10-Q 1 cldt-20220331.htm 10-Q cldt-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
    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: 001-34693
CHATHAM LODGING TRUST
(Exact Name of Registrant as Specified in Its Charter)
Maryland27-1200777
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
222 Lakeview Avenue, Suite 200
West Palm BeachFlorida33401
(Address of Principal Executive Offices)(Zip Code)
(561) 802-4477
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Shares of Beneficial Interest, $0.01 par valueCLDTNew York Stock Exchange
6.625% Series A Cumulative Redeemable Preferred SharesCLDT-PANew 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.    x  Yes    ¨  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    x  Yes    ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨  
Accelerated filerx
Non-accelerated filer
¨  
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes    x  No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
Outstanding at May 4, 2022
Common Shares of Beneficial Interest ($0.01 par value per share)48,805,149
1



2


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CHATHAM LODGING TRUST
Consolidated Balance Sheets
(In thousands, except share and per share data)
 
March 31,
2022
December 31,
2021
(unaudited)
Assets:
Investment in hotel properties, net$1,373,643 $1,282,870 
Investment in hotel properties under development 67,554 
Cash and cash equivalents18,149 19,188 
Restricted cash8,296 10,681 
Right of use asset, net19,816 19,985 
Hotel receivables (net of allowance for doubtful accounts of $288 and $382, respectively)
3,628 3,003 
Deferred costs, net4,646 4,627 
Prepaid expenses and other assets9,530 2,791 
Total assets$1,437,708 $1,410,699 
Liabilities and Equity:
Mortgage debt, net$437,067 $439,282 
Revolving credit facility110,000 70,000 
Construction loan38,450 35,007 
Accounts payable and accrued expenses23,842 27,718 
Lease liability, net 22,554 22,696 
Distributions payable1,656 1,803 
Total liabilities633,569 596,506 
Commitments and contingencies (Note 14)
Equity:
Shareholders’ Equity:
Preferred shares, $0.01 par value, 100,000,000 shares authorized; 4,800,000 and 4,800,000 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively
48 48 
Common shares, $0.01 par value, 500,000,000 shares authorized; 48,804,585 and 48,768,890 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively
488 487 
Additional paid-in capital1,047,031 1,048,070 
Accumulated deficit(262,536)(251,103)
Total shareholders’ equity785,031 797,502 
Noncontrolling Interests:
Noncontrolling interest in Operating Partnership19,108 16,691 
Total equity804,139 814,193 
Total liabilities and equity$1,437,708 $1,410,699 
The accompanying notes are an integral part of these consolidated financial statements.
3


CHATHAM LODGING TRUST
Consolidated Statements of Operations
(In thousands, except share and per share data)
(unaudited)
For the three months ended
March 31,
20222021
Revenue:
Room$50,164 $29,390 
Food and beverage1,415 363 
Other2,980 1,574 
Reimbursable costs from unconsolidated entities326 787 
Total revenue54,885 32,114 
Expenses:
Hotel operating expenses:
Room11,594 7,166 
Food and beverage1,047 284 
Telephone402 400 
Other hotel operating 732 365 
General and administrative5,350 3,812 
Franchise and marketing fees4,408 2,598 
Advertising and promotions1,189 757 
Utilities2,888 2,287 
Repairs and maintenance3,445 2,461 
Management fees1,918 1,196 
Insurance710 648 
Total hotel operating expenses33,683 21,974 
Depreciation and amortization15,036 13,334 
Property taxes, ground rent and insurance4,958 5,879 
General and administrative3,942 3,530 
Other charges250 55 
Reimbursable costs from unconsolidated entities326 787 
Total operating expenses58,195 45,559 
Operating loss before loss on sale of hotel property(3,310)(13,445)
Loss on sale of hotel property (43)
Operating loss(3,310)(13,488)
Interest and other income 74 
Interest expense, including amortization of deferred fees(6,389)(6,470)
Loss from unconsolidated real estate entities (1,231)
Gain on sale of investment in unconsolidated real estate entities 23,817
(Loss) income before income tax expense(9,699)2,702 
Income tax expense  
Net (loss) income(9,699)2,702 
Net loss (income) attributable to noncontrolling interests253 (46)
Net (loss) income attributable to Chatham Lodging Trust(9,446)2,656 
Preferred dividends(1,987) 
Net (loss) income attributable to common shareholders$(11,433)$2,656 
(Loss) Income per Common Share - Basic:
Net (loss) income attributable to common shareholders (Note 11)$(0.23)$0.06 
(Loss) Income per Common Share - Diluted:
Net (loss) income attributable to common shareholders (Note 11)$(0.23)$0.06 
Weighted average number of common shares outstanding:
Basic48,787,519 47,224,972 
Diluted48,787,519 47,368,518 
Distributions declared per common share:$ $ 
The accompanying notes are an integral part of these consolidated financial statements.
4


