy and an increase of ~~46.7%~~35.5% in average daily rate in the ~~first~~second quarter of ~~2022.~~2022 in comparison to the second quarter of 2021. This resulted in ~~our highest nominal quarterly RevPAR,~~ an increase in RevPAR of ~~87.1%~~54.9% over the same period in the prior ~~year, since the onset of the Pandemic.~~year. See "Industry Trends and Outlook - Effects of the Pandemic on Our Business" for further information.

•Room Expenses. The increase in room expenses for both our total and the same-store portfolio is highly correlated to the increase in room revenues driven by increasing occupancy across our portfolio. Room expenses increased at a slower rate than room revenues due to reduced staffing levels and strength in average daily rate, offset by increasing wage rates. Additionally, room costs for the total portfolio increased due to the NCI Transaction, which significantly expanded the size of our ~~portfolio with the acquisition of 27 hotel properties and two parking garages.~~portfolio.

•Food and beverage Revenues and Expenses. Total and same-store food and beverage revenues increased during the quarter ended ~~March 31,~~June 30, 2022 as a result of an increase in occupancy across our portfolio and the NCI Transaction. Food and beverage expenses increased at a higher rate than food and beverage revenues due to an expansion in food and beverage product offerings and increased staffing costs.

•Other hotel operating Revenues and Expenses. The increase in other hotel operating revenues and expenses in both our total and same-store portfolios was driven by an increase in occupancy during the first quarter of 2022 and the NCI Transaction.

The following table includes other consolidated income and expenses for the three months ended ~~March 31,~~June 30, 2022 compared with the three months ended ~~March 31,~~June 30, 2021 (dollars in thousands).


		For the Three Months Ended March 31,									For the Three Months Ended June 30,
		2022		2021		Dollar Change		Percentage Change			2022		2021		Dollar Change		Percentage Change
Property taxes, insurance and other	Property taxes, insurance and other	$	13,138	$	10,904	$	2,234	20.5	%	Property taxes, insurance and other	$	13,525	$	10,990	$	2,535	23.1	%
Management fees	Management fees	3,795		1,555		2,240		144.1	%	Management fees	5,042		2,314		2,728		117.9	%
Depreciation and amortization	Depreciation and amortization	36,274		27,297		8,977		32.9	%	Depreciation and amortization	38,058		26,586		11,472		43.2	%
Corporate general and administrative	Corporate general and administrative	9,137		5,678		3,459		60.9	%	Corporate general and administrative	8,074		6,506		1,568		24.1	%

Hotel acquisition and transaction costs										Hotel acquisition and transaction costs	681		3,849		(3,168)		nm¹

Gain on disposal of assets, net	Gain on disposal of assets, net	—		50		(50)		nm¹		Gain on disposal of assets, net	20,484		31		20,453		nm¹
Interest expense	Interest expense	13,439		10,788		2,651		24.6	%	Interest expense	15,118		10,962		4,156		37.9	%
Other income, net	Other income, net	1,742		3,232		(1,490)		(46.1)	%	Other income, net	1,773		2,295		(522)		(22.7)	%
Income tax (benefit) expense		(2,000)		105		(2,105)		(2004.8)	%
Income tax expense										Income tax expense	6,437		275		6,162		nm¹

(1)Not meaningful.

Changes from the three months ended ~~March 31,~~June 30, 2022 compared with the three months ended ~~March 31,~~June 30, 2021 were due to the following:

•Property Taxes, Insurance and Other. The increase in Property taxes, insurance and other is primarily due to the NCI Transaction, which significantly expanded the size of our ~~portfolio with the acquisition of 27 hotel properties and two parking garages.~~portfolio. The higher property taxes due to an increase in the number of hotel properties in our portfolio during the quarter ended ~~March 31,~~June 30, 2022 was partially offset by property tax reductions that we have generated through our property tax appeal efforts to reduce the assessed values of our hotel properties for property tax purposes based on the lower operating performance ~~than~~that we experienced during the Pandemic.

•Management Fees. The increase in Management fees during the current period is primarily due to increased consolidated revenues as our business has experienced a steady improvement in performance during the three months ended ~~March 31,~~June 30, 2022 and due to the NCI Transaction, which significantly expanded the size of our ~~portfolio with the acquisition of 27 hotel properties and two parking garages.~~portfolio.

•Depreciation and Amortization. The increase in Depreciation and amortization is primarily due to the NCI Transaction, which significantly expanded the size of our portfolio ~~with the acquisition of 27 hotel properties and two parking garages, which resulted~~resulting in a substantial increase the our depreciable assets during the first quarter of 2022. Additionally, we have increased renovation activities at our hotel properties as our operating performance has improved.

•Corporate General and Administrative. The increase in ~~corporate,~~Corporate, general and administrative ~~costs~~expenses during the current period is primarily due to increased corporate staffing to support the growth in the business primarily driven by almost $1.0 billion in acquisitions during the six months ended June 30, 2022, higher incentive and other compensation costs, ~~including a~~and higher legal costs.

•Hotel Acquisition and Transaction Costs. Hotel acquisition and transactions costs for the three months ended June 30, 2022 relate to certain one-time ~~charge of approximately $1.3 million~~costs and other expenses related to the ~~acceleration~~NCI Transaction. Hotel acquisition and transactions costs for the three months ended June 30, 2021 include costs of ~~time-based restricted shares~~$2.1 million in transfer taxes and legal fees related to the ~~modification~~contribution of ~~performance stock-based compensation~~six hotels to our Joint Venture. GIC, our Joint Venture partner, paid 49%, or $0.9 million, of the $1.8 million transfer tax which is reflected in non-controlling interest on our Consolidated Statement of Operations. Hotel acquisition and transactions costs for ~~our former Chief Operating Officer who retired on March 4, 2022.~~the three months ended June 30, 2021 also include $1.7 million in costs incurred in pursuit of the acquisition of a company with a portfolio of hotel properties that ultimately was not consummated.

•Interest Expense. Interest expense increased as a result of the additional debt outstanding during the ~~first~~second quarter of 2022 related to the NCI Transaction and higher base rates on our floating rate debt that is not hedged.

•Other Income, net. Other income, net decreased during the ~~first~~second quarter of 2022 as a result of a reduction in interest income during the period due to the repayment in full of several mezzanine loans totaling approximately $25.8 million during the fourth quarter of 2021.

•Income Tax Expense. The Company recorded a ~~$2.0~~$6.4 million income tax ~~benefit~~expense during the three months ended ~~March~~June 30, 2022 due to an increase in our estimated effective tax rate for the full fiscal year ended December 31, 2022 ~~primarily due~~in comparison to ~~taxable losses incurred during~~ the prior period related to certain of our TRS ~~entities.~~entities as a result of substantial improvement in our operating results for the three and six months ended June 30, 2022 and the sale of the Hilton Garden Inn San Francisco Airport North, which resulted in a taxable gain of $14.5 million.

Comparison of the Six months ended June 30, 2022 with the Six months ended June 30, 2021

The following table contains key operating metrics for our total portfolio for the six months ended June 30, 2022 compared with the six months ended June 30, 2021 (dollars in thousands, except ADR and RevPAR).


