株探米国株
英語
エドガーで原本を確認する
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________________________
FORM 10-Q
____________________________________________________________________________________
 
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2024

OR 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                                to                               
 
Commission File Number:  001-35074
 
SUMMIT HOTEL PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
_____________________________________________________________________________________
Maryland   27-2962512
(State or other jurisdiction   (I.R.S. Employer Identification No.)
of incorporation or organization)    
 
13215 Bee Cave Parkway, Suite B-300
Austin, TX  78738
(Address of principal executive offices, including zip code)
 
(512) 538-2300
(Registrant’s telephone number, including area code)
________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.01 par value INN New York Stock Exchange
Series E Cumulative Redeemable Preferred Stock, $0.01 par value INN-PE New York Stock Exchange
Series F Cumulative Redeemable Preferred Stock, $0.01 par value INN-PF New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes  ☐ No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405) of this chapter during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
 



See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
  Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes  ☒ No
 
As of July 19, 2024, the number of outstanding shares of common stock of Summit Hotel Properties, Inc. was 108,335,913.


TABLE OF CONTENTS
 
    Page
     
     
 
 
 
 
 
     
     
     
     
     
     
     
     
     
     
     
 
i



PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Summit Hotel Properties, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share amounts)
 
June 30, 2024 December 31, 2023
(Unaudited)
ASSETS
Investments in lodging property, net $ 2,702,038  $ 2,729,049 
Investment in lodging property under development 3,955  1,451 
Assets held for sale, net 9,715  73,740 
Cash and cash equivalents 45,873  37,837 
Restricted cash 6,766  9,931 
Right-of-use assets, net 33,851  34,814 
Trade receivables, net 27,967  21,348 
Prepaid expenses and other 14,142  8,865 
Deferred charges, net 6,357  6,659 
Other assets 20,571  15,554 
Total assets $ 2,871,235  $ 2,939,248 
LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS
AND EQUITY
Liabilities:
Debt, net of debt issuance costs $ 1,345,492  $ 1,430,668 
Lease liabilities, net 25,158  25,842 
Accounts payable 6,637  4,827 
Accrued expenses and other 84,412  81,215 
Total liabilities 1,461,699  1,542,552 
Commitments and contingencies (Note 11)
 —  — 
Redeemable non-controlling interests 50,219  50,219 
Equity:    
Preferred stock, $0.01 par value per share, 100,000,000 shares authorized:
    
6.25% Series E - 6,400,000 shares issued and outstanding at June 30, 2024 and December 31, 2023 (aggregate liquidation preference of $160,861 at June 30, 2024 and December 31, 2023, respectively)
 64  64 
5.875% Series F - 4,000,000 shares issued and outstanding at June 30, 2024 and December 31, 2023 (aggregate liquidation preference of $100,506 at June 30, 2024 and December 31, 2023, respectively)
 40  40 
Common stock, $0.01 par value per share, 500,000,000 shares authorized, 108,276,243 and 107,593,373 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively
 1,083  1,076 
Additional paid-in capital 1,242,436  1,238,896 
Accumulated other comprehensive income 14,432  10,967 
Accumulated deficit and distributions in excess of retained earnings (326,108) (339,848)
Total stockholders’ equity 931,947  911,195 
Non-controlling interests 427,370  435,282 
Total equity 1,359,317  1,346,477 
Total liabilities, redeemable non-controlling interests and equity $ 2,871,235  $ 2,939,248 
 

See Notes to the Condensed Consolidated Financial Statements
1

Summit Hotel Properties, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
June 30,		 Six Months Ended
June 30,
2024 2023 2024 2023
Revenues:
Room $ 173,025  $ 174,181  $ 340,456  $ 337,270 
Food and beverage 10,069  10,269  20,902  20,899 
Other 10,809  10,043  20,687  18,707 
Total revenues 193,903  194,493  382,045  376,876 
Expenses:
Room 38,044  38,788  74,017  74,697 
Food and beverage 7,639  8,040  15,841  15,995 
Other lodging property operating expenses 57,470  57,829  113,731  113,954 
Property taxes, insurance and other 13,287  14,215  27,572  28,939 
Management fees 4,434  4,992  9,331  9,797 
Depreciation and amortization 36,458  37,510  73,257  74,418 
Corporate general and administrative 8,704  9,100  17,015  17,099 
Transaction costs —  260  —  266 
Recovery of credit losses —  —  —  (250)
Total expenses 166,036  170,734  330,764  334,915 
Gain (loss) on disposal of assets, net 28,342  (320) 28,417  (320)
Operating income 56,209  23,439  79,698  41,641 
Other income (expense):
Interest expense (20,830) (22,248) (42,412) (43,157)
Interest income 565  411  1,023  717 
Gain on extinguishment of debt 3,000  —  3,000  — 
Other income, net 2,129  79  2,814  38 
Total other expense, net (15,136) (21,758) (35,575) (42,402)
Income (loss) from continuing operations before income taxes 41,073  1,681  44,123  (761)
Income tax expense (Note 13) (2,375) (791) (2,592) (319)
Net income (loss) 38,698  890  41,531  (1,080)
Less - (income) loss attributable to non-controlling interests (3,224) 2,982  (3,546) 4,351 
Net income attributable to Summit Hotel Properties, Inc. before preferred dividends 35,474  3,872  37,985  3,271 
Less - Distributions to and accretion of redeemable non-controlling interests (657) (657) (1,314) (1,314)
Less - Preferred dividends (3,968) (3,968) (7,938) (7,938)
Net income (loss) attributable to common stockholders $ 30,849  $ (753) $ 28,733  $ (5,981)
Income (loss) per common share:
Basic $ 0.29  $ (0.01) $ 0.27  $ (0.06)
Diluted $ 0.23  $ (0.01) $ 0.21  $ (0.06)
Weighted-average common shares outstanding:
Basic 105,918  105,562  105,819  105,438 
Diluted 149,451  105,562  149,112  105,438 
See Notes to the Condensed Consolidated Financial Statements
2

Summit Hotel Properties, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
(In thousands)
Three Months Ended
June 30,		 Six Months Ended
June 30,
2024 2023 2024 2023
Net income (loss) $ 38,698  $ 890  $ 41,531  $ (1,080)
Other comprehensive income, net of tax:
Changes in fair value of derivative financial instruments (563) 10,973  5,133  6,585 
Comprehensive income 38,135  11,863  46,664  5,505 
Comprehensive (income) loss attributable to non-controlling interests (3,198) (254) (5,214) 1,235 
Comprehensive income attributable to Summit Hotel Properties, Inc. 34,937  11,609  41,450  6,740 
Distributions to and accretion on redeemable non-controlling interests (657) (657) (1,314) (1,314)
Preferred dividends and distributions (3,968) (3,968) (7,938) (7,938)
Comprehensive income (loss) attributable to common stockholders $ 30,312  $ 6,984  $ 32,198  $ (2,512)
 

