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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended SeptemberJune 30, 20172022


OR
o☐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 001-35169


RLJ LODGING TRUST
(Exact Name of Registrant as Specified in Its Charter)


Maryland
27-4706509
Maryland27-4706509
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
3 Bethesda Metro Center, Suite 1000
Bethesda, MarylandMaryland20814
(Address of Principal Executive Offices)(Zip Code)
(301) 280-7777
(Registrant’s Telephone Number, Including Area Code)
  

Securities registered pursuant to Section 12 (b) of the Exchange Act:
Title of Each ClassTrading SymbolName of Exchange on Which Registered
Common Shares of beneficial interest, par value $0.01 per shareRLJNew York Stock Exchange
$1.95 Series A Cumulative Convertible Preferred Shares, par value $0.01 per shareRLJ-ANew 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. ý☒ Yes  o☐ No 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  ý☒ Yes  o☐ No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.

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Large accelerated filer☒Accelerated filer☐
Large accelerated filerýAccelerated filero
Non-accelerated filer
o (do not check if a smaller reporting company)
☐		Smaller reporting companyo☐
Emerging growth companyo☐
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. o☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  o☐Yes ý☒ No 



Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 
As of October 30, 2017, 174,910,524July 29, 2022, 162,749,444 common shares of beneficial interest of the Registrant, $0.01 par value per share, were outstanding.




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TABLE OF CONTENTS
 
Page
PART I. FINANCIAL INFORMATION
Consolidated Financial Statements (unaudited)
Balance Sheets as of SeptemberJune 30, 20172022 and December 31, 20162021
1
Statements of Operations and Comprehensive Income (Loss) for the three and ninesix months ended SeptemberJune 30, 20172022 and 20162021
2
Statements of Changes in Equity for the ninethree and six months ended SeptemberJune 30, 20172022 and 20162021
4
Statements of Cash Flows for the ninesix months ended SeptemberJune 30, 20172022 and 20162021
68
Notes to the Consolidated Financial Statements
79
2623
4037
4137
PART II. OTHER INFORMATION
4138
4238
4638
4738
4738
4738
4839
5040
 



ii
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PART I. FINANCIAL INFORMATION
 
Item 1.Financial Statements.Statements
RLJ Lodging Trust
Consolidated Balance Sheets
(Amounts in thousands, except share and per share data)
(unaudited)
June 30, 2022December 31, 2021
Assets  
Investment in hotel properties, net$4,127,290 $4,219,116 
Investment in unconsolidated joint ventures6,927 6,522 
Cash and cash equivalents511,481 665,341 
Restricted cash reserves44,281 48,528 
Hotel and other receivables, net of allowance of $332 and $274, respectively40,938 31,091 
Lease right-of-use assets142,213 144,988 
Prepaid expense and other assets60,096 33,390 
Total assets$4,933,226 $5,148,976 
Liabilities and Equity  
Debt, net$2,211,735 $2,409,438 
Accounts payable and other liabilities139,115 155,136 
Advance deposits and deferred revenue18,583 20,047 
Lease liabilities121,609 123,031 
Accrued interest18,617 19,110 
Distributions payable7,995 8,347 
Total liabilities2,517,654 2,735,109 
Commitments and Contingencies (Note 10)00
Equity 
Shareholders’ equity: 
Preferred shares of beneficial interest, $0.01 par value, 50,000,000 shares authorized
Series A Cumulative Convertible Preferred Shares, $0.01 par value, 12,950,000 shares authorized; 12,879,475 shares issued and outstanding, liquidation value of $328,266, at June 30, 2022 and December 31, 2021366,936 366,936 
Common shares of beneficial interest, $0.01 par value, 450,000,000 shares authorized; 162,981,820 and 166,503,062 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively1,630 1,665 
Additional paid-in capital3,053,345 3,092,883 
Distributions in excess of net earnings(1,044,726)(1,046,739)
Accumulated other comprehensive income (loss)24,594 (17,113)
Total shareholders’ equity2,401,779 2,397,632 
Noncontrolling interests:  
Noncontrolling interest in the Operating Partnership6,325 6,316 
Noncontrolling interest in consolidated joint ventures7,468 9,919 
Total noncontrolling interests13,793 16,235 
Total equity2,415,572 2,413,867 
Total liabilities and equity$4,933,226 $5,148,976 

The accompanying notes are an integral part of these consolidated financial statements.
1
 September 30,
2017		 December 31, 2016
Assets 
  
Investment in hotel properties, net$5,977,524
 $3,367,776
Investment in unconsolidated joint ventures24,959
 —
Cash and cash equivalents421,181
 456,672
Restricted cash reserves78,343
 67,206
Hotel and other receivables, net of allowance of $614 and $182, respectively70,818
 26,018
Deferred income tax asset, net68,642
 44,614
Intangible assets, net151,098
 898
Prepaid expense and other assets72,498
 60,209
Total assets$6,865,063
 $4,023,393
Liabilities and Equity 
  
Debt, net$2,885,739
 $1,582,715
Accounts payable and other liabilities273,315
 137,066
Deferred income tax liability11,430
 11,430
Advance deposits and deferred revenue34,532
 11,975
Accrued interest16,305
 3,444
Distributions payable26,495
 41,486
Total liabilities3,247,816
 1,788,116
Commitments and Contingencies (Note 11)

 

Equity   
Shareholders’ equity:   
Preferred shares of beneficial interest, $0.01 par value, 50,000,000 shares authorized   
Series A Cumulative Convertible Preferred Shares, $0.01 par value, 12,950,000 shares authorized; 12,879,475 shares issued and outstanding, liquidation value of $328,266 at September 30, 2017366,936
 —
Common shares of beneficial interest, $0.01 par value, 450,000,000 shares authorized; 174,913,606 and 124,364,178 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively1,749
 1,244
Additional paid-in capital3,206,193
 2,187,333
Accumulated other comprehensive income (loss)677
 (4,902)
(Distributions in excess of net earnings) retained earnings(25,326) 38,249
Total shareholders’ equity3,550,229
 2,221,924
Noncontrolling interest: 
  
Noncontrolling interest in consolidated joint ventures11,125
 5,973
Noncontrolling interest in the Operating Partnership11,463
 7,380
Total noncontrolling interest22,588
 13,353
Preferred equity in a consolidated joint venture, liquidation value of $45,401 at September 30, 201744,430
 —
Total equity3,617,247
 2,235,277
Total liabilities and equity$6,865,063
 $4,023,393
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RLJ Lodging Trust
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Amounts in thousands, except share and per share data)
(unaudited)
 For the three months ended June 30,For the six months ended June 30,
 2022202120222021
Revenues
Operating revenues
Room revenue$280,676 $166,554 $486,455 $269,326 
Food and beverage revenue31,154 12,983 52,055 19,225 
Other revenue18,671 14,717 34,890 25,255 
Total revenues330,501 194,254 573,400 313,806 
Expenses  
Operating expenses  
Room expense65,793 42,898 119,621 72,325 
Food and beverage expense21,770 8,709 37,939 13,265 
Management and franchise fee expense26,067 12,630 46,456 17,991 
Other operating expense76,888 56,883 145,542 106,003 
Total property operating expenses190,518 121,120 349,558 209,584 
Depreciation and amortization46,922 46,915 93,787 93,858 
Impairment losses— — — 5,946 
Property tax, insurance and other22,949 24,048 45,462 44,129 
General and administrative13,348 12,133 27,482 22,934 
Transaction costs136 195 198 255 
Total operating expenses273,873 204,411 516,487 376,706 
Other income (expense), net721 (9,720)8,006 (9,255)
Interest income347 220 519 604 
Interest expense(23,855)(26,366)(48,416)(54,261)
(Loss) gain on sale of hotel properties, net(364)103 1,053 1,186 
Loss on extinguishment of indebtedness, net— (6,207)— (6,207)
Income (loss) before equity in income (loss) from unconsolidated joint ventures33,477 (52,127)18,075 (130,833)
Equity in income (loss) from unconsolidated joint ventures283 60 405 (238)
Income (loss) before income tax expense33,760 (52,067)18,480 (131,071)
Income tax expense(558)(154)(748)(268)
Net income (loss)33,202 (52,221)17,732 (131,339)
Net (income) loss attributable to noncontrolling interests:  
Noncontrolling interest in the Operating Partnership(125)268 (21)664 
Noncontrolling interest in consolidated joint ventures(111)506 7 1,242 
Net income (loss) attributable to RLJ32,966 (51,447)17,718 (129,433)
Preferred dividends(6,279)(6,279)(12,557)(12,557)
Net income (loss) attributable to common shareholders$26,687 $(57,726)$5,161 $(141,990)
Basic per common share data:
Net income (loss) per share attributable to common shareholders$0.16 $(0.35)$0.03 $(0.87)
Weighted-average number of common shares163,539,446 163,996,003 163,857,785 163,911,475 
2
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Diluted per common share data:
Net income (loss) per share attributable to common shareholders$0.16 $(0.35)$0.03 $(0.87)
Weighted-average number of common shares163,784,573 163,996,003 164,217,150 163,911,475 
Comprehensive income (loss):
Net income (loss)$33,202 $(52,221)$17,732 $(131,339)
Unrealized gain on interest rate derivatives13,380 5,375 47,573 22,095 
Reclassification of unrealized losses (gains) on discontinued cash flow hedges to other income (expense), net— 10,658 (5,866)10,658 
Comprehensive income (loss)46,582 (36,188)59,439 (98,586)
Comprehensive (income) loss attributable to noncontrolling interests:
Noncontrolling interest in the Operating Partnership(125)268 (21)664 
Noncontrolling interest in consolidated joint ventures(111)506 7 1,242 
Comprehensive income (loss) attributable to RLJ$46,346 $(35,414)$59,425 $(96,680)
 
The accompanying notes are an integral part of these consolidated financial statements.

RLJ Lodging Trust
Consolidated Statements of Operations and Comprehensive Income
(Amounts in thousands, except share and per share data)
(unaudited)
3
 For the three months ended September 30, For the nine months ended September 30,
 2017 2016 2017 2016
Revenue       
Operating revenue       
Room revenue$292,046
 $260,659
 $770,751
 $777,211
Food and beverage revenue35,580
 26,001
 91,392
 82,602
Other revenue13,629
 9,599
 31,628
 28,729
Total revenue$341,255
 $296,259
 $893,771
 $888,542
Expense 
  
    
Operating expense 
  
    
Room expense$69,380
 $59,671
 $176,523
 $173,783
Food and beverage expense27,061
 19,135
 66,458
 59,477
Management and franchise fee expense29,571
 29,607
 86,110
 90,869
Other operating expense78,120
 62,162
 195,000
 184,133
Total property operating expense204,132
 170,575
 524,091
 508,262
Depreciation and amortization45,231
 40,953
 122,136
 122,532
Property tax, insurance and other23,618
 20,575
 60,929
 60,032
General and administrative9,506
 7,215
 28,757
 23,522
Transaction costs32,607
 98
 36,923
 257
Total operating expense315,094
 239,416
 772,836
 714,605
Operating income26,161
 56,843
 120,935
 173,937
Other income110
 112
 323
 86
Interest income1,157
 430
 2,306
 1,240
Interest expense(19,650) (14,552) (48,527) (44,233)
Gain on settlement of investment in loan2,670
 —
 2,670
 —
Income before equity in income from unconsolidated joint ventures10,448
 42,833
 77,707
 131,030
Equity in income from unconsolidated joint ventures57
 —
 57
 —
Income before income tax expense10,505
 42,833
 77,764
 131,030
Income tax expense(6,375) (1,439) (9,362) (5,397)
Income from operations4,130
 41,394
 68,402
 125,633
Loss on sale of hotel properties(19) (5) (49) (155)
Net income4,111
 41,389
 68,353
 125,478
Net (income) loss attributable to noncontrolling interests: 
  
    
Noncontrolling interest in consolidated joint ventures(32) (32) 5
 (7)
Noncontrolling interest in the Operating Partnership(43) (183) (318) (553)
Preferred distributions from a consolidated joint venture(122) —
 (122) —
Net income attributable to RLJ3,914
 41,174
 67,918
 124,918
Preferred dividends(2,093) —
 (2,093) —
Net income attributable to common shareholders$1,821
 $41,174
 $65,825
 $124,918
        
Basic per common share data:       
Net income per share attributable to common shareholders$0.01
 $0.33
 $0.50
 $1.00
Weighted-average number of common shares140,249,961
 123,621,323
 129,317,120
 123,635,010
        

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Diluted per common share data:       
Net income per share attributable to common shareholders$0.01
 $0.33
 $0.50
 $1.00
Weighted-average number of common shares140,307,269
 123,836,452
 129,399,177
 123,859,753
        
Dividends declared per common share$0.33
 $0.33
 $0.99
 $0.99
        
Comprehensive income:       
Net income$4,111
 $41,389
 $68,353
 $125,478
Unrealized gain (loss) on interest rate derivatives1,746
 9,470
 5,579
 (16,144)
Comprehensive income5,857
 50,859
 73,932
 109,334
Comprehensive (income) loss attributable to the noncontrolling interest in consolidated joint ventures(32) (32) 5
 (7)
Comprehensive income attributable to the noncontrolling interest in the Operating Partnership(43) (183) (318) (553)
Comprehensive income attributable to the preferred distributions from a consolidated joint venture(122) —
 (122) —
Comprehensive income attributable to RLJ$5,660
 $50,644
 $73,497
 $108,774


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

RLJ Lodging Trust
Consolidated Statements of Changes in Equity
(Amounts in thousands, except share data)
(unaudited)
 Shareholders’ EquityNoncontrolling Interest 
 Preferred StockCommon Stock   
 SharesAmountSharesPar 
Value		Additional
Paid-in Capital		Distributions in excess of net earningsAccumulated Other Comprehensive
(Loss) Income		Operating
Partnership		Consolidated
Joint 
Ventures		Total 
Equity
Balance at December 31, 202112,879,475 $366,936 166,503,062 $1,665 $3,092,883 $(1,046,739)$(17,113)$6,316 $9,919 $2,413,867 
Net income (loss)— — — — — 17,718 — 21 (7)17,732 
Unrealized gain on interest rate derivatives— — — — — — 47,573 — — 47,573 
Reclassification of unrealized gains on discontinued cash flow hedges to other income, net— — — — — — (5,866)— — (5,866)
Contributions from consolidated joint venture partners— — — — — — — — 156 156 
Distribution to consolidated joint venture partners— — — — — — — — (2,600)(2,600)
Issuance of restricted stock— — 702,993 7 (7)— — — — — 
Amortization of share-based compensation— — — — 11,462 — — — — 11,462 
Shares acquired to satisfy minimum required federal and state tax withholding on vesting restricted stock— — (260,187)(3)(3,586)— — — — (3,589)
Shares acquired as part of a share repurchase program— — (3,957,983)(39)(47,407)— — — — (47,446)
Forfeiture of restricted stock— — (6,065)— — — — — — — 
Distributions on preferred shares— — — — — (12,557)— — — (12,557)
Distributions on common shares and units— — — — — (3,148)— (12)— (3,160)
Balance at June 30, 202212,879,475 $366,936 162,981,820 $1,630 $3,053,345 $(1,044,726)$24,594 $6,325 $7,468 $2,415,572 
 
 Shareholders’ Equity Noncontrolling Interest    
 Preferred Stock Common Stock            
 Shares Amount Shares 
Par 
Value
 
Additional
Paid-in Capital
 Retained Earnings (Distributions in excess of net earnings) Accumulated Other Comprehensive
Income (Loss)		 Operating
Partnership		 
Consolidated
Joint 
Ventures
 Preferred Equity in a Consolidated Joint Venture 
Total 
Equity
Balance at December 31, 2016—
 $—
 124,364,178
 $1,244
 $2,187,333
 $38,249
 $(4,902) $7,380
 $5,973
 $—
 $2,235,277
Net income (loss)—
 —
 —
 —
 —
 67,918
 —
 318
 (5) 122
 68,353
Unrealized gain on interest rate derivatives—
 —
 —
 —
 —
 —
 5,579
 —
 —
 —
 5,579
Issuance of common shares—
 —
 50,358,104
 504
 1,015,723
 —
 —
 —
 —
 —
 1,016,227
Issuance of Operating Partnership units—
 —
 —
 —
 —
 —
 —
 4,342
 —
 —
 4,342
Issuance of Series A Cumulative Convertible Preferred Shares12,879,475
 366,936
 —
 —
 —
 —
 —
 —
 —
 —
 366,936
Noncontrolling interest recorded in connection with the Mergers—
 —
 —
 —
 —
 —
 —
 —
 5,157
 —
 5,157
Preferred equity in a consolidated joint venture—
 —
 —
 —
 —
 —
 —
 —
 —
 44,430
 44,430
Issuance of restricted stock—
 —
 425,076
 4
 (4) —
 —
 —
 —
 —
 —
Amortization of share-based compensation—
 —
 —
 —
 7,964
 —
 —
 —
 —
 —
 7,964
Shares acquired to satisfy minimum required federal and state tax withholding on vesting restricted stock—
 —
 (105,378) (2) (2,214) —
 —
 —
 —
 —
 (2,216)
Shares acquired as part of a share repurchase program    (122,508) (1) (2,609) —
 —
 —
 —
   (2,610)
Forfeiture of restricted stock—
 —
 (5,866) —
 —
 —
 —
 —
 —
 —
 —
Distributions on preferred shares—
 —
 —
 —
 —
 (2,093) —
 —
 —
 —
 (2,093)
Distributions on common shares and units—
 —
 —
 —
 —
 (129,400) —
 (577) —
 —
 (129,977)
Preferred distributions to consolidated joint venture—
 —
 —
 —
 —
 —
 —
 —
 —
 (122) (122)
Balance at September 30, 201712,879,475
 $366,936
 174,913,606
 $1,749
 $3,206,193
 $(25,326) $677
 $11,463
 $11,125
 $44,430
 $3,617,247

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



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RLJ Lodging Trust
Consolidated Statements of Changes in Equity
(Amounts in thousands, except share data)
(unaudited)

 Shareholders’ EquityNoncontrolling Interest 
 Preferred StockCommon Stock   
 SharesAmountSharesPar 
Value		Additional
Paid-in Capital		Distributions in excess of net earningsAccumulated Other Comprehensive
Income		Operating
Partnership		Consolidated
Joint 
Ventures		Total 
Equity
Balance at March 31, 202212,879,475 $366,936 166,843,586 $1,668 $3,097,166 $(1,069,769)$11,214 $6,209 $7,368 $2,420,792 
Net income— — — — — 32,966 — 125 111 33,202 
Unrealized gain on interest rate derivatives— — — — — — 13,380 — — 13,380 
Distribution to consolidated joint venture partners— — — — — — — — (11)(11)
Issuance of restricted stock— — 270,214 3 (3)— — — — — 
Amortization of share-based compensation— — — — 5,907 — — — — 5,907 
Shares acquired to satisfy minimum required federal and state tax withholding on vesting restricted stock— — (172,561)(2)(2,318)— — — — (2,320)
Shares acquired as part of a share repurchase program— — (3,957,983)(39)(47,407)— — — — (47,446)
Forfeiture of restricted stock— — (1,436)— — — — — — — 
Distributions on preferred shares— — — — — (6,279)— — — (6,279)
Distributions on common shares and units— — — — — (1,644)— (9)— (1,653)
Balance at June 30, 202212,879,475 $366,936 162,981,820 $1,630 $3,053,345 $(1,044,726)$24,594 $6,325 $7,468 $2,415,572 
 Shareholders’ Equity Noncontrolling Interest  
 Common Stock          
 Shares Par Value Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Operating
Partnership		 Consolidated
Joint Venture		 Total Equity
Balance at December 31, 2015124,635,675
 $1,246
 $2,195,732
 $2,439
 $(16,602) $11,532
 $6,177
 $2,200,524
Net income (loss)—
 —
 —
 124,918
 —
 553
 7
 125,478
Unrealized loss on interest rate derivatives—
 —
 —
 —
 (16,144) —
 —
 (16,144)
Distributions to joint venture partner—
 —
 —
 —
 —
 —
 (259) (259)
Redemption of Operating Partnership units335,250
 3
 4,322
 —
 —
 (4,325) —
 —
Issuance of restricted stock581,544
 6
 (6) —
 —
 —
 —
 —
Amortization of share-based compensation—
 —
 3,935
 —
 —
 —
 —
 3,935
Share grants to trustees2,554
 —
 57
 —
 —
 —
 —
 57
Shares acquired to satisfy minimum required federal and state tax withholding on vesting restricted stock(218,443) (2) (4,958) —
 —
 —
 —
 (4,960)
Shares acquired as part of a share repurchase program(610,607) (6) (13,265) —
 —
 —
 —
 (13,271)
Forfeiture of restricted stock(426,310) (4) 4
 —
 —
 —
 —
 —
Distributions on common shares and units—
 —
 —
 (123,417) —
 (552) —
 (123,969)
Balance at September 30, 2016124,299,663
 $1,243
 $2,185,821
 $3,940
 $(32,746) $7,208
 $5,925
 $2,171,391



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


5
Table of Contents
RLJ Lodging Trust
Consolidated Statements of Changes in Equity
(Amounts in thousands, except share data)
(unaudited)
 Shareholders’ EquityNoncontrolling Interest 
 Preferred StockCommon Stock   
 SharesAmountSharesPar 
Value		Additional 
Paid-in
Capital		Distributions in excess of net earningsAccumulated Other Comprehensive LossOperating
Partnership		Consolidated
Joint
Ventures		Total
Equity
Balance at December 31, 202012,879,475 $366,936 165,002,752 $1,650 $3,077,142 $(710,161)$(69,050)$7,869 $13,002 $2,687,388 
Net loss— — — — — (129,433)— (664)(1,242)(131,339)
Unrealized gain on interest rate derivatives— — — — — — 22,095 — — 22,095 
Reclassification of unrealized losses on discontinued cash flow hedges to other income (expense), net— — — — — — 10,658 — — 10,658 
Contributions from consolidated joint venture partners— — — — — — — — 589 589 
Issuance of restricted stock— — 1,759,193 17 (17)— — — — — 
Amortization of share-based compensation— — — — 8,124 — — — — 8,124 
Shares acquired to satisfy minimum required federal and state tax withholding on vesting restricted stock— — (133,767)(1)(2,074)— — — — (2,075)
Forfeiture of restricted stock— — (1,382)— — — — — — — 
Distributions on preferred shares— — — — — (12,557)— — — (12,557)
Distributions on common shares and units— — — — — (2,955)— (10)— (2,965)
Balance at June 30, 202112,879,475 $366,936 166,626,796 $1,666 $3,083,175 $(855,106)$(36,297)$7,195 $12,349 $2,579,918 

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

6
Table of Contents
RLJ Lodging Trust
Consolidated Statements of Changes in Equity
(Amounts in thousands, except share data)
(unaudited)
 Shareholders’ EquityNoncontrolling Interest 
 Preferred StockCommon Stock   
 SharesAmountSharesPar 
Value		Additional 
Paid-in
Capital		Distributions in excess of net earningsAccumulated Other Comprehensive LossOperating
Partnership		Consolidated
Joint
Ventures		Total
Equity
Balance at March 31, 202112,879,475 $366,936 164,918,126 $1,649 $3,078,824 $(795,706)$(52,330)$7,470 $12,365 $2,619,208 
Net loss— — — — — (51,447)— (268)(506)(52,221)
Unrealized gain on interest rate derivatives— — — — — — 5,375 — — 5,375 
Reclassification of unrealized losses on discontinued cash flow hedges to other income (expense), net— — — — — — 10,658 — — 10,658 
Contributions from consolidated joint venture partners— — — — — — — — 490 490 
Issuance of restricted stock— — 1,759,193 17 (17)— — — — — 
Amortization of share-based compensation— — — — 5,180 — — — — 5,180 
Shares acquired to satisfy minimum required federal and state tax withholding on vesting restricted stock— — (50,523)— (812)— — — — (812)
Distributions on preferred shares— — — — — (6,279)— — — (6,279)
Distributions on common shares and units— — — — — (1,674)— (7)— (1,681)
Balance at June 30, 202112,879,475 $366,936 166,626,796 $1,666 $3,083,175 $(855,106)$(36,297)$7,195 $12,349 $2,579,918 

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

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RLJ Lodging Trust
Consolidated Statements of Cash Flows
(Amounts in thousands)
(unaudited)
 For the nine months ended September 30,
 2017 2016
Cash flows from operating activities 
  
Net income$68,353
 $125,478
Adjustments to reconcile net income to cash flow provided by operating activities: 
  
Loss on sale of hotel properties49
 155
Gain on settlement of investment in loan
(2,670) —
Depreciation and amortization122,136
 122,532
Amortization of deferred financing costs2,597
 3,103
Other amortization(104) 563
Equity in income from unconsolidated joint ventures(57) —
Distributions of income from unconsolidated joint ventures750
 —
Accretion of interest income on investment in loan(664) (430)
Share grants to trustees—
 57
Amortization of share-based compensation7,964
 3,935
Deferred income taxes7,972
 4,217
Changes in assets and liabilities:   
Hotel and other receivables, net(16,493) (12,119)
Prepaid expense and other assets74
 (3,932)
Accounts payable and other liabilities28,411
 7,856
Advance deposits and deferred revenue(1,238) 666
Accrued interest(9,751) (1,677)
Net cash flow provided by operating activities207,329
 250,404
Cash flows from investing activities 
  
