Xenia Hotels & Resorts, Inc. [XHR] Filings

10-Q 1 xhr-20240930.htm 10-Q xhr-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________

FORM 10-Q

____________________________

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period ended ______ to ______

Commission file number 001-36594

___________________________

Xenia Hotels & Resorts, Inc.

(Exact Name of Registrant as Specified in Its Charter)

_______________________



Maryland						20-0141677
(State of Incorporation)						(I.R.S. Employer Identification No.)

200 S. Orange Avenue
Suite 2700, Orlando, Florida						32801
(Address of Principal Executive Offices)						(Zip Code)

(407) 246-8100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock

XHR

New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically 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 definition 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 November 6, 2024, there were 101,816,814 shares of the registrant’s common stock outstanding.

XENIA HOTELS & RESORTS, INC.

TABLE OF CONTENTS


Part I - Financial Information		Page

Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023	1
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2024 and 2023	2

	Condensed Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 2024 and 2023	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023	6
	Notes to the Condensed Consolidated Financial Statements	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	39


Part II - Other Information

Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	42

Signatures		43

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

XENIA HOTELS & RESORTS, INC.

Condensed Consolidated Balance Sheets

As of September 30, 2024 and December 31, 2023

(Dollar amounts in thousands, except per share data)


	September 30, 2024		December 31, 2023
Assets:	(Unaudited)		(Audited)
Investment properties:
Land	$	455,907	$	460,307
Buildings and other improvements	3,177,915		3,097,711

Total	$	3,633,822	$	3,558,018
Less: accumulated depreciation	(1,043,949)		(963,052)
Net investment properties	$	2,589,873	$	2,594,966
Cash and cash equivalents	161,469		164,725
Restricted cash and escrows	63,158		58,350
Accounts and rents receivable, net of allowance for doubtful accounts	31,976		32,432
Intangible assets, net of accumulated amortization of $276 and $241, respectively	4,863		4,898
Deferred tax assets (Note 8)	5,212		—
Other assets	47,930		46,856

Total assets	$	2,904,481	$	2,902,227
Liabilities:
Debt, net of loan premiums, discounts and unamortized deferred financing costs (Note 5)	$	1,395,522	$	1,394,906
Accounts payable and accrued expenses	116,632		102,389
Distributions payable	12,614		10,788
Other liabilities	81,412		76,647

Total liabilities	$	1,606,180	$	1,584,730
Commitments and Contingencies (Note 12)
Stockholders' equity:
Common stock, $0.01 par value, 500,000,000 shares authorized, 101,816,814 and 102,372,589 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively	$	1,019	$	1,024
Additional paid in capital	1,928,063		1,934,775
Accumulated other comprehensive income	665		2,439
Accumulated distributions in excess of net earnings	(667,025)		(647,246)
Total Company stockholders' equity	$	1,262,722	$	1,290,992
Non-controlling interests	35,579		26,505
Total equity	$	1,298,301	$	1,317,497
Total liabilities and equity	$	2,904,481	$	2,902,227

See accompanying notes to the condensed consolidated financial statements.

XENIA HOTELS & RESORTS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

For the Three and Nine Months Ended September 30, 2024 and 2023

(Unaudited)

(Dollar amounts in thousands, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenues:
Rooms revenues	$	139,577	$	138,668	$	453,487	$	450,255
Food and beverage revenues	74,790		71,815		256,643		259,972
Other revenues	22,439		21,541		67,068		61,836
Total revenues	$	236,806	$	232,024	$	777,198	$	772,063
Expenses:
Rooms expenses	37,535		35,510		114,756		108,866
Food and beverage expenses	56,473		53,769		177,587		174,445
Other direct expenses	5,980		5,835		18,824		17,547
Other indirect expenses	68,332		65,142		205,714		197,896
Management and franchise fees	7,362		7,403		27,646		26,818
Total hotel operating expenses	$	175,682	$	167,659	$	544,527	$	525,572
Depreciation and amortization	31,839		33,094		95,626		100,325
Real estate taxes, personal property taxes and insurance	13,112		12,918		39,945		38,196
Ground lease expense	788		751		2,411		2,245
General and administrative expenses	7,817		9,625		28,416		28,380
Gain on business interruption insurance	—		(218)		(745)		(218)

Other operating expenses (credits)	(103)		206		1,104		816

Impairment and other losses	121		—		471		—
Total expenses	$	229,256	$	224,035	$	711,755	$	695,316
Operating income	$	7,550	$	7,989	$	65,443	$	76,747
Gain on sale of investment properties	1,628		—		1,628		—
Other income	2,924		2,031		7,296		6,212
Interest expense	(20,144)		(20,524)		(60,747)		(64,308)
Loss on extinguishment of debt	—		(20)		—		(1,189)
Net income (loss) before income taxes	$	(8,042)	$	(10,524)	$	13,620	$	17,462
Income tax benefit (expense)	609		1,639		4,027		(5,382)


Net income (loss)	$	(7,433)	$	(8,885)	$	17,647	$	12,080
Net (income) loss attributable to non-controlling interests (Note 1)	342		356		(866)		(537)




Net income (loss) attributable to common stockholders	$	(7,091)	$	(8,529)	$	16,781	$	11,543

XENIA HOTELS & RESORTS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), Continued

For the Three and Nine Months Ended September 30, 2024 and 2023

(Unaudited)

(Dollar amounts in thousands, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Basic and diluted income (loss) per share:
Net income (loss) per share available to common stockholders - basic and diluted	$	(0.07)	$	(0.08)	$	0.16	$	0.10
Weighted-average number of common shares (basic)	101,884,090		107,006,690		101,935,744		109,345,761
Weighted-average number of common shares (diluted)	101,884,090		107,006,690		102,342,037		109,568,449

Comprehensive income (loss):
Net income (loss)	$	(7,433)	$	(8,885)	$	17,647	$	12,080
Other comprehensive income (loss):
Unrealized gain (loss) on interest rate derivative instruments	(1,406)		1,676		1,547		7,582
Reclassification adjustment for amounts recognized in net income (loss) (interest expense)	(1,118)		(1,083)		(3,378)		(1,543)
	$	(9,957)	$	(8,292)	$	15,816	$	18,119



Comprehensive (income) loss attributable to non-controlling interests (Note 1)	463		325		(809)		(797)
Comprehensive income (loss) attributable to the Company	$	(9,494)	$	(7,967)	$	15,007	$	17,322

See accompanying notes to the condensed consolidated financial statements.

XENIA HOTELS & RESORTS, INC.

