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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, 2024

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:  001-35074
 
SUMMIT HOTEL PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
_____________________________________________________________________________________
Maryland 27-2962512
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)  
 
13215 Bee Cave Parkway, Suite B-300
Austin, TX  78738
(Address of principal executive offices, including zip code)
 
(512) 538-2300
(Registrant’s telephone number, including area code)
________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueINNNew York Stock Exchange
Series E Cumulative Redeemable Preferred Stock, $0.01 par valueINN-PENew York Stock Exchange
Series F Cumulative Redeemable Preferred Stock, $0.01 par valueINN-PFNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405) of this chapter during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No
 




Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
 Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No
 
As of April 19, 2024, the number of outstanding shares of common stock of Summit Hotel Properties, Inc. was 108,192,206.



TABLE OF CONTENTS
 
  Page
   
   
 
 
 
 
 
   
   
   
   
   
   
   
   
   
   
   
 
i




PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Summit Hotel Properties, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share amounts)
 
March 31, 2024December 31, 2023
(Unaudited)
ASSETS
Investments in lodging property, net$2,715,009 $2,729,049 
Investment in lodging property under development2,364 1,451 
Assets held for sale, net64,019 73,740 
Cash and cash equivalents63,435 37,837 
Restricted cash8,916 9,931 
Right-of-use assets, net34,244 34,814 
Trade receivables, net27,985 21,348 
Prepaid expenses and other17,183 8,865 
Deferred charges, net6,495 6,659 
Other assets21,182 15,554 
Total assets$2,960,832 $2,939,248 
LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS
AND EQUITY
Liabilities:
Debt, net of debt issuance costs$1,452,002 $1,430,668 
Lease liabilities, net25,413 25,842 
Accounts payable7,303 4,827 
Accrued expenses and other81,719 81,215 
Total liabilities1,566,437 1,542,552 
Commitments and contingencies (Note 11)
  
Redeemable non-controlling interests50,219 50,219 
Equity:  
Preferred stock, $0.01 par value per share, 100,000,000 shares authorized:
  
6.25% Series E - 6,400,000 shares issued and outstanding at March 31, 2024 and December 31, 2023 (aggregate liquidation preference of $160,861 at March 31, 2024 and December 31, 2023, respectively)
64 64 
5.875% Series F - 4,000,000 shares issued and outstanding at March 31, 2024 and December 31, 2023 (aggregate liquidation preference of $100,506 at March 31, 2024 and December 31, 2023, respectively)
40 40 
Common stock, $0.01 par value per share, 500,000,000 shares authorized, 108,198,141 and 107,593,373 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively
1,082 1,076 
Additional paid-in capital1,239,905 1,238,896 
Accumulated other comprehensive income14,969 10,967 
Accumulated deficit and distributions in excess of retained earnings(348,302)(339,848)
Total stockholders’ equity907,758 911,195 
Non-controlling interests436,418 435,282 
Total equity1,344,176 1,346,477 
Total liabilities, redeemable non-controlling interests and equity$2,960,832 $2,939,248 
 
See Notes to the Condensed Consolidated Financial Statements
1


Summit Hotel Properties, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
March 31,
20242023
Revenues:
Room$167,431 $163,089 
Food and beverage10,833 10,630 
Other9,878 8,664 
Total revenues188,142 182,383 
Expenses:
Room35,973 35,909 
Food and beverage8,202 7,955 
Other lodging property operating expenses56,261 56,125 
Property taxes, insurance and other14,285 14,724 
Management fees4,897 4,805 
Depreciation and amortization36,799 36,908 
Corporate general and administrative8,311 8,005 
Recoveries of credit losses (250)
Total expenses164,728 164,181 
Gain on disposal of assets, net75  
Operating income23,489 18,202 
Other income (expense):
Interest expense(21,582)(20,909)
Interest income458 306 
Other income (loss), net685 (41)
Total other expense, net(20,439)(20,644)
Income (loss) from continuing operations before income taxes3,050 (2,442)
Income tax (expense) benefit (Note 13)
(217)472 
Net income (loss)2,833 (1,970)
Less - (Income) loss attributable to non-controlling interests(322)1,369 
Net income (loss) attributable to Summit Hotel Properties, Inc. before preferred dividends and distributions2,511 (601)
Less - Distributions to and accretion of redeemable non-controlling interests(657)(657)
Less - Preferred dividends(3,970)(3,970)
Net loss attributable to common stockholders
$(2,116)$(5,228)
Loss per share:
Basic and Diluted$(0.02)$(0.05)
Weighted-average common shares outstanding:
Basic and Diluted105,720 105,312 

See Notes to the Condensed Consolidated Financial Statements
2


Summit Hotel Properties, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
(In thousands)
Three Months Ended
March 31,
20242023
Net income (loss)$2,833 $(1,970)
Other comprehensive income (loss), net of tax:
Changes in fair value of derivative financial instruments5,696 (4,388)
Comprehensive income (loss)8,529 (6,358)
Comprehensive (income) loss attributable to non-controlling interests(2,016)1,489 
Comprehensive income (loss) attributable to Summit Hotel Properties, Inc.6,513 (4,869)
Distributions to and accretion on redeemable non-controlling interests(657)(657)
Preferred dividends and distributions(3,970)(3,970)
Comprehensive income (loss) attributable to common stockholders$1,886 $(9,496)
 

See Notes to the Condensed Consolidated Financial Statements

3


Summit Hotel Properties, Inc.
Condensed Consolidated Statements of Changes in Equity and Redeemable Non-controlling Interests
For the Three Months Ended March 31, 2024 and 2023
(Unaudited - In thousands, except share amounts)
Redeemable Non-controlling InterestsShares
 of Preferred
Stock
Preferred
Stock
Shares
of Common
Stock
Common
Stock
Additional
Paid-In Capital
Accumulated
Comprehensive
Income (Loss)
Accumulated
Deficit and
Distributions
Stockholders’
Equity
Non-controlling InterestsTotal
Equity
Balance at December 31, 2023$50,219 10,400,000 $104 107,593,373 $1,076 $1,238,896 $10,967 $(339,848)$911,195 $435,282 $1,346,477 
Adjustment of redeemable non-controlling interests to redemption value657 — — — — — — (657)(657)— (657)
Contributions by non-controlling interest in joint venture— — — — — — — — — 76 76 
Dividends and distributions on common stock and common units— — — — — — — (6,338)(6,338)(956)(7,294)
Preferred dividends and distributions(657)— — — — — — (3,970)(3,970) (3,970)
Equity-based compensation— — — 731,614 7 1,841 — — 1,848 — 1,848 
Shares of common stock acquired for employee withholding requirements— — — (126,846)(1)(832)— — (833)— (833)
Other comprehensive income— — — — — — 4,002 — 4,002 1,694 5,696 
Net income— — — — — — — 2,511 2,511 322 2,833 
Balance at March 31, 2024$50,219 10,400,000 $104 108,198,141 $1,082 $1,239,905 $14,969 $(348,302)$907,758 $436,418 $1,344,176 
Balance at December 31, 2022$50,219 10,400,000 $104 106,901,576 $1,069 $1,232,302 $14,538 $(288,200)$959,813 $448,137 $1,407,950 
Adjustment of redeemable non-controlling interests to redemption value657 — — — — — — (657)(657)— (657)
Sale of non-controlling interests in joint venture— — — — — — — — — 1,353 1,353 
Common dividends and distributions— — — — — — — (4,259)(4,259)(639)(4,898)
Preferred dividends and distributions(657)— — — — — — (3,970)(3,970) (3,970)
Joint venture partner distributions— — — — — — — — — (790)(790)
Equity-based compensation— — — 736,370 7 1,461 — — 1,468 — 1,468 
Shares of common stock acquired for employee withholding requirements— — — (168,083)(1)(1,282)— — (1,283)— (1,283)
Other— — — — — (24)— — (24)(144)(168)
Other comprehensive loss— — — — — — (4,268)— (4,268)(120)(4,388)
Net loss— — — — — — — (601)(601)(1,369)(1,970)
Balance at March 31, 2023$50,219 10,400,000 $104 107,469,863 $1,075 $1,232,457 $10,270 $(297,687)$946,219 $446,428 $1,392,647 