Acquisition of FelCor, net of cash acquired(41,921) —
Proceeds from the sale of hotel properties, net(49) 2,629
Improvements and additions to hotel properties(58,853) (58,881)
Additions to property and equipment(152) (211)
Proceeds from the settlement of an investment in loan12,792
 —
Distributions from unconsolidated joint ventures in excess of earnings—
 —
Decrease (increase) in restricted cash reserves, net5,901
 (9,913)
Net cash flow used in investing activities(82,282) (66,376)
Cash flows from financing activities 
  
Borrowings under Revolver—
 51,000
Repayments under Revolver—
 (51,000)
Proceeds from mortgage loans—
 11,000
Payments of mortgage loans principal(3,168) (2,760)
Repurchase of common shares under a share repurchase program(2,610) (13,271)
Repurchase of common shares to satisfy employee withholding requirements(2,216) (4,960)
Distributions on common shares(150,701) (123,345)
Distributions on Operating Partnership units(667) (654)
Payments of deferred financing costs(1,050) (5,344)
Preferred distributions - consolidated joint venture(126) —
Distributions to joint venture partners—
 (259)
Net cash flow used in financing activities(160,538) (139,593)
Net change in cash and cash equivalents(35,491) 44,435
Cash and cash equivalents, beginning of period456,672
 134,192
Cash and cash equivalents, end of period$421,181
 $178,627
 For the six months ended June 30,
 20222021
Cash flows from operating activities  
Net income (loss)$17,732 $(131,339)
Adjustments to reconcile net income (loss) to cash flow provided by (used in) operating activities:  
Gain on sale of hotel properties, net(1,053)(1,186)
Loss on extinguishment of indebtedness, net— 6,207 
Depreciation and amortization93,787 93,858 
Amortization of deferred financing costs3,101 2,685 
Other amortization1,136 (1,177)
Reclassification of unrealized (gains) losses on discontinued cash flow hedges to other income (expense), net(5,866)10,658 
Equity in (income) loss from unconsolidated joint ventures(405)238 
Impairment losses— 5,946 
Amortization of share-based compensation10,654 7,600 
Changes in assets and liabilities: 
Hotel and other receivables, net(10,018)(12,071)
Prepaid expense and other assets1,450 1,969 
Accounts payable and other liabilities7,680 2,058 
Advance deposits and deferred revenue(1,401)(9,399)
Accrued interest(493)(66)
Net cash flow provided by (used in) operating activities116,304 (24,019)
Cash flows from investing activities  
Proceeds from sales of hotel properties, net48,073 16,268 
Improvements and additions to hotel properties(51,406)(25,087)
Purchase deposits(1,500)(1,500)
Contributions to unconsolidated joint ventures— (331)
Net cash flow used in investing activities(4,833)(10,650)
Cash flows from financing activities  
Repayment of Revolver(200,000)(200,000)
Proceeds from issuance of $500.0 million senior notes due 2026— 500,000 
Scheduled mortgage loan principal payments— (1,488)
Repayments of Term Loans— (356,338)
Repayments of mortgage loans— (120,469)
Repurchase of common shares under a share repurchase program(47,446)— 
Repurchase of common shares to satisfy employee tax withholding requirements(3,589)(2,075)
Distributions on preferred shares(12,557)(12,557)
Distributions on common shares(3,522)(3,369)
Distributions on Operating Partnership units(10)(10)
Payments of deferred financing costs(10)(7,670)
Contributions from consolidated joint venture partners156 589 
Distribution to consolidated joint venture partners(2,600)— 
Net cash flow used in financing activities(269,578)(203,387)
Net change in cash, cash equivalents, and restricted cash reserves(158,107)(238,056)
Cash, cash equivalents, and restricted cash reserves, beginning of year713,869 934,790 
Cash, cash equivalents, and restricted cash reserves, end of period$555,762 $696,734 


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

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Table of Contents
RLJ Lodging Trust
Notes to the Consolidated Financial Statements
(unaudited)


1.General

Organization
 
RLJ Lodging Trust (the "Company") was formed as a Maryland real estate investment trust ("REIT") on January 31, 2011. The Company is a self-advised and self-administered REIT that acquiresowns primarily premium-branded, high-margin, focused-service and compact full-service hotels. The Company elected to be taxed as a REIT, for U.S. federal income tax purposes, commencing with its taxable year ended December 31, 2011.
 
Substantially all of the Company’s assets and liabilities are held by, and all of its operations are conducted through, RLJ Lodging Trust, L.P. (the "Operating Partnership"). The Company is the sole general partner of the Operating Partnership. As of SeptemberJune 30, 2017,2022, there were 175,687,508163,753,651 units of limited partnership interest in the Operating Partnership ("OP units") outstanding and the Company owned, through a combination of direct and indirect interests, 99.6%99.5% of the outstanding OP units.


As of SeptemberJune 30, 2017,2022, the Company owned 15996 hotel properties with approximately 31,35021,300 rooms, located in 2622 states and the District of Columbia.  The Company, through wholly-owned subsidiaries, owned a 100% interest in 15594 of its hotel properties, a 98.3% controlling interest in the DoubleTree Metropolitan Hotel New York City, a 95% controlling interest in The Knickerbocker,one hotel property, and a 50% interestsnon-controlling interest in entitiesan entity owning two1 hotel properties.property. The Company consolidates its real estate interests in the 15795 hotel properties in which it holds a controlling financial interest, and the Company records the real estate interestsinterest in the two hotelsone hotel property in which it holds an indirect 50% non-controlling interest using the equity method of accounting. The Company leases 15895 of the 15996 hotel properties to its taxable REIT subsidiaries ("TRS"), of which the Company owns a controlling financial interest.
 
2.Merger with FelCor Lodging Trust Incorporated
On August 31, 2017 (the "Acquisition Date"), the Company, the Operating Partnership, Rangers Sub I, LLC, a wholly owned subsidiary of the Operating Partnership ("Rangers"), and Rangers Sub II, LP, a wholly owned subsidiary of the Operating Partnership ("Partnership Merger Sub"), consummated the transactions contemplated by the definitive Agreement and Plan of Merger (the "Merger Agreement"), dated as of April 23, 2017, with FelCor Lodging Trust Incorporated ("FelCor") and FelCor Lodging Limited Partnership ("FelCor LP") pursuant to which Partnership Merger Sub merged with and into FelCor LP, with FelCor LP surviving as a wholly owned subsidiary of the Operating Partnership (the "Partnership Merger"), and, immediately thereafter, FelCor merged with and into Rangers, with Rangers surviving as a wholly owned subsidiary of the Operating Partnership (the "REIT Merger" and, together with the Partnership Merger, the "Mergers").

Upon completion of the REIT Merger and under the terms of the Merger Agreement, each issued and outstanding share of common stock, par value $0.01 per share, of FelCor (other than shares held by any wholly owned subsidiary of FelCor or by the Company or any of its subsidiaries) was converted into the right to receive 0.362 (the "Common Exchange Ratio") common shares of beneficial interest, par value $0.01 per share, of the Company (the "Common Shares"), and each issued and outstanding share of $1.95 Series A cumulative convertible preferred stock, par value $0.01 per share, of FelCor was converted into the right to receive one $1.95 Series A Cumulative Convertible Preferred Share, par value $0.01 per share, of the Company (a "Series A Preferred Share").

Upon completion of the Partnership Merger and under the terms of the Merger Agreement, each limited partner of FelCor LP was entitled to elect to exchange its outstanding common limited partnership units in FelCor LP (the "FelCor LP Common Units") for a number of newly issued Common Shares based on the Common Exchange Ratio. Upon completion of the Partnership Merger, each outstanding FelCor LP Common Unit of any holder who did not make the foregoing election was converted into the right to receive a number of common limited partnership units in the Operating Partnership (the "OP Units") based on the Common Exchange Ratio. No fractional shares of units of Common Shares or OP Units were issued in the Mergers, and the value of any fractional interests was paid in cash.


The Company accounted for the Mergers under the acquisition method of accounting in ASC 805, Business Combinations. As a result of the Mergers, the Company acquired an ownership interest in the following 37 hotel properties: 
Hotel Property Name Location Ownership Interest Management 
Company		 Rooms
DoubleTree Suites by Hilton Austin Austin, TX 100% Hilton 188
DoubleTree Suites by Hilton Orlando - Lake Buena Vista Orlando, FL 100% Hilton 229
Embassy Suites Atlanta - Buckhead Atlanta, GA 100% Hilton 316
Embassy Suites Birmingham Birmingham, AL 100% Hilton 242
Embassy Suites Boston Marlborough Marlborough, MA 100% Hilton 229
Embassy Suites Dallas - Love Field Dallas, TX 100% Aimbridge Hospitality 248
Embassy Suites Deerfield Beach - Resort & Spa Deerfield Beach, FL 100% Hilton 244
Embassy Suites Fort Lauderdale 17th Street Fort Lauderdale, FL 100% Hilton 361
Embassy Suites Los Angeles - International Airport South El Segundo, CA 100% Hilton 349
Embassy Suites Mandalay Beach - Hotel & Resort Oxnard, CA 100% Hilton 250
Embassy Suites Miami - International Airport Miami, FL 100% Hilton 318
Embassy Suites Milpitas Silicon Valley Milpitas, CA 100% Hilton 266
Embassy Suites Minneapolis - Airport Bloomington, MN 100% Hilton 310
Embassy Suites Myrtle Beach - Oceanfront Resort Myrtle Beach, SC 100% Hilton 255
Embassy Suites Napa Valley Napa, CA 100% Hilton 205
Embassy Suites Orlando - International Drive South/Convention Center Orlando, FL 100% Hilton 244
Embassy Suites Phoenix - Biltmore Phoenix, AZ 100% Hilton 232
Embassy Suites San Francisco Airport - South San Francisco San Francisco, CA 100% Hilton 312
Embassy Suites San Francisco Airport - Waterfront Burlingame, CA 100% Hilton 340
Embassy Suites Secaucus - Meadowlands (1) Secaucus, NJ 50% Hilton 261
Hilton Myrtle Beach Resort Myrtle Beach, SC 100% Hilton 385
Holiday Inn San Francisco - Fisherman's Wharf San Francisco, CA 100% InterContinental Hotels 585
San Francisco Marriott Union Square San Francisco, CA 100% Marriott Hotel Services 400
Sheraton Burlington Hotel & Conference Center Burlington, VT 100% Marriott Hotel Services 309
Sheraton Philadelphia Society Hill Hotel Philadelphia, PA 100% Marriott Hotel Services 364
The Fairmont Copley Plaza Boston, MA 100% FRHI Hotels & Resorts 383
The Knickerbocker New York New York, NY 95% Highgate Hotels 330
The Mills House Wyndham Grand Hotel Charleston, SC 100% Wyndham 216
The Vinoy Renaissance St. Petersburg Resort & Golf Club St. Petersburg, FL 100% Marriott Hotel Services 361
Wyndham Boston Beacon Hill Boston, MA 100% Wyndham 304
Wyndham Houston - Medical Center Hotel & Suites Houston, TX 100% Wyndham 287
Wyndham New Orleans - French Quarter New Orleans, LA 100% Wyndham 374
Wyndham Philadelphia Historic District Philadelphia, PA 100% Wyndham 364
Wyndham Pittsburgh University Center Pittsburgh, PA 100% Wyndham 251
Wyndham San Diego Bayside San Diego, CA 100% Wyndham 600
Wyndham Santa Monica At The Pier Santa Monica, CA 100% Wyndham 132
Chateau LeMoyne - French Quarter, New Orleans (2) New Orleans, LA 50% InterContinental Hotels 171
        11,215

(1)The Company owns an indirect 50% ownership interest in the real estate at this hotel property and records the real estate interests using the equity method of accounting. The Company leases the hotel property to its TRS, of which the Company owns a controlling financial interest in the operating lessee, so the Company consolidates its ownership interest in the leased hotel.
(2)The Company owns an indirect 50% ownership interest in this hotel property and accounts for its ownership interest using the equity method of accounting. This hotel property is operated without a lease.



The total consideration for the Mergers was approximately $1.4 billion, which included the Company issuing approximately 50.4 million common shares at $20.18 per share, to FelCor common stockholders, approximately 12.9 million Series A Preferred Shares at $28.49 per share, to former FelCor preferred stockholders, approximately 0.2 million OP Units at $20.18 per unit, to former FelCor LP limited partners, and cash. The total consideration consisted of the following (in thousands):
  Total Consideration
Common Shares $1,016,227
Series A Preferred Shares 366,936
OP Units 4,342
Cash, net of cash acquired 41,921
Total consideration $1,429,426

The Company allocated the purchase price consideration as follows (in thousands):
  August 31, 2017
Investment in hotel properties $2,673,629
Investment in unconsolidated joint ventures 25,651
Restricted cash reserves 17,038
Hotel and other receivables 28,308
Deferred income tax asset 32,000
Intangible assets 151,706
Prepaid expenses and other assets 22,525
Debt (1,305,337)
Accounts payable and other liabilities (115,788)
Advance deposits and deferred revenue (23,795)
Accrued interest (22,612)
Distributions payable (4,312)
Noncontrolling interest in consolidated joint ventures (5,157)
Preferred equity in a consolidated joint venture (44,430)
Total consideration $1,429,426

The estimated fair values for the assets acquired and the liabilities assumed are preliminary and are subject to change during the measurement period as additional information related to the inputs and assumptions used in determining the fair value of the assets and liabilities becomes available. Subsequent adjustments to the preliminary purchase price allocation are not expected to have a material impact to the Company's consolidated financial statements.

The Company used the following valuation methodologies, inputs, and assumptions to estimate the fair value of the assets acquired, the liabilities assumed, and the equity interests acquired:
Investment in hotel properties — The Company estimated the fair values of the land and improvements, buildings and improvements, and furniture, fixtures, and equipment at the hotel properties by using a combination of the market, cost, and income approaches. These valuation methodologies are based on significant Level 2 and Level 3 inputs in the fair value hierarchy, such as estimates of future income growth, capitalization rates, discount rates, capital expenditures, and cash flow projections at the respective hotel properties.
Investment in unconsolidated joint ventures — The Company estimated the fair value of its real estate interests in the unconsolidated joint ventures by using the same valuation methodologies for the investment in hotel properties noted above. The Company recognized the net assets acquired based on its respective ownership interest in the joint venture according to the joint venture agreement.

Deferred income tax asset — The Company estimated the fair value of the deferred income tax asset by estimating the amount of the net operating loss that will be utilized in future periods by the acquired taxable REIT subsidiaries. The Company then applied its applicable effective tax rate against the net operating losses to determine the appropriate

deferred tax asset to recognize. This valuation methodology is based on Level 2 and Level 3 inputs in the fair value hierarchy.

Intangible assets — The Company estimated the fair value of its below market lease intangible assets by calculating the present value of the difference between the contractual rental amounts paid according to the in-place lease agreements and the market rental rates for similar leased space, measured over a period equal to the remaining non-cancelable term of the lease. This valuation methodology is based on Level 2 and Level 3 inputs in the fair value hierarchy. The below market lease intangible assets are amortized as adjustments to rental expense over the remaining terms of the respective leases. The Company estimated the fair value of the advanced bookings intangible asset by using the income approach to determine the projected cash flows that a hotel property will receive as a result of future hotel room and guests events that have already been reserved and pre-booked at the hotel property as of the Acquisition Date. This valuation methodology is based on Level 3 inputs in the fair value hierarchy. The advanced bookings intangible asset is amortized to depreciation and amortization over the duration of the hotel room and guest event reservations period at the hotel property. The Company recognized the following intangible assets in the Mergers (dollars in thousands):
    
Weighted Average Amortization Period
(in Years)
Below market ground leases $128,181
 53
Advanced bookings 15,146
 1
Other intangible assets 8,379
 6
Total intangible assets $151,706
 45

Above market lease liabilities — The Company estimated the fair value of its above market lease liabilities by calculating the present value of the difference between the contractual rental amounts paid according to the in-place lease agreements and the market rental rates for similar leased space, measured over a period equal to the remaining non-cancelable term of the lease. This valuation methodology is based on Level 2 and Level 3 inputs in the fair value hierarchy. The Company recognized approximately $14.6 million of above market lease liabilities in the Mergers, which are included in accounts payable and other liabilities in the accompanying consolidated balance sheet. The above market lease liabilities are amortized as adjustments to rental expense over the remaining terms of the respective leases.

Debt — The Company estimated the fair value of the Senior Notes by using publicly available trading prices, market interest rates, and spreads for the Senior Notes, which are Level 2 and Level 3 inputs in the fair value hierarchy. The Company estimated the fair value of the mortgage loans using a discounted cash flow model and incorporated various inputs and assumptions for the effective borrowing rates for debt with similar terms and the loan to estimated fair value of the collateral, which are Level 3 inputs in the fair value hierarchy.

Noncontrolling interest in consolidated joint ventures — The Company estimated the fair value of the consolidated joint ventures by using the same valuation methodologies for the investment in hotel properties noted above. The Company then recognized the fair value of the noncontrolling interest in the consolidated joint ventures based on the joint venture partner's ownership interest in the consolidated joint venture. This valuation methodology is based on Level 2 and Level 3 inputs and assumptions in the fair value hierarchy.

Preferred equity in a consolidated joint venture — The Company estimated the fair value of the preferred equity in a consolidated joint venture by comparing the contractual terms of the preferred equity agreement to market-based terms of a similar preferred equity agreement, which is based on Level 3 inputs in the fair value hierarchy.

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


For the hotel properties acquired during the nine months ended September 30, 2017, the total revenues and net income from the date of acquisition through September 30, 2017 are included in the accompanying consolidated statements of operations as follows (in thousands):
 
For the one
month ended
September 30, 2017
Revenue$66,457
Net income$6,768
Other than the acquisition of FelCor, there were no other acquisitions of hotel properties during the nine months ended September 30, 2017.

The following table presents the costs that were incurred in connection with the Mergers (in thousands):
 For the three months ended September 30, 2017 
For the nine
month ended
September 30, 2017
Transaction costs$30,270
 $34,517
Integration costs2,193
 2,193
 $32,463
 $36,710

The transaction costs primarily related to transfer taxes and financial advisory, legal, and other professional service fees in connection with the Mergers. The integration costs primarily related to professional fees and employee-related costs, including compensation for transition employees. The merger-related costs noted above were expensed to transaction costs in the consolidated statements of operations.

The following unaudited condensed pro forma financial information presents the results of operations as if the Mergers had taken place on January 1, 2016.  The unaudited condensed pro forma financial information is not necessarily indicative of what the actual results of operations of the Company would have been assuming the Mergers had taken place on January 1, 2016, nor is it indicative of the results of operations for future periods.  The unaudited condensed pro forma financial information is as follows (in thousands):
 For the three months ended September 30, For the nine months ended September 30,
 2017 2016 2017 2016
 (unaudited)
Revenue$482,839
 $511,860
 $1,431,409
 $1,538,257
Net income attributable to common shareholders$37,820
 $57,379
 $114,710
 $154,282
Net income per share attributable to common shareholders - basic$0.22
 $0.33
 $0.66
 $0.89
Net income per share attributable to common shareholders - diluted$0.22
 $0.33
 $0.66
 $0.89
Weighted-average number of shares outstanding - basic174,186,944
 173,979,427
 174,141,367
 173,993,114
Weighted-average number of shares outstanding - diluted174,244,252
 174,194,556
 174,223,424
 174,217,857

3.Summary of Significant Accounting Policies
 
The Company's Annual Report on Form 10-K for the year ended December 31, 20162021, filed with the Securities and Exchange Commission ("SEC") on February 24, 2022 (the "Annual Report"), contains a discussion of the Company's significant accounting policies. Other than noted below, there have been no other significant changes to the Company's significant accounting policies since December 31, 2016.2021.


Basis of Presentation and Principles of Consolidation
 
The unaudited consolidated financial statements and related notes have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ("GAAP") and in conformity with the rules and regulations of the Securities and Exchange Commission ("SEC")SEC applicable to financial information. The unaudited financial statements include all adjustments of a normal recurring nature that are necessary, in the opinion of management, to fairly state the

consolidated balance sheets, statements of operations and comprehensive income (loss), statements of changes in equity and statements of cash flows.


The unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto as of and for the year ended December 31, 2016,2021, included in the Company's Annual Report on Form 10-K filed with the SEC on February 23, 2017.Report.


The consolidated financial statements include the accounts of the Company, the Operating Partnership and its wholly-owned subsidiaries, and joint ventures in which the Company has a majority voting interest and control. For the controlled subsidiaries that are not wholly-owned, the third-party ownership interest represents a noncontrolling interest, which is presented separately in the consolidated financial statements. The Company also records the real estate interestsinterest in two joint ventures1 hotel property in which it holds an indirecta 50% non-controlling interest using the equity method of accounting. All intercompany balances and transactions have been eliminated in consolidation.

Reclassifications
 
Certain prior year amounts in these financial statements have been reclassified to conform to the current year presentation with no impact to net income (loss) and comprehensive income (loss), shareholders’ equity or cash flows.




9
Table of Contents
Use of Estimates
 
The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and the amounts of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Investment in Unconsolidated Joint Ventures

If the Company determines that it does not have a controlling financial interest in a joint venture, either through a controlling financial interest in a variable interest entity or through the Company's voting interest in a voting interest entity, but the Company exercises significant influence over the operating and financial policies of the joint venture, the Company accounts for the joint venture using the equity method of accounting. Under the equity method of accounting, the Company's investment is adjusted each reporting period to recognize the Company's share of the net earnings or losses of the joint venture.

The Company periodically reviews the carrying value of its investment in unconsolidated joint ventures to determine if any circumstances may indicate that the carrying value of the investment exceeds its fair value on an other-than-temporary basis. When an impairment indicator is present, the Company will estimate the fair value of the investment, which will be determined by using internally developed discounted cash flow models, third-party appraisals, or if appropriate, the net sales proceeds from pending offers. If the estimated fair value is less than the carrying value, and management determines that the decline in value is considered to be other-than-temporary, the Company will recognize an impairment loss on its investment in the joint venture.


Recently Issued Accounting Pronouncements
 
In May 2014,March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers, which supersedes or replaces nearly all GAAP revenue recognition guidance. The new guidance establishes a new control-based revenue recognition model that changes the basis for deciding when revenue is recognized over time or at a point in time and expands the disclosures about revenue. The new guidance also applies to sales of real estate and the new principles-based approach is largely based on the transfer of control2020-04, Reference Rate Reform (Topic 848):Facilitation of the real estate to the buyer.Effects of Reference Rate Reform on Financial Reporting. The guidance isprovides optional expedients for applying GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate that was discontinued at the end of 2021 because of reference rate reform. The guidance was effective for annual reporting periods beginning afterupon issuance and expires on December 15, 2017, and the interim periods within those annual periods, with early adoption permitted. The Company expects to adopt this new standard on January 1, 2018 using the modified retrospective transition method.31, 2022. Based on the Company's assessment, the adoption of this standard will not have athere was no material impact on the Company's consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The newarising from this guidance will require lessees to recognize a right-of-use asset and a lease liability for most of their leases on the balance sheet, and an entity will need to classify its leases as either an operating or finance lease in order to determine the income statement presentation. Leases with a term of 12 months or less will be accounted for similar to the existing guidance today for operating leases. Lessors will classify their leases using an approach that is substantially equivalent to the existing guidance today for operating, direct financing, or sales-type leases. Lessors may only capitalize the incremental direct costs of leasing, so any indirect costs of leasing will be

expensed as incurred. The new guidance requires an entity to separate the lease components from the non-lease components in a contract, with the lease components being accounted for in accordance with ASC 842 and the non-lease components being accounted for in accordance with other applicable accounting guidance. The guidance is effective for annual reporting periods beginning after December 15, 2018, and the interim periods within those annual periods, with early adoption permitted. The Company expects to adopt this new standard on January 1, 2019. The Company has not yet completed its analysis on this new standard, but it believes the applicationelected to apply any of the new standard will result in the recording of a right-of-use asset and a lease liability on the consolidated balance sheet for each of its ground leases and equipment leases, which represent the majority of the Company's current operating lease payments. The Company does not expect the adoption of this standard will materially affect its consolidated statements of operations.optional expedients.


