10-Q 1 xhr-20240331.htm 10-Q xhr-20240331
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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 March 31, 2024
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 May 2, 2024, there were 101,963,677 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 March 31, 2024 and December 31, 2023
Condensed Consolidated Statements of Operations and Comprehensive Income for the Three Months Ended March 31, 2024 and 2023
Condensed Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2024 and 2023
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023
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 March 31, 2024 and December 31, 2023
(Dollar amounts in thousands, except per share data)
March 31, 2024December 31, 2023
Assets:(Unaudited)(Audited)
Investment properties:
Land$460,272 $460,307 
Buildings and other improvements3,130,465 3,097,711 
Total$3,590,737 $3,558,018 
Less: accumulated depreciation(994,906)(963,052)
Net investment properties$2,595,831 $2,594,966 
Cash and cash equivalents140,109 164,725 
Restricted cash and escrows56,847 58,350 
Accounts and rents receivable, net of allowance for doubtful accounts41,320 32,432 
Intangible assets, net of accumulated amortization of $261 and $241, respectively
4,878 4,898 
Other assets62,881 46,856 
Total assets $2,901,866 $2,902,227 
Liabilities:
Debt, net of loan premiums, discounts and unamortized deferred financing costs (Note 4)$1,395,096 $1,394,906 
Accounts payable and accrued expenses106,470 102,389 
Distributions payable12,577 10,788 
Other liabilities75,684 76,647 
Total liabilities $1,589,827 $1,584,730 
Commitments and Contingencies (Note 11)
Stockholders' equity:
Common stock, $0.01 par value, 500,000,000 shares authorized, 101,963,677 and 102,372,589 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively
$1,020 $1,024 
Additional paid in capital1,928,667 1,934,775 
Accumulated other comprehensive income3,481 2,439 
Accumulated distributions in excess of net earnings(650,702)(647,246)
Total Company stockholders' equity$1,282,466 $1,290,992 
Non-controlling interests29,573 26,505 
Total equity$1,312,039 $1,317,497 
Total liabilities and equity$2,901,866 $2,902,227 
See accompanying notes to the condensed consolidated financial statements.
1


XENIA HOTELS & RESORTS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
For the Three Months Ended March 31, 2024 and 2023
(Unaudited)
(Dollar amounts in thousands, except per share data)
Three Months Ended March 31,
20242023
Revenues:
Rooms revenues$153,124 $153,645 
Food and beverage revenues92,773 96,124 
Other revenues21,591 19,204 
Total revenues$267,488 $268,973 
Expenses:
Rooms expenses38,193 36,203 
Food and beverage expenses60,480 60,687 
Other direct expenses6,087 5,698 
Other indirect expenses67,633 66,499 
Management and franchise fees10,633 10,189 
Total hotel operating expenses$183,026 $179,276 
Depreciation and amortization31,964 33,741 
Real estate taxes, personal property taxes and insurance13,493 12,470 
Ground lease expense786 710 
General and administrative expenses10,258 8,783 
Gain on business interruption insurance(745) 
Other operating expenses830 232 
Impairment and other losses250  
Total expenses$239,862 $235,212 
Operating income$27,626 $33,761 
Other income2,427 1,284 
Interest expense(20,358)(22,134)
Loss on extinguishment of debt (1,140)
Net income before income taxes$9,695 $11,771 
Income tax expense(728)(5,218)
Net income$8,967 $6,553 
Net income attributable to non-controlling interests (Note 1)(433)(273)
Net income attributable to common stockholders$8,534 $6,280 

2


XENIA HOTELS & RESORTS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income, Continued
For the Three Months Ended March 31, 2024 and 2023
(Unaudited)
(Dollar amounts in thousands, except per share data)
Three Months Ended March 31,
20242023
Basic and diluted income per share:
Net income per share available to common stockholders - basic and diluted$0.08 $0.06 
Weighted-average number of common shares (basic)101,959,418 111,777,894 
Weighted-average number of common shares (diluted)102,364,928 112,037,369 
Comprehensive income:
Net income$8,967 $6,553 
Other comprehensive income:
Unrealized gain on interest rate derivative instruments2,259  
Reclassification adjustment for amounts recognized in net income (interest expense)(1,132) 
$10,094 $6,553 
Comprehensive income attributable to non-controlling interests (Note 1)(518)(273)
Comprehensive income attributable to the Company$9,576 $6,280 
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 March 31, 2024 and 2023
(Unaudited)
(Dollar amounts in thousands, except per share data)

Common Stock
SharesAmountAdditional paid in capitalAccumulated other comprehensive incomeDistributions in excess of retained earningsNon-controlling interests of Operating PartnershipTotal
Balance at December 31, 2023102,372,589 $1,024 $1,934,775 $2,439 $(647,246)$26,505 $1,317,497 
Net income— — — — 8,534 433 8,967 
Repurchase of common shares, net(468,107)(5)(6,319)— — — (6,324)
Dividends, common share / units ($0.12)
— — — — (11,990)(270)(12,260)
Share-based compensation80,837 1 545 — — 3,475 4,021 
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— — — 2,120 — 139 2,259 
Reclassification adjustment for amounts recognized in net income— — — (1,078)— (54)(1,132)
Balance at March 31, 2024101,963,677 $1,020 $1,928,667 $3,481 $(650,702)$29,573 $1,312,039 
    
Balance at December 31, 2022112,519,672 $1,126 $2,063,273 $ $(623,216)$18,825 $1,460,008 
Net income— — — — 6,280 273 6,553 
Repurchase of common shares, net(1,905,820)(19)(26,727)— — — (26,746)
Dividends, common share / units ($0.10)
— — — — (11,124)(228)(11,352)
Share-based compensation65,247 — 419 — — 2,248 2,667 
Shares redeemed to satisfy tax withholding on vested share-based compensation(17,613)— (258)— — — (258)
Balance at March 31, 2023110,661,486 $1,107 $2,036,707 $ $(628,060)$21,118 $1,430,872 
See accompanying notes to the condensed consolidated financial statements.
4


XENIA HOTELS & RESORTS, INC.
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2024 and 2023
(Unaudited)
(Dollar amounts in thousands)
Three Months Ended March 31,
20242023
Cash flows from operating activities:
Net income$8,967 $6,553 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation31,931 33,687 
Non-cash ground rent and amortization of other intangibles33 54 
Amortization of debt premiums, discounts, and financing costs1,333 1,282 
Loss on extinguishment of debt 1,140 
Gain on insurance recoveries(1,010) 
Share-based compensation expense3,897 2,591 
Deferred interest expense (1,296)
Changes in assets and liabilities:
Accounts and rents receivable(8,888)(10,693)
Other assets(15,370)(4,127)
Accounts payable and accrued expenses2,496 (9,507)
Other liabilities1,341 10,629 
Net cash provided by operating activities$24,730 $30,313 
Cash flows from investing activities:
Capital expenditures (33,432)(11,634)
Proceeds from property insurance1,010  
Performance guaranty payments151 1,071 
Net cash used in investing activities$(32,271)$(10,563)
Cash flows from financing activities:
Proceeds from mortgage debt modification 440 
Payoff of mortgage debt (99,488)
Principal payments of mortgage debt(825)(890)
Proceeds from 2023 Term Loans 225,000 
Principal payments on Corporate Credit Facility Term Loan (125,000)
Payment of loan fees and issuance costs (5,554)
Payment of loan modification fees (25)
Repurchase of common shares(6,324)(26,746)
Redemption of Operating Partnership Units(655) 
Dividends and dividend equivalents(10,423)(11,459)
Shares redeemed to satisfy tax withholding on vested share-based compensation(351)(578)
Net cash used in financing activities$(18,578)$(44,300)
Net decrease in cash and cash equivalents and restricted cash(26,119)(24,550)
Cash and cash equivalents and restricted cash, at beginning of period223,075 365,910 
Cash and cash equivalents and restricted cash, at end of period$196,956 $341,360 
5


