Debt Summary
Debt as of
December 31, 2016
and
December 31, 2015
consisted of the following:
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Balance Outstanding as of
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Debt
|
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Interest
Rate
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Maturity
Date
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December 31,
2016
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December 31,
2015
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Credit facilities
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Senior unsecured credit facility
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Floating
(a)
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January 2018
(a)
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$
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0
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$
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21,000
|
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LHL unsecured credit facility
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Floating
(b)
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January 2018
(b)
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0
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0
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Total borrowings under credit facilities
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0
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|
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21,000
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Term loans
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|
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|
|
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First Term Loan
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Floating/Fixed
(c)
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January 2019
(c)
|
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300,000
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300,000
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Second Term Loan
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Floating/Fixed
(c)
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January 2021
(c)
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555,000
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555,000
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Debt issuance costs, net
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|
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(2,242
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)
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(2,797
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)
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Total term loans, net of unamortized debt issuance costs
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852,758
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852,203
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Massport Bonds
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Hyatt Regency Boston Harbor (taxable)
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Floating
(d)
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March 2018
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5,400
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5,400
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Hyatt Regency Boston Harbor (tax exempt)
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Floating
(d)
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March 2018
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37,100
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37,100
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Debt issuance costs, net
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(45
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)
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(184
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)
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Total bonds payable, net of unamortized debt issuance costs
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42,455
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42,316
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Mortgage loans
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Westin Michigan Avenue
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5.75%
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-
(e)
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0
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131,262
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Indianapolis Marriott Downtown
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5.99%
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-
(e)
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0
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96,097
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The Roger
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6.31%
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-
(f)
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0
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58,935
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Westin Copley Place
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Floating
(g)
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August 2018
(g)
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225,000
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225,000
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Debt issuance costs, net
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(1,506
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)
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(2,490
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)
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Total mortgage loans, net of unamortized debt issuance costs
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223,494
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508,804
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Total debt
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$
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1,118,707
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$
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1,424,323
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(a)
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Borrowings bear interest at floating rates equal to, at the Company’s option, either (i) LIBOR plus an applicable margin, or (ii) an Adjusted Base Rate (as defined in the credit agreement) plus an applicable margin. There were
no
borrowings outstanding at
December 31, 2016
. As of
December 31, 2015
, the rate, including the applicable margin, for the Company’s outstanding LIBOR borrowing of
$21,000
was
2.13%
. The Company has the option, pursuant to certain terms and conditions, to extend the maturity date for
two
six
-month extensions. On January 10, 2017, the Company refinanced its senior unsecured credit facility resulting in a new maturity date of January 8, 2021, subject to
two
six
-month extension options, pursuant to certain terms and conditions.
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(b)
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Borrowings bear interest at floating rates equal to, at LHL’s option, either (i) LIBOR plus an applicable margin, or (ii) an Adjusted Base Rate (as defined in the credit agreement) plus an applicable margin. There were
no
borrowings outstanding at
December 31, 2016
and
December 31, 2015
. LHL has the option, pursuant to certain terms and conditions, to extend the maturity date for
two
six
-month extensions. On January 10, 2017, LHL refinanced its unsecured credit facility resulting in a new maturity date of January 10, 2021, subject to
two
six
-month extension options, pursuant to certain terms and conditions.
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(c)
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Term loans bear interest at floating rates equal to LIBOR plus an applicable margin. The Company entered into interest rate swaps to effectively fix the interest rates for the First Term Loan (as defined below) and the Second Term Loan (as defined below). At
December 31, 2016
and
2015
, the Company had interest rate swaps on the full amounts outstanding. See “Derivative and Hedging Activities” below. At
December 31, 2016
and
2015
, the fixed all-in interest rates for the First Term Loan and Second Term Loan were
2.38%
and
2.95%
, respectively, at the Company’s current leverage ratio (as defined in the swap agreements). On January 10, 2017, the Company refinanced its First Term Loan resulting in a new maturity date of January 10, 2022. On January 10, 2017, the Company amended and restated its Second Term Loan to match the financial and other covenants in its refinanced First Term Loan and senior unsecured credit facility. There were no changes to the maturity date.
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(d)
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The Massport Bonds are secured by letters of credit issued by U.S. Bank National Association (“U.S. Bank”) that were extended to September 2017. The letters of credit have
two
one
-year extension options, one of which was exercised in July 2016, and are secured by the Hyatt Regency Boston Harbor. The letters of credit cannot be extended beyond the Massport Bonds’ maturity date. The bonds bear interest based on weekly floating rates. The interest rates as of
December 31, 2016
were
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0.75%
and
0.76%
for the
$5,400
and
$37,100
bonds, respectively. The interest rates as of
December 31, 2015
were
0.39%
and
0.02%
for the
$5,400
and
$37,100
bonds, respectively. The Company incurs an annual letter of credit fee of
1.35%
.
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(e)
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The Company repaid the mortgage loans on January 4, 2016 through borrowings on its senior unsecured credit facility.
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(f)
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The Company repaid the mortgage loan on February 11, 2016 through borrowings on its senior unsecured credit facility.
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(g)
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The mortgage loan matures on August 14, 2018 with
three
options to extend the maturity date to January 5, 2021, pursuant to certain terms and conditions. The interest-only mortgage loan bears interest at a variable rate ranging from LIBOR plus
1.75%
to LIBOR plus
2.00%
, depending on Westin Copley Place’s net cash flow (as defined in the loan agreement). The interest rate as of
December 31, 2016
was LIBOR plus
1.75%
, which equaled
2.46%
. The interest rate as of
December 31, 2015
was LIBOR plus
1.75%
, which equaled
2.09%
. The mortgage loan allows for prepayments without penalty, subject to certain terms and conditions.
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Future scheduled debt principal payments as of
December 31, 2016
are as follows:
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2017
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$
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0
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2018
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267,500
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2019
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300,000
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2020
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0
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2021
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555,000
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Total debt
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$
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1,122,500
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A summary of the Company’s interest expense and weighted average interest rates for unswapped variable rate debt for the years ended
December 31, 2016
,
2015
and
2014
is as follows:
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For the year ended December 31,
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2016
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2015
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2014
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Interest Expense:
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Interest incurred
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$
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40,814
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|
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$
|
52,604
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|
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$
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54,859
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Amortization of debt issuance costs
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3,359
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|
|
2,631
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|
|
2,169
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|
Capitalized interest
|
(398
|
)
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|
(902
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)
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|
(400
|
)
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Interest expense
|
$
|
43,775
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|
|
$
|
54,333
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|
|
$
|
56,628
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Weighted Average Interest Rates for Unswapped Variable Rate Debt:
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Senior unsecured credit facility
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2.14
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%
|
|
1.89
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%
|
|
1.86
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%
|
LHL unsecured credit facility
|
2.13
|
%
|
|
1.89
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%
|
|
1.86
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%
|
Massport Bonds
|
0.44
|
%
|
|
0.06
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%
|
|
0.35
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%
|
Mortgage loan (Westin Copley Place)
|
2.23
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%
|
|
2.19
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%
|
|
N/A
|
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Credit Facilities
On January 8, 2014, the Company refinanced its
$750,000
senior unsecured credit facility with a syndicate of banks. The credit facility matures on January 8, 2018, subject to
two
six
-month extensions that the Company may exercise at its option, pursuant to certain terms and conditions, including payment of an extension fee. The credit facility, with a current commitment of
$750,000
, includes an accordion feature which, subject to certain conditions, entitles the Company to request additional lender commitments, allowing for total commitments of up to
$1,050,000
. Borrowings under the credit facility bear interest at floating rates equal to, at the Company’s option, either (i) LIBOR plus an applicable margin, or (ii) an Adjusted Base Rate (as defined in the credit agreement) plus an applicable margin. Additionally, the Company is required to pay a variable unused commitment fee of
0.25%
or
0.30%
of the unused portion of the credit facility, depending on the average daily unused portion of the credit facility. On January 10, 2017, the Company refinanced its senior unsecured credit facility (see Note 13).
On January 8, 2014, LHL also refinanced its
$25,000
unsecured revolving credit facility to be used for working capital and general lessee corporate purposes. The LHL credit facility matures on January 8, 2018, subject to
two
six
-month extensions that LHL may exercise at its option, pursuant to certain terms and conditions, including payment of an extension fee. Borrowings under the LHL credit facility bear interest at floating rates equal to, at LHL’s option, either (i) LIBOR plus an applicable margin, or (ii) an Adjusted Base Rate (as defined in the credit agreement) plus an applicable margin. Additionally, LHL is required to pay a variable unused commitment fee of
0.25%
or
0.30%
of the unused portion of the credit facility, depending on the average daily
unused portion of the LHL credit facility. On January 10, 2017, LHL refinanced its unsecured revolving credit facility (see Note 13).
The Company’s senior unsecured credit facility and LHL’s unsecured credit facility contain certain financial and other covenants, including covenants relating to net worth requirements, debt ratios and fixed charge coverage ratios. In addition, pursuant to the terms of the agreements, if a default or event of default occurs or is continuing, the Company may be precluded from paying certain distributions or other payments to its shareholders.
The Company and certain of its subsidiaries guarantee the obligations under the Company’s senior unsecured credit facility. While the senior unsecured credit facility does not initially include any pledges of equity interests in the Company’s subsidiaries, in connection with the January 10, 2017 refinancing, such pledges and additional subsidiary guarantees would be required in the event that the Company’s leverage ratio later exceeds
6.50
:
1.00
for
two
consecutive fiscal quarters. In the event that such pledge and guarantee requirement is triggered, the pledges and additional guarantees would ratably benefit the Company’s senior unsecured credit facility, the First Term Loan and the Second Term Loan. If at any time the Company’s leverage ratio falls below
6.50
:
1.00
for
two
consecutive fiscal quarters, such pledges and additional guarantees may be released.
Term Loans
On May 16, 2012, the Company entered into a
$177,500
unsecured term loan (the “Repaid Term Loan”) with a
seven
-year term maturing on May 16, 2019. The Repaid Term Loan bore interest at variable rates. On November 5, 2015, the Company repaid the Repaid Term Loan.
On January 8, 2014, the Company refinanced its
$300,000
unsecured term loan (the “First Term Loan”). The First Term Loan includes an accordion feature, which subject to certain conditions, entitles the Company to request additional lender commitments, allowing for total commitments of up to
$500,000
. The First Term Loan has a
five
-year term maturing on January 8, 2019 and bears interest at variable rates. On January 10, 2017, the Company refinanced its First Term Loan (see Note 13).
On November 5, 2015, the Company entered into a
$555,000
unsecured term loan (the “Second Term Loan”) with a
five
-year term maturing on January 29, 2021. The Second Term Loan includes an accordion feature, which subject to certain conditions, entitles the Company to request additional lender commitments, allowing for total commitments of up to
$700,000
. The Second Term Loan bears interest at variable rates. On January 10, 2017, the Company amended its Second Term Loan (see Note 13).
The Company’s term loans contain certain financial and other covenants, including covenants relating to net worth requirements, debt ratios and fixed charge coverage ratios. In addition, pursuant to the terms of the agreements, if a default or event of default occurs or is continuing, the Company may be precluded from paying certain distributions or other payments to its shareholders. The Company has entered into interest rate swaps to effectively fix the LIBOR rates for all of its term loans (see “Derivative and Hedging Activities” below).
The Company and certain of its subsidiaries guarantee the obligations under the Company’s term loans. While the term loans do not initially include any pledges of equity interests in the Company’s subsidiaries, in connection with the January 10, 2017 refinancing, such pledges and additional subsidiary guarantees would be required in the event that the Company’s leverage ratio later exceeds
6.50
:
1.00
for
two
consecutive fiscal quarters. In the event that such pledge and guarantee requirement is triggered, the pledges and additional guarantees would ratably benefit the Company’s senior unsecured credit facility, the First Term Loan and the Second Term Loan. If at any time the Company’s leverage ratio falls below
6.50
:
1.00
for
two
consecutive fiscal quarters, such pledges and additional guarantees may be released.
Derivative and Hedging Activities
The Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Unrealized gains and losses on the effective portion of hedging instruments are reported in other comprehensive income (loss) (“OCI”). Ineffective portions of changes in the fair value of a cash flow hedge are recognized as interest expense. Amounts reported in accumulated other comprehensive income (loss) (“AOCI”) related to currently outstanding derivatives are recognized as an adjustment to income (loss) as interest payments are made on the Company’s variable rate debt. Effective August 2, 2012, the Company entered into
five
interest rate swap agreements with an aggregate notional amount of
$300,000
to hedge the variable interest rate on the First Term Loan through August 2, 2017, resulting in a fixed all-in interest rate based on the Company’s current leverage ratio (as defined in the swap agreements), which interest rate was
2.38%
at
December 31, 2016
. As of
December 31, 2016
, the Company has interest rate swaps with an aggregate notional amount of
$555,000
to hedge the variable interest rate on the Second Term Loan and, as a result, the fixed all-in interest rate based on the Company’s current leverage ratio (as defined in the swap agreements) is
2.95%
through May 16, 2019. From May 16, 2019 through the term of the Second Term Loan, the Company has interest rate
swaps with an aggregate notional amount of
$377,500
to hedge a portion of the variable interest rate debt on the Second Term Loan. The Company has designated its pay-fixed, receive-floating interest rate swap derivatives as cash flow hedges. The interest rate swaps were entered into with the intention of eliminating the variability of the terms loans, but can also limit the exposure to any amendments, supplements, replacements or refinancings of the Company’s debt.
The following table presents the effect of derivative instruments on the Company’s accompanying consolidated statements of operations and comprehensive income, including the location and amount of unrealized loss on outstanding derivative instruments in cash flow hedging relationships, for the years ended
December 31, 2016
,
2015
and
2014
:
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Amount of Loss Recognized in OCI on Derivative Instruments
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|
Location of Loss Reclassified from AOCI into Net Income
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|
Amount of Loss Reclassified from AOCI into Net Income
|
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|
|
|
|
(Effective Portion)
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|
(Effective Portion)
|
|
(Effective Portion)
|
|
|
For the year ended
|
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|
For the year ended
|
|
|
December 31,
|
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|
|
|
December 31,
|
|
|
2016
|
|
2015
|
|
2014
|
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2016
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2015
|
|
2014
|
Derivatives in cash flow hedging relationships:
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|
|
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|
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Interest rate swaps
|
|
$
|
(4,160
|
)
|
|
$
|
(5,682
|
)
|
|
$
|
(8,276
|
)
|
|
Interest expense
|
|
$
|
6,625
|
|
|
$
|
4,835
|
|
|
$
|
4,410
|
|
During the years ended
December 31, 2016
,
2015
and
2014
, the Company did not have any hedge ineffectiveness or amounts that were excluded from the assessment of hedge effectiveness recorded in earnings.