	For the Six Months Ended June 30,
	2022						2021						Dollar Change				Percentage Change
	Total Portfolio (102 hotels)			Same-Store Portfolio (71 hotels)			Total Portfolio (72 hotels)			Same-Store Portfolio (71 hotels)			Total Portfolio (102/72 hotels)		Same-Store Portfolio (71 hotels)		Total Portfolio (102/72 hotels)		Same-Store Portfolio (71 hotels)
Revenues:
Room	$	295,614		$	227,869		$	133,240		$	132,092		$	162,374	$	95,777	121.9	%	72.5	%
Food and beverage	13,326			6,700			2,559			2,533			10,767		4,167		420.7	%	164.5	%
Other	16,177			12,007			8,579			8,435			7,598		3,572		88.6	%	42.3	%
Total	$	325,117		$	246,576		$	144,378		$	143,060		$	180,739	$	103,516	125.2	%	72.4	%

Expenses:
Room	$	64,193		$	49,408		$	30,134		$	29,810		$	34,059	$	19,598	113.0	%	65.7	%
Food and beverage	10,127			4,902			1,524			1,502			8,603		3,400		564.3	%	226.4	%
Other hotel operating expenses	99,988			75,857			53,959			53,336			46,029		22,521		85.3	%	42.2	%
Total	$	174,308		$	130,167		$	85,617		$	84,648		$	88,691	$	45,519	103.6	%	53.8	%

Operational Statistics:
Occupancy	69.3		%	69.4		%	57.6		%	57.9		%	n/a		n/a		20.2	%	19.8	%
ADR	$	158.22		$	163.22		$	113.14		$	113.39		$	45.08	$	49.83	39.8	%	43.9	%
RevPAR	$	109.64		$	113.22		$	65.21		$	65.63		$	44.43	$	47.59	68.1	%	72.5	%

Changes from the six months ended June 30, 2022 compared with the six months ended June 30, 2021 were due to the following:

•Revenues and RevPAR. The increase in total revenues and RevPAR for our total portfolio for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was due to continued strength in leisure travel as well improving corporate and group demand resulting in steady improvement in both weekend and weekday results. Additionally, revenues increased due to the NCI Transaction which significantly expanded the size of our portfolio. Our increased exposure to the Sunbelt, focused revenue management, and property management initiatives related to the portfolio acquired in the NCI Transaction also contributed to significant revenue growth during the period. On a same store basis, the improvements in our business resulted in an increase of approximately 19.8% in occupancy and 43.9% in average daily rate during the six months ended June 30, 2022, which resulted in an 72.5% increase in same-store RevPAR. For the total portfolio, we experienced an increase of approximately 20.2% in our occupancy and an increase of 39.8% in average daily rate during the six months ended June 30, 2022. This resulted in an increase in RevPAR of 68.1% over the same period in the prior year. See "Industry Trends and Outlook - Effects of the Pandemic on Our Business" for further information.

•Food and beverage Revenues and Expenses. Total and same-store food and beverage revenues increased during the six months ended June 30, 2022 as a result of an increase in occupancy across our portfolio and the NCI Transaction. Food and beverage expenses increased at a higher rate than food and beverage revenues due to an expansion in food and beverage product offerings and increased staffing costs.

The following table includes other consolidated income and expenses for the six months ended June 30, 2022 compared with the six months ended June 30, 2021 (dollars in thousands).


	For the Six Months Ended June 30,
	2022		2021		Dollar Change		Percentage Change
Property taxes, insurance and other	$	26,663	$	21,894	$	4,769	21.8	%
Management fees	8,837		3,869		4,968		128.4	%
Depreciation and amortization	74,332		53,883		20,449		38.0	%
Corporate general and administrative	17,211		12,184		5,027		41.3	%
Hotel acquisition and transaction costs	681		3,849		(3,168)		nm¹


Gain on disposal of assets, net	20,484		81		20,403		nm¹
Interest expense	28,557		21,750		6,807		31.3	%
Other income, net	3,515		5,527		(2,012)		(36.4)	%
Income tax expense	4,437		380		4,057		nm¹

(1)Not meaningful.

Changes from the six months ended June 30, 2022 compared with the six months ended June 30, 2021 were due to the following:

•Property Taxes, Insurance and Other. The increase in Property taxes, insurance and other is primarily due to the NCI Transaction which significantly expanded the size of our portfolio. The higher property taxes due to an increase in the number of hotel properties in our portfolio during the six months ended June 30, 2022 was partially offset by property tax reductions that we have generated through our property tax appeal efforts to reduce the assessed values of our hotel properties for property tax purposes based on the lower operating performance that we experienced during the Pandemic.

•Management Fees. The increase in Management fees during the current period is primarily due to increased consolidated revenues as our business has experienced a steady improvement in performance during the six months ended June 30, 2022 and due to the NCI Transaction, which significantly expanded the size of our portfolio.

•Depreciation and Amortization. The increase in Depreciation and amortization is primarily due to the NCI Transaction which significantly expanded the size of our portfolio, which resulted in a substantial increase the our depreciable assets during the six months ended June 30, 2022. Additionally, we have increased renovation activities at our hotel properties as our operating performance has improved.

•Corporate General and Administrative. The increase in Corporate, general and administrative expenses during the current period is primarily due to increased corporate staffing to support the growth in the business primarily driven by almost $1.0 billion in acquisitions during the six months ended June 30, 2022, higher incentive and other compensation costs, including a one-time charge of approximately $1.3 million related to the acceleration of time-based restricted shares and the modification of performance stock-based compensation for our former Chief Operating Officer who retired on March 4, 2022, and higher legal costs.

•Hotel Acquisition and Transaction Costs. Hotel acquisition and transactions costs for the six months ended June 30, 2022 relate to certain one-time costs and other expenses related to the NCI Transaction. Hotel acquisition and transactions costs for the six months ended June 30, 2021 include costs of $2.1 million in transfer taxes and legal fees related to the contribution of six hotels to our Joint Venture. GIC, our Joint Venture partner, paid 49%, or $0.9 million, of the $1.8 million transfer tax which is reflected in non-controlling interest on our Consolidated Statement of Operations. Hotel acquisition and transactions costs for the six months ended June 30, 2021 also include $1.7 million in costs incurred in pursuit of the acquisition of a company with a portfolio of hotel properties that ultimately was not consummated.

•Interest Expense. Interest expense increased as a result of the additional debt outstanding during the six months ended June 30, 2022 related to the NCI Transaction and higher base rates on our floating rate debt that is not hedged.

•Other Income, net. Other income, net decreased during the six months ended June 30, 2022 as a result of a reduction in interest income during the period due to the repayment in full of several mezzanine loans totaling approximately $25.8 million during the fourth quarter of 2021.

•Income Tax Expense. The Company recorded a $4.4 million income tax expense during the six months ended June 30, 2022 due to an increase in our estimated effective tax rate for the full fiscal year ended December 31, 2022 in comparison to the prior period related to certain of our TRS entities as a result of substantial improvement in our operating results for the six months ended June 30, 2022 and the sale of the Hilton Garden Inn San Francisco Airport North, which resulted in a taxable gain of $14.5 million.