XENIA HOTELS & RESORTS, INC.
Condensed Consolidated Statements of Cash Flows, Continued
For the Three Months Ended March 31, 2024 and 2023
(Unaudited)
(Dollar amounts in thousands)
Three Months Ended March 31,
20242023
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$140,109 $283,154 
Restricted cash56,847 58,206 
Total cash and cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows$196,956 $341,360 
The following represent cash paid during the periods presented for the following:
Cash paid for interest, net of capitalized interest$21,094 $23,869 
Cash paid for taxes 91 220 
Supplemental schedule of non-cash investing and financing activities:
Accrued capital expenditures$2,632 $2,263 
Distributions payable12,577 11,334 
See accompanying notes to the condensed consolidated financial statements.
6


XENIA HOTELS & RESORTS, INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
March 31, 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 March 31, 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 March 31, 2024 and 2023, the Company owned 32 lodging properties.
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, 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 months ended March 31, 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 three months ended March 31, 2024, the Company had a geographical concentration of revenues generated from hotels in the Orlando, Florida and Houston, Texas markets that exceeded ten percent (10%) of total revenues for the period then ended. For the three months ended March 31, 2023, the Company had a geographical concentration of revenues generated from hotels in the Orlando, Florida, Phoenix, Arizona and Houston, Texas markets 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.
7


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 months ended March 31, 2024, the Company expensed $0.3 million of repair and cleanup costs related to The Ritz-Carlton, Denver which experienced damage as a result of winter storms in January 2024. This amount is included in impairment and other losses on the condensed consolidated statement of operations and comprehensive income for the period then ended.
Insurance Recoveries
Insurance proceeds received in excess of recognized losses are treated as gain and are not recorded until contingencies are resolved. The Company received insurance proceeds in excess of recognized losses related to damage sustained during a restaurant kitchen fire which occurred in 2023 and resulted in the recognition of a gain on insurance recovery of $1.0 million
8


for the three months ended March 31, 2024. This amount is included in other income on the condensed consolidated statement of operations and comprehensive income.
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 months ended March 31, 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. This amount is included in gain on business interruption insurance on the condensed consolidated statement of operations and comprehensive income for the period then ended. Further, a business interruption insurance recovery receivable of $0.3 million was accrued as of March 31, 2024.
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 and capitalized in buildings and
9


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 March 31, 2024 and December 31, 2023, deferred financing costs related to the revolving line of credit were $9.6 million, offset by accumulated amortization of $6.0 million and $5.7 million, respectively. At March 31, 2024 and December 31, 2023, deferred financing costs related to all other debt were $24.3 million, offset by accumulated amortization of $12.8 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. The amendments of this update are related to the rate reconciliation and income taxes paid, 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.
10


3. Revenues
The following represents total revenues disaggregated by primary geographical markets (as defined by STR, Inc. ("STR")) for the three months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended
Primary MarketsMarch 31, 2024
Orlando, FL$44,551 
Houston, TX30,597 
Phoenix, AZ23,132 
San Diego, CA22,690 
Dallas, TX20,704 
Atlanta, GA16,465 
San Francisco/San Mateo, CA14,112 
Portland, OR11,772 
Nashville, TN11,345 
Washington, DC-MD-VA10,877 
Other61,243 
Total$267,488 
Three Months Ended
Primary MarketsMarch 31, 2023
Orlando, FL$40,408 
Phoenix, AZ37,473 
Houston, TX27,459 
San Diego, CA21,975 
Dallas, TX19,950 
Atlanta, GA15,501 
San Francisco/San Mateo, CA13,378 
Nashville, TN10,967 
Washington, DC-MD-VA10,907 
Portland, OR10,579 
Other60,376 
Total$268,973 
11


4. Debt
Debt as of March 31, 2024 and December 31, 2023 consisted of the following (dollar amounts in thousands):
Balance Outstanding as of
Rate Type
Rate(1)
Maturity DateMarch 31,
2024
December 31, 2023
Mortgage Loans
Grand Bohemian Hotel Orlando, Autograph CollectionFixed4.53 %3/1/2026$54,223 $54,522 
Marriott San Francisco Airport WaterfrontFixed4.63 %5/1/2027107,585 108,111 
Andaz Napa
Fixed (2)
5.72 %1/19/202855,000 55,000 
Total Mortgage Loans4.88 %(3)$216,808 $217,633 
Corporate Credit Facilities
2023 Initial Term Loan
Fixed (4)
5.50 %3/1/2026125,000 125,000 
2023 Delayed Draw Term Loan
Fixed (4)
5.50 %3/1/2026100,000 100,000 
Revolving Line of Credit
Variable (5)
7.09 %1/11/2027  
Total Corporate Credit Facilities$225,000 $225,000 
2020 Senior Notes $500M
Fixed6.38 %8/15/2025464,747 464,747 
2021 Senior Notes $500M
Fixed4.88 %6/1/2029500,000 500,000 
Loan premiums, discounts and unamortized deferred financing costs, net (6)
(11,459)(12,474)
Total Debt, net of loan premiums, discounts and unamortized deferred financing costs5.47 %(3)$1,395,096 $1,394,906 
(1)The rates shown represent the annual interest rates as of March 31, 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 March 31, 2024.
(4)A variable interest loan for which the spread to Term SOFR has been fixed with interest rate swaps through mid-February 2025.
(5)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.”
(6)Includes loan premiums, discounts and deferred financing costs, net of accumulated amortization.
Mortgage Loans
Of the total outstanding debt at March 31, 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 March 31, 2024, there was no outstanding balance on the revolving line of credit. During the three months ended March 31, 2024, the Company incurred unused commitment fees of approximately $0.3 million and did not incur interest expense. During the three months ended March 31, 2023, the Company incurred unused commitment fees of approximately $0.3 million and did not incur interest expense.
12


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 March 31, 2024, the Company was not in compliance with a debt covenant on one mortgage loan due to disruption from a significant renovation taking place during the prior trailing 12 months and the lender agreed to waive this covenant through March 31, 2024. This did not result in an event of default but allows the lender the option to institute a cash sweep until covenant compliance is achieved for a period of time specified in the loan agreement. The cash sweep permits the lender to withdraw excess cash generated by the collateralized property into a separate bank account that the lender controls and that may be used to reduce the amount of the outstanding loan balance. As of March 31, 2024, the Company was in compliance with all debt covenants, 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 March 31, 2024 and December 31, 2023 was $1,407 million and had a weighted-average interest rate of 5.47% per annum. The following table shows scheduled principal payments and debt maturities for the next five years and thereafter (in thousands):
As of
March 31, 2024
Weighted- 
Average
Interest Rate
2024$2,530 4.59%
2025469,178 6.36%
2026280,381 5.32%
2027102,388 4.64%
202852,078 5.72%
Thereafter500,000 4.88%
Total Debt$1,406,555 5.47%
Revolving Line of Credit (matures in 2027) 7.09%
Loan premiums, discounts and unamortized deferred financing costs, net(11,459)
Debt, net of loan premiums, discounts and unamortized deferred financing costs$1,395,096 5.47%
During the three months ended March 31, 2023, the Company capitalized $5.6 million of deferred financing costs and expensed $1.5 million of debt-related legal fees which were included in other income on the condensed consolidated statement of operations and comprehensive income for the period then ended.
During the three months ended March 31, 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 statement of operations and comprehensive income for the period then ended.
5. Derivatives
The Company primarily uses interest rate swaps as part of its interest rate risk management strategy for variable rate debt. As of March 31, 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. Amounts reported in accumulated
13


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 March 31, 2024 and December 31, 2023, respectively (in thousands):
March 31, 2024December 31, 2023
Hedged DebtTypeFixed RateIndexEffective DateMaturityNotional AmountsEstimated Fair ValueNotional AmountsEstimated Fair Value
2023 Initial Term LoanSwap3.85%1-Month SOFR5/10/20232/10/2025$75,000 $729 $75,000 $587 
2023 Initial Term LoanSwap3.87%1-Month SOFR5/10/20232/10/202550,000 478 50,000 380 
2023 Delayed Draw Term LoanSwap3.85%1-Month SOFR5/17/20232/17/202550,000 492 50,000 388 
2023 Delayed Draw Term LoanSwap3.86%1-Month SOFR5/17/20232/17/202525,000 244 25,000 191 
2023 Delayed Draw Term LoanSwap3.85%1-Month SOFR5/17/20232/17/202525,000 246 25,000 194 
Mortgage DebtSwap3.22%Daily SOFR6/1/20231/1/202755,000 1,468 55,000 790 
$280,000 $3,657 $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 months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended March 31,
20242023
Effect of derivative instruments:Location in Statements of Operations and Comprehensive Income:
Gain recognized in other comprehensive incomeUnrealized gain on interest rate derivative instruments$2,259 $ 
Gain reclassified from accumulated other comprehensive income to net incomeReclassification adjustment for amounts recognized in net income$(1,132)$ 
Total interest expense in which effects of cash flow hedges are recordedInterest expense$20,358 $22,134 
The Company expects approximately $3.3 million will be reclassified from accumulated other comprehensive income as a reduction to interest expense in the next 12 months.
6. 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.

