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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, 2022
OR
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 classTrading SymbolName of each exchange on which registered
Common StockXHRNew 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 October 31, 2022, there were 113,847,779 shares of the registrant’s common stock outstanding.



XENIA HOTELS & RESORTS, INC.
TABLE OF CONTENTS
Part I - Financial InformationPage
Item 1.Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2022 and 2021
Condensed Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 2022 and 2021
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021
Notes to the Condensed Consolidated Financial Statements
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
Signatures



PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
XENIA HOTELS & RESORTS, INC.
Condensed Consolidated Balance Sheets
As of September 30, 2022 and December 31, 2021
(Dollar amounts in thousands, except per share data)
September 30, 2022December 31, 2021
Assets(Unaudited)(Audited)
Investment properties:
Land$460,615 $431,427 
Buildings and other improvements3,091,556 2,856,671 
Total$3,552,171 $3,288,098 
Less: accumulated depreciation(945,659)(888,717)
Net investment properties$2,606,512 $2,399,381 
Cash and cash equivalents259,885 517,377 
Restricted cash and escrows50,788 36,854 
Accounts and rents receivable, net of allowance for doubtful accounts38,709 28,528 
Intangible assets, net of accumulated amortization of $2,604 and $2,231, respectively
5,162 5,446 
Other assets62,371 65,109 
Assets held for sale (Note 4)68,939 34,621 
Total assets $3,092,366 $3,087,316 
Liabilities
Debt, net of loan premiums, discounts and unamortized deferred financing costs (Note 5)$1,429,518 $1,494,231 
Accounts payable and accrued expenses107,823 84,051 
Distributions payable11,660 89 
Other liabilities80,864 68,559 
Liabilities associated with assets held for sale (Note 4)3,532 2,305 
Total liabilities $1,633,397 $1,649,235 
Commitments and Contingencies (Note 12)
Stockholders' equity
Common stock, $0.01 par value, 500,000,000 shares authorized, 114,263,213 and 114,306,727 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
$1,143 $1,143 
Additional paid in capital2,089,463 2,090,393 
Accumulated other comprehensive income (loss)94 (4,089)
Accumulated distributions in excess of net earnings(647,248)(656,461)
Total Company stockholders' equity$1,443,452 $1,430,986 
Non-controlling interests15,517 7,095 
Total equity$1,458,969 $1,438,081 
Total liabilities and equity$3,092,366 $3,087,316 
See accompanying notes to the condensed consolidated financial statements.
1


XENIA HOTELS & RESORTS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
For the Three and Nine Months Ended September 30, 2022 and 2021
(Unaudited)
(Dollar amounts in thousands, except per share data)
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Revenues:
Rooms revenues$142,604 $109,753 $431,382 $260,594 
Food and beverage revenues76,153 44,004 240,669 105,739 
Other revenues21,911 19,027 62,415 46,277 
Total revenues$240,668 $172,784 $734,466 $412,610 
Expenses:
Rooms expenses36,163 27,099 101,803 65,024 
Food and beverage expenses55,888 33,764 161,796 80,534 
Other direct expenses6,155 5,059 17,815 12,993 
Other indirect expenses64,590 50,902 181,509 132,276 
Management and franchise fees9,083 6,025 27,758 15,009 
Total hotel operating expenses$171,879 $122,849 $490,681 $305,836 
Depreciation and amortization34,311 32,076 99,127 98,281 
Real estate taxes, personal property taxes and insurance11,228 9,731 33,452 31,268 
Ground lease expense685 405 2,035 1,187 
General and administrative expenses8,972 7,466 25,841 22,484 
Gain on business interruption insurance(2,487) (2,487)(1,116)
Impairment and other losses 1,759 1,278 14,072 
Total expenses$224,588 $174,286 $649,927 $472,012 
Operating income (loss)$16,080 $(1,502)$84,539 $(59,402)
Other income (loss)1,767 186 2,671 (2,503)
Interest expense(20,583)(21,358)(61,474)(59,799)
Loss on extinguishment of debt  (294)(1,356)
Net income (loss) before income taxes$(2,736)$(22,674)$25,442 $(123,060)
Income tax benefit (expense)1,029 (43)(4,148)(377)
Net income (loss)$(1,707)$(22,717)$21,294 $(123,437)
Net loss (income) attributable to non-controlling interests (Note 1)44 524 (633)2,855 
Net income (loss) attributable to common stockholders$(1,663)$(22,193)$20,661 $(120,582)