Condensed Consolidated Statements of Changes in Equity

For the Three Months Ended September 30, 2024 and 2023

(Unaudited)

(Dollar amounts in thousands, except per share data)


	Common Stock
	Shares	Amount		Additional paid in capital		Accumulated other comprehensive income		Distributions in excess of retained earnings		Non-controlling interests of Operating Partnership		Total

Balance at June 30, 2024	101,963,677	$	1,020	$	1,929,304	$	3,068	$	(647,658)	$	34,258	$	1,319,992
Net loss	—	—		—		—		(7,091)		(342)		(7,433)

Repurchase of common shares, net	(146,863)	(1)		(1,876)		—		—		—		(1,877)
Dividends, common share / units ($0.12)	—	—		—		—		(12,276)		(273)		(12,549)
Share-based compensation	—	—		635		—		—		2,057		2,692





Other comprehensive loss:
Unrealized loss on interest rate derivative instruments	—	—		—		(1,339)		—		(67)		(1,406)
Reclassification adjustment for amounts recognized in net loss	—	—		—		(1,064)		—		(54)		(1,118)
Balance at September 30, 2024	101,816,814	$	1,019	$	1,928,063	$	665	$	(667,025)	$	35,579	$	1,298,301




Balance at June 30, 2023	108,121,598	$	1,082	$	2,005,265	$	5,217	$	(625,118)	$	25,325	$	1,411,771
Net loss	—	—		—		—		(8,529)		(356)		(8,885)
Repurchase of common shares, net	(2,070,777)	(21)		(25,021)		—		—		—		(25,042)
Dividends, common share / units ($0.10)	—	—		—		—		(10,640)		(233)		(10,873)
Share-based compensation	—	—		462		—		—		2,921		3,383





Other comprehensive loss:
Unrealized gain on interest rate derivative instruments	—	—		—		1,598		—		78		1,676
Reclassification adjustment for amounts recognized in net loss	—	—		—		(1,036)		—		(47)		(1,083)
Balance at September 30, 2023	106,050,821	$	1,061	$	1,980,706	$	5,779	$	(644,287)	$	27,688	$	1,370,947

See accompanying notes to the condensed consolidated financial statements.

XENIA HOTELS & RESORTS, INC.

Condensed Consolidated Statements of Changes in Equity

For the Nine Months Ended September 30, 2024 and 2023

(Unaudited)

(Dollar amounts in thousands, except per share data)


	Common Stock
	Shares	Amount		Additional paid in capital		Accumulated other comprehensive income		Distributions in excess of retained earnings		Non-controlling Interests of Operating Partnership		Total

Balance at December 31, 2023	102,372,589	$	1,024	$	1,934,775	$	2,439	$	(647,246)	$	26,505	$	1,317,497
Net income	—	—		—		—		16,781		866		17,647

Repurchase of common shares, net	(614,970)	(6)		(8,195)		—		—		—		(8,201)
Dividends, common share / units ($0.36)	—	—		—		—		(36,560)		(815)		(37,375)
Share-based compensation	80,837	1		1,817		—				9,735		11,553
Shares redeemed to satisfy tax withholding on vested share-based compensation	(21,642)	—		(334)		—		—		—		(334)



Redemption of Operating Partnership Units	—	—		—		—		—		(655)		(655)
Other comprehensive income:
Unrealized gain on interest rate derivative instruments	—	—		—		1,442		—		105		1,547
Reclassification adjustment for amounts recognized in net income	—	—		—		(3,216)		—		(162)		(3,378)
Balance at September 30, 2024	101,816,814	$	1,019	$	1,928,063	$	665	$	(667,025)	$	35,579	$	1,298,301




Balance at December 31, 2022	112,519,672	$	1,126	$	2,063,273	$	—	$	(623,216)	$	18,825	$	1,460,008
Net income	—	—		—		—		11,543		537		12,080
Repurchase of common shares, net	(6,516,485)	(65)		(83,671)		—		—		—		(83,736)
Dividends, common shares / units ($0.30)	—	—		—		—		(32,614)		(692)		(33,306)
Share-based compensation	65,247	—		1,362		—		—		8,758		10,120
Shares redeemed to satisfy tax withholding on vested share-based compensation	(17,613)	—		(258)		—		—		—		(258)




Other comprehensive income:
Unrealized gain on interest rate derivative instruments	—	—		—		7,256		—		326		7,582
Reclassification adjustment for amounts recognized in net income	—	—		—		(1,477)		—		(66)		(1,543)
Balance at September 30, 2023	106,050,821	$	1,061	$	1,980,706	$	5,779	$	(644,287)	$	27,688	$	1,370,947

See accompanying notes to the condensed consolidated financial statements.

XENIA HOTELS & RESORTS, INC.

Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2024 and 2023

(Unaudited)

(Dollar amounts in thousands)


	Nine Months Ended September 30,
	2024		2023
Cash flows from operating activities:
Net income	$	17,647	$	12,080
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	95,554		100,165
Non-cash ground rent and amortization of other intangibles	72		160
Amortization of debt premiums, discounts, and financing costs	4,073		3,558
Loss on extinguishment of debt	—		1,189
Gain on sale of investment properties	(1,628)		—

Gain on insurance recoveries	(2,347)		(535)
Share-based compensation expense	11,115		9,861
Deferred interest expense	—		(1,296)

Changes in assets and liabilities:
Accounts and rents receivable	456		(1,633)
Other assets	(10,423)		8,020
Accounts payable and accrued expenses	11,272		(485)
Other liabilities	7,347		6,861

Net cash provided by operating activities	$	133,138	$	137,945
Cash flows from investing activities:

Capital expenditures	(116,152)		(69,506)
Proceeds from sale of investment properties	29,107		—
Proceeds from property insurance	2,418		535
Performance guaranty payments	151		1,389


Net cash used in investing activities	$	(84,476)	$	(67,582)
Cash flows from financing activities:
Proceeds from mortgage debt modification	—		440
Payoff of mortgage debt	—		(99,488)
Principal payments of mortgage debt	(2,502)		(2,492)
Proceeds from 2023 Term Loans	—		225,000
Principal payments on Corporate Credit Facility Term Loan	—		(125,000)




Repurchase of 2020 Senior Notes	—		(34,925)
Payment of loan fees and issuance costs	—		(5,554)
Payment of loan modification fees	—		(25)
Repurchase of common shares	(8,201)		(83,736)
Redemption of Operating Partnership Units	(655)		—

Dividends and dividend equivalents	(35,401)		(33,810)
Shares redeemed to satisfy tax withholding on vested share-based compensation	(351)		(578)

Net cash used in financing activities	$	(47,110)	$	(160,168)
Net increase (decrease) in cash and cash equivalents and restricted cash	1,552		(89,805)
Cash and cash equivalents and restricted cash, at beginning of period	223,075		365,910
Cash and cash equivalents and restricted cash, at end of period	$	224,627	$	276,105

XENIA HOTELS & RESORTS, INC.

Condensed Consolidated Statements of Cash Flows, Continued

For the Nine Months Ended September 30, 2024 and 2023

(Unaudited)

(Dollar amounts in thousands)


	Nine Months Ended September 30,
	2024		2023
Supplemental disclosure of cash flow information:
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the amount shown in the condensed consolidated statements of cash flows:
Cash and cash equivalents	$	161,469	$	219,165
Restricted cash	63,158		56,940
Total cash and cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows	$	224,627	$	276,105

The following represent cash paid during the periods presented for the following:
Cash paid for interest, net of capitalized interest	$	61,150	$	64,996
Cash paid for taxes	1,601		3,795

Supplemental schedule of non-cash investing and financing activities:
Accrued capital expenditures	$	2,846	$	2,164

Distributions payable	12,614		10,870

See accompanying notes to the condensed consolidated financial statements.

XENIA HOTELS & RESORTS, INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

September 30, 2024

1. Organization

Xenia Hotels & Resorts, Inc. (the "Company" or "Xenia") is a Maryland corporation that invests in uniquely positioned luxury and upper upscale hotels and resorts with a focus on the top 25 lodging markets as well as key leisure destinations in the United States.