14


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 March 31, 2024 and December 31, 2023 (in thousands):
Fair Value Measurement Date
March 31, 2024December 31, 2023
Location on Condensed Consolidated Balance Sheets/Description of InstrumentObservable 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)
$3,657 $ $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 March 31, 2024 and December 31, 2023 (in thousands):
March 31, 2024December 31, 2023
Carrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
Total Mortgage and Term Loans$441,808 $426,599 $442,633 $425,858 
Senior Notes964,747 941,570 964,747 939,826 
Revolving Line of Credit    
Total$1,406,555 $1,368,169 $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 6.17% and 6.09% per annum as of March 31, 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.
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7. Income Taxes
The Company estimated the income tax expense for the three months ended March 31, 2024 using an estimated federal and state combined effective tax rate of 9.90% and recognized an income tax expense of $0.7 million.
The Company estimated the income tax expense for the three months ended March 31, 2023 using an estimated federal and state combined effective tax rate of 31.04% and recognized an income tax expense of $5.2 million.
8. 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 months ended March 31, 2024 and 2023 and, as of March 31, 2024, $200 million of common stock remained available for issuance under the ATM Agreement. As of March 31, 2024 and December 31, 2023, the Company had accumulated offering related costs included in other assets on the condensed consolidated balance sheets of $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 months ended March 31, 2024, 468,107 shares were repurchased under the Repurchase Program, at a weighted-average price of $13.51 per share for an aggregate purchase price of $6.3 million. During the three months ended March 31, 2023, 1,905,820 shares were repurchased under the Repurchase Program, at a weighted-average price of $14.03 per share for an aggregate purchase price of $26.7 million. As of March 31, 2024, the Company had approximately $127.4 million remaining under its share repurchase authorization.
Dividends
The Company declared the following dividends during the three months ended March 31, 2024:
Dividend per Share/UnitFor the Quarter EndedRecord DatePayable Date
$0.12March 31, 2024March 28, 2024April 15, 2024
Non-Controlling Interest of Common Units in Operating Partnership
As of March 31, 2024, the Operating Partnership had 5,089,607 LTIP Units outstanding, representing a 4.8% partnership interest held by the limited partners. Of the 5,089,607 LTIP Units outstanding at March 31, 2024, 1,687,821 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 three months ended March 31, 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.
9. 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
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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 March 31,
20242023
Numerator:
Net income attributable to common stockholders$8,534 $6,280 
Dividends paid on unvested share-based compensation(99)(67)
Net income available to common stockholders$8,435 $6,213 
Denominator:
Weighted-average shares outstanding - Basic 101,959,418 111,777,894 
Effect of dilutive share-based compensation
405,510 259,475 
Weighted-average shares outstanding - Diluted102,364,928 112,037,369 
Basic and diluted earnings per share:
Net income per share available to common stockholders - basic and diluted$0.08 $0.06 
10. 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 20242024 Restricted Stock Units170,041 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
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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 20242024 LTIP Units149,221 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 vested receive a quarterly per-unit distribution equal to ten percent (10%) of the distribution paid on common units in the Operating Partnership.
The following is a summary of the unvested incentive awards under the 2015 Incentive Award Plan as of March 31, 2024:
2015 Incentive Award Plan Restricted Stock Units
2015 Incentive Award Plan LTIP Units(1)
Total
Unvested as of December 31, 2023316,500 2,160,198 2,476,698 
Granted262,303 1,350,433 1,612,736 
Vested(2)
(80,837)(108,845)(189,682)
Unvested as of March 31, 2024497,966 3,401,786 3,899,752 
Weighted-average fair value of unvested shares/units$11.81 $8.32 $8.77 
(1)    Includes time-based LTIP Units and performance-based Class A LTIP Units.