See Notes to the Condensed Consolidated Financial Statements

3

Summit Hotel Properties, Inc.
Condensed Consolidated Statements of Changes in Equity and Redeemable Non-controlling Interests
For the Three Months Ended June 30, 2024 and 2023
(Unaudited)
(In thousands, except share amounts)
Redeemable Non-controlling Interests Shares
 of Preferred
Stock		 Preferred
Stock		 Shares
of Common
Stock		 Common
Stock		 Additional
Paid-In Capital		 Accumulated
Comprehensive
Income (Loss)		 Accumulated
Deficit and
Distributions		 Stockholders’
Equity		 Non-controlling Interests Total
Equity
Balance at March 31, 2024 $ 50,219  10,400,000  $ 104  108,198,141  $ 1,082  $ 1,239,905  $ 14,969  $ (348,302) $ 907,758  $ 436,418  $ 1,344,176 
Adjustment of redeemable non-controlling interests to redemption value 657  —  —  —  —  —  —  (657) (657) —  (657)
Contributions by non-controlling interest in joint venture —  —  —  —  —  —  —  —  —  146  146 
Common stock redemption of common units —  —  —  310  —  3  —  —  3  (3) — 
Dividends and distributions on common stock and common units —  —  —  —  —  —  —  (8,655) (8,655) (1,276) (9,931)
Preferred dividends and distributions (657) —  —  —  —  —  —  (3,968) (3,968) (150) (4,118)
Joint venture partner distributions —  —  —  —  —  —  —  —  —  (10,963) (10,963)
Equity-based compensation —  —  —  95,600  1  2,634  —  —  2,635  —  2,635 
Shares of common stock acquired for employee withholding requirements —  —  —  (17,808) —  (106) —  —  (106) —  (106)
Other comprehensive loss —  —  —  —  —  —  (537) —  (537) (26) (563)
Net income —  —  —  —  —  —  —  35,474  35,474  3,224  38,698 
Balance at June 30, 2024 $ 50,219  10,400,000  $ 104  108,276,243  $ 1,083  $ 1,242,436  $ 14,432  $ (326,108) $ 931,947  $ 427,370  $ 1,359,317 
Balance at March 31, 2023 $ 50,219  10,400,000  $ 104  107,469,863  $ 1,075  $ 1,232,457  $ 10,270  $ (297,687) $ 946,219  $ 446,428  $ 1,392,647 
Adjustment of redeemable non-controlling interests to redemption value 657  —  —  —  —  —  —  (657) (657) —  (657)
Contributions by non-controlling interest in joint venture —  —  —  —  —  —  —  —  —  20,532  20,532 
Dividends and distributions on common stock and common units —  —  —  —  —  —  —  (6,448) (6,448) (958) (7,406)
Preferred dividends and distributions (657) —  —  —  —  —  —  (3,968) (3,968) (161) (4,129)
Joint venture partner distributions —  —  —  —  —  —  —  —  —  (3,365) (3,365)
Equity-based compensation —  —  —  112,572  1  2,577  —  —  2,578  —  2,578 
Shares of common stock acquired for employee withholding requirements —  —  —  (12,697) —  (87) —  —  (87) —  (87)
Other comprehensive income —  —  —  —  —  —  7,737  —  7,737  3,236  10,973 
Net income (loss) —  —  —  —  —  —  —  3,872  3,872  (2,982) 890 
Balance at June 30, 2023 $ 50,219  10,400,000  $ 104  107,569,738  $ 1,076  $ 1,234,947  $ 18,007  $ (304,888) $ 949,246  $ 462,730  $ 1,411,976 

See Notes to the Condensed Consolidated Financial Statements
4

Summit Hotel Properties, Inc.
Condensed Consolidated Statements of Changes in Equity and Redeemable Non-controlling Interests
For the Six Months Ended June 30, 2024 and 2023
(Unaudited)
(In thousands, except share amounts)
Redeemable Non-controlling Interests Shares
 of Preferred
Stock		 Preferred
Stock		 Shares
of Common
Stock		 Common
Stock		 Additional
Paid-In Capital		 Accumulated
Comprehensive
Income (Loss)		 Accumulated
Deficit and
Distributions		 Stockholders’
Equity		 Non-controlling Interests Total
Equity
Balance at December 31, 2023 $ 50,219  10,400,000  $ 104  107,593,373  $ 1,076  $ 1,238,896  $ 10,967  $ (339,848) $ 911,195  $ 435,282  $ 1,346,477 
Adjustment of redeemable non-controlling interests to redemption value 1,314  —  —  —  —  —  —  (1,314) (1,314) —  (1,314)
Contributions by non-controlling interest in joint venture —  —  —  —  —  —  —  —  —  222  222 
Common stock redemption of common units —  —  —  310  —  3  —  —  3  (3) — 
Dividends and distributions on common stock and common units
 —  —  —  —  —  —  —  (14,993) (14,993) (2,232) (17,225)
Preferred dividends and distributions (1,314) —  —  —  —  —  —  (7,938) (7,938) (150) (8,088)
Joint venture partner distributions —  —  —  —  —  —  —  —  —  (10,963) (10,963)
Equity-based compensation —  —  —  827,214  8  4,475  —  —  4,483  —  4,483 
Shares of common stock acquired for employee withholding requirements —  —  —  (144,654) (1) (938) —  —  (939) —  (939)
Other comprehensive income —  —  —  —  —  —  3,465  —  3,465  1,668  5,133 
Net income —  —  —  —  —  —  —  37,985  37,985  3,546  41,531 
Balance at June 30, 2024 $ 50,219  10,400,000  $ 104  108,276,243  $ 1,083  $ 1,242,436  $ 14,432  $ (326,108) $ 931,947  $ 427,370  $ 1,359,317 
Balance at December 31, 2022 $ 50,219  10,400,000  $ 104  106,901,576  $ 1,069  $ 1,232,302  $ 14,538  $ (288,200) $ 959,813  $ 448,137  $ 1,407,950 
Adjustment of redeemable non-controlling interests to redemption value 1,314  —  —  —  —  —  —  (1,314) (1,314) —  (1,314)
Sale of non-controlling interests in joint venture —  —  —  —  —  —  —  —  —  1,353  1,353 
Contributions by non-controlling interest in joint venture —  —  —  —  —  —  —  —  —  20,532  20,532 
Dividends and distributions on common stock and common units
 —  —  —  —  —  —  —  (10,707) (10,707) (1,597) (12,304)
Preferred dividends and distributions (1,314) —  —  —  —  —  —  (7,938) (7,938) (161) (8,099)
Joint venture partner distributions —  —  —  —  —  —  —  —  —  (4,155) (4,155)
Equity-based compensation —  —  —  848,942  8  4,038  —  —  4,046  —  4,046 
Shares of common stock acquired for employee withholding requirements —  —  —  (180,780) (1) (1,369) —  —  (1,370) —  (1,370)
Other comprehensive income —  —  —  —  —  —  3,469  —  3,469  3,116  6,585 
Other —  —  —  —  —  (24) —  —  (24) (144) (168)
Net income (loss) —  —  —  —  —  —  —  3,271  3,271  (4,351) (1,080)
Balance at June 30, 2023 $ 50,219  10,400,000  $ 104  107,569,738  $ 1,076  $ 1,234,947  $ 18,007  $ (304,888) $ 949,246  $ 462,730  $ 1,411,976 



See Notes to the Condensed Consolidated Financial Statements
5

Summit Hotel Properties, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Six Months Ended June 30,
2024 2023
OPERATING ACTIVITIES
Net income (loss) $ 41,531  $ (1,080)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 73,257  74,418 
Amortization of debt issuance costs 3,240  2,785 
Recovery of credit losses
 —  (250)
Equity-based compensation 4,483  4,046 
(Gain) loss on disposal of assets, net (28,417) 320 
Gain on extinguishment of debt (3,000) — 
Non-cash interest income (266) (288)
Debt transaction costs 581  328 
Other 6  513 
Changes in operating assets and liabilities:
Trade receivables, net (6,619) (1,097)
Prepaid expenses and other (5,255) 3,855 
Accounts payable (63) (150)
Accrued expenses and other (1,003) (4,346)
NET CASH PROVIDED BY OPERATING ACTIVITIES 78,475  79,054 
INVESTING ACTIVITIES
Acquisitions of lodging properties —  (42,813)
Improvements to lodging properties (39,007) (42,889)
Investment in lodging property under development (2,503) — 
Proceeds from asset dispositions, net 92,168  27,632 
Funding of real estate loans —  (2,917)
Repayments of real estate loans —  257 
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 50,658  (60,730)
FINANCING ACTIVITIES
Proceeds from borrowings on revolving line of credit 90,000  55,000 
Repayments of revolving line of credit (80,000) (50,000)
Principal payments on debt (93,497) (1,187)
Proceeds from the sale of non-controlling interests —  1,353 
Dividends and distributions paid on common stock and common units (17,181) (12,247)
Preferred dividends and distributions paid (9,402) (9,413)
Contributions by non-controlling interests in joint venture 221  20,332 
Distributions to joint venture partners (10,963) (4,155)
Financing fees, debt transaction costs and other issuance costs (2,501) (8,036)
Repurchase of shares of common stock for withholding requirements (939) (1,370)
NET CASH USED IN FINANCING ACTIVITIES (124,262) (9,723)
Net change in cash, cash equivalents and restricted cash 4,871  8,601 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH    
Beginning of period 47,768  61,808 
End of period $ 52,639  $ 70,409 
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH WITHIN THE CONDENSED CONSOLIDATED BALANCE SHEET TO THE AMOUNTS SHOWN IN THE STATEMENT OF CASH FLOWS ABOVE:
Cash and cash equivalents $ 45,873  $ 58,456 
Restricted cash 6,766  11,953 
TOTAL CASH, CASH EQUIVALENTS AND RESTRICTED CASH $ 52,639  $ 70,409 

See Notes to the Condensed Consolidated Financial Statements
6

SUMMIT HOTEL PROPERTIES, INC. 
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
NOTE 1 - DESCRIPTION OF BUSINESS
 
General

Summit Hotel Properties, Inc. (the “Company”) is a self-managed lodging property investment company that was organized on June 30, 2010 as a Maryland corporation. The Company holds both general and limited partnership interests in Summit Hotel OP, LP (the “Operating Partnership”), a Delaware limited partnership also organized on June 30, 2010. Unless the context otherwise requires, “we,” “us,” and “our” refer to the Company and its consolidated subsidiaries.
 
