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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM10-Q
 
☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023
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 001-34571
PEBBLEBROOK HOTEL TRUST
(Exact Name of Registrant as Specified in Its Charter)

Maryland27-1055421
(State of Incorporation or Organization)(I.R.S. Employer Identification No.)
4747 Bethesda Avenue, Suite 1100, Bethesda, Maryland
20814
(Address of Principal Executive Offices)(Zip Code)

(240)507-1300
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Shares, $0.01 par value per sharePEBNew York Stock Exchange
Series E Cumulative Redeemable Preferred Shares, $0.01 par valuePEB-PENew York Stock Exchange
Series F Cumulative Redeemable Preferred Shares, $0.01 par valuePEB-PFNew York Stock Exchange
Series G Cumulative Redeemable Preferred Shares, $0.01 par valuePEB-PGNew York Stock Exchange
Series H Cumulative Redeemable Preferred Shares, $0.01 par valuePEB-PHNew York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☑  Yes    ☐  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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).    ☑  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
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 October 23, 2023
Common shares of beneficial interest ($0.01 par value per share)120,501,861



Pebblebrook Hotel Trust
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements.
Consolidated Balance Sheets - September 30, 2023 (unaudited) and December 31, 2022
Consolidated Statements of Operations and Comprehensive Income (unaudited) - Three and nine months ended September 30, 2023 and 2022
Consolidated Statements of Equity (unaudited) - Three and nine months ended September 30, 2023 and 2022
Consolidated Statements of Cash Flows (unaudited) - Nine months ended September 30, 2023 and 2022
Notes to the Consolidated Financial Statements (unaudited)
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3.Quantitative and Qualitative Disclosures About Market Risk.
Item 4.Controls and Procedures.
PART II. OTHER INFORMATION
Item 1.Legal Proceedings.
Item 1A.Risk Factors.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3.Defaults Upon Senior Securities.
Item 4.Mine Safety Disclosures.
Item 5.Other Information.
Item 6.Exhibits.
2

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.

Pebblebrook Hotel Trust
Consolidated Balance Sheets
(in thousands, except share and per-share data)
September 30, 2023December 31, 2022
 (Unaudited) 
ASSETS
Investment in hotel properties, net$5,553,122 $5,874,876 
Hotels held for sale65,453 44,861 
Cash and cash equivalents182,665 41,040 
Restricted cash8,946 11,229 
Hotel receivables (net of allowance for doubtful accounts of $519 and $431, respectively)
56,842 45,258 
Prepaid expenses and other assets131,800 116,276 
Total assets$5,998,828 $6,133,540 
LIABILITIES AND EQUITY
Debt$2,366,945 $2,387,293 
Accounts payable, accrued expenses and other liabilities272,745 250,518 
Lease liabilities - operating leases320,571 320,402 
Deferred revenues74,576 73,603 
Accrued interest10,720 4,535 
Liabilities related to hotels held for sale1,647 428 
Distribution payable12,156 12,218 
Total liabilities3,059,360 3,048,997 
Commitments and contingencies (Note 11)
Shareholders’ equity:
Preferred shares of beneficial interest, $.01 par value (liquidation preference $715,000 at September 30, 2023 and December 31, 2022), 100,000,000 shares authorized; 28,600,000 shares issued and outstanding at September 30, 2023 and December 31, 2022
286 286 
Common shares of beneficial interest, $.01 par value, 500,000,000 shares authorized; 120,057,744 shares issued and outstanding at September 30, 2023 and 126,345,293 shares issued and outstanding at December 31, 2022
1,201 1,263 
Additional paid-in capital4,097,130 4,182,359 
Accumulated other comprehensive income (loss)45,834 35,724 
Distributions in excess of retained earnings(1,295,089)(1,223,117)
Total shareholders’ equity2,849,362 2,996,515 
Non-controlling interests90,106 88,028 
Total equity2,939,468 3,084,543 
Total liabilities and equity$5,998,828 $6,133,540 

The accompanying notes are an integral part of these financial statements.
3
Pebblebrook Hotel Trust
Consolidated Statements of Operations and Comprehensive Income
(in thousands, except share and per-share data)
(Unaudited)
 For the three months ended September 30,For the nine months ended September 30,
 2023202220232022
Revenues:
Room$259,397 $277,971 $706,705 $707,997 
Food and beverage91,661 98,080 261,172 261,228 
Other operating44,741 40,642 117,984 103,060 
Total revenues395,799 416,693 1,085,861 1,072,285 
Expenses:
Hotel operating expenses:
Room68,065 66,637 189,179 167,102 
Food and beverage69,091 69,296 196,748 179,859 
Other direct and indirect112,596 115,589 324,164 307,317 
Total hotel operating expenses249,752 251,522 710,091 654,278 
Depreciation and amortization63,272 60,372 179,598 179,746 
Real estate taxes, personal property taxes, property insurance, and ground rent32,905 34,641 91,380 98,118 
General and administrative11,549 10,281 32,739 29,675 
Impairment71,416 12,865 71,416 86,119 
Gain on sale of hotel properties— (6,194)(30,219)(6,194)
Business interruption insurance income(10,881)— (32,985)— 
Other operating expenses3,829 989 9,876 4,045 
Total operating expenses421,842 364,476 1,031,896 1,045,787 
Operating income (loss)(26,043)52,217 53,965 26,498 
Interest expense(31,022)(25,020)(87,996)(70,753)
Other1,403 123 2,538 156 
Income (loss) before income taxes(55,662)27,320 (31,493)(44,099)
Income tax (expense) benefit(822)(1,015)(853)(1,015)
Net income (loss)(56,484)26,305 (32,346)(45,114)
Net income (loss) attributable to non-controlling interests658 1,237 2,999 1,359 
Net income (loss) attributable to the Company(57,142)25,068 (35,345)(46,473)
Distributions to preferred shareholders(10,988)(11,344)(32,963)(34,031)
Net income (loss) attributable to common shareholders$(68,130)$13,724 $(68,308)$(80,504)
Net income (loss) per share available to common shareholders, basic$(0.57)$0.10 $(0.56)$(0.62)
Net income (loss) per share available to common shareholders, diluted$(0.57)$0.10 $(0.56)$(0.62)
Weighted-average number of common shares, basic120,057,744 130,905,132 122,394,293 130,904,772 
Weighted-average number of common shares, diluted120,057,744 131,149,783 122,394,293 130,904,772 