(2)    During the three months ended March 31, 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:
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Performance Award Grant DatePercentage of Total AwardGrant Date Fair Value by
Component
VolatilityInterest RateDividend Yield
February 23, 2024
Absolute TSR Restricted Stock Units25%$7.7546.86%
4.57% - 5.31%
3.01%
Relative TSR Restricted Stock Units75%$7.7446.86%
4.57% - 5.31%
3.01%
Absolute TSR Class A LTIP Units25%$7.8146.86%
4.57% - 5.31%
3.01%
Relative TSR Class A LTIP Units75%$7.7546.86%
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 ASC 718, Compensation - Stock Compensation. 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 months ended March 31, 2024, the Company recognized approximately $3.9 million of share-based compensation expense related to Restricted Stock Units and LTIP Units provided to certain of its executive officers and corporate employees. In addition, during the three months ended March 31, 2024, the Company capitalized approximately $0.1 million related to Restricted Stock Units provided to certain other employees who oversee development and capital projects on behalf of the Company. As of March 31, 2024, there was $21.1 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 2.03 years.
For the three months ended March 31, 2023, the Company recognized approximately $2.6 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 corporate employees. In addition, during the three months ended March 31, 2023, the Company capitalized approximately $0.1 million related to Restricted Stock Units provided to certain other employees who oversee development and capital projects on behalf of the Company.
11. 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 three months ended March 31, 2024 (dollar amounts in thousands):
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March 31, 2024
Weighted-average remaining lease term, including reasonably certain extension options(1)
19 years
Weighted-average discount rate5.71%
ROU asset(2)
$17,551 
Lease liability(3)
$18,547 
Operating lease rent expense$542 
Variable lease costs1,067 
Total rent and variable lease costs$1,609 
(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 March 31, 2024.
(3)The lease liability is included in other liabilities on the condensed consolidated balance sheet as of March 31, 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 March 31, 2024 (in thousands):
Year Ending
December 31, 2024
2024 (excluding the three months ended March 31, 2024)$1,618 
20252,172 
20262,188 
20272,204 
20282,086 
Thereafter
22,358 
Total undiscounted lease payments
$32,626 
Less imputed interest(14,079)
Lease liability(1)
$18,547 
(1)The lease liability is included in other liabilities on the condensed consolidated balance sheet as of March 31, 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 27 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
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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 nine 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.
The Company incurred management and franchise fee expenses of $10.6 million and $10.2 million for the three months ended March 31, 2024 and 2023, respectively, which are included on the condensed consolidated statements of operations and comprehensive income 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 March 31, 2024 and December 31, 2023, the Company had a balance of $49.6 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 March 31, 2024 and December 31, 2023, respectively.
Renovation and Construction Commitments
As of March 31, 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 March 31, 2024 totaled $64.9 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.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Certain statements in this Quarterly Report on Form 10-Q, other than purely historical information, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements include statements about Xenia’s plans, objectives, strategies, financial performance and outlook, trends, the amount and timing of future cash distributions, prospects or future events and involve known and unknown risks that are difficult to predict. As a result, our actual financial results, performance, achievements or prospects may differ materially from those expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “guidance,” “predict,” “potential,” “continue,” “likely,” “will,” “would,” “illustrative” and variations of these terms and similar expressions, or the negative of these terms or similar expressions. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by Xenia and its management based on their knowledge and understanding of the business and industry, are inherently uncertain. These statements are not guarantees of future performance, and stockholders should not place undue reliance on forward-looking statements. Forward-looking statements in this Form 10-Q include, among others, statements about our plans, strategies and the impact of macroeconomic factors, including inflation, rising interest rates, a potential domestic and/or global recession, global conflicts, the evolving workforce and wage landscape, capital expenditures, the ability to consummate acquisitions and dispositions of hotel properties, liquidity and derivations thereof, financial performance and potential dividends, prospects or future events. There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. Such risks, uncertainties and other important factors include, among others: the risk factors set forth under “Part I-Item 1A. Risk Factors” and “Part II-Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 27, 2024, as may be updated elsewhere in this report and the information set forth in other Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that we have filed or will file with the SEC; general economic uncertainty and a contraction in the U.S. or global economy or low levels of economic growth; macroeconomic factors and other factors beyond our control that can adversely affect and reduce demand for hotel rooms, food and beverage services, and/or meeting facilities; inflation which increases our labor and other costs of providing services to guests and meeting hotel brand standards as well as costs related to construction and other capital expenditures, property and other taxes, and insurance which could result in reduced operating profit margins; the impact of supply chain disruptions on our ability to source furniture, fixtures, and equipment required to comply with brand standards and guest expectations and the ability of our third-party managers to source supplies and other items required for operations; our ability to comply with contractual covenants; business, financial and operating risks inherent to real estate investments and the lodging industry; seasonal and cyclical volatility in the lodging industry; adverse changes in specialized industries, such as the energy, technology and/or tourism industries that result in a sustained downturn of related businesses and corporate spending that may negatively impact our revenues and results of operations; levels of spending in transient or group business and leisure segments as well as consumer confidence; declines in occupancy and average daily rate; decreased business travel for in-person meetings due to virtual meeting technological advancements and/or changes in guest and consumer preferences, including consideration of the impact of travel on the environment; fluctuations in the supply of hotels, due to hotel construction and/or renovation and expansion of existing hotels, and demand for hotel rooms; changes in the competitive environment in the lodging industry, including due to consolidation of management companies, franchisors and online travel agencies, and changes in the markets where we own hotels; events beyond our control, such as war, terrorist or cyber-attacks, mass casualty events, government shutdowns and closures, travel-related health concerns, global outbreaks of pandemics (such as the COVID-19 pandemic) or contagious diseases, or fear of such outbreaks, weather and climate-related events, such as hurricanes, tornadoes, floods, wildfires, and droughts, and natural or man-made disasters; cyber incidents and information technology failures, including unauthorized access to our computer systems and/or our vendors' computer systems, and our third-party management companies' or franchisors' computer systems and/or their vendors' computer systems; changes in interest rates and operating costs, including labor and service related costs; our inability to directly operate our properties and reliance on third-party hotel management companies to operate and manage our hotels; our ability to maintain good relationships with our third-party hotel management companies and franchisors; our failure to maintain and/or comply with required brand operating standards; our ability to maintain our brand licenses at our hotels; relationships with labor unions and changes in labor laws, including increases to minimum wages; retention and attraction of our senior management team or key personnel; our ability to identify and consummate additional acquisitions and dispositions of hotels; our ability to integrate and successfully operate any hotel properties that we acquire in the future and the risks associated with these hotel properties; disruption resulting from the impact of hotel renovations, repositionings, redevelopments and re-branding activities; our ability to access capital for renovations and acquisitions and general operating needs on terms and at times that are acceptable to us; the fixed cost nature of hotel ownership; our ability to service, restructure or refinance our debt; compliance with regulatory regimes and local laws; uninsured or underinsured losses, including those relating to natural disasters, the physical effects of climate change, civil unrest, terrorism or cyber-attacks and the physical effects and transition-related impacts of climate change; changes in distribution channels, such as