CHATHAM LODGING TRUST
Consolidated Statements of Equity
(In thousands, except share and per share data)
(unaudited)
Three months ended March 31, 2021 and 2022
Preferred SharesCommon SharesAdditional Paid - In CapitalRetained earnings (distributions in excess of retained earnings)Total Shareholders’ EquityNoncontrolling Interest in Operating PartnershipTotal Equity
SharesAmountSharesAmount
Balance, January 1, 2021 $ 46,973,473 $470 $906,000 $(228,718)$677,752 $14,708 $692,460 
Issuance of shares pursuant to Equity Incentive Plan— — 40,203 — 450 — 450 — 450 
Issuance of common shares, net of offering costs of $518
— — 1,504,525 15 20,761 — 20,776 — 20,776 
Amortization of share based compensation— — — — 7 — 7 1,031 1,038 
Forfeited distributions declared on LTIP units— — — — — — — 40 40 
Reallocation of noncontrolling interest— — — — 2,507 — 2,507 (2,507) 
Net income— — — — — 2,656 2,656 46 2,702 
Balance, March 31, 2021 $ 48,518,201 $485 $929,725 $(226,062)$704,148 $13,318 $717,466 
Balance, January 1, 20224,800,000 $48 48,768,890 $487 $1,048,070 $(251,103)$797,502 $16,691 $814,193 
Issuance of common shares pursuant to Equity Incentive Plan— — 34,672 1 486 — 487 — 487 
Issuance of common shares, net of offering costs of $28
— — 1,023 — (14)— (14)— (14)
Amortization of share based compensation— — — — 10 — 10 1,149 1,159 
Dividends accrued on preferred shares— — — — — (1,987)(1,987)— (1,987)
Reallocation of noncontrolling interest— — — — (1,521)— (1,521)1,521  
Net loss— — — — — (9,446)(9,446)(253)(9,699)
Balance, March 31, 20224,800,000 $48 48,804,585 $488 $1,047,031 $(262,536)$785,031 $19,108 $804,139 

The accompanying notes are an integral part of these consolidated financial statements.
5


CHATHAM LODGING TRUST
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
For the three months ended
March 31,
20222021
Cash flows from operating activities:
Net (loss) income$(9,699)$2,702 
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation14,970 13,274 
Amortization of deferred franchise fees66 60 
Amortization of deferred financing fees included in interest expense358 480 
Loss on sale of hotel property 43 
Gain on sale of investment in unconsolidated real estate entities (23,817)
Share based compensation1,294 1,156 
Loss from unconsolidated real estate entities 1,231 
Changes in assets and liabilities:
Right of use asset169 161 
Hotel receivables(625)(818)
Deferred costs(206) 
Prepaid expenses and other assets(6,740)(4,617)
Accounts payable and accrued expenses(3,620)(1,797)
Lease liability(142)(130)
Net cash used in operating activities(4,175)(12,072)
Cash flows from investing activities:
Improvements and additions to hotel properties(4,131)(1,115)
Acquisition of hotel properties(31,013) 
Investment in hotel properties under development(2,947)(8,889)
Proceeds from sale of unconsolidated real estate entity 2,800 
Net cash used in investing activities(38,091)(7,204)
Cash flows from financing activities:
Borrowings on revolving credit facility40,000 8,000 
Repayments on revolving credit facility (23,300)
Borrowings on construction loan3,443 8,432 
Payments on mortgage debt(2,280)(2,300)
Payment of financing costs(173)(142)
Payment of offering costs on common shares(28)(518)
Proceeds from issuance of common shares14 21,294 
Distributions-common shares/units(147)(281)
Distributions-preferred shares(1,987) 
Net cash provided by financing activities38,842 11,185 
Net change in cash, cash equivalents and restricted cash(3,424)(8,091)
Cash, cash equivalents and restricted cash, beginning of period29,869 31,453 
Cash, cash equivalents and restricted cash, end of period$26,445 $23,362 
Supplemental disclosure of cash flow information:
Cash paid for interest$6,355 $6,698 
Capitalized interest$330 $690 
Cash paid for income taxes$53 $2 
-continued-
Supplemental disclosure of non-cash investing and financing information (dollars in thousands):
On January 18, 2022, the Company issued 34,672 shares to its independent trustees pursuant to the Company’s Equity Incentive Plan as compensation for services performed in 2021. On January 15, 2021, the Company issued 40,203 shares to its independent trustees pursuant to the Company’s Equity Incentive Plan as compensation for services performed in 2020.
As of March 31, 2022, the Company had accrued distributions payable of $1,656. As of March 31, 2021, the Company had accrued distributions payable of $147.
Accrued share based compensation of $135 and $118 is included in accounts payable and accrued expenses as of March 31, 2022 and 2021, respectively.
Accrued capital improvements of $1,095 and $3,507 are included in accounts payable and accrued expenses as of March 31, 2022 and 2021, respectively.