4
Pebblebrook Hotel Trust
Consolidated Statements of Operations and Comprehensive Income - Continued
(in thousands, except share and per-share data)
(Unaudited)
For the three months ended September 30,For the nine months ended September 30,
2023202220232022
Comprehensive Income:
Net income (loss)$(56,484)$26,305 $(32,346)$(45,114)
Other comprehensive income (loss):
Change in fair value of derivative instruments9,897 16,487 30,971 53,184 
Amounts reclassified from other comprehensive income(8,003)(1,337)(20,766)5,441 
Comprehensive income (loss)(54,590)41,455 (22,141)13,511 
Comprehensive income (loss) attributable to non-controlling interests674 1,339 3,094 1,746 
Comprehensive income (loss) attributable to the Company$(55,264)$40,116 $(25,235)$11,765 

The accompanying notes are an integral part of these financial statements.
5
Pebblebrook Hotel Trust
Consolidated Statements of Equity
(in thousands, except share data)
(Unaudited)
For the three months ended September 30, 2023
Preferred SharesCommon SharesAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Distributions in Excess of Retained EarningsTotal Shareholders' EquityNon-Controlling InterestsTotal Equity
SharesAmountSharesAmount
Balance at June 30, 2023
28,600,000$286 120,057,744 $1,201 $4,094,680 $43,956 $(1,225,748)$2,914,375 $89,737 $3,004,112 
Share-based compensation—— — — 2,450 — — 2,450 870 3,320 
Distributions on common shares/units—— — — — — (1,211)(1,211)(11)(1,222)
Distributions on preferred shares/units—— — — — — (10,988)(10,988)(1,164)(12,152)
Other comprehensive income (loss):
Change in fair value of derivative instruments—— — — — 9,881 — 9,881 16 9,897 
Amounts reclassified from other comprehensive income—— — — — (8,003)— (8,003)— (8,003)
Net income (loss)—— — — — — (57,142)(57,142)658 (56,484)
Balance at September 30, 2023
28,600,000$286 120,057,744$1,201 $4,097,130 $45,834 $(1,295,089)$2,849,362 $90,106 $2,939,468 


6


Pebblebrook Hotel Trust
Consolidated Statements of Equity - Continued
(in thousands, except share data)
(Unaudited)
For the three months ended September 30, 2022
Preferred SharesCommon SharesAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Distributions in Excess of Retained EarningsTotal Shareholders' EquityNon-Controlling InterestsTotal Equity
SharesAmountSharesAmount
Balance at June 30, 2022
29,600,000 $296 130,905,132 $1,309 $4,271,169 $23,748 $(1,190,693)$3,105,829 $86,847 $3,192,676 
Issuance of shares, net of offering costs— — — — (48)— — (48)— (48)
Share-based compensation— — — — 2,482 — — 2,482 699 3,181 
Distributions on common shares/units— — — — — — (1,320)(1,320)(11)(1,331)
Distributions on preferred shares/units— — — — — — (11,344)(11,344)(1,164)(12,508)
Other comprehensive income (loss):
Change in fair value of derivative instruments— — — — — 16,385 — 16,385 102 16,487 
Amounts reclassified from other comprehensive income— — — — — (1,337)— (1,337)— (1,337)
Net income (loss)— — — — — — 25,068 25,068 1,237 26,305 
Balance at September 30, 2022
29,600,000 $296 130,905,132 $1,309 $4,273,603 $38,796 $(1,178,289)$3,135,715 $87,710 $3,223,425 


7
Pebblebrook Hotel Trust
Consolidated Statements of Equity - Continued
(in thousands, except share data)
(Unaudited)
For the nine months ended September 30, 2023
Preferred SharesCommon SharesAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Distributions in Excess of Retained EarningsTotal Shareholders' EquityNon-Controlling InterestsTotal Equity
SharesAmountSharesAmount
Balance at December 31, 2022
28,600,000$286 126,345,293 $1,263 $4,182,359 $35,724 $(1,223,117)$2,996,515 $88,028 $3,084,543 
Issuance of common shares for Board of Trustees compensation—— 55,480 1 753 — — 754 — 754 
Repurchase of common shares—— (6,578,436)(65)(92,688)— — (92,753)— (92,753)
Share-based compensation—— 235,407 2 6,706 — — 6,708 2,523 9,231 
Distributions on common shares/units—— — — — — (3,664)(3,664)(47)(3,711)
Distributions on preferred shares/units—— — — — — (32,963)(32,963)(3,492)(36,455)
Other comprehensive income (loss):
Change in fair value of derivative instruments—— — — — 30,876 — 30,876 95 30,971 
Amounts reclassified from other comprehensive income—— — — — (20,766)— (20,766)— (20,766)
Net income (loss)—— — — — — (35,345)(35,345)2,999 (32,346)
Balance at September 30, 2023
28,600,000$286 120,057,744$1,201 $4,097,130 $45,834 $(1,295,089)$2,849,362 $90,106 $2,939,468 