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through internet travel intermediaries or websites that facilitate the short-term rental of homes and apartments from owners; the amount of debt that we currently have or may incur in the future; provisions in our debt agreements that may restrict the operation of our business; our organizational and governance structure; our status as a real estate investment trust (“REIT”); our taxable REIT subsidiary (“TRS”) lessee structure; the cost of compliance with and liabilities under environmental, health and safety laws; adverse litigation judgments or settlements; changes in real estate and zoning laws; increases in insurance or other fixed costs and increases in real property tax valuations or rates; changes in federal, state or local tax law, including legislative, administrative, regulatory or other actions affecting REITs; changes in governmental regulations or interpretations thereof; and estimates relating to our ability to make distributions to our stockholders in the future.
These factors are not necessarily all of the important factors that could cause our actual financial results, performance, achievements or prospects to differ materially from those expressed in or implied by any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date they are made, and we do not undertake or assume any obligation to update publicly any of these forward-looking statements to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. 
The following discussion and analysis should be read in conjunction with the Company’s Unaudited Condensed Consolidated Financial Statements and accompanying notes, which appear elsewhere in this Quarterly Report on Form 10-Q.
Overview
Xenia Hotels & Resorts, Inc. ("we", "us", "our", "Xenia" or the "Company") is a self-advised and self-administered REIT that invests primarily 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 ("U.S."). As of March 31, 2024, we owned 32 hotels and resorts, comprising 9,515 rooms across 14 states. Our hotels are primarily operated and/or licensed by industry leaders such as Marriott, Hyatt, Fairmont, Kimpton, Loews, Hilton, The Kessler Collection and Davidson.
Basis of Presentation
The accompanying 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. Corporate costs directly associated with our executive offices, personnel and other administrative costs are reflected as general and administrative expenses on the condensed consolidated statements of operations and comprehensive income.
Our Revenues and Expenses
Our revenue is primarily derived from hotel operations, including rooms revenue, food and beverage revenue and other revenue, which consists of parking, spa, resort fees, other guest services, and tenant leases, among other items.
Our operating costs and expenses consist of the costs to provide hotel services, including rooms expense, food and beverage expense, other direct and indirect operating expenses, and management and franchise fees. Rooms expense includes housekeeping wages and associated payroll taxes, room supplies, laundry services and front desk costs. Food and beverage expense primarily includes the cost of food, beverages and associated labor. Other direct and indirect hotel expenses include labor and other costs associated with the other operating department revenue, as well as labor and other costs associated with general and administrative departments, sales and marketing, information technology and telecommunications, repairs and maintenance and utility costs. We enter into management agreements with independent third-party management companies to operate our hotels. The management companies typically earn base and incentive management fees based on the levels of revenues and profitability of each individual hotel. Certain hotels that are not operated by brand managers incur franchise fees based on the level of revenues of each individual hotel.
Key Indicators of Operating Performance
We measure hotel results of operations and the operating performance of our business by evaluating financial and non-financial metrics such as Revenue Per Available Room ("RevPAR"); average daily rate ("ADR"); occupancy rate ("occupancy"); earnings before interest, income taxes, depreciation and amortization for real estate ("EBITDAre") and Adjusted EBITDAre; and funds from operations ("FFO") and Adjusted FFO. We evaluate individual hotel and company-wide performance with comparisons to budgets, prior periods and competing properties. RevPAR, ADR, and occupancy may be impacted by
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macroeconomic factors as well as regional and local economies and events. See "Non-GAAP Financial Measures" for further discussion of the Company's use, definitions and limitations of EBITDAre, Adjusted EBITDAre, FFO and Adjusted FFO.
Results of Operations
Lodging Industry Overview
The U.S. lodging industry historically exhibits a strong correlation to U.S. GDP, which increased at an estimated annual rate of approximately 1.6% during the first quarter of 2024, according to the U.S. Department of Commerce, compared to the increase in annual rate growth trend from the third and fourth quarters of 2023 of 4.9% and 3.4%, respectively. The increase during the first quarter reflected increases in consumer spending, residential fixed investment, nonresidential fixed investment and state and local government spending that were partially offset by a decrease in private inventory investment and an increase in imports. In addition, the unemployment rate rose slightly to 3.8% in March 2024 compared to 3.7% in December 2023 and was flat to September 2023. We continue to monitor and evaluate the challenges associated with inflationary pressures, rising interest rates, a potential domestic and/or global recession, global conflicts, and the evolving workforce and wage landscape. The impact of these potential challenges could negatively impact the Company’s operating results as well as its ability to consummate acquisitions and dispositions of hotel properties in the near term.
Demand decreased 1.4% during the three months ended March 31, 2024 while hotel supply increased 0.6% during the same period. An increase in ADR of 2.2% was partially offset by a decrease in occupancy of 2.0% which led to an increase in industry RevPAR of 0.2% for the three months ended March 31, 2024 compared to 2023.
First Quarter 2024 Overview
Our total portfolio RevPAR, which includes the results of hotels sold or acquired for the period of ownership by the Company, decreased 1.5% to $176.86 for the three months ended March 31, 2024 compared to $179.55 for the three months ended March 31, 2023. The decrease in our total portfolio RevPAR for the three months ended March 31, 2024 compared to the same period in 2023 was driven primarily by renovation disruption and normalizing leisure demand. Further, demand has continued to shift to a more traditional mix of leisure, business transient and group within our portfolio. Excluding Hyatt Regency Scottsdale Resort & Spa at Gainey Ranch ("Hyatt Regency Scottsdale"), which is undergoing a transformative renovation, total portfolio RevPAR increased 3.7% to $178.07 for the three months ended March 31, 2024 compared to $171.69 for the three months ended March 31, 2023.
Net income increased 36.8% for the three months ended March 31, 2024 compared the three months ended March 31, 2023, which was primarily attributed to a $4.5 million reduction in income tax expense, a $1.8 million reduction in depreciation and amortization expense, a $1.8 million reduction in interest expense, a $1.1 million reduction in loss on extinguishment of debt, a $1.1 million increase in other income, a $0.7 million increase in gain on business interruption and a $0.2 reduction in operating loss attributed to hotels sold in 2022. These increases were partially offset by a $6.4 million decrease in hotel operating income, a $1.5 million increase in general and administrative costs, a $0.6 million increase in other operating expenses and a $0.3 million increase in impairment and other losses.
Adjusted EBITDAre and Adjusted FFO attributable to common stock and unit holders for the three months ended March 31, 2024 decreased 8.5% and increased 0.6%, respectively, compared to the three months ended March 31, 2023. Refer to "Non-GAAP Financial Measures" for the definition of these financial measures, a description of the reasons we believe they are useful to investors as key supplemental measures of our operating performance and the reconciliation of these non-GAAP financial measures to net income attributable to common stock and unit holders.
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Operating Information Comparison
The following table sets forth certain operating information for the three months ended March 31, 2024 and 2023:
Three Months Ended
March 31,
20242023Change
Number of properties at January 1 3232
Number of properties at March 313232
Number of rooms at January 1
9,5149,5086
Rooms in properties acquired(1)
11
Number of rooms at March 319,5159,5087
Three Months Ended
March 31,
20242023Change
Total Portfolio Statistics:
Occupancy67.4 %66.1 %130  bps
ADR$262.39 $271.79 (3.5)%
RevPAR$176.86 $179.55 (1.5)%
(1)    In March 2024, we added one newly created room at Grand Bohemian Hotel Orlando, Autograph Collection.
Revenues
Revenues consists of rooms, food and beverage, and other revenues from our hotels, as follows (in thousands):
Three Months Ended March 31,
20242023Change% Change
Revenues:
Rooms revenues$153,124 $153,645 $(521)(0.3)%
Food and beverage revenues92,773 96,124 (3,351)(3.5)%
Other revenues21,591 19,204 2,387 12.4 %
Total revenues$267,488 $268,973 $(1,485)(0.6)%