In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. This new guidance is intended to reduce the diversity in practice in how certain transactions are classified in the statement of cash flows. In addition, in November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash. This new guidance provides additional guidance related to transfers between cash and restricted cash and how entities present, in their statement of cash flows, the cash receipts and cash payments that directly affect the restricted cash accounts. Both of these ASUs will be effective for the annual reporting periods beginning after December 15, 2017, and the interim periods within those annual periods. Early adoption is permitted, provided that all of the amendments are adopted in the same period, and the guidance requires application using a retrospective transition method. The Company expects to adopt the new guidance on January 1, 2018. The adoption of ASU 2016-15 and ASU 2016-18 will modify the Company's current disclosures and classifications within the consolidated statement of cash flows, but such modifications are not expected to have a material impact on the Company's consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The new guidance clarifies the definition of a business with the objective of adding guidance to assist companies and other reporting organizations with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The changes to the definition of a business will likely result in more acquisitions being accounted for as asset acquisitions across all industries. The guidance is effective for annual reporting periods beginning after December 15, 2017, and the interim periods within those annual periods. The Company expects to adopt this new guidance on January 1, 2018. Based on the Company's assessment, the Company will evaluate each future acquisition (or disposal) to determine whether it will be considered to be an acquisition (or disposal) of assets or a business. The Company does not believe the accounting for each future acquisition (or disposal) of assets or a business will be materially different, therefore, the adoption of this guidance will not have a material impact on the Company's consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. The new guidance clarifies that ASC 610-20 applies to the derecognition of nonfinancial assets, including real estate, and in substance nonfinancial assets, which are defined as assets or a group of assets for which substantially all of the fair value consists of nonfinancial assets and the group or subsidiary is not a business. As a result of the new guidance, sales and partial sales of real estate assets will be accounted for similar to all other sales of nonfinancial and in substance nonfinancial assets. The guidance is effective for annual reporting periods beginning after December 15, 2017, and the interim periods within those annual periods, with early adoption permitted. The Company expects to adopt this new guidance on January 1, 2018. Based on the Company's assessment, the adoption of this guidance will not have a material impact on the Company's consolidated financial statements.

4.3.Investment in Hotel Properties
 
Investment in hotel properties consisted of the following (in thousands):
September 30, 2017 December 31, 2016June 30, 2022December 31, 2021
Land and improvements$1,306,524
 $675,889
Land and improvements$970,821 $975,688 
Buildings and improvements5,004,884
 3,050,043
Buildings and improvements3,959,957 4,001,875 
Furniture, fixtures and equipment736,135
 595,816
Furniture, fixtures and equipment704,311 691,057 
7,047,543
 4,321,748
5,635,089 5,668,620 
Accumulated depreciation(1,070,019) (953,972)Accumulated depreciation(1,507,799)(1,449,504)
Investment in hotel properties, net$5,977,524
 $3,367,776
Investment in hotel properties, net$4,127,290 $4,219,116 
 
For the three and ninesix months ended SeptemberJune 30, 2017,2022, the Company recognized depreciation and amortization expense related to its investment in hotel properties of approximately $44.1$46.8 million and $120.8$93.5 million, respectively. For the three and

nine six months ended SeptemberJune 30, 2016,2021 the Company recognized depreciation and amortization expense related to its investment in hotel properties of approximately $40.9$46.8 million and $122.3$93.6 million, respectively.

ImpairmentImpairments

The Company determined that there was no impairment of any assets for eitherDuring the three and ninesix months ended SeptemberJune 30, 2017 or 2016.

5.Investment in Unconsolidated Joint Ventures

As of September 30, 2017,2021, the Company owned 50% interests in joint ventures that ownedentered into purchase and sale agreements to sell two hotel properties. The Company also owned 50% interests in joint ventures that owned real estaterecorded impairment losses of $5.9 million to adjust the hotels' carrying amounts to their estimated fair values during the three months ended March 31, 2021. The fair values were determined based on the contractual sales price pursuant to an executed purchase and a condominium management business that are associated with two of our resort hotel properties. The Company accounts for the investments in these unconsolidated joint ventures under the equity method of accounting. The Company makes adjustments to the equity in income from unconsolidated joint ventures related to the difference between the Company's basissale agreement (a Level 2 measurement in the investmentfair value hierarchy). The sales of these hotel properties closed in May 2021. There was no impairment recorded during the unconsolidated joint ventures as compared to the historical basis of the assets and liabilities of the joint ventures. As of Septembersix months ended June 30, 2017, the unconsolidated joint ventures' debt consisted entirely of non-recourse mortgage debt.2022.


The following table summarizes the components of the Company's investments in unconsolidated joint ventures (in thousands):
 September 30, 2017
Equity basis of the joint venture investments$930
Cost of the joint venture investments in excess of the joint venture book value24,029
Investment in unconsolidated joint ventures$24,959

The following table summarizes the components of the Company's equity in income from unconsolidated joint ventures (in thousands):
 For the one month ended September 30,
 2017
Unconsolidated joint venture net income attributable to the Company$150
Depreciation of cost in excess of book value(93)
Equity in income from unconsolidated joint ventures$57

6.4.Sale of Hotel Properties

DuringIn connection with the ninesale of hotel properties for the six months ended SeptemberJune 30, 2017, the Company did not sell any hotel properties.

During the nine months ended September 30, 2016, the Company sold one hotel property for a sale price of approximately $2.9 million. In conjunction with this transaction,2022 and 2021, the Company recorded a $0.2net gain of $1.1 million loss on sale which is included inand $1.2 million, respectively.

During the accompanying consolidated statement of operations.

The following table discloses the hotel property that was sold during the ninesix months ended SeptemberJune 30, 2016:2022, the Company sold the following hotel properties in 2 separate transactions for combined sales prices of approximately $49.9 million:

Hotel Property NameLocationSale DateRooms
Holiday Inn Express MerrillvilleMarriott Denver Airport @ Gateway ParkMerrillville, INAurora, COFebruary 22, 2016March 8, 202262238 
SpringHill Suites Denver North WestminsterWestminster, COTotalApril 19, 202262164 
Total402 


Investment in Loan
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In November 2009,During the six months ended June 30, 2021, the Company purchasedsold the following hotel properties in 3 separate transactions for a mortgage loan that was collateralized by one hotel property. combined sales price of approximately $17.7 million:
Hotel Property NameLocationSale DateRooms
Courtyard Houston SugarlandStafford, TXJanuary 21, 2021112 
Residence Inn Indianapolis FishersIndianapolis, INMay 10, 202178 
Residence Inn Chicago NapervilleWarrenville, ILMay 12, 2021130 
Total320 

5.Revenue

The loan matured on September 6, 2017. At the date of maturity, the Company's investment in loan receivable balance was $10.1 million and the Company received $12.8 million in net proceedsrecognized revenue from the debtor. Accordingly, the Company recognized a gain on settlementfollowing geographic markets (in thousands):

For the three months ended June 30, 2022For the three months ended June 30, 2021
Room RevenueFood and Beverage RevenueOther RevenueTotal RevenueRoom RevenueFood and Beverage RevenueOther RevenueTotal Revenue
Northern California$36,589 $2,773 $1,698 $41,060 $14,563 $428 $1,043 $16,034 
South Florida29,537 4,953 2,270 36,760 28,175 3,483 2,177 33,835 
Southern California31,101 2,161 2,615 35,877 22,560 1,384 2,524 26,468 
New York City16,134 2,855 701 19,690 6,622 266 273 7,161 
Chicago15,104 2,343 737 18,184 12,131 1,681 573 14,385 
Washington, DC15,171 364 661 16,196 5,944 60 476 6,480 
Louisville10,929 3,166 876 14,971 3,551 942 667 5,160 
Boston13,000 1,051 389 14,440 2,863 91 55 3,009 
Austin11,119 873 810 12,802 5,952 317 709 6,978 
Atlanta10,275 666 992 11,933 4,501 83 605 5,189 
Houston10,029 792 1,032 11,853 7,248 167 769 8,184 
New Orleans10,638 262 742 11,642 4,657 29 658 5,344 
Pittsburgh8,351 2,291 400 11,042 5,440 706 204 6,350 
Denver8,405 1,894 359 10,658 5,519 899 227 6,645 
Charleston8,452 1,435 396 10,283 8,520 1,161 541 10,222 
Other45,842 3,275 3,993 53,110 28,308 1,286 3,216 32,810 
Total$280,676 $31,154 $18,671 $330,501 $166,554 $12,983 $14,717 $194,254 

11
Table of investment in loan of approximately $2.7 million.Contents

For the six months ended June 30, 2022For the six months ended June 30, 2021
Room RevenueFood and Beverage RevenueOther RevenueTotal RevenueRoom RevenueFood and Beverage RevenueOther RevenueTotal Revenue
South Florida$66,948 $9,692 $4,493 $81,133 $49,003 $5,848 $3,933 $58,784 
Northern California56,797 4,386 2,735 63,918 23,407 645 1,743 25,795 
Southern California54,692 3,822 4,772 63,286 34,465 1,722 3,931 40,118 
Chicago24,064 3,966 1,197 29,227 18,522 2,365 931 21,818 
New York City23,796 3,644 1,174 28,614 9,860 283 402 10,545 
Washington DC23,496 481 1,251 25,228 10,079 89 760 10,928 
Louisville15,773 5,159 1,755 22,687 5,332 1,310 1,022 7,664 
Austin19,501 1,544 1,550 22,595 9,559 539 1,188 11,286 
Houston18,557 1,361 1,899 21,817 12,571 265 1,437 14,273 
Atlanta17,960 1,052 1,816 20,828 7,649 151 1,098 8,898 
New Orleans18,494 425 1,439 20,358 7,007 29 1,041 8,077 
Boston17,671 1,547 621 19,839 4,654 111 105 4,870 
Denver14,957 3,621 679 19,257 7,720 1,297 557 9,574 
Charleston15,190 2,631 899 18,720 11,698 1,461 942 14,101 
Pittsburgh12,481 3,198 721 16,400 10,070 943 374 11,387 
Other86,078 5,526 7,889 99,493 47,730 2,167 5,791 55,688 
Total$486,455 $52,055 $34,890 $573,400 $269,326 $19,225 $25,255 $313,806 


7.
6.Debt
 
The Company's debt consisted of the following (in thousands):
June 30, 2022December 31, 2021
Senior Notes, net$988,125 $986,942 
Revolver— 200,000 
Term Loans, net815,877 815,004 
Mortgage loans, net407,733 407,492 
Debt, net$2,211,735 $2,409,438 
 September 30, 2017 December 31, 2016
Senior Notes$1,066,275
 $—
Revolver and Term Loans, net1,170,540
 1,169,308
Mortgage loans, net648,924
 413,407
Debt, net$2,885,739
 $1,582,715


Senior Notes


TheAs of June 30, 2022 and December 31, 2021, respectively, the Company's senior secured notes and the senior unsecured notes are collectivelySenior Notes (collectively, the "Senior Notes". The Company's Senior Notes) consisted of the following (in(dollars in thousands):
Carrying Value at
Interest RateMaturity DateJune 30, 2022December 31, 2021
Senior Notes due 20294.00%September 2029$500,000 $500,000 
Senior Notes due 20263.75%July 2026500,000 500,000 
1,000,000 1,000,000 
Deferred financing costs, net(11,875)(13,058)
Total senior notes, net$988,125 $986,942 
The indentures governing the Senior Notes contain customary covenants that will limit the Operating Partnership’s ability and, in certain instances, the ability of its subsidiaries, to incur additional debt, create liens on assets, make distributions and pay dividends, make certain types of investments, issue guarantees of indebtedness, and make certain restricted payments. These limitations are subject to a number of exceptions and qualifications set forth in the indentures.

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        Outstanding Borrowings at
  Number of Assets Encumbered Interest Rate Maturity Date September 30, 2017 December 31, 2016
Senior secured notes (1) (2) (3) 9 5.63% March 2023 $555,046
 $—
Senior unsecured notes (1) (2) (4) — 6.00% June 2025 511,229
 —
Total Senior Notes       $1,066,275
 $—
A summary of the various restrictive covenants for the Senior Notes are as follows:

(1)Requires payments of interest only through maturity.CovenantCompliance
Maintenance Covenant
(2)Unencumbered Asset to Unencumbered Debt RatioIncludes $30.0 million and $36.2 million at September 30, 2017 related to fair value adjustments on the senior secured notes and the senior unsecured notes, respectively, that were assumed in the Mergers.> 150.0%Yes
Incurrence Covenants
(3)Consolidated Indebtedness less than Adjusted Total AssetsThe Company has the option to redeem the senior secured notes beginning March 1, 2018 at a premium of 102.8%.
< .65xYes
(4)Consolidated Secured Indebtedness less than Adjusted Total AssetsThe Company has the option to redeem the senior unsecured notes beginning June 1, 2020 at a premium of 103.0%.< .45xYes
Interest Coverage Ratio> 1.5xYes

The Senior Notes are subject to customary financial covenants.
As of SeptemberJune 30, 2017,2022 and December 31, 2021, the Company was in compliance with all financial covenants.covenants associated with the Senior Notes.


Revolver and Term Loans
 
The Company has the following unsecured credit agreements in place:


•$600.0 million revolving credit facility with a scheduled maturity date of April 22, 2020 withMay 18, 2024 and a one-yearone year extension option if certain conditions are satisfied (the "Revolver");
•$400.0 million term loan with a scheduled maturity date (excluding the available extension option) of January 25, 2023 (the "$400 Million Term Loan Maturing 2023");
•$225.0 million term loan with a scheduled maturity date (excluding the available extension option) of January 25, 2023 (the "$225 Million Term Loan Maturing 2023");
•$150.0 million term loan with a scheduled maturity date (excluding the available extension option) of June 10, 2023 (the "$150 Million Term Loan Maturing 2023"); and
•$400.0 million term loan with a scheduled maturity date of March 20, 2019May 18, 2025 (the "$400 Million Term Loan Maturing 2019"2025");.
$225.0 million term loan with a scheduled maturity date of November 20, 2019 (the "$225 Million Term Loan Maturing 2019");
$400.0 million term loan with a scheduled maturity date of April 22, 2021 (the "$400 Million Term Loan Maturing 2021"); and
$150.0 million term loan with a scheduled maturity date of January 22, 2022 (the "$150 Million Term Loan Maturing 2022").

The $400 Million Term Loan Maturing 2019,2023, the $225 Million Term Loan Maturing 2019,2023, the $150 Million Term Loan Maturing 2023, and the $400 Million Term Loan Maturing 2021, and the $150 Million Term Loan Maturing 20222025 are collectively the "Term Loans". Loans."

The Company's credit agreements consisted of the following (dollars in thousands):
Carrying Value at
Interest Rate at June 30, 2022 (1)Maturity DateJune 30, 2022December 31, 2021
Revolver (2)4.29%May 2024$— $200,000 
$400 Million Term Loan Maturing 20234.69%January 2023 (4)203,944 203,944 
$225 Million Term Loan Maturing 20234.27%January 2023 (5)114,718 114,718 
$150 Million Term Loan Maturing 20234.18%June 2023 (6)100,000 100,000 
$400 Million Term Loan Maturing 20254.00%May 2025400,000 400,000 
818,662 1,018,662 
Deferred financing costs, net (3)(2,785)(3,658)
Total Revolver and Term Loans, net$815,877 $1,015,004 
(1)Interest rate at June 30, 2022 gives effect to interest rate hedges.
(2)At June 30, 2022 and December 31, 2021, there was $600.0 million and$400.0 million of remaining capacity on the Revolver, respectively. The Company also has the ability to extend the maturity date for an additional one year period ending May 2025 if certain conditions are satisfied.
(3)Excludes $2.3 million and $2.9 million as of June 30, 2022 and December 31, 2021, respectively, related to deferred financing costs on the Revolver, which are included in prepaid expense and other assets in the accompanying consolidated balance sheets.
(4)This term loan includes a one-year extension option for approximately $151.7 million of the principal balance. The exercise of the one-year extension option will be at the Company's discretion, subject to certain conditions.
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(5)This term loan includes a one-year extension option for approximately $73.0 million of the principal balance. The exercise of the one-year extension option will be at the Company's discretion, subject to certain conditions.
(6)The Company has the option to extend the maturity one additional year to June 2024.

The Revolver and Term Loans are subject to customaryvarious financial covenants. As of September 30, 2017 and December 31, 2016, the Company was in compliance with all financial covenants.

The Company's unsecured credit agreements consistedA summary of the following (in thousands):most restrictive covenants is as follows:
      Outstanding Borrowings at
  Interest Rate at September 30, 2017 (1) Maturity Date September 30, 2017 December 31, 2016
Revolver (2) 2.73% April 2020 $—
 $—
$400 Million Term Loan Maturing 2019 2.72% March 2019 400,000
 400,000
$225 Million Term Loan Maturing 2019 4.04% November 2019 225,000
 225,000
$400 Million Term Loan Maturing 2021 3.00% April 2021 400,000
 400,000
$150 Million Term Loan Maturing 2022 3.43% January 2022 150,000
 150,000
      1,175,000
 1,175,000
Deferred financing costs, net (3)     (4,460) (5,692)
Total Revolver and Term Loans, net     $1,170,540
 $1,169,308
(1)Interest rate at September 30, 2017 gives effect to interest rate hedges.
Original CovenantModified Covenant (3)Compliance
(2)Leverage ratio (1)At September 30, 2017 and December 31, 2016, there was $600.0 million and $400.0 million, respectively, of borrowing capacity on the Revolver. On August 31, 2017, the Company amended the Revolver to increase the borrowing capacity from $400.0 million to $600.0 million. The Company has the ability to further increase the borrowing capacity to $750.0 million, subject to certain lender requirements.
<= 7.00x<= 8.50xYes
(3)Fixed charge coverage ratio (2)Excludes $2.7>= 1.50x>= 1.50xYes
Secured indebtedness ratio<= 45.0%<= 45.0%Yes
Unencumbered indebtedness ratio<= 60.0%<= 65.0%Yes
Unencumbered debt service coverage ratio>= 2.00x>= 1.50xYes
Maintain minimum liquidity levelN/A>= $225.0 million and $2.3 million as of September 30, 2017 and December 31, 2016, respectively, related to deferred financing costs on the Revolver, which are included in prepaid expense and other assets in the accompanying consolidated balance sheets.Yes


(1)Leverage ratio is net indebtedness, as defined in the Revolver and Term Loan agreements, to corporate earnings before interest, taxes, depreciation, and amortization ("EBITDA"), as defined in the Revolver and Term Loan agreements.
(2)Fixed charge coverage ratio is Adjusted EBITDA, generally defined in the Revolver and Term Loan agreements as EBITDA less furniture, fixtures and equipment ("FF&E") reserves, to fixed charges, which is generally defined in the Revolver and Term Loan agreements as interest expense, all regularly scheduled principal payments, preferred dividends paid, and cash taxes paid.
(3)During the year ended December 31, 2021, the Company amended its Revolver and Term Loans. The amendments suspended the testing of all existing financial maintenance covenants for all periods through and including the quarter ending March 31, 2022 (the “Covenant Relief Period”). During the quarter ended June 30, 2022, the Company exited the Covenant Relief Period. In addition, for periods following the Covenant Relief Period, the amendments modified certain covenant thresholds, including the leverage ratio, through the fifth quarter following the Covenant Relief Period (the "Leverage Relief Period").

In April 2022, the Company also amended the Revolver and Term Loans to allow for repurchases of the Company's shares up to $50.0 million with either cash on hand, cash from operations, or disposition proceeds.

In August 2022, the Company exited the Leverage Relief Period under its Revolver and Term Loan agreements. The impact of these exits includes the reinstatement of financial covenants, the elimination of the minimum liquidity financial covenant, the elimination of limitations on share repurchases and the reinstatement of the original leverage-based pricing grid.

Mortgage Loans

The Company's mortgage loans consisted of the following (in(dollars in thousands):
Carrying Value at
Number of Assets EncumberedInterest Rate at June 30, 2022Maturity DateJune 30, 2022December 31, 2021
Mortgage loan (1)73.30%(3)April 2023(4)$200,000 $200,000 
Mortgage loan (1)32.53%(3)April 2024(5)96,000 96,000 
Mortgage loan (1)43.43%(3)April 2024(5)85,000 85,000 
Mortgage loan (2)15.06%January 202927,373 27,554 
15408,373 408,554 
Deferred financing costs, net(640)(1,062)
Total mortgage loans, net$407,733 $407,492 
          Principal balance at
Lender Number of Assets Encumbered Interest Rate at September 30, 2017 (1) Maturity Date   September 30, 2017 December 31, 2016
Wells Fargo (5) 4 4.04% March 2018 (3) $144,000
 $146,250
Wells Fargo (2) 4 4.03% October 2018 (4) 150,000
 150,000
PNC Bank (2) (6) 5 3.33% March 2021 (7) 85,000
 85,000
Wells Fargo (9) 1 5.25% June 2022   33,078
 33,666
PNC Bank/Wells Fargo (10) 4 4.95% October 2022   121,614
 —
Prudential (11) 1 4.94% October 2022   30,504
 —
Scotiabank (2) (8) (12) 1 LIBOR + 3.00% December 2017   85,514
 —
  20       649,710
 414,916
Deferred financing costs, net         (786) (1,509)
Total mortgage loans, net         $648,924
 $413,407


(1)The hotels encumbered by the mortgage loan are cross-collateralized. Requires payments of interest only through maturity.
(1)Interest rate at September 30, 2017 gives effect to interest rate hedges.
(2)Requires payments of interest only through maturity.
(3)The maturity date may be extended for four one-year terms at the Company’s option, subject to certain lender requirements.
(4)
In October 2017, the Company extended the maturity date for a one-year term. The maturity date may be extended for three additional one-year terms at the Company's option, subject to certain lender requirements.
(2)Includes $2.4 million and $2.6 million at June 30, 2022 and December 31, 2021, respectively, related to a fair value adjustment on this mortgage loan.
(3)Interest rate at June 30, 2022 gives effect to interest rate hedges.
(4)The mortgage loan provides a one year extension option.
(5)The mortgage loan provides 2 one year extension options.
(5)Two of the four hotels encumbered by the Wells Fargo loan are cross-collateralized.
(6)The five hotels encumbered by the PNC Bank loan are cross-collateralized.
(7)The maturity date may be extended for two one-year terms at the Company’s option, subject to certain lender requirements.
(8)This mortgage loan can be extended for one year, subject to certain lender requirements.
(9)Includes $0.9 million and $1.0 million at September 30, 2017 and December 31, 2016, respectively, related to a fair value adjustment on mortgage debt assumed in conjunction with an acquisition.
(10)Includes $3.2 million at September 30, 2017 related to fair value adjustments on the mortgage loans that were assumed in the Mergers.
(11)Includes $0.8 million at September 30, 2017 related to a fair value adjustment on the mortgage loan that was assumed in the Mergers.

(12)Includes $0.5 million at September 30, 2017 related to a fair value adjustment on the mortgage loan that was assumed in the Mergers.
 
Certain mortgage agreements are subject to customary financial covenants. Thevarious maintenance covenants requiring the Company was in compliance with all financial covenants at Septemberto maintain a minimum debt yield or debt service coverage ratio ("DSCR"). Failure to meet the debt yield or DSCR thresholds is not an event of default, but instead triggers a cash trap event. During the cash trap event, the lender or servicer of the mortgage loan controls
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cash outflows until the loan is covenant compliant. In addition certain mortgage loans have other requirements including continued operation and maintenance of the hotel property. At June 30, 20172022 and December 31, 2016.2021, 1 and 2 mortgage loans, respectively, were in cash trap events. In addition, the DSCR covenant for one mortgage loan has been waived through December 31, 2022.


At June 30, 2022 and December 31, 2021, there was approximately $12.3 million and $22.4 million, respectively, of restricted cash held by lenders due to cash trap events.