Non-GAAP Financial Measures

We disclose certain “non-GAAP financial measures,” which are measures of our historical financial performance. Non-GAAP financial measures are financial measures not prescribed by Generally Accepted Accounting Principles ("GAAP"). These measures are as follows: (i) Funds From Operations (“FFO”) and Adjusted Funds from Operations ("AFFO"), (ii) Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA"), Earnings before Interest, Taxes, Depreciation and Amortization for Real Estate ("EBITDAre") and Adjusted EBITDAre (as described below). We caution investors that amounts presented in accordance with our definitions of non-GAAP financial measures may not be comparable to similar measures disclosed by other companies, since not all companies calculate these non-GAAP financial measures in the same manner. Our non-GAAP financial measures should be considered along with, but not as alternatives to, net income (loss) as a measure of our operating performance. Our non-GAAP financial measures may include funds that may not be available for our discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, debt service obligations and other commitments and uncertainties. Although we believe that our non-GAAP financial measures can enhance the understanding of our financial condition and results of operations, these non-GAAP financial measures are not necessarily better indicators of any trend as compared to a comparable measure prescribed by GAAP such as net income (loss).

FFO and AFFO

As defined by Nareit, FFO represents net income or loss (computed in accordance with GAAP), excluding preferred dividends, gains (or losses) from sales of real property, impairment losses on real estate assets, items classified by GAAP as extraordinary, the cumulative effect of changes in accounting principles, plus depreciation and amortization related to real estate assets, and adjustments for unconsolidated partnerships, and joint ventures. AFFO represents FFO excluding amortization of deferred financing costs, franchise fees, equity-based compensation expense, debt transaction costs, premiums on redemption of preferred shares, losses from net casualties, non-cash lease expense, non-cash interest income and non-cash income tax related adjustments to our deferred tax assets. Unless otherwise indicated, we present FFO and AFFO applicable to our common shares and common units. We present FFO and AFFO because we consider FFO and AFFO important supplemental measures of our operational performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO and AFFO when reporting their results. FFO and AFFO are intended to exclude GAAP historical cost depreciation and amortization, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO and AFFO exclude depreciation and amortization related to real estate assets, gains and losses from real property dispositions and impairment losses on real estate assets, FFO and AFFO provide performance measures that, when compared year over year, reflect the effect to operations from trends in occupancy, guestroom rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income. Our computation of FFO differs slightly from the computation of Nareit-defined FFO related to the reporting of corporate depreciation and amortization ~~expense, and adjustments related to provision for credit losses.~~expense. Our computation of FFO may also differ from the methodology for calculating FFO used by other equity REITs and, accordingly, may not be comparable to such other REITs. FFO and AFFO should not be considered as alternatives to net

income (loss) (computed in accordance with GAAP) as an indicator of our liquidity, nor are they indicative of funds available to fund our cash needs, including our ability to pay dividends or make distributions. Where indicated in this Quarterly Report on Form 10-Q, FFO is based on our computation of FFO and not the computation of Nareit-defined FFO unless otherwise noted.

The following is a reconciliation of our GAAP net loss to FFO and AFFO for the three months ended ~~March 31,~~June 30, 2022 and 2021, and for the six months ended June 30, 2022 and 2021, (in thousands, except per share/unit amounts):


		For the Three Months Ended March 31,					For the Three Months Ended June 30,					For the Six Months Ended June 30,
			2022		2021				2022			2021		2022		2021
Net loss			$	(8,973)	$	(32,871)
Net income (loss)								Net income (loss)	$	23,313		$	(20,569)	$	14,340	$	(53,440)
Preferred dividends	Preferred dividends		(4,525)		(3,709)			Preferred dividends	(3,968)			(3,709)		(7,938)		(7,418)
Preferred distributions								Preferred distributions	(653)			—		(1,208)		—

Loss related to non-controlling interests in joint venture			82		1,452
Net loss applicable to common shares and common units			(13,416)		(35,128)
(Income) loss related to non-controlling interests in joint venture								(Income) loss related to non-controlling interests in joint venture	(9,031)			1,843		(8,949)		3,295
Net income (loss) applicable to common shares and common units								Net income (loss) applicable to common shares and common units	9,661			(22,435)		(3,755)		(57,563)
Real estate-related depreciation	Real estate-related depreciation		35,195		27,180			Real estate-related depreciation	36,960			26,468		72,155		53,648

Gain on disposal of assets, net	Gain on disposal of assets, net		—		(50)			Gain on disposal of assets, net	(20,484)			(31)		(20,484)		(81)

Adjustments related to non-controlling interests in consolidated joint venture	Adjustments related to non-controlling interests in consolidated joint venture		(7,286)		(1,510)			Adjustments related to non-controlling interests in consolidated joint venture	998			(2,175)		(6,288)		(3,685)
FFO applicable to common shares and common units	FFO applicable to common shares and common units		14,493		(9,508)			FFO applicable to common shares and common units	27,135			1,827		41,628		(7,681)

Amortization of intangible assets			911		—
Amortization of lease-related intangible assets, net			—		22
Recoveries of credit losses								Recoveries of credit losses	(250)			—		(250)		—
Amortization of lease-related intangible assets								Amortization of lease-related intangible assets	—			21		—		43
Amortization of deferred financing costs	Amortization of deferred financing costs		1,412		1,011			Amortization of deferred financing costs	1,413			1,113		2,825		2,124
Amortization of franchise fees	Amortization of franchise fees		168		117			Amortization of franchise fees	169			118		337		235
Amortization of intangible assets								Amortization of intangible assets	929			—		1,840		—

Equity-based compensation	Equity-based compensation		3,698		1,569			Equity-based compensation	2,141			2,400		5,839		3,969

Hotel acquisition and transaction costs								Hotel acquisition and transaction costs	681			3,849		681		3,849
Debt transaction costs	Debt transaction costs		—		116			Debt transaction costs	35			27		35		143

Non-cash interest income			(122)		(257)
Non-cash interest income (expense)								Non-cash interest income (expense)	9			(260)		(113)		(517)
Non-cash lease expense, net	Non-cash lease expense, net		128		120			Non-cash lease expense, net	131			137		259		257
Casualty losses (recoveries), net			185		(35)
Casualty losses, net								Casualty losses, net	119			189		304		154

Adjustments related to non-controlling interests in consolidated joint venture	Adjustments related to non-controlling interests in consolidated joint venture		(732)		(78)			Adjustments related to non-controlling interests in consolidated joint venture	112			(1,001)		(620)		(1,079)

AFFO applicable to common shares and common units (1)	AFFO applicable to common shares and common units (1)		$	20,141	$	(6,923)		AFFO applicable to common shares and common units (1)	$	32,624	32624000	$	8,420	$	52,765	$	1,497
FFO per common share/common unit	FFO per common share/common unit		$	0.12	$	(0.09)		FFO per common share/common unit	$	0.22		$	0.02	$	0.35	$	(0.07)
AFFO per common share/common unit	AFFO per common share/common unit		$	0.17	$	(0.07)		AFFO per common share/common unit	$	0.27		$	0.08	$	0.44	$	0.01
Weighted average diluted common shares/common units:
FFO and AFFO (2) (3)			118,976		104,440

Weighted average diluted common shares/common units								Weighted average diluted common shares/common units
FFO (2) (3)								FFO (2) (3)	121,352			104,992		119,890		104,547
AFFO (2) (3)								AFFO (2) (3)	121,352			104,992		119,890		105,172

(1)AFFO applicable to common shares and common units for the three and six months ended ~~March 31,~~June 30, 2022 and 2021 has not been adjusted for interest related to our Convertible Notes for purposes of calculating AFFO per common share/common unit because we intend to settle the principal portion of the Convertible Notes in cash and we did not include in the denominator of our calculation of AFFO per common share/common unit the potential dilutive effect of shares that would be issued if the principal portion of the Convertible Notes were converted into shares of our ~~common stock.~~Common Stock.