Substantially all of the Company's assets are held by, and all the operations are conducted through, XHR LP (the "Operating Partnership"). XHR GP, Inc. is the sole general partner of XHR LP and is wholly-owned by the Company. As of September 30, 2024, the Company collectively owned 95.2% of the common limited partnership units issued by the Operating Partnership ("Operating Partnership Units"). The remaining 4.8% of the Operating Partnership Units are owned by the other limited partners comprised of certain of our executive officers and current or former members of our Board of Directors and includes vested and unvested long-term incentive plan ("LTIP") partnership units. LTIP partnership units may or may not vest based on the passage of time and whether certain market-based performance objectives are met.

Xenia operates as a real estate investment trust ("REIT") for U.S. federal income tax purposes. To qualify as a REIT, the Company cannot operate or manage its hotels. Therefore, the Operating Partnership and its subsidiaries lease the hotel properties to XHR Holding, Inc. and its subsidiaries (collectively with its subsidiaries, "XHR Holding"), the Company's taxable REIT subsidiary ("TRS"), which engages third-party eligible independent contractors to manage the hotels.

As of September 30, 2024 and 2023, the Company owned 31 and 32 lodging properties, respectively.

2. Summary of Significant Accounting Policies

The unaudited interim condensed consolidated financial statements and related notes have been prepared on an accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP" or "GAAP") and in conformity with the rules and regulations of the Securities and Exchange Commission ("SEC") applicable to financial information. 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. The unaudited condensed consolidated financial statements include normal recurring adjustments, which management considers necessary for the fair presentation of the condensed consolidated balance sheets, condensed consolidated statements of operations and comprehensive income (loss), condensed consolidated statements of changes in equity and condensed consolidated statements of cash flows for the periods presented. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto as of and for the year ended December 31, 2023, included in the Company's Annual Report on Form 10-K filed with the SEC on February 27, 2024. Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of actual operating results for the entire year.

Basis of Presentation

The condensed consolidated financial statements include the accounts of the Company, the Operating Partnership, and XHR Holding. The Company's subsidiaries generally consist of limited liability companies, limited partnerships and the TRS. The effects of all inter-company transactions have been eliminated.

Use of Estimates

The preparation of the condensed consolidated 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 future economic conditions. Actual results could differ from these estimates.

Risks and Uncertainties

For the nine months ended September 30, 2024, the Company had a geographical concentration of revenues generated from hotels in the Orlando, Florida, Houston, Texas and San Diego, California markets that exceeded ten percent (10%) of total revenues for the period then ended. For the nine months ended September 30, 2023, the Company had a geographical concentration of revenues generated from hotels in the Orlando, Florida market that exceeded ten percent (10%) of total revenues for the period then ended. To the extent that there are adverse changes in these markets, or the industry sectors that operate in these markets, our business and operating results could be negatively impacted.

Consolidation

The Company evaluates its investments in partially owned entities to determine whether such entities may be a variable interest entity ("VIE") or voting interest entity. If the entity is a VIE, the determination of whether the Company is the primary beneficiary must then be made. The primary beneficiary determination is based on a qualitative assessment as to whether the entity has (i) power to direct significant activities of the VIE and (ii) an obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. The Company will consolidate a VIE if it is deemed to be the primary beneficiary. The equity method of accounting is applied to entities in which the Company is not the primary beneficiary, or the entity is not a VIE and over which the Company does not have effective control but can exercise influence over the entity with respect to its operations and major decisions.

The Operating Partnership is a VIE. The Company's significant asset is its investment in the Operating Partnership, as described in Note 1, and consequently, substantially all of the Company's assets and liabilities represent those assets and liabilities of the Operating Partnership.

Cash and Cash Equivalents

The Company considers all demand deposits, money market accounts and investments in certificates of deposit and repurchase agreements purchased, and similar accounts with a maturity of three months or less, at the date of purchase, to be cash equivalents. The Company maintains its cash and cash equivalents at various banks and other financial institutions. The combined account balances at banking institutions generally exceed the Federal Depository Insurance Corporation ("FDIC") insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. The Company monitors its concentration risk and reallocates funds among various institutions from time to time as determined appropriate based on perceived risks.

Restricted Cash and Escrows

Restricted cash primarily relates to furniture, fixtures and equipment replacement reserves ("FF&E reserves") as required per the terms of the Company's management and franchise agreements, cash held in restricted escrows for real estate taxes and insurance, capital spending reserves and, at times, disposition-related holdback escrows.

Impairment

Long-lived assets and intangibles

The Company assesses the carrying values of the respective long-lived assets whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be fully recoverable. Events or circumstances that may cause a review include, but are not limited to, when (1) a hotel property experiences a significant decrease in the market price of the long-lived asset, (2) a hotel property experiences a current or projected loss from operations combined with a history of operating or cash flow losses, (3) it becomes more likely than not that a hotel property will be sold before the end of its useful life, (4) an accumulation of costs is significantly in excess of the amount originally expected for the acquisition, construction or renovation of a long-lived asset, (5) adverse changes in demand occur for lodging at a specific property due to declining national or local economic conditions and/or new hotel construction in markets where the hotel is located, (6) there is a significant adverse change in legal factors or in the business climate that could affect the value of the long-lived asset, and/or (7) there is a significant adverse change in the extent or manner in which a long-lived asset is being used or in its physical condition. If it is determined that the carrying value is not recoverable because the undiscounted cash flows do not exceed carrying value, the Company records an impairment charge to the extent that the carrying value exceeds fair value.

For the three and nine months ended September 30, 2024, the Company expensed $0.1 million and $0.5 million, respectively, of repair and clean up costs related to property damage sustained at certain properties. These amounts are included in impairment and other losses on the condensed consolidated statements of operations and comprehensive income (loss) for the periods then ended.

Insurance Recoveries

Insurance proceeds received in excess of recognized losses are treated as gain and are not recorded until contingencies are resolved. During the three and nine months ended September 30, 2024, the Company recorded $0.9 million and $2.3 million, respectively, of insurance proceeds in excess of recognized losses related to casualty losses at certain properties. For the nine months ended September 30, 2023, the Company recorded $0.5 million of insurance proceeds in excess of recognized losses

related to a casualty loss at one property. These amounts are included in other income on the condensed consolidated statements of operations and comprehensive income (loss) for the periods then ended.

The Company may also be entitled to business interruption proceeds for losses occurring at certain properties; however, an insurance recovery receivable will not be recorded until a final settlement has been reached with the insurers. During the nine months ended September 30, 2024, the Company recognized $0.7 million in business interruption insurance proceeds, net of license and management fees, for a portion of lost income related to a restaurant kitchen fire which occurred in 2023. During the three and nine months ended September 30, 2023, the Company recognized $0.2 million in business interruption insurance proceeds for a portion of lost income associated with a power outage. These amounts are included in gain on business interruption insurance on the condensed consolidated statements of operations and comprehensive income (loss) for the periods then ended.

Disposition of Real Estate

The Company accounts for dispositions of real estate in accordance with Accounting Standards Update 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20), ("ASU 2017-05"), for the transactions between the Company and unrelated third-parties that are not considered a customer in the ordinary course of business. Typically, the real estate assets disposed of do not represent the transfer of a business or contain a material amount of financial assets, if any. The real estate assets promised in a sales contract are typically nonfinancial assets (i.e. land or a leasehold interest in land, buildings, furniture, fixtures and equipment) or in substance nonfinancial assets. The Company recognizes a gain or loss in full when the real estate is sold, provided (a) there is a valid contract and (b) transfer of control has occurred.