As of
December 31, 2016
, there was
$2,368
in cumulative unrealized gain of which
$2,365
was included in AOCI and
$3
was attributable to noncontrolling interests. As of
December 31, 2015
, there was
$97
in cumulative unrealized loss of which
$97
was included in AOCI and
zero
was attributable to noncontrolling interests. The Company expects that approximately
$4,890
will be reclassified from AOCI and noncontrolling interests and recognized as a reduction to income in the next
12 months
, calculated as estimated interest expense using the interest rates on the derivative instruments as of
December 31, 2016
.
Bonds Payable
The Company is the obligor with respect to a
$37,100
tax-exempt special project revenue bond and a
$5,400
taxable special project revenue bond, both issued by the Massachusetts Port Authority (collectively, the “Massport Bonds”). The Massport Bonds, which mature on March 1, 2018, bear interest based on weekly floating rates and have no principal reductions prior to their scheduled maturities. The Massport Bonds may be redeemed at any time, at the Company’s option, without penalty. The Massport Bonds are secured by letters of credit issued by U.S. Bank that were extended to September 30, 2017. The letters of credit have
two
one
-year extension options, one of which was exercised in July 2016, that the Company may exercise at its option, subject to certain terms and conditions. The letters of credit cannot be extended beyond the Massport Bonds’ maturity date. The Company incurs an annual letter of credit fee of
1.35%
. The letters of credit are secured by the Hyatt Regency Boston Harbor. If U.S. Bank fails to renew its letters of credit at expiration and an acceptable replacement provider cannot be found, the Company may be required to pay off the bonds.
Extinguishment of Debt
As discussed above, on January 8, 2014, the Company refinanced its senior unsecured credit facility and First Term Loan and LHL refinanced its unsecured revolving credit facility. The refinancing arrangements for the senior unsecured credit facility and First Term Loan were considered substantial modifications. The Company recognized a loss from extinguishment of debt of
$2,487
, which is included in the accompanying consolidated statements of operations and comprehensive income for the year ended December 31, 2014. As discussed above, on November 5, 2015, the Company repaid the Repaid Term Loan prior to maturity and recognized a loss from extinguishment of debt of
$831
, which is included in the accompanying consolidated statements of operations and comprehensive income for the year ended December 31, 2015. The loss from extinguishment of debt represents the unamortized deferred financing costs incurred when the original agreements were executed.
Mortgage Loans
The Company’s mortgage loans are secured by the respective properties. The mortgages are non-recourse to the Company except for fraud or misapplication of funds.
On January 4, 2016, the Company repaid without fee or penalty the Westin Michigan Avenue mortgage loan in the amount of
$131,262
plus accrued interest through borrowings under its senior unsecured credit facility. The loan was due to mature in April 2016.
On January 4, 2016, the Company repaid without fee or penalty the Indianapolis Marriott Downtown mortgage loan in the amount of
$96,097
plus accrued interest through borrowings under its senior unsecured credit facility. The loan was due to mature in July 2016.
On February 11, 2016, the Company repaid without fee or penalty The Roger mortgage loan in the amount of
$58,831
plus accrued interest through borrowings under its senior unsecured credit facility. The loan was due to mature in August 2016.
The Company’s mortgage loans contain debt service coverage ratio tests related to the mortgaged properties. If the debt service coverage ratio for a specific property fails to exceed a threshold level specified in the mortgage, cash flows from that hotel may automatically be directed to the lender to (i) satisfy required payments, (ii) fund certain reserves required by the mortgage and (iii) fund additional cash reserves for future required payments, including final payment. Cash flows may be directed to the lender (“cash trap”) until such time as the property again complies with the specified debt service coverage ratio or the mortgage is paid off.
Financial Covenants
Failure of the Company to comply with financial and other covenants contained in its credit facilities, term loans and non-recourse secured mortgages could result from, among other things, changes in its results of operations, the incurrence of additional debt or changes in general economic conditions.
If the Company violates financial and other covenants contained in any of its credit facilities or term loans described above, the Company may attempt to negotiate waivers of the violations or amend the terms of the applicable credit facilities or term loans with the lenders thereunder; however, the Company can make no assurance that it would be successful in any such negotiations or that, if successful in obtaining waivers or amendments, such amendments or waivers would be on terms attractive to the Company. If a default under the credit facilities or term loans were to occur, the Company would possibly have to refinance the debt through additional debt financing, private or public offerings of debt securities, or additional equity financings. If the Company is unable to refinance its debt on acceptable terms, including at maturity of the credit facilities and term loans, it may be forced to dispose of hotel properties on disadvantageous terms, potentially resulting in losses that reduce cash flow from operating activities. If, at the time of any refinancing, prevailing interest rates or other factors result in higher interest rates upon refinancing, increases in interest expense would lower the Company’s cash flow, and, consequently, cash available for distribution to its shareholders.
A cash trap associated with a mortgage loan may limit the overall liquidity for the Company as cash from the hotel securing such mortgage would not be available for the Company to use. If the Company is unable to meet mortgage payment obligations, including the payment obligation upon maturity of the mortgage borrowing, the mortgage securing the specific property could be foreclosed upon by, or the property could be otherwise transferred to, the mortgagee with a consequent loss of income and asset value to the Company.
As of
December 31, 2016
, the Company is in compliance with all debt covenants, current on all loan payments and not otherwise in default under the credit facilities, term loans, bonds payable or mortgage loan.
|
|
5.
|
Commitments and Contingencies
|
Ground, Land and Building, and Air Rights Leases
A summary of the Company’s hotels subject to non-cancelable operating leases as of
December 31, 2016
is as follows:
|
|
|
|
|
|
Lease Properties
|
|
Lease Type
|
|
Lease Expiration Date
|
Southernmost Beach Resort Key West (Restaurant facility)
|
|
Ground lease
|
|
April 2019
(1)
|
Hyatt Regency Boston Harbor
|
|
Ground lease
|
|
March 2026
(2)
|
The Hilton San Diego Resort and Spa
|
|
Ground lease
|
|
December 2045
|
San Diego Paradise Point Resort and Spa
|
|
Ground lease
|
|
May 2050
|
Hotel Vitale
|
|
Ground lease
|
|
March 2056
(3)
|
Viceroy Santa Monica
|
|
Ground lease
|
|
September 2065
|
Westin Copley Place
(4)
|
|
Air rights lease
|
|
December 2077
|
The Liberty Hotel
|
|
Ground lease
|
|
May 2080
|
Hotel Solamar
|
|
Ground lease
|
|
December 2102
|
(1)
The Company can begin negotiating a renewal
one
year in advance of the lease expiration date.
(2)
The Company has options, subject to certain terms and conditions, to extend the ground lease for
51
years to 2077.
(3)
The Company has the option, subject to certain terms and conditions, to extend the ground lease for
14
years to 2070.
(4)
No
payments are required through maturity.
The ground leases at Viceroy Santa Monica, The Liberty Hotel and Hotel Vitale are subject to minimum annual rent increases, resulting in noncash straight-line rent expense of
$1,890
,
$1,943
and
$1,820
for the years ended
December 31, 2016
,
2015
and
2014
, respectively, which is included in total ground rent expense. Total ground rent expense for the years ended
December 31, 2016
,
2015
and
2014
was
$16,187
,
$16,076
and
$14,667
, respectively. Certain rent payments are based on the hotel’s performance. Actual payments of rent may exceed the minimum required rent due to meeting specified thresholds.
A summary of the Company’s hotels subject to capital leases of land and building as of
December 31, 2016
is as follows:
|
|
|
|
|
|
Lease Properties
|
|
Estimated Present Value of Remaining Rent Payments
(1)
|
|
Lease Expiration Date
|
The Roger
|
|
$4,892
|
|
December 2044
|
Harbor Court Hotel
|
|
$18,424
|
|
April 2048
|
Hotel Triton
(2)
|
|
$25,625
|
|
December 2049
|
(1)
At acquisition, the estimated present value of the remaining rent payments were recorded as capital lease obligations. These obligations, net of amortization, are included in accounts payable and accrued expenses in the accompanying consolidated balance sheets.
(2)
In 2015, the hotel lease was amended, extending the lease expiration date from January 2048 to December 2049. At acquisition, the estimated present value of the remaining payments recorded as a capital lease obligation was
$27,752
. Due to the lease amendment, the recalculated estimated present value of the remaining rent payments is
$25,625
, which net of amortization, is included in accounts payable and accrued expenses in the accompanying consolidated balance sheets.
Future minimum rent payments, including capital lease payments, (without reflecting future applicable Consumer Price Index increases) are as follows:
|
|
|
|
|
2017
|
$
|
13,052
|
|
2018
|
13,195
|
|
2019
|
13,172
|
|
2020
|
13,559
|
|
2021
|
13,713
|
|
Thereafter
|
587,067
|
|
|
$
|
653,758
|
|
Reserve Funds for Future Capital Expenditures
Certain of the Company’s agreements with its hotel managers, franchisors and lenders have provisions for the Company to provide funds, generally
4.0%
of hotel revenues, sufficient to cover the cost of (a) certain non-routine repairs and maintenance to the hotels and (b) replacements and renewals to the hotels’ capital assets. Certain of the agreements require that the Company reserve this cash in separate accounts. As of
December 31, 2016
,
$13,073
was available in restricted cash reserves for future capital expenditures. The Company has sufficient cash on hand and availability on its credit facilities to cover capital expenditures under agreements that do not require that the Company separately reserve cash.
Restricted Cash Reserves
At
December 31, 2016
, the Company held
$15,035
in restricted cash reserves. Included in such amounts are
$13,073
of reserve funds for future capital expenditures and
$1,962
held by insurance and management companies on the Company’s behalf to be refunded or applied to future liabilities.
Litigation
The nature of hotel operations exposes the Company and its hotels to the risk of claims and litigation in the normal course of their business. The Company is not presently subject to any material litigation nor, to the Company’s knowledge, is any litigation threatened against the Company, other than routine actions for negligence or other claims and administrative proceedings arising in the ordinary course of business, some of which are expected to be covered by liability insurance and all of which collectively are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Company.
Common Shares of Beneficial Interest
At December 31,
2016
and
2015
, there were
200,000,000
authorized common shares under the Company’s declaration of trust, as amended.
On January 1, 2015, the Company issued
11,682
common shares of beneficial interest and authorized an additional
4,183
deferred shares to the independent members of its Board of Trustees for their 2014 compensation. These common shares of beneficial interest were issued under the 2014 Plan. Additionally, the Company issued
9,757
common shares of beneficial interest under the 2009 Plan, related to the resignation of a former trustee, for the second of
five
payouts of his accumulated deferred shares granted as compensation for years 1999 through 2013. On November 9, 2015, the Company issued
30,388
common shares of beneficial interest for the trustee’s remaining deferred share balance. These common shares of beneficial interest were issued under the 2009 Plan and 2014 Plan.
On January 1, 2015, the Company issued
108,779
nonvested shares with service conditions to executives related to the nonvested share awards with market conditions granted on January 26, 2012 (see Note 7 for additional details including vesting information). These common shares of beneficial interest were issued under the 2009 Plan.
On March 19, 2015, the Company issued
62,742
nonvested shares with service conditions to the Company’s executives and employees. The nonvested shares will vest in
three
annual installments starting January 1, 2016, subject to continued employment. These common shares of beneficial interest were issued under the 2014 Plan.
On January 1, 2016, the Company issued
13,864
common shares of beneficial interest and authorized an additional
4,910
deferred shares to the independent members of its Board of Trustees for their 2015 compensation. These common shares of beneficial interest were issued under the 2014 Plan.
On March 1, 2016, the Company issued
36,926
common shares of beneficial interest to executives related to the nonvested share awards with market conditions granted on January 30, 2013 (see Note 7 for additional details including vesting information). These common shares of beneficial interest were issued under the 2009 Plan.
On March 18, 2016, the Company issued
98,787
nonvested shares with service conditions to the Company’s executives and employees. The nonvested shares will vest in
three
annual installments starting January 1, 2017, subject to continued employment. These common shares of beneficial interest were issued under the 2014 Plan.
On April 25, 2016, the Company issued
10,526
nonvested shares with service conditions to one of the Company’s executives. The nonvested shares will vest in
three
annual installments starting January 1, 2017, subject to continued employment. These common shares of beneficial interest were issued under the 2014 Plan.
On May 9, 2016, the Company issued
20,688
common shares of beneficial interest to its former Chief Financial Officer related to the nonvested share awards with market conditions, as a result of the previously announced termination of employment. Pursuant to the terms of the award agreements, a portion of his nonvested share awards with market conditions vested upon termination (see Note 7). Of the common shares of beneficial interest issued,
15,320
shares were issued under the 2009 Plan and
5,368
shares were issued under the 2014 Plan.
On August 11, 2016, the Company issued
42,824
common shares of beneficial interest to executives related to the nonvested share awards with market conditions granted on January 30, 2013 (see Note 7 for additional details including vesting information). These common shares of beneficial interest were issued under the 2009 Plan.
Common Dividends
The Company paid the following dividends on common shares/units during the year ended
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
Dividend per
Share/Unit
|
|
For the Quarter Ended
|
|
Record Date
|
|
Date Paid
|
$
|
0.45
|
|
|
December 31, 2015
|
|
December 31, 2015
|
|
January 15, 2016
|
$
|
0.45
|
|
|
March 31, 2016
|
|
March 31, 2016
|
|
April 15, 2016
|
$
|
0.45
|
|
|
June 30, 2016
|
|
June 30, 2016
|
|
July 15, 2016
|
$
|
0.45
|
|
|
September 30, 2016
|
|
September 30, 2016
|
|
October 17, 2016
|
Treasury Shares
Treasury shares are accounted for under the cost method. During the year ended
December 31, 2016
, the Company received
96,601
common shares of beneficial interest related to employees surrendering shares to pay minimum withholding taxes at the time nonvested shares vested and forfeiting nonvested shares upon resignation.