(2)Includes common units in the Operating Partnership held by limited partners (other than us and our subsidiaries) because the common units are redeemable for cash or, at our election, shares of our common stock.

(3)The weighted average diluted common shares/common units used to calculate FFO and AFFO per common share/common unit for the three and six months ended ~~March 31,~~June 30, 2022 and 2021 includes the dilutive effect of our outstanding restricted stock awards. These shares were excluded from our weighted average shares outstanding used to calculate net loss per share because they would have been antidilutive. The weighted average common shares/common units used to calculate FFO and AFFO per common share/common unit for the three and six months ended ~~March 31,~~June 30, 2022 and 2021 exclude the potential dilution related to our Convertible Notes as we intend to settle the principal value of the Convertible Notes in cash.

40A reconciliation of weighted average diluted common shares to non-GAAP weighted average diluted common shares/common units for FFO is as follows (in thousands):


	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2022	2021	2022	2021
Weighted average common shares outstanding	105,199	104,495	105,049	104,387
Dilutive effect of unvested restricted stock awards	164	338	113	625
Dilutive effect of common units of Operating Partnership	15,989	159	14,728	—
Shares issuable upon conversion of convertible debt	23,978	23,978	23,978	22,521
Adjusted weighted dilutive common shares outstanding	145,330	128,970	143,868	127,533

Non-GAAP adjustment for effect of common units of Operating Partnership	—	—	—	160
Non-GAAP adjustment for effect of restricted stock awards	—	—	—	(625)
Non-GAAP adjustment for effect of shares issuable upon conversion of convertible debt	(23,978)	(23,978)	(23,978)	(22,521)
Non-GAAP weighted dilutive common shares/common units outstanding	121,352	104,992	119,890	104,547

A reconciliation of weighted average diluted common shares to non-GAAP weighted average diluted common shares/common units for ~~FFO and~~ AFFO is as follows (in thousands):

For the Three Months Ended
March 31,
2022 2021
Weighted average common shares outstanding 104,896 104,278
Dilutive effect of unvested restricted stock awards 627 —
Dilutive effect of shares issuable upon conversion of convertible debt 23,978 —
Adjusted weighted dilutive common shares outstanding 129,501 104,278
Non-GAAP adjustment for dilutive effects of common units 13,453 162
Non-GAAP adjustment for dilutive effect of shares issuable upon conversion of convertible debt (23,978) —
Non-GAAP weighted dilutive common shares/common units outstanding 118,976 104,440


	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2022	2021	2022	2021
Weighted average dilutive common shares outstanding	105,199	104,495	105,049	104,387
Dilutive effect of restricted stock awards	164	338	113	625
Dilutive effect of common units of Operating Partnership	15,989	159	14,728	160
Shares issuable upon conversion of convertible debt	23,978	23,978	23,978	22,521
Adjusted weighted dilutive common shares outstanding	145,330	128,970	143,868	127,693


Non-GAAP adjustment for effect of shares issuable upon conversion of convertible debt	(23,978)	(23,978)	(23,978)	(22,521)
Non-GAAP weighted dilutive common shares/common units outstanding - AFFO	121,352	104,992	119,890	105,172

AFFO applicable to common shares and common units increased ~~$28.9~~$25.2 million and $53.5 million, respectively, for the three and six months ended ~~March 31,~~June 30, 2022 compared to the same ~~period of~~periods in 2021. The increase was due to the NCI Transaction which significantly expanded the size of our ~~portfolio with the acquisition of 27 hotel properties and two parking garages.~~portfolio. In addition, the increase in AFFO applicable to common shares and common units during the ~~first quarter of~~three and six months ended June 30, 2022 was due to ana substantial improvement in our ~~business~~operating performance that has been primarily driven by leisure travel and to a lesser extent modest improvement in other demand segments.

EBITDA, EBITDAre and Adjusted EBITDAre

EBITDA

EBITDA represents net income or loss, excluding: (i) interest, (ii) income tax expense and (iii) depreciation and amortization. We believe EBITDA is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results. Our management team also uses EBITDA as one measure in determining the value of acquisitions and dispositions.

EBITDAre and Adjusted EBITDAre

EBITDAre is based on EBITDA and is expected to provide additional relevant information about REITs as real estate companies in support of growing interest among generalist investors. EBITDAre is intended to be a supplemental non-GAAP performance measure that is independent of a company’s capital structure and will provide a uniform basis to measure the enterprise value of a company compared to other REITs.

EBITDAre, as defined by Nareit, is calculated as EBITDA, excluding: (i) loss and gains on disposition of property and (ii) asset impairments, if any. We believe EBITDAre is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results.

We make additional adjustments to EBITDAre when evaluating our performance, such as adjustments related to the provision for credit losses, because we believe that the exclusion of certain additional non-recurring or certain non-cash items described below provides useful supplemental information to investors regarding our ongoing operating performance. We believe that the presentation of Adjusted EBITDAre, when combined with the primary GAAP presentation of net income, is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results.

The following is a reconciliation of our GAAP net loss to EBITDA, EBITDAre and Adjusted EBITDAre for the three months ended ~~March 31,~~June 30, 2022 and 2021, and for the six months ended June 30, 2022 and 2021, (in thousands):


		For the Three Months Ended March 31,				For the Three Months Ended June 30,				For the Six Months Ended June 30,
		2022		2021				2022		2021		2022		2021
Net loss		$	(8,973)	$	(32,871)
Net income (loss)							Net income (loss)	$	23,313	$	(20,569)	$	14,340	$	(53,440)
Depreciation and amortization	Depreciation and amortization	36,274		27,297			Depreciation and amortization	38,058		26,586		74,332		53,883
Interest expense	Interest expense	13,439		10,788			Interest expense	15,118		10,962		28,557		21,750
Interest income	Interest income	(2)		(1)			Interest income	(4)		(1)		(6)		(2)
Income tax (benefit) expense		(2,000)		105
Income tax expense							Income tax expense	6,437		275		4,437		380
EBITDA	EBITDA	38,738		5,318			EBITDA	82,922		17,253		121,660		22,571

Gain on disposal of assets, net	Gain on disposal of assets, net	—		(50)			Gain on disposal of assets, net	(20,484)		(31)		(20,484)		(81)
EBITDAre	EBITDAre	38,738		5,268			EBITDAre	62,438		17,222		101,176		22,490

Amortization of lease-related intangible assets, net		—		22
Recoveries of credit losses							Recoveries of credit losses	(250)		—		(250)		—
Amortization of lease-related intangible assets							Amortization of lease-related intangible assets	—		21		—		43
Amortization of intangible liabilities							Amortization of intangible liabilities	(123)		—		(123)		—
Equity-based compensation	Equity-based compensation	3,698		1,569			Equity-based compensation	2,141		2,400		5,839		3,969

Hotel acquisition and transaction costs							Hotel acquisition and transaction costs	681		3,849		681		3,849
Debt transaction costs	Debt transaction costs	—		116			Debt transaction costs	35		27		35		143
Non-cash interest income		(122)		(257)
Non-cash interest income (expense)							Non-cash interest income (expense)	9		(260)		(113)		(517)
Non-cash lease expense, net	Non-cash lease expense, net	128		120			Non-cash lease expense, net	131		137		259		257
Casualty losses, net	Casualty losses, net	185		(35)			Casualty losses, net	119		189		304		154
Loss related to non-controlling interests in joint venture		82		1,452
(Income) loss related to non-controlling interests in joint venture							(Income) loss related to non-controlling interests in joint venture	(9,031)		1,843		(8,949)		3,295
Adjustments related to non-controlling interests in consolidated joint venture	Adjustments related to non-controlling interests in consolidated joint venture	(9,788)		(2,031)			Adjustments related to non-controlling interests in consolidated joint venture	(1,558)		(3,694)		(11,346)		(5,725)