2


XENIA HOTELS & RESORTS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), Continued
For the Three and Nine Months Ended September 30, 2022 and 2021
(Unaudited)
(Dollar amounts in thousands, except per share data)
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Basic and diluted income (loss) per share
Net income (loss) per share available to common stockholders - basic and diluted$(0.01)$(0.20)$0.18 $(1.06)
Weighted-average number of common shares (basic)114,322,269 113,809,212 114,334,110 113,798,761 
Weighted-average number of common shares (diluted)114,322,269 113,809,212 114,719,309 113,798,761 
Comprehensive income (loss):
Net income (loss)$(1,707)$(22,717)$21,294 $(123,437)
Other comprehensive income (loss):
Unrealized gain (loss) on interest rate derivative instruments36 (163)2,932 2,389 
Reclassification adjustment for amounts recognized in net (loss) income (interest expense)(147)1,598 1,697 5,999 
$(1,818)$(21,282)$25,923 $(115,049)
Comprehensive loss (income) attributable to non-controlling interests (Note 1)47 490 (1,079)2,649 
Comprehensive income (loss) attributable to the Company$(1,771)$(20,792)$24,844 $(112,400)
See accompanying notes to the condensed consolidated financial statements.
3


XENIA HOTELS & RESORTS, INC.
Condensed Consolidated Statements of Changes in Equity
For the Three Months Ended September 30, 2022 and 2021
(Unaudited)
(Dollar amounts in thousands, except per share data)

Common Stock
SharesAmountAdditional paid in capitalAccumulated other comprehensive income (loss)Distributions in excess of retained earningsNon-controlling interests of Operating PartnershipTotal
Balance at June 30, 2022114,353,273 $1,144 $2,091,042 $202 $(634,137)$13,330 $1,471,581 
Net loss— — — — (1,663)(44)(1,707)
Repurchase of common shares, net(120,978)$(1)$(1,877)$— $— $— $(1,878)
Dividends, common share / units ($0.10)
— — — — (11,448)(204)(11,652)
Share-based compensation40,871 — 435 — — 2,438 2,873 
Shares redeemed to satisfy tax withholding on vested share-based compensation(9,953)— (137)— — — (137)
Other comprehensive loss:
Unrealized gain on interest rate derivative instruments— — — 35 — 1 36 
Reclassification adjustment for amounts recognized in net loss— — — (143)— (4)(147)
Balance at September 30, 2022114,263,213 $1,143 $2,089,463 $94 $(647,248)$15,517 $1,458,969 
    
Balance at June 30, 2021114,209,134 $1,142 $2,089,550 $(7,644)$(611,391)$3,437 $1,475,094 
Net loss— — — — (22,193)(524)(22,717)
Share-based compensation— — 779 — — 2,172 2,951 
Other comprehensive loss:
Unrealized loss on interest rate derivative instruments— — — (160)— (3)(163)
Reclassification adjustment for amounts recognized in net loss— — — 1,561 — 37 1,598 
Balance at September 30, 2021114,209,134 $1,142 $2,090,329 $(6,243)$(633,584)$5,119 $1,456,763 
See accompanying notes to the condensed consolidated financial statements.
4