The Company’s Board of Trustees previously authorized a share repurchase program (the “Repurchase Program”) to acquire up to
$100,000
of the Company’s common shares of beneficial interest, with repurchased shares recorded at cost in treasury. As of
December 31, 2016
, the Company had availability under the Repurchase Program to acquire up to
$69,807
of common shares of beneficial interest. In February 2017, the Company’s Board of Trustees authorized an expansion of the Repurchase Program to acquire up to an additional
$500,000
of the Company’s common shares of beneficial interest (see Note 13). The timing, manner, price and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, market conditions, and other corporate liquidity requirements and priorities. The Repurchase Program may be suspended, modified or terminated at any time for any reason without prior notice. The Repurchase Program does not obligate the Company to acquire any specific number of shares, and all open market repurchases will be made in accordance with applicable rules and regulations setting forth certain restrictions on the method, timing, price and volume of open market share repurchases.
During the year ended
December 31, 2016
, the Company re-issued
13,864
treasury shares related to earned 2015 compensation for the Board of Trustees,
100,438
treasury shares related to the earned share awards with market conditions and
110,826
treasury shares related to the grants of nonvested shares with service conditions.
At
December 31, 2016
, there were
27,368
common shares of beneficial interest in treasury.
Preferred Shares
At
December 31, 2016
and
2015
, there were
40,000,000
authorized preferred shares under the Company’s declaration of trust, as amended.
On July 3, 2014, the Company redeemed the remaining
2,348,888
7.25% Series G Cumulative Redeemable Preferred Shares (the “Series G Preferred Shares”) for
$58,722
(
$25.00
per share) plus accrued and unpaid dividends through the redemption date, July 3, 2014, of
$1,100
. The redemption value of the Series G Preferred Shares exceeded their carrying value by
$951
, which is included in the determination of net income attributable to common shareholders for the year ended December 31, 2014. The
$951
represents the offering costs related to the redeemed Series G Preferred Shares.
On May 25, 2016, the Company issued
6,000,000
6.3% Series J Cumulative Redeemable Preferred Shares (
$0.01
par value) (the “Series J Preferred Shares”) at a price of
$25.00
per share and received net proceeds, after deducting underwriting discounts and other offering costs, of
$145,078
. The net proceeds were used to pay down amounts outstanding under the Company’s senior unsecured credit facility, and for general corporate purposes.
The following Preferred Shares were outstanding as of
December 31, 2016
:
|
|
|
|
|
Security Type
|
|
Number of
Shares
|
7.5% Series H Preferred Shares
|
|
2,750,000
|
|
6.375% Series I Preferred Shares
|
|
4,400,000
|
|
6.3% Series J Preferred Shares
|
|
6,000,000
|
|
The 7.5% Series H Cumulative Redeemable Preferred Shares (the “Series H Preferred Shares”), the 6.375% Series I Cumulative Redeemable Preferred Shares (the “Series I Preferred Shares”) and the Series J Preferred Shares (collectively, the “Preferred Shares”) rank senior to the common shares of beneficial interest and on parity with each other with respect to payment of distributions. The Company will not pay any distributions, or set aside any funds for the payment of distributions, on its common shares of beneficial interest unless it has also paid (or set aside for payment) (i) the full cumulative distributions on the Series H Preferred Shares for the current and all past dividend periods and (ii)
the full cumulative distributions on the Series I Preferred Shares and the Series J Preferred Shares for all past dividend periods
. The outstanding Preferred Shares do not have any maturity date, and are not subject to mandatory redemption. The difference between the carrying value and the redemption amount of the Preferred Shares are the offering costs. In addition, the Company is not required to set aside funds to redeem the Preferred Shares.
As of January 24, 2016, the Company may optionally redeem the Series H Preferred Shares. The Company may not optionally redeem the Series I Preferred Shares and the Series J Preferred Shares prior to March 4, 2018 and May 25, 2021, respectively, except in limited circumstances relating to the Company’s continuing qualification as a REIT or as discussed below. After those dates, the Company may, at its option, redeem the Preferred Shares, in whole or from time to time in part, by payment of
$25.00
per share, plus any accumulated, accrued and unpaid distributions. In addition, upon the occurrence of a change of control (as defined in the Company’s charter), the result of which the Company’s common shares of beneficial interest and the common securities of the acquiring or surviving entity are not listed on the New York Stock Exchange, the NYSE MKT LLC or the NASDAQ Stock Market, or any successor exchanges, the Company may, at its option, redeem the Preferred Shares in whole or in part within
120
days after the change of control occurred, by paying
$25.00
per share, plus any accrued and unpaid distributions. If the Company does not exercise its right to redeem the Preferred Shares upon a change of control, the holders of Series H Preferred Shares, Series I Preferred Shares and Series J Preferred Shares have the right to convert some or all of their shares into a number of the Company’s common shares of beneficial interest based on a defined formula subject to a cap of
4,680,500
common shares,
8,835,200
commons shares and
12,842,400
common shares, respectively.
Preferred Dividends
The Company paid the following dividends on preferred shares during the year ended
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
Security Type
|
|
Dividend per Share
(1)
|
|
For the Quarter Ended
|
|
Record Date
|
|
Date Paid
|
7.5% Series H
|
|
$
|
0.47
|
|
|
December 31, 2015
|
|
January 1, 2016
|
|
January 15, 2016
|
6.375% Series I
|
|
$
|
0.40
|
|
|
December 31, 2015
|
|
January 1, 2016
|
|
January 15, 2016
|
7.5% Series H
|
|
$
|
0.47
|
|
|
March 31, 2016
|
|
April 1, 2016
|
|
April 15, 2016
|
6.375% Series I
|
|
$
|
0.40
|
|
|
March 31, 2016
|
|
April 1, 2016
|
|
April 15, 2016
|
7.5% Series H
|
|
$
|
0.47
|
|
|
June 30, 2016
|
|
July 1, 2016
|
|
July 15, 2016
|
6.375% Series I
|
|
$
|
0.40
|
|
|
June 30, 2016
|
|
July 1, 2016
|
|
July 15, 2016
|
6.3% Series J
(2)
|
|
$
|
0.22
|
|
|
June 30, 2016
|
|
July 1, 2016
|
|
July 15, 2016
|
7.5% Series H
|
|
$
|
0.47
|
|
|
September 30, 2016
|
|
September 30, 2016
|
|
October 17, 2016
|
6.375% Series I
|
|
$
|
0.40
|
|
|
September 30, 2016
|
|
September 30, 2016
|
|
October 17, 2016
|
6.3% Series J
|
|
$
|
0.39
|
|
|
September 30, 2016
|
|
September 30, 2016
|
|
October 17, 2016
|
(1)
Amounts are rounded to the nearest whole cent for presentation purposes.
(2)
Partial dividend for newly issued preferred shares.
Noncontrolling Interests of Common Units in Operating Partnership
On May 13, 2015, the Company issued an aggregate of
151,077
common shares of beneficial interest in connection with the redemption of
151,077
common units of limited partnership interest held by certain limited partners of the Operating Partnership. These common shares of beneficial interest were issued in reliance on an exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, and Regulation D promulgated thereunder. The Company relied on the exemption under Section 4(a)(2) based upon factual representations given by the limited partners who received the common shares of beneficial interest.
The following schedule presents the effects of changes in the Company’s ownership interest in the Operating Partnership on the Company’s equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Net income attributable to common shareholders
|
$
|
234,575
|
|
|
$
|
123,383
|
|
|
$
|
197,561
|
|
Increase (decrease) in additional paid-in capital from adjustments to noncontrolling interests of common units in Operating Partnership
|
0
|
|
|
14
|
|
|
(397
|
)
|
Change from net income attributable to common shareholders and adjustments to noncontrolling interests
|
$
|
234,575
|
|
|
$
|
123,397
|
|
|
$
|
197,164
|
|
There were
no
redemptions of common units of limited partnership interest held by limited partners of the Operating Partnership in 2016.
As of
December 31, 2016
, the Operating Partnership had
145,223
common units of limited partnership interest outstanding, representing a
0.1%
partnership interest held by the limited partners. As of
December 31, 2016
, approximately
$4,425
of cash or the equivalent value in common shares, at the Company’s option, would be paid to the limited partners of the Operating Partnership if the partnership were terminated. The approximate value of
$4,425
is based on the Company’s closing common share price of
$30.47
on
December 31, 2016
, which is assumed to be equal to the value provided to the limited partners upon liquidation of the Operating Partnership. Subject to certain limitations, the outstanding common units of limited partnership are redeemable for cash, or at the Company’s option, for a like number of common shares of beneficial interest of the Company.
The 2014 Plan permits the Company to issue equity-based awards to executives, employees, non-employee members of the Board of Trustees and any other persons providing services to or for the Company and its subsidiaries. The 2014 Plan provides for a maximum of
2,900,000
common shares of beneficial interest to be issued in the form of share options, share appreciation rights, restricted or unrestricted share awards, phantom shares, performance awards, incentive awards, other share-based awards, or any combination of the foregoing. In addition, the maximum number of common shares subject to awards of any combination that may be granted under the 2014 Plan during any fiscal year to any one individual is limited to
500,000
shares. The 2014 Plan terminates on February 17, 2024. The 2014 Plan authorized, among other things: (i) the grant of share options that qualify as incentive options under the Code, (ii) the grant of share options that do not so qualify, (iii) the grant of common shares in lieu of cash for trustees’ fees, (iv) grants of common shares in lieu of cash compensation and (v) the making of loans to acquire common shares in lieu of compensation (to the extent permitted by law and applicable provisions of the Sarbanes Oxley Act of 2002). The exercise price of share options is determined by the Compensation Committee of the Board of Trustees, but may not be less than
100%
of the fair value of the common shares on the date of grant. Restricted share awards and options under the 2014 Plan vest over a period determined by the Compensation Committee of the Board of Trustees, generally a
three
year period. The duration of each option is also determined by the Compensation Committee, subject to applicable laws and regulations. At
December 31, 2016
, there were
2,663,994
common shares available for future grant under the 2014 Plan. Upon the approval of the 2014 Plan by the common shareholders on May 7, 2014, the 2014 Plan replaced the 2009 Plan. The Company will no longer make any grants under the 2009 Plan (although awards previously made under the 2009 Plan that are outstanding will remain in effect in accordance with the terms of that plan and the applicable award agreements).
Nonvested Share Awards with Service Conditions
From time to time, the Company awards nonvested shares under the 2014 Plan to executives, employees and members of the Board of Trustees. The nonvested shares issued to executives and employees generally vest over
three
years based on continued employment. The shares issued to the members of the Board of Trustees vest immediately upon issuance. The Company determines the grant date fair value of the nonvested shares based upon the closing stock price of its common shares on the New York Stock Exchange on the date of grant and number of shares per the award agreements. Compensation costs are recognized on a straight-line basis over the requisite service period and are included in general and administrative expense in the accompanying consolidated statements of operations and comprehensive income.
A summary of the Company’s nonvested shares with service conditions as of
December 31, 2016
is as follows:
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted -
Average Grant
Date Fair Value
|
Nonvested at January 1, 2016
|
228,835
|
|
|
$
|
33.29
|
|
Granted
|
110,826
|
|
|
25.01
|
|
Vested
(1)
|
(90,191
|
)
|
|
31.70
|
|
Forfeited
|
(12,711
|
)
|
|
27.41
|
|
Nonvested at December 31, 2016
(2)
|
236,759
|
|
|
$
|
30.78
|
|
|
|
(1)
|
Amount includes accelerated vesting of the former Chief Financial Officer’s shares.
|
|
|
(2)
|
Amount excludes
29,376
share awards with market conditions which were earned but nonvested due to a service condition as of
December 31, 2016
.
|
As of
December 31, 2016
and
2015
, there were
$2,798
and
$3,914
, respectively, of total unrecognized compensation costs related to nonvested share awards with service conditions. As of
December 31, 2016
and
2015
, these costs were expected to be recognized over a weighted–average period of
1.2
and
1.4
years, respectively. The total intrinsic value of shares vested (calculated as number of shares multiplied by vesting date share price) during the years ended
December 31, 2016
,
2015
and
2014
was
$2,256
,
$3,152
and
$5,602
, respectively. Compensation costs (net of forfeitures) related to nonvested share awards with service conditions that have been included in general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income were
$3,002
,
$3,323
and
$3,055
for the years ended
December 31, 2016
,
2015
and
2014
, respectively.
On April 9, 2016, the Company finalized the former Chief Financial Officer’s severance package and the termination date was set to be no later than April 29, 2016. Pursuant to the terms of the award agreements, all of his nonvested share awards with service conditions would vest upon termination. Accordingly, the Company accelerated the recognition of previously unrecognized compensation costs related to his nonvested share awards with service conditions over the estimated remaining service period. On May 6, 2016, all of his nonvested share awards with service conditions vested with all remaining previously unrecognized compensation costs recognized. The compensation cost (net of forfeitures) that has been included in general and administrative expense in the accompanying consolidated statements of operations and comprehensive income was
$538
for the year ended
December 31, 2016
.
Nonvested Share Awards with Market or Performance Conditions
On May 31, 2008, the Company’s Board of Trustees entered into three Performance-Based Share Agreements (the “Share Agreements”), awarding
125,000
nonvested share awards with market conditions, in
25,000
,
50,000
and
50,000
increments, of nonvested shares to an executive. The actual amounts of the shares awarded earned for each of the Share Agreements is based on the specified
three
-year performance measurement periods ending on July 1, 2011, 2014 and 2017, respectively. The actual amounts of the shares awarded are to range from
0%
to
200%
of the target amounts, depending on the performance analysis stipulated in the Share Agreements, and
none
of the shares are outstanding until issued in accordance with the Share Agreements.
On July 1, 2014, the Company issued
59,778
shares to an executive who earned
119.6%
of the
50,000
target number of shares from the nonvested share awards with market conditions granted on May 31, 2008. All of the shares earned, or
59,778
shares, vested immediately on July 1, 2014. The executive received a cash payment of
$239
on the earned shares equal to the value of all dividends paid on common shares from May 31, 2008 until the determination date, July 1, 2014. As of July 1, 2014, the executive is entitled to receive dividends as declared and paid on the earned shares and to vote the shares. These common shares of beneficial interest were issued under the 2009 Plan.
With respect to the remaining
50,000
shares with a performance measurement period ending on July 1, 2017, the fair value of these shares was estimated on July 1, 2014, the beginning of the performance measurement period.