Adjusted EBITDAre	Adjusted EBITDAre	$	32,921	$	6,224		Adjusted EBITDAre	$	54,592	$	21,734	$	87,513	$	27,958

Adjusted EBITDAre increased ~~$26.7~~$32.9 million and $59.6 million for the three and six months ended ~~March 31,~~June 30, 2022 compared to the same ~~period of~~periods in 2021. The increase was due to the NCI Transaction which significantly expanded the size of our ~~portfolio with the acquisition of 27 hotel properties and two parking garages.~~portfolio. In addition, the increase in Adjusted EBITDAre during the first quarter of 2022 was due to ana substantial improvement in our ~~business~~operating performance that has been primarily driven by leisure travel and to a lesser extent modest improvement in other demand segments.

4243

Liquidity and Capital Resources

Due to the Pandemic, we entered into modifications of our 2018 Senior Credit Facility during the years ended December 31, 2020 and 2021, which included a waiver of covenants through March 31, 2022. In July 2022, ~~and restricted~~the Company entered into amendments to the 2018 Senior Credit Facility, which included improvements to certain of the key financial covenants, provides us with full access to our ~~ability to use advances on the~~ $400 Million Revolver (as defined in “Note 5 –Debt” to the Condensed Consolidated Financial Statements) and provides an option for ~~certain purposes; however, we continue~~us to ~~be able~~extend the maturity dates for up to access the $400 Million Revolver to fund operations, for growth opportunities and to execute our business plan. Upon expiration of our covenant waivers in March 2022, the capacity available under the $400 Million Revolver may be restricted based upon our quarterly achievement of certain liquidity or other financial metrics. The Company's availability under the $400 Million Revolver will fluctuate based on the performance of the Company relative to its covenant package.one additional year. See “Note 5 – Debt” to the Condensed Consolidated Financial Statements for additional ~~information concerning our 2018 Senior Credit Facility.~~information.

Our short-term liquidity requirements consist primarily of operating expenses and other expenditures directly

associated with our hotel properties, recurring maintenance and capital expenditures necessary to maintain our hotel properties

in accordance with internal and brand standards, capital expenditures to improve our hotel properties, hotel property development costs, acquisitions, interest payments, settlement of interest rate swaps, scheduled principal payments on outstanding indebtedness, restricted cash funding obligations, ~~mezzanine loan funding commitments,~~ our ~~Joint Venture~~joint venture acquisitions and capital requirements, contractual lease payments, corporate overhead, and distributions to our stockholders when declared. ~~We have approximately $62.0 million of debt under our 2017 Term Loan maturing in November 2022. We currently have adequate liquidity to fund this maturity.~~ Our corporate overhead primarily consists of employee compensation expenses, professional fees and corporate insurance and rent expenses. Cash requirements for our corporate overhead expenses (excluding non-cash stock-based compensation), which are generally paid from operating cash flows, were ~~$7.5~~$5.9 million and $4.1 million for the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively, and $11.4 million and $8.2 million for the six months ended June 30, 2022 and 2021, respectively. We generally expect our corporate overhead expenses to remain consistent with the level of our operating activities and market conditions for goods and services.

Our long-term liquidity requirements consist primarily of the costs of acquiring additional hotel properties, renovations

and other non-recurring capital expenditures that periodically are made with respect to our hotel properties, dividend

distributions and scheduled debt payments, including maturing loans.

During the ~~three~~six months ended ~~March 31,~~June 30, 2022, we completed the NCI Transaction for an aggregate purchase price of $822.0 ~~million (the "NCI Transaction").~~million. Additionally, in June 2022, we exercised our purchase option to acquire a 90% equity interest in the AC/Element Hotel based on a gross hotel option exercise price of $89.0 million. See "Note 3 - Investment in Hotel Properties, net" to the Condensed Consolidated Financial Statements for additional information.

During the ~~three~~six months ended ~~March 31,~~June 30, 2021 we sold Convertible Notes totaling approximately $280.0 million before consideration of the related capped call transactions, and after deducting approximately $7.0 million related to underwriting discounts and commissions and estimated offering expenses payable by the Company (including net proceeds from the full exercise by the underwriters of their over-allotment option to purchase additional Convertible Notes). These proceeds were used to pay the cost of the capped call transactions and to partially repay outstanding obligations under the 2018 Senior Credit Facility and 2017 Term Loan. See ~~“Note~~“Note 5 – Debt” to the Condensed Consolidated Financial Statements for additional information concerning the Convertible Notes, Convertible Notes Offering and the Capped Call Transactions.

To satisfy the requirements for qualification as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute annually at least 90% of our REIT taxable income to our stockholders, determined without regard to the deduction for dividends paid and excluding any net capital gains. We intend to distribute a sufficient amount of our taxable income to maintain our status as a REIT and to avoid tax on undistributed income. Because we anticipate distributing a substantial amount of our available cash from operations, if sufficient funds are not available to us from hotel property dispositions, our senior revolving credit and term loan facilities and other loans, we may need to raise additional capital to grow our business.

4344

Outstanding Indebtedness

Subsequent to quarter-end, at ~~April~~July 22, 2022, we had $200.0 million outstanding on our $200 Million ~~Term Loan, $62.0 million outstanding on our 2017~~ Term Loan and $225.0 million outstanding on our 2018 Term Loan. Each of the credit facilities was supported by the 46 hotel properties included in the credit facility borrowing base and a pledge of the equity securities in each of the entities which own one of the 46 hotel properties, and the respective TRS Lessees. We also had $287.5 million of Convertible Notes outstanding.

Subsequent to quarter-end, at ~~April~~July 22, 2022, the GIC Joint Venture had ~~$143.5~~$200.0 million outstanding under our GIC Joint Venture Credit Facility, which included borrowings of $75.0 million on its ~~$75~~$75.0 million term loan and ~~$68.5~~$125.0 million on its ~~$125~~$125.0 million revolving line of credit. The GIC Joint Venture Credit Facility is secured primarily by a first priority pledge of the Borrower's equity interests in the subsidiaries that hold the ~~five~~11 hotel property borrowing base assets, and the related TRS entities, which wholly own the TRS lessees that lease each of the borrowing base assets. As of ~~April~~July 22, 2022, our Joint Venture also owns ~~eight~~28 hotel properties that are not collateral for the GIC Joint Venture Credit Facility. See "Note 5 - Debt" to the Condensed Consolidated Financial Statements for additional information related to our GIC Joint Venture financing arrangements.