XENIA HOTELS & RESORTS, INC.
Condensed Consolidated Statements of Changes in Equity
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)
(Dollar amounts in thousands, except per share data)
Common Stock
SharesAmountAdditional paid in capitalAccumulated other comprehensive income (loss)Distributions in excess of retained earningsNon-controlling Interests of Operating PartnershipTotal
Balance at December 31, 2021114,306,727 $1,143 $2,090,393 $(4,089)$(656,461)$7,095 $1,438,081 
Net income— — — — 20,661 633 21,294 
Repurchase of common shares, net(120,978)(1)(1,877)— — — (1,878)
Dividends, common share / units ($0.10)
— — — — (11,448)(204)(11,652)
Share-based compensation103,895 1 1,387 — 7,547 8,935 
Shares redeemed to satisfy tax withholding on vested share-based compensation(26,431)— (440)— — — (440)
Other comprehensive income:
Unrealized gain on interest rate derivative instruments— — — 2,535 — 397 2,932 
Reclassification adjustment for amounts recognized in net income— — — 1,648 — 49 1,697 
Balance at September 30, 2022114,263,213 $1,143 $2,089,463 $94 $(647,248)$15,517 $1,458,969 
Balance at December 31, 2020113,755,513 $1,138 $2,080,364 $(14,425)$(513,002)$12,788 $1,566,863 
Net loss— — — — (120,582)(2,855)(123,437)
Share-based compensation72,692 — 2,694 — — 6,661 9,355 
Shares redeemed to satisfy tax withholding on vested share-based compensation(18,993)— (318)— — — (318)
Redemption of Operating Partnership Units399,922 4 7,589 — — (11,681)(4,088)
Other comprehensive income:
Unrealized gain on interest rate derivative instruments— — — 2,334 — 55 2,389 
Reclassification adjustment for amounts recognized in net loss— — — 5,848 — 151 5,999 
Balance at September 30, 2021114,209,134 $1,142 $2,090,329 $(6,243)$(633,584)$5,119 $1,456,763 
See accompanying notes to the condensed consolidated financial statements.
5


XENIA HOTELS & RESORTS, INC.
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)
(Dollar amounts in thousands)
Nine Months Ended September 30,
20222021
Cash flows from operating activities:
Net income (loss)$21,294 $(123,437)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation98,709 97,478 
Non-cash ground rent and amortization of other intangibles418 803 
Amortization of debt premiums, discounts, and financing costs3,925 4,615 
Loss on extinguishment of debt294 1,356 
Impairment and other losses 13,072 
Gain on insurance recoveries(3,550) 
Share-based compensation expense8,598 8,813 
Deferred interest expense(409) 
Changes in assets and liabilities:
Accounts and rents receivable(10,435)(15,683)
Other assets1,013 1,343 
Accounts payable and accrued expenses25,282 28,742 
Other liabilities12,755 12,251 
Net cash provided by operating activities$157,894 $29,353 
Cash flows from investing activities:
Purchase of investment properties(328,493) 
Capital expenditures (40,682)(19,150)
Proceeds from sale of investment properties32,820  
Proceeds from property insurance3,723  
Performance guaranty payments1,695 2,524 
Net cash used in investing activities$(330,937)$(16,626)
Cash flows from financing activities:
Payoff of mortgage debt(65,000)(56,750)
Principal payments of mortgage debt(3,093)(4,888)
Principal payments on Corporate Credit Facility Term Loan (150,000)
Payments on the Revolving Credit Facility (163,093)
Proceeds from Senior Notes 500,000 
Payment of loan fees and issuance costs (10,233)
Repurchase of common shares(1,878) 
Redemption of Operating Partnership Units (4,088)
Shares redeemed to satisfy tax withholding on vested share-based compensation(490)(443)
Dividends and dividend equivalents(54)(54)
Net cash (used in) provided by financing activities$(70,515)$110,451 
Net (decrease) increase in cash and cash equivalents and restricted cash(243,558)123,178 
Cash and cash equivalents and restricted cash, at beginning of period554,231 428,786 
Cash and cash equivalents and restricted cash, at end of period$310,673 $551,964 
6