On January 24 and January 26, 2011, the Company’s Board of Trustees granted a target of
8,925
and
35,920
nonvested share awards with market conditions to executives, respectively. On January 1, 2014, the executives earned
79.5%
of the target number of shares, or
35,652
shares. The shares representing the difference between
79.5%
and
100%
of the target, or
9,193
shares, were forfeited on January 1, 2014. Of the earned shares,
11,885
shares vested immediately on January 1, 2014,
11,884
shares vested on January 1, 2015 and the remaining
11,883
shares vested on January 1, 2016. The executives received cash payments of
$75
on the earned shares equal to the value of all dividends paid on common shares from December 31, 2010 until the determination date, January 1, 2014. As of January 1, 2014, the executives are entitled to receive dividends as declared and paid on the earned shares and to vote the shares, including those shares subject to further vesting.
On January 26, 2012, the Company’s Board of Trustees granted a target of
79,823
nonvested share awards with market conditions to executives (the “January 26, 2012 Awards”). On January 1, 2015, the executives earned
136.3%
of their
79,823
target number of shares, or
108,779
shares. Of the shares earned,
36,261
and
36,260
shares vested on January 1, 2015 and January 1, 2016, respectively. On May 6, 2016, upon his termination, all of the former Chief Financial Officer’s
6,882
earned shares vested immediately. The remaining
29,376
earned shares will vest January 1, 2017 based on continued employment. The executives received a cash payment of
$334
on the earned shares equal to the value of all dividends paid on common shares from January 1, 2012 until the determination date, January 1, 2015. As of January 1, 2015, the executives are entitled to receive dividends as declared and paid on the earned shares and to vote the shares.
On January 30, 2013, the Company’s Board of Trustees granted a target of
80,559
nonvested share awards with either market or performance conditions to executives (the “January 30, 2013 Awards”). On March 1, 2016, the executives earned
91.7%
of their
40,280
target number of shares, or
36,926
shares, and all of the earned shares vested immediately. The shares representing the difference between
91.7%
and
100%
of the target, or
3,354
shares, were forfeited on March 1, 2016. The executives also received a cash payment of
$151
on the shares equal to the value of all dividends paid on common shares from January 1, 2013 until the determination date, February 29, 2016. As of March 1, 2016, the executives are entitled to receive dividends as declared and paid on the earned shares and to vote the shares. On August 11, 2016, the executives earned
133.2%
of their
32,117
remaining target shares exclusive of the
8,162
shares granted to the former Chief Financial Officer, or
42,824
shares, and all of the earned shares vested immediately. The executives also received a cash payment of
$214
on the shares equal to the value of all dividends paid on common shares from January 1, 2013 until the determination date, August 11, 2016. As of August 11, 2016, the executives are entitled to receive dividends as declared and paid on the earned shares and to vote the shares.
On March 20, 2014, the Company’s Board of Trustees granted a target of
57,385
nonvested share awards exclusive of the
14,582
shares granted to the former Chief Financial Officer, with either market or performance conditions to executives (the “March 20, 2014 Awards”). The actual amounts of the shares awarded with respect to
28,692
of the
57,385
shares will be determined on January 1, 2017, based on the performance measurement period of January 1, 2014 through December 31, 2016, in accordance with the terms of the agreements. The actual amounts of the shares awarded with respect to the remaining
28,693
of the
57,385
shares will be determined on July 1, 2017, based on the performance measurement period of July 1, 2014 through June 30, 2017, in accordance with the terms of the agreements. The actual amounts of the shares awarded will range from
0%
to
200%
of the target amounts, depending on the performance analysis stipulated in the agreements, and
none
of the shares are outstanding until issued in accordance with award agreements based on performance. After the actual amounts of the awards are determined (or earned) at the end of the respective performance measurement period, all of the earned shares will be issued and outstanding on those dates. The executives will receive cash payments on the earned shares equal to the value of all dividends paid on common shares from the grant date through the respective determination date. Such amounts will be paid to the awardees on or about January 1, 2017 and July 1, 2017, respectively. Thereafter, the executives will be entitled to receive dividends as declared and paid on the earned shares and to vote the shares. With respect to
28,692
shares, amortization commenced on March 20, 2014, the beginning of the requisite service period, and, with respect to
28,693
shares, amortization commenced on July 1, 2014, the beginning of the requisite service period.
On March 19, 2015, the Company’s Board of Trustees granted a target of
49,225
nonvested share awards exclusive of the
12,435
shares granted to the former Chief Financial Officer, with either market or performance conditions to executives (the “March 19, 2015 Awards”). The actual amounts of the shares awarded with respect to
24,612
of the
49,225
shares will be determined on January 1, 2018, based on the performance measurement period of January 1, 2015 through December 31, 2017, in accordance with the terms of the agreements. The actual amounts of the shares awarded with respect to the remaining
24,613
of the
49,225
shares will be determined on July 1, 2018, based on the performance measurement period of July 1, 2015 through June 30, 2018, in accordance with the terms of the agreements. The actual amounts of the shares awarded will range from
0%
to
200%
of the target amounts, depending on the performance analysis stipulated in the agreements, and
none
of the shares are outstanding until issued in accordance with award agreements based on performance. After the actual amounts of the awards are determined (or earned) at the end of the respective performance measurement period, all of the earned shares will be issued and outstanding on those dates. The executives will receive cash payments on the earned shares equal to the value of all dividends paid on common shares from the grant date through the respective determination date. Such amounts will be paid to the awardees on or about January 1, 2018 and July 1, 2018, respectively. Thereafter, the executives will be entitled to receive dividends as declared and paid on the earned shares and to vote the shares. With respect to
24,612
shares, amortization commenced on March 19, 2015, the beginning of the requisite service period, and, with respect to
24,613
shares, amortization commenced on July 1, 2015, the beginning of the requisite service period.
On March 18, 2016, the Company’s Board of Trustees granted a target of
77,565
nonvested share awards exclusive of the
19,610
shares granted to the former Chief Financial Officer, with either market or performance conditions to executives (the “March 18, 2016 Awards”). The actual amounts of the shares awarded with respect to
38,782
of the
77,565
shares will be determined on or about January 1, 2019, based on the performance measurement period of January 1, 2016 through December 31, 2018, in accordance with the terms of the agreements. The actual amounts of the shares awarded with respect to the remaining
38,783
of
the
77,565
shares will be determined on or about July 1, 2019, based on the performance measurement period of July 1, 2016 through June 30, 2019, in accordance with the terms of the agreements. The actual amounts of the shares awarded will range from
0%
to
200%
of the target amounts, depending on the performance analysis stipulated in the agreements, and
none
of the shares are outstanding until issued in accordance with award agreements based on performance. After the actual amounts of the awards are determined (or earned) at the end of the respective performance measurement period, all of the earned shares will be issued and outstanding on those dates. The executives will receive cash payments on the earned shares equal to the value of all dividends paid on common shares from the grant date through the respective determination date. Such amounts will be paid to the awardees on or about January 1, 2019 and July 1, 2019, respectively. Thereafter, the executives will be entitled to receive dividends as declared and paid on the earned shares and to vote the shares. With respect to
38,782
shares, amortization commenced on March 18, 2016, the beginning of the requisite service period, and, with respect to
38,783
shares, amortization commenced on July 1, 2016, the beginning of the requisite service period.
On April 25, 2016, the Company’s Board of Trustees granted a target of
12,632
nonvested share awards with either market or performance conditions to an executive (the “April 25, 2016 Awards”). The actual amounts of the shares awarded with respect to
6,316
of the
12,632
shares will be determined on or about January 1, 2019, based on the performance measurement period of January 1, 2016 through December 31, 2018, in accordance with the terms of the agreements. The actual amounts of the shares awarded with respect to the remaining
6,316
of the
12,632
shares will be determined on or about July 1, 2019, based on the performance measurement period of July 1, 2016 through June 30, 2019, in accordance with the terms of the agreements. The actual amounts of the shares awarded will range from
0%
to
200%
of the target amounts, depending on the performance analysis stipulated in the agreements, and
none
of the shares are outstanding until issued in accordance with award agreements based on performance. After the actual amounts of the awards are determined (or earned) at the end of the respective performance measurement period, all of the earned shares will be issued and outstanding on those dates. The executive will receive cash payments on the earned shares equal to the value of all dividends paid on common shares from the grant date through the respective determination date. Such amounts will be paid to the awardee on or about January 1, 2019 and July 1, 2019, respectively. Thereafter, the executive will be entitled to receive dividends as declared and paid on the earned shares and to vote the shares. With respect to
6,316
shares, amortization commenced on April 25, 2016, the beginning of the requisite service period, and with respect to
6,316
shares, amortization commenced on July 1, 2016, the beginning of the requisite service period.
The grant date fair values of the above described nonvested share awards with market conditions were determined by the Company using data under the Monte Carlo valuation method provided by a third-party consultant. The terms stipulated in the award agreements used to determine the total amount of the shares awarded for all awards granted prior to 2013 consist of the following
three
tranches: (1) a comparison of the Company’s “total return” (the increase in the market price of a Company’s common shares plus dividends declared thereon and assuming such dividends are reinvested as calculated by the FTSE NAREIT Equity Index) to the total return of the companies in the FTSE NAREIT Equity Index, (2) a comparison of the Company’s total return to the total returns of
six
companies in a designated peer group of the Company and (3) the Company’s actual performance as compared to a Board-established total return goal.
For the awards granted in 2013 and after, the nonvested awards consist of
three
tranches in each performance measurement period described above.
Two
of the tranches in the award agreements are nonvested share awards with market conditions, consistent with tranches described in (2) and (3) above, and were valued on the grant date via the methodology described above using a third-party consultant. The third tranche is based on “return on invested capital” discussed below, which is a performance condition. The grant date fair values of the tranches with performance conditions were calculated based on the targeted awards, and the valuation is adjusted on a periodic basis. As of December 31, 2016, a change in the Company’s estimate of probable outcome occurred for all the award tranches with performance conditions as the return on invested capital measurement assumptions (see below) was revised from
100%
to
200%
resulting in a cumulative adjustment to compensation cost.
The capital market assumptions used in the valuations consisted of the following:
|
|
•
|
Factors associated with the underlying performance of the Company’s share price and shareholder returns over the term of the awards including total share return volatility and risk-free interest.
|
|
|
•
|
Factors associated with the relative performance of the Company’s share price and shareholder returns when compared to those companies which compose the index including beta as a means to breakdown total volatility into market-related and company specific volatilities.
|
|
|
•
|
The valuation has been performed in a risk-neutral framework.
|
|
|
•
|
Return on invested capital is a performance condition award measurement. The estimated value was calculated based on the initial face value at the date of grant. The valuation will be adjusted on a periodic basis as the estimated number of awards expected to vest is revised.
|
The assumptions used were as follows for each performance measure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volatility
|
|
Interest
Rates
|
|
Dividend
Yield
|
|
Stock
Beta
|
|
Fair Value of
Components
of Award
|
|
Weighting
of Total
Awards
|
April 25, 2016 Awards (performance period starting January 1, 2016)
|
|
|
|
|
Target amounts
|
26.40
|
%
|
|
1.01
|
%
|
|
N/A
|
|
N/A
|
|
|
$
|
18.61
|
|
|
33.40
|
%
|
Return on invested capital
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
N/A
|
|
|
$
|
23.75
|
|
|
33.30
|
%
|
Peer companies
|
26.40
|
%
|
|
1.01
|
%
|
|
N/A
|
|
1.024
|
|
|
$
|
23.63
|
|
|
33.30
|
%
|
April 25, 2016 Awards (performance period starting July 1, 2016)
|
|
|
|
|
Target amounts
|
26.40
|
%
|
|
1.01
|
%
|
|
N/A
|
|
N/A
|
|
|
$
|
20.47
|
|
|
33.40
|
%
|
Return on invested capital
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
N/A
|
|
|
$
|
23.75
|
|
|
33.30
|
%
|
Peer companies
|
26.40
|
%
|
|
1.01
|
%
|
|
N/A
|
|
1.024
|
|
|
$
|
26.10
|
|
|
33.30
|
%
|
March 18, 2016 Awards (performance period starting January 1, 2016)
|
|
|
|
|
Target amounts
|
26.40
|
%
|
|
1.00
|
%
|
|
N/A
|
|
N/A
|
|
|
$
|
22.23
|
|
|
33.40
|
%
|
Return on invested capital
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
N/A
|
|
|
$
|
25.14
|
|
|
33.30
|
%
|
Peer companies
|
26.40
|
%
|
|
1.00
|
%
|
|
N/A
|
|
1.023
|
|
|
$
|
25.18
|
|
|
33.30
|
%
|
March 18, 2016 Awards (performance period starting July 1, 2016)
|
|
|
|
|
Target amounts
|
26.40
|
%
|
|
1.00
|
%
|
|
N/A
|
|
N/A
|
|
|
$
|
21.65
|
|
|
33.40
|
%
|
Return on invested capital
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
N/A
|
|
|
$
|
25.14
|
|
|
33.30
|
%
|
Peer companies
|
26.40
|
%
|
|
1.00
|
%
|
|
N/A
|
|
1.023
|
|
|
$
|
27.81
|
|
|
33.30
|
%
|
March 19, 2015 Awards (performance period starting January 1, 2015)
|
|
|
|
|
Target amounts
|
24.40
|
%
|
|
0.99
|
%
|
|
N/A
|
|
N/A
|
|
|
$
|
29.25
|
|
|
33.40
|
%
|
Return on invested capital
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
N/A
|
|
|
$
|
38.84
|
|
|
33.30
|
%
|
Peer companies
|
24.40
|
%
|
|
0.99
|
%
|
|
N/A
|
|
1.011
|
|
|
$
|
40.69
|
|
|
33.30
|
%
|
March 19, 2015 Awards (performance period starting July 1, 2015)
|
|
|
|
|
Target amounts
|
24.40
|
%
|
|
0.99
|
%
|
|
N/A
|
|
N/A
|
|
|
$
|
31.86
|
|
|
33.40
|
%
|
Return on invested capital
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
N/A
|
|
|
$
|
38.84
|
|
|
33.30
|
%
|
Peer companies
|
24.40
|
%
|
|
0.99
|
%
|
|
N/A
|
|
1.011
|
|
|
$
|
41.00
|
|
|
33.30
|
%
|
May 31, 2008 Awards (performance period starting July 1, 2014)
|
|
|
|
|
Target amounts
|
33.30
|
%
|
|
0.90
|
%
|
|
N/A
|
|
N/A
|
|
|
$
|
32.57
|
|
|
20.00
|
%
|
NAREIT index
|
33.30
|
%
|
|
0.90
|
%
|
|
N/A
|
|
1.356
|
|
|
$
|
39.26
|
|
|
40.00
|
%
|
Peer companies
|
33.30
|
%
|
|
0.90
|
%
|
|
N/A
|
|
0.908
|
|
|
$
|
38.15
|
|
|
40.00
|
%
|
March 20, 2014 Awards (performance period starting January 1, 2014)
|
|
|
|
|
|
|
Target amounts
|
33.70
|
%
|
|
0.90
|
%
|
|
N/A
|
|
N/A
|
|
|
$
|
31.94
|
|
|
33.40
|
%
|
Return on invested capital
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
N/A
|
|
|
$
|
31.82
|
|
|
33.30
|
%
|
Peer companies
|
33.70
|
%
|
|
0.90
|
%
|
|
N/A
|
|
0.938
|
|
|
$
|
31.02
|
|
|
33.30
|
%
|
March 20, 2014 Awards (performance period starting July 1, 2014)
|
|
|
|
|
|
|
Target amounts
|
33.70
|
%
|
|
0.90
|
%
|
|
N/A
|
|
N/A
|
|
|
$
|
31.23
|
|
|
33.40
|
%
|
Return on invested capital
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
N/A
|
|
|
$
|
31.82
|
|
|
33.30
|
%
|
Peer companies
|
33.70
|
%
|
|
0.90
|
%
|
|
N/A
|
|
0.938
|
|
|
$
|
34.53
|
|
|
33.30
|
%
|
January 30, 2013 Awards (performance period starting January 1, 2013)
|
|
|
|
|
|
|
Target amounts
|
38.70
|
%
|
|
0.42
|
%
|
|
N/A
|
|
N/A
|
|
|
$
|
29.38
|
|
|
33.40
|
%
|
Return on invested capital
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
N/A
|
|
|
$
|
27.20
|
|
|
33.30
|
%
|
Peer companies
|
38.70
|
%
|
|
0.42
|
%
|
|
N/A
|
|
0.864
|
|
|
$
|
30.51
|
|
|
33.30
|
%
|
January 30, 2013 Awards (performance period starting July 1, 2013)
|
|
|
|
|
|
|
Target amounts
|
38.70
|
%
|
|
0.42
|
%
|
|
N/A
|
|
N/A
|
|
|
$
|
27.70
|
|
|
33.40
|
%
|
Return on invested capital
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
N/A
|
|
|
$
|
27.20
|
|
|
33.30
|
%
|
Peer companies
|
38.70
|
%
|
|
0.42
|
%
|
|
N/A
|
|
0.864
|
|
|
$
|
31.34
|
|
|
33.30
|
%
|
January 26, 2012 Awards
|
|
|
|
|
|
|
|
|
|
|
|
Target amounts
|
65.30
|
%
|
|
0.31
|
%
|
|
N/A
|
|
N/A
|
|
|
$
|
36.22
|
|
|
33.40
|
%
|
NAREIT index
|
65.30
|
%
|
|
0.31
|
%
|
|
N/A
|
|
1.370
|
|
|
$
|
35.25
|
|
|
33.30
|
%
|
Peer companies
|
65.30
|
%
|
|
0.31
|
%
|
|
N/A
|
|
0.911
|
|
|
$
|
35.33
|
|
|
33.30
|
%
|
A summary of the Company’s restricted share awards with either market or performance conditions as of
December 31, 2016
is as follows:
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted-
Average Grant
Date Fair Value
|
Nonvested at January 1, 2016
|
348,587
|
|
|
$
|
33.98
|
|
Granted
(1)(2)
|
121,372
|
|
|
24.74
|
|
Vested
(2)
|
(155,463
|
)
|
|
31.89
|
|
Forfeited
(2)
|
(38,313
|
)
|
|
29.26
|
|
Nonvested at December 31, 2016
|
276,183
|
|
|
$
|
27.36
|
|
|
|
(1)
|
Amount includes an additional
10,707
shares issued on August 11, 2016 from the January 30, 2013 grant, which were earned in excess of the target amount.