The accompanying notes are an integral part of these consolidated financial statements.
6


CHATHAM LODGING TRUST
Notes to the Consolidated Financial Statements
(unaudited)
 
1.    Organization

Chatham Lodging Trust (“we,” “us” or the “Company”) was formed as a Maryland real estate investment trust on October 26, 2009. The Company is internally-managed and invests primarily in upscale extended-stay and premium-branded select-service hotels. The Company has elected to be treated as a real estate investment trust for federal income tax purposes ("REIT").
The net proceeds from our share offerings are contributed to Chatham Lodging, L.P., our operating partnership (the “Operating Partnership”), in exchange for partnership interests. Substantially all of the Company’s assets are held by, and all operations are conducted through, the Operating Partnership. The Company is the sole general partner of the Operating Partnership and owns 100% of the common units of limited partnership interest in the Operating Partnership ("common units"). Certain of the Company’s executive officers hold vested and unvested long-term incentive plan units in the Operating Partnership ("LTIP units"), which are presented as non-controlling interests on our consolidated balance sheets.
As of March 31, 2022, the Company owned 43 hotels with an aggregate of 6,451 rooms located in 16 states and the District of Columbia. Prior to September 23, 2021, the Company held a 10.0% noncontrolling interest in a joint venture (the "Inland JV") with affiliates of Colony Capital, Inc. ("CLNY"), which owned 48 hotels acquired from Inland American Real Estate Trust, Inc. ("Inland"), comprising an aggregate of 6,402 rooms. Chatham sold its interest in the Inland JV in September 2021. Prior to March 18, 2021, the Company also held a 10.3% noncontrolling interest in a joint venture (the “NewINK JV”) with affiliates of CLNY, which owned 46 hotels with an aggregate of 5,948 rooms. Chatham sold its interest in the NewINK JV in March 2021 for $2.8 million.
To qualify as a REIT, the Company cannot operate the hotels. Therefore, the Operating Partnership and its subsidiaries lease the Company's wholly owned hotels to taxable REIT subsidiary lessees (“TRS Lessees”), which are wholly owned by the Company’s taxable REIT subsidiary (“TRS”) holding company. Each hotel is leased to a TRS Lessee under a percentage lease that provides for rental payments equal to the greater of (i) a fixed base rent amount or (ii) a percentage rent based on hotel revenue. The initial term of each of the TRS leases is 5 years. Lease revenue from each TRS Lessee is eliminated in consolidation.
The TRS Lessees have entered into management agreements with a third-party management company that provides day-to-day management for the hotels. As of March 31, 2022, Island Hospitality Management LLC (“IHM”), which is 100% owned by Jeffrey H. Fisher, the Company's Chairman, President and Chief Executive Officer, managed all 43 of the Company’s hotels.

2.    Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim consolidated financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and in conformity with the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim financial information. These unaudited consolidated financial statements, in the opinion of management, include all adjustments consisting of normal, recurring adjustments which are considered necessary for a fair statement of the consolidated balance sheets, consolidated statements of operations, consolidated statements of equity, and consolidated statements of cash flows for the periods presented. Interim results are not necessarily indicative of full year performance due to seasonal and other factors, including the timing of the acquisition or sale of hotels.

The consolidated financial statements include all of the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions are eliminated in consolidation. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited financial statements prepared in accordance with GAAP, and the related notes thereto as of December 31, 2021, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.



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Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Recently Issued Accounting Standards

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04 Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform-related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company is evaluating the impact that ASU 2020-04 will have on its consolidated financial statements and related disclosures.

3.    Acquisition of Hotel Properties
On March 8, 2022, the Company acquired the Hilton Garden Inn Destin Miramar Beach ("HGI Destin") hotel property in Miramar Beach, FL for $31.0 million. The Company allocated the purchase price of the hotel based on the estimated fair values of the assets on the date of acquisition. Property acquisition costs of $13 thousand were capitalized in 2022.
On August 3, 2021, the Company acquired both the Residence Inn Austin Northwest/The Domain Area ("RI Austin") hotel property in Austin, TX for $37.0 million and the TownePlace Suites Austin Northwest/The Domain Area ("TPS Austin") hotel property in Austin, TX for $34.3 million. The Company allocated the purchase price of each hotel based on the estimated fair values of the assets on the date of acquisition. Property acquisition costs of $0.1 million were capitalized in 2021.

4.    Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts at a level believed to be adequate to absorb estimated probable losses. That estimate is based on past loss experience, current economic and market conditions and other relevant factors. The allowance for doubtful accounts was $0.3 million and $0.4 million as of March 31, 2022 and December 31, 2021, respectively.