Interest Expense


The components of the Company's interest expense consisted of the following (in thousands):
For the three months ended June 30,For the six months ended June 30,
2022202120222021
Senior Notes$9,688 $6,685 $19,431 $12,627 
Revolver and Term Loans9,136 14,023 19,104 31,201 
Mortgage loans3,329 4,294 6,539 7,748 
Amortization of deferred financing costs1,417 1,364 3,101 2,685 
Non-cash interest expense related to interest rate hedges285 — 241 — 
Total interest expense$23,855 $26,366 $48,416 $54,261 
  For the three months ended September 30, For the nine months ended September 30,
  2017 2016 2017 2016
Senior Notes $3,980
 $—
 $3,980
 $—
Revolver and Term Loans 9,834
 9,662
 28,981
 29,138
Mortgage loans 4,943
 4,009
 12,969
 11,992
Amortization of deferred financing costs 893
 881
 2,597
 3,103
Total interest expense $19,650
 $14,552
 $48,527
 $44,233
7.Derivatives and Hedging Activities
 

8.Derivatives and Hedging
The Company'sfollowing interest rate swaps consistedhave been designated as cash flow hedges (in thousands):
Notional value atFair value at
Hedge typeInterest
rate		MaturityJune 30, 2022December 31, 2021June 30, 2022December 31, 2021
Swap-cash flow (1)2.29%December 2022$200,000 $200,000 $159 $(4,077)
Swap-cash flow (1)2.29%December 2022125,000 125,000 101 (2,545)
Swap-cash flow (2)2.38%December 2022— 87,780 — (1,879)
Swap-cash flow (2)2.38%December 2022— 36,875 — (789)
Swap-cash flow2.39%December 202375,000 75,000 718 (2,504)
Swap-cash flow2.51%December 202375,000 75,000 577 (2,692)
Swap-cash flow2.75%November 2023100,000 100,000 343 (3,893)
Swap-cash flow (3)1.28%September 202224,662 100,000 26 (759)
Swap-cash flow1.24%September 2025150,000 150,000 7,601 (860)
Swap-cash flow1.16%April 202450,000 50,000 1,701 (338)
Swap-cash flow1.20%April 202450,000 50,000 1,663 (387)
Swap-cash flow1.15%April 202450,000 50,000 1,710 (327)
Swap-cash flow1.10%April 202450,000 50,000 1,757 (267)
Swap-cash flow0.98%April 202425,000 25,000 934 (61)
Swap-cash flow0.95%April 202425,000 25,000 948 (43)
Swap-cash flow (4)0.93%April 202425,000 25,000 958 (31)
Swap-cash flow (4)0.90%April 202425,000 25,000 972 (13)
Swap-cash flow (4)0.85%December 202450,000 50,000 2,532 221 
Swap-cash flow (4)0.75%December 202450,000 50,000 2,655 372 
Swap-cash flow (4)0.65%January 202650,000 50,000 3,775 955 
$1,199,662 $1,399,655 $29,130 $(19,917)
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(1)In June 2021, the Company dedesignated a portion of the following (in thousands):
original notional value of these swaps as the hedged forecasted transactions were no longer probable of occurring. Therefore, the Company reclassified a total of $4.4 million of unrealized losses included in other comprehensive income (loss) to other income, net, in the consolidated statements of operations and comprehensive income (loss). The portion of the swaps that were dedesignated were subsequently redesignated and the amounts related to the initial fair values of $4.4 million that were recorded in other comprehensive income (loss) during the new hedging relationship will be reclassified to earnings on a straight line basis over the remaining life of these swaps.
      Notional value at Fair value at
Hedge type Interest rate Maturity September 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016
Swap-cash flow 1.12% November 2017 $275,000
 $275,000
 $75
 $(558)
Swap-cash flow 1.56% March 2018 175,000
 175,000
 (223) (1,251)
Swap-cash flow 1.64% March 2018 175,000
 175,000
 (288) (1,413)
Swap-cash flow 1.83% September 2018 15,840
 16,088
 (65) (193)
Swap-cash flow 1.75% September 2018 15,840
 16,088
 (53) (172)
Swap-cash flow 1.83% September 2018 38,880
 39,488
 (160) (474)
Swap-cash flow 1.75% September 2018 39,840
 40,462
 (134) (433)
Swap-cash flow 1.83% September 2018 17,280
 17,550
 (71) (211)
Swap-cash flow 1.75% September 2018 16,320
 16,575
 (55) (177)
Swap-cash flow 2.02% March 2019 125,000
 125,000
 (945) (2,090)
Swap-cash flow 1.94% March 2019 100,000
 100,000
 (644) (1,505)
Swap-cash flow 1.27% March 2019 125,000
 125,000
 493
 54
Swap-cash flow (1) 1.96% March 2019 100,000
 100,000
 (517) (516)
Swap-cash flow (1) 1.85% March 2019 50,000
 50,000
 (184) (184)
Swap-cash flow (1) 1.81% March 2019 50,000
 50,000
 (159) (159)
Swap-cash flow (1) 1.74% March 2019 25,000
 25,000
 (57) (57)
Swap-cash flow (2) 1.80% September 2020 33,000
 33,000
 28
 111
Swap-cash flow (2) 1.80% September 2020 82,000
 82,000
 70
 277
Swap-cash flow (2) 1.80% September 2020 35,000
 35,000
 30
 118
Swap-cash flow 1.81% October 2020 143,000
 143,000
 (425) (1,113)
Swap-cash flow (3) 1.15% April 2021 100,000
 100,000
 2,097
 2,513
Swap-cash flow (3) 1.20% April 2021 100,000
 100,000
 1,943
 2,360
Swap-cash flow (3) 2.15% April 2021 75,000
 75,000
 (735) (410)
Swap-cash flow (3) 1.91% April 2021 75,000
 —
 (176) —
Swap-cash flow 1.61% June 2021 50,000
 50,000
 303
 224
Swap-cash flow 1.56% June 2021 50,000
 50,000
 410
 352
Swap-cash flow 1.71% June 2021 50,000
 50,000
 119
 5
      $2,137,000
 $2,064,251
 $677
 $(4,902)
(2)In June 2021, the Company terminated a portion of the original notional value of these swaps as the hedged forecasted transactions were no longer probable of occurring and paid approximately $6.2 million to terminate a portion of these swaps. In February 2022, the Company paid a total of approximately $1.5 million to terminate these swaps and will reclassify the unrealized losses included in other comprehensive income (loss) to earnings on a straight line basis over the remaining life of these swaps.
(1)Effective between the maturity of the existing swap in November 2017 and the maturity of the debt in March 2019.
(2)Effective between the maturity of the existing swaps in September 2018 and September 2020.
(3)Effective between the maturity of the existing swaps in March 2018 and the maturity of the debt in April 2021.

(3)In February 2022, the Company terminated approximately $75.3 million of the original $100.0 million notional value of this swap as the hedged forecasted transactions were no longer probable of occurring. As part of the swap termination, the Company paid approximately $0.2 million to terminate a portion of this swap. The Company will reclassify the unrealized losses included in other comprehensive income (loss) to earnings on a straight line basis over the remaining life of the swap.
(4)In February 2022, the Company dedesignated these swaps as the hedged forecasted transactions were no longer probable of occurring. Therefore, the Company reclassified a total of approximately $5.9 million of unrealized gains included in other comprehensive income (loss) to other income, net, in the consolidated statements of operations and comprehensive income (loss). These swaps were subsequently redesignated and the amounts related to the initial fair value of $5.9 million that are recorded in other comprehensive income (loss) during the new hedging relationship will be reclassified to earnings on a straight line basis over the remaining life of these swaps.

As of SeptemberJune 30, 20172022 and December 31, 2016,2021, the aggregate fair value of the interest rate swap assets of $5.6$29.1 million and $6.0$1.5 million, respectively, was included in prepaid expense and other assets in the accompanying consolidated balance sheets. As of September 30, 2017 and December 31, 2016,2021, the aggregate fair value of the interest rate swap liabilities of $4.9$21.5 million and $10.9 million, respectively, was included in accounts payable and other liabilities in the accompanying consolidated balance sheets.sheet.


As of SeptemberJune 30, 2017,2022, there was approximately $0.7$24.6 million of unrealized gains included in accumulated other comprehensive income (loss) related to interest rate hedges that are effective in offsetting the variable cash flows.swaps. As of December 31, 2016,2021, there was approximately $4.9$17.1 million of unrealized losses included in accumulated other comprehensive lossincome (loss) related to interest rate hedges that are effective in offsetting the variable cash flows.swaps. There was no ineffectiveness recorded on the designated hedges during the three and nineor six month periods ended SeptemberJune 30, 2017 and 2016.2022 or 2021. For the three and ninesix months ended SeptemberJune 30, 2017,2022, approximately $1.3$3.1 million and $6.2$8.1 million, respectively, of amounts included in

accumulated other comprehensive loss were reclassified into interest expense. For the three and nine months ended September 30, 2016, approximately $4.0 million and $12.3 million, respectively, of amounts included in accumulated other comprehensive lossincome (loss) were reclassified into interest expense.expense for the interest rate swaps. For the three and six months ended June 30, 2021, approximately $6.6 million and $13.9 million, respectively, of the amounts included in accumulated other comprehensive income (loss) were reclassified into interest expense for the interest rate swaps. Approximately $3.6$12.2 million of the unrealized losses included in accumulated other comprehensive income (loss) at SeptemberJune 30, 20172022 is expected to be reclassified into interest expenseearnings within the next 12 months.
 
9.8.Fair Value
 
Fair Value Measurement
 
Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market.  The fair value hierarchy has three levels of inputs, both observable and unobservable:
 
•Level 1 — Inputs include quoted market prices in an active market for identical assets or liabilities.
 
•Level 2 — Inputs are market data, other than Level 1, that are observable either directly or indirectly.  Level 2 inputs include quoted market prices for similar assets or liabilities, quoted market prices in an inactive market, and other observable information that can be corroborated by market data.


•Level 3 — Inputs are unobservable and corroborated by little or no market data.

Fair Value of Financial Instruments
 
The Company used the following market assumptions and/or estimation methods:
 
•Cash and cash equivalents, restricted cash reserves, hotel and other receivables, accounts payable and other liabilities — The carrying amounts reported in the consolidated balance sheets for these financial instruments approximate fair value because of their short term maturities.
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•Debt — The Company estimated the fair value of the Senior Notes by using publicly available trading prices, market interest rates, and spreads for the Senior Notes, which are Level 2 and Level 31 inputs in the fair value hierarchy. The Company estimated the fair value of the Revolver and Term Loans by using a discounted cash flow model and incorporating various inputs and assumptions for the effective borrowing rates for debt with similar terms, which are Level 2 and Level 3 inputs in the fair value hierarchy. The Company estimated the fair value of the mortgage loans by using a discounted cash flow model and incorporating various inputs and assumptions for the effective borrowing rates for debt with similar terms and the loan to estimated fair value of the collateral, which are Level 3 inputs in the fair value hierarchy.


The fair value of the Company's debt was as follows (in thousands):
June 30, 2022December 31, 2021
Carrying ValueFair ValueCarrying ValueFair Value
Senior Notes, net$988,125 $854,850 $986,942 $999,060 
Revolver and Term Loans, net815,877 799,993 1,015,004 1,006,647 
Mortgage loans, net407,733 399,671 407,492 401,387 
Debt, net$2,211,735 $2,054,514 $2,409,438 $2,407,094 
 September 30, 2017 December 31, 2016
 Carrying Value Fair Value Carrying Value Fair Value
Senior Notes$1,066,275
 $1,053,797
 $—
 $—
Revolver and Term Loans, net1,170,540
 1,175,739
 1,169,308
 1,176,798
Mortgage loans, net648,924
 641,707
 413,407
 402,134
Debt, net$2,885,739
 $2,871,243
 $1,582,715
 $1,578,932





Recurring Fair Value Measurements
 
The following table presents the Company’s fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis as of SeptemberJune 30, 20172022 (in thousands):
Fair Value at September 30, 2017Fair Value at June 30, 2022
Level 1 Level 2 Level 3 TotalLevel 1Level 2Level 3Total
Interest rate swap asset$—
 $5,569
 $—
 $5,569
Interest rate swap asset$— $29,130 $— $29,130 
Interest rate swap liability—
 (4,892) —
 (4,892)
Total$—
 $677
 $—
 $677
Total$— $29,130 $— $29,130 
 
The following table presents the Company’s fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis as of December 31, 20162021 (in thousands):
Fair Value at December 31, 2021
Level 1Level 2Level 3Total
Interest rate swap asset$— $1,548 $— $1,548 
Interest rate swap liability— (21,465)— (21,465)
Total$— $(19,917)$— $(19,917)
 Fair Value at December 31, 2016
 Level 1 Level 2 Level 3 Total
Interest rate swap asset$—
 $6,014
 $—
 $6,014
Interest rate swap liability—
 (10,916) —
 (10,916)
Total$—
 $(4,902) $—
 $(4,902)


The fair values of the derivative financial instruments are determined using widely accepted valuation techniques including a discounted cash flow analysis on the expected cash flows for each derivative. The Company determined that the significant inputs, such as interest yield curves and discount rates, used to value its derivatives fall within Level 2 of the fair value hierarchy and that the credit valuation adjustments associated with the Company’s counterparties and its own credit risk utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. As of SeptemberJune 30, 2017,2022, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments were not significant to the overall valuation of its derivatives. As a result, the Company determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.


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10.
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9.Income Taxes
The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"), commencing with its taxable year ended December 31, 2011.  To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it distribute at least 90% of its REIT taxable income, subject to certain adjustments and excluding any net capital gain, to shareholders.  The Company’s intention is to adhere to the REIT qualification requirements and to maintain its qualification for taxation as a REIT.  As a REIT, the Company is generally not subject to federal corporate income tax on the portion of taxable income that is distributed to shareholders.  If the Company fails to qualify for taxation as a REIT in any taxable year, the Company will be subject to U.S. federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and it may not be able to qualify as a REIT for four subsequent taxable years. As a REIT, the Company may be subject to certain state and local taxes on its income and property, and to federal income and excise taxes on undistributed taxable income. The Company’s taxable REIT subsidiaries ("TRS") will generally be subject to U.S. federal, state, and local income taxes at the applicable rates.
 
The Company accounts for income taxes using the asset and liability method.  Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases, and for net operating loss, capital loss and tax credit carryforwards.  The deferred tax assets and liabilities are measured using the enacted income tax rates in effect for the year in which those temporary differences are expected to be realized or settled.  The effect on the deferred tax assets and liabilities from a change in tax rates is recognized in earnings in the period when the new rate is enacted. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of all available evidence, including the future reversals of existing taxable temporary differences, future projected taxable income and tax planning strategies. 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. The Company is still continuing to provide a full valuation allowance against the deferred tax assets.

The Company had no accruals for tax uncertainties as of SeptemberJune 30, 20172022 and December 31, 2016.2021.


11.10.Commitments and Contingencies
 
Restricted Cash Reserves
 
The Company is obligated to maintain cash reserve funds for future capital expenditures at the hotels (including the periodic replacement or refurbishment of furniture, fixtures and equipment ("FF&E"))&E as determined pursuant to the management agreements, franchise agreements and/or mortgage loan documents.documents). The management agreements, franchise agreements and/or mortgage loan documents require the Company to reserve cash ranging typically from 3.0% to 5.0% of the individual hotel’s revenues and maintain the reserves in restricted cash reserve escrows.revenues. Any unexpended amounts will remain the property of the Company upon termination of the management agreements, franchise agreements or mortgage loan documents. As of SeptemberJune 30, 20172022 and December 31, 2016,2021, approximately $78.3$44.3 million and $67.2$48.5 million, respectively, was available in the restricted cash reserves for future capital expenditures, real estate taxes, insurance and insurance.debt obligations where certain lenders held restricted cash due to a cash trap event.  

Litigation
 
Other than the legal proceedings mentioned below, neitherNeither the Company nor any of its subsidiaries is currently involved in any regulatory or legal proceedings that management believes will have a material and adverse effect on the Company's financial position, results of operations or cash flows.


Shareholder LitigationManagement Agreements


The Company and several affiliated entities were named as defendants in four putative shareholder class action lawsuits filed in connection with RLJ's merger with FelCor. The first case, Assad v. FelCor Lodging Trust, Inc. et al., Case No. 1:17-cv-01744 (D. Md.) (the “Assad Lawsuit”), named as defendants the Company and certain affiliated entities, as well as FelCor, its former directors, and FelCor LP. The Assad Lawsuit was filed onAs of June 26, 2017 in the United States District Court for the District of Maryland (the "Maryland Court"). The second case, Bagheri v. FelCor Lodging Trust, Inc., et al., Case No. 3:17-cv-01892 (the “Bagheri Lawsuit”), named as defendants the Company and certain affiliated entities, as well as FelCor, its former directors, and FelCor LP. The Bagheri Lawsuit was filed on July 17, 2017 in the United States District Court for the Northern District of Texas but was subsequently transferred to the Maryland Court. The third case, Johnson v. FelCor Lodging Trust Inc., et al., Case No. 1:17-cv-01786 (D. Md.) (the "Johnson Lawsuit"), named as defendants FelCor and its former directors. The Johnson Lawsuit was filed on June 28, 2017 in the Maryland Court. The fourth case, Sachs Investment Group v. FelCor Lodging Trust Inc., et al., Case No. 1:17-cv-01933 (D. Md.) (the "Sachs Lawsuit"), named as defendants FelCor and its former directors. The Sachs Lawsuit was filed on July 11, 2017 in the Maryland Court. Each of the lawsuits allege violations of the Securities and Exchange Act of 1934 (the “Exchange Act”) arising in connection with the filing30, 2022, 95 of the Company's Registration Statement on Form S-4 (the "Registration Statement") that was filed in connection with the Company's merger with FelCor. The plaintiffs in the lawsuits sought, among other things, damages, rescission of the Mergers, changes to the Registration Statement, an award of attorney's fees, and declaratory relief stating that the defendants violated the Exchange Act.

On July 21, 2017, the plaintiff in the Johnson Lawsuit filed a motion for preliminary injunction seeking to enjoin the Mergers. On August 8, 2017, however, the plaintiff withdrew that motion and represented that certain supplemental disclosures made by FelCor had addressed the basis for its preliminary injunction request.

On August 10, 2017, an order was entered consolidating the three original Maryland cases under the caption In Re FelCor Lodging Securities Litig., Case No. 1:17-cv-1786 (the "Consolidated Action"). The Assad Lawsuit was designated as the lead case for the Consolidated Action. On September 28, 2017, the Bagheri Lawsuit was also consolidated into the Consolidated Action.

On August 11, 2017, the Maryland Court entered an order regarding the selection of a Lead Plaintiff for the Consolidated Action. No stockholder moved for appointment and no Lead Plaintiff was appointed by the Court.

On October 26, 2017, the plaintiff and defendants in the Bagheri Lawsuit filed a stipulation of voluntary dismissal without prejudice. The Maryland Court entered an order dismissing the lawsuit that same day, and ordered the clerk to close the case.

On November 2, 2017, the plaintiffs in the Assad, Johnson, and Sachs lawsuits filed a notice of voluntary dismissal without prejudice. The Maryland Court entered an order dismissing the lawsuit that same day.


Pension Trust Litigation

Prior to the Mergers, on March 24, 2016, an affiliate of InterContinental Hotels Group PLC ("IHG"), which was previously the hotel management company for three of FelCor's hotels (two of which were sold in 2006, and one of which was converted by FelCor into a Wyndham brand and operation in 2013), notified FelCor that the National Retirement Fund in which the employees at those hotels had participated had assessed a withdrawal liability of $8.3 million, with required quarterly payments including interest, in connection with the termination of IHG’s operation of those hotels. FelCor's hotel management agreements with IHG stated that it may be obligated to indemnify and hold IHG harmless for some or all of any amount ultimately contributed to the pension trust fund with respect to those hotels.

Based on the current assessment of the claim, the resolution of this matter may not occur until 2022. As of September 30, 2017, the Company had accrued approximately $5.7 million for the future quarterly payments to the pension trust fund.

The Company plans to vigorously defend the underlying claims and, if appropriate, IHG’s demand for indemnification.

Management Agreements

As of September 30, 2017, 158 of the Company's hotel properties were operated pursuant to long-term management agreements with initial terms ranging from 3one to 25 years. This number includes certain34 hotel properties that receive the benefits of a franchise agreement pursuant to management agreements with Hilton, (nineteen hotels), Hyatt, (ten hotels), Marriott (eight hotels), Wyndham (eight hotels), and other hotel brands (two hotels).or Marriott. Each management company receives a base management fee generally between 3.0%1.75% and 3.5% of hotel revenues. Management agreements that include the benefits of a franchise agreement incur a base management fee generally between 2.0% and 7.0% of hotel revenues. The management companies are also eligible to receive an incentive management fee if hotel operating income, as defined in the management agreements, exceeds certain thresholds. The incentive management fee is generally calculated as a percentage of hotel operating income after the Company has received a priority return on its investment in the hotel.

Management fees are included in management and franchise fee expense in the accompanying consolidated statements of operations.operations and comprehensive income (loss). For the three and ninesix months ended SeptemberJune 30, 2017,2022, the Company incurred management fee expense including amortization of deferred management fees, of approximately $10.9$10.7 million and $32.5$18.6 million, respectively. For the three and ninesix months ended SeptemberJune 30, 2016,2021, the Company incurred management fee expense including amortization of deferred management fees, of approximately $10.6$6.2 million and $34.2$9.4 million, respectively.


The Wyndham management agreements guarantee minimum levels
18
Table of annual net operating income at each of the Wyndham-managed hotels for each year of the initial 10-year term to 2023, subject to an aggregate $100 million limit over the term and an annual $21.5 million limit. During the one month ended September 30, 2017, the Company recorded $1.2 million for the pro-rata portion of the projected aggregate full-year guaranties. The Company recognized this amount as a reduction of Wyndham's contractual management and other fees.Contents

Franchise Agreements
 
As of SeptemberJune 30, 2017, 1102022, 60 of the Company’s hotel properties were operated under franchise agreements with initial terms ranging from 10one to 30 years. This number excludes certain34 hotel properties that receive the benefits of a franchise agreement pursuant to management agreements with Hilton, (nineteen hotels), Hyatt, (ten hotels), Marriott (eight hotels), Wyndham (eight hotels), and other hotel brands (two hotels), respectively.or Marriott. In addition, The Knickerbockerone hotel is not operated with a hotel brand so the hotelit does not have a franchise agreement. Franchise agreements allow the hotel properties to operate under the respective brands. Pursuant to the franchise agreements, the Company pays a royalty fee, generally between 4.0%3.0% and 6.0% of room revenue, plus additional fees for marketing, central reservation systems and other franchisor costs generally between 1.0% and 4.3% of room revenue. Certain hotels are also charged a royalty fee of generallybetween 1.5% and 3.0% of food and beverage revenues. 

Franchise fees are included in management and franchise fee expense in the accompanying consolidated statements of operations.operations and comprehensive income (loss). For the three and ninesix months ended SeptemberJune 30, 2017,2022, the Company incurred franchise fee expense of approximately $18.6$16.4 million and $53.6$30.0 million, respectively. For the three and ninesix months ended SeptemberJune 30, 2016,2021, the Company incurred franchise fee expense of approximately $19.0$11.0 million and $56.6$17.6 million, respectively.


Wyndham Agreements
12.Equity
In 2019, the Company entered into an agreement with Wyndham to terminate the net operating income guarantee and received termination payments totaling $36.0 million from Wyndham. For the three and six months ended June 30, 2022, the Company recognized approximately $1.0 million and $2.1 million, respectively, as a reduction in management and franchise fee expense related to the amortization of the termination payments over the remaining terms of the management agreements. For the three and six months ended June 30, 2021, the Company recognized approximately $4.5 million and $9.1 million, respectively, as a reduction in management and franchise fee expense related to the amortization of the termination payments over the remaining terms of the management agreements.

11.Equity

Common Shares of Beneficial Interest


In 2015,During the six months ended June 30, 2022 and 2021, the Company declared a cash dividend of $0.01 per common share in each of the first and second quarters of 2022 and 2021.

On April 29, 2022, the Company's board of trustees authorizedapproved a new share repurchase program to acquire up to $400.0an aggregate of $250.0 million of the Common Shares through December 31, 2016. On February 17, 2017, the Company's board of trustees extended the duration of the share repurchase programcommon and preferred shares from May 9, 2022 to February 28, 2018 and increased the authorized amount that may be repurchased by $40.0 million to a total of $440.0 million.May 8, 2023 (the "2022 Share Repurchase Program"). During the ninesix months ended SeptemberJune 30, 2017,2022, the Company repurchased and retired 122,508 Common Sharesapproximately 4.0 million common shares for approximately $47.4 million. In July 2022, the Company repurchased and retired approximately 0.2 million common shares for approximately $2.6 million. As of September 30, 2017,August 5, 2022, the share repurchase program2022 Share Repurchase Program had a remaining capacity of $198.9 million. During the nine months ended September 30, 2016, the Company repurchased and retired 610,607 Common Shares for approximately $13.3$200.0 million.


As a result of the REIT Merger, the Company issued 50.4 million Common Shares at a price of $20.18 per share to former FelCor common stockholders as consideration in the REIT Merger.


Series A Preferred Shares


On August 31, 2017,During the six months ended June 30, 2022 and 2021, the Company designated and authorized the issuancedeclared a cash dividend of up to 12,950,000 $1.95 Series A Preferred Shares. The Company issued 12,879,475 Series A Preferred Shares, at a price of $28.49 per share, to former FelCor preferred stockholders as consideration in the REIT Merger. The holders of the Series A Preferred Shares are entitled to receive dividends that are payable in cash in an amount equal to the greater of (i) $1.95 per annum or (ii) the cash distributions declared or paid for the corresponding period$0.4875 on the number of Common Shares into which aeach Series A Preferred Share is then convertible.in each of the first and second quarters of 2022 and 2021.


Noncontrolling Interest in Consolidated Joint Ventures


The Company consolidates the joint venture that owns The Knickerbocker, which has a third-party partner that owns a noncontrolling 5% ownership interest in the joint venture. The third-party ownership interests are included in the noncontrolling interest in consolidated joint ventures on the consolidated balance sheets.

Noncontrolling Interest in the Operating Partnership

The Company consolidates the Operating Partnership, which is a majority-owned limited partnership that has a noncontrolling interest. The outstanding OP Unitsunits held by the limited partners are redeemable for cash, or at the option of the Company, for a like number of Common Shares.common shares. As a result of the Partnership Merger, the Operating Partnership issued 215,152June 30, 2022, 771,831 outstanding OP units at a price of $20.18 per unit, to former FelCor LP limited partners as consideration in the Partnership Merger. As of September 30, 2017, 773,902 outstanding OP Units arewere held by the limited partners. During the nine months ended September 30, 2016, the Company issued 335,250 Common Shares in exchange for redeemed OP Units. The noncontrolling interest is included in the noncontrolling interest in the Operating Partnership on the consolidated balance sheets.


Consolidated Joint Venture Preferred Equity
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The Company's joint venture that redeveloped The Knickerbocker raised $45.0 million ($44.4 million net of issuance costs) through the sale of redeemable preferred equity under the EB-5 Immigrant Investor Program. The purchasers receive a 3.25% current annual return (which increases to 8% if the Company does not redeem the equity interest before the fifth anniversary of the respective equity issuance), plus a 0.25% non-compounding annual return payable at redemption. The preferred equity raised by the joint venture is included in preferred equity in a consolidated joint venture on the consolidated balance sheets.