Revenues

Revenues consist of amounts derived from hotel operations, including the sale of rooms for lodging accommodations, food and beverage, and other ancillary revenue generated by hotel amenities including spa, parking, golf, resort fees and other services.

Revenues are generated from various distribution channels including but not limited to direct bookings, global distribution systems and Internet travel sites. Room transaction prices are based on an individual hotel's location, room type and the bundle of services included in the reservation and are set by the hotel daily. Any discounts, including advanced purchase, loyalty point redemptions or promotions are recognized at the discounted rate whereas rebates and incentives are recorded as a reduction in rooms revenues when earned. Revenues from online channels are generally recognized net of commission fees, unless the end price paid by the guest is known. Rooms revenue is recognized over the length of stay that the hotel room is occupied by the guest. Cash received from a guest prior to check-in is recorded as an advance deposit and is generally recognized as rooms revenue at the time the room reservation has become non-cancellable, upon occupancy or upon expiration of the re-booking date. Advance deposits are included in other liabilities on the condensed consolidated balance sheets. Payment of any remaining balance is typically due from the guest upon check-out. Sales, use, occupancy, and similar taxes are collected and presented on a net basis (excluded from revenues).

Food and beverage transaction prices are based on the stated price for the specific food or beverage and varies depending on type, venue and hotel location. Service charges are typically a percentage of food and beverage prices and meeting space rental. Food and beverage revenue is recognized at the point in time in which the goods and/or services are rendered to the guest. Cash received in advance of an event is recorded as either a security or advance deposit. Security and advance deposits are recognized as revenue when it becomes non-cancellable or at the time the food and beverage goods and services are rendered to the guest. Payment for the remaining balance of food and beverage goods and services is due upon delivery and completion of such goods and services.

Parking and audio visual fees are recognized at the time services are provided to the guest. In parking and audio visual contracts in which we have control over the services provided, we are considered the principal in the agreement and recognize the related revenues gross of associated costs. If we do not have control over the services in the contract, we are considered the agent and record the related revenues net of associated costs.

Resort and amenity fees, spa, golf and other ancillary amenity revenues are recognized at the point in time the goods or services have been rendered to the guest at the stated price for the service or amenity.

Share-Based Compensation

The Company maintains a share-based incentive plan that provides for the grant of stock options, stock awards, restricted stock units, LTIP units and other equity-based awards. Share-based compensation is measured at the estimated fair value of the award

on the date of grant, adjusted for forfeitures as they occur, and are generally recognized as an expense on a straight-line basis over the longest vesting period for each grant for the entire award. An acceleration of expense recognition may occur in certain cases where the award recipient has met or will meet the retirement eligibility requirements prior to the applicable vesting date. The determination of fair value of these awards is subjective and involves significant estimates and assumptions including expected volatility of the Company's share price, expected dividend yield, expected term and assumptions of whether certain of these awards will achieve performance thresholds. Share-based compensation is included in general and administrative expenses in the condensed consolidated statements of operations and comprehensive income (loss) and capitalized in buildings and other improvements in the condensed consolidated balance sheets for certain employees that manage property developments, renovations and capital improvements.

Deferred Financing Costs

Financing costs related to the revolving line of credit and long-term debt are recorded at cost and are amortized as interest expense on a straight-line basis, which approximates the effective interest method, over the life of the related debt instrument unless there is a significant modification to the debt instrument. Financing costs related to the Senior Notes are amortized using the effective interest method. The balance of unamortized deferred financing costs related to the revolving line of credit is included in other assets and unamortized deferred financing costs related to all other debt are presented as a reduction in debt, net of loan premiums, discounts and unamortized deferred financing costs on the condensed consolidated balance sheets.

At September 30, 2024 and December 31, 2023, deferred financing costs related to the revolving line of credit were $9.6 million, offset by accumulated amortization of $6.6 million and $5.7 million, respectively. At September 30, 2024 and December 31, 2023, deferred financing costs related to all other debt were $24.3 million, offset by accumulated amortization of $14.9 million and $11.8 million, respectively.

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board issued Accounting Standard Update 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"). This guidance requires annual and interim disclosure of significant segment expenses that are provided to the chief operating decision maker ("CODM") and interim disclosures for all reportable segment's profit or loss and assets. Additionally, this guidance requires disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measures of segment profit and loss in assessing segment performance and deciding how to allocate resources. This guidance, which also applies to entities with a single reportable segment, is expected to improve financial reporting by providing additional information about a public company's significant segment expenses and more timely and detailed segment information reporting throughout the fiscal period. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of the new guidance on the disclosures to its consolidated financial statements.

In December 2023, the Financial Accounting Standards Board issued Accounting Standard Update 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). This new guidance is designed to enhance the transparency and decision usefulness of income tax disclosures and updates are related to the rate reconciliation and income taxes paid disclosures, requiring (1) the consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of the new guidance on the disclosures to its consolidated financial statements.

3. Revenues

The following represents total revenues disaggregated by primary geographical markets (as defined by STR, Inc. ("STR")) for the three and nine months ended September 30, 2024 and 2023 (in thousands):


	Three Months Ended		Nine Months Ended
Primary Markets	September 30, 2024		September 30, 2024
Orlando, FL	$	25,884	$	103,445
Houston, TX	25,983		85,298
San Diego, CA	29,540		79,171
Dallas, TX	15,498		56,374
Atlanta, GA	16,889		51,908
Phoenix, AZ	5,994		44,927
San Francisco/San Mateo, CA	15,228		43,411
Nashville, TN	13,664		40,936
Portland, OR	13,403		38,789
Washington, DC-MD-VA	9,843		35,380
Other	64,880		197,559
Total	$	236,806	$	777,198


	Three Months Ended		Nine Months Ended
Primary Markets	September 30, 2023		September 30, 2023
Orlando, FL	$	25,028	$	99,488
San Diego, CA	30,499		77,102
Houston, TX	22,033		76,365
Phoenix, AZ	6,135		68,520
Dallas, TX	16,053		53,264
Atlanta, GA	15,885		48,360
Nashville, TN	14,606		42,911
San Francisco/San Mateo, CA	14,602		41,849
Portland, OR	13,065		37,086
Washington, DC-MD-VA	10,834		34,883
Other	63,284		192,235
Total	$	232,024	$	772,063

4. Investment Properties

From time to time, the Company evaluates acquisition opportunities based on our investment criteria and/or the opportunistic disposition of our hotels in order to take advantage of market conditions or in situations where the hotels no longer fit within our strategic objectives.

In June 2024, the Company entered into an agreement to sell the 107-room Lorien Hotel & Spa, in Alexandria, Virginia for a sale price of $30.0 million. The sale closed in July 2024 resulting in a gain of $1.6 million. Net cash proceeds from the sale, after transaction closing costs, were $29.1 million.