XENIA HOTELS & RESORTS, INC.
Condensed Consolidated Statements of Cash Flows, Continued
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)
(Dollar amounts in thousands)
Nine Months Ended September 30,
20222021
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$259,885 $517,464 
Restricted cash50,788 34,500 
Total cash and cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows$310,673 $551,964 
The following represent cash paid during the periods presented for the following:
Cash paid for interest, net of capitalized interest$59,898 $55,427 
Cash paid for taxes 2,100 163 
Supplemental schedule of non-cash investing and financing activities:
Accrued capital expenditures$2,252 $206 
Distributions Payable11,660  
See accompanying notes to the condensed consolidated financial statements.
7


XENIA HOTELS & RESORTS, INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
September 30, 2022

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, 2022, the Company collectively owned 97.1% of the common limited partnership units issued by the Operating Partnership ("Operating Partnership Units"). The remaining 2.9% of the Operating Partnership Units are owned by the other limited partners comprised of certain of our current executive officers and current and prior 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"). 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, 2022 and 2021, the Company owned 34 and 35 lodging properties, respectively.
Ongoing Recovery from COVID-19
The Company's hotel portfolio began to see improvements in leisure demand during the second half of 2020, a trend that accelerated in 2021 and has continued in 2022. During the first half of 2022, operations continued to improve including a continuation of strong leisure bookings, higher levels of business transient demand and improving group demand in certain markets. In the third quarter of 2022, while the Company experienced its typical seasonal decline in leisure demand it also saw a broader acceleration of business transient and group business particularly following the Labor Day holiday period.
Despite this improvement, there remains uncertainty regarding the pace of recovery and whether and when business travel and larger group meetings will return to pre-pandemic levels. As the recovery continues, we expect that the pace will vary from market to market and may be uneven in nature. Additionally, there has been increasing uncertainty regarding the broader economic environment as higher levels of inflation have persisted along with rising interest rates and increased concerns of a recession in the near term.
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, 2021, included in the Company's Annual Report on Form 10-K filed with the SEC on March 1, 2022. Operating results for the three and nine months ended September 30, 2022 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.
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Reclassifications
Certain prior year amounts in these condensed consolidated financial statements have been reclassified to conform to the presentation as of and for the three and nine months ended September 30, 2022.
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
As a result of the COVID-19 pandemic, the majority of the Company's hotels and resorts temporarily suspended operations for certain periods of time during 2020. All of the Company's hotels had resumed operations by the end of May 2021. The Company's portfolio consists of luxury and upper upscale hotels and resorts, which generally offer restaurant and bar venues, large meeting facilities and event space, and amenities, including spas and golf courses, some of which had limited operations due to operating restrictions and staffing challenges. The Company continues to monitor the evolving situation and guidance from federal, state and local governmental and public health authorities and additional actions may be taken or required based on their recommendations and regulations in place. Under these circumstances, there may be developments that require further adjustments to operations.
The Company cannot predict with certainty the full extent and duration of the effects of the COVID-19 pandemic on its business, operating margins, results of operations, cash flows, financial condition, the market price of its common stock, its ability to make distributions to its shareholders, its access to equity and credit markets or its ability to service its indebtedness. Further, the Company continues to monitor and evaluate the challenges associated with inflationary pressures, rising interest rates, a potential domestic and/or global recession, the evolving workforce landscape, particularly related to industry-wide labor shortages and increases in cost of labor, as well as ongoing supply chain issues which may continue to impact the hotels' ability to source operating supplies and other materials. Additionally, the effects of the pandemic or other economic challenges could materially and adversely affect the Company's ability to consummate acquisitions and dispositions of hotel properties in the near term.
For the nine months ended September 30, 2022, the Company had a geographical concentration of revenues generated from hotels in the Orlando, Florida, Phoenix, Arizona and San Diego, California markets that exceeded 10% of total revenues for the period then ended. For the nine months ended September 30, 2021, the Company had a geographical concentration of revenues generated from hotels in the Orlando, Florida, Phoenix, Arizona, San Diego, California and Houston, Texas markets that exceeded 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 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
9