8


Pebblebrook Hotel Trust
Consolidated Statements of Equity - Continued
(in thousands, except share data)
(Unaudited)
For the nine months ended September 30, 2022
Preferred SharesCommon SharesAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Distributions in Excess of Retained EarningsTotal Shareholders' EquityNon-Controlling InterestsTotal Equity
SharesAmountSharesAmount
Balance at December 31, 2021
29,600,000 $296 130,813,750 $1,308 $4,268,042 $(19,442)$(1,094,023)$3,156,181 $7,724 $3,163,905 
Issuance of shares, net of offering costs— — — — (123)— — (123)— (123)
Issuance of operating partnership units— — — — — — — — 78,000 78,000 
Issuance of common shares for Board of Trustees compensation— — 33,866 1 737 — — 738 — 738 
Repurchase of common shares— — (49,787)(1)(1,112)— — (1,113)— (1,113)
Share-based compensation— — 107,303 1 6,059 — — 6,060 2,095 8,155 
Distributions on common shares/units— — — — — — (3,762)(3,762)(44)(3,806)
Distributions on preferred shares/units— — — — — — (34,031)(34,031)(1,811)(35,842)
Other comprehensive income (loss):
Change in fair value of derivative instruments— — — — — 52,797 — 52,797 387 53,184 
Amounts reclassified from other comprehensive income— — — — — 5,441 — 5,441 — 5,441 
Net income (loss)— — — — — — (46,473)(46,473)1,359 (45,114)
Balance at September 30, 2022
29,600,000$296 130,905,132$1,309 $4,273,603 $38,796 $(1,178,289)$3,135,715 $87,710 $3,223,425 

The accompanying notes are an integral part of these financial statements.
9
Pebblebrook Hotel Trust
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
 For the nine months ended September 30,
 20232022
Operating activities:
Net income (loss)$(32,346)$(45,114)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization179,598 179,746 
Share-based compensation9,231 8,155 
Amortization of deferred financing costs, non-cash interest and other amortization9,578 9,961 
Gain on sale of hotel properties(30,219)(6,194)
Impairment71,416 86,119 
Non-cash ground rent7,426 7,467 
Other adjustments(7,348)(3,914)
Changes in assets and liabilities:
Hotel receivables(12,087)(29,243)
Prepaid expenses and other assets(26,200)(5,297)
Accounts payable and accrued expenses28,619 50,280 
Deferred revenues4,615 2,447 
Net cash provided by (used in) operating activities202,283 254,413 
Investing activities:
Improvements and additions to hotel properties(140,057)(68,266)
Proceeds from sales of hotel properties224,384 248,908 
Acquisition of hotel properties— (247,163)
Property insurance proceeds14,361 — 
Other investing activities(2,414)(111)
Net cash provided by (used in) investing activities96,274 (66,632)
Financing activities:
Payment of offering costs — common and preferred shares— (123)
Payment of deferred financing costs(2,423)(96)
Borrowings under revolving credit facilities— 180,000 
Repayments under revolving credit facilities— (180,000)
Proceeds from debt140,000 — 
Repayments of debt(162,988)(27,740)
Repurchases of common shares(92,753)(1,113)
Distributions — common shares/units(3,756)(3,968)
Distributions — preferred shares/units(36,455)(34,859)
Repayments of refundable membership deposits(840)(2,008)
Net cash provided by (used in) financing activities(159,215)(69,907)
Net change in cash and cash equivalents and restricted cash139,342 117,874 
Cash and cash equivalents and restricted cash, beginning of year52,269 92,247 
Cash and cash equivalents and restricted cash, end of period$191,611 $210,121 