We focus on owning lodging properties with efficient operating models that generate strong margins and investment returns. At June 30, 2024, our portfolio consisted of 96 lodging properties with a total of 14,256 guestrooms located in 24 states. At June 30, 2024, we own 100% of the outstanding equity interests in 54 of the 96 lodging properties. We own a 51% controlling interest in 39 lodging properties through a joint venture that was formed in July 2019 with USFI G-Peak, Ltd. ("GIC"), a private limited company incorporated in the Republic of Singapore (the "GIC Joint Venture"). We also own 90% equity interests in two separate joint ventures (the "Brickell Joint Venture" and the "Onera Joint Venture"). The Brickell Joint Venture owns two lodging properties, and the Onera Joint Venture owns one lodging property.

As of June 30, 2024, 86% of our guestrooms were located in the top 50 metropolitan statistical areas (“MSAs”), 91% were located within the top 100 MSAs, and over 99% of our guestrooms operate under premium franchise brands owned by Marriott® International, Inc. (“Marriott”), Hilton® Worldwide (“Hilton”), Hyatt® Hotels Corporation (“Hyatt”), and InterContinental® Hotels Group (“IHG”).

Substantially all of our assets are held by, and all of our operations are conducted through, the Operating Partnership. Through a wholly-owned subsidiary, we are the sole general partner of the Operating Partnership. At June 30, 2024, we owned, directly and indirectly, approximately 87% of the Operating Partnership’s issued and outstanding common units of limited partnership interest (“Common Units”), and all of the Operating Partnership’s issued and outstanding 6.25% Series E and 5.875% Series F preferred units of limited partnership interest. NewcrestImage (as defined in Note 5 - Debt to the Condensed Consolidated Financial Statements) owns all of the issued and outstanding 5.25% Series Z Cumulative Perpetual Preferred Units (liquidation preference $25 per unit) of the Operating Partnership ("Series Z Preferred Units"), as a result of the NCI Transaction (described in Note 5 - Debt to the Condensed Consolidated Financial Statements). We collectively refer to preferred units of limited partnership interests of our Operating Partnership as "Preferred Units."

Pursuant to the Operating Partnership’s partnership agreement, we have full, exclusive and complete responsibility and discretion in the management and control of the Operating Partnership, including the ability to cause the Operating Partnership to enter into certain major transactions including acquisitions, dispositions, refinancings, to make distributions to partners, and to cause changes in the Operating Partnership’s business activities.

We have elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes. To qualify as a REIT, we cannot operate or manage our lodging properties. Accordingly, all of our lodging properties are leased to our taxable REIT subsidiaries (“TRS Lessees” or "TRSs") and managed by professional third-party lodging property management companies.

7

NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
 
Basis of Presentation
 
We prepare our Condensed Consolidated Financial Statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Condensed Consolidated Financial Statements and reported amounts of revenues and expenses in the reporting period. Actual results could differ from those estimates. As interim statements, the Condensed Consolidated Financial Statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation in accordance with GAAP have been included. Results for the three and six months ended June 30, 2024 may not be indicative of the results that may be expected for the full year of 2024. For further information, please read the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.

The accompanying Condensed Consolidated Financial Statements consolidate the accounts of all entities in which we have a controlling financial interest, as well as variable interest entities, if any, for which the Company is the primary beneficiary. All significant intercompany balances and transactions have been eliminated in the Condensed Consolidated Financial Statements.

We evaluate joint venture partnerships to determine if they should be consolidated based on whether the partners exercise joint control. For a joint venture where we exercise primary control and we also own a majority of the equity interests, we consolidate the joint venture partnership. We have consolidated the accounts of all of our joint venture partnerships in the accompanying Condensed Consolidated Financial Statements.

Use of Estimates

Our Condensed Consolidated Financial Statements are prepared in conformity with GAAP, which requires us to make estimates based on assumptions about current and, for some estimates, future economic and market conditions that affect reported amounts and related disclosures in our Condensed Consolidated Financial Statements. Although our current estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could significantly differ from our expectations, which could materially affect our consolidated financial position and results of operations.

Trade Receivables and Current Estimate of Credit Losses

We grant credit to qualified guests, generally without collateral, in the form of trade accounts receivable. Trade receivables result from the rental of guestrooms and the sales of food, beverage, and banquet services and are payable under normal trade terms. Trade receivables also include credit and debit card transactions that are in the process of being settled. Trade receivables are stated at the amount billed to the guest and do not accrue interest. We regularly review the collectability of our trade receivables. A provision for losses is determined based on previous loss experience and current economic conditions. Our allowance for doubtful accounts was $0.1 million at both June 30, 2024 and December 31, 2023. Bad debt expense was $0.1 million for each of the three months ended June 30, 2024 and 2023, respectively, and $0.2 million for each of the six months ended June 30, 2024 and 2023, respectively.

Investments in Lodging Property, net
 
The Company allocates the purchase price of acquired lodging properties based on the relative fair values of the acquired land, land improvements, building, furniture, fixtures and equipment, identifiable intangible assets or liabilities, other assets, and assumed liabilities. Intangible assets may include certain value associated with the on-going operations of the lodging business being acquired as part of the property acquisition. Acquired intangible assets that derive their values from real property, or an interest in real property, are inseparable from that real property or interest in real property, do not produce or contribute to the production of income other than consideration for the use or occupancy of space, and are recorded as a component of the related real estate asset in our Condensed Consolidated Financial Statements. We allocate the purchase price of acquired lodging properties to land, building and furniture, fixtures and equipment based on independent third-party appraisals.

8

Our lodging properties and related assets are recorded at cost, less accumulated depreciation and amortization. We capitalize development costs and the costs of significant additions and improvements that materially upgrade, increase the value or extend the useful life of the property. These costs may include development, refurbishment, renovation, and remodeling expenditures, as well as certain indirect internal costs related to construction projects. If an asset requires a period of time in which to carry out the activities necessary to bring it to the condition necessary for its intended use, the interest cost incurred during that period as a result of expenditures for the asset is capitalized as part of the cost of the asset. We expense the cost of repairs and maintenance as incurred.
 
We generally depreciate our lodging properties and related assets using the straight-line method over their estimated useful lives as follows:
 
Classification   Estimated Useful Lives
Buildings and improvements
6 to 40 years
Furniture, fixtures and equipment
2 to 15 years
 
We periodically re-evaluate asset lives based on current assessments of remaining utilization, which may result in changes in estimated useful lives. Such changes are accounted for prospectively and will increase or decrease future depreciation expense. 

When depreciable property and equipment is retired or disposed, the related costs and accumulated depreciation are removed from the balance sheet and any gain or loss is reflected in current operations. 

On a limited basis, we provide financing to developers of lodging properties for development projects. We evaluate these arrangements to determine if we participate in residual profits of the lodging property through the loan provisions or other agreements. Where we conclude that these arrangements are more appropriately treated as an investment in the real property, we reflect the loan in Investments in lodging property, net in our Condensed Consolidated Balance Sheets.

We monitor events and changes in circumstances for indicators that the carrying value of a lodging property or undeveloped land may be impaired. Additionally, we perform at least annual reviews to monitor the factors that could trigger an impairment. Factors that we consider for an impairment analysis include, among others: i) significant underperformance relative to historical or anticipated operating results, ii) significant changes in the manner of use of a property or the strategy of our overall business, including changes in the estimated holding periods for lodging properties and land parcels, iii) a significant increase in competition, iv) a significant adverse change in legal factors or regulations, v) changes in values of comparable land or lodging property sales, vi) significant negative industry or economic trends, and fair value less costs to sell of lodging properties held for sale relative to the contractual selling price. When such factors are identified, we prepare an estimate of the undiscounted future cash flows of the specific property and determine if the carrying amount of the asset is recoverable. If the carrying amount of the asset is not recoverable, we estimate the fair value of the property based on discounted cash flows or sales price if the property is under contract and an adjustment is made to reduce the carrying value of the property to its estimated net fair value.
 