5. Debt

Debt as of September 30, 2024 and December 31, 2023 consisted of the following (dollar amounts in thousands):


						Balance Outstanding as of
	Rate Type	Rate(1)			Maturity Date	September 30, 2024		December 31, 2023
Mortgage Loans
Grand Bohemian Hotel Orlando, Autograph Collection	Fixed	4.53	%		3/1/2026	$	53,615	$	54,522
Marriott San Francisco Airport Waterfront	Fixed	4.63	%		5/1/2027	106,516		108,111
Andaz Napa	Fixed (2)	5.72	%		1/19/2028	55,000		55,000
Total Mortgage Loans		4.88	%	(3)		$	215,131	$	217,633
Corporate Credit Facilities (4)



2023 Initial Term Loan	Fixed (5)	5.65	%		3/1/2026	125,000		125,000
2023 Delayed Draw Term Loan	Fixed (5)	5.65	%		3/1/2026	100,000		100,000

Revolving Line of Credit	Variable (6)	6.74	%		1/11/2027	—		—
Total Corporate Credit Facilities						$	225,000	$	225,000
2020 Senior Notes $500M	Fixed	6.38	%		8/15/2025	464,747		464,747
2021 Senior Notes $500M	Fixed	4.88	%		6/1/2029	500,000		500,000

Loan premiums, discounts and unamortized deferred financing costs, net (7)						(9,356)		(12,474)
Total Debt, net of loan premiums, discounts and unamortized deferred financing costs		5.50	%	(3)		$	1,395,522	$	1,394,906

(1)The rates shown represent the annual interest rates as of September 30, 2024. The variable index for the corporate credit facilities is Term SOFR, subject to a 10 basis point credit spread adjustment and a zero basis point floor, as further described below under "Corporate Credit Facilities."

(2)A variable interest loan for which the interest rate has been fixed with an interest rate swap to Term SOFR through January 1, 2027.

(3)Represents the weighted-average interest rate as of September 30, 2024.

(4)In November 2024, the Company upsized and extended its corporate credit facility. The amended credit facility consists of a $500 million revolving line of credit (which remains undrawn), a new $225 million term loan and a $100 million delayed draw term loan available to be drawn at the Company's election within 90 days of closing. The amended credit facility matures in November 2028 and can be extended to November 2029. Pricing on the amended credit facility remains the same.

(5)A variable interest loan for which the spread to Term SOFR has been fixed with interest rate swaps through mid-February 2025.

(6)Commitments under the revolving line of credit total $450 million through maturity. The spread to Term SOFR varies based on the Company’s leverage ratio, as further described below under “Corporate Credit Facilities.”

(7)Includes loan premiums, discounts and deferred financing costs, net of accumulated amortization.

Mortgage Loans

Of the total outstanding debt at September 30, 2024, none of the mortgage loans were recourse to the Company and the mortgage loan agreements require contributions to be made to FF&E reserves.

Corporate Credit Facilities

The $450 million revolving line of credit matures in January 2027 and can be extended up to an additional year. The interest rate on the revolving line of credit is based on a pricing grid with a range of 145 to 275 basis points over the applicable Term SOFR rate as determined by the Company’s leverage ratio, subject to a 10-basis point credit spread adjustment and a zero basis point floor. The 2023 Initial Term Loan and the 2023 Delayed Draw Term Loan (together, the "2023 Term Loans") mature in March 2026, can be extended up to an additional year and bear interest rates consistent with the pricing grid on the revolving line of credit.

As of September 30, 2024, there was no outstanding balance on the revolving line of credit. During the three and nine months ended September 30, 2024, the Company incurred unused commitment fees of approximately $0.3 million and $1.0 million,

respectively, and did not incur interest expense. During the three and nine months ended September 30, 2023, the Company incurred unused commitment fees of approximately $0.3 million and $1.0 million, respectively, and did not incur interest expense.

Senior Notes

The indentures governing the Senior Notes contain customary covenants that limit the Operating Partnership's ability and, in certain circumstances, the ability of its subsidiaries, to borrow money, create liens on assets, make distributions and pay dividends, redeem or repurchase stock, make certain types of investments, sell stock in certain subsidiaries, enter into agreements that restrict dividends or other payments from subsidiaries, enter into transactions with affiliates, issue guarantees of indebtedness and sell assets or merge with other companies. These limitations are subject to a number of important exceptions and qualifications set forth in the indentures.

Financial Covenants

As of September 30, 2024, the Company was not in compliance with a debt covenant on one mortgage loan which resulted in an event of default. The Company cured the default in October 2024 by depositing $2.7 million in an interest-bearing escrow account held by the lender. We were current on all loan payments and not otherwise in default under the revolving line of credit, corporate credit facility term loans, remaining mortgage loans or Senior Notes.

Debt Outstanding

Total debt outstanding as of September 30, 2024 and December 31, 2023 was $1,405 million and $1,407 million, respectively, and had a weighted-average interest rate of 5.50% and 5.47% per annum, respectively. The following table shows scheduled principal payments and debt maturities for the next five years and thereafter (in thousands):


	As of September 30, 2024		Weighted- Average Interest Rate
2024	$	853	4.59%
2025	469,178		6.36%
2026	280,381		5.43%
2027	102,388		4.64%
2028	52,078		5.72%
Thereafter	500,000		4.88%
Total Debt	$	1,404,878	5.50%
Revolving Line of Credit (matures in 2027)	—		6.74%
Loan premiums, discounts and unamortized deferred financing costs, net	(9,356)		—
Debt, net of loan premiums, discounts and unamortized deferred financing costs	$	1,395,522	5.50%

During the nine months ended September 30, 2023, the Company capitalized $5.6 million of deferred financing costs and expensed $1.7 million of debt-related legal fees which were included in other income on the condensed consolidated statements of operations and comprehensive income for the period then ended.

During the nine months ended September 30, 2023, in connection with the refinancing of the prior revolving credit facility, the repayment of the prior corporate credit facility term loan and the repayment of one mortgage loan, the Company wrote off unamortized deferred financing costs of $1.1 million, which is included in loss on extinguishment of debt on the condensed consolidated statements of operations and comprehensive income for the period then ended.

6. Derivatives

The Company primarily uses interest rate swaps as part of its interest rate risk management strategy for variable rate debt. As of September 30, 2024, all interest rate swaps were designated as cash flow hedges and involve the receipt of variable rate payments from a counterparty in exchange for making fixed rate payments over the life of the agreements without exchange of the underlying notional amount. Unrealized gains and losses of hedging instruments are reported in other comprehensive income or loss on the condensed consolidated statements of operations and comprehensive income (loss). Amounts reported in

accumulated other comprehensive income related to currently outstanding derivatives are recognized as an adjustment to income or loss through interest expense as interest payments are made on the Company’s variable rate debt.

Derivative instruments held by the Company with the right of offset in a net asset position are included in other assets on the condensed consolidated balance sheets.

The following table summarizes the terms of the derivative financial instruments held by the Company as of September 30, 2024 and December 31, 2023, respectively (in thousands):


						September 30, 2024				December 31, 2023
Hedged Debt	Type	Fixed Rate	Index	Effective Date	Maturity	Notional Amounts		Estimated Fair Value		Notional Amounts		Estimated Fair Value
2023 Initial Term Loan	Swap	3.85%	1-Month SOFR	5/10/2023	2/10/2025	$	75,000	$	172	$	75,000	$	587
2023 Initial Term Loan	Swap	3.87%	1-Month SOFR	5/10/2023	2/10/2025	50,000		111		50,000		380
2023 Delayed Draw Term Loan	Swap	3.85%	1-Month SOFR	5/17/2023	2/17/2025	50,000		116		50,000		388
2023 Delayed Draw Term Loan	Swap	3.86%	1-Month SOFR	5/17/2023	2/17/2025	25,000		57		25,000		191
2023 Delayed Draw Term Loan	Swap	3.85%	1-Month SOFR	5/17/2023	2/17/2025	25,000		58		25,000		194
Mortgage Debt	Swap	3.22%	Daily SOFR	6/1/2023	1/1/2027	55,000		185		55,000		790




						$	280,000	$	699	$	280,000	$	2,530

The table below details the location in the condensed consolidated financial statements of the gains and losses recognized on derivative financial instruments designated as cash flow hedges for the three and nine months ended September 30, 2024 and 2023 (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,
		2024		2023		2024		2023
Effect of derivative instruments:	Location in Statements of Operations and Comprehensive Income (Loss):
Gain (loss) recognized in other comprehensive income (loss)	Unrealized gain (loss) on interest rate derivative instruments	$	(1,406)	$	1,676	$	1,547	$	7,582
Amount reclassified from accumulated other comprehensive income to net income (loss)	Reclassification adjustment for amounts recognized in net income (loss)	$	(1,118)	$	(1,083)	$	(3,378)	$	(1,543)
Total interest expense in which effects of cash flow hedges are recorded	Interest expense	$	20,144	$	20,524	$	60,747	$	64,308

The Company expects approximately $0.5 million will be reclassified from accumulated other comprehensive income as a reduction to interest expense in the next 12 months.