The accompanying notes are an integral part of these financial statements.
10

PEBBLEBROOK HOTEL TRUST
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Organization
Pebblebrook Hotel Trust (the "Company") is an internally managed hotel investment company, formed as a Maryland real estate investment trust in October 2009 to opportunistically acquire and invest in hotel properties located primarily in major U.S. cities and resort properties located near our primary target urban markets and select destination resort markets, with an emphasis on major gateway coastal markets.
As of September 30, 2023, the Company owned interests in 47 hotels with a total of 12,142 guest rooms. The hotel properties are located in: Boston, Massachusetts; Chicago, Illinois; Hollywood, Florida; Jekyll Island, Georgia; Key West, Florida; Los Angeles, California (Beverly Hills, Santa Monica, and West Hollywood); Naples, Florida; Newport, Rhode Island; Portland, Oregon; San Diego, California; San Francisco, California; Santa Cruz, California; Stevenson, Washington; and Washington, D.C.
Substantially all of the Company’s assets are held by, and all of the Company's operations are conducted through, Pebblebrook Hotel, L.P. (the "Operating Partnership"). The Company is the sole general partner of the Operating Partnership. As of September 30, 2023, the Company owned 99.2% of the common limited partnership units issued by the Operating Partnership ("common units"). The remaining 0.8% of the common units are owned by the other limited partners of the Operating Partnership. For the Company to maintain its qualification as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"), it cannot operate the hotels it owns. Therefore, the Operating Partnership and its subsidiaries lease the hotel properties to subsidiaries of Pebblebrook Hotel Lessee, Inc. (collectively with its subsidiaries, "PHL"), a taxable REIT subsidiary ("TRS"), which in turn engage third-party eligible independent contractors to manage the hotels. PHL is consolidated into the Company’s financial statements.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and in conformity with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) applicable to interim financial information. As such, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted in accordance with the rules and regulations of the SEC. These unaudited consolidated financial statements include all adjustments considered necessary for a fair presentation of the consolidated balance sheets, consolidated statements of operations and comprehensive income, consolidated statements of equity and consolidated statements of cash flows for the periods presented. Interim results are not necessarily indicative of full-year performance, as a result of the impact of seasonal and other short-term variations and the acquisitions and or dispositions of hotel properties. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
The Company and its subsidiaries are separate legal entities and maintain records and books of account separate and apart from each other. The consolidated financial statements include all of the accounts of the Company and its subsidiaries and are presented in accordance with U.S. GAAP. All significant intercompany balances and transactions have been eliminated in consolidation. Investments in entities that the Company does not control, but over which the Company has the ability to exercise significant influence regarding operating and financial policies, are accounted for under the equity method.
Certain reclassifications have been made to the prior period's financial statements to conform to the current year presentation.
Use of Estimates
The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses. These estimates are prepared using management’s best judgment, after considering past, current and expected events and economic conditions. Actual results could differ from these estimates.
11
Risks and Uncertainties
The state of the overall economy can significantly impact hotel operational performance and thus the Company's financial position. It is uncertain what the future affects of the COVID-19 pandemic will have on the overall economy or travel. In addition, the rise in inflation and corresponding increase in interest rates may also impact the overall economy. A decline in travel or a significant increase in costs may impact the Company's cash flow and ability to service debt or meet other financial obligations.
New Accounting Pronouncements
There were no new accounting pronouncements issued during the nine months ended September 30, 2023 that the Company believes will have a material impact on its consolidated financial statements and disclosures.
Note 3. Acquisition and Disposition of Hotel Properties
Acquisitions
There were no acquisitions of hotel properties during the nine months ended September 30, 2023.
Dispositions
The following table summarizes disposition transactions during the nine months ended September 30, 2023 and 2022 (in thousands):
Hotel Property NameLocationSale DateSale Price
The Heathman HotelPortland, ORFebruary 22, 2023$45,000 
Retail at The Westin Michigan Avenue Chicago
Chicago, ILMarch 17, 202327,300 
Hotel Colonnade Coral GablesCoral Gables, FLMarch 28, 202363,000 
Hotel Monaco SeattleSeattle, WAMay 9, 202363,250 
Hotel Vintage SeattleSeattle, WAMay 24, 202333,700 
2023 Total$232,250 
The Marker San FranciscoSan Francisco, CAJune 28, 2022$77,000 
Sofitel Philadelphia at Rittenhouse SquarePhiladelphia, PAAugust 2, 202280,000 
Hotel SperoSan Francisco, CAAugust 25, 202271,000 
Hotel Vintage PortlandPortland, ORSeptember 14, 202232,900 
2022 Total$260,900 
For the three and nine months ended September 30, 2023, the accompanying consolidated statements of operations and comprehensive income included operating income (loss) of $0.9 million and $(0.8) million, respectively, excluding impairment loss and gain on sale of hotel properties related to the hotel properties sold and held for sale.
For the three and nine months ended September 30, 2022, the accompanying consolidated statements of operations and comprehensive income included operating income (loss) of $1.9 million and $(3.4) million, respectively, excluding impairment loss and gain on sale of hotel properties related to the hotel properties sold and held for sale.
The sales of the hotel properties described above did not represent a strategic shift that had a major effect on the Company’s operations and financial results, and therefore, did not qualify as discontinued operations.
Held for Sale
As of September 30, 2023, the Company had entered into an agreement to sell Hotel Zoe Fisherman's Wharf for a sale price of $68.5 million. This hotel was classified as held for sale and, as a result, the Company classified all of the assets and liabilities related to this hotel as assets and liabilities held for sale in the accompanying consolidated balance sheets and ceased depreciating its assets. The Company expects to complete the sale in the fourth quarter of 2023. However, no assurances can be given that the sale will be completed on these terms or at all.
12
Note 4. Investment in Hotel Properties
Investment in hotel properties as of September 30, 2023 and December 31, 2022 consisted of the following (in thousands):
September 30, 2023December 31, 2022
Land$824,872 $897,756 
Buildings and improvements5,008,765 5,170,976 
Furniture, fixtures and equipment512,746 504,518 
Finance lease asset91,181 91,181 
Construction in progress19,249 11,961 
$6,456,813 $6,676,392 
Right-of-use asset, operating leases363,165 370,383 
Investment in hotel properties$6,819,978 $7,046,775 
Less: Accumulated depreciation(1,266,856)(1,171,899)
Investment in hotel properties, net$5,553,122 $5,874,876 
Hurricane Ian
On September 27, 2022, LaPlaya Beach Resort & Club ("LaPlaya") and Inn on Fifth, both located in Naples, Florida, and Southernmost Beach Resort located in Key West, Florida were impacted by the effects of Hurricane Ian. Inn on Fifth and Southernmost Beach Resort did not suffer significant damage or disruption. LaPlaya was closed in anticipation of the storm and required remediation and repairs from the damage and remained closed. In 2023, LaPlaya began to reopen in stages as the buildings and facilities were repaired. The Company expects LaPlaya's remediation and repair to be substantially completed in the first quarter of 2024.
The Company’s insurance policies provide coverage for property damage, business interruption and reimbursement for other costs that were incurred relating to damages sustained during Hurricane Ian and the Company has recorded a receivable for the expenditures to date which it anticipates to collect from the insurance providers in excess of the deductibles. In 2022, the Company recognized an aggregate impairment loss of $7.9 million for the damage to LaPlaya and Southernmost Beach Resort. During the nine months ended September 30, 2023, the Company incurred $5.1 million of costs related to payroll, repair and claims administration for which reimbursement from insurance policies is uncertain and therefore is included in other operating expenses in the Company's consolidated statements of operations and comprehensive income. Through September 30, 2023, the Company has cumulatively received $55.1 million in preliminary advances from the insurance providers and continues to work with the insurance providers on the settlement of the property and business interruption claims.
Impairment
The Company reviews its investment in hotel properties for impairment whenever events or circumstances indicate potential impairment. The Company periodically adjusts its estimate of future operating cash flows and estimated hold periods for certain properties. As a result of this review, the Company may identify an impairment trigger has occurred and assess its investment in hotel properties for recoverability. During the three and nine months ended September 30, 2023, the Company recognized an impairment loss of $71.4 million related to three hotels as a result of their fair values being lower than their carrying values. During the three months ended September 30, 2022, no impairment loss was recognized. During the nine months ended September 30, 2022, the Company recognized an impairment loss of $73.3 million related to two hotels as a result of their fair values being lower than their carrying values. The impairment losses were determined using Level 2 inputs under authoritative guidance for fair value measurements using purchase and sale agreements and information from marketing efforts for these properties.
Right-of-use Assets and Lease Liabilities
The Company recognized right-of-use assets and related liabilities related to its ground leases, all of which are operating leases. When the rate implicit in the lease could not be determined, the Company used incremental borrowing rates, which ranged from 4.7% to 7.6%. In addition, the term used includes any options to exercise extensions when it is reasonably certain the Company will exercise such option. See Note 11. Commitments and Contingencies for additional information about the ground leases.
The right-of-use assets and liabilities are amortized to ground rent expense over the term of the underlying lease agreements. As of September 30, 2023, the Company's lease liabilities consisted of operating lease liabilities of $320.6 million and financing lease liabilities of $43.2 million. As of December 31, 2022, the Company's lease liabilities consisted of operating lease liabilities of $320.4 million and financing lease liabilities of $42.7 million. The financing lease liabilities are included in accounts payable, accrued expenses and other liabilities on the Company's accompanying consolidated balance sheets.
13
Note 5. Debt
On October 13, 2022, the Company entered into the Fifth Amended and Restated Credit Agreement with Bank of America, N.A., as administrative agent and certain other agents and lenders ("Credit Agreement"). The Credit Agreement provides for a $650.0 million senior unsecured revolving credit facility and three $460.0 million unsecured term loan facilities totaling $1.38 billion. The Company may request additional lender commitments to increase the aggregate borrowing capacity under the Credit Agreement up to an additional $970.0 million.
The Company's debt consisted of the following as of September 30, 2023 and December 31, 2022 (dollars in thousands):
   Balance Outstanding as of
 