Segment Disclosure
Accounting Standards Codification (“ASC”) No. 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. We have determined that we have one reportable operating segment for activities related to investing in real estate; thus, all required financial segment information is included in the Condensed Consolidated Financial Statements as a single operating segment because all of our lodging properties have similar economic characteristics, facilities, and services.

9

Exchange or Modification of Debt

We consider modifications or exchanges of debt as extinguishments in accordance with ASC No. 470, Debt, with gains or losses recognized in current earnings if the terms of the new debt and original instrument are substantially different. If the original and new debt instruments are substantially different, the original debt is derecognized and the new debt is initially recorded at fair value, with the difference recognized as an extinguishment gain or loss. Under an exchange or modification accounted for as a debt extinguishment, fees paid to the lenders are included in the gain or loss on extinguishment of debt. Costs incurred with third parties, such as legal fees, directly related to the exchange or modification are capitalized as deferred financing costs and amortized over the initial term of the new debt. Previously deferred fees and costs for existing debt are included in the calculation of gain or loss. Under an exchange or modification not accounted for as a debt extinguishment, fees paid to the lenders are reflected as additional debt discount and amortized as non-cash interest expense over the remaining initial term of the exchanged or modified debt. Furthermore, costs incurred with third parties, such as legal fees, directly related to the exchange or modification are expensed as incurred. Additionally, previously deferred fees and costs are amortized as non-cash interest expense over the remaining initial term of the exchanged or modified debt.

New Accounting Standards

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280). ASU 2023-07 will improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. Although we operate only a single segment, ASU 2023-07 will require us to adhere to all disclosure requirements of the pronouncement which includes among other things, disclosures related to our chief operating decision maker. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The adoption of ASU 2023-07 will not have a material effect on our Consolidated Financial Statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The adoption of ASU 2023-09 will not have a material effect on our Consolidated Financial Statements.

NOTE 3 - INVESTMENTS IN LODGING PROPERTY, NET
 
Investments in Lodging Property, net

Investments in lodging property, net is as follows (in thousands):
June 30, 2024 December 31, 2023
Lodging buildings and improvements $ 2,806,950  $ 2,786,223 
Land 373,039  373,039 
Furniture, fixtures and equipment 275,917  268,631 
Construction in progress 58,965  41,324 
Intangible assets 39,954  39,954 
Real estate development loan, net 4,442  4,176 
3,559,267  3,513,347 
Less accumulated depreciation and amortization (857,229) (784,298)
$ 2,702,038  $ 2,729,049 

Depreciation and amortization expense related to our lodging properties (excluding amortization of franchise fees) was $36.3 million and $37.4 million for the three months ended June 30, 2024 and 2023, respectively, and $72.9 million, and $74.1 million for the six months ended June 30, 2024 and 2023, respectively.
10


Lodging Property Acquisitions

We did not acquire any properties during the six months ended June 30, 2024. We acquired the following properties during the six months ended June 30, 2023 (in thousands):

Date Acquired Brand/Hotel Name Location Guestrooms Purchase
Price
June 1, 2023 Residence Inn by Marriott Scottsdale, AZ 120 $ 29,000 
June 23, 2023 Nordic Lodge Steamboat Springs, CO 47 13,700 
Total 167 $ 42,700 

All of the acquisitions completed during the six months ended June 30, 2023 were recorded as asset acquisitions. As such, we allocated the aggregate purchase price paid for each transaction to the net assets acquired based on their relative fair values. In determining relative fair values, we made significant estimates regarding replacement costs for the buildings and furniture, fixtures and equipment, and judgments related to certain market assumptions. Acquisition costs related to the transactions have been capitalized as part of the recorded amounts of the acquired net assets.

The allocation of the aggregate purchase prices to the fair value of assets and liabilities acquired for the above acquisitions is as follows (in thousands):
Six Months Ended
June 30, 2023
Land $ 12,257 
Lodging buildings and improvements 29,225 
Furniture, fixtures and equipment 1,331 
Net assets acquired (1)
 $ 42,813 

(1) Net assets acquired during the six months ended June 30, 2023 is based on an aggregate purchase price of $42.7 million plus transaction costs of $0.1 million.

Lodging Property Sales

We sold the following properties during the six months ended June 30, 2024 and 2023:

Portfolio of Two Lodging Properties - New Orleans, LA

In April 2024, we completed the sale of the 202-guestroom Courtyard by Marriott and the 208-guestroom SpringHill Suites by Marriott, both located in New Orleans, LA, for an aggregate selling price of $73.0 million, which resulted in a gain of approximately $28.3 million that was recorded in the three months ended June 30, 2024.

Hilton Garden Inn - Bryan (College Station), TX

In April 2024, we completed the sale of the 119-guestroom Hilton Garden Inn - Bryan (College Station), TX for $11.0 million. The net selling price of the lodging property approximated its net book value on the closing date.

Hyatt Place - Dallas (Plano), TX

In February 2024, we completed the sale of the 127-guestroom Hyatt Place - Dallas (Plano), TX for $10.3 million. We recorded a nominal gain on the sale during the six months ended June 30, 2024 upon closing the transaction.

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Sale of a Portfolio of Four Lodging Properties

In May 2023, we completed the sale of four lodging properties (the "Sale Portfolio") for an aggregate gross selling price of $28.1 million as follows:

Franchise/Brand Location Guestrooms
Hyatt Place Chicago (Lombard/Oak Brook), IL 151
Hyatt Place Chicago (Hoffman Estates), IL 126
Hilton Garden Inn Minneapolis (Eden Prairie), MN 97
Holiday Inn Express & Suites Minneapolis (Minnetonka), MN 93
467

The net selling proceeds approximated the net carrying amount of the Sale Portfolio at closing.

Assets Held for Sale, net

Assets held for sale, net is as follows (in thousands):
June 30, 2024 December 31, 2023
Under Contract for Sale:
Courtyard by Marriott and SpringHill Suites - New Orleans, LA
 $ —  $ 43,504 
Hilton Garden Inn - Bryan (College Station), TX —  10,642 
Hyatt Place - Dallas (Plano), TX —  9,940 
Parcel of undeveloped land - San Antonio, TX 1,225  1,225 
1,225  65,311 
Marketed for Sale:
One individual lodging property 8,065  8,004 
Parcel of undeveloped land - Flagstaff, AZ 425  425 
$ 9,715  $ 73,740 

The parcel of undeveloped land in San Antonio, TX is currently under contract to sell, and the sale is expected to close in the fourth quarter of 2024.

Intangible Assets

Intangible assets, net is as follows (in thousands):
June 30, 2024 December 31, 2023
Indefinite-lived intangible assets:
Air rights $ 10,754  $ 10,754 
Other 80  80 
10,834  10,834 
Finite-lived intangible assets:
Tax incentives 19,750  19,750 
Key money 9,370  9,370 
29,120  29,120 
Intangible assets 39,954  39,954 
Less - accumulated amortization (11,315) (9,251)
Intangible assets, net $ 28,639  $ 30,703 

We recorded amortization expense related to intangible assets of approximately $1.0 million for each of the three months ended June 30, 2024 and 2023, respectively, and $2.1 million for each of the six months ended June 30, 2024 and 2023, respectively.
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Future amortization expense related to intangible assets is as follows (in thousands):

For the Year Ending
December 31,		 Amount
2024 $ 2,454 
2025 1,564 
2026 1,564 
2027 1,374 
2028 1,016 
Thereafter 9,833 
$ 17,805 

NOTE 4 — INVESTMENT IN REAL ESTATE LOANS

Real Estate Development Loans

Onera Mezzanine Financing Loan

In January 2023, we entered into an agreement with affiliates of Onera Opportunity Fund I, LP ("Onera") to provide a mezzanine financing loan of $4.6 million (the "Onera Mezzanine Loan") for the development of a glamping property. The Onera Mezzanine Loan is secured by a second mortgage on the property and is subordinate to the senior lender for the development project. The loan matures 24 months from the closing date of the transaction and may be extended for an additional 12 months at the borrower's option. Additionally, we issued a $3.0 million letter of credit to the senior lender of the project as additional support for Onera's construction loan. We also have an option to purchase 90% of the equity of the entity that owns the development property upon completion of construction or at the one-year anniversary of such completion at a pre-determined price (the "Onera Purchase Option"). The development is expected to be completed in the second half of 2024. As of June 30, 2024, we have funded our entire $4.6 million commitment under the mezzanine financing loan. The balance of the Onera Mezzanine Loan is recorded net of the unamortized discount related to the carrying amount of the Onera Purchase Option of $0.1 million and $0.4 million at June 30, 2024 and December 31, 2023, respectively, and is classified as Investments in lodging property, net in our Condensed Consolidated Balance Sheets.