7. Fair Value Measurements

The Company defines fair value based on the price that would be received upon sale of an asset or the exit price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value. The fair value hierarchy consists of three broad levels, which are described below:

•Level 1 - Quoted prices for identical assets or liabilities in active markets that the entity has the ability to access.

•Level 2 - Observable inputs, other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

•Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The Company has estimated the fair value of its financial and non-financial instruments using available market information and valuation methodologies it believes to be appropriate for these purposes. Considerable judgment and a high degree of subjectivity are involved in developing these estimates and, accordingly, they are not necessarily indicative of amounts that would be realized upon disposition.

For assets and liabilities measured at fair value on a recurring basis and non-recurring basis, quantitative disclosure of their fair value is included in the condensed consolidated balance sheets as of as of September 30, 2024 and December 31, 2023 (in thousands):


	Fair Value Measurement Date
	September 30, 2024				December 31, 2023
Location on Condensed Consolidated Balance Sheets/Description of Instrument	Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring measurements
Other assets
Interest rate swaps(1)	$	699	$	—	$	2,530	$	—

(1) Interest rate swap fair values are netted as applicable per the terms of the respective master netting agreements.

Recurring Measurements

The fair value of each derivative instrument is based on a discounted cash flow analysis of the expected cash flows under each arrangement. This analysis reflects the contractual terms of the derivative instrument, including the period to maturity, and utilizes observable market-based inputs, including interest rate curves and implied volatilities, which are classified within Level 2 of the fair value hierarchy. The Company also incorporates credit value adjustments to appropriately reflect each parties’ nonperformance risk in the fair value measurement, which utilizes Level 3 inputs such as estimates of current credit spreads. However, the Company has assessed that the credit valuation adjustments are not significant to the overall valuation of the derivatives and, as a result, its derivative valuations in their entirety are classified within Level 2 of the fair value hierarchy.

Financial Instruments Not Measured at Fair Value

The table below represents the fair value of financial instruments presented at carrying values in the condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024				December 31, 2023
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Total Mortgage and Term Loans	$	440,131	$	430,194	$	442,633	$	425,858
Senior Notes	964,747		958,489		964,747		939,826

Revolving Line of Credit	—		—		—		—
Total	$	1,404,878	$	1,388,683	$	1,407,380	$	1,365,684

The Company estimated the fair value of its total debt, net of discounts, using a weighted-average effective interest rate of 5.91% and 6.09% per annum as of September 30, 2024 and December 31, 2023, respectively. The assumptions reflect the terms currently available to borrowers with credit profiles similar to the Company's. The Company has determined that its debt instrument valuations are classified in Level 2 of the fair value hierarchy.

8. Income Taxes

The Company estimated an income tax benefit for the three and nine months ended September 30, 2024 using an estimated federal and state combined effective tax rate of 56.37% and recognized an income tax benefit of $0.6 million and $4.0 million, respectively, including the recognition of an income tax benefit due to the release of a valuation allowance on certain deferred tax assets which caused the year to date effective tax rate to be significantly different from historical annual effective tax rates.

The Company estimated income tax for the three and nine months ended September 30, 2023 using an estimated federal and state combined effective tax rate of 25.54% and recognized an income tax benefit of $1.6 million and income tax expense of $5.4 million, respectively.

The Company considers various factors, including cumulative losses, the future reversals of existing taxable temporary differences, projected future taxable income and tax-planning strategies when assessing the realizability of its deferred tax assets. During the nine months ended September 30, 2024, the Company determined there is sufficient positive evidence to conclude it is more likely than not that a portion of the deferred tax assets related to certain state net operating loss carryforwards is realizable and therefore recorded a $5.2 million reduction in the related valuation allowance.

9. Stockholders' Equity

Common Stock

The Company maintains an "At-The-Market" ("ATM") program pursuant to an Equity Distribution Agreement ("ATM Agreement") with Wells Fargo Securities, LLC, Robert W. Baird & Co. Incorporated, Jefferies LLC, KeyBanc Capital Markets Inc. and Raymond James & Associates, Inc. In accordance with the terms of the ATM Agreement, the Company may from time to time offer and sell shares of its common stock having an aggregate offering price of up to $200 million. No shares were sold under the ATM Agreement during the three and nine months ended September 30, 2024 and 2023 and, as of September 30, 2024, $200 million of common stock remained available for issuance under the ATM Agreement. As of September 30, 2024 and December 31, 2023, the Company had accumulated offering related costs included in other assets on the condensed consolidated balance sheets of $0.4 million and $0.3 million, respectively. These offering costs will be reclassified to additional paid in capital to offset proceeds from the sale of common stock. Any remaining accumulated offering costs will be written off when the current registration statement expires in August 2026.

The Board of Directors has authorized a stock repurchase program (the "Repurchase Program") resulting in authorization to repurchase common stock in the open market, in privately negotiated transactions or otherwise, including pursuant to Rule 10b5-1 plans. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The Repurchase Program does not have an expiration date, may be suspended or discontinued at any time and does not obligate the Company to acquire any particular amount of shares.

During the three and nine months ended September 30, 2024, 146,863 and 614,970 shares were repurchased under the Repurchase Program, at a weighted-average price of $12.78 and $13.34 per share for an aggregate purchase price of $1.9 million and $8.2 million, respectively. During the three and nine months ended September 30, 2023, 2,070,777 and 6,516,485 shares were repurchased under the Repurchase Program, at a weighted-average price of $12.09 and $12.85 per share for an aggregate purchase price of $25.0 million and $83.7 million, respectively. As of September 30, 2024, the Company had approximately $125.5 million remaining under its share repurchase authorization.

Dividends

The Company declared the following dividends during the nine months ended September 30, 2024:

Dividend per Share/Unit

For the Quarter Ended

Record Date

Payable Date

$0.12

March 31, 2024

March 28, 2024

April 15, 2024

$0.12

June 30, 2024

June 28, 2024

July 15, 2024

$0.12

September 30, 2024

October 15, 2024

Non-Controlling Interest of Common Units in Operating Partnership

As of September 30, 2024, the Operating Partnership had 5,136,969 LTIP Units outstanding, representing a 4.8% partnership interest held by the limited partners. Of the 5,136,969 LTIP Units outstanding at September 30, 2024, 1,735,183 LTIP Units

had vested but had yet to be converted or redeemed. Only vested LTIP Units may be converted to common units of the Operating Partnership, which in turn can be tendered for redemption per the terms of the partnership agreement.