Rooms revenues
Rooms revenues for our total portfolio decreased $0.5 million, or 0.3%, to $153.1 million for the three months ended March 31, 2024 from $153.6 million for the three months ended March 31, 2023 driven primarily by renovation disruption and normalizing leisure demand which was partially offset by an increase in occupancy. Excluding Hyatt Regency Scottsdale, which is undergoing a transformative renovation, rooms revenues for the three months ended March 31, 2024 increased $6.9 million, or 4.9%, when compared to the prior period.
Food and beverage revenues
Food and beverage revenues decreased $3.4 million, or 3.5%, to $92.8 million for the three months ended March 31, 2024 from $96.1 million for the three months ended March 31, 2023 primarily due to renovation disruption and normalizing leisure demand which was partially offset by an increase in occupancy. Excluding Hyatt Regency Scottsdale, food and beverage revenues for the three months ended March 31, 2024 increased $2.8 million, or 3.3%, when compared to the prior period.
Other revenues
Other revenues increased $2.4 million, or 12.4%, to $21.6 million for the three months ended March 31, 2024 from $19.2 million for the three months ended March 31, 2023 primarily as a result of increased occupancy which was partially offset by
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renovation disruption. Excluding Hyatt Regency Scottsdale, other revenues for the three months ended March 31, 2024 increased $3.0 million, or 17.8%, when compared to the prior period.
Hotel Operating Expenses
Hotel operating expenses consist of the following (in thousands):
Three Months Ended March 31,
20242023Change% Change
Hotel operating expenses:
Rooms expenses$38,193 $36,203 $1,990 5.5 %
Food and beverage expenses60,480 60,687 (207)(0.3)%
Other direct expenses6,087 5,698 389 6.8 %
Other indirect expenses67,633 66,499 1,134 1.7 %
Management and franchise fees10,633 10,189 444 4.4 %
Total hotel operating expenses$183,026 $179,276 $3,750 2.1 %
Total hotel operating expenses
In general, hotel operating costs correlate to increases or decreases in revenues and fluctuate based on various factors, including occupancy, labor costs, utilities and insurance costs. Luxury and upper upscale hotels generally have higher fixed costs than other types of hotels due to the level of services and amenities provided to guests.
Total hotel operating expenses increased $3.8 million, or 2.1%, to $183.0 million for the three months ended March 31, 2024 from $179.3 million for the three months ended March 31, 2023 largely due to increasing labor costs. Excluding Hyatt Regency Scottsdale, total hotel operating expenses for the three months ended March 31, 2024 increased $8.7 million, or 5.2%, when compared to the prior period.
Corporate and Other Expenses
Corporate and other expenses consist of the following (in thousands):
Three Months Ended March 31,
20242023Change% Change
Depreciation and amortization$31,964 $33,741 $(1,777)(5.3)%
Real estate taxes, personal property taxes and insurance13,493 12,470 1,023 8.2 %
Ground lease expense786 710 76 10.7 %
General and administrative expenses10,258 8,783 1,475 16.8 %
Gain on business interruption insurance(745)— (745)(100.0)%
Other operating expenses830 232 598 257.8 %
Impairment and other losses250 — 250 100.0 %
Total corporate and other expenses$56,836 $55,936 $900 1.6 %
Depreciation and amortization
Depreciation and amortization expense decreased $1.8 million, or 5.3%, to $32.0 million for the three months ended March 31, 2024 from $33.7 million for the three months ended March 31, 2023. This decrease was primarily attributed to fully depreciated assets during the comparable periods partially offset by the timing of new assets being placed in service.
Real estate taxes, personal property taxes and insurance
Real estate taxes, personal property taxes and insurance expense increased $1.0 million, or 8.2%, to $13.5 million for the three months ended March 31, 2024 from $12.5 million for the three months ended March 31, 2023. This increase was primarily attributed to a $0.5 million increase in insurance premiums and a $0.5 million increase in real estate taxes compared to the prior period.
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Ground lease expense
Ground lease expense increased $0.1 million, or 10.7%, to $0.8 million for the three months ended March 31, 2024 from $0.7 million for the three months ended March 31, 2023. The increase was primarily attributable to an increase in percentage rent in 2024, which is based on revenues at certain hotels with ground leases, compared to the prior period.
General and administrative expenses
General and administrative expenses increased $1.5 million, or 16.8%, to $10.3 million for the three months ended March 31, 2024 from $8.8 million for the three months ended March 31, 2023. This increase is primarily due an increase in stock compensation expense resulting from the acceleration of expense recognition for awards granted to participants that have met or will meet retirement eligibility requirements prior to the applicable vesting dates. In addition, professional fees increased $0.2 million primarily related to the timing of the fee accrual.
Gain on business interruption insurance
Gain on business interruption insurance was $0.7 million for the three months ended March 31, 2024, which was attributed to insurance proceeds, net of license and management fees, for a portion of lost income related to a restaurant kitchen fire which occurred in 2023.
Other operating expenses
Other operating expenses increased $0.6 million, or 257.8% to $0.8 million for the three months ended March 31, 2024 from $0.2 million for the three months ended March 31, 2023. This increase was primarily attributed to the recognition of pre-opening costs and a net increase in franchise tax expense.
Impairment and other losses
For the three months ended March 31, 2024, the Company expensed $0.3 million of repair and cleanup costs related to The Ritz-Carlton, Denver which experienced damage as a result of winter storms in January 2024.
Non-Operating Income and Expenses
Non-operating income and expenses consist of the following (in thousands):
Three Months Ended March 31,
20242023Change% Change
Non-operating income and expenses:
Other income$2,427 $1,284 $1,143 89.0 %
Interest expense(20,358)(22,134)1,776 8.0 %
Loss on extinguishment of debt— (1,140)1,140 100.0 %
Income tax expense(728)(5,218)4,490 86.0 %
Other income
Other income increased $1.1 million, or 89.0%, to $2.4 million for the three months ended March 31, 2024 from $1.3 million for the three months ended March 31, 2023. The increase is primarily attributed to the recognition of a $1.0 million gain on insurance recovery related to damage sustained during a restaurant kitchen fire which occurred in 2023. Additionally, during the first quarter of 2023, $1.4 million of loan costs were expensed in connection with the refinancing of the prior corporate credit facility. These increases were partially offset by a decrease in interest income primarily due to lower cash balances during the respective periods.
Interest expense
Interest expense decreased $1.8 million, or 8.0%, to $20.4 million for the three months ended March 31, 2024 from $22.1 million for the three months ended March 31, 2023. The decrease was primarily due to the impact of interest rate swaps entered into during the second quarter of 2023, reduced interest expense related to the repurchase and retirement of $35.3 million aggregate principal of 6.375% 2020 Senior Notes due 2025 during 2023 and capitalized interest of $0.7 million during the first quarter of 2024. These decreases were partially offset by an increase attributed to rising interest rates on variable debt and higher average outstanding term loan debt.
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Loss on extinguishment of debt
The loss on extinguishment of debt of $1.1 million for the three months ended March 31, 2023 was primarily attributable to the write-off of certain unamortized debt issuance costs associated with the prior revolving credit facility, which was refinanced with the revolving line of credit in January 2023, as well as the early repayments of the corporate credit facility term loan that was due to mature in September 2024 and one mortgage loan.
Income tax expense
Income tax expense decreased $4.5 million, or 86.0% to $0.7 million for the three months ended March 31, 2024 from $5.2 million for the three months ended March 31, 2023. The decrease from prior year is primarily attributable to lower projected taxable income during the first quarter when compared to the prior period and the use of federal and state net operating loss carryforwards.
Liquidity and Capital Resources
We expect to meet our short-term liquidity requirements from cash on hand, cash flow from hotel operations, use of our unencumbered asset base, asset dispositions, borrowings under our revolving line of credit, and proceeds from various capital market transactions, including issuances of debt and equity securities. The objectives of our cash management policy are to maintain the availability of liquidity and minimize operational costs.
On a long-term basis, our objectives are to maximize revenue and profits generated by our existing properties and acquired hotels, to further enhance the value of our portfolio and produce an attractive current yield, as well as to generate sustainable and predictable cash flow from our operations to distribute to our common stock and unit holders. To the extent we are able to successfully improve the performance of our portfolio, we believe this will result in increased operating cash flows. Additionally, we may meet our long-term liquidity requirements through additional borrowings, the issuance of equity and debt securities, which may not be available on advantageous terms or at all, and/or proceeds from the sales of hotels.
Liquidity
As of March 31, 2024, we had $140.1 million of consolidated cash and cash equivalents and $56.8 million of restricted cash and escrows. The restricted cash as of March 31, 2024 primarily consisted of $49.6 million related to FF&E reserves as required per the terms of our management and franchise agreements, $5.0 million in deposits made for capital projects and cash held in restricted escrows of $2.2 million primarily for real estate taxes and mortgage escrows.
As of March 31, 2024, there was no outstanding balance on our revolving line of credit and the full $450 million was available to be borrowed.
As of March 31, 2024, we had $200 million available for sale under the ATM Agreement.
We remain committed to increasing total shareholder returns through the following priorities: (1) maximize revenue and profits generated by our existing properties and acquired hotels, including the continued focused management of expenses, (2) further enhance the value of our portfolio and produce an attractive current yield and (3) generate sustainable and predictable cash flow from our operations to distribute to our common stock and unit holders. Future determinations regarding the declaration and payment of dividends will be at the discretion of our Board of Directors and will depend on then-existing conditions, including our results of operations, payout ratio, capital requirements, financial condition, prospects, contractual arrangements, any limitations on payment of dividends present in our current and future debt agreements, maintaining our REIT status and other factors that our Board of Directors may deem relevant.
We believe that our cash position, short-term investments, cash from operations, borrowing capacity under our revolving line of credit, and access to the capital markets, including pursuant to our ATM program, will be adequate to meet all of our funding requirements and capital deployment objectives both in the short-term and long-term.
Debt and Loan Covenants
As of March 31, 2024, our outstanding total debt was $1.4 billion and had a weighted-average interest rate of 5.47%.
Mortgage Loans
Our mortgage loan agreements require contributions to be made to FF&E reserves and the compliance with certain financial covenants.