We recorded the Onera Purchase Option related to the Onera Mezzanine Loan in Other assets and as a contra-asset to Investments in lodging property, net at its estimated fair value of $0.9 million on the transaction date using the Black-Scholes model. The recorded amount of the Onera Purchase Option is being amortized over the term of the Onera Mezzanine Loan using the straight-line method, which approximates the interest method, as non-cash interest income. For each of the three months ended June 30, 2024, and 2023, we amortized $0.1 million of the carrying amount of the Onera Purchase Option as non-cash interest income, and for each of the six months ended June 30, 2024 and 2023, we amortized $0.3 million and $0.2 million, respectively, of the carrying amount of the Onera Purchase Option as non-cash interest income.

Our estimate of the fair value of the Onera Purchase Option under the Black-Scholes model requires judgment and estimates primarily related to the volatility of our stock price and expected levels of future dividends on our common stock.

NOTE 5 - DEBT
 
At June 30, 2024, our indebtedness was comprised of borrowings under our 2023 Senior Credit Facility (as defined below), the 2024 Term Loan (as defined below), the GIC Joint Venture Credit Facility (as defined below), the GIC Joint Venture Term Loan (as defined below), the PACE loan (as defined below), the Convertible Notes (as defined below), and other indebtedness secured by first priority mortgage liens on various lodging properties.

We have entered into interest rate swaps to fix the interest rates on a portion of our variable interest rate indebtedness. The weighted-average interest rate, after giving effect to our interest rate derivatives, for all borrowings was 5.29% at June 30, 2024 and 5.31% at December 31, 2023. There are currently no defaults under any of the Company's loan agreements.
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Debt, net of debt issuance costs, is as follows (in thousands):

June 30, 2024 December 31, 2023
Revolving debt $ 135,000  $ 125,000 
Term loans 871,037  910,000 
Convertible notes 287,500  287,500 
Mortgage loans 65,649  123,339 
  1,359,186  1,445,839 
Unamortized debt issuance costs (13,694) (15,171)
    Debt, net of debt issuance costs $ 1,345,492  $ 1,430,668 

Our total fixed-rate and variable-rate debt, after consideration of our interest rate derivative agreements that are currently in effect, is as follows (in thousands):
 
June 30, 2024 Percentage December 31, 2023 Percentage
Fixed-rate debt (1)
 $ 906,149  67% $ 956,414  66%
Variable-rate debt 453,037  33% 489,425  34%
$ 1,359,186  $ 1,445,839 

(1) At June 30, 2024, debt related to our wholly-owned properties and our pro rata share of joint venture debt has a fixed-rate debt ratio of approximately 76% of our total pro rata indebtedness when taking into consideration interest rate swaps that are currently in effect.

Information about the fair value of our fixed-rate debt that is not recorded at fair value is as follows (in thousands):
 
June 30, 2024 December 31, 2023  
Carrying
Value		 Fair Value Carrying
Value		 Fair Value Valuation Technique
Convertible notes $ 287,500  $ 260,336  $ 287,500  $ 256,141  Level 1 - Market approach
Mortgage loans 18,649  16,876  68,915  60,883  Level 2 - Market approach
$ 306,149  $ 277,212  $ 356,415  $ 317,024 
 
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Detailed information about our gross debt at June 30, 2024 and December 31, 2023 is as follows (dollars in thousands):

Principal Balance Outstanding
Lender Interest Rate Initial Maturity Date Fully Extended Maturity Date Number of
Encumbered  Properties		 June 30, 2024 December 31, 2023
OPERATING PARTNERSHIP DEBT:
2023 Senior Credit and Term Loan Facility
Bank of America, N.A.
$400 Million Revolver (1)
7.38% Variable
 6/21/2027 6/21/2028 n/a $ 10,000  $ — 
$200 Million Term Loan (1)
7.34% Variable
 6/21/2026 6/21/2028 n/a 200,000  200,000 
Total Senior Credit and Term Loan Facility 210,000  200,000 
Term Loans
KeyBank National Association Term Loan (1) (2)
 n/a 2/14/2025 2/14/2025 n/a —  225,000 
Regions Bank 2024 Term Loan Facility (1)
7.33% Variable
 2/26/2027 2/26/2029 n/a 200,000  — 
200,000  225,000 
Convertible Notes
1.50% Fixed
 2/15/2026 2/15/2026 n/a 287,500  287,500 
Secured Mortgage Indebtedness
MetaBank (2)
4.44% Fixed
 7/1/2027 7/1/2027 n/a —  42,611 
Bank of the Cascades (2)
7.32% Variable
 12/19/2024 12/19/2024 n/a —  7,425 
4.30% Fixed
 12/19/2024 12/19/2024 n/a —  7,425 
Total Mortgage Loans —  —  57,461 
Total Operating Partnership Debt
 697,500  769,961 
JOINT VENTURE DEBT:
Brickell Joint Venture Mortgage Loan
City National Bank of Florida
8.29% Variable
 6/9/2025 6/9/2025 2  47,000  47,000 
GIC Joint Venture Credit Facility and Term Loans
Bank of America, N.A.
$125 Million Revolver (3)
7.59% Variable
 9/15/2027 9/15/2028 n/a 125,000  125,000 
 $75 Million Term Loan (3)
7.54% Variable
 9/15/2027 9/15/2028 n/a 75,000  75,000 
Bank of America, N.A.Term Loan (4)
8.21% Variable
 1/13/2026 1/13/2027 n/a 396,037  410,000 
Wells Fargo
4.99% Fixed
 6/6/2028 6/6/2028 1 12,657  12,785 
PACE loan
6.10% Fixed
 7/31/2040 7/31/2040 n/a 5,992  6,093 
Total GIC Joint Venture Credit Facility and Term Loans 1 614,686  628,878 
Total Joint Venture Debt 3  661,686  675,878 
Total Debt 3  $ 1,359,186  $ 1,445,839 

(1) The 2023 Senior Credit and Term Loan Facility is supported by a borrowing base of 53 unencumbered hotel properties.
(2) The KeyBank Term Loan was paid off with proceeds from the Regions Bank 2024 Term Loan. The MetaBank loan was paid off in June 2024. The Bank of the Cascades mortgage loan was comprised of two promissory notes. We repaid The Bank of the Cascades mortgage loans in May 2024.
(3) The $125 Million Revolver and the $75 Million Term Loan are secured by pledges of the equity in the entities and affiliated entities that own 13 lodging properties.
(4) The GIC Joint Venture Term Loan with Bank of America, N.A. is secured by pledges of the equity in the entities and affiliated entities that own 25 lodging properties and two parking garages.


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$600 Million Senior Credit and Term Loan Facility

In June 2023, the Operating Partnership, as borrower, the Company, as parent guarantor, and each party executing the loan documentation as a subsidiary guarantor, entered into an amended and restated $600.0 million senior credit facility (the “2023 Senior Credit Facility”) with Bank of America, N.A., as successor administrative agent, and a syndicate of lenders. The 2023 Senior Credit Facility is comprised of a $400.0 million revolver (the "$400 Million Revolver") and a $200.0 million term loan facility (the “$200 Million Term Loan”). The 2023 Senior Credit Facility has an accordion feature which allows the Company to increase the total commitments by an aggregate of up to $300.0 million.

At June 30, 2024, our $200 Million Term Loan was fully funded, and our $400 Million Revolver had $10.0 million in outstanding borrowings. Borrowings under the 2023 Senior Credit Facility are limited by the value of the Unencumbered Properties (as defined below).

The $400 Million Revolver has a maturity date of June 2027, which may be extended by the Company for up to two consecutive six-month periods, subject to certain conditions, and the $200 Million Term Loan has a maturity date of June 2026, which may be extended by the Company for up to two consecutive 12-month periods, subject to certain conditions.

The 2023 Senior Credit Facility bears interest at the Secured Overnight Funding Rate ("SOFR"). The interest rate on the $400 Million Revolver is based on the higher of (i) a pricing grid ranging from 140 basis points to 240 basis points plus Adjusted Daily SOFR or Adjusted Term SOFR, depending on the Company's leverage ratio (as defined in the loan documents); and (ii) a pricing grid ranging from 40 basis points to 140 basis points over the Base Rate, depending on the Company's leverage ratio (as defined in the credit agreements governing the 2023 Senior Credit Facility).