Interest Rate at September 30, 2023
Maturity DateSeptember 30, 2023December 31, 2022
Revolving credit facilities
Senior unsecured credit facility—
(1)(2)
October 2026$— $— 
PHL unsecured credit facility—
(1)
October 2026— — 
Total revolving credit facilities$— $— 
Unsecured term loans
Term Loan 20247.50%
(1)(5)
October 2024460,000 460,000 
Term Loan 20255.16%
(1)
October 2025460,000 460,000 
Term Loan 20273.84%
(1)
October 2027460,000 460,000 
Term loan principal$1,380,000 $1,380,000 
Convertible senior notes principal1.75%December 2026$750,000 $750,000 
Senior unsecured notes
Series A Notes4.70%
(3)
December 202347,600 47,600 
Series B Notes4.93%December 20252,400 2,400 
Senior unsecured notes principal$50,000 $50,000 
Mortgage loans
Margaritaville Hollywood Beach Resort7.04%
(4)
September 2026140,000 161,500 
Estancia La Jolla Hotel & Spa5.07%September 202857,997 59,485 
Mortgage loans principal$197,997 $220,985 
Total debt principal$2,377,997 $2,400,985 
Unamortized debt premiums, discount and deferred financing costs, net(11,052)(13,692)
Debt, Net$2,366,945 $2,387,293 
______________________
(1)    Borrowings bear interest at floating rates. Interest rate at September 30, 2023 gives effect to interest rate hedges.
(2)    The Company has the option to extend the maturity date for up to two six-month periods, pursuant to certain terms and conditions and payment of an extension fee.
(3)    The Company intends to payoff the Series A Notes using available cash or borrowings under the revolving credit facility at maturity.
(4)    This loan was refinanced during the third quarter of 2023 and now bears interest at a floating rate equal to daily SOFR plus a spread of 3.75%. The interest rate at September 30, 2023 gives effect to an interest rate swap. The Company has the option to extend the maturity date for up to two one-year periods, pursuant to certain terms and conditions and payment of an extension fee.
(5)    The Company intends to refinance or payoff this loan using available cash or borrowings under the revolving credit facility at maturity.
Unsecured Revolving Credit Facilities
The $650.0 million senior unsecured revolving credit facility provided for in the Credit Agreement matures in October 2026 and provides for two six-month extension options, subject to certain terms and conditions and payment of an extension fee. All borrowings under the senior unsecured revolving credit facility bear interest at a rate per annum equal to, at the option of the Company, (i) the Secured Overnight Financing Rate ("SOFR") plus 0.10% (the “SOFR Adjustment”) plus a margin that is based upon the Company’s leverage ratio or (ii) the Base Rate (as defined by the Credit Agreement) plus a margin that is based on the Company’s leverage ratio. The margins for revolving credit facility loans range in amount from 1.45% to 2.50% for SOFR-based loans and 0.45% to 1.50% for Base Rate-based loans, depending on the Company’s leverage ratio. As of September 30, 2023, the Company had no outstanding borrowings, $12.6 million of outstanding letters of credit and a borrowing capacity of $637.4 million remaining on the senior unsecured revolving credit facility. The Company is required to pay an unused commitment fee at an annual rate of 0.20% or 0.30% of the unused portion of the senior unsecured revolving credit facility, depending on the amount of borrowings outstanding. The credit agreement contains certain financial covenants, including a maximum leverage ratio, a minimum fixed charge coverage ratio and a maximum percentage of secured debt to total asset value. 
14
Under the terms of the Credit Agreement, one or more standby letters of credit, up to a maximum aggregate outstanding balance of $30.0 million, may be issued on behalf of the Company by the lenders under the senior unsecured revolving facility. The Company pays a fee for outstanding standby letters of credit at a rate per annum equal to the applicable margin based upon the Company's leverage ratio. Any outstanding standby letters of credit reduce the available borrowings on the senior unsecured revolving credit facility by a corresponding amount. Standby letters of credit of $12.6 million were outstanding as of September 30, 2023 and December 31, 2022.
As of September 30, 2023, the Company also has a $20.0 million unsecured revolving credit facility (the "PHL Credit Facility") to be used for PHL's working capital and general corporate purposes. On October 13, 2022, PHL amended and restated the agreement governing the PHL Credit Facility to extend the maturity to October 2026. The PHL Credit Facility has substantially similar terms as the Company's senior unsecured revolving credit facility. Borrowings on the PHL Credit Facility bear interest at a rate per annum equal to, at the option of the Company, (i) SOFR plus the SOFR Adjustment plus a margin that is based upon the Company’s leverage ratio or (ii) the Base Rate (as defined by the Credit Agreement) plus a margin that is based on the Company’s leverage ratio. The PHL Credit Facility is subject to debt covenants substantially similar to the covenants under the Credit Agreement, which governs the Company's senior unsecured revolving credit facility. As of September 30, 2023, the Company had no borrowings under the PHL Credit Facility and had $20.0 million borrowing capacity remaining available under the PHL Credit Facility.
As of September 30, 2023, the Company was in compliance with all debt covenants of the credit agreements that govern the unsecured revolving credit facilities.
Unsecured Term Loan Facilities
The three $460.0 million term loans provided for in the Credit Agreement mature in October 2024, October 2025 and October 2027, respectively. The term loans bear interest at a rate per annum equal to, at the option of the Company, (i) SOFR plus the SOFR Adjustment plus a margin that is based upon the Company’s leverage ratio or (ii) the Base Rate (as defined by the Credit Agreement) plus a margin that is based on the Company’s leverage ratio. The margins for term loans range in amount from 1.40% to 2.45% for SOFR-based loans and 0.40% to 1.45% for Base Rate-based loans, depending on the Company's leverage ratio. The term loans are subject to the debt covenants in the Credit Agreement. As of September 30, 2023, the Company was in compliance with all debt covenants of its term loans.