equivalents. The Company maintains its cash and cash equivalents at various financial institutions. The combined account balances at one or more 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 believes that the risk is not significant as the Company does not anticipate non-performance by the financial institutions.
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.
Acquisition of Real Estate
Investments in hotel properties, including land and land improvements, buildings and building improvements, furniture, fixtures and equipment, and identifiable intangibles assets, will generally be accounted for as asset acquisitions. Acquired assets are recorded at their relative fair value based on total accumulated costs of the acquisition. Direct acquisition-related costs are capitalized as a component of the acquired assets. This includes all costs related to finding, analyzing and negotiating a transaction.
The allocation of the purchase price is an area that requires judgment and significant estimates. Tangible and intangible assets typically include land, buildings and improvements, furniture and fixtures, inventory, acquired above market and below market leases, in-place lease value, advance bookings, and any assumed financing that is determined to be above or below market terms (all as applicable). Acquisition-date fair values of assets and assumed liabilities are determined based on replacement costs, appraised values, and estimated fair values using methods similar to those used by independent appraisers and that use appropriate discount and/or capitalization rates and available market information.
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.
In June 2021, the Company concluded that it intended to sell the 352-room Marriott Charleston Town Center, in Charleston, West Virginia and began marketing the property. As a result of multiple bids from qualified buyers and ongoing price discussions, management determined, based on a probability weighted-average undiscounted cash flow analysis, that the hotel was impaired as the estimated undiscounted cash flows were less than the carrying value of the hotel as of June 30, 2021. Management determined the impairment loss as the excess of carrying value over the estimated fair value. As a result, for the three and six months ended June 30, 2021, the Company recorded an impairment loss of approximately $12.3 million. In August 2021, the Company entered into an agreement to sell the property for a sale price of $5.0 million and the buyer funded an at-risk deposit. Upon meeting held for sale criteria, the Company recorded an additional impairment loss of $0.3 million for the three and nine months ended September 30, 2021 related to estimated closing costs.
Involuntary Conversion
In August 2021, Hurricane Ida impacted Loews New Orleans Hotel located in New Orleans, Louisiana. As a result, the Company recorded an impairment loss of $0.5 million for the three and nine months ended September 30, 2021, which represents the write off of the estimated historical cost, net of accumulated depreciation, of property damaged during the
10