The interest rate on the $200 Million Term Loan is based on the higher of (i) a pricing grid ranging from 135 basis points to 235 basis points plus Adjusted Daily SOFR or Adjusted Term SOFR, depending on the Company's leverage ratio (as defined in the loan documents); and (ii) a pricing grid ranging from 35 basis points to 135 basis points over the Base Rate, depending on the Company's leverage ratio (as defined in the loan documents).

Term SOFR will be available for one, three and six-month interest periods. The Base Rate is a fluctuating rate of interest per annum equal to the highest of (a) the Federal Funds Rate plus 0.50%, (b) the rate of interest in effect for such day as publicly announced by Bank of America as its “prime rate,” (c) SOFR published on such day on the Federal Reserve Bank of New York’s website (or any successor source) plus 1.00% and (d) 1.00%. For purposes of the 2023 Senior Credit Facility, SOFR is subject to a floor of zero basis points.

We are also required to pay an unused fee (the “Unused Fee”) on the undrawn portion of the $400 Million Revolver. The Unused Fee is calculated on a daily basis on the unused amount of the $400 Million Revolver multiplied by (i) 0.25% per annum in the event that Revolver usage is greater than 50%, and (ii) 0.20% per annum in the event that Revolver usage is equal to or less than 50%. The Unused Fee is payable quarterly in arrears and on the final maturity date of the $400 Million Revolver.

We are required to comply with various financial and other covenants to draw and maintain borrowings under the $400 million Revolver.

2024 Term Loan

In February 2024, our Operating Partnership, as borrower, the Company, as parent guarantor, and each party executing the term loan document as a subsidiary guarantor, entered into a $200 million senior unsecured term loan financing (the “2024 Term Loan”) with Regions Bank. Proceeds from the 2024 Term Loan financing and advances on our $400 Million Revolver were used to repay in full the Company’s $225 million term loan that was scheduled to mature in February 2025.

The 2024 Term Loan has an initial maturity date of February 2027 and can be extended for two 12-month periods by the Company, subject to certain conditions. At June 30, 2024, the 2024 Term Loan was fully funded.

We pay interest on advances at varying rates, based upon, at our option, either (i) daily, 1-, 3-, or 6-month SOFR (subject to a floor of 35 basis points), plus a SOFR adjustment equal to 10 basis points and an applicable margin between 135 and 235 basis points, depending upon our leverage ratio (as defined in the loan documents). We are required to pay other fees, including arrangement and administrative fees.
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We are required to comply with various financial and other covenants to draw and maintain borrowings under the 2024 Term Loan.

Convertible Senior Notes and Capped Call Options

In January 2021, we entered into an underwriting agreement (the “Convertible Notes Offering”) pursuant to which the Company agreed to offer and sell an aggregate of $287.5 million of 1.50% convertible senior notes due in 2026 (the “Convertible Notes"). The net proceeds from the Convertible Notes Offering, after deducting underwriting discounts and commissions and offering expenses payable by the Company (including net proceeds from the full exercise by the underwriters of their over-allotment option to purchase additional Convertible Notes), were approximately $280.0 million before consideration of the Capped Call Transactions (as described below). These proceeds were used to pay the cost of the Capped Call Transactions and to partially repay outstanding obligations under our senior credit facility that was replaced by the 2023 Senior Credit Facility and another term loan.

The Convertible Notes bear interest at a rate of 1.50% per year, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2021. The Convertible Notes will mature on February 15, 2026 (the “Maturity Date”), unless earlier converted, purchased, or redeemed. Prior to August 15, 2025, the Convertible Notes will be convertible only upon certain circumstances and during certain periods. On or after August 15, 2025 and through the Maturity Date, holders may convert any of their Convertible Notes into shares of the Company’s common stock, at the applicable conversion rate, unless the Convertible Notes have been previously purchased or redeemed by the Company. The Company recorded interest expense of $1.1 million for each of the three months ended June 30, 2024 and 2023, respectively, and $2.2 million for each of the six months ended June 30, 2024 and 2023, respectively. The Company incurred debt issuance costs related to the Convertible Notes Offering of $7.6 million, of which $0.4 million was amortized as non-cash interest expense for each of the three months ended June 30, 2024 and 2023, respectively, and $0.7 million for each of the six months ended June 30, 2024 and 2023, respectively. Including the amortization of the debt issuance costs, the effective interest rate on the Convertible Notes was approximately 2.00% for the three and six months ended June 30, 2024 and 2023. The unamortized discount related to the Convertible Notes was $2.5 million and $3.2 million at June 30, 2024 and December 31, 2023, respectively.

The initial conversion rate of the Convertible Notes is 83.4028 shares of common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of $11.99 per share of common stock based on the 37.5% base conversion premium on the reference price of $8.72 per share. In no event will the conversion rate exceed 114.6788 shares of common stock per $1,000 principal amount of Convertible Notes, subject to certain adjustments defined in the Convertible Notes Offering. Commensurate with the declaration of dividends and distributions on our common stock and Common Units, respectively, on May 1, 2024, the conversion rate of the Convertible Notes was adjusted to 89.10 shares of common stock per $1,000 principal amount of Convertible Notes.

On January 7, 2021, in connection with the pricing of the Convertible Notes, and on January 8, 2021, in connection with the full exercise by the underwriters of their option to purchase additional Convertible Notes pursuant to the underwriting agreement, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain of the underwriters or their respective affiliates and another financial institution (the “Capped Call Counterparties”). The Capped Call Transactions initially cover, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes, the number of shares of common stock underlying the Convertible Notes. The Capped Call Transactions are generally expected to reduce the potential dilution to holders of shares of common stock upon conversion of the Convertible Notes or offset the potential cash payments that the Company could be required to make in excess of the principal amount of any converted Convertible Notes upon conversion thereof, with such reduction or offset subject to a cap.

The effective strike price of the Capped Call Transactions was initially $15.26, which represented a premium of 75.0% over the last reported sale price of our common stock on the New York Stock Exchange on January 7, 2021 and is subject to certain adjustments under the terms of the Capped Call transactions. The current strike price is $14.28 due to the adjustments related to the dividends paid during the period that the Capped Call securities have been outstanding.

17

MetaBank Loan

In June 2017, Summit Meta 2017, LLC, a subsidiary of our Operating Partnership, entered into a $47.6 million secured, non-recourse loan with MetaBank (the "MetaBank Loan"). In June 2024, the outstanding balance of the loan was $42.3 million at which time we repaid the MetaBank Loan for $39.1 million prior to its scheduled maturity date, which represented a discount of $3.2 million and resulted in a gain on extinguishment of debt of $3.0 million after legal fees and unamortized debt issuance costs that were written-off on the closing date. As a result of this repayment, the three lodging properties previously held as collateral for the MetaBank Loan were released.

Bank of the Cascades

In May 2024, we repaid the outstanding principal of the Bank of the Cascades that was scheduled to mature in December 2024 with no prepayment penalty. This repayment resulted in the release of the lodging property that was pledged as collateral for this mortgage loan.

GIC Joint Venture Credit Facility

In October 2019, Summit JV MR 1, LLC (the “Borrower”), as borrower, and Summit Hospitality JV, LP (the “Parent” or "GIC Joint Venture"), as parent of the Borrower, and each party executing the credit facility documentation as a subsidiary guarantor, entered into a $200.0 million credit facility (the “GIC Joint Venture Credit Facility”) with Bank of America, N.A., as administrative agent and sole initial lender, and BofA Securities, Inc., as sole lead arranger and sole bookrunner. The Operating Partnership and the Company are not borrowers or guarantors of the GIC Joint Venture Credit Facility. The GIC Joint Venture Credit Facility is guaranteed by all of the Borrower’s existing and future subsidiaries, subject to certain exceptions.

The GIC Joint Venture Credit Facility is comprised of a $125.0 million revolving credit facility (the “$125 Million Revolver”) and a $75.0 million term loan (the “$75 Million Term Loan”). The GIC Joint Venture Credit Facility has an accordion feature which allows us to increase the total commitments by up to $300.0 million, for aggregate potential borrowings of up to $500.0 million. At June 30, 2024, we had $125.0 million outstanding under the $125 Million Revolver.