13.12.Equity Incentive Plan
 
The Company may issue share-based awards to officers, employees, non-employee trustees and other eligible persons under the RLJ Lodging Trust 20152021 Equity Incentive Plan (the "2015"2021 Plan"). The 20152021 Plan provides for a maximum of 7,500,000 Common Shares6,828,527 common shares to be issued in the form of share options, share appreciation rights, restricted share awards, unrestricted share awards, share units, dividend equivalent rights, long-term incentive units, other equity-based awards and cash bonus awards.
 
Share Awards
 
From time to time, the Company may award unvested restricted shares under the 2015 Plan as compensation to officers, employees and non-employee trustees. The issued shares vest over a period of time as determined by the board of trustees at the date of grant. The Company recognizes compensation expense for time-based unvested restricted shares on a straight-line basis over the vesting period based upon the fair market value of the shares on the date of issuance, adjusted for forfeitures.


Non-employee trustees may also elect to receive unrestricted shares under the 2015 Plan as compensation that would otherwise be paid in cash for their services. The shares issued to non-employee trustees in lieu of cash compensation are unrestricted and include no vesting conditions. The Company recognizes compensation expense for the unrestricted shares issued in lieu of cash compensation on the date of issuance based upon the fair market value of the shares on that date.


A summary of the unvested restricted shares as of SeptemberJune 30, 20172022 is as follows:
 2022
 Number of
Shares		Weighted-Average
Grant Date
Fair Value
Unvested at January 1, 20222,380,283 $15.43 
Granted569,600 15.10 
Vested(619,285)15.69 
Forfeited(6,065)13.56 
Unvested at June 30, 20222,324,533 $15.28 
 2017
 Number of
Shares		 Weighted-Average
Grant Date Fair
Value
Unvested at January 1,649,447
 $23.00
Granted425,076
 23.15
Vested(271,551) 23.67
Forfeited(5,866) 23.27
Unvested at September 30,797,106
 $22.86

For the three and ninesix months ended SeptemberJune 30, 2017,2022, the Company recognized approximately $2.0$3.6 million and $6.7$7.1 million, respectively, of share-based compensation expense related to restricted share awards. For the three and ninesix months ended SeptemberJune 30, 2016,2021, the Company recognized approximately $1.6$3.0 million and $5.0$4.9 million, respectively, of share-based compensation expense related to restricted share awards, which includes a benefit of $0.5 million as a result of the forfeiture of unvested restricted shares upon the resignation of the Company's President and Chief Executive Officer in May 2016.awards. As of SeptemberJune 30, 2017,2022, there was $16.6$27.8 million of total unrecognized compensation costs related to unvested restricted share awards and these costs are expected to be recognized over a weighted-average period of 2.52.0 years. The total fair value of the shares vested (calculated as the number of shares multiplied by the vesting date share price) during the ninesix months ended SeptemberJune 30, 20172022 and 20162021 was approximately $5.7$8.7 million and $4.5$6.3 million, respectively.

Performance Units
 
In July 2012,From time to time, the Company awardedmay award performance units as compensation to certainofficers and employees. The performance units vested over a four-year period, including three years of performance-based vesting (the "2012 performance units measurement period") plus an additional one year of time-based vesting. In July 2015, following the end of the 2012 performance units measurement period, the Company issued 838,934 restricted shares upon conversion of the performance units. Half of the restricted shares vested immediately and the remaining half vested in July 2016. In May 2016, 133,467 unvested restricted shares relatedgranted prior to the conversion of the performance units were forfeited upon the resignation of the Company's President and Chief Executive Officer.

In May 2016, the Company awarded 280,000 performance units with a grant date fair value of $10.31 per unit to certain employees. The performance units2021 vest over a four-year period, including three years of performance-based vesting plus an additional onefour year of time-based vesting.

In February 2017, the Company awarded 259,000 performance units with a grant date fair value of $14.93 per unit to certain employees. The performance units vest over a four-year period, including three years of performance-based vesting (the “2017 performance“performance units measurement period”) plus an additional one year of time-based vesting. These performance units may convert into restricted shares at a range of 25%0% to 150%200% of the number of performance units granted contingent upon the Company achieving an absolute total shareholder return (40% of award) and a relative total shareholder return (60% of award) over the measurement period at specified percentiles of the peer group, as defined by the award.awards. If at the end of the 2017 performance units measurement period the target criterion is met, then 50% of the performance units that are earned will vest at the end of the measurement period. The remaining 50% convert to restricted shares that will vest on the one year anniversary of the end of the measurement period. For any restricted shares issued upon conversion, the award recipient will be entitled to receive payment of an amount equal to all dividends that would have been paid if such restricted shares had been issued at the beginning of the performance units measurement period. The fair value of the performance units is determined using a Monte Carlo simulation, and an expected term equal to the requisite service period for the awards of four years. The Company estimates the compensation expense for the performance units on a straight-line basis using a calculation that recognizes 50% of the grant date fair value over three years and 50% of the grant date fair value over four years.
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The performance units granted in 2021 and 2022 vest at the end of a three year period. These performance units may convert into restricted shares at a range of 0% to 200% of the number of performance units granted contingent upon the Company achieving an absolute total shareholder return (25% of award) and a relative shareholder return (75% of award) over the measurement period at specified percentiles of the peer group, as defined by the awards. At the end of the performance units measurement period the target criterion is met, 100% of the performance units that are earned will vest immediately. The remaining 50% will vest one year later. The award recipients will not be entitled to receive any dividends prior to the date of conversion. For any restricted shares issued upon conversion, the award recipient will be entitled to receive payment of an amount equal to all dividends that would have been paid if such restricted shares had been issued at the beginning of the 2017 performance units measurement period. The fair value of theFor performance units is determined using a Monte Carlo simulation withgranted in 2021 and 2022, the following assumptions: a risk-free interest rate of 1.57%, volatility of 25.73%, and an expected term equal to the requisite service period for the awards. The Company estimatedestimates the compensation expense for the performance units on a straight linestraight-line basis using a calculation that recognizes 50%100% of the grant date fair value over three years and 50%years.
A summary of the grant dateperformance unit awards is as follows:
Date of AwardNumber of
Units Granted
Grant Date Fair
Value		Conversion RangeRisk Free Interest RateVolatility
February 2019 (1)260,000$19.160% to 200%2.52%27.19%
February 2020489,000$11.590% to 200%1.08%23.46%
February 2021431,151$20.900% to 200%0.23%69.47%
February 2022407,024$21.960% to 200%1.7%70.15%
(1) In February 2022, following the end of the measurement period, the Company met certain threshold criterion and the performance units converted into approximately 133,000 restricted shares. Half of the restricted shares vested immediately with the remaining half vesting in February 2023. As of June 30, 2022, there were approximately 67,000 unvested restricted shares related to the conversion of the performance units. The total fair value over four years.of the vested shares related to the conversion of the performance units (calculated as the number of vested shares multiplied by the vesting date share price) during the six months ended June 30, 2022 was approximately $0.8 million.


For the three and ninesix months ended SeptemberJune 30, 2017,2022, the Company recognized approximately $0.5$1.9 million and $1.3$3.5 million, respectively, of share-based compensation expense related to the performance unit awards. For the three and ninesix months ended SeptemberJune 30, 2016,2021, the Company recognized approximately $1.8 million and $2.7 million, respectively, of share-based compensation expense of $0.3 million and a share-based compensation benefit of $1.1 million, respectively, related to the performance unit awards, which includes a benefit of $2.3 million for the nine months ended September 30, 2016 as a result of the forfeiture of unvested restricted shares related to the conversion of the performance units upon the resignation of the Company's President and Chief Executive Officer in May

2016.awards. As of SeptemberJune 30, 2017,2022, there was $4.8$14.5 million of total unrecognized compensation costcosts related to the performance unit awards and these costs are expected to be recognized over a weighted-average period of 2.72.1 years.

 
As of SeptemberJune 30, 2017,2022, there were 3,455,332 Common Shares3,531,171 common shares available for future grant under the 2015 Plan. 2021 Plan, which includes potential common shares that may convert from performance units if certain target criterion is met.


14.13.Earnings per Common Share
 
Basic earnings per Common Sharecommon share is calculated by dividing net income attributable to common shareholders by the weighted-average number of Common Sharescommon shares outstanding during the period excluding the weighted-average number of unvested restricted shares outstanding during the period. Diluted earnings per Common Sharecommon share is calculated by dividing net income attributable to common shareholders by the weighted-average number of Common Sharescommon shares outstanding during the period, plus any shares that could potentially be outstanding during the period. The potential shares consist of the unvested restricted share grants and unvested performance units, calculated using the treasury stock method. Any anti-dilutive shares have been excluded from the diluted earnings per share calculation.

Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating shares and are considered in the computation of earnings per share pursuant to the two-class method. If there were any undistributed earnings allocable to the participating shares, they would be deducted from net income attributable to common shareholders used in the basic and diluted earnings per share calculations.

The limited partners’ outstanding OP Unitsunits (which may be redeemed for Common Sharescommon shares under certain circumstances) have been excluded from the diluted earnings per share calculation as there was no effect on the amounts for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, since the limited partners’ share of income would also be added back to net income attributable to common shareholders.
 
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The computation of basic and diluted earnings per Common Sharecommon share is as follows (in thousands, except share and per share data):
 For the three months ended June 30,For the six months ended June 30,
 2022202120222021
Numerator:
Net income (loss) attributable to RLJ$32,966 $(51,447)$17,718 $(129,433)
Less: Preferred dividends(6,279)(6,279)(12,557)(12,557)
Less: Dividends paid on unvested restricted shares(24)(26)(50)(36)
Less: Undistributed earnings attributable to unvested restricted shares(368)— (27)— 
Net income (loss) attributable to common shareholders excluding amounts attributable to unvested restricted shares$26,295 $(57,752)$5,084 $(142,026)
Denominator:
Weighted-average number of common shares - basic163,539,446 163,996,003 163,857,785 163,911,475 
Unvested restricted shares245,127 — 359,365 — 
Weighted-average number of common shares - diluted163,784,573 163,996,003 164,217,150 163,911,475 
Net income (loss) per share attributable to common shareholders - basic$0.16 $(0.35)$0.03 $(0.87)
Net income (loss) per share attributable to common shareholders - diluted$0.16 $(0.35)$0.03 $(0.87)
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 For the three months ended September 30, For the nine months ended September 30,
 2017 2016 2017 2016
Numerator:       
Net income attributable to RLJ$3,914
 $41,174
 $67,918
 $124,918
Less: Preferred dividends(2,093) —
 (2,093) —
Less: Dividends paid on unvested restricted shares(243) (204) (798) (891)
Less: Undistributed earnings attributable to unvested restricted shares—
 (1) —
 (8)
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares$1,578
 $40,969
 $65,027
 $124,019
        
Denominator:       
Weighted-average number of Common Shares - basic140,249,961
 123,621,323
 129,317,120
 123,635,010
Unvested restricted shares57,308
 194,210
 82,057
 224,743
Unvested performance units—
 20,919
 —
 —
Weighted-average number of Common Shares - diluted140,307,269
 123,836,452
 129,399,177
 123,859,753
        
Net income per share attributable to common shareholders - basic$0.01
 $0.33
 $0.50
 $1.00
        
Net income per share attributable to common shareholders - diluted$0.01
 $0.33
 $0.50
 $1.00
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15.14.Supplemental Information to Statements of Cash Flows (in thousands)
 For the nine months ended September 30,
 2017 2016
Interest paid$34,170
 $42,807
    
Income taxes paid$1,107
 $1,560
    
Supplemental investing and financing transactions   
In conjunction with the sale of hotel properties, the Company recorded the following:   
Sale of hotel properties$—
 $2,850
Transaction costs(49) (122)
Operating prorations—
 (99)
Proceeds from the sale of hotel properties, net$(49) $2,629
    
Supplemental non-cash transactions (1)   
Accrued capital expenditures$5,465
 $2,500
Redemption of OP Units$—
 $4,325

(1) Refer to Note 2, Merger with FelCor Lodging Trust, for information related to the non-cash investing and financing activities associated with the acquisition of FelCor.
For the six months ended June 30,
20222021
Reconciliation of cash, cash equivalents, and restricted cash reserves
Cash and cash equivalents$511,481 $657,892 
Restricted cash reserves44,281 38,842 
Cash, cash equivalents, and restricted cash reserves$555,762 $696,734 
Interest paid$45,747 $54,603 
Income taxes paid$677 $154 
Operating cash flow lease payments for operating leases$7,667 $5,718 
Supplemental investing and financing transactions
In connection with the sale of hotel properties, the Company recorded the following:
Sales price$49,900 $17,677 
Transaction costs(836)(980)
Operating prorations(991)(429)
Proceeds from the sale of hotel properties, net$48,073 $16,268 
Supplemental non-cash transactions
Accrued capital expenditures$7,405 $6,065 
 
15.Subsequent Events

In July 2022, the Company acquired the 124-room 21c Museum Hotel in Nashville, Tennessee for $59.0 million.

In July 2022, the Company's board of trustees declared a quarterly cash dividend of $0.05 per common share payable on October 17, 2022 to shareholders of record as of September, 30, 2022. In addition, the Company's board of trustees declared a cash dividend of $0.4875 on each Series A Preferred Share payable on October 31, 2022 to shareholders of record as of September 30, 2022.

In August 2022, the Company exited the Leverage Relief Period under its Revolver and Term Loan agreements.

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations.Operations
 
The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report, as well as the information contained in our Annual Report, on Form 10-K for the year ended December 31, 2016, filed with the SEC on February 23, 2017 (the "Annual Report"), which is accessible on the SEC’s website at www.sec.gov.


Statement Regarding Forward-Looking Information
 
The following information contains certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally are identified by the use of the words "believe," "project," "expect," "anticipate," "estimate," "plan," "may," "will," "will continue," "intend," "should," or similar expressions.  Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, beliefs and expectations, such forward-looking statements are not predictions of future events or guarantees of future performance and our actual results could differ materially from those set forth in the forward-looking statements. Some factors that might cause such a difference include the following: the current global economic uncertainty, increased direct competition, changes in government regulations or accounting rules, changes in local, national and global real estate conditions, declines in the lodging industry, seasonality
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Table of the lodging industry, risks related to natural disasters, such as earthquakes and hurricanes, hostilities, including future terrorist attacks or fear of hostilities that affect travel, our ability to obtain lines of credit or permanent financing on satisfactory terms, changes in interest rates, access to capital through offerings of our common and preferred shares of beneficial interest, or debt, our ability to identify suitable acquisitions, our ability to close on identified acquisitions and integrate those businesses and inaccuracies of our accounting estimates.  Given these uncertainties, undue reliance should not be placed on such statements.Contents
Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. We caution investors not to place undue reliance on these forward-looking statements and urge investors to carefully review the disclosures we make concerning risks and uncertainties in the sections entitled "Forward-Looking Statements," "Risk Factors," and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report, as well as the risks, uncertainties and other factors discussed in this Quarterly Report on Form 10-Q and identified in other documents filed by us with the SEC.


Overview
 
We are a self-advised and self-administered Maryland real estate investment trust ("REIT")REIT that acquiresowns primarily premium-branded, high-margin, focused-service and compact full-service hotels. We are one of the largest U.S. publicly-traded lodging REITs in terms of both numberown a geographically diversified portfolio of hotels and number of rooms. Our hotels are concentratedlocated in high-growth urban markets that we believe exhibit multiple demand generators and high barriers to entry.attractive long-term growth prospects. We believe premium-branded, focused-service and compact full-service hotels with these characteristicsthat our investment strategy allows us to generate high levels of Revenue per Available Room ("RevPAR"), strong operating margins and attractive returns.

Our strategy is to acquireown primarily premium-branded, focused-service and compact full-service hotels. Focused-service and compact full-service hotels typically generate most of their revenue from room rentals, have limited food and beverage outlets and meeting space, and require fewer employees than traditional full-service hotels. We believe these types of hotels have the potential to generate attractive returns relative to other types of hotels due to their ability to achieve RevPAR levels at or close to those achieved by traditional full-service hotels while achieving higher profit margins due to their more efficient operating model and less volatile cash flows.


As we look at factors that could impact our business, we find that the consumer is generally in good health, job creation remains positive and wages are increasing at a moderate pace. While geopolitical and global economic uncertainty still exists, we remain hopeful that positive employment trends and an improving consumer balance sheet will continue to drive economic expansion in the U.S.

We are cautiously optimistic that continued expansion of the U.S. economy will generate positive lodging demand and RevPAR growth for the industry. However, in light of accelerating supply, RevPAR growth is likely to be moderate.

We continue to follow a prudent and disciplined capital allocation strategy. We will continue to look for and weigh all possible investment decisions against the highest and best returns for our shareholders over the long term. We believe that our cash on hand and expected access to capital (including availability under our revolving credit facility ("Revolver")) along with our senior management team's experience, extensive industry relationships and asset management expertise, will enable us to pursue investment opportunities that generate additional internal and external growth.

On August 31, 2017, we completed our merger with FelCor Lodging Trust Incorporated ("FelCor"). The combined company, headquartered in Bethesda, Maryland, will continue to be led by our existing senior management team. As of SeptemberJune 30, 2017,2022, we owned 159 hotels96 hotel properties with approximately 31,35021,300 rooms, located in 2622 states and the District of Columbia.  We owned, through wholly-owned subsidiaries, a 100% interest in 15594 of our hotel properties, a 98.3% controlling interest in the DoubleTree Metropolitan Hotel New York City, a 95% controlling interest in The Knickerbocker,one hotel property, and a 50% interestsnon-controlling interest in entitiesan entity owning twoone hotel properties.property. We consolidate our real estate interests in the 15795 hotel properties in which we hold a controlling financial interest, and we record the real estate interests in the two hotelsone hotel property in which we hold an indirecta 50% non-controlling interest using the equity method of accounting. We lease 15895 of the 15996 hotel properties to our taxable REIT subsidiaries ("TRS"),TRS, of which we own a controlling financial interest.


For U.S. federal income tax purposes, we elected to be taxed as a REIT commencing with our taxable year ended December 31, 2011. Substantially all of our assets and liabilities are held by, and all of our operations are conducted through our operating partnership RLJ Lodging Trust, L.P. (the "Operating Partnership").Operating Partnership. We are the sole general partner of the Operating Partnership. As of SeptemberJune 30, 2017,2022, we owned, through a combination of direct and indirect interests, 99.6%99.5% of the units of limited partnership interest in the Operating Partnership ("OP units").units.
 
Recent2022 Significant Activities
 
Our significant activities reflect our commitment to creating long-term shareholder value through enhancing our hotel portfolio's quality, recycling capital and maintaining a prudent capital structure. During the nine months ended September 30, 2017, theThe following significant activities took place:have taken place in 2022:


On August 31, 2017, we completed•Paid off the merger transaction with FelCor$200.0 million outstanding balance on our Revolver using cash on hand.

•Sold two hotel properties for a total purchasecombined sales price of approximately $1.4 billion. As$49.9 million.

•Exercised a result, we acquired an ownership interestone-year extension option on a mortgage loan extending the maturity to April 2023.

•Purchased and retired approximately 4.2 million shares for $50.0 million under a new share repurchase program.

•Acquired the 124-room 21c Museum Hotel in 37 hotel properties that are located in major urbanNashville, Tennessee for $59.0 million.

•Exited both the Covenant Relief Period and resort markets.Leverage Relief Period under our Revolver and Term Loan agreements.


We declared a cash dividend of $0.4875 on each Series A Preferred Share.


We declared a cash dividend of $0.33 per Common Share in each of the first, second, and third quarters of 2017.

Our Customers
 
The majority of our hotels consist of premium-branded, focused-service and compact full-service hotels. As a result of this property profile, the majority of our customers are transient in nature. Transient business typically represents individual business or leisure travelers. The majority of our hotels are located in business districts within major metropolitan areas. Accordingly, business travelers represent the majority of the transient demand at our hotels. As a result, macroeconomic factors impacting business travel have a greater effect on our business than factors impacting leisure travel.

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Group business is typically defined as a minimum of 10 guestrooms booked together as part of the same piece of business. Group business may or may not use the meeting space at any given hotel. Given the limited meeting space at the majority of our hotels, group business that utilizes meeting space represents a small component of our customer base.

A number of our hotelshotel properties are affiliated with brands marketed toward extended-stay customers. Extended-stay customers are generally defined as those staying five nights or longer.


Our Revenues and Expenses
 
Our revenue isrevenues are primarily derived from the operation of hotels, including the sale of rooms, food and beverage revenue and other revenue, which consists of parking fees, golf, pool and other resort fees, gift shop sales and other guest service fees.
 
Our operating costs and expenses consist of the costs to provide hotel services, including room expense, food and beverage expense, management and franchise fees and other operating expenses. Room expense includes housekeeping and front office wages and payroll taxes, reservation systems, room supplies, laundry services and other costs. Food and beverage expense primarily includes the cost of food, the cost of beverages and the associated labor costs. Other operating expenses include labor and other costs associated with the other operating department revenue, as well as labor and other costs associated with administrative departments, sales and marketing, repairs and maintenance and utility costs. Our hotels that are subject to franchise agreements are charged a royalty fee, plus additional fees for marketing, central reservation systems and other franchisor costs, in order for the hotel properties to operate under the respective brands. Franchise fees are based on a percentage of room revenue and for certain hotels additional franchise fees are charged for food and beverage revenue. Our hotels are managed by independent, third-party management companies under long-term agreements pursuant to which the management companies typically earn base and incentive management fees based on the levels of revenues and profitability of each individual hotel property. We generally receive a cash distribution from the hotel management companies on a monthly basis, which reflects the hotel-level sales less hotel-level operating expenses.


Key Indicators of Financial Performance
 
We use a variety of operating, financial and other information to evaluate the operating performance of our business. These key indicators include financial information that is prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP")GAAP as well as other financial measures that are non-GAAP measures. In addition, we use other information that may not be financial in nature, including industry standard statistical information and comparative data. We use this information to measure the operating performance of our individual hotels, groups of hotels and/or the business as a whole. We also use these metrics to evaluate the hotels in our portfolio and potential acquisition opportunities to determine each hotel's contribution to cash flow and its potential to provide attractive long-term total returns. The key indicators include:


•Average Daily Rate ("ADR")
•Occupancy
•RevPAR
ADR, Occupancy and RevPAR are commonly used measures within the lodging industry to evaluate operating performance. RevPAR is an important statistic for monitoring the operating performance at the individual hotel property level and across our entire business. We evaluate the individual hotel RevPAR performance on an absolute basis with comparisons to budget and prior periods, as well as on a regional and company-wide basis. ADR and RevPAR include only room revenue.



We also use non-GAAP measures such as FFO, Adjusted FFO, EBITDA, EBITDAre and Adjusted EBITDA to evaluate the operating performance of our business. For a more in depth discussion of the non-GAAP measures, please refer to the "Non-GAAP Financial Measures" section.


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Critical Accounting Policies and Estimates
 
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period. It is possible that the actual amounts may differ significantly from these estimates and assumptions. We evaluate our estimates, assumptions and judgments on an ongoing basis, based on information that is available to us, our business and industry experience, and various other matters that we believe are reasonable and appropriate for consideration under the circumstances. Our Annual Report on Form 10-K for the year ended December 31, 2016 contains a discussion of our critical accounting policies.policies and estimates. There have been no significant changes to our critical accounting policies and estimates since December 31, 2016.2021. 


Results of Operations
 
At SeptemberJune 30, 20172022 and 2016,2021, we owned 15996 and 125100 hotel properties, respectively.  Based on when a hotel property is acquired, sold or closed for renovation, the operating results for certain hotel properties are not comparable for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016.2021.  The non-comparable hotel properties include 37ten hotel properties that were acquiredsold or otherwise disposed in the merger with FelCor2022 and four dispositions2021 and three acquisitions that were completed between January 1, 2016 and September 30, 2017.in 2021.