See Notes to the Condensed Consolidated Financial Statements
4


Summit Hotel Properties, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Three Months Ended
March 31,
20242023
OPERATING ACTIVITIES
Net income (loss)$2,833 $(1,970)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization36,799 36,908 
Amortization of debt issuance costs1,619 1,399 
Recoveries of credit losses (250)
Equity-based compensation1,848 1,468 
Gain on disposal of assets, net(75) 
Non-cash interest income(133)(143)
Debt transaction costs564 87 
Other60 285 
Changes in operating assets and liabilities:
Trade receivables, net(6,637)(3,055)
Prepaid expenses and other(8,318)388 
Accounts payable2,059 (38)
Accrued expenses and other(2,469)(3,073)
NET CASH PROVIDED BY OPERATING ACTIVITIES28,150 32,006 
INVESTING ACTIVITIES
Improvements to lodging properties(18,116)(24,088)
Investment in lodging property under development(913) 
Proceeds from asset dispositions, net9,043  
Funding of real estate loans (1,320)
NET CASH USED IN INVESTING ACTIVITIES(9,986)(25,408)
FINANCING ACTIVITIES
Proceeds from borrowings on revolving line of credit60,000 25,000 
Repayments of revolving line of credit(5,000)(10,000)
Principal payments on debt(33,490)(692)
Proceeds from the sale of non-controlling interests 1,353 
Common dividends paid(7,349)(4,904)
Preferred dividends and distributions paid(4,627)(4,627)
Proceeds from contributions by non-controlling interests in joint venture76  
Distributions to joint venture partners (790)
Financing fees, debt transaction costs and other issuance costs(2,358)(632)
Repurchase of shares of common stock for withholding requirements(833)(1,283)
NET CASH PROVIDED BY FINANCING ACTIVITIES6,419 3,425 
Net change in cash, cash equivalents and restricted cash24,583 10,023 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH  
Beginning of period47,768 61,808 
End of period$72,351 $71,831 
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH WITHIN THE CONDENSED CONSOLIDATED BALANCE SHEET TO THE AMOUNTS SHOWN IN THE STATEMENT OF CASH FLOWS ABOVE:
Cash and cash equivalents$63,435 $60,678 
Restricted cash8,916 11,153 
TOTAL CASH, CASH EQUIVALENTS AND RESTRICTED CASH$72,351 $71,831 
See Notes to the Condensed Consolidated Financial Statements
5


SUMMIT HOTEL PROPERTIES, INC. 
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
NOTE 1 - DESCRIPTION OF BUSINESS
 
General

Summit Hotel Properties, Inc. (the “Company”) is a self-managed lodging property investment company that was organized on June 30, 2010 as a Maryland corporation. The Company holds both general and limited partnership interests in Summit Hotel OP, LP (the “Operating Partnership”), a Delaware limited partnership also organized on June 30, 2010. Unless the context otherwise requires, “we,” “us,” and “our” refer to the Company and its consolidated subsidiaries.
 
We focus on owning lodging properties with efficient operating models that generate strong margins and investment returns. At March 31, 2024, our portfolio consisted of 99 lodging properties with a total of 14,785 guestrooms located in 24 states. At March 31, 2024, we own 100% of the outstanding equity interests in 56 of our 99 lodging properties. We own a 51% controlling interest in 40 lodging properties through a joint venture that was formed in July 2019 with USFI G-Peak, Ltd. ("GIC"), a private limited company incorporated in the Republic of Singapore (the "GIC Joint Venture"). We also own 90% equity interests in two separate joint ventures (the "Brickell Joint Venture" and the "Onera Joint Venture"). The Brickell Joint Venture owns two lodging properties, and the Onera Joint Venture owns one lodging property.

As of March 31, 2024, 85% of our guestrooms were located in the top 50 metropolitan statistical areas (“MSAs”), 90% were located within the top 100 MSAs and over 99% of our guestrooms operated under premium franchise brands owned by Marriott® International, Inc. (“Marriott”), Hilton® Worldwide (“Hilton”), Hyatt® Hotels Corporation (“Hyatt”), and InterContinental® Hotels Group (“IHG”).

Substantially all of our assets are held by, and all of our operations are conducted through, the Operating Partnership. Through a wholly-owned subsidiary, we are the sole general partner of the Operating Partnership. At March 31, 2024, we owned, directly and indirectly, approximately 87% of the Operating Partnership’s issued and outstanding common units of limited partnership interest (“Common Units”), and all of the Operating Partnership’s issued and outstanding 6.25% Series E and 5.875% Series F preferred units of limited partnership interest. NewcrestImage (as defined in Note 4 - Debt to the Condensed Consolidated Financial Statements) owns all of the issued and outstanding 5.25% Series Z Cumulative Perpetual Preferred Units (liquidation preference $25 per unit) of the Operating Partnership ("Series Z Preferred Units"), as a result of the NCI Transaction (described in Note 4 - Debt to the Condensed Consolidated Financial Statements). We collectively refer to preferred units of limited partnership interests of our Operating Partnership as "Preferred Units".

Pursuant to the Operating Partnership’s partnership agreement, we have full, exclusive and complete responsibility and discretion in the management and control of the Operating Partnership, including the ability to cause the Operating Partnership to enter into certain major transactions including acquisitions, dispositions and refinancings, to make distributions to partners and to cause changes in the Operating Partnership’s business activities.

We have elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes. To qualify as a REIT, we cannot operate or manage our lodging properties. Accordingly, all of our lodging properties are leased to our taxable REIT subsidiaries (“TRS Lessees” or "TRSs") and managed by professional third-party management companies.

NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
 
Basis of Presentation
 
We prepare our Condensed Consolidated Financial Statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Condensed Consolidated Financial Statements and reported amounts of revenues and expenses in the reporting period. Actual results could differ from those estimates. As interim statements, the Condensed Consolidated Financial Statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation in accordance with GAAP have been included. Results for the three months ended March 31, 2024 may not be indicative of the results that may be expected for the full year of 2024. For further information, please read the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.
6



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

We evaluate joint venture partnerships to determine if they should be consolidated based on whether the partners exercise joint control. For a joint venture where we exercise primary control and we also own a majority of the equity interests, we consolidate the joint venture partnership. We have consolidated the accounts of all of our joint venture partnerships in our accompanying Condensed Consolidated Financial Statements.

Use of Estimates

Our Condensed Consolidated Financial Statements are prepared in conformity with GAAP, which requires us to make estimates based on assumptions about current and, for some estimates, future economic and market conditions that affect reported amounts and related disclosures in our Condensed Consolidated Financial Statements. Although our current estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could significantly differ from our expectations, which could materially affect our consolidated financial position and results of operations.

Trade Receivables and Current Estimate of Credit Losses

We grant credit to qualified guests, generally without collateral, in the form of trade accounts receivable. Trade receivables result from the rental of guestrooms and the sales of food, beverage, and banquet services and are payable under normal trade terms. Trade receivables also include credit and debit card transactions that are in the process of being settled. Trade receivables are stated at the amount billed to the guest and do not accrue interest. We regularly review the collectability of our trade receivables. A provision for losses is determined on the basis of previous loss experience and current economic conditions. Our allowance for doubtful accounts was $0.1 million at both March 31, 2024 and December 31, 2023. Bad debt expense was $0.1 million for each of the three months ended March 31, 2024 and 2023, respectively.

Investments in Lodging Property, net
 
The Company allocates the purchase price of acquired lodging properties based on the relative fair values of the acquired land, land improvements, building, furniture, fixtures and equipment, identifiable intangible assets or liabilities, other assets, and assumed liabilities. Intangible assets may include certain value associated with the on-going operations of the lodging business being acquired as part of the property acquisition. Acquired intangible assets that derive their values from real property, or an interest in real property, are inseparable from that real property or interest in real property, do not produce or contribute to the production of income other than consideration for the use or occupancy of space, and are recorded as a component of the related real estate asset in our Condensed Consolidated Financial Statements. We allocate the purchase price of acquired lodging properties to land, building and furniture, fixtures and equipment based on independent third-party appraisals.

Our lodging properties and related assets are recorded at cost, less accumulated depreciation. We capitalize development costs and the costs of significant additions and improvements that materially upgrade, increase the value or extend the useful life of the property. These costs may include development, refurbishment, renovation, and remodeling expenditures, as well as certain indirect internal costs related to construction projects. If an asset requires a period of time in which to carry out the activities necessary to bring it to the condition necessary for its intended use, the interest cost incurred during that period as a result of expenditures for the asset is capitalized as part of the cost of the asset. We expense the cost of repairs and maintenance as incurred.
 
We generally depreciate our lodging properties and related assets using the straight-line method over their estimated useful lives as follows:
 
Classification Estimated Useful Lives
Buildings and improvements
6 to 40 years
Furniture, fixtures and equipment
2 to 15 years
 
We periodically re-evaluate asset lives based on current assessments of remaining utilization, which may result in changes in estimated useful lives. Such changes are accounted for prospectively and will increase or decrease future depreciation expense. 

7


When depreciable property and equipment is retired or disposed, the related costs and accumulated depreciation are removed from the balance sheet and any gain or loss is reflected in current operations. 

On a limited basis, we provide financing to developers of lodging properties for development projects. We evaluate these arrangements to determine if we participate in residual profits of the lodging property through the loan provisions or other agreements. Where we conclude that these arrangements are more appropriately treated as an investment in the real property, we reflect the loan in Investments in lodging property, net in our Condensed Consolidated Balance Sheets.

We monitor events and changes in circumstances for indicators that the carrying value of a lodging property or undeveloped land may be impaired. Additionally, we perform at least annual reviews to monitor the factors that could trigger an impairment. Factors that we consider for an impairment analysis include, among others: i) significant underperformance relative to historical or anticipated operating results, ii) significant changes in the manner of use of a property or the strategy of our overall business, including changes in the estimated holding periods for lodging properties and land parcels, iii) a significant increase in competition, iv) a significant adverse change in legal factors or regulations, v) changes in values of comparable land or lodging property sales, vi) significant negative industry or economic trends, and fair value less costs to sell of lodging properties held for sale relative to the contractual selling price. When such factors are identified, we prepare an estimate of the undiscounted future cash flows of the specific property and determine if the carrying amount of the asset is recoverable. If the carrying amount of the asset is not recoverable, we estimate the fair value of the property based on discounted cash flows or sales price if the property is under contract and an adjustment is made to reduce the carrying value of the property to its estimated net fair value.
 
Segment Disclosure
Accounting Standards Codification (“ASC”) No. 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. We have determined that we have one reportable operating segment for activities related to investing in real estate; thus, all required financial segment information is included in the Condensed Consolidated Financial Statements as a single operating segment because all of our lodging properties have similar economic characteristics, facilities, and services.

Exchange or Modification of Debt

We consider modifications or exchanges of debt as extinguishments in accordance with ASC No. 470, Debt, with gains or losses recognized in current earnings if the terms of the new debt and original instrument are substantially different. If the original and new debt instruments are substantially different, the original debt is derecognized and the new debt is initially recorded at fair value, with the difference recognized as an extinguishment gain or loss. Under an exchange or modification accounted for as a debt extinguishment, fees paid to the lenders are included in the gain or loss on extinguishment of debt. Costs incurred with third parties, such as legal fees, directly related to the exchange or modification are capitalized as deferred financing costs and amortized over the initial term of the new debt. Previously deferred fees and costs for existing debt are included in the calculation of gain or loss. Under an exchange or modification not accounted for as a debt extinguishment, fees paid to the lenders are reflected as additional debt discount and amortized as non-cash interest expense over the remaining initial term of the exchanged or modified debt. Furthermore, costs incurred with third parties, such as legal fees, directly related to the exchange or modification are expensed as incurred. Additionally, previously deferred fees and costs are amortized as non-cash interest expense over the remaining initial term of the exchanged or modified debt.

Earnings Per Share

Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. We apply the two-class method of computing EPS, which requires the calculation of separate EPS amounts for participating securities. Under the two-class computation method, net losses are not allocated to participating securities unless the holder of the security has a contractual obligation to share in the losses. Any anti-dilutive securities are excluded from the basic per-share calculation.

Diluted EPS is computed by dividing net income (loss) available to common stockholders, as adjusted for dilutive securities, by the weighted-average number of shares of common stock outstanding plus dilutive securities. Any anti-dilutive securities are excluded from the diluted per-share calculation. Potentially dilutive shares include unvested restricted share grants, unvested performance share grants, shares of common stock issuable upon conversion of convertible debt and shares of common stock issuable upon conversion of Common Units of our Operating Partnership.

8


Basic and diluted loss per share for the three months ended March 31, 2024 and 2023 are calculated as Net loss attributable to common stockholders for each respective period divided by weighted average common shares outstanding for each respective period as all other securities are antidilutive.