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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 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.
Senior Notes
The indentures governing the Senior Notes contain customary covenants that limit our ability and, in certain circumstances, the ability of our subsidiaries, to borrow money, create liens on assets, make distributions and pay dividends on or 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.
From time to time, we will consider open market purchases or tenders of our Senior Notes or other public indebtedness when considered advantageous relative to other uses of capital.
Debt Covenants
As of March 31, 2024, we were not in compliance with a debt covenant on one mortgage loan due to disruption from a significant renovation taking place during the prior trailing 12 months. This did not result in an event of default but allows the lender the option to institute a cash sweep until covenant compliance is achieved for a period of time specified in the loan agreement. The cash sweep permits the lender to withdraw excess cash generated by the collateralized property into a separate bank account that the lender controls and that may be used to reduce the amount of the outstanding loan balance. The lender agreed to waive this covenant through March 31, 2024. As of March 31, 2024, we were in compliance with all debt covenants, 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.
Derivatives
As of March 31, 2024, we had six interest rate swaps with an aggregate notional amount of $280.0 million. These swaps fix the variable interest rate on one mortgage loan for a portion of the term and fix SOFR for a portion of the terms of the 2023 Term Loans. The 2023 Term Loans spread may vary, as it is determined by our leverage ratio.
Capital Markets
We maintain an ATM program pursuant to the ATM Agreement. 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 gross offering price of up to $200 million. No shares were sold under the ATM Agreement during the three months ended March 31, 2024. As of March 31, 2024, we had $200 million available for sale under the ATM Agreement.
The Board of Directors has authorized a stock repurchase program pursuant to which we are authorized to repurchase our common stock, par value $0.01 per share, in the open market, in privately negotiated transactions or otherwise, including pursuant to Rule 10b5-1 plans (the "Repurchase Program"). 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. This Repurchase Program may be suspended or discontinued at any time and does not obligate us to acquire any particular amount of shares.
During the three months ended March 31, 2024, 468,107 shares were repurchased under the Repurchase Program, at a weighted-average price of $13.51 per share for an aggregate purchase price of $6.3 million. During the three months ended March 31, 2023, 1,905,820 shares were repurchased under the Repurchase Program, at a weighted-average price of $14.03 per share for an aggregate purchase price of $26.7 million. As of March 31, 2024, we had approximately $127.4 million remaining under our share repurchase authorization.
Capital Expenditures and Reserve Funds
We maintain each of our properties in good repair and condition and in conformity with applicable laws and regulations, franchise agreements and management agreements. Routine capital expenditures are administered by the property management companies. However, we have approval rights over the capital expenditures as part of the annual budget process for each of our properties. From time to time, certain of our hotels may be undergoing renovations as a result of our decision to upgrade
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portions of the hotels, such as guest rooms, public space, meeting space and/or restaurants, in order to better compete with other hotels in our markets. In addition, upon the acquisition of a hotel we often are required to complete a property improvement plan in order to bring the hotel into compliance with the respective brand standards. If permitted by the terms of the management agreement, funding for a renovation will first come from the FF&E reserves. We are obligated to maintain reserve funds with respect to certain agreements with our hotel management companies, franchisors and lenders to provide funds, generally 3% to 5% of hotel revenues, sufficient to cover the cost of certain capital improvements to the hotels and to periodically replace and update furniture, fixtures and equipment. Most of the agreements require that we reserve this cash in separate accounts. To the extent that the FF&E reserves are not available or adequate to cover the cost of the renovation, we may fund a portion of the renovation with cash on hand, borrowings from our revolving line of credit and/or other sources of available liquidity. We have been and will continue to be prudent with respect to our capital spending, taking into account our cash flows from operations.
As of March 31, 2024 and December 31, 2023, we had a total of $49.6 million and $49.7 million, respectively, of FF&E reserves. During the three months ended March 31, 2024 and 2023, we made total capital expenditures $33.4 million and $11.6 million, respectively.
Off-Balance Sheet Arrangements
As of March 31, 2024, we had various contracts outstanding with third-parties in connection with the renovation of certain of our hotel properties. The remaining commitments under these contracts as of March 31, 2024 totaled $64.9 million.
Sources and Uses of Cash
Our principal sources of cash are cash flows from operations, borrowings under debt financings including draws on our revolving line of credit and from various types of equity offerings or the sale of our hotels. Our principal uses of cash are asset acquisitions, capital investments, routine debt service and debt repayments, operating costs, corporate expenses and dividends. We may also elect to use cash to buy back our common stock in the future under the Repurchase Program.
Comparison of the Three Months Ended March 31, 2024 to the Three Months Ended March 31, 2023
The table below presents summary cash flow information for the condensed consolidated statements of cash flows (in thousands):
Three Months Ended March 31,
20242023
Net cash provided by operating activities$24,730 $30,313 
Net cash used in investing activities(32,271)(10,563)
Net cash used in financing activities(18,578)(44,300)
Net decrease in cash and cash equivalents and restricted cash$(26,119)$(24,550)
Cash and cash equivalents and restricted cash, at beginning of period223,075 365,910 
Cash and cash equivalents and restricted cash, at end of period$196,956 $341,360 
Operating
Cash provided by operating activities was $24.7 million and $30.3 million for the three months ended March 31, 2024 and 2023, respectively. Cash flows from operating activities generally consist of the net cash generated by our hotel operations, partially offset by the cash paid for interest, corporate expenses and other working capital changes. Our cash flows from operating activities may also be affected by changes in our portfolio resulting from hotel acquisitions, dispositions or from disruption and subsequent improvements resulting from renovations. The net decrease to cash provided by operating activities during the three months ended March 31, 2024 was primarily due to the timing of working capital transactions. Refer to the "Results of Operations" section for further discussion of our operating results for the three months ended March 31, 2024 and 2023.
Investing
Cash used in investing activities was $32.3 million and $10.6 million for the three months ended March 31, 2024 and 2023, respectively. Cash used in investing activities for the three months ended March 31, 2024 was attributed to $33.4 million in capital improvements at our hotel properties, which was partially offset by $1.0 million of proceeds from property insurance and $0.2 million of performance guaranty payments received that were recorded as a reduction in the respective hotel's cost basis. Cash used in investing activities for the three months ended March 31, 2023 was
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attributed to $11.6 million in capital improvements at our hotel properties, which was partially offset by $1.1 million of performance guaranty payments received that were recorded as a reduction in the respective hotel's cost basis.
Financing
Cash used in financing activities was $18.6 million and $44.3 million for the three months ended March 31, 2024 and 2023, respectively. Cash used in financing activities for the three months ended March 31, 2024 was attributed (i) to the payment of $10.4 million in dividends, (ii) the repurchase of common stock totaling $6.3 million, (iii) principal payments of mortgage debt totaling $0.8 million, (iv) the redemption of Operating Partnership Units for cash of $0.7 million and (v) shares redeemed to satisfy tax withholding on vested share-based compensation of $0.4 million. Cash used in financing activities for the three months ended March 31, 2023 was attributed to (i) the repayment of the prior corporate credit facility term loan maturing in 2024 totaling $125.0 million, (ii) the repayment of mortgage debt totaling $99.5 million, (iii) the repurchase of common stock totaling $26.7 million, (iv) the payment of $11.5 million in dividends, (v) payment of loan fees and issuance costs of $5.6 million, (vi) principal payments of mortgage debt totaling $0.9 million and (vii) shares redeemed to satisfy tax withholding on vested share-based compensation of $0.6 million, which was partially offset (y) by proceeds from the 2023 Term Loans totaling $225 million and (z) proceeds from the amendment of one mortgage loan of $0.4 million.
Non-GAAP Financial Measures
We consider the following non-GAAP financial measures useful to investors as key supplemental measures of our operating performance: EBITDA, EBITDAre, Adjusted EBITDAre, FFO and Adjusted FFO. These non-GAAP financial measures should be considered along with, but not as alternatives to, net income or loss, operating profit, cash from operations, or any other operating performance measure as prescribed per GAAP.
EBITDA, EBITDAre and Adjusted EBITDAre
EBITDA is a commonly used measure of performance in many industries and is defined as net income or loss (calculated in accordance with GAAP) excluding interest expense, provision for income taxes (including income taxes applicable to sale of assets) and depreciation and amortization. We consider EBITDA useful to an investor regarding our results of operations, in evaluating and facilitating comparisons of our operating performance between periods and between REITs by removing the impact of our capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from our operating results, even though EBITDA does not represent an amount that accrues directly to common stockholders. In addition, EBITDA is used as one measure in determining the value of hotel acquisitions and dispositions and along with FFO and Adjusted FFO is used by management in the annual budget process for compensation programs.
We then calculate EBITDAre in accordance with standards established by the National Association of Real Estate Investment Trusts ("Nareit"). Nareit defines EBITDAre as EBITDA plus or minus losses and gains on the disposition of depreciated property, including gains or losses on change of control, plus impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate, and adjustments to reflect the entity's share of EBITDAre of unconsolidated affiliates.
We further adjust EBITDAre to exclude the impact of non-controlling interests in consolidated entities other than our Operating Partnership Units because our Operating Partnership Units may be redeemed for common stock. We believe it is meaningful for the investor to understand Adjusted EBITDAre attributable to all common stock and Operating Partnership unit holders. We also adjust EBITDAre for certain additional items such as depreciation and amortization related to corporate assets, terminated transaction and pre-opening expenses, amortization of share-based compensation, non-cash ground rent and straight-line rent expense, the cumulative effect of changes in accounting principles, and other costs we believe do not represent recurring operations and are not indicative of the performance of our underlying hotel property entities. We believe Adjusted EBITDAre attributable to common stock and unit holders provides investors with another financial measure in evaluating and facilitating comparison of operating performance between periods and between REITs that report similar measures.