The Company entered into interest rate swap agreements to fix the SOFR rate on a portion of these unsecured term loan facilities. See Derivative and Hedging Activities for further discussion on the interest rate swaps.
Convertible Senior Notes
In December 2020, the Company issued $500.0 million aggregate principal amount of 1.75% Convertible Senior Notes due December 2026 (the "Convertible Notes"). The net proceeds from the offering of the Convertible Notes were approximately $487.3 million after deducting the underwriting fees and other expenses paid by the Company.
In February 2021, the Company issued an additional $250.0 million aggregate principal amount of Convertible Notes. These additional Convertible Notes were sold at a 5.5% premium to par and generated net proceeds of approximately $257.2 million after deducting the underwriting fees and other expenses paid by the Company of $6.5 million, which was offset by a premium received in the amount of $13.8 million.
The Convertible Notes are governed by an indenture (the “Base Indenture”) between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee. The Convertible Notes bear interest at a rate of 1.75% per annum, payable semi-annually in arrears on June 15th and December 15th of each year, beginning on June 15, 2021. The Convertible Notes will mature on December 15, 2026.
Prior to June 15, 2026, the Convertible Notes will be convertible upon certain circumstances. On and after June 15, 2026, holders may convert any of their Convertible Notes into the Company’s common shares of beneficial interest (“common shares”) at the applicable conversion rate at any time at their election two days prior to the maturity date. The initial conversion rate is 39.2549 common shares per $1,000 principal amount of Convertible Notes, which represents an initial conversion price of approximately $25.47 per share. The conversion rate is subject to adjustment in certain circumstances. As of September 30, 2023 and December 31, 2022, the if-converted value of the Convertible Notes did not exceed the principal amount.
The Company may redeem for cash all or a portion of the Convertible Notes, at its option, on or after December 20, 2023 upon certain circumstances. The redemption price will be equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If certain make-whole fundamental changes occur, the conversion rate for the Convertible Notes may be increased.
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In connection with the Convertible Notes issuances, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain of the underwriters of the offerings of the Convertible Notes or their respective affiliates and other financial institutions. The Capped Call Transactions initially cover, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes, the number of common shares underlying the Convertible Notes. The Capped Call Transactions are expected generally to reduce the potential dilution to holders of common shares upon conversion of the Convertible Notes and/or offset the potential cash payments that the Company could be required to make in excess of the principal amount of any converted Convertible Notes upon conversion thereof, with such reduction and/or offset subject to a cap. The upper strike price of the Capped Call Transactions is $33.0225 per share.
Senior Unsecured Notes
The Company has $47.6 million of senior unsecured notes outstanding bearing a fixed interest rate of 4.70% per annum and maturing in December 2023 (the "Series A Notes") and $2.4 million of senior unsecured notes outstanding bearing a fixed interest rate of 4.93% per annum and maturing in December 2025 (the "Series B Notes"). The debt covenants of the Series A Notes and the Series B Notes are substantially similar to those of the Company's senior unsecured revolving credit facility. As of September 30, 2023, the Company was in compliance with all such debt covenants.
Mortgage Loans
On September 23, 2021, the Company assumed a $161.5 million loan secured by a first-lien mortgage on the leasehold interest of Margaritaville Hollywood Beach Resort ("Margaritaville"). During the third quarter of 2023, the Company paid down $21.5 million of this loan and refinanced the remaining $140.0 million balance. The new loan requires interest-only payments based on a floating rate equal to daily SOFR plus a spread of 3.75%. This loan matures on September 7, 2026 and may be extended for up to two one-year periods, subject to certain terms and conditions and payment of an extension fee.
On December 1, 2021, the Company assumed a $61.7 million loan secured by a first-lien mortgage on the leasehold interest of Estancia La Jolla Hotel & Spa ("Estancia"). The loan requires both principal and interest monthly payments based on a fixed interest rate of 5.07%. The loan matures on September 1, 2028.
The Company's mortgage loans associated with Margaritaville and Estancia are non-recourse to the Company except for customary carve-outs to the general non-recourse liability. The loans contain customary provisions regarding events of default, as well as customary cash management, cash trap and lockbox provisions. Cash trap provisions are triggered if the hotel's performance is below a certain threshold. Once triggered, all of the cash flow generated by the hotel is deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of the lender. These properties are not in a cash trap and no event of default has occurred under the loan documents.
Interest Expense
The components of the Company's interest expense consisted of the following for the three and nine months ended September 30, 2023 and 2022 (in thousands):
For the three months ended September 30,For the nine months ended September 30,
2023202220232022
Unsecured revolving credit facilities$504 $788 $1,570 $2,067 
Unsecured term loan facilities18,777 14,465 53,750 41,608 
Convertible senior notes3,281 3,282 9,844 9,844 
Senior unsecured notes589 645 1,767 1,935 
Mortgage debt4,094 2,657 11,437 6,531 
Amortization of deferred financing fees, (premiums) and discounts2,755 2,145 6,486 6,594 
Other1,022 1,038 3,142 2,174 
Total interest expense$31,022 $25,020 $87,996 $70,753 
Fair Value