During the nine months ended September 30, 2024, 42,826 vested LTIP Units were converted into common limited partnership units in the Operating Partnership ("Common Units") on a one-for-one basis and subsequently all 42,826 Common Units were tendered to the Operating Partnership for redemption. At the Company's election, all 42,826 Common Units were redeemed for cash totaling $0.7 million.

10. Earnings Per Share

Basic earnings per common share is calculated by dividing net income or loss available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share is calculated by dividing net income or loss available to common stockholders by the weighted-average number of common shares outstanding during the period plus any shares that could potentially be outstanding during the period. Any anti-dilutive shares have been excluded from the diluted earnings per share calculation.

Unvested share-based awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of earnings per share pursuant to the two-class method. Accordingly, distributed and undistributed earnings attributable to unvested share-based compensation have been excluded, as applicable, from net income or loss available to common stockholders used in the basic and diluted earnings per share calculations.

Income or loss allocated to non-controlling interests in the Operating Partnership has been excluded from the numerator and Operating Partnership Units and LTIP Units in the Operating Partnership have been omitted from the denominator for the purpose of computing diluted earnings per share since including these amounts in the numerator and denominator would have no impact.

The following table reconciles net income or loss attributable to common stockholders to basic and diluted earnings per share (in thousands, except share and per share data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Numerator:
Net income (loss) attributable to common stockholders	$	(7,091)	$	(8,529)	$	16,781	$	11,543
Dividends paid on unvested share-based compensation	(97)		(65)		(293)		(198)

Net income (loss) available to common stockholders	$	(7,188)	$	(8,594)	$	16,488	$	11,345

Denominator:
Weighted-average shares outstanding - Basic	101,884,090		107,006,690		101,935,744		109,345,761
Effect of dilutive share-based compensation(1)	—		—		406,293		222,688
Weighted-average shares outstanding - Diluted	101,884,090		107,006,690		102,342,037		109,568,449

Basic and diluted earnings (loss) per share:
Net income (loss) per share available to common stockholders - basic and diluted	$	(0.07)	$	(0.08)	$	0.16	$	0.10

(1)During the three months ended September 30, 2024 and 2023, the Company excluded 427,592 and 200,926 anti-dilutive shares from its calculation of diluted earnings per share, respectively.

11. Share-Based Compensation

2015 Incentive Award Plan

Restricted Stock Unit Grants

The Compensation Committee of the Board of Directors approved the following awards of restricted stock units under the 2015 Incentive Award Plan:

Grant Date

Grant Description

Time-Based Grants

Performance-Based Grants

Weighted-Average Grant Date Fair Value

February 2024

2024 Restricted Stock Units

170,041

92,262

11.35

Each award of time-based Restricted Stock Units will vest as follows, subject to continued employment with the Company or its affiliates through each applicable vesting date: thirty-three percent (33%) on the first anniversary of the vesting commencement date, thirty-three percent (33%) on the second anniversary of the vesting commencement date, and thirty-four percent (34%) on the third anniversary of the vesting commencement date.

The performance-based Restricted Stock Units are designated twenty-five percent (25%) as absolute total stockholder return ("TSR") units and seventy-five percent (75%) as relative TSR share units. The absolute TSR share units vest based on achievement of varying levels of the Company's TSR over the three-year performance period. The relative TSR share units vest based on the ranking of the Company's TSR as compared to a defined peer group over the three-year performance period. Vesting of performance-based Restricted Stock Units is also subject to continued employment with the Company or its affiliates through the applicable vesting date.

LTIP Unit Grants

The Compensation Committee of the Board of Directors approved the issuance of the following awards under the 2015 Incentive Award Plan:

Grant Date

Grant Description

Time-Based LTIP Units

Performance-Based Class A LTIP Units

Weighted-Average Grant Date Fair Value

February 2024

2024 LTIP Units

149,221

1,201,212

7.48

Each award of time-based LTIP Units will vest as follows, subject to continued employment with the Company or its affiliates through each applicable vesting date: thirty-three percent (33%) on the first anniversary of the vesting commencement date, thirty-three percent (33%) on the second anniversary of the vesting commencement date, and thirty-four percent (34%) on the third anniversary of the vesting commencement date.

A portion of each award of Class A LTIP Units are designated as a number of base units. The base units are designated twenty-five percent (25%) as absolute TSR base units and vest based on achievement of varying levels of the Company's TSR over the three-year performance period. The other seventy-five percent (75%) of the base units are designated as relative TSR base units and vest based on the ranking of the Company's TSR as compared to a defined peer group over the three-year performance period. Vesting of Class A LTIP Units is also subject to continued employment with the Company or its affiliates through the applicable vesting date.

LTIP Units (other than unvested Class A LTIP Units), whether vested or unvested, receive the same quarterly per-unit distributions as common units in the Operating Partnership, which equal the per-share distributions on the common stock of the Company. Class A LTIP Units that have not satisfied the applicable performance vesting conditions receive a quarterly per-unit distribution equal to ten percent (10%) of the distribution paid on common units in the Operating Partnership.

In May 2024, pursuant to the Company's Director Compensation Program, the Company issued 47,362 fully vested LTIP Units to its non-employee directors which had a grant date fair value of $14.78 per unit.

The following is a summary of the unvested incentive awards under the 2015 Incentive Award Plan as of September 30, 2024:


	2015 Incentive Award Plan Restricted Stock Units		2015 Incentive Award Plan LTIP Units(1)		Total
Unvested as of December 31, 2023	316,500		2,160,198		2,476,698
Granted	262,303		1,397,795		1,660,098
Vested(2)	(80,837)		(156,207)		(237,044)

Forfeited	(17,868)		—		(17,868)

Unvested as of September 30, 2024	480,098		3,401,786		3,881,884
Weighted-average fair value of unvested shares/units	$	11.74	$	8.32	$	8.74

(1) Includes time-based LTIP Units and performance-based Class A LTIP Units.

(2) During the nine months ended September 30, 2024 and 2023, 21,642 and 17,613 shares of common stock, respectively, were withheld by the Company upon the settlement of the applicable awards in order to satisfy federal and state tax withholding requirements on the vesting of Restricted Stock Units under the 2015 Incentive Award Plan.

The grant date fair value of the time-based Restricted Stock Units and time-based LTIP Units is determined based on the closing price of the Company’s common stock on the grant date. The grant date fair value of performance-based units is determined based on a Monte Carlo simulation method with the following assumptions:


Performance Award Grant Date	Percentage of Total Award	Grant Date Fair Value by Component	Volatility	Interest Rate	Dividend Yield
February 23, 2024
Absolute TSR Restricted Stock Units	25%	$7.75	46.86%	4.57% - 5.31%	3.01%
Relative TSR Restricted Stock Units	75%	$7.74	46.86%	4.57% - 5.31%	3.01%
Absolute TSR Class A LTIP Units	25%	$7.81	46.86%	4.57% - 5.31%	3.01%
Relative TSR Class A LTIP Units	75%	$7.75	46.86%	4.57% - 5.31%	3.01%

Compensation expense related to time-based Restricted Stock Units and time-based LTIP Units is generally recognized on a straight-line basis over the vesting period and compensation expense related to performance-based units is generally recognized on a straight-line basis over the performance period. An acceleration of compensation expense recognition may occur in certain cases where the award recipient has met or will meet the retirement eligibility requirements prior to the vesting date.