New Accounting Standards

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280). ASU 2023-07 will improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. Although we operate only a single segment, ASU 2023-07 will require us to adhere to all disclosure requirements of the pronouncement which includes among other things, disclosures related to our chief operating decision maker. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The adoption of ASU 2023-07 will not have a material effect on our Consolidated Financial Statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The adoption of ASU 2023-09 will not have a material effect on our Consolidated Financial Statements.

NOTE 3 - INVESTMENTS IN LODGING PROPERTY, NET
 
Investments in Lodging Property, net

Investments in lodging property, net is as follows (in thousands):
March 31, 2024December 31, 2023
Lodging buildings and improvements$2,793,479 $2,786,223 
Land373,039 373,039 
Furniture, fixtures and equipment271,533 268,631 
Construction in progress53,628 41,324 
Intangible assets39,954 39,954 
Real estate development loan, net4,309 4,176 
3,535,942 3,513,347 
Less accumulated depreciation and amortization(820,933)(784,298)
$2,715,009 $2,729,049 

Depreciation and amortization expense related to our lodging properties (excluding amortization of franchise fees) was $36.6 million, and $36.8 million for the three months ended March 31, 2024 and 2023, respectively.

Lodging Property Sales

In February 2024, we completed the sale of the 127-guestroom Hyatt Place - Dallas (Plano), TX for $10.3 million. At December 31, 2023, we classified the property as Assets held for sale, net. We recorded a nominal gain on the sale during the three months ended March 31, 2024 upon closing the transaction.

During the first quarter of 2024, we entered into a purchase and sale agreement with a single buyer to sell the 202-guestroom Courtyard by Marriott and the 208-guestroom SpringHill Suites, both located in New Orleans, LA, for an aggregate selling price of $73.0 million. The properties were recorded as Assets held for sale, net at both March 31, 2024 and December 31, 2023. We closed on the sale of these properties on April 17, 2024 in accordance with the expected terms of the transaction, which resulted in a gain of approximately $28.0 million that will be recorded in the second quarter of 2024. The sale will result in the return of approximately $2.6 million of restricted cash to us related to reserves for furniture, fixtures and equipment. Net proceeds from the sale were used to repay the outstanding $55.0 million balance on our $400 Million Revolver (defined in "Note 5 - Debt" below) subsequent to quarter end.

9


Additionally, during the first quarter of 2024, we entered into a purchase and sale agreement to sell the 119-guestroom Hilton Garden Inn - Bryan (College Station), TX for $11.0 million. The property was recorded as Assets held for sale, net at both March 31, 2024 and December 31, 2023. We closed on the sale of this lodging property on April 25, 2024 in accordance with the expected terms of the transaction. The net selling price of the lodging property was consistent with its net book value on the closing date. Net proceeds from the sale were used to repay $6.0 million of the GIC Joint Venture Term Loan (defined in "Note 5 - Debt" below) subsequent to quarter end.

Assets Held for Sale, net

Assets held for sale, net is as follows (in thousands):

March 31, 2024December 31, 2023
Under Contract for Sale:
Hyatt Place - Dallas (Plano), TX$ $9,940 
Courtyard by Marriott and SpringHill Suites - New Orleans, LA
43,693 43,504 
Hilton Garden Inn - Bryan (College Station), TX10,652 10,642 
Parcel of undeveloped land - San Antonio, TX1,225 1,225 
55,570 65,311 
Marketed for Sale:
One individual lodging property8,024 8,004 
Parcel of undeveloped land - Flagstaff, AZ425 425 
$64,019 $73,740 

The parcel of undeveloped land in San Antonio, TX is currently under contract to sell and the sale is expected to close in the fourth quarter of 2024.

Intangible Assets

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

March 31, 2024December 31, 2023
Indefinite-lived intangible assets:
Air rights$10,754 $10,754 
Other80 80 
10,834 10,834 
Finite-lived intangible assets:
Tax incentives19,750 19,750 
Key money9,370 9,370 
29,120 29,120 
Intangible assets39,954 39,954 
Less accumulated amortization(10,283)(9,251)
Intangible assets, net$29,671 $30,703 

We recorded amortization expense related to intangible assets of approximately $1.0 million for each of the three months ended March 31, 2024 and 2023, respectively.
10



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

For the Year Ending
December 31,
Amount
2024$3,486 
20251,564 
20261,564 
20271,374 
20281,016 
Thereafter9,833 
$18,837 

NOTE 4 — INVESTMENT IN REAL ESTATE LOANS

Real Estate Development Loans

Onera Mezzanine Financing Loan

In January 2023, we entered into an agreement with affiliates of Onera Opportunity Fund I, LP ("Onera") to provide a mezzanine financing loan of $4.6 million (the "Onera Mezzanine Loan") for the development of a glamping property. The Onera Mezzanine Loan is secured by a second mortgage on the property and is subordinate to the senior lender for the development project. The loan matures 24 months from the closing date of the transaction and may be extended for an additional 12 months at the borrower's option. Additionally, we issued a $3.0 million letter of credit to the senior lender of the project as additional support for Onera's construction loan. We also have an option to purchase 90% of the equity of the entity that owns the development property upon completion of construction or at the one-year anniversary of such completion at a pre-determined price (the "Onera Purchase Option"). The development is expected to be completed in the second half of 2024. As of March 31, 2024, we have funded our entire $4.6 million commitment under the mezzanine financing loan. The balance of the Onera Mezzanine Loan is recorded net of the unamortized discount related to the carrying amount of the Onera Purchase Option of $0.3 million and $0.4 million at March 31, 2024 and December 31, 2023, respectively, and is classified as Investments in lodging property, net in our Condensed Consolidated Balance Sheets.

We recorded the Onera Purchase Option related to the Onera Mezzanine Loan in Other assets and as a contra-asset to Investments in lodging property, net at its estimated fair value of $0.9 million on the transaction date using the Black-Scholes model. The recorded amount of the Onera Purchase Option is being amortized over the term of the Onera Mezzanine Loan using the straight-line method, which approximates the interest method, as non-cash interest income. For each of the three months ended March 31, 2024, and 2023, we amortized $0.1 million of the carrying amount of the Onera Purchase Option as non-cash interest income.

Our estimate of the fair value of the Onera Purchase Option under the Black-Scholes model requires judgment and estimates primarily related to the volatility of our stock price and expected levels of future dividends on our common stock.

11


NOTE 5 - DEBT
 
At March 31, 2023, our indebtedness was comprised of borrowings under our 2023 Senior Credit Facility (as defined below), the 2024 Term Loan (as defined below), the GIC Joint Venture Credit Facility (as defined below), the GIC Joint Venture Term Loan (as defined below), the PACE Loan (as defined below), the Brickell Mortgage Loan (as defined below), the Convertible Notes (as defined below), and other indebtedness secured by first priority mortgage liens on various lodging properties. The weighted-average interest rate, after giving effect to our interest rate derivatives, for all borrowings was 5.35% at March 31, 2024 and 5.31% at December 31, 2023. There are currently no defaults under any of the Company's loan agreements.