The Company estimates the fair value of its fixed rate debt by discounting the future cash flows of each instrument at estimated market rates, taking into consideration general market conditions and maturity of the debt with similar credit terms and is classified within Level 2 of the fair value hierarchy. The estimated fair value of the Company’s fixed rate debt (unsecured senior notes, convertible senior notes and the Estancia mortgage loan) as of September 30, 2023 and December 31, 2022 was $699.8 million and $700.5 million, respectively.
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Derivative and Hedging Activities
The Company enters into interest rate swap agreements to hedge against interest rate fluctuations. All of the Company's interest rate swaps are cash flow hedges. All unrealized gains and losses on these hedging instruments are reported in accumulated other comprehensive income (loss) and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.
The Company's interest rate swaps at September 30, 2023 and December 31, 2022 consisted of the following, by maturity date (dollars in thousands):
Aggregate Notional Value as of
Hedge TypeInterest Rate Range (SOFR)MaturitySeptember 30, 2023December 31, 2022
Swap-cash flow
0.05% - 0.07%
January 2023$— $200,000 
Swap-cash flow
1.84% - 1.87%
November 2023250,000 250,000 
Swap-cash flow
2.47% - 2.50%
January 2024300,000 300,000 
Swap-cash flow
1.33% - 1.36%
February 2026290,000 290,000 
Swap-cash flow
3.29%
October 2027165,000 — 
Total$1,005,000 $1,040,000 
The Company records all derivative instruments at fair value in the accompanying consolidated balance sheets. Fair values of interest rate swaps and caps are determined using the standard market methodology of netting the discounted future fixed cash receipts/payments and the discounted expected variable cash payments/receipts. Variable interest rates used in the calculation of projected receipts and payments on the swaps are based on an expectation of future interest rates derived from observable market interest rate curves (Overnight Index Swap curves) and volatilities (Level 2 inputs). Derivatives expose the Company to credit risk in the event of non-performance by the counterparties under the terms of the interest rate hedge agreements. The Company incorporates these counterparty credit risks in its fair value measurements. The Company believes it minimizes the credit risk by transacting with major creditworthy financial institutions.
As of September 30, 2023, the Company's derivative instruments were in an asset position with an aggregate fair value of $46.2 million. None of the Company's derivative instruments was in a liability position as of September 30, 2023. Derivative assets are included in prepaid expenses and other assets and derivative liabilities are included in accounts payable, accrued expenses and other liabilities in the accompanying consolidated balance sheets. The Company expects approximately $25.6 million will be reclassified from accumulated other comprehensive income (loss) to interest expense within the next 12 months.
In January 2023, the Company entered into interest rate swap agreements with an aggregate notional amount of $400.0 million, which will be effective in November 2023.
Note 6. Revenue
The Company presents revenue on a disaggregated basis in the accompanying consolidated statements of operations and comprehensive income. The following table presents revenues by geographic location for the three and nine months ended September 30, 2023 and 2022 (in thousands):
For the three months ended September 30,For the nine months ended September 30,
2023202220232022
San Diego, CA$95,885 $99,552 $239,653 $237,011 
Boston, MA75,650 73,229 194,908 180,882 
Southern Florida/Georgia43,174 53,543 173,183 219,068 
Los Angeles, CA51,303 47,251 144,445 128,364 
San Francisco, CA43,755 40,753 113,084 87,070 
Portland, OR24,538 29,635 61,510 67,571 
Chicago, IL22,233 22,954 57,036 49,966 
Washington, D.C.16,522 13,901 51,326 37,148 
Seattle, WA— 7,148 5,551 14,037 
Other(1)
22,739 28,727 45,165 51,168 
Total Revenues$395,799 $416,693 $1,085,861 $1,072,285 
______________________
(1)     Other includes: Philadelphia, PA, Newport, RI, and Santa Cruz, CA.
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Payments from customers are primarily made when services are provided. Due to the short-term nature of the Company's contracts and the almost simultaneous receipt of payment, almost all of the contract liability balance at the beginning of the period is expected to be recognized as revenue over the following 12 months.
Note 7. Equity
Common Shares
The Company is authorized to issue up to 500,000,000 common shares. Each outstanding common share entitles the holder to one vote on each matter submitted to a vote of shareholders. Holders of common shares are entitled to receive dividends when authorized by the Board of Trustees.
Common Share Repurchase Programs
On July 27, 2017, the Company's Board of Trustees authorized a share repurchase program of up to $100.0 million of common shares. Under this program, the Company could have repurchased common shares from time to time in transactions on the open market or by private agreement. As of September 30, 2023, no common shares remained available for repurchase under this program.
On February 17, 2023, the Company's Board of Trustees authorized a share repurchase program of up to $150.0 million of common shares. Under this program, the Company may repurchase common shares from time to time in transactions on the open market or by private agreement. The Company may suspend or discontinue this program at any time. Common shares repurchased by the Company cease to be outstanding and become authorized but unissued common shares. As of September 30, 2023, $146.0 million of common shares remained available for repurchase under this program.
During the nine months ended September 30, 2023, the Company repurchased 6,498,901 common shares under the 2017 and 2023 repurchase programs, for an aggregate purchase price of $91.0 million, or an average of approximately $14.01 per share.
Common Dividends
The Company declared the following dividends on common shares/units for the nine months ended September 30, 2023:
Dividend per Share/UnitFor the Quarter EndedRecord DatePayable Date
$0.01 March 31, 2023March 31, 2023April 17, 2023
$0.01 June 30, 2023June 30, 2023July 17, 2023
$0.01 September 30, 2023September 29, 2023October 16, 2023
Preferred Shares