5.    Investment in Hotel Properties

Investment in hotel properties,net

Investment in hotel properties, net as of March 31, 2022 and December 31, 2021 consisted of the following (in thousands):
 
March 31, 2022December 31, 2021
Land and improvements$302,640 $291,768 
Building and improvements1,344,843 1,258,845 
Furniture, fixtures and equipment102,299 91,110 
Renovations in progress5,553 7,869 
1,755,335 1,649,592 
Less: accumulated depreciation(381,692)(366,722)
Investment in hotel properties, net$1,373,643 $1,282,870 

Investment in hotel properties under development

On January 24, 2022, the Company opened the newly developed Home2 Suites by Hilton Woodland Hills Los Angeles ("Home2 Woodland Hills"). We incurred $70.7 million of costs to develop the hotel, which included $6.6 million of land acquisition costs and $64.1 million of other development costs.

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6.    Investment in Unconsolidated Entities

 On June 9, 2014, the Company acquired a 10.3% interest in the NewINK JV, a joint venture between affiliates of NorthStar Realty Finance Corp. ("NorthStar") and the Operating Partnership. NorthStar merged with Colony Capital, Inc. ("Colony") on January 10, 2017 to form a new company, CLNY, which owned a 89.7% interest in the NewINK JV. Chatham sold its interest in the NewINK JV in March 2021 for $2.8 million which resulted in Chatham recording a gain on sale of investment in unconsolidated real estate entities of $23.8 million during the three months ended March 31, 2021. The Company accounted for this investment under the equity method.

On November 17, 2014, the Company acquired a 10.0% interest in the Inland JV, a joint venture between affiliates of NorthStar and the Operating Partnership. NorthStar merged with Colony on January 10, 2017 to form a new company, CLNY, which owned a 90% interest in the Inland JV. Chatham sold its interest in the Inland JV for $0 in September 2021. The Company accounted for this investment under the equity method.

The following table sets forth the combined components of net loss, including the Company’s share, related to the NewINK JV and the Inland JV for the three months ended March 31, 2022 and 2021 (in thousands):
For the three months ended
March 31,
20222021
Revenue$ $24,690 
Total hotel operating expenses 24,106 
Hotel operating income$ $584 
Loss from continuing operations$ $(13,109)
Net loss$ $(13,109)
Loss allocable to the Company$ $(1,347)
Basis difference adjustment 116 
Total loss from unconsolidated real estate entities attributable to the Company$ $(1,231)

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7.    Debt

The Company’s mortgage loans are collateralized by first-mortgage liens on certain of the Company’s properties. The mortgage loans are non-recourse except for instances of fraud or misapplication of funds. Mortgage and revolving credit facility debt consisted of the following (dollars in thousands):
 
CollateralInterest RateMaturity Date3/31/22 Property Carrying ValueBalance Outstanding on Loan as of
March 31, 2022December 31,
2021
Revolving Credit Facility (1)3.33 %March 8, 2023$693,802 $110,000 $70,000 
Construction loan (2)7.95 %August 4, 202469,648 38,450 35,007 
Homewood Suites by Hilton San Antonio, TX 4.59 %February 6, 202327,902 14,706 14,808 
Residence Inn by Marriott Vienna, VA4.49 %February 6, 202329,661 20,101 20,243 
Courtyard by Marriott Houston, TX4.19 %May 6, 202329,115 16,554 16,673 
Hyatt Place Pittsburgh, PA4.65 %July 6, 202332,409 20,379 20,515 
Residence Inn by Marriott Bellevue, WA4.97 %December 6, 202360,810 41,848 42,089 
Residence Inn by Marriott Garden Grove, CA4.79 %April 6, 202439,253 30,673 30,839 
Residence Inn by Marriott Silicon Valley I, CA 4.64 %July 1, 202470,848 62,096 62,374 
Residence Inn by Marriott Silicon Valley II, CA4.64 %July 1, 202478,643 67,750 68,054 
Residence Inn by Marriott San Mateo, CA 4.64 %July 1, 202459,094 46,572 46,781 
Residence Inn by Marriott Mountain View, CA4.64 %July 6, 202444,531 36,318 36,481 
SpringHill Suites by Marriott Savannah, GA4.62 %July 6, 202432,276 28,743 28,873 
Hilton Garden Inn Marina del Rey, CA4.68 %July 6, 202436,963 19,900 20,024 
Homewood Suites by Hilton Billerica, MA 4.32 %December 6, 202412,022 15,036 15,114 
Hampton Inn & Suites Houston Medical Center, TX 4.25 %January 6, 202514,926 16,969 17,058 
Total debt before unamortized debt issue costs$1,331,903 $586,095 $544,933 
Unamortized mortgage debt issue costs(578)(644)
Total debt outstanding$585,517 $544,289 
 