hurricane. Additionally, the Company expensed $1.0 million of hurricane-related repair and cleanup costs for the three and nine months ended September 30, 2021. In March 2022, the Company recorded additional hurricane-related repair and cleanup costs of $1.3 million. These amounts are included in impairment and other losses on the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2022 and 2021.
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, 2022, the Company recorded insurance proceeds related to damage sustained at Loews New Orleans Hotel during Hurricane Ida. These insurance proceeds were in excess of recognized losses and resulted in a gain on insurance recovery of $1.0 million and $3.6 million, respectively, for the three and nine months ended September 30, 2022, which are included in other income (loss) 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 insurance company. During the three and nine months ended September 30, 2022, the Company recognized $1.5 million in business interruption insurance proceeds for a portion of lost income associated with cancellations at Loews New Orleans Hotel due to the impact of Hurricane Ida in August 2021 as well as $1.0 million in proceeds for lost income associated with cancellations for properties in Texas due to the impact of the Texas winter storms in February 2021. During the nine months ended September 30, 2021, the Company recognized $1.1 million in business interruption insurance proceeds for a portion of lost revenues associated with cancellations related to the COVID-19 pandemic. These amounts are included in gain on business interruption insurance on the condensed consolidated statements of operations and comprehensive income (loss) for the period then ended.
Investment Properties Held for Sale
In determining whether to classify an investment property as held for sale, the Company considers whether: (i) management has committed to a plan to sell the investment property; (ii) the investment property is available for immediate sale, in its present condition; (iii) the Company is actively marketing the investment property for sale at a price that is reasonable in relation to its fair value; (iv) the Company has initiated a program to locate a buyer; (v) the Company believes that the sale of the investment property is probable; (vi) the Company has received a significant non-refundable deposit for the purchase of the property; and (vii) actions required for the Company to complete the plan indicate that it is unlikely that any significant changes will be made to the plan.
If all of the above criteria are met, the Company classifies the investment property as held for sale. On the day that these criteria are met, the Company suspends depreciation and amortization on the investment properties held for sale. The investment properties, other assets and liabilities associated with those investment properties that are held for sale are classified separately on the consolidated balance sheet for the most recent reporting period, and are presented at the lesser of the carrying value or fair value, less costs to sell.
Additionally, if the sale constitutes a strategic shift with a major effect on operations, as defined in ASU 2014-08 Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity ("ASU 2014-08"), the operations for the investment properties held for sale are classified on the consolidated statement of operations and comprehensive income (loss) as discontinued operations for all periods presented.
Disposition of Real Estate
The Company accounts for dispositions of real estate in accordance with ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets ("Subtopic 610-20") 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.
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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 advance 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 at the stated price for the service or goods. In parking and audio visual contracts in which the Company has control over the services provided, the Company is considered the principal in the agreement and recognizes the related revenues gross of associated costs. If the Company does not have control over the services in the contract, the Company is considered the agent and records 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 recognized as an expense on a straight-line basis over the longest vesting period for each grant for the entire award. 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.
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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, 2022 and 2021 (in thousands):
Three Months EndedNine Months Ended
Primary MarketsSeptember 30, 2022September 30, 2022
Orlando, FL$26,635 $99,780 
Phoenix, AZ17,382 78,974 
San Diego, CA28,937 74,998 
Houston, TX17,442 62,517 
Dallas, TX14,311 45,714 
Atlanta, GA15,636 42,333 
Denver, CO14,180 37,184 
San Francisco/San Mateo, CA13,369 35,658 
Washington, DC-MD-VA11,348 32,388 
Nashville, TN13,573 30,424 
Other67,855 194,496 
Total$240,668 $734,466 
Three Months EndedNine Months Ended
Primary MarketsSeptember 30, 2021September 30, 2021
Orlando, FL$19,269 $52,231 
Phoenix, AZ12,901 45,327 
San Diego, CA23,073 42,947 
Houston, TX15,117 42,639 
Denver, CO11,762 26,902 
Atlanta, GA10,868 24,861 
Dallas, TX9,284 20,726 
Florida Keys5,202 18,339 
Washington, DC-MD-VA7,672 17,081 
Savannah, GA5,832 15,525 
Other51,804 106,032 
Total$172,784 $412,610 
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.
Acquisitions