To complete the NCI Transaction, the GIC Joint Venture entered into a $410.0 million senior secured term loan facility (the ~~“Joint~~“GIC Joint Venture Term Loan”). secured by the 27 hotel properties and two parking garages acquired in the transaction. The GIC Joint Venture Term Loan has an accordion feature which will permit an increase in the total commitments by up to $190.0 million, for aggregate potential borrowings of up to $600.0 million. The ~~Second~~GIC Joint ~~Credit Facility~~Venture Term Loan will mature on January 13, 2026 and can be extended for one 12-month period at the Company’s option, subject to certain conditions. The GIC Joint Venture Term Loan is interest-only and provides for a floating interest rate equal to SOFR plus 2.86%. Subsequent to quarter-end, at April 22, 2022, the GIC Joint Venture had $410.0 million outstanding under the GIC Joint Venture Term Loan. See "Note 5 - Debt" to the Condensed Consolidated Financial Statements for additional information related to our GIC Joint Venture financing arrangements.

On June 10, 2022, the Brickell Joint Venture (the “Borrower”) and Summit Hotel OP, LP (the “Non-Recourse Guarantor”) entered into a $47.0 million mortgage loan and non-recourse guaranty with City National Bank of Florida to finance the dual-branded 264-guestroom AC/Element Hotel.  The City National Bank Loan provides for an interest rate equal to one-month term SOFR plus 300 basis points.  Payment terms include an interest-only period through June 30, 2024 and the loan will amortize on a 25-year schedule from July 1, 2024 through the maturity date of June 30, 2025.  The City National Bank Loan is prepayable at any time without penalty.

At ~~March 31,~~June 30, 2022, we have scheduled debt principal amortization payments during the next twelve months totaling ~~$3.4~~$4.1 million and $54.1 million of debt ~~maturities of $62.0 million.~~maturities. Currently, we have the capacity to pay these scheduled principal debt payments using cash on hand or draws under our $400 Million Revolver.

We have obtained financing through debt instruments having staggered maturities and intend to continue to do so in the future. Our debt includes, and may include in the future, debt secured by stock pledges, debt secured by first priority mortgage liens on certain hotel properties and unsecured debt. We believe that we will have adequate liquidity to meet the requirements for scheduled maturities and principal repayments. However, we can provide no assurance that we will be able to refinance our indebtedness as it becomes due and, if refinanced, whether such refinancing will be available on favorable terms.

Our outstanding indebtedness requires us to comply with various financial and other covenants. At ~~March 31,~~June 30, 2022, we are in compliance with all of ~~the Company's~~our loan agreements. We have entered into certain amendments of the 2018 Senior Credit Facility ~~the 2018 Term Loan~~ and the ~~2017~~2018 Term Loan that give us full access to the $400 Million Revolver (subject to certain conditions)~~, provide for financial covenant waivers through March 31, 2022,~~ and ~~modify~~improve certain financial covenant measures through December 31, 2023. Additionally, we have amended the GIC Joint Venture Credit Facility to provide for certain financial covenant waivers and adjustments as described in “Note 5 – Debt” to the Condensed Consolidated Financial Statements. Our outstanding indebtedness requires us to comply with various financial and other covenants. At ~~March 31,~~June 30, 2022, we and our GIC Joint Venture are in compliance with all loan covenants.

On July 19, 2022, Bank of America, N.A. entered into successor administrative agent documentation to succeed Deutsche Bank AG New York Branch as administrative agent on the 2018 Senior Credit Facility.

See "Note 5 - Debt" to the Condensed Consolidated Financial Statements for additional information concerning the loan amendments and our financing arrangements.

A summary of our gross debt at ~~March 31,~~June 30, 2022 is as follows (dollars in thousands):

Lender

Interest Rate

Amortization
Period (Years)

Maturity Date

Number of
Encumbered Properties

Principal Amount
Outstanding

Lender

Interest Rate

Amortization
Period (Years)

Maturity Date

Number of
Encumbered Properties

Principal Amount
Outstanding

2018 Senior Credit Facility (1)

Deutsche Bank AG New York Branch

$400 Million Revolver

2.65% Variable

n/a

March 31, 2023

n/a

—

$400 Million Revolver

4.19% Variable

n/a

March 31, 2023

n/a

—

$200 Million Term Loan

2.60% Variable

n/a

April 1, 2024

n/a

200,000

$200 Million Term Loan

4.14% Variable

n/a

April 1, 2024

n/a

200,000

Total Senior Credit and Term Loan Facility

200,000

Total Senior Credit and Term Loan Facility

200,000

Term Loans (1)

KeyBank National Association Term Loan

2.70% Variable

n/a

November 25, 2022

n/a

62,000

KeyBank National Association Term Loan

4.24% Variable

n/a

November 25, 2022

n/a

—

KeyBank National Association Term Loan

2.40% Variable

n/a

February 14, 2025

n/a

225,000

KeyBank National Association Term Loan

3.94% Variable

n/a

February 14, 2025

n/a

225,000

287,000

Convertible Notes

1.50% Fixed

n/a

February 15, 2026

n/a

287,500

Convertible Notes

1.50% Fixed

n/a

February 15, 2026

n/a

287,500

Secured Mortgage Indebtedness

MetaBank

4.44% Fixed

July 1, 2027

44,780

MetaBank

4.44% Fixed

July 1, 2027

44,497

KeyBank National Association

4.46% Fixed

February 1, 2023

18,415

KeyBank National Association (Berkadia)

4.46% Fixed

February 1, 2023

18,288

4.52% Fixed

April 1, 2023

18,893

4.52% Fixed

April 1, 2023

18,766

4.30% Fixed

April 1, 2023

18,229

4.30% Fixed

April 1, 2023

18,102

4.95% Fixed

August 1, 2023

32,945

4.95% Fixed

August 1, 2023

32,742

Bank of the Cascades

2.08% Variable

December 19, 2024

(3)

7,891

Bank of the Cascades (First Interstate Bank) (2)

3.79% Variable

December 19, 2024

(3)

7,824

4.30% Fixed

December 19, 2024

—

(3)

7,891

4.30% Fixed

December 19, 2024

—

(3)

7,824

Total Mortgage Loans

148,043

860,543

149,044

Brickell Joint Venture Mortgage Loan

City National Bank of Florida

4.69% Variable

June 30, 2025

47,000

923,544

Joint Venture Credit Facilities and Term Loans (2)

GIC Joint Venture Credit Facility and Term Loans (3)

Bank of America, N.A.

$125 Million Revolver

2.55% Variable

n/a

October 8, 2023

n/a

68,500

$125 Million Revolver

4.09% Variable

n/a

October 8, 2023

n/a

125,000

$75 Million Term Loan

2.50% Variable

n/a

October 8, 2023

n/a

75,000

$75 Million Term Loan

4.04% Variable

n/a

October 8, 2023

n/a

75,000

Bank of America, N.A. (4)

2.91% Variable

n/a

January 13, 2026

n/a

410,000

Bank of America, N.A.

4.55% Variable

n/a

January 13, 2026

n/a

410,000

Wells Fargo

4.99% Fixed

June 6, 2028

13,207

Wells Fargo

4.99% Fixed

June 6, 2028

13,150

PACE loan(5)

6.10% Fixed

July 31, 2040

6,389

Total Joint Venture Credit Facility and Term Loans

573,096

PACE loan (4)

6.10% Fixed

July 31, 2040

(4)

6,389

Total GIC Joint Venture Credit Facility and Term Loans

629,539

Total Joint Venture Debt

676,539

Total Debt

1,496,640

Total Debt

1,537,082

(1)The 2018 Senior Credit Facility and Term Loans are supported by a borrowing base of 46 unencumbered hotel properties and a pledge of the equity securities of the entities that own and operate the 46 unencumbered hotel properties.