1.The interest rate for the revolving credit facility is variable and based on LIBOR (subject to a 0.5% floor) plus a spread of 2.5% if borrowings remain at or below $200 million and a spread of 3.0% if borrowings exceed $200 million. At March 31, 2022 and December 31, 2021, the Company had $110.0 million and $70.0 million, respectively, of outstanding borrowings under its $250.0 million revolving credit facility. Credit facility lenders representing $227.5 million of commitments have provided two six-month extension options that would extend the final maturity to March 8, 2024, if exercised. The credit facility is currently secured by equity pledges in properties that do not serve as collateral for other secured debt.
2.On August 4, 2020, a subsidiary of Chatham entered into an agreement with affiliates of Mack Real Estate Credit Strategies to obtain a $40 million loan to fund the remaining construction costs of the Home2 Woodland Hills hotel development. The loan has an initial term of 4 years and there are two six-month extension options. The interest rate on the loan is LIBOR, subject to a 0.25% floor, plus a spread of 7.5%.
The Company estimates the fair value of its fixed rate debt by discounting the future cash flows of each instrument at estimated market rates. All of the Company's mortgage loans are fixed-rate. Rates take into consideration general market conditions, quality and estimated value of collateral and maturity of debt with similar credit terms and are classified within level 3 of the fair value hierarchy. The estimated fair value of the Company’s fixed rate debt as of March 31, 2022 and December 31, 2021 was $429.4 million and $443.4 million, respectively.
The Company estimates the fair value of its variable rate debt by taking into account general market conditions and the estimated credit terms it could obtain for debt with similar maturity and is classified within level 3 of the fair value hierarchy. As of March 31, 2022, the Company’s variable rate debt consisted of its revolving credit facility and construction loan. The estimated fair value of the Company’s variable rate debt as of March 31, 2022 and December 31, 2021 was $148.5 million and $105.0 million, respectively.
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On October 26, 2021, Chatham executed an amendment to its credit facility which extended a waiver of financial covenants until June 30, 2022, provided for the immediate exercise of an option to extend the maturity of the entire $250.0 million credit facility through March 8, 2023, and added two six-month options to further extend the maturity of the credit facility through March 8, 2024 from lenders representing $227.5 million of commitments. In conjunction with the amendment, Chatham provided credit facility lenders with equity pledges on three unencumbered hotels. The spread on the credit facility did not change as a result of the amendment. The amendment places limits on the Company’s ability to incur debt, pay dividends, and make capital expenditures during the covenant waiver period. During the covenant waiver period interest will be calculated as LIBOR (subject to a 0.5% floor) plus a spread of 2.50% if borrowings remain at or below $200.0 million and a spread of 3.0% if borrowings exceed $200.0 million. As of March 31, 2022, the Company was in compliance with all of its modified financial covenants.

Our mortgage debt agreements contain “cash trap” provisions that are triggered when the hotel’s operating results
fall below a certain debt service coverage ratio or debt yield. When these provisions are triggered, all of the excess cash flow generated by the hotel is deposited directly into cash management accounts for the benefit of our lenders until a specified debt service coverage ratio or debt yield is reached. Such provisions do not allow the lender the right to accelerate repayment of the underlying debt. As of March 31, 2022, the debt service coverage ratios or debt yields for eight of our mortgage loans were below the minimum thresholds such that the cash trap provision of each respective loan could be enforced. As of March 31, 2022, one of our mortgage debt lenders has enforced cash trap provisions. We do not expect that such cash traps will affect our ability to satisfy our short-term liquidity requirements.
Future scheduled principal payments of debt obligations as of March 31, 2022, for the current year and each of the next five calendar years and thereafter are as follows (in thousands):
Amount
2022 (remaining nine months)$6,969 
2023227,919 
2024335,260 
202515,947 
2026 
Thereafter 
Total debt before unamortized debt issue costs$586,095 
Unamortized mortgage debt issue costs(578)
Total debt outstanding$585,517 

Accounting for Derivative Instruments
The Company has entered into interest rate cap agreements to hedge against interest rate fluctuations related to the construction loan for the Home2 Woodland Hills hotel. The Company records its derivative instruments on the balance sheet at their estimated fair values. Changes in the fair value of the derivatives are recorded each period in current earnings or in other comprehensive income, depending on whether a derivative is designated as part of a hedging relationship and, if it is, depending on the type of hedging relationship. The Company's interest rate caps are not designated as a hedge but to eliminate the incremental cost to the Company if the one-month LIBOR were to exceed 3.5%. Accordingly, the interest rate caps are recorded on the balance sheet under prepaid expenses and other assets at the estimated fair value and realized and unrealized changes in the fair value are reported in the consolidated statement of operations. As of March 31, 2022, the fair value of the interest rate caps were $0.3 million.
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8.    Income Taxes

The Company’s TRS is subject to federal and state income taxes. Income tax expense was zero for the three months ended March 31, 2022 and 2021.
As of each reporting date, the Company's management considers new evidence, both positive and negative, that could impact management's view with regard to future realization of deferred tax assets. The Company's TRS is expecting continued taxable losses in 2022. As of March 31, 2022, the TRS continues to recognize a full valuation allowance equal to 100% of the net deferred tax assets due to the uncertainty of the TRS's ability to utilize these net deferred tax assets. Management will continue to monitor the need for a valuation allowance.