|
|
|
(2)
|
Amounts include
27,570
shares vested,
858
shares earned in excess of target amount, and
34,959
shares forfeited, respectively, upon termination of the former Chief Financial Officer.
|
As of
December 31, 2016
and
2015
, there were
$3,757
and
$5,342
, respectively, of total unrecognized compensation costs related to restricted share awards with market or performance conditions. As of
December 31, 2016
and
2015
, these costs were expected to be recognized over a weighted–average period of
1.8
and
1.7
years, respectively. As of
December 31, 2016
and
2015
, there were
463,532
and
308,069
share awards with market or performance conditions vested, respectively. Additionally, there were
29,376
and
84,401
nonvested share awards with market or performance conditions earned but nonvested due to a service condition as of
December 31, 2016
and
2015
, respectively. Compensation costs (net of forfeitures) related to nonvested share awards with market or performance conditions are included in general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income were
$3,896
,
$4,360
and
$3,567
for the years ended
December 31, 2016
,
2015
and
2014
, respectively.
On April 9, 2016, the Company finalized the former Chief Financial Officer’s severance package and the termination date was set to be no later than April 29, 2016. Pursuant to the terms of the award agreements, a portion of his nonvested share awards with market or performance conditions would vest upon termination. Accordingly, the Company accelerated the recognition of previously unrecognized compensation costs on his nonvested share awards with market or performance conditions over the estimated remaining service period. On May 6, 2016 and May 9, 2016, a portion of his nonvested share awards with market or performance conditions vested, a portion was forfeited and additional shares were earned for awards valued at over
100%
of the target, with all remaining previously unrecognized compensation costs recognized. The compensation cost (net of forfeitures) related to his nonvested share awards with market or performance conditions that has been included in general and administrative expense in the accompanying consolidated statements of operations and comprehensive income was
$96
for the year ended
December 31, 2016
.
For the year ended
December 31, 2016
, severance expense related to the former Chief Financial Officer’s termination totaled
$1,576
and included cash compensation and benefits, compensation for shares with service conditions and shares with market or performance conditions and cash payments related to dividends on restricted shares that vested.
Board of Trustees’ Compensation
The Company issues common shares of beneficial interest to the independent members of the Board of Trustees for at least half of their compensation in lieu of cash. The Trustees may elect to receive the remaining half in cash or additional common shares. All or a portion of the shares issued may be deferred. The Company issued an aggregate of
25,113
,
18,774
and
15,865
shares, including
9,103
,
4,910
and
4,183
deferred shares, related to the Trustees’ compensation for the years
2016
,
2015
and
2014
, respectively.
Substantially all of the Company’s revenues are derived from operating revenues generated by the hotels, all of which are leased by LHL.
Other indirect hotel operating expenses consist of the following expenses incurred by the hotels:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
General and administrative
|
$
|
103,993
|
|
|
$
|
101,397
|
|
|
$
|
87,210
|
|
Sales and marketing
|
75,212
|
|
|
73,654
|
|
|
61,249
|
|
Repairs and maintenance
|
39,309
|
|
|
39,521
|
|
|
37,169
|
|
Management and incentive fees
|
40,064
|
|
|
39,686
|
|
|
36,463
|
|
Utilities and insurance
|
33,109
|
|
|
34,427
|
|
|
32,296
|
|
Franchise fees
|
10,396
|
|
|
9,836
|
|
|
8,346
|
|
Other expenses
|
3,182
|
|
|
2,483
|
|
|
1,775
|
|
Total other indirect expenses
|
$
|
305,265
|
|
|
$
|
301,004
|
|
|
$
|
264,508
|
|
As of
December 31, 2016
, LHL leased all
46
hotels owned by the Company as follows:
|
|
|
|
|
|
|
|
Hotel Properties
|
|
Location
|
1.
|
|
Hotel Amarano Burbank
|
|
Burbank, CA
|
2.
|
|
L’Auberge Del Mar
|
|
Del Mar, CA
|
3.
|
|
Hilton San Diego Gaslamp Quarter
|
|
San Diego, CA
|
4.
|
|
Hotel Solamar
|
|
San Diego, CA
|
5.
|
|
San Diego Paradise Point Resort and Spa
|
|
San Diego, CA
|
6.
|
|
The Hilton San Diego Resort and Spa
|
|
San Diego, CA
|
7.
|
|
Harbor Court Hotel
|
|
San Francisco, CA
|
8.
|
|
Hotel Triton
|
|
San Francisco, CA
|
9.
|
|
Hotel Vitale
|
|
San Francisco, CA
|
10.
|
|
Park Central San Francisco
|
|
San Francisco, CA
|
11.
|
|
Serrano Hotel
|
|
San Francisco, CA
|
12.
|
|
The Marker San Francisco
|
|
San Francisco, CA
|
13.
|
|
Villa Florence
|
|
San Francisco, CA
|
14.
|
|
Chaminade Resort and Conference Center
|
|
Santa Cruz, CA
|
15.
|
|
Viceroy Santa Monica
|
|
Santa Monica, CA
|
16.
|
|
Chamberlain West Hollywood
|
|
West Hollywood, CA
|
17.
|
|
Le Montrose Suite Hotel
|
|
West Hollywood, CA
|
18.
|
|
Le Parc Suite Hotel
|
|
West Hollywood, CA
|
19.
|
|
The Grafton on Sunset
|
|
West Hollywood, CA
|
20.
|
|
Hotel George
|
|
Washington, DC
|
21.
|
|
Hotel Madera
|
|
Washington, DC
|
22.
|
|
Hotel Palomar, Washington, DC
|
|
Washington, DC
|
23.
|
|
Hotel Rouge
|
|
Washington, DC
|
24.
|
|
Mason & Rook Hotel
|
|
Washington, DC
|
25.
|
|
Sofitel Washington, DC Lafayette Square
|
|
Washington, DC
|
26.
|
|
The Donovan
|
|
Washington, DC
|
27.
|
|
The Liaison Capitol Hill
|
|
Washington, DC
|
28.
|
|
Topaz Hotel
|
|
Washington, DC
|
29.
|
|
Southernmost Beach Resort Key West
|
|
Key West, FL
|
30.
|
|
The Marker Waterfront Resort
|
|
Key West, FL
|
31.
|
|
Hotel Chicago
|
|
Chicago, IL
|
32.
|
|
Westin Michigan Avenue
|
|
Chicago, IL
|
33.
|
|
Hyatt Regency Boston Harbor
|
|
Boston, MA
|
34.
|
|
Onyx Hotel
|
|
Boston, MA
|
35.
|
|
The Liberty Hotel
|
|
Boston, MA
|
36.
|
|
Westin Copley Place
|
|
Boston, MA
|
37.
|
|
Gild Hall
|
|
New York, NY
|
38.
|
|
The Roger
|
|
New York, NY
|
39.
|
|
Park Central Hotel New York (shared lease with WestHouse Hotel New York)
|
|
New York, NY
|
40.
|
|
WestHouse Hotel New York
|
|
New York, NY
|
41.
|
|
The Heathman Hotel
|
|
Portland, OR
|
42.
|
|
Embassy Suites Philadelphia - Center City
|
|
Philadelphia, PA
|
43.
|
|
Westin Philadelphia
|
|
Philadelphia, PA
|
44.
|
|
Lansdowne Resort
|
|
Lansdowne,VA
|
45.
|
|
Alexis Hotel
|
|
Seattle, WA
|
46.
|
|
Hotel Deca
(1)
|
|
Seattle, WA
|
(1)
Property sold on January 19, 2017 (see Note 13).
The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Code commencing with its taxable year ended December 31, 1998. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least
90%
of its adjusted taxable income to its shareholders. It is the Company’s current intention to adhere to these requirements and maintain the Company’s qualification for taxation as a REIT. As a REIT, the Company generally is not subject to federal corporate income tax on that portion of its net income that is currently distributed to shareholders. If the Company fails to qualify for taxation as a REIT in any taxable year, it will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for
four
subsequent taxable years. Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income and property, and to federal income and excise taxes on its undistributed taxable income. In addition, taxable income from non-REIT activities managed through a TRS is subject to federal, state and local income taxes. As a wholly owned TRS of the Company, LHL is required to pay income taxes at the applicable federal, state and local rates.
For federal income tax purposes, the cash distributions paid to the Company’s common shareholders of beneficial interest and preferred shareholders may be characterized as ordinary income, return of capital (generally non-taxable) or capital gains. Tax law permits certain characterization of distributions which could result in differences between cash basis and tax basis distribution amounts.