The Company is authorized to issue up to 100,000,000 preferred shares of beneficial interest, $0.01 par value per share (“preferred shares”).
The following preferred shares were outstanding as of September 30, 2023 and December 31, 2022:
Security TypeSeptember 30, 2023December 31, 2022
6.375% Series E
4,400,000 4,400,000 
6.30% Series F
6,000,000 6,000,000 
6.375% Series G
9,200,000 9,200,000 
5.70% Series H
9,000,000 9,000,000 
28,600,000 28,600,000 
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The Series E, Series F, Series G and Series H Cumulative Redeemable Preferred Shares (collectively, the “Preferred Shares”) rank senior to the common shares and on parity with each other with respect to payment of distributions. The Preferred Shares do not have any maturity date and are not subject to mandatory redemption. The Company may redeem the Series E and Series F Preferred Shares at any time. The Series G and Series H Preferred Shares may not be redeemed prior to May 13, 2026 and July 27, 2026, respectively, except in limited circumstances relating to the Company’s continuing qualification as a REIT or as discussed below. On or after such dates, the Company may, at its option, redeem the Preferred Shares, in each case in whole or from time to time in part, by payment of $25.00 per share, plus any accumulated, accrued and unpaid distributions through the date of redemption. Upon the occurrence of a change of control, as defined in the Company's declaration of trust, the result of which the common shares and the common securities of the acquiring or surviving entity are not listed on the New York Stock Exchange, the NYSE American or Nasdaq, or any successor exchanges, the Company may, at its option, redeem the Preferred Shares in whole or in part within 120 days following the change of control by paying $25.00 per share, plus any accrued and unpaid distributions through the date of redemption. If the Company does not exercise its right to redeem the Preferred Shares upon a change of control, the holders of the Preferred Shares have the right to convert some or all of their shares into a number of common shares based on defined formulas subject to share caps. The share cap on each Series E Preferred Share is 1.9372 common shares, on each Series F Preferred Share is 2.0649 common shares, on each Series G Preferred Share is 2.1231 common shares, and on each Series H Preferred Share is 2.2311 common shares.
Preferred Share Repurchase Program
On February 17, 2023, the Company's Board of Trustees authorized a repurchase program of up to $100.0 million of the Preferred Shares. Under the terms of the program, the Company may repurchase up to an aggregate of $100.0 million of the Preferred Shares. The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will depend on a variety of factors, including legal requirements, price, liquidity and economic considerations, and market conditions. The program does not require the Company to repurchase any specific number of shares. The program does not have an expiration date and may be suspended, modified or discontinued at any time. During the nine months ended September 30, 2023, no Preferred Shares were repurchased under this program.
Preferred Dividends
The Company declared the following dividends on preferred shares for the nine months ended September 30, 2023:
Security TypeDividend per Share/UnitFor the Quarter EndedRecord DatePayable Date
6.375% Series E
$0.40 March 31, 2023March 31, 2023April 17, 2023
6.375% Series E
$0.40 June 30, 2023June 30, 2023July 17, 2023
6.375% Series E
$0.40 September 30, 2023September 29, 2023October 16, 2023
6.30% Series F
$0.39 March 31, 2023March 31, 2023April 17, 2023
6.30% Series F
$0.39 June 30, 2023June 30, 2023July 17, 2023
6.30% Series F
$0.39 September 30, 2023September 29, 2023October 16, 2023
6.375% Series G
$0.40 March 31, 2023March 31, 2023April 17, 2023
6.375% Series G
$0.40 June 30, 2023June 30, 2023July 17, 2023
6.375% Series G
$0.40 September 30, 2023September 29, 2023October 16, 2023
5.70% Series H
$0.36 March 31, 2023March 31, 2023April 17, 2023
5.70% Series H
$0.36 June 30, 2023June 30, 2023July 17, 2023
5.70% Series H
$0.36 September 30, 2023September 29, 2023October 16, 2023
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Non-controlling Interest of Common Units in Operating Partnership
Holders of Operating Partnership units ("OP units") have certain redemption rights that enable OP unit holders to cause the Operating Partnership to redeem their units in exchange for, at the Company’s option, cash per unit equal to the market price of common shares at the time of redemption or common shares on a one-for-one basis. The number of shares issuable upon exercise of the redemption rights will be adjusted upon the occurrence of share splits, mergers, consolidations or similar pro-rata share transactions, which otherwise would have the effect of diluting the ownership interests of the Operating Partnership's limited partners or the Company's shareholders.
On November 30, 2018, in connection with the merger with LaSalle Hotel Properties ("LaSalle"), the Company issued 133,605 OP units in the Operating Partnership to third-party limited partners of LaSalle's operating partnership.
On May 11, 2022, in connection with the acquisition of Inn on Fifth in Naples, Florida, the Company issued 16,291 OP units in the Operating Partnership.
As of September 30, 2023 and December 31, 2022, the Operating Partnership had 149,896 OP units held by third parties, excluding LTIP units.
As of September 30, 2023, the Operating Partnership had two classes of long-term incentive partnership units ("LTIP units"), LTIP Class A units and LTIP Class B units. All of the outstanding LTIP units are held by officers of the Company.
On February 17, 2023, the Board of Trustees granted 131,276 LTIP Class B units to its executive officers. These LTIP units will vest ratably on January 1, 2024, 2025 and 2026, contingent upon continued employment with the Company. The fair value of each award was determined based on the closing price of the Company’s common shares on the grant date of $15.04 per unit with an aggregate grant date fair value of $2.0 million.
As of September 30, 2023, the Operating Partnership had 858,484 LTIP units outstanding, of which 277,136 LTIP units have vested. As of December 31, 2022, the Operating Partnership had 727,208 LTIP units outstanding, of which