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Comparison of the three months ended SeptemberJune 30, 2017 2022to thethree months ended SeptemberJune 30, 20162021
 For the three months ended June 30, 
 20222021$ Change
 (amounts in thousands)
Revenues   
Operating revenues   
Room revenue$280,676 $166,554 $114,122 
Food and beverage revenue31,154 12,983 18,171 
Other revenue18,671 14,717 3,954 
Total revenues330,501 194,254 136,247 
Expenses   
Operating expenses   
Room expense65,793 42,898 22,895 
Food and beverage expense21,770 8,709 13,061 
Management and franchise fee expense26,067 12,630 13,437 
Other operating expense76,888 56,883 20,005 
Total property operating expenses190,518 121,120 69,398 
Depreciation and amortization46,922 46,915 7 
Property tax, insurance and other22,949 24,048 (1,099)
General and administrative13,348 12,133 1,215 
Transaction costs136 195 (59)
Total operating expenses273,873 204,411 69,462 
Other income (expense), net721 (9,720)10,441 
Interest income347 220 127 
Interest expense(23,855)(26,366)2,511 
(Loss) gain on sale of hotel properties, net(364)103 (467)
Loss on extinguishment of indebtedness, net— (6,207)6,207 
Income (loss) before equity in income from unconsolidated joint ventures33,477 (52,127)85,604 
Equity in income from unconsolidated joint ventures283 60 223 
Income (loss) before income tax expense33,760 (52,067)85,827 
Income tax expense(558)(154)(404)
Net income (loss)33,202 (52,221)85,423 
Net (income) loss attributable to noncontrolling interests:   
Noncontrolling interest in the Operating Partnership(125)268 (393)
Noncontrolling interest in consolidated joint ventures(111)506 (617)
Net income (loss) attributable to RLJ32,966 (51,447)84,413 
Preferred dividends(6,279)(6,279)— 
Net income (loss) attributable to common shareholders$26,687 $(57,726)$84,413 

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 For the three months ended September 30,    
 2017 2016 $ Change % Change
 (amounts in thousands)  
Revenue 
  
  
  
Operating revenue 
  
  
  
Room revenue$292,046
 $260,659
 $31,387
 12.0 %
Food and beverage revenue35,580
 26,001
 9,579
 36.8 %
Other revenue13,629
 9,599
 4,030
 42.0 %
Total revenue$341,255
 $296,259
 $44,996
 15.2 %
Expense 
  
  
  
Operating expense 
  
  
  
Room expense$69,380
 $59,671
 $9,709
 16.3 %
Food and beverage expense27,061
 19,135
 7,926
 41.4 %
Management and franchise fee expense29,571
 29,607
 (36) (0.1)%
Other operating expense78,120
 62,162
 15,958
 25.7 %
Total property operating expense204,132
 170,575
 33,557
 19.7 %
Depreciation and amortization45,231
 40,953
 4,278
 10.4 %
Property tax, insurance and other23,618
 20,575
 3,043
 14.8 %
General and administrative9,506
 7,215
 2,291
 31.8 %
Transaction costs32,607
 98
 32,509
 — %
Total operating expense315,094
 239,416
 75,678
 31.6 %
Operating income26,161
 56,843
 (30,682) (54.0)%
Other income110
 112
 (2) (1.8)%
Interest income1,157
 430
 727
 — %
Interest expense(19,650) (14,552) (5,098) 35.0 %
Gain on settlement of investment in loan2,670
 —
 2,670
 — %
Income before equity in income from unconsolidated joint ventures10,448
 42,833

(32,385) (75.6)%
Equity in income from unconsolidated joint ventures57
 —
 57
 — %
Income before income tax expense10,505
 42,833
 (32,328) (75.5)%
Income tax expense(6,375) (1,439) (4,936) 343.0 %
Income from operations4,130
 41,394
 (37,264) (90.0)%
Loss on sale of hotel properties(19) (5) (14) — %
Net income4,111
 41,389
 (37,278) (90.1)%
Net income attributable to noncontrolling interests: 
  
  
  
Noncontrolling interest in consolidated joint ventures(32) (32) —
 — %
Noncontrolling interest in the Operating Partnership(43) (183) 140
 (76.5)%
Preferred distributions from a consolidated joint venture(122) —
 (122) — %
Net income attributable to RLJ3,914
 41,174
 (37,260) (90.5)%
Preferred dividends(2,093) —
 (2,093) — %
Net income attributable to common shareholders$1,821
 $41,174
 $(39,353) (95.6)%


RevenueRevenues
 
Total revenuerevenues increased $45.0$136.2 million or 15.2%, to $341.3$330.5 million for the three months ended SeptemberJune 30, 20172022 from $296.3$194.3 million for the three months ended SeptemberJune 30, 2016.2021. The increase was the result of a $31.4$114.1 million increase in room revenue, a $9.6$18.2 million increase in food and beverage revenue, and a $4.0 million increase in other operating department revenue.


Room Revenue


Room revenue increased $31.4$114.1 million or 12.0%, to $292.0$280.7 million for the three months ended SeptemberJune 30, 20172022 from $260.7$166.6 million for the three months ended SeptemberJune 30, 2016.2021.  The increase was athe result of a $37.0$111.8 million increase in room revenue attributable to the comparable properties and a $2.4 million increase in room revenue attributable to the non-comparable properties, partially offset by a $5.6 million decrease in room revenue attributable to the comparable properties. The decreaseincrease in room revenue from the comparable properties was attributable to a 2.3% decreasean increase in RevPAR led byresulting from an increase in demand as compared to the prior period. Though RevPAR decreasesincreased over the comparable period in our Chicago and Austin markets of 8.6% and 5.7%, respectively, which were partially offset by RevPAR increases2021, it remained below the comparable period in our Houston, Denver, and Southern California markets of 5.2%, 1.7%, and 1.7%, respectively.2019.


The following are the quarter-to-date key hotel operating statistics for the comparable properties owned at September 30, 2017 and 2016, respectively:properties:
For the three months ended June 30,
For the three months ended September 30,  202220212019
2017 2016 % Change
Number of comparable properties (at end of period)122
 122
 —
Occupancy80.2% 81.2% (1.2)%Occupancy74.7 %59.8 %83.0 %
ADR$161.86
 $163.63
 (1.1)%ADR$195.64 $143.39 $189.69 
RevPAR$129.88
 $132.89
 (2.3)%RevPAR$146.05 $85.78 $157.45 
 
Food and Beverage Revenue
 
Food and beverage revenue increased $9.6$18.2 million or 36.8%, to $35.6$31.2 million for the three months ended SeptemberJune 30, 20172022 from $26.0$13.0 million for the three months ended SeptemberJune 30, 2016.2021 due to an increase in demand as compared to the prior period. The increase was a result of a $10.5 million increase in food and beverage revenue attributablewas due to an increase in group business and the non-comparable properties, partially offset by a $1.0 million decrease inreopening of certain food and beverage revenue attributable to the comparable properties.outlets.
 
Other Revenue
 
Other revenue which includes revenue derived from ancillary sources such as parking fees, golf, pool and other resort fees, gift shop sales and other guest service fees, increased $4.0 million or 42.0%, to $13.6$18.7 million for the three months ended SeptemberJune 30, 20172022 from $9.6$14.7 million for the three months ended SeptemberJune 30, 2016.2021.  The increase in other revenue was due to an increase in parking fees, resort fees, cancellation fees, and gift shop sales that corresponded to the increase in demand over the prior period.

Property Operating Expenses
Property operating expenses increased $69.4 million to $190.5 million for the three months ended June 30, 2022 from $121.1 million for the three months ended June 30, 2021. The increase was due to a $4.2$70.6 million increase in other revenueproperty operating expenses attributable to the comparable properties, which was partially offset by a $1.2 million decrease in property operating expenses attributable to the non-comparable properties.

The components of our property operating expenses for the comparable properties partially offset by a $0.1 million decreasewere as follows (in thousands):
For the three months ended June 30,
20222021$ Change
Room expense$64,297 $41,156 $23,141 
Food and beverage expense21,425 8,570 12,855 
Management and franchise fee expense25,023 11,914 13,109 
Other operating expenses74,990 53,527 21,463 
Total property operating expenses$185,735 $115,167 $70,568 

The increase in other revenueproperty operating expenses attributable to the comparable properties.properties corresponded to an increase in demand over the prior period. Management and franchise fee expense for the three months ended June 30, 2022 and 2021 included a reduction to management and franchise fee expense of $1.0 million and $4.5 million, respectively, related to the recognition of the Wyndham termination payment. The decrease in the recognition of the Wyndham termination payment was

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due to certain Wyndham agreements expiring in 2021 coupled with the remaining agreements being extended and recognized over a longer period. 

Property Operating ExpenseTax, Insurance and Other
 
Property operatingtax, insurance and other expense increased $33.6decreased $1.1 million or 19.7%, to $204.1$22.9 million for the three months ended SeptemberJune 30, 20172022 from $170.6$24.0 million for the three months ended SeptemberJune 30, 2016.2021.  The increasedecrease was dueattributable to an $33.2a $1.9 million decrease in property tax, insurance and other expense attributable to the non-comparable properties, which was partially offset by a $0.8 million increase in property operating expense attributable to the non-comparable propertiestax, insurance and a $0.3 million increase in property operatingother expense attributable to the comparable properties. The increase in property tax, insurance and other expense attributable to the comparable properties was primarily attributable to an increase in insurance expense premiums and ground lease rent due to percentage rent obligations and increases based on the consumer price index. These increases were partially offset by decreases in real estate tax assessments and the beneficial impact of successful real estate tax appeals in the current period.

General and Administrative
General and administrative expense increased $1.2 million to $13.3 million for the three months ended June 30, 2022 from $12.1 million for the three months ended June 30, 2021.  The increase was primarily attributable to an increase in non-cash compensation expense and an increase in payroll tax expense due to payroll tax credits in the prior year that did not recur in the current year.

Other Income (Expense), net

Other income (expense), net increased $10.4 million to income of $0.7 million for the three months ended June 30, 2022 from expense of $9.7 million for the three months ended June 30, 2021. The increase was primarily attributable to the reclassification of unrealized losses from accumulated other comprehensive income (loss) due to the discontinuation of certain cash flow hedges during the three months ended June 30, 2021.

Interest Expense
Interest expense decreased $2.5 million to $23.9 million for the three months ended June 30, 2022 from $26.4 million for the three months ended June 30, 2021. Interest expense decreased due to lower average debt balances and lower effective interest rates after taking into account the impact of interest rate swaps in each of the periods. The components of our interest expense for the three months ended June 30, 2022 and 2021 were as follows (in thousands):
For the three months ended June 30,
20222021$ Change
Senior Notes$9,688 $6,685 $3,003 
Revolver and Term Loans9,136 14,023 (4,887)
Mortgage loans3,329 4,294 (965)
Amortization of deferred financing costs1,417 1,364 53 
Undesignated interest rate swaps285 — 285 
Total interest expense$23,855 $26,366 $(2,511)

Loss (Gain) on Sale of Hotel Properties, net
During the three months ended June 30, 2022, we sold one hotel property for a sales price of approximately $14.5 million and recorded a net loss on the sale of approximately $0.3 million. During the three months ended June 30, 2021, we sold two hotel properties for a sales price of approximately $13.3 million and recorded a net gain on sale of approximately $0.1 million.

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Table of Contents
Comparison of the six months ended June 30, 2022 to the six months ended June 30, 2021
 For the six months ended June 30, 
 20222021$ Change
 (amounts in thousands)
Revenues   
Operating revenues   
Room revenue$486,455 $269,326 $217,129 
Food and beverage revenue52,055 19,225 32,830 
Other revenue34,890 25,255 9,635 
Total revenues573,400 313,806 259,594 
Expenses   
Operating expenses   
Room expense119,621 72,325 47,296 
Food and beverage expense37,939 13,265 24,674 
Management and franchise fee expense46,456 17,991 28,465 
Other operating expense145,542 106,003 39,539 
Total property operating expenses349,558 209,584 139,974 
Depreciation and amortization93,787 93,858 (71)
Impairment losses— 5,946 (5,946)
Property tax, insurance and other45,462 44,129 1,333 
General and administrative27,482 22,934 4,548 
Transaction costs198 255 (57)
Total operating expenses516,487 376,706 139,781 
Other income (expense), net8,006 (9,255)17,261 
Interest income519 604 (85)
Interest expense(48,416)(54,261)5,845 
Gain on sale of hotel properties, net1,053 1,186 (133)
Loss on extinguishment of indebtedness, net— (6,207)6,207 
Income (loss) before equity in income (loss) from unconsolidated joint ventures18,075 (130,833)148,908 
Equity in income (loss) from unconsolidated joint ventures405 (238)643 
Income (loss) before income tax expense18,480 (131,071)149,551 
Income tax expense(748)(268)(480)
Net income (loss)17,732 (131,339)149,071 
Net (income) loss attributable to noncontrolling interests:   
Noncontrolling interest in the Operating Partnership(21)664 (685)
Noncontrolling interest in consolidated joint ventures7 1,242 (1,235)
Net income (loss) attributable to RLJ17,718 (129,433)147,151 
Preferred dividends(12,557)(12,557)— 
Net income (loss) attributable to common shareholders$5,161 $(141,990)$147,151 








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Table of Contents
Revenues
Total revenues increased $259.6 million to $573.4 million for the six months ended June 30, 2022 from $313.8 million for the six months ended June 30, 2021. The increase was the result of a $217.1 million increase in room revenue, a $32.8 million increase in food and beverage revenue, and a $9.6 million increase in other revenue.

Room Revenue
Room revenue increased $217.1 million to $486.5 million for the six months ended June 30, 2022 from $269.3 million for the six months ended June 30, 2021.  The increase was the result of a $212.6 million increase in room revenue attributable to the comparable properties, and a $4.5 million increase in room revenue attributable to the non-comparable properties. The increase in room revenue from the comparable properties was attributable to an increase in RevPAR, including a significant increase in ADR, resulting from an increase in demand over the prior period. The increase was also attributable to the impact of hotels that were closed for all or a portion of the prior period being open for the entirety of the current period. Though RevPAR increased over the comparable period in 2021, it remained below the comparable period in 2019.

The following are the year-to-date key hotel operating expensestatistics for the comparable properties:
For the six months ended June 30,
202220212019
Occupancy67.9 %52.3 %79.7 %
ADR$186.66 $133.49 $189.78 
RevPAR$126.83 $69.76 $151.26 
Food and Beverage Revenue
Food and beverage revenue increased $32.8 million to $52.1 million for the six months ended June 30, 2022 from $19.2 million for the six months ended June 30, 2021 due to an increase in demand over the prior period. The increase in food and beverage revenue was due to an increase in group business and the reopening of certain food and beverage outlets. The increase was also attributable to the impact of hotels that were closed for all or a portion of the prior period being open for the entirety of the current period.
Other Revenue
Other revenue increased $9.6 million to $34.9 million for the six months ended June 30, 2022 from $25.3 million for the six months ended June 30, 2021.  The increase in other revenue was due to an increase in parking fees, resort fees, cancellation fees, and gift shop sales that corresponded to the increase in demand over the prior period.

Property Operating Expenses
Property operating expenses increased $140.0 million to $349.6 million for the six months ended June 30, 2022 from $209.6 million for the six months ended June 30, 2021. The increase was due to a $141.4 million increase in property operating expenses attributable to the comparable properties, which was partially offset by a $1.4 million decrease in property operating expenses attributable to the non-comparable properties.

The components of our property operating expenses for the comparable properties were as follows (in thousands):
For the six months ended June 30,
20222021$ Change
Room expense$116,354 $69,064 $47,290 
Food and beverage expense37,171 13,039 24,132 
Management and franchise fee expense44,686 16,822 27,864 
Other operating expenses141,301 99,190 42,111 
Total property operating expenses$339,512 $198,115 $141,397 

The increase in property operating expenses attributable to the comparable properties was due to higher room expense, food and beverage expense, and other operating costs.  Room expense, food and beverage expense, and other operating costs fluctuate based on various factors, including changesan increase in occupancy, labor costs, utilities and insurance costs.demand over the prior period. Management fees and franchise fees, which are computed asfee expense for the six months ended June 30, 2022 and 2021 included a percentage
31
Table of gross revenueContents
reduction in management and room revenue,franchise fee expense of $2.1 million and $9.1 million, respectively, decreased asrelated to the recognition of the Wyndham termination payment. The decrease in the recognition of the Wyndham termination payment was due to certain Wyndham agreements expiring in 2021 coupled with the remaining agreements being extended and recognized over a result of lower revenues at the comparable properties.longer period.

Impairment Losses
 
Depreciation and Amortization
Depreciation and amortization expense increased $4.3 million, or 10.4%, to $45.2 million forDuring the threesix months ended SeptemberJune 30, 2017 from $41.02021, we recorded impairment losses of $5.9 million for the three months ended September 30, 2016. The increase was a result of a $5.5 million increase in depreciation and amortization expense attributablerelated to the non-comparable properties, partially offset by a

$1.2 million decrease in depreciation and amortization expense attributable to the comparable properties as a result of furniture, fixtures and equipment at certaintwo hotel properties that were fully depreciatedsold in 2016.May 2021.


Property Tax, Insurance and Other
 
Property tax, insurance and other expense increased $3.0$1.3 million or 14.8%, to $23.6$45.5 million for the threesix months ended SeptemberJune 30, 20172022 from $20.6$44.1 million for the threesix months ended SeptemberJune 30, 2016.2021.  The increase was attributable to a $3.4 million increase in property tax, insurance and other expense attributable to the non-comparable properties, partially offset by a $0.4 million decrease in property tax, insurance and other expense attributable to the comparable properties.

General and Administrative
General and administrative expense increased $2.3 million, or 31.8%, to $9.5 million for the three months ended September 30, 2017 from $7.2 million for the three months ended September 30, 2016.  The increase in general and administrative expense was primarily attributable to a $2.4 million increase in compensation expense, partially offset by a net decrease of $0.1 million in other general and administrative costs, including legal fees and other professional fees and costs. The increase in compensation expense for the three months ended September 30, 2017 was due to an increase in salary, bonus, and other employee compensation costs.

Transaction Costs
Transaction costs increased $32.5 million to $32.6 million for the three months ended September 30, 2017 from $0.1 million for the three months ended September 30, 2016. The increase in transaction costs was attributable to approximately $30.3 million in transaction costs and $2.2 million in integration costs that were incurred by the Company related to the merger with FelCor.

Interest Expense
The components of our interest expense for the three months ended September 30, 2017 and 2016 were as follows (in thousands):
 For the three months ended September 30,    
 2017 2016 $ Change % Change
Senior Notes$3,980
 $—
 $3,980
 —%
Revolver and Term Loans9,834
 9,662
 172
 1.8%
Mortgage loans4,943
 4,009
 934
 23.3%
Amortization of deferred financing costs893
 881
 12
 1.4%
Total interest expense$19,650
 $14,552
 $5,098
 35.0%

Interest expense increased $5.1 million, or 35.0%, to $19.6 million for the three months ended September 30, 2017 from $14.6 million for the three months ended September 30, 2016.  The increase in interest expense was primarily due to assuming the Senior Notes and mortgage loans in the merger with FelCor.
Gain on Settlement of Investment in Loan

During the three months ended September 30, 2017, the Company recognized a gain on settlement of investment in loan of approximately $2.7 million as a result of the investment in loan maturing in September 2017.

Income Taxes
As part of our structure, we own TRSs that are subject to federal and state income taxes. The effective tax rates were 65.6% and 3.4% for the three months ended September 30, 2017 and 2016, respectively. Income tax expense increased $4.9 million to $6.4 million for the three months ended September 30, 2017 from $1.4 million for the three months ended September 30, 2016. The increase was due to deferred tax expense arising from an increase in income at a TRS during the three months ended September 30, 2017.



Comparison of the nine months ended September 30, 2017 to the nine months ended September 30, 2016
 For the nine months ended September 30,    
 2017 2016 $ Change % Change
 (amounts in thousands)  
Revenue 
  
  
  
Operating revenue 
  
  
  
Room revenue$770,751
 $777,211
 $(6,460) (0.8)%
Food and beverage revenue91,392
 82,602
 8,790
 10.6 %
Other revenue31,628
 28,729
 2,899
 10.1 %
Total revenue$893,771
 $888,542
 $5,229
 0.6 %
Expense 
  
  
  
Operating expense 
  
  
  
Room expense$176,523
 $173,783
 $2,740
 1.6 %
Food and beverage expense66,458
 59,477
 6,981
 11.7 %
Management and franchise fee expense86,110
 90,869
 (4,759) (5.2)%
Other operating expense195,000
 184,133
 10,867
 5.9 %
Total property operating expense524,091
 508,262
 15,829
 3.1 %
Depreciation and amortization122,136
 122,532
 (396) (0.3)%
Property tax, insurance and other60,929
 60,032
 897
 1.5 %
General and administrative28,757
 23,522
 5,235
 22.3 %
Transaction costs36,923
 257
 36,666
 — %
Total operating expense772,836
 714,605
 58,231
 8.1 %
Operating income120,935
 173,937
 (53,002) (30.5)%
Other income323
 86
 237
 — %
Interest income2,306
 1,240
 1,066
 86.0 %
Interest expense(48,527) (44,233) (4,294) 9.7 %
Gain on settlement of an investment in loan2,670
 —
 2,670
 — %
Income before equity in income from unconsolidated joint ventures77,707
 131,030
 (53,323) (40.7)%
Equity in income from unconsolidated joint ventures57
 —
 57
 — %
Income before income tax expense77,764
 131,030
 (53,266) (40.7)%
Income tax expense(9,362) (5,397) (3,965) 73.5 %
Income from operations68,402
 125,633
 (57,231) (45.6)%
Loss on sale of hotel properties(49) (155) 106
 (68.4)%
Net income68,353
 125,478
 (57,125) (45.5)%
Net loss (income) attributable to noncontrolling interests: 
  
  
  
Noncontrolling interest in consolidated joint ventures5
 (7) 12
 (171.4)%
Noncontrolling interest in the Operating Partnership(318) (553) 235
 (42.5)%
Preferred distributions from a consolidated joint venture(122) —
 (122) — %
Net income attributable to RLJ67,918
 124,918
 (57,000) (45.6)%
Preferred dividends(2,093) —
 (2,093) — %
Net income attributable to common shareholders$65,825
 $124,918
 $(59,093) (47.3)%

Revenue
Total revenue increased $5.2 million, or 0.6%, to $893.8 million for the nine months ended September 30, 2017 from $888.5 million for the nine months ended September 30, 2016. The increase was a result of an $8.8 million increase in food and beverage revenue and a $2.9 million increase in other operating department revenue, partially offset by a $6.5 million decrease in room revenue.

Room Revenue
Room revenue decreased $6.5 million, or 0.8%, to $770.8 million for the nine months ended September 30, 2017 from $777.2 million for the nine months ended September 30, 2016.  The decrease was a result of an $18.3 million decrease in room revenue attributable to the comparable properties, partially offset by an $11.9 million increase in room revenue attributable to the non-comparable properties. The decrease in room revenue from the comparable properties was attributable to a 2.1% decrease in RevPAR, led by RevPAR decreases in our Louisville and New York markets of 9.9% and 5.6%, respectively, which were partially offset by RevPAR increases in our Southern California and Washington D.C. markets of 4.6% and 3.7%, respectively.

The following are the year-to-date key hotel operating statistics for the comparable properties owned at September 30, 2017 and 2016, respectively:
 For the nine months ended September 30,  
 2017 2016 % Change
Number of comparable properties (at end of period)122
 122
 —
Occupancy78.5% 79.6% (1.4)%
ADR$166.64
 $167.94
 (0.8)%
RevPAR$130.85
 $133.69
 (2.1)%
Food and Beverage Revenue
Food and beverage revenue increased $8.8 million, or 10.6%, to $91.4 million for the nine months ended September 30, 2017 from $82.6 million for the nine months ended September 30, 2016. The increase was a result of a $10.3 million increase in food and beverage revenue attributable to the non-comparable properties, partially offset by a $1.5 million decrease in food and beverage revenue attributable to the comparable properties.
Other Revenue
Other revenue, which includes revenue derived from ancillary sources such as parking fees, golf, pool and other resort fees, gift shop sales and other guest service fees, increased $2.9 million, or 10.1%, to $31.6 million for the nine months ended September 30, 2017 from $28.7 million for the nine months ended September 30, 2016.  The increase was due to a $3.6 million increase in other revenue attributable to the non-comparable properties, partially offset by a $0.7 million decrease in other revenue attributable to the comparable properties.

Property Operating Expense
Property operating expense increased $15.8 million, or 3.1%, to $524.1 million for the nine months ended September 30, 2017 from $508.3 million for the nine months ended September 30, 2016. The increase was due to a $17.4 million increase in property operating expense attributable to the non-comparable properties, partially offset by a $1.6 million decrease in property operating expense attributable to the comparable properties. The decrease in property operating expense attributable to the comparable properties was primarily due to lower food and beverage expense and management and franchise fees. Management fees and franchise fees, which are computed as a percentage of gross revenue and room revenue, respectively, decreased as a result of lower revenues at the comparable properties.
Depreciation and Amortization
Depreciation and amortization expense decreased $0.4 million, or 0.3%, to $122.1 million for the nine months ended September 30, 2017 from $122.5 million for the nine months ended September 30, 2016. The decrease was a result of a $3.1 million decrease in depreciation and amortization expense attributable to the comparable properties as a result of furniture,

fixtures and equipment at certain hotel properties that were fully depreciated in 2016, partially offset by a $2.7 million increase in depreciation and amortization expense attributable to the non-comparable properties.

Property Tax, Insurance and Other
Property tax, insurance and other expense increased $0.9 million, or 1.5%, to $60.9 million for the nine months ended September 30, 2017 from $60.0 million for the nine months ended September 30, 2016.  The increase was attributable to a $0.5$4.5 million increase in property tax, insurance and other expense attributable to the comparable properties, which was partially offset by a $3.1 million decrease in property tax, insurance and a $0.4 millionother expense attributable to the non-comparable properties. The increase in property tax, insurance and other expense attributable to the non-comparable properties.comparable properties was primarily attributable to a benefit of $5.4 million during the six months ended June 30, 2021 related to the reversal of accrued real estate tax liabilities in excess of the amounts owed for certain of our California hotels acquired in our merger with FelCor Lodging Trust that did not recur in 2022. Additionally, the increase was attributable to an increase in insurance expense premiums and ground lease rent due to percentage rent obligations and increases based on the consumer price index. These increases were partially offset by decreases in other real estate tax assessments and the beneficial impact of successful real estate tax appeals in the current period.