The following characterizes distributions paid per common share of beneficial interest and preferred share on a tax basis for the years ended
December 31, 2016
,
2015
and
2014
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
$
|
|
%
|
|
$
|
|
%
|
|
$
|
|
%
|
Common shares of beneficial interest
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary income
|
$
|
1.1631
|
|
|
62.26
|
%
|
|
$
|
1.6570
|
|
|
100.00
|
%
|
|
$
|
1.4556
|
|
|
100.00
|
%
|
Capital gain
|
0.4550
|
|
|
24.36
|
%
|
|
0.0000
|
|
|
0.00
|
%
|
|
0.0000
|
|
|
0.00
|
%
|
Unrecaptured Section 1250 gain
|
0.2499
|
|
|
13.38
|
%
|
|
0.0000
|
|
|
0.00
|
%
|
|
0.0000
|
|
|
0.00
|
%
|
|
$
|
1.8680
|
|
|
100.00
|
%
|
|
$
|
1.6570
|
|
|
100.00
|
%
|
|
$
|
1.4556
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares (Series G)
(1)
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary income
|
$
|
0.0000
|
|
|
0.00
|
%
|
|
$
|
0.0000
|
|
|
0.00
|
%
|
|
$
|
1.3745
|
|
|
100.00
|
%
|
Capital gain
|
0.0000
|
|
|
0.00
|
%
|
|
0.0000
|
|
|
0.00
|
%
|
|
0.0000
|
|
|
0.00
|
%
|
Unrecaptured Section 1250 gain
|
0.0000
|
|
|
0.00
|
%
|
|
0.0000
|
|
|
0.00
|
%
|
|
0.0000
|
|
|
0.00
|
%
|
|
$
|
0.0000
|
|
|
0.00
|
%
|
|
$
|
0.0000
|
|
|
0.00
|
%
|
|
$
|
1.3745
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares (Series H)
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary income
|
$
|
1.4593
|
|
|
62.26
|
%
|
|
$
|
1.8750
|
|
|
100.00
|
%
|
|
$
|
1.8750
|
|
|
100.00
|
%
|
Capital gain
|
0.5709
|
|
|
24.36
|
%
|
|
0.0000
|
|
|
0.00
|
%
|
|
0.0000
|
|
|
0.00
|
%
|
Unrecaptured Section 1250 gain
|
0.3136
|
|
|
13.38
|
%
|
|
0.0000
|
|
|
0.00
|
%
|
|
0.0000
|
|
|
0.00
|
%
|
|
$
|
2.3438
|
|
|
100.00
|
%
|
|
$
|
1.8750
|
|
|
100.00
|
%
|
|
$
|
1.8750
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares (Series I)
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary income
|
$
|
1.2404
|
|
|
62.26
|
%
|
|
$
|
1.5938
|
|
|
100.00
|
%
|
|
$
|
1.5938
|
|
|
100.00
|
%
|
Capital gain
|
0.4853
|
|
|
24.36
|
%
|
|
0.0000
|
|
|
0.00
|
%
|
|
0.0000
|
|
|
0.00
|
%
|
Unrecaptured Section 1250 gain
|
0.2665
|
|
|
13.38
|
%
|
|
0.0000
|
|
|
0.00
|
%
|
|
0.0000
|
|
|
0.00
|
%
|
|
$
|
1.9922
|
|
|
100.00
|
%
|
|
$
|
1.5938
|
|
|
100.00
|
%
|
|
$
|
1.5938
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares (Series J)
(2)
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary income
|
$
|
0.6265
|
|
|
62.26
|
%
|
|
$
|
0.0000
|
|
|
0.00
|
%
|
|
$
|
0.0000
|
|
|
0.00
|
%
|
Capital gain
|
0.2451
|
|
|
24.36
|
%
|
|
0.0000
|
|
|
0.00
|
%
|
|
0.0000
|
|
|
0.00
|
%
|
Unrecaptured Section 1250 gain
|
0.1346
|
|
|
13.38
|
%
|
|
0.0000
|
|
|
0.00
|
%
|
|
0.0000
|
|
|
0.00
|
%
|
|
$
|
1.0062
|
|
|
100.00
|
%
|
|
$
|
0.0000
|
|
|
0.00
|
%
|
|
$
|
0.0000
|
|
|
0.00
|
%
|
(1)
On July 3, 2014, the Company redeemed its remaining Series G Preferred Shares (see Note 6).
(2)
On May 25, 2016, the Company issued the Series J Preferred Shares (see Note 6).
The Company’s federal and state tax returns for the year ended
December 31, 2016
have not been filed. The taxability information presented for the Company’s dividends paid in
2016
is based upon management’s estimate.
Income tax expense (benefit) was comprised of the following for the years ended
December 31, 2016
,
2015
and
2014
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
LHL’s income tax expense (benefit)
|
$
|
4,491
|
|
|
$
|
(2,546
|
)
|
|
$
|
1,260
|
|
Operating Partnership’s income tax expense
|
1,293
|
|
|
1,254
|
|
|
1,046
|
|
Total income tax expense (benefit)
|
$
|
5,784
|
|
|
$
|
(1,292
|
)
|
|
$
|
2,306
|
|
The components of LHL’s income tax expense (benefit) and income (loss) before income tax expense (benefit) for the years ended
December 31, 2016
,
2015
and
2014
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
LHL’s income tax expense (benefit):
|
|
|
|
|
|
Federal
|
|
|
|
|
|
Current
|
$
|
1,490
|
|
|
$
|
(510
|
)
|
|
$
|
912
|
|
Deferred
|
1,901
|
|
|
(1,251
|
)
|
|
372
|
|
State & local
|
|
|
|
|
|
Current
|
516
|
|
|
83
|
|
|
297
|
|
Deferred
|
584
|
|
|
(868
|
)
|
|
(321
|
)
|
Total
|
$
|
4,491
|
|
|
$
|
(2,546
|
)
|
|
$
|
1,260
|
|
|
|
|
|
|
|
LHL’s income (loss) before income tax expense (benefit)
|
$
|
10,255
|
|
|
$
|
(4,876
|
)
|
|
$
|
3,559
|
|
LHL’s provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to LHL’s pretax income (loss) for the years ended
December 31, 2016
,
2015
and
2014
as a result of the following differences:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
“Expected” federal tax expense (benefit) at statutory rate
|
$
|
3,487
|
|
|
$
|
(1,658
|
)
|
|
$
|
1,210
|
|
State income tax expense (benefit), net of federal income tax effect
|
776
|
|
|
(443
|
)
|
|
302
|
|
Other, net
|
228
|
|
|
(445
|
)
|
|
(252
|
)
|
Income tax expense (benefit)
|
$
|
4,491
|
|
|
$
|
(2,546
|
)
|
|
$
|
1,260
|
|
LHL’s deferred tax assets (liabilities) as of
December 31, 2016
and
2015
were as follows:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
Net operating loss carryforwards
|
$
|
1,902
|
|
|
$
|
4,175
|
|
Bad debt reserves
(1)
|
260
|
|
|
255
|
|
Golf membership deferred revenue
(1)(2)
|
(347
|
)
|
|
(343
|
)
|
Straight-line rent
(1)(2)
|
(734
|
)
|
|
(643
|
)
|
Other
|
0
|
|
|
122
|
|
Net deferred tax assets
|
$
|
1,081
|
|
|
$
|
3,566
|
|
|
|
(1)
|
Amounts included in accounts payable and accrued expenses in the accompanying consolidated balance sheets for 2016.
|
|
|
(2)
|
For 2015, amounts netted because of the existence of deferred tax assets in both federal and state jurisdictions.
|
As of
December 31, 2016
, the Company had net deferred tax assets of
$1,081
primarily due to temporary federal differences and current and past years’ state tax net operating losses. These loss carryforwards will generally expire in
2017
through
2035
if not utilized by then. The Company analyzes state loss carryforwards on a state by state basis and records a valuation allowance when management deems it more likely than not that future results will not generate sufficient taxable income in the respective state to realize the deferred tax asset prior to the expiration of the loss carryforwards. Management believes that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets related to state loss carryforwards prior to the expiration of the loss carryforwards and has determined that no valuation allowance is necessary. From time to time, the Company may be subject to federal, state or local tax audits in the normal course of business.
Regarding accounting for uncertainty in income taxes, GAAP guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken in a tax return. The Company must determine whether it is “more-likely-than-not” that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Once it is determined that a position meets the more-likely-than-not recognition threshold, the previously unrecognized benefit associated with the position is recognized in the financial statements. This guidance applies to all positions related to income taxes.
The Company has
no
material unrecognized income tax benefits as of
December 31, 2016
and
2015
. As of
December 31, 2016
, the tax years that remain subject to examination by major tax jurisdictions generally include
2012
through
2016
.
|
|
10.
|
Fair Value Measurements
|
In evaluating fair value, GAAP outlines a valuation framework and creates a fair value hierarchy that distinguishes between market assumptions based on market data (observable inputs) and a reporting entity’s own assumptions about market data (unobservable inputs). The hierarchy ranks the quality and reliability of inputs used to determine fair value, which are then classified and disclosed in one of the three categories. The three levels are as follows:
Level 1—Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date.
Level 2—Observable inputs, other than quoted prices included in level 1, such as interest rates, yield curves, quoted prices in active markets for similar assets and liabilities, and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3—Unobservable inputs that are supported by limited market activity. This includes certain pricing models, discounted cash flow methodologies and similar techniques when observable inputs are not available.
The Company estimates the fair value of its financial instruments using available market information and valuation methodologies the Company believes to be appropriate for these purposes. Considerable judgment and subjectivity are involved in developing these estimates and, accordingly, such estimates are not necessarily indicative of amounts that would be realized upon disposition.
Recurring Measurements
For assets and liabilities measured at fair value on a recurring basis, quantitative disclosure of their fair value is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at
|
|
|
|
|
December 31, 2016
|
|
December 31, 2015
|
|
|
|
|
Using Significant Other Observable
|
|
|
|
|
Inputs (Level 2)
|
Description
|
|
Consolidated Balance Sheet Location
|
|
|
|
|
Derivative interest rate instruments
|
|
Prepaid expenses and other assets
|
|
$
|
3,295
|
|
|
$
|
1,605
|
|
Derivative interest rate instruments
|
|
Accounts payable and accrued expenses
|
|
$
|
927
|
|
|
$
|
1,702
|
|
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. As a result, the Company has determined that its derivative valuations in their entirety are classified within level 2 of the fair value hierarchy.
Financial Instruments Not Measured at Fair Value
The following table represents the fair value, derived using level 2 inputs, of financial instruments presented at carrying value in the Company’s consolidated financial statements as of
December 31, 2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
December 31, 2015
|
|
Carrying Value
|
|
Estimated Fair Value
|
|
Carrying Value
|
|
Estimated Fair Value
|
Note receivable
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
80,000
|
|
|
$
|
80,000
|
|
Borrowings under credit facilities
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
21,000
|
|
|
$
|
21,061
|
|
Term loans
|
$
|
855,000
|
|
|
$
|
857,224
|
|
|
$
|
855,000
|
|
|
$
|
856,038
|
|
Bonds payable
|
$
|
42,500
|
|
|
$
|
42,500
|
|
|
$
|
42,500
|
|
|
$
|
42,500
|
|
Mortgage loans
|
$
|
225,000
|
|
|
$
|
225,224
|
|
|
$
|
511,294
|
|
|
$
|
511,786
|
|
The Company estimated the fair value of its borrowings under credit facilities, term loans, bonds payable and mortgage loans using interest rates ranging from
1.5%
to
1.8%
as of
December 31, 2016
and from
1.5%
to
4.4%
as of
December 31, 2015
with a weighted average effective interest rate of
1.5%
and
2.1%
as of
December 31, 2016
and
2015
, respectively. The assumptions reflect the terms currently available on similar borrowings to borrowers with credit profiles similar to the Company’s.
At
December 31, 2016
and
2015
, the carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses and distributions payable were representative of their fair values due to the short-term nature of these instruments and the recent acquisition of these items.
|
|
11.
|
Earnings per Common Share
|
The limited partners’ outstanding common partnership units in the Operating Partnership (which may be converted to common shares of beneficial interest) have been excluded from the diluted earnings per share calculation as there would be no effect on the amounts since the limited partners’ share of income or loss would also be added back to net income or loss. Any anti-dilutive shares have been excluded from the diluted earnings per share calculation. Unvested share-based payment awards expected to vest that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. Accordingly, distributed and undistributed earnings attributable to unvested restricted shares (participating securities) have been excluded, as applicable, from net income or loss attributable to common shareholders used in the basic and diluted earnings per share calculations. Net income or loss figures are presented net of noncontrolling interests in the earnings per share calculations.
The computation of basic and diluted earnings per common share is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Numerator:
|
|
|
|
|
|
Net income attributable to common shareholders
|
$
|
234,575
|
|
|
$
|
123,383
|
|
|
$
|
197,561
|
|
Dividends paid on unvested restricted shares
|
(491
|
)
|
|
(542
|
)
|
|
(411
|
)
|
Undistributed earnings attributable to unvested restricted shares
|
(70
|
)
|
|
0
|
|
|
(138
|
)
|
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares
|
$
|
234,014
|
|
|
$
|
122,841
|
|
|
$
|
197,012
|
|
Denominator:
|
|
|
|
|
|
Weighted average number of common shares - basic
|
112,791,839
|
|
|
112,685,235
|
|
|
104,188,785
|
|
Effect of dilutive securities:
|
|
|
|
|
|
Compensation-related shares
|
372,760
|
|
|
411,185
|
|
|
357,110
|
|
Weighted average number of common shares - diluted
|
113,164,599
|
|
|
113,096,420
|
|
|
104,545,895
|
|
Earnings per Common Share - Basic:
|
|
|
|
|
|
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares
|
$
|
2.07
|
|
|
$
|
1.09
|
|
|
$
|
1.89
|
|
Earnings per Common Share - Diluted:
|
|
|
|
|
|
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares
|
$
|
2.07
|
|
|
$
|
1.09
|
|
|
$
|
1.88
|
|
|
|
12.
|
Supplemental Information to Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Interest paid, net of capitalized interest
|
$
|
41,483
|
|
|
$
|
52,155
|
|
|
$
|
54,558
|
|
Interest capitalized
|
398
|
|
|
902
|
|
|
400
|
|
Income taxes paid, net
|
5,111
|
|
|
3,112
|
|
|
815
|
|
Increase in distributions payable on common shares
|
58
|
|
|
8,477
|
|
|
13,227
|
|
Increase (decrease) in distributions payable on preferred shares
|
2,363
|
|
|
0
|
|
|
(1,064
|
)
|
Redemption of common units for common shares
|
0
|
|
|
3,400
|
|
|
0
|
|
Write-off of fully depreciated furniture, fixtures and equipment
|
0
|
|
|
16,000
|
|
|
582
|
|
Write-off of fully amortized debt issuance costs
|
826
|
|
|
131
|
|
|
273
|
|
(Decrease) increase in accrued capital expenditures
|
(6,149
|
)
|
|
2,334
|
|
|
(994
|
)
|
Grant of nonvested shares and awards to employees and executives, net
|
4,831
|
|
|
5,188
|
|
|
7,953
|
|
Issuance of common shares for Board of Trustees compensation
(1)
|
480
|
|
|
1,874
|
|
|
602
|
|
In conjunction with the sale of properties, the Company disposed of the following assets and liabilities:
|
|
|
|
|
|
Sale proceeds, net of closing costs
|
$
|
164,094
|
|
|
$
|
0
|
|
|
$
|
167,921
|
|
Other assets
|
4,226
|
|
|
0
|
|
|
1,397
|
|
Liabilities
|
(1,655
|
)
|
|
0
|
|
|
(1,480
|
)
|
Proceeds from sale of properties
|
$
|
166,665
|
|
|
$
|
0
|
|
|
$
|
167,838
|
|
In conjunction with the acquisition of properties, the Company assumed the following assets and liabilities:
|
|
|
|
|
|
Investment in properties (after credits at closing)
|
$
|
0
|
|
|
$
|
(445,734
|
)
|
|
$
|
(194,198
|
)
|
Other assets
|
0
|
|
|
(1,897
|
)
|
|
(1,361
|
)
|
Liabilities
|
0
|
|
|
8,474
|
|
|
4,448
|
|
Acquisition of properties
|
$
|
0
|
|
|
$
|
(439,157
|
)
|
|
$
|
(191,111
|
)
|
(1)
Refer to Note 6 for issuances of previously deferred shares.