Amendments to the $200 million GIC Joint Venture Credit Facility

In February 2023, the Borrower entered into the Fifth Amendment to Credit Agreement to, among other things, convert the reference rate used in interest rate calculations from the London Interbank Offered Rate ("LIBOR") to adjusted term or daily SOFR (using a 10-basis point credit spread adjustment), with Borrower's option to borrow base rate advances, term SOFR advances or daily SOFR advances.

In September 2023, the GIC Joint Venture entered into an amendment to the GIC Joint Venture Credit Facility (the "GIC Joint Venture Credit Amendment"). The GIC Joint Venture Credit Amendment extends the maturity of the $125 Million Revolver and the $75 Million Term Loan to September 2027, which may be extended by the Company for a single twelve-month period, subject to certain conditions.

The interest rate on the $125 Million Revolver is unchanged and is based on the higher of the following:

i.Daily SOFR or Term SOFR (1-month or 3-month), plus a SOFR adjustment of 0.10%, plus a margin of 2.15%, or,

ii.the applicable base rate, which is the greatest of the administrative agent’s prime rate, the federal funds rate plus 0.50%, and 1-month Term SOFR plus 1.00%, plus a base rate margin of 1.15%.

The interest rate on the $75 Million Term Loan is five basis points less than the interest rate on the $125 Million Revolver referenced above.

In addition, on a quarterly basis, we are required to pay a fee of 0.25% of the average unused amount of the GIC Joint Venture Credit Facility. We are also required to pay other fees, including customary arrangement and administrative fees.

The GIC Joint Venture Credit Amendment requires the GIC Joint Venture and certain subsidiaries to pledge to the secured parties all of the equity interests in the entities that own the 13 properties included in the borrowing base assets, the related TRS entities that lease each of the borrowing base assets, and all other subsidiaries of the borrower and the subsidiary guarantors, subject to certain exceptions.
18


GIC Joint Venture Term Loan

In January and March 2022, the Operating Partnership and the GIC Joint Venture closed on a transaction with NewcrestImage Holdings, LLC, a Delaware limited liability company, and NewcrestImage Holdings II, LLC, a Delaware limited liability company (together, “NewcrestImage”), to acquire a portfolio of 27 lodging properties, containing an aggregate of 3,709 guestrooms, and two parking structures, containing 1,002 spaces and various financial incentives for an aggregate purchase price of $822.0 million (the "NCI Transaction"). In connection with the NCI Transaction, in January 2022, Summit JV MR 2, LLC, Summit JV MR 3, LLC and Summit NCI NOLA BR 184, LLC (each of which is a subsidiary of the GIC Joint Venture, and are collectively, the “Term Loan Borrower”), the GIC Joint Venture, as parent guarantor, and each party executing the credit facility documentation as a subsidiary guarantor, entered into a $410.0 million senior secured term loan facility (the “GIC Joint Venture Term Loan”) with Bank of America, N.A., as administrative agent and initial lender, Wells Fargo Bank, National Association, as syndication agent and an initial lender, and BofA Securities, Inc. and Wells Fargo Securities, LLC, as joint lead arrangers and joint bookrunners.

Neither the Operating Partnership nor the Company are borrowers or guarantors of the GIC Joint Venture Term Loan. The GIC Joint Venture Term Loan is guaranteed by the GIC Joint Venture and all of the Term Loan Borrower's existing and future subsidiaries, subject to certain exceptions.

The GIC Joint Venture Term Loan has an accordion feature that permits an increase in the total commitments by up to $190.0 million, for aggregate potential borrowings of up to $600.0 million. The GIC Joint Venture Term Loan will mature on January 13, 2026 and can be extended for one twelve-month period at the option of the GIC Joint Venture, subject to certain conditions.

As of June 30, 2024, we had $396.0 million outstanding on the GIC Joint Venture Term Loan bearing interest at a floating rate of SOFR plus 2.75%.

The GIC Joint Venture Term Loan is secured primarily by a first priority pledge of the Term Loan Borrower's equity interests in the subsidiaries that hold a direct or indirect interest in 25 of the lodging properties and two parking facilities at June 30, 2024 purchased in the NCI Transaction that constitute borrowing base assets. The GIC Joint Venture Term Loan contains terms, conditions, and covenants typical for similar credit facilities.

PACE Loan

As part of the NCI Transaction, a subsidiary of the GIC Joint Venture assumed a Property Assessed Clean Energy ("PACE") loan of approximately $6.5 million. The loan bears fixed interest at 6.10%, has an amortization period of 20 years, and matures on July 31, 2040. The PACE loan is secured by an assessment lien imposed by the County of Tarrant, TX for the benefit of the lender. As of June 30, 2024, the outstanding balance of the PACE loan was $6.0 million.

NOTE 6 - LEASES

The Company has operating leases related to the land under certain lodging properties, conference centers, parking spaces, automobiles, our corporate office, and miscellaneous office equipment. These leases have remaining terms of one year to 74.0 years, some of which include options to extend the leases for additional years. The exercise of lease renewal options is at our sole discretion. As of June 30, 2024 and December 31, 2023, the weighted-average operating lease term was approximately 32.1 years and 32.2 years, respectively. Certain leases also include options to purchase the leased property. As of June 30, 2024 and December 31, 2023, our weighted-average incremental borrowing rate for leases was 4.8%.
19


Certain of our lease agreements include rental payments based on a percentage of revenue over contractual levels and others include rental payments adjusted periodically for inflation. Our lease agreements do not contain any material residual value guarantees or restrictive covenants that materially affect our business. In addition, we lease certain owned real estate to third parties. We recorded gross third-party tenant income of $0.6 million and $0.7 million for the three months ended June 30, 2024 and 2023, respectively, and $1.4 million during each of the six months ended June 30, 2024 and 2023, respectively, which was recorded in Other income, net in our Condensed Consolidated Statement of Operations.

During each of the three months ended June 30, 2024 and 2023, the Company's total operating lease cost was $1.1 million, and the cash payments on operating leases were $1.0 million.

During each of the six months ended June 30, 2024 and 2023, the Company's total operating lease cost was $2.3 million, and the cash payments on operating leases were $2.0 million.

Operating lease maturities as of June 30, 2024 are as follows (in thousands):

For the Year Ending
December 31,		 Amount
2024 $ 1,126 
2025 2,252 
2026 2,206 
2027 2,249 
2028 2,090 
Thereafter 35,803 
Total lease payments (1)
 45,726 
Less: Imputed interest (20,568)
Total $ 25,158 

(1)Certain payments above include future increases to the minimum fixed rent based on the Consumer Price Index in effect at the initial measurement of the lease balances.

NOTE 7 - DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING
 
Information about our derivative financial instruments at June 30, 2024 and December 31, 2023 is as follows (dollars in thousands): 
Notional Amount Fair Value
Contract date Effective Date Expiration Date Average Annual Effective Fixed Rate June 30, 2024 December 31, 2023 June 30, 2024 December 31, 2023
Operating Partnership:
June 11, 2018 September 28, 2018 September 30, 2024 2.86  % $ 75,000  $ 75,000  $ 479  $ 1,170 
June 11, 2018 December 31, 2018 December 31, 2025 2.92  % 125,000  125,000  3,393  2,877 
July 26, 2022 January 31, 2023 January 31, 2027 2.60  % 100,000  100,000  4,234  3,134 
July 26, 2022 January 31, 2023 January 31, 2029 2.56  % 100,000  100,000  6,145  4,273 
Total Operating Partnership 400,000  400,000  14,251  11,454 
GIC Joint Venture:
March 24, 2023 July 1, 2023 January 13, 2026 3.35  % 100,000  100,000  1,947  1,250 
March 24, 2023 July 1, 2023 January 13, 2026 3.35  % 100,000  100,000  1,948  1,254 
January 19, 2024 October 1, 2024 January 13, 2026 3.77  % 100,000  (1) —  945  — 
Total GIC Joint Venture
 300,000  200,000  4,840  2,504 
Total
 $ 700,000  $ 600,000  $ 19,091  $ 13,958 

(1)     At December 31, 2023, we had interest rate swaps that were in effect with a notional amount totaling $600.0 million. In January, 2024, we executed one additional interest rate swap with a notional amount totaling $100.0 million that becomes effective on October 1, 2024.
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At June 30, 2024, debt related to our wholly-owned properties and our pro rata share of joint venture debt has a fixed-rate debt ratio of approximately 76% of our total pro rata indebtedness when taking into consideration interest rate swaps that are currently in effect.