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

March 31, 2024December 31, 2023
Revolving debt$180,000 $125,000 
Term loans877,021 910,000 
Convertible notes287,500 287,500 
Mortgage loans122,828 123,339 
 1,467,349 1,445,839 
Unamortized debt issuance costs(15,347)(15,171)
    Debt, net of debt issuance costs$1,452,002 $1,430,668 

We have entered into interest rate swaps to fix the interest rates on a portion of our variable interest rate indebtedness. In January 2024, subsidiaries of the GIC Joint Venture that are the borrowers under the GIC Joint Venture Term Loan entered into a $100.0 million interest rate swap to fix the one-month term Secured Overnight Financing Rate (“SOFR”) until January 2026. The interest rate swap has an effective date of October 1, 2024 and a termination date of January 13, 2026. Pursuant to the interest rate swaps, we will pay a fixed rate of 3.77% and receive the one-month term SOFR floating rate index. See "Note 7 - Derivative Financial Instruments and Hedging" to the Condensed Consolidated Financial Statements for additional information.

Our total fixed-rate and variable-rate debt, after consideration of our interest rate derivative agreements that are currently in effect, is as follows (in thousands):
 
March 31, 2024PercentageDecember 31, 2023Percentage
Fixed-rate debt (1)
$955,970 65%$956,414 66%
Variable-rate debt511,379 35%489,425 34%
$1,467,349 $1,445,839 

(1) At March 31, 2024, debt related to our wholly-owned properties and our pro rata share of joint venture debt has a fixed-rate debt ratio of approximately 73% of our total pro rata indebtedness when taking into consideration interest rate swaps. In April 2024, after repayment of the outstanding $55.0 million balance of our $400 Million Revolver from the proceeds of the sale of a portfolio of two lodging properties in New Orleans, LA and a $6.0 million paydown to the GIC Joint Venture Term Loan from the proceeds of the sale of the Hilton Garden Inn - Bryan (College Station), TX, debt related to our wholly-owned properties and our pro rata share of joint venture debt has a fixed-rate debt ratio of approximately 77% of our total pro rata indebtedness when taking into consideration interest rate swaps.

Information about the fair value of our fixed-rate debt that is not recorded at fair value is as follows (dollars in thousands):
 
March 31, 2024December 31, 2023 
Carrying
Value
Fair ValueCarrying
Value
Fair ValueValuation Technique
Convertible notes$287,500 $257,313 $287,500 $256,141 Level 1 - Market approach
Mortgage loans68,470 62,547 68,915 60,883 Level 2 - Market approach
$355,970 $319,860 $356,415 $317,024 
 
12


Detailed information about our gross debt at March 31, 2024 and December 31, 2023 is as follows (dollars in thousands):

Principal Balance Outstanding
LenderInterest RateInitial Maturity DateFully Extended Maturity DateNumber of
Encumbered  Properties
March 31, 2024December 31, 2023
OPERATING PARTNERSHIP DEBT:
2023 Senior Credit and Term Loan Facility
Bank of America, N.A.
$400 Million Revolver (1)
7.38% Variable
6/21/20276/21/2028n/a$55,000 $ 
$200 Million Term Loan (1)
7.33% Variable
6/21/20266/21/2028n/a200,000 200,000 
Total Senior Credit and Term Loan Facility255,000 200,000 
Term Loans
KeyBank National Association Term Loan (1)
n/a2/14/20252/14/2025n/a 225,000 
Regions Bank Term Loan (1)
7.32% Variable
2/26/20272/26/2029n/a200,000  
200,000 225,000 
Convertible Notes
1.50% Fixed
2/15/20262/15/2026n/a287,500 287,500 
Secured Mortgage Indebtedness
MetaBank
4.44% Fixed
7/1/20277/1/20273 42,400 42,611 
Bank of the Cascades (2)
7.32% Variable
12/19/202412/19/20241 7,358 7,425 
4.30% Fixed
12/19/202412/19/20247,358 7,425 
Total Mortgage Loans4 57,116 57,461 
Total Operating Partnership Debt
799,616 769,961 
JOINT VENTURE DEBT:
Brickell Joint Venture Mortgage Loan
City National Bank of Florida
8.32% Variable
6/9/20256/9/20252 47,000 47,000 
GIC Joint Venture Credit Facility and Term Loans
Bank of America, N.A.
$125 Million Revolver (3)
7.58% Variable
9/15/20279/15/2028n/a125,000 125,000 
 $75 Million Term Loan (3)
7.53% Variable
9/15/20279/15/2028n/a75,000 75,000 
Bank of America, N.A. (4)
8.19% Variable
1/13/20261/13/2027n/a402,021 410,000 
Wells Fargo
4.99% Fixed
6/6/20286/6/2028112,720 12,785 
PACE loan
6.10% Fixed
7/31/20407/31/204015,992 6,093 
Total GIC Joint Venture Credit Facility and Term Loans2620,733 628,878 
Total Joint Venture Debt4 667,733 675,878 
Total Debt8 $1,467,349 $1,445,839 

(1) The 2023 Senior Credit and Term Loan Facility is supported by a borrowing base of 52 unencumbered hotel properties.
(2) The Bank of Cascades mortgage loan is comprised of two promissory notes that are secured by the same collateral and have cross-default provisions.
(3) The $125 Million Revolver and the $75 Million Term Loan are secured by pledges of the equity in the entities and affiliated entities that own 13 lodging properties.
(4) The GIC Joint Venture Term Loan is secured by pledges of the equity in the entities and affiliated entities that own 26 lodging properties.


13


$600 Million Senior Credit and Term Loan Facility

In June 2023, the Operating Partnership, as borrower, the Company, as parent guarantor, and each party executing the loan documentation as a subsidiary guarantor, entered into an amended and restated $600.0 million senior credit facility (the “2023 Senior Credit Facility”) with Bank of America, N.A., as successor administrative agent, and a syndicate of lenders. The 2023 Senior Credit Facility is comprised of a $400.0 million revolver (the "$400 Million Revolver") and a $200.0 million term loan facility (the “$200 Million Term Loan”). The 2023 Senior Credit Facility has an accordion feature which allows the Company to increase the total commitments by an aggregate of up to $300.0 million.

At March 31, 2024, our $200 Million Term Loan was fully funded, and our $400 Million Revolver had $55.0 million in outstanding borrowings. Borrowings under the 2023 Senior Credit Facility are limited by the value of the Unencumbered Properties (as defined below). We repaid the $55.0 million outstanding balance of the $400 Million Revolver in April 2024 with the net proceeds from the sale of two lodging properties located in New Orleans, LA.

The $400 Million Revolver has a maturity date of June 2027, which may be extended by the Company for up to two consecutive six-month periods, subject to certain conditions and the $200 Term Loan has a maturity date of June 2026, which may be extended by the Company for up to two consecutive 12-month periods, subject to certain conditions.