On January 1,
2017
, the Company issued
16,010
common shares of beneficial interest and authorized an additional
9,103
deferred shares to the independent members of its Board of Trustees for their
2016
compensation. These common shares of beneficial interest were issued under the 2014 Plan.
On January 4,
2017
, the Company received
54,410
common shares of beneficial interest related to executives and employees surrendering shares to pay taxes at the time restricted shares vested.
On January 31,
2017
the Company issued
27,767
common shares of beneficial interest, related to a former Board of Trustee member, for his accumulated deferred shares granted as compensation for years 2001 through 2016. Of the common shares of beneficial interest issued,
4,888
were issued under the 2014 Plan and the remaining
22,879
were issued under the 2009 Plan.
The Company paid the following common and preferred share dividends subsequent to
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
Security Type
|
|
Dividend per Share/Unit
(1)
|
|
For the Quarter Ended
|
|
Record Date
|
|
Date Paid
|
Common Shares/Units
|
|
$
|
0.45
|
|
|
December 31, 2016
|
|
December 30, 2016
|
|
January 17, 2017
|
7.5% Series H Preferred Shares
|
|
$
|
0.47
|
|
|
December 31, 2016
|
|
December 30, 2016
|
|
January 17, 2017
|
6.375% Series I Preferred Shares
|
|
$
|
0.40
|
|
|
December 31, 2016
|
|
December 30, 2016
|
|
January 17, 2017
|
6.3% Series J Preferred Shares
|
|
$
|
0.39
|
|
|
December 31, 2016
|
|
December 30, 2016
|
|
January 17, 2017
|
(1)
Amounts are rounded to the nearest whole cent for presentation purposes.
On January 10, 2017, the Company refinanced its senior unsecured credit facility and First Term Loan. The
$750,000
senior unsecured credit facility has a revised accordion feature which, subject to certain terms and conditions, entitles the Company to request additional lender commitments, allowing for total commitments of up to
$1,250,000
. The new maturity date is January 8, 2021, subject to
two
six
-month extension options, pursuant to certain terms and conditions, including payment of an extension
fee. Borrowings bear interest at variable rates equal to, at the Company’s option, either (i) LIBOR plus an applicable margin, or (ii) an Adjusted Base Rate (as defined in the credit agreement) plus an applicable margin. The
$300,000
First Term Loan includes an accordion feature, which subject to certain terms and conditions, entitles the Company to request additional lender commitments, allowing for total commitments of up to
$500,000
. The First Term Loan matures on January 10, 2022 and bears interest at variable rates, but was hedged to a fixed interest rate based on the Company’s current leverage ratio (as defined in the swap agreements) through August 2, 2017 (see Note 4).
On January 10, 2017, the Company amended and restated its
$555,000
Second Term Loan to match the financial and other covenants in its refinanced First Term Loan and senior unsecured credit facility. There were no changes to the maturity date or the accordion feature. The Second Term Loan bears interest at variable rates, but was hedged to a fixed interest rate based on the Company’s current leverage ratio (as defined in the swap agreements) through May 16, 2019 for
$177,500
of the Second Term Loan and through January 29, 2021 for the remaining
$377,500
of the Second Term Loan (see Note 4).
Additionally, LHL refinanced its unsecured revolving credit facility with no change in capacity of
$25,000
, on similar terms as the senior unsecured credit facility. The new maturity date is January 10, 2021, subject to
two
six
-month extension options, pursuant to certain terms and conditions, including payment of an extension fee.
On January 19, 2017, the Company sold Hotel Deca for
$55,000
. Substantially all of the assets held for sale consist of investment in hotel properties, net and immaterial prepaid expenses and other assets and the liabilities of assets held for sale consist of accounts payable and accrued expenses. The Company will recognize a gain in the first quarter of 2017 of approximately
$30,500
related to the sale of this property. The proceeds will be used for general corporate purposes.
In February 2017, the Company’s Board of Trustees authorized an expansion of the Repurchase Program to acquire up to an additional
$500,000
of the Company’s common shares of beneficial interest. Including the previous authorization, the Company now has availability under the Repurchase Program to acquire up to
$569,807
of common shares of beneficial interest as of February 22, 2017.
|
|
14.
|
Quarterly Operating Results (Unaudited)
|
The Company’s unaudited consolidated quarterly operating data for the years ended
December 31, 2016
and
2015
(in thousands, except per share data) follows. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of quarterly results have been reflected in the data. It is also management’s opinion, however, that quarterly operating data for hotel enterprises are not indicative of results to be achieved in succeeding quarters or years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
Total revenues
|
$
|
261,758
|
|
|
$
|
352,763
|
|
|
$
|
431,652
|
|
|
$
|
289,477
|
|
Total expenses
|
252,684
|
|
|
293,143
|
|
|
273,974
|
|
|
262,714
|
|
Net income
|
9,074
|
|
|
59,620
|
|
|
157,678
|
|
|
26,763
|
|
Net income attributable to noncontrolling interests
|
(15
|
)
|
|
(89
|
)
|
|
(203
|
)
|
|
(47
|
)
|
Distributions to preferred shareholders
|
(3,042
|
)
|
|
(4,355
|
)
|
|
(5,405
|
)
|
|
(5,404
|
)
|
Net income attributable to common shareholders
|
$
|
6,017
|
|
|
$
|
55,176
|
|
|
$
|
152,070
|
|
|
$
|
21,312
|
|
Earnings per Common Share—Basic:
|
|
|
|
|
|
|
|
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares
|
$
|
0.05
|
|
|
$
|
0.49
|
|
|
$
|
1.34
|
|
|
$
|
0.19
|
|
Earnings per Common Share—Diluted:
|
|
|
|
|
|
|
|
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares
|
$
|
0.05
|
|
|
$
|
0.49
|
|
|
$
|
1.34
|
|
|
$
|
0.19
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
112,748,492
|
|
|
112,784,976
|
|
|
112,811,403
|
|
|
112,821,939
|
|
Diluted
|
113,108,158
|
|
|
113,113,253
|
|
|
113,159,844
|
|
|
113,185,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2015
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
Total revenues
|
$
|
250,809
|
|
|
$
|
341,387
|
|
|
$
|
331,004
|
|
|
$
|
296,322
|
|
Total expenses
|
248,071
|
|
|
282,376
|
|
|
283,462
|
|
|
269,784
|
|
Net income
|
2,738
|
|
|
59,011
|
|
|
47,542
|
|
|
26,538
|
|
Net income attributable to noncontrolling interests
|
(15
|
)
|
|
(147
|
)
|
|
(75
|
)
|
|
(40
|
)
|
Distributions to preferred shareholders
|
(3,042
|
)
|
|
(3,042
|
)
|
|
(3,043
|
)
|
|
(3,042
|
)
|
Net (loss) income attributable to common shareholders
|
$
|
(319
|
)
|
|
$
|
55,822
|
|
|
$
|
44,424
|
|
|
$
|
23,456
|
|
Earnings per Common Share—Basic:
|
|
|
|
|
|
|
|
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares
|
$
|
0.00
|
|
|
$
|
0.49
|
|
|
$
|
0.39
|
|
|
$
|
0.21
|
|
Earnings per Common Share—Diluted:
|
|
|
|
|
|
|
|
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares
|
$
|
0.00
|
|
|
$
|
0.49
|
|
|
$
|
0.39
|
|
|
$
|
0.21
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
112,647,715
|
|
|
112,728,085
|
|
|
112,731,358
|
|
|
112,633,429
|
|
Diluted
|
112,647,715
|
|
|
113,141,908
|
|
|
113,137,284
|
|
|
113,028,661
|
|
LASALLE HOTEL PROPERTIES
Schedule III—Real Estate and Accumulated Depreciation
As of December 31,
2016
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial Cost
|
|
Cost Capitalized Subsequent
to Acquisition
(1)
|
|
Gross Amount at End of Year
|
|
|
|
|
|
|
|
Life on
Which
Depreciation
in Statement
of Operations
is Computed
|
|
|
Encum-
brances
|
|
Land
|
|
Building
and
Improve-
ments
|
|
Furniture,
Fixtures
and
Equipment
|
|
Land
|
|
Building
and
Improve-
ments
|
|
Furniture,
Fixtures
and
Equipment
|
|
Land
|
|
Building
and
Improve-
ments
|
|
Furniture,
Fixtures
and
Equipment
|
|
Accumu-
lated
Depre-
ciation
|
|
Net Book
Value
|
|
Date of
Original
Construc-
tion
|
|
Date of
Acqui-
sition
|
|
1.
|
Le Montrose Suite Hotel
|
$
|
0
|
|
|
$
|
5,004
|
|
|
$
|
19,752
|
|
|
$
|
2,951
|
|
|
$
|
0
|
|
|
$
|
5,764
|
|
|
$
|
14,418
|
|
|
$
|
5,004
|
|
|
$
|
25,516
|
|
|
$
|
17,369
|
|
|
$
|
29,951
|
|
|
$
|
17,938
|
|
|
1976
|
|
4/29/1998
|
|
3-40 years
|
2.
|
San Diego Paradise Point Resort and Spa
|
0
|
|
|
0
|
|
|
69,639
|
|
|
3,665
|
|
|
154
|
|
|
43,196
|
|
|
35,711
|
|
|
154
|
|
|
112,835
|
|
|
39,376
|
|
|
95,926
|
|
|
56,439
|
|
|
1962
|
|
6/1/1998
|
|
3-40 years
|
3.
|
Hyatt Regency Boston Harbor
|
42,500
|
|
|
0
|
|
|
66,159
|
|
|
5,246
|
|
|
16
|
|
|
5,059
|
|
|
15,952
|
|
|
16
|
|
|
71,218
|
|
|
21,198
|
|
|
58,736
|
|
|
33,696
|
|
|
1993
|
|
6/24/1998
|
|
3-40 years
|
4.
|
Topaz Hotel
|
0
|
|
|
2,137
|
|
|
8,549
|
|
|
0
|
|
|
12
|
|
|
4,307
|
|
|
6,845
|
|
|
2,149
|
|
|
12,856
|
|
|
6,845
|
|
|
12,719
|
|
|
9,131
|
|
|
1963
|
|
3/8/2001
|
|
3-40 years
|
5.
|
Hotel Madera
|
0
|
|
|
1,682
|
|
|
6,726
|
|
|
0
|
|
|
15
|
|
|
5,559
|
|
|
6,643
|
|
|
1,697
|
|
|
12,285
|
|
|
6,643
|
|
|
11,685
|
|
|
8,940
|
|
|
1963
|
|
3/8/2001
|
|
3-40 years
|
6.
|
Hotel Rouge
|
0
|
|
|
2,162
|
|
|
8,647
|
|
|
0
|
|
|
17
|
|
|
5,071
|
|
|
8,233
|
|
|
2,179
|
|
|
13,718
|
|
|
8,233
|
|
|
14,764
|
|
|
9,366
|
|
|
1963
|
|
3/8/2001
|
|
3-40 years
|
7.
|
Mason & Rook Hotel
|
0
|
|
|
2,636
|
|
|
10,546
|
|
|
0
|
|
|
14
|
|
|
26,545
|
|
|
8,718
|
|
|
2,650
|
|
|
37,091
|
|
|
8,718
|
|
|
12,087
|
|
|
36,372
|
|
|
1962
|
|
3/8/2001
|
|
3-40 years
|
8.
|
The Liaison Capitol Hill
|
0
|
|
|
8,353
|
|
|
33,412
|
|
|
2,742
|
|
|
19
|
|
|
15,647
|
|
|
23,494
|
|
|
8,372
|
|
|
49,059
|
|
|
26,236
|
|
|
48,663
|
|
|
35,004
|
|
|
1968
|
|
6/1/2001
|
|
3-40 years
|
9.
|
Lansdowne Resort
|
0
|
|
|
27,421
|
|
|
74,835
|
|
|
3,114
|
|
|
33,333
|
|
|
28,210
|
|
|
37,225
|
|
|
60,754
|
|
|
103,045
|
|
|
40,339
|
|
|
83,776
|
|
|
120,362
|
|
|
1991
|
|
6/17/2003
|
|
3-40 years
|
10.
|
Hotel George
|
0
|
|
|
1,743
|
|
|
22,221
|
|
|
531
|
|
|
0
|
|
|
1,141
|
|
|
8,745
|
|
|
1,743
|
|
|
23,362
|
|
|
9,276
|
|
|
16,849
|
|
|
17,532
|
|
|
1928
|
|
9/18/2003
|
|
3-40 years
|
11.
|
Chaminade Resort and Conference Center
|
0
|
|
|
5,240
|
|
|
13,111
|
|
|
299
|
|
|
24
|
|
|
9,124
|
|
|
17,817
|
|
|
5,264
|
|
|
22,235
|
|
|
18,116
|
|
|
21,544
|
|
|
24,071
|
|
|
1985
|
|
11/18/2004
|
|
3-40 years
|
12.
|
Hilton San Diego Gaslamp Quarter
|
0
|
|
|
5,008
|
|
|
77,892
|
|
|
2,250
|
|
|
0
|
|
|
1,508
|
|
|
11,897
|
|
|
5,008
|
|
|
79,400
|
|
|
14,147
|
|
|
34,054
|
|
|
64,501
|
|
|
2000
|
|
1/6/2005
|
|
3-40 years
|
13.
|
The Grafton on Sunset
|
0
|
|
|
1,882
|
|
|
23,226
|
|
|
431
|
|
|
11
|
|
|
3,695
|
|
|
9,666
|
|
|
1,893
|
|
|
26,921
|
|
|
10,097
|
|
|
13,966
|
|
|
24,945
|
|
|
1954
|
|
1/10/2005
|
|
3-40 years
|
14.
|
Onyx Hotel
|
0
|
|
|
6,963
|
|
|
21,262
|
|
|
445
|
|
|
3,568
|
|
|
212
|
|
|
3,943
|
|
|
10,531
|
|
|
21,474
|
|
|
4,388
|
|
|
9,286
|
|
|
27,107
|
|
|
2004
|
|
5/18/2005
|
|
3-40 years
|
15.
|
Westin Copley Place
|
225,000
|
|
|
0
|
|
|
295,809
|
|
|
28,223
|
|
|
0
|
|
|
24,909
|
|
|
51,845
|
|
|
0
|
|
|
320,718
|
|
|
80,068
|
|
|
160,192
|
|
|
240,594
|
|
|
1983
|
|
8/31/2005
|
|
3-40 years
|
16.