(2)The ~~Joint Venture Credit Facility is secured by pledges of the equity in the entities (and affiliated entities) that own five~~ ~~of the hotel proeprties owned by the joint venture.~~

~~(3)The~~ Bank of Cascades mortgage loan is comprised of two promissory notes that are secured by the same collateral and cross-defaulted.

~~(4)~~(3)The GIC Joint Venture Credit Facilities and Term Loans are secured by a pledge of the equity interests in the subsidiaries that own and operate the borrowing base assets financed by the facility.

~~(5)~~(4)The PACE loan is secured by an assessment lien imposed by the County of Tarrant, Texas for the benefit of the lender.

We are exposed to interest rate risk through our variable-rate debt. We manage this risk primarily by managing the amount, sources, and duration of our debt funding and through the use of derivative financial instruments. Specifically, we enter into derivative financial instruments to manage our exposure to known or expected cash payments related to our variable-rate debt. During the ~~three~~six months ended ~~March 31,~~June 30, 2022, the fair value of our interest rate swaps increased ~~$12.1~~$17.0 million due to an increase in interest rate expectations. Each interest rate swap fixes the interest rates on portions of our variable interest rate indebtedness and converts LIBOR from a floating rate to average fixed rates ranging from 1.98% to 2.93%.

Capital Expenditures

During the ~~three~~six months ended ~~March 31,~~June 30, 2022, we funded ~~$10.3~~$25.3 million in capital expenditures at our hotel properties. We anticipate spending an additional ~~$60.0~~$45.0 million to ~~$80.0~~$65.0 million on capital expenditures across our portfolio during the remainder of 2022 assuming a reasonable recovery in lodging demand occurs throughout the remainder of the year. We expect to fund these expenditures through a combination of cash on hand, working capital, borrowings under our $400 Million Revolver, or other potential sources of capital, to the extent available to us.

Cash Flows


		For the Three Months Ended March 31,							For the Six Months Ended June 30,
		2022		2021		Change			2022		2021		Change
		(in thousands)							(in thousands)
Net cash provided by (used in) operating activities		$	25,505	$	(3,167)	$	28,672
Net cash provided by operating activities								Net cash provided by operating activities	$	86,903	$	14,830	$	72,073
Net cash used in investing activities	Net cash used in investing activities	(284,818)		(6,243)		(278,575)		Net cash used in investing activities	(234,764)		(12,542)		(222,222)
Net cash provided by financing activities	Net cash provided by financing activities	277,602		17,902		259,700		Net cash provided by financing activities	196,977		36,988		159,989
Net change in cash, cash equivalents and restricted cash	Net change in cash, cash equivalents and restricted cash	$	18,289	$	8,492	$	9,797	Net change in cash, cash equivalents and restricted cash	$	49,116	$	39,276	$	9,840

Changes from the ~~three~~six months ended ~~March 31,~~June 30, 2022 compared to the ~~three~~six months ended ~~March 31,~~June 30, 2021 were due to the following:

•Cash provided by ~~(used in)~~ operating activities. ~~This~~The increase in cash provided by operating activities primarily resulted from an increase in net income of ~~$35.4~~$70.2 million after adjusting for non-cash items, such as depreciation and amortization and gains on the sale of assets, and net changes in working capital of ~~$6.7~~$1.9 million. The net changes in working capital were primarily due to ~~increases~~an increase in ~~accrued~~Accrued expenses and other during the ~~three~~six months ended ~~March 31,~~June 30, 2021 as a result of an increase in the number of hotel properties during the ~~first quarter of 2022~~period with the NCI Transaction ~~decreases~~and Brickell Transaction, offset by increases in Prepaid expenses and other ~~as a result of the NCI Transaction, offset by an increase in~~and Trade receivables, net due to the increased size of our hotel ~~portfolio with the NCI Transaction.~~portfolio.

•Cash used in investing activities. This increase in cash used in investing activities iswas due to the closing of the NCI Transaction ~~which resulted~~and the Brickell Transaction during the six months ended June 2022. Cash used in investing activities for the ~~acquisition~~six months ended June 30, 2022 was partially offset by proceeds from the sale of ~~27 hotel properties and two parking garages.~~169-guestroom Hilton Garden Inn San Francisco Airport North in San Francisco, CA for a gross selling price of $75.0 million.

•Cash provided by financing activities. Cash provided by financing activities for the ~~three~~six months ended ~~March 31,~~June 30, 2022 was primarily the result of contributions from our ~~joint venture~~GIC Joint Venture partner of ~~$203.7~~$204.1 million for the NCI Transaction, borrowings of $410.0 million under the GIC Joint Venture Term Loan for the NCI Transaction, offset by debt repayments, including the repayment of $328.7 million of debt assumed as part of the NCI ~~Transaction.~~ Transaction, and the repayment of the 2017 Term Loan of $62.0 million in May 2022.

During the ~~first quarter of~~six months ended June 30, 2021, cash provided by financing activities was primarily the result of the completion of a convertible debt offering of $287.5 million aggregate principal amount, which was used to partially repay obligations under the 2018 Senior Credit Facility and to pay the cost of capped call transactions.

Critical Accounting Policies

For critical accounting policies, see "Note 2 - Basis of Presentation and Significant Accounting Policies" to the Condensed Consolidated Financial Statements.

Cybersecurity

The hospitality industry and certain of the major brand and franchise companies have recently experienced cybersecurity breaches. We are not aware of any material cybersecurity losses at any of our properties. We manage cybersecurity risks at our hotel properties through our franchisors and property management companies. An important part of our cybersecurity risk mitigation efforts includes maintaining cybersecurity insurance and indemnifications in certain of our property management agreements. Our Board of Directors provides on-going oversight of management's approach to managing cybersecurity risks.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market-sensitive instruments. In pursuing our business strategies, the primary market risk to which we are exposed is interest rate risk. Our primary interest rate exposure is to 30-day LIBOR. We primarily use derivative financial instruments to manage interest rate risk.

Our interest rate derivatives are based on USD-LIBOR. In July 2017, the Financial Conduct Authority (“FCA”) that

regulates LIBOR announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee, which identified SOFR as its preferred alternative to USD-LIBOR in derivatives and other financial contracts. The Company has contracts that are indexed to LIBOR and is monitoring and evaluating the related changes and risks. LIBOR has ceased to be available for new loans originated after 2021. The transition from LIBOR to SOFR or another benchmark interest rate will result in a different calculation of our variable interest rates that are currently indexed to LIBOR. Our loan agreements contain provisions for our lenders and us to establish an alternative interest rate.

At ~~March 31,~~June 30, 2022, we were party to four interest rate derivative agreements pursuant to which we receive variable-rate payments in exchange for making fixed-rate payments (dollars in thousands):

Contract date

Effective Date

Expiration Date

Notional Amount

October 2, 2017

January 29, 2018

January 31, 2023

100,000

October 2, 2017

January 29, 2018

January 31, 2023

100,000

June 11, 2018

September 28, 2018

September 30, 2024

75,000

June 11, 2018

December 31, 2018

December 31, 2025

125,000

400,000

At ~~March 31,~~June 30, 2022, after giving effect to our interest rate derivative agreements, ~~$848.2~~$847.3 million, or ~~57%~~55%, of our debt had fixed interest rates and ~~$648.4~~$689.8 million, or ~~43%~~45%, had variable interest rates. The percentage of debt with fixed rates increased during the first nine months of 2021 primarily as the result of the issuance of $287.5 million of fixed rate Convertible Notes (See "Note 5 - Debt" to the Condensed Consolidated Financial Statements). At December 31, 2021, after giving effect to our interest rate derivative agreements, $842.9 million, or 78%, of our debt had fixed interest rates and $238.5 million, or 22%, had variable interest rates. Taking into consideration our existing interest rate swaps an increase or decrease in interest rates of 1.0% would decrease or increase, respectively, our cash flows by approximately $6.5 million per year.