The 2023 Senior Credit Facility bears interest at SOFR. The interest rate on the $400 Million Revolver is based on the higher of (i) a pricing grid ranging from 140 basis points to 240 basis points plus Adjusted Daily SOFR or Adjusted Term SOFR, depending on the Company's leverage ratio (as defined in the loan documents); and (ii) a pricing grid ranging from 40 basis points to 140 basis points over the Base Rate, depending on the Company's leverage ratio (as defined in the credit agreements governing the 2023 Senior Credit Facility).

The interest rate on the $200 Million Term Loan is based on the higher of (i) a pricing grid ranging from 135 basis points to 235 basis points plus Adjusted Daily SOFR or Adjusted Term SOFR, depending on the Company's leverage ratio (as defined in the loan documents); and (ii) a pricing grid ranging from 35 basis points to 135 basis points over the Base Rate, depending on the Company's leverage ratio (as defined in the loan documents).

Term SOFR will be available for one, three and six-month interest periods. The Base Rate is a fluctuating rate of interest per annum equal to the highest of (a) the Federal Funds Rate plus 0.50%, (b) the rate of interest in effect for such day as publicly announced by Bank of America as its “prime rate,” (c) SOFR published on such day on the Federal Reserve Bank of New York’s website (or any successor source) plus 1.00% and (d) 1.00%. For purposes of the 2023 Senior Credit Facility, SOFR is subject to a floor of zero basis points.

We are also required to pay an unused fee (“Unused Fee”) on the undrawn portion of the $400 Million Revolver. The Unused Fee is calculated on a daily basis on the unused amount of the $400 Million Revolver multiplied by (i) 0.25% per annum in the event that Revolver usage is greater than 50%, and (ii) 0.20% per annum in the event that Revolver usage is equal to or less than 50%. The Unused Fee is payable quarterly in arrears and on the final maturity date of the $400 Million Revolver.

2024 Term Loan

In February 2024, our Operating Partnership, as borrower, the Company, as parent guarantor, and each party executing the term loan document as a subsidiary guarantor, entered into a $200 million senior unsecured term loan financing (the “2024 Term Loan”). Proceeds from the 2024 Term Loan financing and advances on our $400 Million Revolver were used to repay in full the Company’s $225 million term loan that was scheduled to mature in February 2025.

The 2024 Term Loan has an initial maturity date of February 2027 and can be extended for two 12-month periods by the Company, subject to certain conditions. At March 31, 2024, the 2024 Term Loan was fully funded.

We pay interest on advances at varying rates, based upon, at our option, either (i) daily, 1-, 3-, or 6-month SOFR (subject to a floor of 35 basis points), plus a SOFR adjustment equal to 10 basis points and an applicable margin between 135 and 235 basis points, depending upon our leverage ratio (as defined in the loan documents). We are required to pay other fees, including arrangement and administrative fees.

Financial and Other Covenants. We are required to comply with various financial and other covenants to draw and maintain borrowings under the 2024 Term Loan.

14


Convertible Senior Notes and Capped Call Options

In January 2021, we entered into an underwriting agreement (the “Convertible Notes Offering”) pursuant to which the Company agreed to offer and sell an aggregate of $287.5 million of 1.50% convertible senior notes due in 2026 (the “Convertible Notes"). The net proceeds from the Convertible Notes Offering, after deducting underwriting discounts and commissions and offering expenses payable by the Company (including net proceeds from the full exercise by the underwriters of their over-allotment option to purchase additional Convertible Notes), were approximately $280.0 million before consideration of the Capped Call Transactions (as described below). These proceeds were used to pay the cost of the Capped Call Transactions and to partially repay outstanding obligations under our senior credit facility that was replaced by the 2023 Senior Credit Facility and another term loan.

The Convertible Notes bear interest at a rate of 1.50% per year, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2021. The Convertible Notes will mature on February 15, 2026 (the “Maturity Date”), unless earlier converted, purchased, or redeemed. Prior to August 15, 2025, the Convertible Notes will be convertible only upon certain circumstances and during certain periods. On or after August 15, 2025 and through the Maturity Date, holders may convert any of their Convertible Notes into shares of the Company’s common stock, at the applicable conversion rate, unless the Convertible Notes have been previously purchased or redeemed by the Company. The Company recorded interest expense of $1.1 million for each of the three months ended March 31, 2024 and 2023. The Company incurred debt issuance costs related to the Convertible Notes Offering of $7.6 million of which $0.4 million was amortized as non-cash interest expense for each of the three months ended March 31, 2024 and 2023. Including the amortization of the debt issuance costs, the effective interest rate on the Convertible Notes was approximately 2.00% for the three months ended March 31, 2024 and 2023. The unamortized discount related to the Convertible Notes was $2.8 million and $3.2 million at March 31, 2024 and December 31, 2023, respectively.

The initial conversion rate of the Convertible Notes is 83.4028 shares of common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of $11.99 per share of common stock based on the 37.5% base conversion premium on the reference price of $8.72 per share. In no event will the conversion rate exceed 114.6788 shares of common stock per $1,000 principal amount of Convertible Notes, subject to certain adjustments defined in the Convertible Notes Offering. Commensurate with the declaration of dividends and distributions on our common stock and Common Units, respectively, on January 25, 2024, the conversion rate of the Convertible Notes was adjusted to 87.92 shares of common stock per $1,000 principal amount of Convertible Notes.

On January 7, 2021, in connection with the pricing of the Convertible Notes, and on January 8, 2021, in connection with the full exercise by the Underwriters of their option to purchase additional Convertible Notes pursuant to the Underwriting Agreement, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain of the underwriters or their respective affiliates and another financial institution (the “Capped Call Counterparties”). The Capped Call Transactions initially cover, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes, the number of shares of common stock underlying the Convertible Notes. The Capped Call Transactions are generally expected to reduce the potential dilution to holders of shares of common stock upon conversion of the Convertible Notes or offset the potential cash payments that the Company could be required to make in excess of the principal amount of any converted Convertible Notes upon conversion thereof, with such reduction or offset subject to a cap.

The effective strike price of the Capped Call Transactions was initially $15.26, which represented a premium of 75.0% over the last reported sale price of our common stock on the New York Stock Exchange on January 7, 2021 and is subject to certain adjustments under the terms of the Capped Call transactions. The current strike price is $14.48 due to the adjustments related to the dividends paid during the period that the Capped Call securities have been outstanding.

Mortgage Loans

At March 31, 2024 and December 31, 2023, we had mortgage loans totaling $122.8 million and $123.3 million, respectively, that are secured primarily by first mortgage liens on eight lodging properties.