On March 29, 2022, the Company acquired a fee-simple interest in the 346-room W Nashville located in Nashville, Tennessee for a purchase price of $328.5 million including acquisition costs and a $1.3 million credit related to an unfinished portion of the hotel provided by seller at closing.
The acquisition of W Nashville was funded with cash on hand and was accounted for as an asset acquisition resulting in the related acquisition costs being capitalized as part of the purchase price. The results of operations for W Nashville have been
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included in the Company’s condensed consolidated statements of operations and comprehensive income (loss) since its acquisition date.
The Company recorded the identifiable assets and liabilities, including intangible assets and liabilities, acquired in the asset acquisition at the acquisition date relative fair value, which is based on the total accumulated costs of the acquisition. The following represents the purchase price allocation of the hotel acquired during the nine months ended September 30, 2022 (in thousands):
September 30, 2022
Land
$36,364 
Buildings and improvements
264,766 
Furniture, fixtures, and equipment
31,091 
Intangible and other assets(1)
232 
Intangible liability(2)
(3,960)
Total purchase price(3)
$328,493 
(1)As part of the purchase price allocation for W Nashville, the Company allocated $0.1 million to advance bookings that will be amortized over 1.3 years as well as $0.1 million allocated to food inventory.
(2)As part of the purchase price allocation for W Nashville, the Company allocated $4.0 million to a liability associated with key money received by the seller from the third-party hotel manager. This liability will be amortized over 29.8 years and in the event of early termination is payable to the third-party hotel manager on a pro rata basis for the remaining portion of the term of the hotel management agreement.
(3)The total cost capitalized includes acquisition costs as the transaction was accounted for as an asset acquisition.
Dispositions
In November 2021, the Company entered into an agreement to sell the 191-room Kimpton Hotel Monaco Chicago in Chicago, Illinois for a sale price of $36.0 million. The sale closed in January 2022 and did not result in a gain or loss after previously recording an impairment of $15.7 million during the year ended December 31, 2021. Proceeds from the sale were used for general corporate purposes.
The operating results of the hotel that was sold during the nine months ended September 30, 2022 are included in the Company's condensed consolidated financial statements as part of continuing operations as the disposition did not represent a strategic shift nor did it have a major impact on the Company's results of operations.
Held for Sale
In August 2022, the Company entered into an agreement to sell the 115-room Bohemian Hotel Celebration, Autograph Collection, in Celebration, Florida for a sale price of approximately $27.8 million and the buyer funded an at-risk deposit. The sale closed on October 20, 2022 for an estimated gain of approximately $12.6 million. Net cash proceeds from the sale, after transaction closing costs, were $25.5 million. The Company also retained the approximately $0.3 million balance in the FF&E reserve. As of September 30, 2022, the hotel's assets and liabilities were classified as held for sale on the condensed consolidated balance sheet for the period then ended.
In September 2022, the Company entered into an agreement to sell the 189-room Kimpton Hotel Monaco Denver in Denver, Colorado for a sale price of approximately $69.8 million. The buyer funded an at-risk deposit and the sale is subject to customary closing conditions and certain third-party approvals. The sale is expected to close in the fourth quarter of 2022. As of September 30, 2022, the hotel's assets and liabilities were classified as held for sale on the condensed consolidated balance sheet for the period then ended.
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The following represents the major classes of assets and liabilities associated with assets held for sale as of September 30, 2022 (in thousands):
September 30, 2022
Land$6,975 
Buildings and other improvements102,463 
     Total$109,438 
Less: accumulated depreciation(41,463)
     Net investment properties$67,975 
Accounts and rents receivable, net of allowance for doubtful accounts368 
Other assets596 
     Total assets held for sale$68,939 
Accounts payable and accrued expenses2,766 
Other liabilities766 
     Total liabilities associated with assets held for sale$3,532 
The operating results of the two hotels that were held for sale as of September 30, 2022 are included in the Company's condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2022 and 2021, respectively.
5. Debt
Debt as of September 30, 2022 and December 31, 2021 consisted of the following (dollar amounts in thousands):
Balance Outstanding as of
Rate Type
Rate(1)
Maturity DateSeptember 30, 2022December 31, 2021
Mortgage Loans
Renaissance Atlanta Waverly Hotel & Convention Center
Fixed (2)
4.45 %8/14/2024$100,000 $100,000 
Andaz Napa
Partially
Fixed (3)
4.43 %9/13/202454,830 55,640 
The Ritz-Carlton, Pentagon City
Fixed (4)
 % 65,000 
Grand Bohemian Hotel Orlando, Autograph CollectionFixed4.53 %3/1/202655,967 56,796 
Marriott San Francisco Airport WaterfrontFixed4.63 %5/1/2027110,649 112,102 
Total Mortgage Loans4.52 %(5)$321,446 $389,538 
Corporate Credit Facilities
Corporate Credit Facility Term Loan $125M
Variable (6)
4.47 %9/13/2024125,000 125,000 
Revolving Credit Facility
Variable (7)
5.37 %2/28/2024