FFO and Adjusted FFO
We calculate FFO in accordance with standards established by Nareit, as amended in the 2018 Restatement White Paper, which defines FFO as net income or loss (calculated in accordance with GAAP), excluding real estate-related depreciation, amortization and impairments, gains or losses from sales of real estate, the cumulative effect of changes in accounting principles, similar adjustments for unconsolidated partnerships and consolidated variable interest entities, and items classified by GAAP as extraordinary. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. We believe that the presentation of FFO provides useful supplemental information to investors
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regarding our operating performance by excluding the effect of real estate depreciation and amortization, gains or losses from sales for real estate, impairments of real estate assets, extraordinary items and the portion of these items related to unconsolidated entities, all of which are based on historical cost accounting and which may be of lesser significance in evaluating current performance. We believe that the presentation of FFO can facilitate comparisons of operating performance between periods and between REITs, even though FFO does not represent an amount that accrues directly to common stockholders. Our calculation of FFO may not be comparable to measures calculated by other companies who do not use the Nareit definition of FFO or do not calculate FFO per diluted share in accordance with Nareit guidance. Additionally, FFO may not be helpful when comparing us to non-REITs. We present FFO attributable to common stock and unit holders, which includes our Operating Partnership Units because our Operating Partnership Units may be redeemed for common stock. We believe it is meaningful for the investor to understand FFO attributable to all common stock and unit holders.
We further adjust FFO for certain additional items that are not in Nareit’s definition of FFO such as terminated transaction and pre-opening expenses, amortization of debt origination costs and share-based compensation, non-cash ground rent and straight-line rent expense, operating results from properties that are sold and other items we believe do not represent recurring operations. We believe that Adjusted FFO provides investors with useful supplemental information that may facilitate comparisons of ongoing operating performance between periods and between REITs that make similar adjustments to FFO and is beneficial to investors’ complete understanding of our operating performance.
The following is a reconciliation of net income to EBITDA, EBITDAre and Adjusted EBITDAre attributable to common stock and unit holders for the three months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended March 31,
20242023
Net income$8,967 $6,553 
Adjustments:
Interest expense20,358 22,134 
Income tax expense728 5,218 
Depreciation and amortization31,964 33,741 
EBITDA and EBITDAre$62,017 $67,646 
Reconciliation to Adjusted EBITDAre
Depreciation and amortization related to corporate assets$(80)$(73)
Gain on insurance recoveries(1)
(1,010)— 
Loss on extinguishment of debt— 1,140 
Amortization of share-based compensation expense3,897 2,591 
Non-cash ground rent and straight-line rent expense(138)(4)
Other non-recurring expenses(2)
565 — 
Adjusted EBITDAre attributable to common stock and unit holders$65,251 $71,300 
(1)     During the three months ended March 31, 2024, the Company recorded $1.0 million of insurance proceeds in excess of recognized losses related to damage sustained during a restaurant kitchen fire which occurred in 2023. This amount is included in other income on the condensed consolidated statement of operations and comprehensive income for the period then ended.
(2)     During the three months ended March 31, 2024, the Company incurred $0.3 million of pre-opening expenses in connection with opening of a restaurant at The Ritz-Carlton, Denver. Additionally, during the three months ended March 31, 2024, the Company expensed $0.3 million of repair and cleanup costs related to The Ritz-Carlton, Denver which experienced damage as a result of winter storms in January 2024.
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The following is a reconciliation of net income to FFO and Adjusted FFO attributable to common stock and unit holders for the three months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended March 31,
20242023
Net income$8,967 $6,553 
Adjustments:
Depreciation and amortization related to investment properties31,884 33,668 
FFO attributable to common stock and unit holders$40,851 $40,221 
Reconciliation to Adjusted FFO
Gain on insurance recoveries(1)
$(1,010)$— 
Loss on extinguishment of debt— 1,140 
Loan related costs, net of adjustment related to non-controlling interests(2)
1,333 1,282 
Amortization of share-based compensation expense
3,897 2,591 
Non-cash ground rent and straight-line rent expense(138)(4)
Other non-recurring expenses(3)
565 — 
Adjusted FFO attributable to common stock and unit holders$45,498 $45,230 
(1)     During the three months ended March 31, 2024, the Company recorded $1.0 million of insurance proceeds in excess of recognized losses related to damage sustained during a restaurant kitchen fire which occurred in 2023. This amount is included in other income on the condensed consolidated statement of operations and comprehensive income for the period then ended.
(2)     Loan related costs included amortization of debt premiums, discounts and deferred loan origination costs.
(3)     During the three months ended March 31, 2024, the Company incurred $0.3 million of pre-opening expenses in connection with opening of a restaurant at The Ritz-Carlton, Denver. Additionally, during the three months ended March 31, 2024, the Company expensed $0.3 million of repair and cleanup costs related to The Ritz-Carlton, Denver which experienced damage as a result of winter storms in January 2024.
Use and Limitations of Non-GAAP Financial Measures
EBITDA, EBITDAre, Adjusted EBITDAre, FFO, and Adjusted FFO do not represent cash generated from operating activities under GAAP and should not be considered as alternatives to net income or loss, operating profit, cash flows from operations or any other operating performance measure prescribed by GAAP. Although we present and use EBITDA, EBITDAre, Adjusted EBITDAre, FFO and Adjusted FFO because we believe they are useful to investors in evaluating and facilitating comparisons of our operating performance between periods and between REITs that report similar measures, the use of these non-GAAP measures has certain limitations as analytical tools. These non-GAAP financial measures are not measures of our liquidity, nor are they indicative of funds available to fund our cash needs, including our ability to fund capital expenditures, contractual commitments, working capital, service debt or make cash distributions. These measurements do not reflect cash expenditures for long-term assets and other items that we have incurred and will incur. These non-GAAP financial measures may include funds that may not be available for management's discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, and other commitments and uncertainties. These non-GAAP financial measures as presented may not be comparable to non-GAAP financial measures as calculated by other real estate companies.
We compensate for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our reconciliations to the most comparable GAAP financial measures, and our condensed consolidated statements of operations and comprehensive income, include interest expense, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures. These non-GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts may differ significantly from these estimates
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and assumptions. We evaluate our estimates, assumptions and judgments to confirm that they are reasonable and appropriate on an ongoing basis, based on information that is then available to us as well as our experience relating to various matters. All of our significant accounting policies, including certain critical accounting policies, are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023 and Note 2 in the accompanying condensed consolidated financial statements included herein.
Seasonality
Demand in the lodging industry is affected by recurring seasonal patterns, which are greatly influenced by overall economic cycles, the geographic locations of the hotels and the customer mix at the hotels.
New Accounting Pronouncements Not Yet Implemented
See Note 2 in the accompanying condensed consolidated financial statements included herein for additional information related to recently issued accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are subject to market risk associated with changes in interest rates both in terms of variable rate debt and the price of new fixed rate debt upon maturity of existing debt and for acquisitions. Our exposure to market risk has not materially changed from what we previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.
Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. As of March 31, 2024 and December 31, 2023, all of our variable rate debt was fixed by interest rate swaps and, as a result, an increase or decrease of 1% in market interest rates would not have an impact on our interest expense, future earnings or cash flows through the date of the earliest maturity of our interest rate hedges, which is mid-February 2025.
With regard to our variable rate financing, we assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. We maintain risk management control systems to monitor interest rate cash flow risk attributable to both of our outstanding or forecasted debt obligations as well as our potential offsetting hedge positions. The risk management control systems involve the use of analytical techniques, including cash flow sensitivity analysis, to estimate the expected impact of changes in interest rates on our future cash flows.
We monitor interest rate risk using a variety of techniques, including periodically evaluating fixed interest rate quotes on variable rate debt and the costs associated with converting the debt to fixed rate debt. Also, existing fixed and variable rate loans that are scheduled to mature in the near term are evaluated for possible early refinancing or extension due to consideration given to current interest rates. We have taken significant steps in reducing our variable rate debt exposure by paying off property-level mortgage debt subject to floating rates and entering into various interest rate swap agreements to hedge interest rate risk. Refer to Note 4 in the accompanying condensed consolidated financial statements included herein, for our mortgage debt principal amounts and weighted-average interest rates by year and expected maturity to evaluate the expected cash flows and sensitivity to interest rate changes.
We may continue to use derivative instruments to hedge exposure to changes in interest rates on loans secured by our properties. To the extent we do, we are exposed to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. We maintain credit policies with regard to our counterparties that we believe reduce overall credit risk. These policies include evaluating and monitoring our counterparties' financial condition, including their credit ratings, and entering into agreements with counterparties based on established credit limit policies. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates. The market risk associated with interest rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.
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The following table provides information about our financial instruments that are sensitive to changes in interest rates. For debt obligations outstanding as of March 31, 2024, the following table presents principal repayments and related weighted-average interest rates by contractual maturity dates (in thousands):
20242025202620272028ThereafterTotalFair Value