15


Metabank Loan

In June 2017, Summit Meta 2017, LLC (“SM-17”), a subsidiary of our Operating Partnership, entered into a $47.6 million secured, non-recourse loan with MetaBank (the "MetaBank Loan"). The MetaBank Loan provides for a fixed interest rate of 4.44%, amortizes over 25 years, and matures on July 1, 2027. The MetaBank Loan is secured by three lodging properties and is subject to a prepayment penalty if prepaid prior to April 1, 2027. In or around December 2021, MetaBank sold the MetaBank Loan to Bayside MB CRE Loans, LLC (“Bayside”). In October 2022, SM-17 received a letter from Bayside’s counsel alleging various events of default under the MetaBank Loan, primarily related to certain non-monetary covenants. SM-17 engaged legal counsel which sent a written response to Bayside disputing that any events of default have occurred. In April 2023 and September 2023, SM-17 received additional letters from Bayside's counsel reasserting their allegations of default. SM-17 continues to dispute that any events of default have occurred.

GIC Joint Venture Credit Facility

In October 2019, Summit JV MR 1, LLC (the “Borrower”), as borrower, and Summit Hospitality JV, LP (the “Parent” or "GIC Joint Venture"), as parent of the Borrower, and each party executing the credit facility documentation as a subsidiary guarantor, entered into a $200.0 million credit facility (the “GIC Joint Venture Credit Facility”) with Bank of America, N.A., as administrative agent and sole initial lender, and BofA Securities, Inc., as sole lead arranger and sole bookrunner. The Operating Partnership and the Company are not borrowers or guarantors of the GIC Joint Venture Credit Facility. The GIC Joint Venture Credit Facility is guaranteed by all of the Borrower’s existing and future subsidiaries, subject to certain exceptions.

The GIC Joint Venture Credit Facility is comprised of a $125.0 million revolving credit facility (the “$125 Million Revolver”) and a $75.0 million term loan (the “$75 Million Term Loan”). The GIC Joint Venture Credit Facility has an accordion feature which allows us to increase the total commitments by up to $300.0 million, for aggregate potential borrowings of up to $500.0 million. At March 31, 2024, we had $125.0 million outstanding under the $125 Million Revolver.

Amendments to the $200 million GIC Joint Venture Credit Facility

In February 2023, the Borrower entered into the Fifth Amendment to Credit Agreement to, among other things, convert the reference rate used in interest rate calculations from the London Interbank Offered Rate ("LIBOR") to adjusted term or daily SOFR (using a 10-basis point credit spread adjustment), with Borrower's option to borrow base rate advances, term SOFR advances or daily SOFR advances.

In September 2023, the GIC Joint Venture entered into an amendment to the GIC Joint Venture Credit Facility (the "GIC Joint Venture Credit Amendment"). The GIC Joint Venture Credit Amendment extends the maturity of the $125 Million Revolver and the $75 Million Term Loan to September 2027, which may be extended by the Company for a single twelve-month period, subject to certain conditions.

The interest rate on the $125 Million Revolver is unchanged and is based on the higher of the following:

i.Daily SOFR or Term SOFR (1-month or 3-month), plus a SOFR adjustment of 0.10%, plus a margin of 2.15%, or,

ii.the applicable base rate, which is the greatest of the administrative agent’s prime rate, the federal funds rate plus 0.50%, and 1-month Term SOFR plus 1.00%, plus a base rate margin of 1.15%.

The interest rate on the $75 Million Term Loan is five basis points less than the interest rate on the $125 Million Revolver referenced above.

In addition, on a quarterly basis, we are required to pay a fee on the unused portion of the Credit Facility equal to the unused amount multiplied by an annual rate of 0.25% of the average unused amount of the Credit Facility. We are also required to pay other fees, including customary arrangement and administrative fees.

The GIC Joint Venture Credit Amendment requires the GIC Joint Venture and certain subsidiaries to pledge to the secured parties all of the equity interests in the entities that own the 13 properties included in the borrowing base assets, the related TRS entities that lease each of the borrowing base assets, and all other subsidiaries of the borrower and the subsidiary guarantors, subject to certain exceptions.
16



GIC Joint Venture Term Loan

In January and March 2022, the Operating Partnership and the GIC Joint Venture closed on a transaction with NewcrestImage Holdings, LLC, a Delaware limited liability company, and NewcrestImage Holdings II, LLC, a Delaware limited liability company (together, “NewcrestImage”), to acquire a portfolio of 27 lodging properties, containing an aggregate of 3,709 guestrooms, and two parking structures, containing 1,002 spaces and various financial incentives for an aggregate purchase price of $822.0 million (the "NCI Transaction"). In connection with the NCI Transaction, in January 2022, Summit JV MR 2, LLC, Summit JV MR 3, LLC and Summit NCI NOLA BR 184, LLC (each of which is a subsidiary of the GIC Joint Venture, and are collectively, the “Term Loan Borrower”), the GIC Joint Venture, as parent guarantor, and each party executing the credit facility documentation as a subsidiary guarantor, entered into a $410.0 million senior secured term loan facility (the “GIC Joint Venture Term Loan”) with Bank of America, N.A., as administrative agent and initial lender, Wells Fargo Bank, National Association, as syndication agent and an initial lender, and BofA Securities, Inc. and Wells Fargo Securities, LLC, as joint lead arrangers and joint bookrunners.

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

The GIC Joint Venture Term Loan has an accordion feature that permits an increase in the total commitments by up to $190.0 million, for aggregate potential borrowings of up to $600.0 million. The GIC Joint Venture Term Loan will mature on January 13, 2026 and can be extended for one twelve-month period at the option of the GIC Joint Venture, subject to certain conditions.

As of March 31, 2024, we had $402.0 million outstanding on the GIC Joint Venture Term Loan bearing interest at a floating rate of SOFR plus 2.75%. In April 2024, we repaid $6.0 million of the GIC Joint Venture Term Loan from the net proceeds of sale of the Hilton Garden Inn - Bryan (College Station), TX.

The GIC Joint Venture Term Loan is secured primarily by a first priority pledge of the Term Loan Borrower's equity interests in the subsidiaries that hold a direct or indirect interest in 26 of the lodging properties and two parking facilities at March 31, 2024 purchased in the NCI Transaction that constitute borrowing base assets. The GIC Joint Venture Term Loan contains terms, conditions, and covenants typical for similar credit facilities.

PACE Loan

As part of the NCI Transaction, a subsidiary of the GIC Joint Venture assumed a Property Assessed Clean Energy ("PACE") loan of approximately $6.5 million. The loan bears fixed interest at 6.10%, has an amortization period of 20 years, and matures on July 31, 2040. The PACE loan is secured by an assessment lien imposed by the County of Tarrant, TX for the benefit of the lender. As of March 31, 2024, the outstanding balance of the PACE loan was $6.0 million.

Brickell Mortgage Loan

In June 2022, the Company entered into a joint venture (the "Brickell Joint Venture") with C-F Brickell, LLC, a Delaware limited liability company ("C-F Brickell") that was the developer of the AC Hotel by Marriott and Element Miami Brickell Hotel in Miami, FL (the "AC/Element Hotel"), to facilitate the exercise of our purchase option to acquire a 90% equity interest in the Brickell Joint Venture (the "Initial Purchase Option"), which owned a 100% interest in the AC/Element Hotel. In June 2022, the Brickell Joint Venture entered into a $47.0 million mortgage loan and non-recourse guaranty with City National Bank of Florida (the "Brickell Mortgage Loan") to finance the AC/Element Hotel. The Brickell Mortgage Loan provided for an interest rate equal to one-month LIBOR plus 300 basis points through June 30, 2023. Effective July 1, 2023, the interest rate for the Brickell Mortgage Loan was converted to one-month SOFR plus 300 basis points.