As our fixed-rate debts mature, they will become subject to interest rate risk. In addition, as our variable-rate debts mature, lenders may impose interest rate floors on new financing arrangements because of the low interest rates experienced during the past few years. At ~~March 31,~~June 30, 2022, we have scheduled debt principal amortization payments during the next twelve months totaling ~~$3.4~~$4.1 million and $54.1 million of debt ~~maturities totaling $62.0 million.~~maturities.

In July 2022, we entered into two new interest rate swap agreements. One interest rate swap agreement has a notional amount of $100.0 million and an effective date of January 31, 2023 with a term of six years. Regions Bank is the counterparty and the swap provides for a fixed rate of 2.5625%. The second interest rate swap has a notional amount of $100.0 million and an effective date of January 31, 2023 with a term of four years. Capital One Bank, N.A. is the counterparty and the swap provides for a fixed rate of 2.6%.

Item 4. Controls and Procedures.

Controls and Procedures

Disclosure Controls and Procedures

Our management team evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of ~~March 31,~~June 30, 2022. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of ~~March 31,~~June 30, 2022, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the three-month period covered by this Quarterly Report on Form 10-Q, which were identified in connection with management’s evaluation required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

4849

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

We are involved from time to time in litigation arising in the ordinary course of business; however, there are currently no pending legal actions that we believe would have a material adverse effect on our financial position or results of operations.

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, 2021.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

4950

Item 6. Exhibits.

The following exhibits are filed as part of this report:


Exhibit
Number						Description of Exhibit

~~3.1~~						~~Tenth Amendment to the First Amended and Restated Agreement of Limited Partnership of Summit Hotel OP, LP, dated January 13, 2022.~~
~~10.1~~						~~Contribution and Purchase Agreement, dated as of November 2, 2021, among Summit Hotel OP, LP, Summit Hospitality JV, LP, NewcrestImage Holdings, LLC and NewcrestImage Holdings II, LLC.~~
~~10.~~2						~~Director Nomination Agreement, dated as of January 13, 2022, by and among Summit Hotel Properties, Inc., Bright Force Investment, LLC, Sagestar Family, LLC and C&D Family Holdings, LLC.~~
~~10.~~3						~~Registration Rights Agreement, dated as of January 13, 2022, by and among Summit Hotel Properties, Inc., Bright Force Investment, LLC, Sagestar Family, LLC and C & D Family Holdings, LLC.~~
~~10.~~4						~~Tax Protection Agreement, dated as of January 13, 2022, among Summit Hotel OP, LP, NewcrestImage Holdings, LLC, Sagestar Family, LLC and C&D Family Holdings, LLC.~~
~~10.~~5						$410 Million Credit Agreement, dated January 13, 2022, among Summit JV MR 2, LLC, Summit JV MR 3, LLC and Summit NCI NOLA BR 184, LLC as borrowers, Summit Hospitality JV, LP, as parent, each party executing the credit facility documentation as a guarantor, Bank of America, N.A., as administrative agent and initial lender, Wells Fargo Bank, National Association as syndication agent and initial lender, BofA Securities, Inc., as joint lead arranger and joint bookrunner and Wells Fargo Securities, LLC as joint lead arranger and joint bookrunner.
~~10.~~6 *						~~Separation Agreement and General Release dated February 28, 2022 between Summit Hotel Properties, Inc. and Craig J. Aniszewski~~
31.1†						Certification of Chief Executive Officer of Summit Hotel Properties, Inc. 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 of Summit Hotel Properties, Inc. 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 of Summit Hotel Properties, Inc. 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 of Summit Hotel Properties, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS						The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH						Inline XBRL Taxonomy Extension Schema Document (1)
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document (1)
101.LAB						Inline XBRL Taxonomy Extension Labels Linkbase Document (1)
101.PRE						Inline XBRL Taxonomy Presentation Linkbase Document (1)
104						Cover Page Interactive Data File (the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

* - Management contract or compensatory plan or arrangement.

† - Filed herewith

†† - Furnished herewith

(1) - Submitted electronically herewith

5051

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	SUMMIT HOTEL PROPERTIES, INC. (registrant)

Date: ~~May 3,~~August 2, 2022	By:	/s/ William H. Conkling
		William H. Conkling Executive Vice President and Chief Financial Officer (principal financial officer)

5152


Summit Hotel Properties, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands)
	Three Months Ended March 31,
	2022		2021
OPERATING ACTIVITIES
Net loss	(8,973)		(32,871)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	36,274		27,297
Deferred finance cost amortization	1,412		1,011


Equity-based compensation	3,698		1,569

Gain on disposal of assets	—		(50)

Non-cash interest income	(122)		(257)
Debt transaction costs	—		116
Other	69		143
Changes in operating assets and liabilities:	0

Trade receivables, net	(13,726)		(2,940)
Prepaid expenses and other	(9,054)		1,180
Accounts payable	900		1,082
Accrued expenses	15,027		553
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	25,505		(3,167)
INVESTING ACTIVITIES
Acquisitions of hotel and other properties	(272,556)		—

Improvements and additions to hotel properties	(10,347)		(3,579)




Funding of real estate loans	(1,915)		(2,664)


NET CASH USED IN INVESTING ACTIVITIES	(284,818)		(6,243)
FINANCING ACTIVITIES
Proceeds from issuance of debt	410,000		317,500
Principal payments on debt	(329,882)		(264,485)
Proceeds from the sale of non-controlling interests	674		—
Purchases of capped calls for convertible senior notes	—		(21,131)


Financing fees on debt and other issuance costs	(2,588)		(8,671)
Dividends paid	(4,305)		(3,709)
Proceeds from contributions by joint venture partner	203,703		—
Repurchase of common shares for withholding requirements	—		(1,602)

NET CASH PROVIDED BY FINANCING ACTIVITIES	277,602		17,902
Net change in cash, cash equivalents and restricted cash	18,289		8,492
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Beginning of period	96,944		38,896
End of period	$	115,233	$	47,388
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments for interest	$	(11,213)	$	(8,890)
Accrued acquisitions and improvements to hotel properties	$	(3,749)	$	(1,184)

Cash payments for income taxes, net of refunds	$	60	$	(39)
Debt assumed to complete acquisition of a portfolio of properties	$	335,205	$	—
Assumption of leases and other assets and liabilities in connection with the acquisition of a portfolio of properties	$	9,206	$	—
Non-controlling interests in operating partnership issued to complete acquisition of a portfolio of properties	$	157,513	$	—
Redeemable non-controlling interests in operating partnership issued to complete acquisition of a portfolio of properties	$	50,000	$	—


	March 31,		December 31,
	2022		2021
Hotel buildings and improvements	$	43,078	$	—
Land	12,771		425
Furniture, fixtures and equipment	3,199		—


	59,048		425
Less - accumulated depreciation and amortization	(6,247)		—
	$	52,801	$	425