9.    Dividends Declared and Paid

Common Dividends

The Company suspended common dividends beginning after the payment of the March 27, 2020 dividend due to a decline in operating performance caused by the COVID-19 pandemic. There were no common share dividends declared during the three months ended March 31, 2022 and 2021.

Preferred Dividends

During the three months ended March 31, 2022, the Company declared dividends of $0.41406 per share of 6.625% Series A Cumulative Redeemable Preferred Shares. There were no preferred share dividends declared during the three months ended March 31, 2021. The preferred share dividends paid during the three months ended March 31, 2022 were as follows:

Record DatePayment DateDividend per Preferred Share
March3/31/20224/18/2022$0.41406 
1st Quarter 2022$0.41406 

10.    Shareholders' Equity

Common Shares

The Company is authorized to issue up to 500,000,000 common shares of beneficial interest, $0.01 par value per share ("common shares"). Each outstanding common share entitles the holder to one vote on all matters submitted to a vote of shareholders. Holders of the Company’s common shares are entitled to receive dividends when authorized by the Company's Board of Trustees. As of March 31, 2022, 48,804,585 common shares were outstanding.
In December 2017, we established an "at-the-market" equity offering program (the "Prior ATM Program") whereby, from time to time, we could publicly offer and sell our common shares having an aggregate offering price of up to $100 million by means of ordinary brokers transactions on the New York Stock Exchange (the "NYSE"), in negotiated transactions or in transactions deemed to be “at-the-market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended. We filed a registration statement for a new $100 million ATM program (the "ATM Program") on January 5, 2021 to replace the prior program. At the same time, the Company entered into sales agreements with Cantor Fitzgerald & Co., Barclays Capital Inc., BMO Capital Markets Corp., BofA Securities, Inc., BTIG, LLC, Citigroup Global Markets Inc., Regions Securities LLC, Stifel, Nicolaus & Company, Incorporated and Wells Fargo Securities as sales agents. The Company did not issue any shares under its ATM Program during the three months ended March 31, 2022. As of March 31, 2022, there was approximately $77.5 million in common shares available for issuance under the ATM Program.
In December 2017, we established a $50 million dividend reinvestment and stock purchase plan (the "Prior DRSPP"). We filed a new $50 million shelf registration statement for the dividend reinvestment and stock purchase plan (the "Current DRSPP" and together with the Prior DRSPP, the "DRSPPs") on December 22, 2020 to replace the prior program. Under the DRSPPs, shareholders may purchase additional common shares by reinvesting some or all of the cash dividends received on
12


common shares. Shareholders may also make optional cash purchases of the Company's common shares subject to certain limitations detailed in the prospectuses for the DRSPPs. During the three months ended March 31, 2022, the Company issued 1,023 common shares under the Current DRSPP at a weighted average price of $13.67, which generated $14 thousand of proceeds. As of March 31, 2022, there was approximately $47.9 million in common shares available for issuance under the Current DRSPP.
Preferred Shares
The Company is authorized to issue up to 100,000,000 preferred shares of beneficial interest, $0.01 par value per share, in one or more series.
On June 30, 2021, the Company issued 4,800,000 6.625% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest, $0.01 par value per share (the “Series A Preferred Shares”), and received net proceeds of approximately $115.9 million. The Series A Preferred Shares rank senior to common shares with respect to the payment of dividends and distributions of assets in the event of a liquidation, dissolution, or winding up. The Series A Preferred Shares do not have any maturity date and are not subject to mandatory redemptions or sinking fund requirements. The distribution rate is 6.625% per annum of the $25.00 liquidation preference, which is equivalent to $1.65625 per annum per Series A Preferred Share. Distributions on the Series A Preferred Shares are payable quarterly in arrears with the first distribution on the Series A Preferred Shares paid on October 15, 2021. The Company may not redeem the Series A Preferred Shares before June 30, 2026 except in limited circumstances to preserve the Company's status as a REIT for federal income tax purposes and upon the occurrence of a change of control. On and after June 30, 2026, the Company may, at its option, redeem the Series A Preferred Shares, in whole or from time to time in part, by paying $25.00 per share, plus any accrued and unpaid distributions to, but not including, the date of redemption. Upon the occurrence of a change of control, as defined in the Company's declaration of trust, the result of which common shares and the common securities of the acquiring or surviving entity are not listed on the New York Stock Exchange, the NYSE MKT or NASDAQ, or any successor exchanges, the Company may, at its option, redeem the Series A Preferred Shares in whole or in part within 120 days following the change of control by paying $25.00 per share, plus any accrued and unpaid distributions through the date of redemption. If the Company does not exercise its right to redeem the Series A Preferred Shares upon a change of control, the holders of Series A Preferred Shares have the right to convert some or all of their shares into a number of common shares based on defined formulas subject to share caps. The share cap on each Series A Preferred Share is 3.701 common shares. As of March 31, 2022, 4,800,000 Series A Preferred Shares were issued and outstanding. During the three months ended March 31, 2022, the Company accrued preferred share dividends of $2.0 million.
Operating Partnership Units
Holders of common units in the Operating Partnership, if and when issued, will have certain redemption rights, which will enable the unit holders to cause the Operating Partnership to redeem their units in exchange for, at the Company’s option, cash per unit equal to the market price per common share at the time of redemption or for common shares on a one-for-one basis. The number of shares issuable upon exercise of the redemption rights will be adjusted upon the occurrence of share splits, mergers, consolidations or similar pro-rata share transactions, which otherwise would have the effect of diluting the ownership interests of limited partners or shareholders. As of March 31, 2022, there were 1,214,759 vested Operating Partnership LTIP units held by current and former employees.
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11.    Earnings Per Share