The absolute and relative total stockholder returns are market conditions as defined by Accounting Standards Codification 718, Compensation - Stock Compensation ("ASC 718"). Market conditions include provisions wherein the vesting condition is met through the achievement of a specific value of the Company’s common stock, which is total stockholder return in this case. Market conditions differ from other performance awards under ASC 718 in that the probability of attaining the condition (and thus vesting of units or shares) is reflected in the initial grant date fair value of the award. Accordingly, it is not appropriate to reconsider the probability of vesting in the award subsequent to the initial measurement of the award, nor is it appropriate to reverse any of the expense if the condition is not met. As such, once the expense for these awards is measured, the expense must be recognized over the vesting period regardless of whether the target is met, or at what level the target is met. Expense may only be reversed if the holder of the instrument forfeits the award as a result of the holder's termination of service to the Company prior to vesting.

For the three and nine months ended September 30, 2024, the Company recognized approximately $2.5 million and $10.4 million of share-based compensation expense (net of forfeitures) related to Restricted Stock Units and LTIP Units provided to certain of its executive officers and employees. In addition, for the nine months ended September 30, 2024, the Company recognized $0.7 million of share-based compensation expense related to grants to the Board of Directors and for the three and nine months ended September 30, 2024 capitalized approximately $0.1 million and $0.4 million (net of forfeitures) related to Restricted Stock Units provided to certain other employees who oversee development and capital projects on behalf of the Company. As of September 30, 2024, there was $14.1 million of total unrecognized compensation costs related to unvested

Restricted Stock Units, Class A LTIP Units and Time-Based LTIP Units issued under the 2015 Incentive Award Plan, which are expected to be recognized over a remaining weighted-average period of 1.81 years.

For the three and nine months ended September 30, 2023, the Company recognized approximately $3.3 million and $9.2 million of share-based compensation expense (net of forfeitures) related to Restricted Stock Units and LTIP Units provided to certain of its executive officers and employees. In addition, for the nine months ended September 30, 2023, the Company recognized $0.7 million of share-based compensation expense related to grants to the Board of Directors and for the three and nine months ended September 30, 2023 and capitalized approximately $0.1 million and $0.3 million (net of forfeitures) related to Restricted Stock Units provided to certain other employees who oversee development and capital projects on behalf of the Company.

12. Commitments and Contingencies

Leases

The Company is a lessee to long-term ground, parking, and its corporate office leases, which are accounted for as operating leases. The following is a summary of the Company's leases as of and for the nine months ended September 30, 2024 (dollar amounts in thousands):


	September 30, 2024
Weighted-average remaining lease term, including reasonably certain extension options(1)	19 years
Weighted-average discount rate	5.71%

ROU asset(2)	$	17,059
Lease liability(3)	$	17,979

Operating lease rent expense	$	1,628
Variable lease costs	3,260
Total rent and variable lease costs	$	4,888

(1)The weighted-average remaining lease term including all available extension options is approximately 56 years.

(2)The ROU asset is included in other assets on the condensed consolidated balance sheet as of September 30, 2024.

(3)The lease liability is included in other liabilities on the condensed consolidated balance sheet as of September 30, 2024.

The following table shows the remaining lease payments, which includes reasonably certain extension options, for the next five years and thereafter reconciled to the lease liability as of September 30, 2024 (in thousands):


	Year Ending December 31, 2024
2024 (excluding the nine months ended September 30, 2024)	$	541
2025	2,172
2026	2,188
2027	2,204
2028	2,086
Thereafter	22,358
Total undiscounted lease payments	$	31,549
Less imputed interest	(13,570)
Lease liability(1)	$	17,979

(1)The lease liability is included in other liabilities on the condensed consolidated balance sheet as of September 30, 2024.

Management and Franchise Agreements

In order to maintain its qualification as a REIT, the Company cannot directly or indirectly operate any of its hotels. The Company leases each hotel to TRS lessees, which in turn engages property managers to manage the hotels. Each hotel is operated pursuant to a hotel management agreement with an independent third-party hotel management company.

Pursuant to the hotel management agreements, the management company controls the day-to-day operation of each hotel, and the Company is granted limited approval rights with respect to certain of the management company’s actions. The hotel management agreements typically contain a two-tiered fee structure, wherein the management company receives a base management fee and, if certain financial thresholds are exceeded, an incentive management fee. Many hotel management agreements also require the maintenance of a capital reserve fund based on a percentage of hotel revenues to be used for capital expenditures to maintain the quality of the hotels.

Management agreements for brand-managed hotels have terms generally ranging from 10 to 30 years and allow for one or more renewal periods at the option of the hotel manager. Assuming all renewal periods are exercised, the average remaining term is 26 years. Management agreements for franchised hotels generally contain initial terms between 15 and 20 years with an average remaining term of approximately five years; none of these agreements contemplate renewal or extension of the initial term.

The Company is generally limited in its ability to sell, lease or otherwise transfer hotels unless the transferee assumes the related hotel management agreement. However, most agreements include owner rights to terminate the agreements on the basis of the manager’s failure to meet certain performance-based metrics. Typically, these criteria are subject to the manager’s ability to ‘cure’ and avoid termination by payment to the Company of specified deficiency amounts (or, in some instances, waiver of the right to receive specified future management fees).

Franchise agreements generally have initial terms of 20 years, with an average remaining initial term of approximately eight years. The franchise agreements require royalty fees based on a percentage of gross rooms revenue and, for certain hotels, an additional fee based on a percentage of gross food and beverage revenue. In addition, franchise agreements require fees for marketing, reservation or other program fees based on a percentage of gross rooms revenue. Many franchise agreements also require the maintenance of a capital reserve fund based on a percentage of hotel revenues to be used for capital expenditures to maintain the quality of the hotels.

For the three and nine months ended September 30, 2024, the Company incurred management and franchise fee expenses of $7.4 million and $27.6 million, respectively, and for the three and nine months ended September 30, 2023 incurred expenses of $7.4 million and $26.8 million, respectively, which are included on the condensed consolidated statements of operations and comprehensive income (loss) for the periods then ended.

Reserve Requirements

Certain franchise and management agreements require the Company to reserve funds relating to replacements and renewals of the hotels' furniture, fixtures and equipment. As of September 30, 2024 and December 31, 2023, the Company had a balance of $57.3 million and $49.7 million, respectively, in reserves for such future improvements. This amount is included in restricted cash and escrows on the condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023, respectively.

Renovation and Construction Commitments

As of September 30, 2024, the Company had various contracts outstanding with third-parties in connection with the renovation of certain of its hotel properties. The remaining commitments under these contracts as of September 30, 2024 totaled $55.5 million.

Legal

The Company is subject, from time to time, to various legal proceedings and claims that arise in the ordinary course of business. While the resolution of these matters cannot be predicted with certainty, management believes, based on currently available information, that the final outcome of such matters will not have a material adverse effect on the financial condition of the Company.

13. Subsequent Events

On November 4, 2024, XHR LP amended and restated the credit agreement governing its corporate credit facilities to replace the credit facilities outstanding thereunder with a new $825 million senior unsecured credit facility comprised of a $500 million revolving line of credit (“Revolving Credit Facility”), a $225 million term loan (“2024 Initial Term Loan”), and a $100 million delayed draw term loan commitment (“2024 Delayed Draw Term Loan” and, together with the 2024 Initial Term Loan, the "2024 Term Loans"), pursuant to an amended and restated revolving credit and term loan agreeme