|
Hotel Deca
(2)
|
0
|
|
|
4,938
|
|
|
21,720
|
|
|
577
|
|
|
0
|
|
|
885
|
|
|
6,315
|
|
|
4,938
|
|
|
22,605
|
|
|
6,892
|
|
|
11,555
|
|
|
22,880
|
|
|
1931
|
|
12/8/2005
|
|
3-40 years
|
17.
|
The Hilton San Diego Resort and Spa
|
0
|
|
|
0
|
|
|
85,572
|
|
|
4,800
|
|
|
122
|
|
|
15,900
|
|
|
20,377
|
|
|
122
|
|
|
101,472
|
|
|
25,177
|
|
|
55,135
|
|
|
71,636
|
|
|
1962
|
|
12/15/2005
|
|
3-40 years
|
18.
|
The Donovan
|
0
|
|
|
11,384
|
|
|
34,573
|
|
|
0
|
|
|
0
|
|
|
36,539
|
|
|
15,751
|
|
|
11,384
|
|
|
71,112
|
|
|
15,751
|
|
|
42,445
|
|
|
55,802
|
|
|
1972
|
|
12/16/2005
|
|
3-40 years
|
19.
|
Le Parc Suite Hotel
|
0
|
|
|
13,971
|
|
|
31,742
|
|
|
2,741
|
|
|
3
|
|
|
2,550
|
|
|
10,684
|
|
|
13,974
|
|
|
34,292
|
|
|
13,425
|
|
|
21,131
|
|
|
40,560
|
|
|
1970
|
|
1/27/2006
|
|
3-40 years
|
20.
|
Westin Michigan Avenue
|
0
|
|
|
38,158
|
|
|
154,181
|
|
|
24,112
|
|
|
17
|
|
|
19,557
|
|
|
39,639
|
|
|
38,175
|
|
|
173,738
|
|
|
63,751
|
|
|
95,259
|
|
|
180,405
|
|
|
1963/1972
|
|
3/1/2006
|
|
3-40 years
|
21.
|
Hotel Chicago
|
0
|
|
|
9,403
|
|
|
104,148
|
|
|
889
|
|
|
155
|
|
|
32,177
|
|
|
29,433
|
|
|
9,558
|
|
|
136,325
|
|
|
30,322
|
|
|
65,165
|
|
|
111,040
|
|
|
1998
|
|
3/1/2006
|
|
3-40 years
|
22.
|
Alexis Hotel
|
0
|
|
|
6,581
|
|
|
31,062
|
|
|
578
|
|
|
13
|
|
|
10,716
|
|
|
8,562
|
|
|
6,594
|
|
|
41,778
|
|
|
9,140
|
|
|
21,434
|
|
|
36,078
|
|
|
1901/1982
|
|
6/15/2006
|
|
3-40 years
|
23.
|
Hotel Solamar
|
0
|
|
|
0
|
|
|
79,111
|
|
|
7,890
|
|
|
0
|
|
|
717
|
|
|
12,715
|
|
|
0
|
|
|
79,828
|
|
|
20,605
|
|
|
33,157
|
|
|
67,276
|
|
|
2005
|
|
8/1/2006
|
|
3-40 years
|
24.
|
Gild Hall
|
0
|
|
|
6,732
|
|
|
45,016
|
|
|
984
|
|
|
2
|
|
|
3,157
|
|
|
13,557
|
|
|
6,734
|
|
|
48,173
|
|
|
14,541
|
|
|
24,501
|
|
|
44,947
|
|
|
1999
|
|
11/17/2006
|
|
3-40 years
|
25.
|
Hotel Amarano Burbank
|
0
|
|
|
5,982
|
|
|
29,292
|
|
|
1,253
|
|
|
329
|
|
|
6,394
|
|
|
8,193
|
|
|
6,311
|
|
|
35,686
|
|
|
9,446
|
|
|
14,716
|
|
|
36,727
|
|
|
2002
|
|
12/19/2006
|
|
3-40 years
|
26.
|
Sofitel Washington, DC Lafayette Square
|
0
|
|
|
11,082
|
|
|
80,342
|
|
|
2,619
|
|
|
0
|
|
|
409
|
|
|
14,111
|
|
|
11,082
|
|
|
80,751
|
|
|
16,730
|
|
|
23,507
|
|
|
85,056
|
|
|
2002
|
|
3/1/2010
|
|
3-40 years
|
27.
|
The Marker San Francisco
|
0
|
|
|
11,435
|
|
|
53,186
|
|
|
3,736
|
|
|
0
|
|
|
1,930
|
|
|
9,832
|
|
|
11,435
|
|
|
55,116
|
|
|
13,568
|
|
|
17,806
|
|
|
62,313
|
|
|
1910/1995
|
|
9/1/2010
|
|
3-40 years
|
28.
|
Westin Philadelphia
|
0
|
|
|
35,100
|
|
|
106,100
|
|
|
3,776
|
|
|
0
|
|
|
817
|
|
|
9,974
|
|
|
35,100
|
|
|
106,917
|
|
|
13,750
|
|
|
25,205
|
|
|
130,562
|
|
|
1990
|
|
9/1/2010
|
|
3-40 years
|
29.
|
Embassy Suites Philadelphia - Center City
|
0
|
|
|
13,600
|
|
|
62,900
|
|
|
2,504
|
|
|
0
|
|
|
2,554
|
|
|
8,536
|
|
|
13,600
|
|
|
65,454
|
|
|
11,040
|
|
|
17,193
|
|
|
72,901
|
|
|
1963/1993
|
|
9/1/2010
|
|
3-40 years
|
30.
|
The Roger
|
0
|
|
|
0
|
|
|
95,079
|
|
|
3,509
|
|
|
0
|
|
|
122
|
|
|
12,310
|
|
|
0
|
|
|
95,201
|
|
|
15,819
|
|
|
31,446
|
|
|
79,574
|
|
|
1930/1998
|
|
10/6/2010
|
|
3-34 years
|
31.
|
Chamberlain West Hollywood
|
0
|
|
|
6,470
|
|
|
29,085
|
|
|
2,895
|
|
|
0
|
|
|
356
|
|
|
4,185
|
|
|
6,470
|
|
|
29,441
|
|
|
7,080
|
|
|
9,650
|
|
|
33,341
|
|
|
1970/2005
|
|
12/6/2010
|
|
3-40 years
|
32.
|
Viceroy Santa Monica
|
0
|
|
|
0
|
|
|
75,270
|
|
|
4,747
|
|
|
0
|
|
|
390
|
|
|
5,168
|
|
|
0
|
|
|
75,660
|
|
|
9,915
|
|
|
18,639
|
|
|
66,936
|
|
|
1967/2002
|
|
3/16/2011
|
|
3-40 years
|
33.
|
Villa Florence
|
0
|
|
|
12,413
|
|
|
50,997
|
|
|
3,202
|
|
|
0
|
|
|
0
|
|
|
9,912
|
|
|
12,413
|
|
|
50,997
|
|
|
13,114
|
|
|
14,041
|
|
|
62,483
|
|
|
1908
|
|
10/5/2011
|
|
3-40 years
|
34/35.
|
Park Central Hotel New York/WestHouse Hotel New York
|
0
|
|
|
135,306
|
|
|
250,262
|
|
|
9,004
|
|
|
0
|
|
|
41,840
|
|
|
50,830
|
|
|
135,306
|
|
|
292,102
|
|
|
59,834
|
|
|
77,758
|
|
|
409,484
|
|
|
1928
|
|
12/29/2011
|
|
3-40 years
|
36.
|
Hotel Palomar, Washington, DC
|
0
|
|
|
26,859
|
|
|
111,214
|
|
|
5,648
|
|
|
0
|
|
|
890
|
|
|
12,678
|
|
|
26,859
|
|
|
112,104
|
|
|
18,326
|
|
|
22,096
|
|
|
135,193
|
|
|
1962
|
|
3/8/2012
|
|
3-40 years
|
37.
|
L’Auberge Del Mar
|
0
|
|
|
13,475
|
|
|
59,481
|
|
|
3,628
|
|
|
125
|
|
|
19
|
|
|
4,476
|
|
|
13,600
|
|
|
59,500
|
|
|
8,104
|
|
|
9,940
|
|
|
71,264
|
|
|
1989
|
|
12/6/2012
|
|
3-40 years
|
38.
|
The Liberty Hotel
|
0
|
|
|
0
|
|
|
160,731
|
|
|
9,040
|
|
|
0
|
|
|
263
|
|
|
14,288
|
|
|
0
|
|
|
160,994
|
|
|
23,328
|
|
|
26,350
|
|
|
157,972
|
|
|
1851/2007
|
|
12/28/2012
|
|
3-40 years
|
39.
|
Harbor Court Hotel
|
0
|
|
|
0
|
|
|
54,563
|
|
|
714
|
|
|
0
|
|
|
701
|
|
|
455
|
|
|
0
|
|
|
55,264
|
|
|
1,169
|
|
|
5,953
|
|
|
50,480
|
|
|
1926/1991
|
|
8/1/2013
|
|
3-35 years
|
40.
|
Hotel Triton
|
0
|
|
|
0
|
|
|
37,253
|
|
|
1,379
|
|
|
0
|
|
|
(2,284
|
)
|
|
718
|
|
|
0
|
|
|
34,969
|
|
|
2,097
|
|
|
4,693
|
|
|
32,373
|
|
|
1912/1991
|
|
8/1/2013
|
|
3-34.5 years
|
41.
|
Serrano Hotel
|
0
|
|
|
20,475
|
|
|
48,501
|
|
|
2,500
|
|
|
0
|
|
|
219
|
|
|
1,055
|
|
|
20,475
|
|
|
48,720
|
|
|
3,555
|
|
|
6,864
|
|
|
65,886
|
|
|
1928/1999
|
|
8/21/2013
|
|
3-40 years
|
42.
|
Southernmost Beach Resort Key West
|
0
|
|
|
101,517
|
|
|
79,795
|
|
|
3,105
|
|
|
0
|
|
|
1,676
|
|
|
3,054
|
|
|
101,517
|
|
|
81,471
|
|
|
6,159
|
|
|
10,016
|
|
|
179,131
|
|
|
1958-2008
|
|
8/27/2013
|
|
3-40 years
|
43.
|
Hotel Vitale
|
0
|
|
|
0
|
|
|
125,150
|
|
|
4,766
|
|
|
0
|
|
|
(241
|
)
|
|
735
|
|
|
0
|
|
|
124,909
|
|
|
5,501
|
|
|
11,321
|
|
|
119,089
|
|
|
2005
|
|
4/2/2014
|
|
3-40 years
|
44.
|
The Heathman Hotel
|
0
|
|
|
10,280
|
|
|
50,001
|
|
|
4,002
|
|
|
0
|
|
|
1,268
|
|
|
352
|
|
|
10,280
|
|
|
51,269
|
|
|
4,354
|
|
|
4,142
|
|
|
61,761
|
|
|
1927
|
|
12/18/2014
|
|
3-40 years
|
45.
|
Pack Central San Francisco
|
0
|
|
|
80,640
|
|
|
255,105
|
|
|
14,057
|
|
|
0
|
|
|
56
|
|
|
1,586
|
|
|
80,640
|
|
|
255,161
|
|
|
15,643
|
|
|
18,008
|
|
|
333,436
|
|
|
1984
|
|
1/23/2015
|
|
3-40 years
|
46.
|
The Marker Waterfront Resort
|
0
|
|
|
48,133
|
|
|
41,143
|
|
|
6,656
|
|
|
0
|
|
|
0
|
|
|
722
|
|
|
48,133
|
|
|
41,143
|
|
|
7,378
|
|
|
4,149
|
|
|
92,505
|
|
|
2014
|
|
3/16/2015
|
|
3-40 years
|
|
Total
|
$
|
267,500
|
|
|
$
|
694,165
|
|
|
$
|
3,194,361
|
|
|
$
|
185,208
|
|
|
$
|
37,949
|
|
|
$
|
359,524
|
|
|
$
|
591,355
|
|
|
$
|
732,114
|
|
|
$
|
3,553,885
|
|
|
$
|
776,563
|
|
|
$
|
1,367,473
|
|
|
$
|
3,695,089
|
|
|
|
|
|
|
|
(1)
Costs of disposals, impairments and reclassifications to property under development are reflected as reductions to cost capitalized subsequent to acquisition. Reclassifications from property under development are reflected as increases to cost capitalized subsequent to acquisition.
(2)
As of December 31, 2016, Hotel Deca was classified as held for sale. The property was sold on January 19, 2017.
LASALLE HOTEL PROPERTIES
Schedule III—Real Estate and Accumulated Depreciation—Continued
As of
December 31, 2016
Reconciliation of Real Estate and Accumulated Depreciation:
|
|
|
|
|
Reconciliation of Real Estate:
|
|
Balance at December 31, 2013
|
$
|
4,351,073
|
|
Acquisition of hotel properties
|
194,198
|
|
Improvements and additions to hotel properties
|
66,706
|
|
Reclassification from property under development
|
14,163
|
|
Disposal of hotels
|
(130,846
|
)
|
Disposal of assets
|
(1,220
|
)
|
Balance at December 31, 2014
|
$
|
4,494,074
|
|
Acquisition of hotel properties
|
445,734
|
|
Improvements and additions to hotel properties
|
93,599
|
|
Reclassification from property under development
|
30,343
|
|
Disposal of assets
|
(16,488
|
)
|
Balance at December 31, 2015
|
$
|
5,047,262
|
|
Improvements and additions to hotel properties
|
82,148
|
|
Reclassification from property under development
|
46,292
|
|
Disposal of hotel
|
(112,718
|
)
|
Disposal of assets
|
(422
|
)
|
Balance at December 31, 2016
|
$
|
5,062,562
|
|
|
|
Reconciliation of Accumulated Depreciation:
|
|
Balance at December 31, 2013
|
$
|
967,885
|
|
Depreciation
|
154,585
|
|
Disposal of hotels
|
(56,130
|
)
|
Disposal of assets
|
(822
|
)
|
Balance at December 31, 2014
|
$
|
1,065,518
|
|
Depreciation
|
180,346
|
|
Disposal of assets
|
(16,278
|
)
|
Balance at December 31, 2015
|
$
|
1,229,586
|
|
Depreciation
|
191,791
|
|
Disposal of hotel
|
(53,697
|
)
|
Disposal of assets
|
(207
|
)
|
Balance at December 31, 2016
|
$
|
1,367,473
|
|