The two-class method is used to determine earnings per share because unvested restricted shares and unvested LTIP units are considered to be participating shares. The LTIP units held by the non-controlling interest holders, which may be converted to common shares, have been excluded from the denominator of the diluted earnings per share calculation as there would be no effect on the amounts since limited partners' share of income or loss would also be added back to net income or loss. Unvested restricted shares, unvested long-term incentive plan units and unvested Class A Performance LTIP units that could potentially dilute basic earnings per share in the future would not be included in the computation of diluted loss per share, for the periods where a loss has been recorded, because they would have been anti-dilutive for the periods presented. The following is a reconciliation of the amounts used in calculating basic and diluted net income per share (in thousands, except share and per share data):

For the three months ended
March 31,
20222021
Numerator:
Net (loss) income attributable to common shareholders$(11,433)$2,656 
Dividends paid on unvested shares and units  
Net (loss) income attributable to common shareholders$(11,433)$2,656 
Denominator:
Weighted average number of common shares - basic48,787,519 47,224,972 
Unvested shares and units 143,546 
Weighted average number of common shares - diluted48,787,519 47,368,518 
Basic (loss) income per Common Share:
Net (loss) income attributable to common shareholders per weighted average basic common share$(0.23)$0.06 
Diluted (loss) income per Common Share:
Net (loss) income attributable to common shareholders per weighted average diluted common share$(0.23)$0.06 

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12.    Equity Incentive Plan

The Company maintains its Equity Incentive Plan to attract and retain independent trustees, executive officers and other key employees. The plan provides for the grant of options to purchase common shares, share awards, share appreciation rights, performance units and other equity-based awards. The plan was amended and restated as of May 17, 2013 to increase the maximum number of shares available under the plan to 3,000,000 shares. Share awards under this plan generally vest over three to five years, though compensation for the Company’s independent trustees includes share grants that vest immediately. The Company pays dividends on unvested shares and units, except for performance-based shares and outperformance based units, for which dividends on unvested performance-based shares and units are accrued and not paid until those shares or units vest. Certain awards may provide for accelerated vesting if there is a change in control. In January 2022 and 2021, the Company issued 34,672 and 40,203 common shares, respectively, to its independent trustees as compensation for services performed in 2021 and 2020, respectively. As of March 31, 2022, there were 165,149 common shares available for issuance under the Equity Incentive Plan.
Restricted Share Awards
From time to time, the Company may award restricted shares under the Equity Incentive Plan as compensation to officers, employees and non-employee trustees. The Company recognizes compensation expense for the restricted shares on a straight-line basis over the vesting period based on the fair market value of the shares on the date of issuance.
A summary of the Company’s restricted share awards for the three months ended March 31, 2022 and the year ended December 31, 2021 is as follows:
For the three months endedFor the year ended
March 31, 2022December 31, 2021
Number of SharesWeighted-Average Grant Date Fair ValueNumber of SharesWeighted-Average Grant Date Fair Value
Non-vested at beginning of the period10,000 $11.47 1,667 $17.40 
Granted  10,000 11.47 
Vested  (1,667)17.40 
Forfeited    
Non-vested at end of the period10,000 $11.47 10,000 $11.47 

As of March 31, 2022 and December 31, 2021, there were $90 thousand and $100 thousand, respectively, of unrecognized compensation costs related to restricted share awards. As of March 31, 2022, these costs were expected to be recognized over a weighted–average period of approximately 2.4 years. For the three months ended March 31, 2022 and 2021, the Company recognized approximately $10 thousand and $7 thousand, respectively, of expense related to the restricted share awards.