Payment terms include an interest-only period through June 30, 2024 and the loan will amortize based on a 25-year schedule from July 1, 2024 through the maturity date of June 30, 2025. The Brickell Mortgage Loan is prepayable at any time without penalty.

17


Financial Guarantee

In January 2023, we issued a $3.0 million letter of credit to the senior lender of a glamping project for which we provided the Onera Mezzanine Loan as additional credit support on behalf of the developer. We recorded the non-contingent portion of financial guarantee as a liability of $0.2 million on the transaction date, which is the premium receivable for the guarantee payable to us by the borrower. The liability is being amortized using the straight-line method into interest income over the term of the letter of credit and is recorded in Accrued expenses and other in our Condensed Consolidated Balance Sheets at March 31, 2024 and December 31, 2023.

Currently, payment under the contingent portion of the guarantee is not probable nor reasonably estimable. Therefore, no liability for the contingent portion of the guarantee is recorded at March 31, 2024 and December 31, 2023.

NOTE 6 - LEASES

The Company has operating leases related to the land under certain lodging properties, conference centers, parking spaces, automobiles, our corporate office, and miscellaneous office equipment. These leases have remaining terms of one year to 74.3 years, some of which include options to extend the leases for additional years. The exercise of lease renewal options is at our sole discretion. As of March 31, 2024 and December 31, 2023, the weighted-average operating lease term was approximately 32.2 years. Certain leases also include options to purchase the leased property. As of March 31, 2024 and December 31, 2023, our weighted-average incremental borrowing rate for leases was 4.8%.

Certain of our lease agreements include rental payments based on a percentage of revenue over contractual levels and others include rental payments adjusted periodically for inflation. Our lease agreements do not contain any material residual value guarantees or restrictive covenants that materially affect our business. In addition, we lease certain owned real estate to third parties. We recorded gross third-party tenant income of $0.8 million and $0.7 million during the three months ended March 31, 2024 and 2023, respectively, which was recorded in Other income (loss), net in our Condensed Consolidated Statement of Operations.

During the three months ended March 31, 2024 and 2023, the Company's total operating lease cost was $1.2 million and $1.1 million, respectively, and the operating cash payments on operating leases were $1.1 million and $1.0 million, respectively.

Operating lease maturities as of March 31, 2024 are as follows (in thousands):

For the Year Ending
December 31,
Amount
2024$1,678 
20252,251 
20262,205 
20272,247 
20282,090 
Thereafter35,803 
Total lease payments (1)
46,274 
Less: Imputed interest(20,861)
Total$25,413 

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

18


NOTE 7 - DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING
 
Information about our derivative financial instruments at March 31, 2024 and December 31, 2023 is as follows (dollars in thousands): 
Notional AmountFair Value
Contract dateEffective DateExpiration DateAverage Annual Effective Fixed RateMarch 31, 2024December 31, 2023March 31, 2024December 31, 2023
Operating Partnership:
June 11, 2018September 28, 2018September 30, 20242.86 %$75,000 $75,000 $905 $1,170 
June 11, 2018December 31, 2018December 31, 20252.92 %125,000 125,000 3,683 2,877 
July 26, 2022January 31, 2023January 31, 20272.60 %100,000 100,000 4,328 3,134 
July 26, 2022January 31, 2023January 31, 20292.56 %100,000 100,000 6,010 4,273 
Total Operating Partnership (1)
400,000 400,000 14,926 11,454 
GIC Joint Venture:
March 24, 2023July 1, 2023January 13, 20263.35 %100,000 100,000 2,048 1,250 
March 24, 2023July 1, 2023January 13, 20263.35 %100,000 100,000 2,048 1,254 
January 19, 2024October 1, 2024January 13, 20263.77 %100,000  (2)632  
Total GIC Joint Venture
300,000 200,000 4,728 2,504 
Total
$700,000 $600,000 $19,654 $13,958 

(1)    In April 2024, after repayment of the outstanding $55.0 million balance of our $400 Million Revolver from the proceeds of the sale of a portfolio of two lodging properties in New Orleans, LA and a $6.0 million paydown to the GIC Joint Venture Term Loan from the proceeds of the sale of the Hilton Garden Inn - Bryan (College Station), TX, debt related to our wholly-owned properties and our pro rata share of joint venture debt has a fixed-rate debt ratio of approximately 77% of our total pro rata indebtedness when taking into consideration interest rate swaps.

(2)     At December 31, 2023, we had interest rate swaps that were in effect with a notional amount totaling $600.0 million. In January, 2024, we executed one additional interest rate swap with a notional amount totaling $100.0 million that becomes effective on October 1, 2024.


At March 31, 2024, debt related to our wholly-owned properties and our pro rata share of joint venture debt has a fixed-rate debt ratio of approximately 73% of our total pro rata indebtedness when taking into consideration interest rate swaps.

At March 31, 2024 and December 31, 2023, we had $600.0 million of debt with variable interest rates that had been converted to fixed interest rates through derivative financial instruments which are carried at fair value. Differences between carrying value and fair value of our fixed-rate debt are primarily due to changes in interest rates. Inherently, fixed-rate debt is subject to fluctuations in fair value as a result of changes in the current market rate of interest on the valuation date.

In January 2024, subsidiaries of the GIC Joint Venture that are the borrowers under the GIC Joint Venture Term Loan entered into a $100.0 million interest rate swap to fix one-month term SOFR until January 2026. The interest rate swap has an effective date of October 1, 2024 and a termination date of January 13, 2026. Pursuant to the interest rate swap, we will pay a fixed rate of 3.77% and receive the one-month term SOFR floating rate index.

Our interest rate swaps have been designated as cash flow hedges and are valued using a market approach, which is a Level 2 valuation technique. At March 31, 2024 and December 31, 2023, our interest rate swaps were in an asset position. Derivative assets related to our interest rate swaps are recorded in Other assets in our Condensed Consolidated Balance Sheets. We are not required to post any collateral related to these agreements and are not in breach of any financial provisions of the agreements.

Changes in the fair value of the hedging instruments are deferred in Accumulated other comprehensive income (loss) and are reclassified as Interest expense in our Condensed Consolidated Statements of Operations in the period in which the hedged item affects earnings. In the next twelve months, we estimate that $11.6 million will be reclassified from Accumulated other comprehensive income (loss) and recorded as a decrease to interest expense.
 
19


We characterize the realized and unrealized gain or loss related to derivative financial instruments designated as cash flow hedges as follows (in thousands):
 
 Three Months Ended
March 31,
 20242023
Unrealized gain (loss) recognized in Accumulated other comprehensive income (loss) on derivative financial instruments $9,375 $(2,439)
Gain reclassified from Accumulated other comprehensive income (loss) to Interest expense$3,679 $