General and Administrative
 
General and administrative expense increased $5.2$4.5 million or 22.3%, to $28.8$27.5 million for the ninesix months ended SeptemberJune 30, 20172022 from $23.5$22.9 million for the ninesix months ended SeptemberJune 30, 2016.2021. The increase in general and administrative expense was primarily attributable to a $5.9 million increase in compensation expense, partially offset by a net decrease of $0.7 million in other general and administrative costs, including legal fees and other professional fees and costs. The increase in compensation expense for the nine months ended September 30, 2017 was primarily due to a benefit of $2.8 million realized from the forfeiture of restricted shares and performance units upon the resignation of the Company's President and Chief Executive Officer during the nine months ended September 30, 2016. In addition, there was an increase in salary, bonus,non-cash compensation expense and other employee compensation costs.an increase in payroll tax expense due to payroll tax credits in the prior year that did not recur in the current year.


Transaction CostsOther Income (Expense), net

Transaction costsOther income (expense), net increased $36.7$17.3 million to $36.9income of $8.0 million for the ninesix months ended SeptemberJune 30, 20172022 from $0.3expense of $9.3 million for the ninesix months ended SeptemberJune 30, 2016.2021. The increase in transaction costs was primarily attributable to approximately $34.5 million in transaction coststhe reclassification of unrealized gains and $2.2 million in integration costs that were incurred by the Company relatedlosses from accumulated other comprehensive income (loss) due to the merger with FelCor.discontinuation of certain cash flow hedges in each of the periods.


Interest Expense
 
Interest expense decreased $5.8 million to $48.4 million for the six months ended June 30, 2022 from $54.3 million for the six months ended June 30, 2021.  Interest expense decreased due to lower average debt balances and lower effective interest rates after taking into account the impact of interest rate swaps in each of the periods. The components of our interest expense for the ninesix months ended SeptemberJune 30, 20172022 and 20162021 were as follows (in thousands):
For the six months ended June 30,
20222021$ Change
Senior Notes$19,431 $12,627 $6,804 
Revolver and Term Loans19,104 31,201 (12,097)
Mortgage loans6,539 7,748 (1,209)
Amortization of deferred financing costs3,101 2,685 416 
Non-cash interest expense related to interest rate hedges241 — 241 
Total interest expense$48,416 $54,261 $(5,845)

32
 For the nine months ended September 30,    
 2017 2016 $ Change % Change
Senior Notes$3,980
 $—
 $3,980
 — %
Revolver and Term Loans28,981
 29,138
 (157) (0.5)%
Mortgage loans12,969
 11,992
 977
 8.1 %
Amortization of deferred financing costs2,597
 3,103
 (506) (16.3)%
Total interest expense$48,527
 $44,233
 $4,294
 9.7 %

Interest expense increased $4.3 million, or 9.7%, to $48.5 million for the nine months ended September 30, 2017 from $44.2 million for the nine months ended September 30, 2016.  The increase in interest expense was primarily due to assuming the Senior Notes and mortgage loans in the merger with FelCor, partially offset by a decrease in amortizationTable of the deferred financing costs as a result of the accelerated amortization of the deferred financing costs associated with the debt refinancing transactions in 2016 and partially offset by the additional amortization of the costs capitalized in conjunction with the debt refinancing transactions in 2016.Contents

Gain on SettlementSale of Investment in LoanHotel Properties, net

During the ninesix months ended SeptemberJune 30, 2017, the Company recognized2022, we sold two hotel properties for a sales price of approximately $49.9 million and recorded a net gain on settlement of investment in loansale of approximately $2.7 million as a result of$1.1 million. During the investment in loan maturing in September 2017.

Income Taxes
As part of our structure, we own TRSs that are subject to federal and state income taxes. The effective tax rates were 12.5% and 4.1% for the ninesix months ended SeptemberJune 30, 20172021, we sold three hotel properties for a sales price of approximately $17.7 million and 2016, respectively. Income tax expense increased $4.0recorded a net gain on sale of approximately $1.2 million.


million to $9.4 million for the nine months ended September 30, 2017 from $5.4 million for the nine months ended September 30, 2016. The increase was due to deferred tax expense arising from an increase in income at a TRS during the nine months ended September 30, 2017.

Non-GAAP Financial Measures
 
We consider the following non-GAAP financial measures useful to investors as key supplemental measures of our performance: (1) FFO, (2) Adjusted FFO, (3) EBITDA, (4) EBITDAreand (4)(5) Adjusted EBITDA. These non-GAAP financial measures should be considered along with, but not as alternatives to, net income or loss as a measure of our operating performance. FFO, Adjusted FFO, EBITDA, EBITDAre,and Adjusted EBITDA, as calculated by us, may not be comparable to FFO, Adjusted FFO, EBITDA, EBITDAre and Adjusted EBITDA as reported by other companies that do not define such terms exactly as we define such terms.


Funds From Operations
 
We calculate funds from operations ("FFO") in accordance with standards established by the National Association of Real Estate Investment Trusts ("NAREIT"), which defines FFO as net income or loss, (calculated in accordance with GAAP), excluding gains or losses from sales of real estate, impairment, the cumulative effect of changes in accounting principles, plus depreciation and amortization, and adjustments for unconsolidated partnerships and joint ventures. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most real estate industry investors consider FFO to be helpful in evaluating a real estate company’s operations. We believe that the presentation of FFO provides useful information to investors regarding our operating performance and can facilitate comparisons of operating performance between periods and between REITs, even though FFO does not represent an amount that accrues directly to common shareholders. Our calculation of FFO may not be comparable to measures calculated by other companies who do not use the NAREIT definition of FFO or do not calculate FFO per diluted share in accordance with NAREIT guidance. Additionally, FFO may not be helpful when comparing us to non-REITs. We present FFO attributable to common shareholders, which includes our OP units, because our OP units may be redeemed for common shares. We believe it is meaningful for the investor to understand FFO attributable to all common shares and OP units.
 
We further adjust FFO for certain additional items that are not in NAREIT’s definition of FFO, such as hotel transaction costs, pre-opening costs, non-cash income tax expense or benefit, the amortization of share-based compensation, non-cash expense related to discontinued interest rate hedges, and certain other expenses that we consider outside the normal course of operations. We believe that Adjusted FFO provides useful supplemental information to investors regarding our ongoing operating performance that, when considered with net income and FFO, is beneficial to an investor’s understanding of our operating performance.

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Table of Contents
The following table is a reconciliation of our GAAP net income (loss) to FFO attributable to common shareholders and unitholders and Adjusted FFO attributable to common shareholders and unitholders for the three and ninesix months ended SeptemberJune 30, 20172022 and 20162021 (in thousands):

 For the three months ended September 30, For the nine months ended September 30,
 2017 2016 2017 2016
Net income$4,111
 $41,389
 $68,353
 $125,478
Preferred dividends(2,093) —
 (2,093) —
Preferred distributions - consolidated joint venture(122) —
 (122) —
Depreciation and amortization45,231
 40,953
 122,136
 122,532
Loss on sale of hotel properties19
 5
 49
 155
Noncontrolling interest in consolidated joint ventures(32) (32) 5
 (7)
Adjustments related to consolidated joint ventures (1)(46) (39) (109) (116)
Adjustments related to unconsolidated joint ventures (2)193
 —
 193
 —
FFO47,261
 82,276
 188,412
 248,042
Transaction costs32,607
 98
 36,923
 257
Gain on settlement of investment in loan(2,670) —
 (2,670) —
Amortization of share-based compensation2,495
 1,921
 7,964
 3,935
Non-cash income tax expense5,711
 1,189
 7,972
 4,217
Loan related costs (3)—
 —
 —
 1,247
Other expenses (income) (4)1,116
 (82) 1,116
 604
Adjusted FFO$86,520
 $85,402
 $239,717
 $258,302
 For the three months ended June 30,For the six months ended June 30,
 2022202120222021
Net income (loss)$33,202 $(52,221)$17,732 $(131,339)
Preferred dividends(6,279)(6,279)(12,557)(12,557)
Depreciation and amortization46,922 46,915 93,787 93,858 
Loss (gain) on sale of hotel properties, net364 (103)(1,053)(1,186)
Impairment losses— — — 5,946 
Noncontrolling interest in consolidated joint ventures(111)506 7 1,242 
Adjustments related to consolidated joint ventures (1)(49)(75)(98)(150)
Adjustments related to unconsolidated joint ventures (2)295 291 590 585 
FFO74,344 (10,966)98,408 (43,601)
Transaction costs136 195 198 255 
Loss on extinguishment of indebtedness, net— 6,207 — 6,207 
Amortization of share-based compensation5,470 4,848 10,654 7,600 
Non-cash income tax expense135 — — — 
Derivative losses (gains) in accumulated other comprehensive income (loss) reclassified to earnings (3)— 10,658 (5,866)10,658 
Other expenses (4)914 353 1,498 409 
Adjusted FFO$80,999 $11,295 $104,892 $(18,472)
 
(1)Includes depreciation and amortization expense allocated to the noncontrolling interest in joint ventures.
(2)Includes depreciation and amortization expense of unconsolidated joint ventures.
(3)Represents debt modification costs.
(4)Represents income and expenses outside of the normal course of operations, including hurricane-related costs that are not reimbursed by insurance and property-level severance costs.
(1)Includes depreciation and amortization expense allocated to the noncontrolling interest in the consolidated joint ventures.
Earnings Before Interest, Taxes, Depreciation(2)Includes our ownership interest in the depreciation and Amortizationamortization expense of the unconsolidated joint ventures.
(3)Reclassification of interest rate swap losses (gains) from accumulated other comprehensive income (loss) to earnings for discontinued interest rate hedges.
(4)Represents expenses and income outside of the normal course of operations, including $0.5 million and $0.8 million of non-cash interest expense related to discontinued interest rate hedges during the three and six months ended June 30, 2022, respectively.

EBITDA and EBITDAre
 
Earnings before interest, taxes, depreciation and amortization ("EBITDA") is defined as net income or loss excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sales of assets;tax expense; and (3) depreciation and amortization.amortization expense. We consider EBITDA useful to an investor in evaluating and facilitating comparisons of our operating performance between periods and between REITs by removing the impact of our capital structure (primarily interest expense) and asset base (primarily depreciation and amortization)amortization expense) from our operating results.  In addition, EBITDA is used as one measure in determining the value of hotel acquisitions and disposals.
In addition to EBITDA, we present EBITDAre in accordance with NAREIT guidelines, which defines EBITDAre as net income or loss excluding interest expense, income tax expense, depreciation and amortization expense, gains or losses from sales of real estate, impairment, and adjustments for unconsolidated joint ventures. We believe that the presentation of EBITDAre provides useful information to investors regarding our operating performance and can facilitate comparisons of operating performance between periods and between REITs.

We also present Adjusted EBITDA, attributable to common shareholders, which includes our OP units, because our OP units may be redeemedadditional adjustments for common shares.  We believe it is meaningful for the investor to understand EBITDA attributable to all common shares and OP units.
We further adjust EBITDA for certain additional items such as gains or losses on dispositions, hotel transaction costs, impairment losses,pre-opening costs, the amortization of share-based compensation, non-cash expense related to discontinued interest rate hedges, and certain other expenses that we consider outside the normal course of operations. We believe that Adjusted EBITDA provides useful supplemental information to investors regarding our ongoing operating performance that, when considered with net income, EBITDA, and EBITDAre, is beneficial to an investor’s understanding of our operating performance.
 

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Table of Contents
The following table is a reconciliation of our GAAP net income (loss) to EBITDA, attributable to common shareholders and unitholdersEBITDAre and Adjusted EBITDA attributable to common shareholders and unitholders for the three and ninesix months ended SeptemberJune 30, 20172022 and 20162021 (in thousands):
 For the three months ended June 30,For the six months ended June 30,
 2022202120222021
Net income (loss)$33,202 $(52,221)$17,732 $(131,339)
Depreciation and amortization46,922 46,915 93,787 93,858 
Interest expense, net of interest income23,508 26,146 47,897 53,657 
Income tax expense558 154 748 268 
Adjustments related to unconsolidated joint ventures (1)408 408 815 818 
EBITDA104,598 21,402 160,979 17,262 
Loss (gain) on sale of hotel properties, net364 (103)(1,053)(1,186)
Impairment losses— — — 5,946 
EBITDAre
104,962 21,299 159,926 22,022 
Transaction costs136 195 198 255 
Loss on extinguishment of indebtedness, net— 6,207 — 6,207 
Amortization of share-based compensation5,470 4,848 10,654 7,600 
Derivative losses (gains) in accumulated other comprehensive income (loss) reclassified to earnings (2)— 10,658 (5,866)10,658 
Other expenses (3)410 353 658 409 
Adjusted EBITDA$110,978 $43,560 $165,570 $47,151 
 For the three months ended September 30, For the nine months ended September 30,
 2017 2016 2017 2016
Net income$4,111
 $41,389
 $68,353
 $125,478
Depreciation and amortization45,231
 40,953
 122,136
 122,532
Interest expense, net (1)18,873
 14,546
 47,589
 44,214
Income tax expense6,375
 1,439
 9,362
 5,397
Noncontrolling interest in consolidated joint ventures(32) (32) 5
 (7)
Adjustments related to consolidated joint ventures (2)(59) (39) (121) (116)
Adjustments related to unconsolidated joint ventures (3)236
 —
 236
 —
EBITDA74,735
 98,256
 247,560
 297,498
Noncontrolling interest in preferred distributions to consolidated joint venture(6) —
 (6) —
Transaction costs32,607
 98
 36,923
 257
Loss on sale of hotel properties19
 5
 49
 155
Gain on settlement of investment in loan(2,670) —
 (2,670) —
Amortization of share-based compensation2,495
 1,921
 7,964
 3,935
Loan related costs (4)—
 —
 —
 924
Other expenses (income) (5)1,116
 (82) 1,116
 604
Adjusted EBITDA$108,296
 $100,198
 $290,936
 $303,373


(1)Excludes amounts attributable to investment in loans of $0.4 million and $1.4 million for the three and nine months ended September 30, 2017, respectively, and $0.4 million and $1.2 million for the three and nine months ended September 30, 2016, respectively.
(2)Includes interest, depreciation, and amortization expense allocated to the noncontrolling interest in joint ventures.
(3)Includes interest, depreciation, and amortization expense of unconsolidated joint ventures.
(4)Represents debt modification costs.
(5)Represents income and expenses outside of the normal course of operations, including hurricane-related costs that are not reimbursed by insurance and property-level severance costs.

(1)Includes our ownership interest in the interest, depreciation, and amortization expense of the unconsolidated joint ventures.
(2)Reclassification of interest rate swap losses (gains) from accumulated other comprehensive income (loss) to earnings for discontinued interest rate hedges.
(3)Represents expenses and income outside of the normal course of operations.

Liquidity and Capital Resources
 
Our short-term liquidity requirements consist primarily of the funds necessary to pay for operating expenses and other expenditures directly associated with our hotel properties, including:

•funds necessary to pay for the costs of acquiring hotel properties;

•redevelopments, conversions, renovations and other capital expenditures that need to be made periodically to our hotel properties;
•recurring maintenance and capital expenditures necessary to maintain our hotel properties in accordance with brand standards;
 
•interest expense and scheduled principal payments on outstanding indebtedness; and
 
•distributions necessary to qualify for taxation as a REIT.on common and preferred shares; and

We expect to meet our short-term liquidity requirements generally through the net cash provided by operations, existing cash balances and, if necessary, short-term borrowings under our Revolver, of which $600.0 million was available at September 30, 2017, or proceeds from public offerings of common shares.
Our long-term liquidity requirements consist primarily of the funds necessary to pay for the costs of acquiring additional hotel properties, the redevelopments, renovations, expansions•corporate and other capital expenditures that need to be made periodically to our hotel properties,general and scheduled debt payments, at maturity or otherwise. We expect to meet our long-term liquidity requirements through various sources of capital, including our Revolver and future equity (including OP units) or debt offerings, existing working capital, net cash provided by operations, long-term mortgage loans and other secured and unsecured borrowings.

Sources and Uses of Cashadministrative expenses.
 
As of SeptemberJune 30, 2017,2022, we had $421.2$555.8 million of cash and cash equivalents as compared to $456.7 million at December 31, 2016.and restricted cash reserves.

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Table of Contents
Sources and Uses of Cash
 
Cash flows from Operating Activities
 
NetThe net cash flow provided by operating activities totaled $207.3$116.3 million and $250.4the net cash flow used in operating activities totaled $24.0 million for the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively. Our cash flows provided by or used in operating activities generally consist of the net cash generated by our hotel operations, partially offset by the cash paid for corporate expenses and other working capital changes. Refer to the "Results of Operations" section for further discussion of our operating results for the ninesix months ended SeptemberJune 30, 20172022 and 2016.2021.

Cash flows from Investing Activities
 
NetThe net cash flow used in investing activities totaled $82.3$4.8 million for the ninesix months ended SeptemberJune 30, 20172022 primarily due to $58.9the $51.4 million in routine capital improvements and additions to our hotel properties and a cash payment of $41.9 million for the acquisition of FelCor.properties. The net cash flow used in investing activities was partially offset by $12.8the $48.1 million in proceeds onfrom the settlementsale of an investment in loan and ahotel properties.

The net decrease in the restricted cash reserves of $5.9 million.

Net cash flow used in investing activities totaled $66.4$10.7 million for the ninesix months ended SeptemberJune 30, 20162021 primarily due to $58.9$25.1 million in routine capital improvements and additions to our hotel properties and the net increase in the restricted cash reserves of $9.9 million.properties. The net cash flow used in investing activities was partially offset by $2.6$16.3 million of netin proceeds from the sale of one hotel property.properties.

Cash flows from Financing Activities
 
NetThe net cash flow used in financing activities totaled $160.5$269.6 million for the ninesix months ended SeptemberJune 30, 20172022 primarily due to $151.4the $200.0 million repayment of the outstanding balance on the Revolver, $47.4 million paid to repurchase common shares under a share repurchase program, $16.1 million in distributions to shareholders and unitholders, $3.2$2.6 million in mortgage loans principal payments,distributions to joint venture partners, and $4.8$3.6 million paid to repurchase common shares.shares to satisfy employee tax withholding requirements.


NetThe net cash flow used in financing activities totaled $139.6$203.4 million for the ninesix months ended SeptemberJune 30, 20162021 primarily due to $124.0$200.0 million in repayment on the Revolver, $356.3 million in repayment of term loans, $120.5 million in repayment of mortgage loans, $15.9 million in distributions to shareholders and unitholders, $18.2$7.7 million in deferred financing cost payments, $2.1 million paid to repurchase common shares $5.3to satisfy employee tax withholding requirements, and $1.5 million in deferred financing cost payments and $2.8 million inscheduled mortgage loansloan principal payments. The net cash flow used in financing activities for the six months ended June 30, 2021 was partially offset by $11.0$500.0 million in gross proceeds from additional mortgage loan debt.the issuance of $500.0 million aggregate principal amount of senior notes due 2026 in June 2021.


Capital Expenditures and Reserve Funds
 
We maintain each of our hotel properties in good repair and condition and in conformity with applicable laws and regulations, franchise agreements and management agreements. The cost of all such routine improvements and alterations are paid out of furniture, fixtures and equipment ("FF&E")&E reserves, which are funded by a portion of each hotel property’s gross revenues. Routine capital expenditures aremay be administered by the property management companies. However, we have approval rights over the capital expenditures as part of the annual budget process for each of our hotel properties.

From time to time, certain of our hotelshotel properties may undergo renovations as a result of our decision to upgrade portions of the hotels, such as guestrooms, public space, meeting space, and/or restaurants, in order to better compete with other hotels and alternative lodging options in our markets. In addition, upon acquisition of a hotel property we often are required to complete a property improvement plan in order to bring the hotel up to the respective franchisor’s standards. If permitted by the terms of the management agreement, funding for a renovation will first come from the FF&E reserves. To the extent that the FF&E reserves are not available or sufficient to cover the cost of the renovation, we will fund all or the remaining portion of the renovation with cash and cash equivalents on hand, our Revolver and/or other sources of available liquidity.

With respect to some of our hotels that are operated under franchise agreements with major national hotel brands and for some of our hotels subject to first mortgage liens, we are obligated to maintain FF&E reserve accounts for future capital expenditures at these hotels. The amount funded into each of these reserve accounts is generally determined pursuant to the management agreements, franchise agreements and/or mortgage loan documents for each of the respective hotels, and typically ranges between 3.0% and 5.0% of the respective hotel’s total gross revenue. As of SeptemberJune 30, 2017,2022, approximately $73.4$37.6 million was held in FF&E reserve accounts for future capital expenditures.


36
Off-Balance Sheet Arrangements
AsTable of September 30, 2017, we had no off-balance sheet arrangements.Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk.Risk
 
Market risk includes the risks that arise from changes in interest rates, equity prices and other market changes that affect market sensitive instruments. Our primary market risk exposure is to changes in interest rates on our variable rate debt. As of SeptemberJune 30, 2017,2022, we had approximately $1.6$1.2 billion of total variable rate debt outstanding (or 58.1%53.9% of total indebtedness) with a weighted-average interest rate of 3.38%3.88% per annum. After taking into consideration the effect of interest rate swaps, $227.0 million (or 8.1%100.0% of our total indebtedness)indebtedness was subject to variable rates. Iffixed or effectively fixed. As of June 30, 2022, if market interest rates on our variable rate debt outstanding as of September 30, 2017not subject to interest rate swaps were to increase by 1.00%, or 100 basis points, interest expense would decreasehave no impact on future earnings and cash flows, by approximately $2.3 million annually, taking into account our existing contractual hedging arrangements.
 
Our interest rate risk objectives are to limit the impact of interest rate fluctuations on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, we manage our exposure to fluctuations in market interest rates through the use of fixed rate debt instruments to the extent that reasonably favorable rates are obtainable. We have entered into derivative financial instruments such as interest rate swaps to mitigate our interest rate risk or to effectively lock the interest rate on a portion of our variable rate debt. We do not enter into derivative or interest rate transactions for speculative purposes.
 
The following table provides information about our financial instruments that are sensitive to changes in interest rates. For debt obligations outstanding as of SeptemberJune 30, 2017,2022, the following table presents the principal repayments and related weighted-average interest rates by contractual maturity dates (in thousands):
 20222023202420252026ThereafterTotal
Fixed rate debt (1)$— $— $— $— $500,000 $525,000$1,025,000 
Weighted-average interest rate— %— %— %— %3.75 %4.05 %3.90 %
Variable rate debt (1)$— $618,662 $181,000 $400,000$—$— $1,199,662 
Weighted-average interest rate (2)— %4.08 %2.95 %4.00 %— %— %3.88 %
Total (3)$— $618,662 $181,000 $400,000$500,000$525,000$2,224,662 
 2017 2018 2019 2020 2021 Thereafter Total
Fixed rate debt (1)$575
 $3,580
 $3,765
 $3,936
 $4,166
 $1,164,308
 $1,180,330
Weighted-average interest rate5.00% 5.00% 5.00% 5.00% 5.00% 5.69% 5.68%
Variable rate debt (1)(2)$750
 $378,250
 $625,000
 $—
 $485,000
 $150,000
 $1,639,000
Weighted-average interest rate (3)4.04% 4.08% 3.19% —% 3.06% 3.43% 3.38%
Total (4)$1,325
 $381,830
 $628,765
 $3,936
 $489,166
 $1,314,308
 $2,819,330


(1)Excludes $2.8 million, $0.6 million and $11.9 million of net deferred financing costs on the Term Loans, mortgage loans and Senior Notes, respectively.
(1)Excludes $4.5 million and $0.8 million of net deferred financing costs on the Term Loans and mortgage loans, respectively.
(2)Although the current maturity date for the $85.0 million mortgage loan with Scotiabank is December 2017, the mortgage loan can be extended for one year, subject to certain lender requirements.
(3)The weighted-average interest rate gives effect to interest rate swaps, as applicable.
(4)Excludes a total of $71.7 million related to fair value adjustments on debt.
(2)The weighted-average interest rate gives effect to interest rate swaps, as applicable.
(3)Excludes $2.4 million related to a fair value adjustment on debt.
 
Our ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during future periods, prevailing interest rates and our hedging strategies at that time.
 
Changes in market interest rates on our fixed rate debt impact the fair value of our debt, but such changes have no impact to our consolidated financial statements. As of SeptemberJune 30, 2017,2022, the estimated fair value of our fixed rate debt was $1.2 billion,$881.5 million, which is based on having the same debt service requirements that could have been borrowed at the date presented, at prevailing current market interest rates. If interest rates were to rise by 1.00%, or 100 basis points, and our fixed rate debt balance remains constant, we expect the fair value of our debt to decrease by approximately $63.8$42.3 million.