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Long-Term Incentive Plan Awards

LTIP units are a special class of partnership interests in the Operating Partnership which may be issued to eligible participants for the performance of services to or for the benefit of the Company. Under the Equity Incentive Plan, each LTIP unit issued is deemed equivalent to an award of one common share thereby reducing the number of shares available for other equity awards on a one-for-one basis.

A summary of the Company's LTIP Unit awards for the three months ended March 31, 2022 and the year ended December 31, 2021 is as follows:
For the three months endedFor the year ended
March 31, 2022December 31, 2021
Number of UnitsWeighted-Average Grant Date Fair ValueNumber of UnitsWeighted-Average Grant Date Fair Value
Non-vested at beginning of the period764,178 $15.00 669,609 $15.73 
Granted380,004 16.08 330,945 14.55 
Vested(238,657)16.61 (219,451)16.39 
Forfeited  (16,925)17.02 
Non-vested at end of the period905,525 $15.03 764,178 $15.00 

Time-Based LTIP Awards

On March 1, 2022, the Company’s Operating Partnership, upon the recommendation of the Compensation Committee, granted 152,004 time-based awards (the “2022 Time-Based LTIP Unit Award”). The grants were made pursuant to award agreements that provide for time-based vesting (the "LTIP Unit Time-Based Vesting Agreement").

Time-based LTIP Unit Awards will vest ratably provided that the recipient remains employed by the Company through the applicable vesting date, subject to acceleration of vesting in the event of the recipient’s death, disability, termination without cause or resignation with good reason, or in the event of a change of control of the Company. Prior to vesting, a holder is entitled to receive distributions on the LTIP Units that comprise the 2022 Time-Based LTIP Unit Awards and the prior year LTIP unit Awards set forth in the table above.

Performance-Based LTIP Awards

On March 1, 2022, the Company's Operating Partnership, upon the recommendation of the Compensation Committee, also granted 228,000 performance-based awards (the "2022 Performance-Based LTIP Unit Awards"). The grants were made pursuant to award agreements that have market based vesting conditions. The Performance-Based LTIP Unit Awards are comprised of Class A Performance LTIP Units that will vest only if and to the extent that (i) the Company achieves certain long-term market based TSR criteria established by the Compensation Committee and (ii) the recipient remains employed by the Company through the applicable vesting date, subject to acceleration of vesting in the event of the recipient’s death, disability, termination without cause or resignation with good reason, or in the event of a change of control of the Company. Compensation expense is based on an estimated value of $18.58 per 2022 Performance-Based LTIP Unit Award, which takes into account that some or all of the awards may not vest if long-term market based TSR criteria are not met during the vesting period.

The 2022 Performance-Based LTIP Unit Awards may be earned based on the Company’s relative TSR performance for the three-year period beginning on March 1, 2022 and ending on February 28, 2025. The 2022 Performance-Based LTIP Unit Awards, if earned, will be paid out between 50% and 200% of target value as follows:
Relative TSR Hurdles (Percentile)Payout Percentage
Threshold25th50%
Target55th100%
Maximum80th200%
Payouts at performance levels in between the hurdles will be calculated by straight-line interpolation.
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The Company estimated the aggregate compensation cost to be recognized over the service period determined as of the grant date under ASC 718, excluding the effect of estimated forfeitures, using a Monte Carlo approach. In determining the discounted value of the LTIP units, the Company considered the inherent uncertainty that the LTIP units would never reach parity with the other common units of the Operating Partnership and thus have an economic value of zero to the grantee. Additional factors considered in estimating the value of LTIP units included discounts for illiquidity; expectations for future dividends; risk free interest rates; stock price volatility; and economic environment and market conditions.

The grant date fair values of the LTIPs and the assumptions used to estimate the values are as follows:
Grant DateNumber of Units GrantedEstimated Value Per UnitVolatilityDividend YieldRisk Free Interest Rate
2017 Time-Based LTIP Unit Awards3/1/201789,574$18.5324%%0.92%
2017 Performance-Based LTIP Unit Awards3/1/2017134,348$19.6525%5.8%1.47%
2018 Time-Based LTIP Unit Awards3/1/201897,968$16.8326%%2.07%
2018 Performance-Based LTIP Unit Awards3/1/2018146,949$17.0226%6.2%2.37%
2019 Time-Based LTIP Unit Awards3/1/201988,746$18.4521%%2.57%
2019 Performance-Based LTIP Unit Awards3/1/2019133,107$18.9121%6.2%2.55%
2020 Time-Based LTIP Unit Awards3/1/2020130,206$13.0520%%1.06%
2020 Performance-Based LTIP Unit Awards3/1/2020195,301$13.6620%8.1%0.90%
2021 Time-Based LTIP Unit Awards3/1/2021132,381$12.5278%%0.08%
2021 Performance-Based LTIP Unit Awards3/1/2021198,564$15.9164%3.4%0.30%
2022 Time-Based LTIP Unit Awards3/1/2022152,004$12.3380%%