Item 4.Controls and Procedures.Procedures
 
Evaluation of Disclosure Controls and Procedures
 
In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company’s management, under the supervision and participation of the Company's Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of SeptemberJune 30, 2017.2022.


On August 31, 2017, the Company completed its merger transaction with FelCor. As permitted by SEC guidance for newly acquired businesses, the Company excluded FelCor from its assessment
37
Table of internal control over financial reporting. The total value of FelCor's assets acquired by the Company in the merger was approximately $3.0 billion, which represents approximately 43% of the Company total assets as of September 30, 2017. The Company is currently in the process of integrating FelCor's operations into its internal control structure. The Company does not believe that any of these integration activities will have a material impact to the Company's internal control over financial reporting.Contents
Changes in Internal Control over Financial Reporting
 
There have been no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15 and 15d-15 of the Exchange Act) during the period ended SeptemberJune 30, 20172022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.


PART II.  OTHER INFORMATION


Item 1.Legal Proceedings.Proceedings
 
The nature of the operations of our hotels exposes our hotels,hotel properties, the Company and the Operating Partnership to the risk of claims and litigation in the normal course of their business. Other than routine litigation arising out of the legal proceedings mentioned below,ordinary course of business, the Company is not presently subject to any material litigation nor, to the Company's knowledge, is any material litigation threatened against the Company.


The Company and several affiliated entities were named as defendants in four putative shareholder class action lawsuits filed in connection with RLJ's merger with FelCor. The first case, Assad v. FelCor Lodging Trust, Inc. et al., Case No. 1:17-cv-01744 (D. Md.) (the “Assad Lawsuit”), named as defendants the Company and certain affiliated entities, as well as FelCor, its former directors, and FelCor LP. The Assad Lawsuit was filed on June 26, 2017 in the United States District Court for the District of Maryland (the "Maryland Court"). The second case, Bagheri v. FelCor Lodging Trust, Inc., et al., Case No. 3:17-cv-01892 (the “Bagheri Lawsuit”), named as defendants the Company and certain affiliated entities, as well as FelCor, its former directors, and FelCor LP. The Bagheri Lawsuit was filed on July 17, 2017 in the United States District Court for the Northern District of Texas but was subsequently transferred to the Maryland Court. The third case, Johnson v. FelCor Lodging Trust Inc., et al., Case No. 1:17-cv-01786 (D. Md.) (the "Johnson Lawsuit"), named as defendants FelCor and its former directors. The Johnson Lawsuit was filed on June 28, 2017 in the Maryland Court. The fourth case, Sachs Investment Group v. FelCor Lodging Trust Inc., et al., Case No. 1:17-cv-01933 (D. Md.) (the "Sachs Lawsuit"), named as defendants FelCor and its former directors. The Sachs Lawsuit was filed on July 11, 2017 in the Maryland Court. Each of the lawsuits allege violations of the Securities and Exchange Act of 1934 (the “Exchange Act”) arising in connection with the filing of the Company's Registration Statement on Form S-4 (the "Registration Statement") that was filed in connection with the Company's merger with FelCor. The plaintiffs in the lawsuits sought, among other things, damages, rescission of the Mergers, changes to the Registration Statement, an award of attorney's fees, and declaratory relief stating that the defendants violated the Exchange Act.

On July 21, 2017, the plaintiff in the Johnson Lawsuit filed a motion for preliminary injunction seeking to enjoin the Mergers. On August 8, 2017, however, the plaintiff withdrew that motion and represented that certain supplemental disclosures made by FelCor had addressed the basis for its preliminary injunction request.

On August 10, 2017, an order was entered consolidating the three original Maryland cases under the caption In Re FelCor Lodging Securities Litig., Case No. 1:17-cv-1786 (the "Consolidated Action"). The Assad Lawsuit was designated as the lead case for the Consolidated Action. On September 28, 2017, the Bagheri Lawsuit was also consolidated into the Consolidated Action.

On August 11, 2017, the Maryland Court entered an order regarding the selection of a Lead Plaintiff for the Consolidated Action. No stockholder moved for appointment and no Lead Plaintiff was been appointed by the Court.

On October 26, 2017, the plaintiff and defendants in the Bagheri Lawsuit filed a stipulation of voluntary dismissal without prejudice. The Maryland Court entered an order dismissing the lawsuit that same day, and ordered the clerk to close the case.

On November 2, 2017, the plaintiffs in the Assad, Johnson, and Sachs lawsuits filed a notice of voluntary dismissal without prejudice. The Maryland Court entered an order dismissing the lawsuit that same day.

Item 1A.Risk Factors.Factors
 
For a discussion of our potential risks and uncertainties, please refer to the "Risk Factors" sectionsections in theour Annual Report, which is accessible on the SEC’s website at www.sec.gov. Other than the risks related to the Merger Agreement set forth below, thereThere have been no material changes to the risk factors previously disclosed in theour Annual Report.


On August 31, 2017, the Company, the Operating Partnership, Rangers Sub I, LLC, a wholly owned subsidiary of the Operating Partnership ("Rangers"), and Rangers Sub II, LP, a wholly owned subsidiary of the Operating Partnership ("Partnership Merger Sub"), consummated the transactions contemplated by the definitive Agreement and Plan of Merger (the "Merger Agreement"), dated as of April 23, 2017, with FelCor and FelCor Lodging Limited Partnership ("FelCor LP") pursuant to which Partnership Merger Sub merged with and into FelCor LP, with FelCor LP surviving as a wholly owned subsidiary of the Operating Partnership (the "Partnership Merger"), and, immediately thereafter, FelCor merged with and into Rangers, with Rangers surviving as a wholly owned subsidiary of the Operating Partnership (the "REIT Merger" and, together with the Partnership Merger, the "Mergers").
Risks Related to the Mergers
We expect to incur substantial expenses related and unrelated to the Mergers.
We have incurred substantial legal, accounting, financial advisory and other costs, and our management has devoted considerable time and effort in connection with the Mergers. We expect to incur substantial expenses in connection with integrating the business, operations, network, systems, technologies, policies and procedures of the two companies. The fees and expenses may be significant and could have an adverse impact on our results of operations.

Although we have assumed that a certain level of integration expenses would be incurred, there are a number of factors beyond our control that could affect the total amount or the timing of the integration expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. As a result, the transaction and integration expenses associated with the Mergers could, particularly in the near term, exceed the savings that we expect to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the integration of the businesses.

We may be unable to integrate the businesses successfully and realize the anticipated synergies and other expected benefits of the Mergers on the anticipated timeframe or at all.
The Mergers involved the combination of two companies that previously operated as independent public companies. We expect the combined company to benefit from the elimination of duplicative costs associated with supporting a public company platform and the resulting economies of scale. These savings are not expected to be realized until the companies are fully integrated, which is not expected to occur until 2018. We will be required to devote significant management attention and resources to the integration of the combined company's business practices and operations. The potential difficulties we may encounter in the integration process include the following:
the inability to successfully combine the businesses in a manner that permits us to achieve the anticipated cost savings from the Mergers, which would result in the anticipated benefits of the Mergers not being realized in the timeframe currently anticipated or at all;
the complexities associated with integrating personnel from the two companies;
the complexities of combining two companies with different histories, cultures, geographic footprints and hotel properties;
potential unknown liabilities and unforeseen increased expenses, delays or conditions associated with the Mergers; and

performance shortfalls as a result of the diversion of management’s attention caused by completing the Mergers and integrating the companies’ operations.
For all these reasons, you should be aware that it is possible that the integration process could result in the distraction of our management, the disruption of our ongoing business or inconsistencies in our operations, services, standards, controls, policies and procedures, any of which could adversely affect our ability to deliver exceptional service to our hotel guests, to maintain relationships with our guests, vendors and employee, or to achieve the anticipated benefits of the Mergers, or could otherwise materially and adversely affect our business and financial results.

Our future results will suffer if we do not effectively manage our expanded operations following the Mergers.

We expect to continue to expand our operations through additional acquisitions of properties, some of which may involve complex challenges. Our future success will depend, in part, upon our ability to manage our expansion opportunities, which may pose substantial challenges for us to integrate new operations into our existing business in an efficient and timely manner, and upon our ability to successfully monitor our operations, costs, regulatory compliance and service quality, and to maintain other necessary internal controls. There is no assurance that our expansion or acquisition opportunities will be successful, or that we will realize our expected operating efficiencies, cost savings, revenue enhancements, synergies or other benefits.
The market price of our common shares may decline as a result of the Mergers and may be affected by factors different from those that affected the price of our common shares before the Mergers.

The market price of our common shares may decline if we do not achieve the perceived benefits of the Mergers or the effect of the Mergers on our financial results is not consistent with the expectations of financial or industry analysts.

In addition, the consummation of the Mergers resulted in the combination of two companies that previoiusly operated as independent public companies. The two companies had different histories, markets, hotel properties and customer bases. For example, FelCor operated in different geographic markets than us and owned hotel properties that operated under different hotel brands from ours. As a result, while we expect to benefit from certain synergies, we may also encounter new risks and liabilities associated with these differences. Our shareholders own interests in a combined company operating an expanded business and may not wish to continue to invest in the combined company, or for other reasons may wish to dispose of some or all of our common shares. If large amounts of our Common Shares are sold, the price of our Common Shares could decline.

An adverse judgment in the shareholder litigation could adversely affect the Company.

Four putative class actions have been filed by purported stockholders of FelCor challenging the Mergers. For more information on the four putative class actions, see "Legal Proceedings". It is possible that our shareholders or former FelCor stockholders may file additional lawsuits challenging the Mergers, which may name us as defendants. The outcome of such lawsuits cannot be assured, including the amount of costs associated with defending these claims or any other liabilities that may be incurred in connection with the litigation of these claims. Whether or not any plaintiff's claim is successful, this type of litigation may result in significant costs and divert management's attention and resources, which could adversely affect our business.

Risks Related to our Business Following the Mergers

We may not continue to pay dividends at or above the rate previously paid by us.

Our shareholders may not receive dividends at the same rate that they did as our shareholders prior to the REIT Merger for various reasons, including the following:
we may not have enough cash to pay such dividends due to changes in our cash requirements, capital spending plans, cash flow or financial position;
decisions on whether, when and in what amounts to make any future dividends will remain at all times entirely at the discretion of our board of trustees, which reserves the right to change our dividend practices at any time and for any reason; and
the amount of dividends that our subsidiaries may distribute to us may be subject to restrictions imposed by state law and restrictions imposed by the terms of any current or future indebtedness that these subsidiaries may incur. 

Our shareholders will have no contractual or other legal right to dividends that have not been declared by our board of trustees.

We will have a significant amount of indebtedness and may need to incur more in the future.

As a result of the Mergers, we have substantial indebtedness. In addition, in connection with executing our business strategies, we expect to continue to evaluate the possibility of acquiring additional properties and making strategic investments, and we may elect to finance these endeavors by incurring additional indebtedness. The amount of such indebtedness could have material adverse consequences for us, including:
hindering our ability to adjust to changing market, industry or economic conditions;
limiting our ability to access the capital markets to raise additional equity or refinance maturing debt on favorable terms or to fund acquisitions or emerging businesses;
limiting the amount of free cash flow available for future operations, acquisitions, dividends, share repurchases or other uses;
making us more vulnerable to economic or industry downturns, including interest rate increases; and
placing us at a competitive disadvantage compared to less leveraged competitors.  
Moreover, to respond to competitive challenges, we may be required to raise substantial additional capital to execute our business strategy. Our ability to arrange additional financing will depend on, among other factors, our financial position and performance, as well as prevailing market conditions and other factors beyond our control. If we are able to obtain additional financing, our credit ratings could be further adversely affected, which could further raise our borrowing costs and further limit our future access to capital and our ability to satisfy our obligations under our indebtedness.

Risks Related to Taxes and the Mergers

We would incur adverse tax consequences if FelCor failed to qualify as a REIT for U.S. federal income tax
purposes prior to the Mergers.

In connection with the closing of the Mergers, FelCor received an opinion of counsel to the effect that it qualified as a REIT for U.S. federal income tax purposes under the Code through the time of the Mergers. FelCor, however, did not request a ruling from the Internal Revenue Service (the “IRS”) that it qualified as a REIT. If, notwithstanding this opinion, FelCor’s REIT status prior to the Mergers were successfully challenged, we would face serious tax consequences that would substantially reduce our core funds from operations, and cash available for distribution, including cash available to pay dividends to our shareholders, because:
FelCor, would be subject to U.S. federal, state and local income tax on its net income at regular corporate rates for the years that it did not qualify as a REIT (and, for such years, would not be allowed a deduction for dividends paid to shareholders in computing its taxable income) and we would succeed to the liability for such taxes;
the deemed sale of assets by FelCor in the REIT Merger would be subject to U.S. federal, state and local income tax at regular corporate rates (and FelCor would not be allowed a deduction for dividends paid for the deemed liquidating distribution paid to its shareholders) and we would succeed to the liability for such taxes; and
we would succeed to any earnings and profits accumulated by FelCor, as applicable, for the tax periods that FelCor did not qualify as a REIT and we would have to pay a special dividend and/or employ applicable deficiency dividend procedures (including interest payments to the IRS) to eliminate such earnings and profits to maintain our REIT qualification.
As a result of these factors, FelCor’s failure to qualify as a REIT prior to the Mergers could impair our ability to expand our business and raise capital and could materially adversely affect the value of our stock.  In addition, even if FelCor qualified as a REIT for the duration of its existence, if there is an adjustment to FelCor’s taxable income or dividends paid deductions, we could be required to elect to use the deficiency dividend procedure to maintain FelCor’s REIT status. That deficiency dividend procedure could require us to make significant distributions to our shareholders and pay significant interest to the IRS.


If we fail to remain qualified as a REIT, we will be subject to U.S. federal income tax and potentially to additional state and local taxes which would reduce the amount of cash available for distribution to our shareholders.

We have elected to be taxed as a REIT under the Code, commencing with our taxable year ended December 31, 2011. So
long as we meet the requirements under the Code for qualification as a REIT each year, we can deduct dividends paid to our shareholders when calculating our taxable income. To qualify as a REIT, we must meet detailed technical requirements,
including income, asset, distribution and stock ownership tests, under several Code provisions that have not been extensively
interpreted by judges or administrative officers. In addition, we do not control the determination of all factual matters and
circumstances that affect our ability to qualify as a REIT. New legislation, regulations, administrative interpretations or court
decisions might significantly change the tax laws with respect to REIT qualification or the U.S. federal income tax consequences of such qualification. We believe that we are organized so that we qualify as a REIT under the Code and that we have operated and will continue to operate so that we continue to qualify. However, we cannot guarantee that we will qualify as a REIT in any given year because:
the rules governing REITs are highly complex;
we do not control all factual determinations that affect REIT status; and
our circumstances may change in the future.
For any taxable year that we fail to qualify as a REIT, we would not be entitled to deduct dividends paid to our shareholders from our taxable income. Consequently, our net assets and distributions to shareholders would be substantially
reduced because of our increased tax liability. If we made distributions in anticipation of our qualification as a REIT, we might
be required to borrow additional funds or to liquidate some of our investments in order to pay the applicable tax. If our
qualification as a REIT terminates, we may not be able to elect to be treated as a REIT for the four taxable years following the
year we lost the qualification.

We may pay taxes even if we continue to qualify as a REIT.

Even if we continue to qualify as a REIT, we are required to pay some U.S. federal, state, local and foreign taxes on our income and property. For example, certain of our subsidiaries have elected to be treated as taxable REIT subsidiaries. We will be subject to a 100% penalty tax on payments we receive from these subsidiaries if the economic arrangements between the REIT and the taxable subsidiaries are not comparable to similar arrangements between unrelated third parties. We also could be subject to tax in the event we, among other things:
sell property that is considered to be held for sale to customers in the ordinary course of our trade or business (for example, inventory) for U.S. federal income tax purposes; or
fail to satisfy certain distribution rules, as described below.

Our REIT distribution requirements are complex and may create tax difficulties.

To maintain our status as a REIT for U.S. federal income tax purposes, we generally must distribute to our shareholders at
least 90% of our taxable income each year. In addition, we are subject to a 4% nondeductible excise tax on the amount by which our distributions for a calendar year are less than the sum of:
85% of our ordinary income for the calendar year;
95% of our capital gain net income for the calendar year; and
any amount of our income that we did not distribute in prior years.
For tax purposes, we may be required to treat interest, rent and other items as earned even though we have not yet received these amounts. In addition, we may not be able to deduct currently as expenses for tax purposes some items that we have actually paid. We could also realize income, such as income from cancellation of indebtedness that is not accompanied by cash proceeds. If one or more of these events happened, we could have taxable income in excess of cash available for distribution. In such circumstances, we might have to borrow money or sell investments on unfavorable terms in order to meet the distribution requirements applicable to a REIT.


Certain of our taxable REIT subsidiaries will be limited in using certain tax net operating loss carryovers.

If a corporation undergoes an "ownership change" within the meaning of Section 382 of the Code and the Treasury Regulations thereunder, such corporation's ability to use net operating losses ("NOLs"), generated prior to the time of that ownership change may be limited. To the extent the affected corporation's ability to use NOLs is limited, such corporation's taxable income may increase. As of December 31, 2016, FelCor's taxable REIT subsidiaries had approximately $336 million of NOLs which will begin to expire in 2023 for U.S. federal tax purposes and during the period from 2019 to 2033 for state tax purposes if not utilized. An ownership change within the meaning of Section 382 of the Code with respect to certain of our taxable REIT subsidiaries occured in connection with the Mergers. Accordingly, certain of our taxable REIT subsidiaries' ability to use NOLs incurred prior to the Mergers in such future years will be limited, and these taxable REIT subsidiaries will have greater taxable income as a result of such limitation.

Some of our hotels will be subject to property tax reappraisal.

As a result of the Mergers, some of our hotels will be subject to property tax reappraisal that could increase property tax expense and adversely affect our profitability. Ten of our hotel properties, or approximately 26%, are located in jurisdictions that may provide for property tax reappraisal upon a change of ownership and so may face such a reassessment. Further, an additional five of our hotel properties, or approximately 13%, are located in jurisdictions where the property tax value is subject to a ceiling that will no longer be applicable following the Mergers. The Mergers and the associated publicity together with the related transfers of property and property name changes that will occur in connection with the Mergers may cause other jurisdictions, in which the timing of the reappraisals is discretionary with the taxing authorities, to decide to reappraise our hotel properties in those jurisdictions and may correspondingly increase the property tax expense to the combined company. Due to the significant uncertainties involved, the possible increases in property tax expense have not been quantified.

There is a risk of changes in the tax law applicable to REITs.

The IRS, the U.S. Treasury Department and Congress frequently review U.S. federal income tax legislation, regulations and other guidance. We cannot predict whether, when or to what extent new U.S. federal tax laws, regulations, interpretations or rulings will be adopted. Any legislative action may prospectively or retroactively modify our tax treatment and, therefore, may adversely affect taxation of us and/or our shareholders.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.Proceeds
 
Unregistered Sales of Equity Securities
 
The Company did not sell any securities during the quarter ended SeptemberJune 30, 20172022 that were not registered under the Securities Act of 1933, as amended (the "Securities Act").Act.


Issuer Purchases of Equity Securities

DuringThe following table summarizes all of the nineshare repurchases during the three months ended SeptemberJune 30, 2017, certain of the Company's employees2022:
PeriodTotal number
of shares
purchased (1)		Average price
paid per share		Total number of
shares purchased as
part of publicly
announced plans or
programs		Maximum number
of shares that may
yet be purchased
under the plans or
programs (2)
April 1, 2022 through April 30, 202220,928 $14.02 — — 
May 1, 2022 through May 31, 20221,489,915 $12.77 1,367,043 17,323,076 
June 1, 2022 through June 30, 20222,619,701 $11.62 2,590,940 18,363,903 
Total4,130,544  3,957,983  
(1)Includes surrendered common shares owned by themcertain employees to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted common shares of beneficial interest issued under the 20152021 Plan.

(2)The following table summarizes allmaximum number of shares that may yet be repurchased under a share repurchase program is calculated by dividing the total dollar amount available to repurchase shares by the closing price of our common shares on the last business day of the share repurchases during the nine months ended September 30, 2017:respective month.

Period 
Total number
of shares
purchased
 
Average price
paid per share
 
Total number of
shares purchased as
part of publicly
announced plans or
programs
 
Maximum number
of shares that may
yet be purchased
under the plans or
programs (1)
 
January 1, 2017 through January 31, 2017 1,335
 $24.15
 —
 8,683,441
 
February 1, 2017 through February 28, 2017 19,526
 $23.26
 —
 8,855,126
 
March 1, 2017 through March 31, 2017 —
 $—
 —
 8,572,636
 
April 1, 2017 through April 30, 2017 1,298
 $22.66
 —
 9,378,440
 
May 1, 2017 through May 31, 2017 31,125
 $20.02
 —
 9,903,817
 
June 1, 2017 through June 30, 2017 —
 $—
 —
 10,143,063
 
July 1, 2017 through July 31, 2017 2,035
 $21.13
 —
 9,524,701
 
August 1, 2017 through August 31, 2017 50,059
 $20.64
 —
 9,987,248
 
September 1, 2017 through September 30, 2017 122,508
 $21.31
 122,508
 9,042,387
 
Total 227,886
  
 122,508
  
 
(1)The maximum number of shares that may yet be repurchased under the share repurchase program is calculated by dividing the total dollar amount available to repurchase shares by the closing price of our common shares on the last business day of the respective month.

Item 3.Defaults Upon Senior Securities.Securities
 
None.
 
Item 4.Mine Safety Disclosures.Disclosures
 
Not Applicable.applicable.


Item 5.Other Information.Information

None.

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Item 6.Exhibits.Exhibits

The exhibits required to be filed by Item 601 of Regulation S-K are noted below:


Exhibit Index
Exhibit

Number		Description of Exhibit
2.13.1
3.1
Articles of Amendment and Restatement of Declaration of Trust of RLJ Lodging Trust (incorporated by reference to Exhibit 3.1 to Amendment No. 4 to the Registrant's Registration Statement on Form S-11 (File. No. 333-172011) filed on May 5, 2011)
3.2
3.3
3.4
3.5
3.6
4.131.1*
4.2
Second Supplemental Indenture with respect to FelCor Lodging Limited Partnership’s 5.625% Senior Secured Notes due 2023, dated as of August 31, 2017, by and among FelCor Lodging Limited Partnership, Rangers Sub I, LLC, the other guarantors party thereto and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed on September 1, 2017)
4.3
Second Supplemental Indenture with respect to FelCor Lodging Limited Partnership’s 6.000% Senior Notes due 2025, dated as of August 31, 2017, by and among FelCor Lodging Limited Partnership, Rangers Sub I, LLC, the other guarantors party thereto and U.S. Bank National Association (incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed on September 1, 2017)
10.1
First Amendment to Second Amended and Restated Credit Agreement, dated August 31, 2017, by and among RLJ Lodging Trust, RLJ Lodging Trust, L.P., certain subsidiaries of RLJ Lodging Trust party thereto, Wells Fargo Bank, National Association, as administrative agent and a lender, and the other lenders party thereto (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on September 1, 2017)
10.2
Fifth Amendment to Term Loan Agreement, dated August 31, 2017, by and among RLJ Lodging Trust, RLJ Lodging Trust, L.P., certain subsidiaries of RLJ Lodging Trust party thereto, Wells Fargo Bank, National Association, as administrative agent and a lender, and the other lenders party thereto (incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed on September 1, 2017)
10.3
Amendment No.1 to Amended and Restated Agreement of Limited Partnership, dated August 31, 2017 (incorporated by reference to Exhibit 10.3 to the Registrant's Current Report on Form 8-K filed on September 1, 2017)
31.1*
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
32.1*
101.INSInline XBRL Instance DocumentSubmitted electronically with this report

101.SCH
101.SCHInline XBRL Taxonomy Extension Schema DocumentSubmitted electronically with this report
101.CALInline XBRL Taxonomy Calculation Linkbase DocumentSubmitted electronically with this report
101.DEFInline XBRL Taxonomy Extension Definition Linkbase DocumentSubmitted electronically with this report
101.LABInline XBRL Taxonomy Label Linkbase DocumentSubmitted electronically with this report
101.PREInline XBRL Taxonomy Presentation Linkbase DocumentSubmitted electronically with this report
104Cover Page Interactive Data File (formatted as Inline XBRL and included in Exhibit 101)Submitted electronically with this report

 *Filed herewith





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SIGNATURES
 
Pursuant to the requirements 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.
RLJ LODGING TRUST
Dated: August 5, 2022/s/ LESLIE D. HALE
Leslie D. Hale
President and Chief Executive Officer
Dated: August 5, 2022RLJ LODGING TRUST/s/ SEAN M. MAHONEY
Sean M. Mahoney
Dated: November 9, 2017/s/ ROSS H. BIERKAN
Ross H. Bierkan
Executive Vice President Chief Executive Officer, Chief Investment Officer and Trustee
Dated: November 9, 2017/s/ LESLIE D. HALE
Leslie D. Hale
Chief Operating Officer, Chief Financial Officer and Executive Vice President
(Principal Financial Officer)
Dated: November 9, 2017August 5, 2022/s/ CHRISTOPHER A. GORMSEN
Christopher A. Gormsen
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)

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