At June 30, 2024 and December 31, 2023, we had $600.0 million of debt with variable interest rates that had been converted to fixed interest rates through derivative financial instruments which are carried at fair value. Differences between carrying value and fair value of our fixed-rate debt are primarily due to changes in interest rates. Inherently, fixed-rate debt is subject to fluctuations in fair value as a result of changes in the current market rate of interest on the valuation date.

In January 2024, subsidiaries of the GIC Joint Venture that are the borrowers under the GIC Joint Venture Term Loan entered into a $100.0 million interest rate swap to fix one-month term SOFR until January 2026. The interest rate swap has an effective date of October 1, 2024 and a termination date of January 13, 2026. Pursuant to the interest rate swap, we will pay a fixed rate of 3.77% and receive the one-month term SOFR floating rate index.

Our interest rate swaps have been designated as cash flow hedges and are valued using a market approach, which is a Level 2 valuation technique. At June 30, 2024 and December 31, 2023, our interest rate swaps were in an asset position. Derivative assets related to our interest rate swaps are recorded in Other assets in our Condensed Consolidated Balance Sheets. We are not required to post any collateral related to these agreements and are not in breach of any financial provisions of the agreements.

Changes in the fair value of the hedging instruments are deferred in Accumulated other comprehensive income (loss) in our Condensed Consolidated Balance Sheets and are reclassified as Interest expense in our Condensed Consolidated Statements of Operations in the period in which the hedged item affects earnings. In the next twelve months, we estimate that $11.5 million will be reclassified from Accumulated other comprehensive income (loss) and recorded as a decrease to Interest expense.
 
We characterize the realized and unrealized gain or loss related to derivative financial instruments designated as cash flow hedges as follows (in thousands):
  Three Months Ended
June 30,		 Six Months Ended
June 30,
  2024 2023 2024 2023
Unrealized gain recognized in Accumulated other comprehensive income (loss) on derivative financial instruments $ 3,097  $ 13,286  $ 12,473  $ 10,846 
Gain reclassified from Accumulated other comprehensive income (loss) to Interest expense $ 3,660  $ 2,313  $ 7,340  $ 4,261 
Total interest expense and other finance expense presented in the Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded $ 20,830  $ 22,248  $ 42,412  $ 43,157 
 
NOTE 8 - EQUITY
 
Common Stock
 
The Company is authorized to issue up to 500,000,000 shares of common stock, $0.01 par value per share ("Common Stock"). Each outstanding share of our Common Stock entitles the holder to one vote on all matters submitted to a vote of stockholders, including the election of directors and, except as may be provided with respect to any other class or series of stock, the holders of such shares possess the exclusive voting power.

In May 2022, the Company and the Operating Partnership entered into an equity distribution agreement (the “Equity Distribution Agreement”) with a group of underwriters as sales agents for the Company, principals and with certain exceptions, forward sellers (collectively the “Managers”) and certain banks as forward purchasers, providing for the offer and sale of shares of the Company’s Common Stock, having a maximum aggregate offering price of up to $200.0 million through or to the Managers, as the Company’s sales agents or, if applicable, as forward sellers, or directly to the Managers, as principals (the “2022 ATM Program”). To date, we have not sold any shares of our Common Stock under the 2022 ATM Program.
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Changes in Common Stock during the six months ended June 30, 2024 and 2023 were as follows:

Six Months Ended
June 30,
2024 2023
Beginning shares of Common Stock outstanding 107,593,373  106,901,576 
Common Unit redemptions 310  — 
Grants under the Equity Plan (as defined below in "Note 12 - Equity-Based Compensation")
 1,055,544  875,055 
Annual grants to independent directors 127,491  113,141 
Performance share and other forfeitures (355,821) (139,254)
Shares acquired for employee withholding requirements (144,654) (180,780)
Ending shares of Common Stock outstanding 108,276,243  107,569,738 

Preferred Stock
 
The Company is authorized to issue up to 100,000,000 shares of preferred stock, $0.01 par value per share, of which 89,600,000 is currently undesignated, 6,400,000 shares have been designated as 6.25% Series E Cumulative Redeemable Preferred Stock (the "Series E Preferred Stock") and 4,000,000 shares have been designated as 5.875% Series F Cumulative Redeemable Preferred Stock (the "Series F Preferred Stock").

The Company's outstanding shares of preferred stock (collectively, “Preferred Shares”) rank senior to our Common Stock and on parity with each other with respect to the payment of dividends and distributions of assets in the event of a liquidation, dissolution, or winding up. The Preferred Shares do not have maturity dates and are not subject to mandatory redemption or sinking fund requirements. The Series E Preferred Stock is redeemable by the Company at its election. The Company may not redeem the Series F Preferred Stock prior to August 12, 2026, except in limited circumstances relating to the Company’s continuing qualification as a REIT or in connection with certain changes in control. When redeemable, the Company may, at its option, redeem the applicable Preferred Shares, in whole or from time to time in part, by payment of $25 per share, plus any accumulated, accrued and unpaid dividends up to, but not including the date of redemption. If the Company does not exercise its rights to redeem the Preferred Shares upon certain changes in control, the holders of the Preferred Shares have the right to convert some or all of their shares into a number of the Company’s Common Stock based on a defined formula, subject to a share cap, or alternative consideration. The share cap on each share of Series E Preferred Stock and Series F Preferred Stock is 3.1686 and 5.8275 shares of Common Stock, respectively, all subject to certain adjustments.
 
The Company pays dividends at an annual rate of $1.5625 for each Series E Preferred Stock and $1.46875 for each share of Series F Preferred Stock. Dividend payments are made quarterly in arrears on or about the last day of February, May, August, and November of each year.

NOTE 9 - NON-CONTROLLING INTERESTS AND REDEEMABLE NON-CONTROLLING INTERESTS

Non-controlling Interests in Operating Partnership

Pursuant to the limited partnership agreement of our Operating Partnership, the unaffiliated third parties who hold Common Units have the right to request that we redeem their Common Units in exchange for cash based upon the fair value of an equivalent number of our shares of Common Stock at the time of redemption; however, the Company has the option to redeem Common Units with shares of our Common Stock on a one-for-one basis. The number of shares of our Common Stock issuable upon redemption of Common Units may be adjusted upon the occurrence of certain events such as share dividend payments, share subdivisions or combinations. In the first quarter of 2022, in connection with the NCI Transaction, the Operating Partnership issued an aggregate of 15,864,674 Common Units as partial consideration for the purchase.

NewcrestImage and other unaffiliated third parties collectively owned 15,948,318 of Common Units at June 30, 2024 and December 31, 2023, which represents approximately 13% of the outstanding Common Units.
 
We classify outstanding Common Units held by unaffiliated third parties as Non-controlling interests, a component of equity in our Condensed Consolidated Balance Sheets. The portion of net income (loss) allocated to these Common Units is included on the Company’s Condensed Consolidated Statements of Operations as Net income (loss) attributable to non-controlling interests.
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Non-controlling Interests in Consolidated Joint Ventures

At June 30, 2024, the Company is a partner with a majority equity interest in the three joint ventures described below, which are consolidated in our Condensed Consolidated Financial Statements. The portion of net income (loss) allocated to these non-controlling interests is included on the Company’s Condensed Consolidated Statements of Operations as Net income (loss) attributable to non-controlling interests.

GIC Joint Venture

In July 2019, the Company entered into the GIC Joint Venture to acquire assets that align with the Company’s current investment strategy and criteria. The Company serves as general partner and asset manager of the GIC Joint Venture and has historically and in the future intends to invest 51% of the equity capitalization of the limited partnership, with GIC investing the remaining 49%. The Company earns fees for providing services to the GIC Joint Venture and has the potential to earn incentive fees based on the GIC Joint Venture achieving certain return thresholds. As of June 30, 2024, the GIC Joint Venture owns 39 lodging properties containing 5,335 guestrooms in nine states.

The GIC Joint Venture owns the lodging properties through master REITs (the “Master REIT”) and subsidiary REITs (the “Subsidiary REIT”). All of the lodging properties owned by the GIC Joint Venture are leased to taxable REIT subsidiaries of the Subsidiary REITs (the “Subsidiary REIT TRSs”). To qualify as a REIT, the Master REIT and each Subsidiary REIT must meet all of the REIT requirements provided in the Internal Revenue Code, as amended. Taxable income related to the Subsidiary REIT TRSs is subject to federal, state and local income taxes at applicable tax rates.

Brickell Joint Venture

In June 2022, the Company entered into the Brickell Joint Venture to facilitate the exercise of a purchase option to acquire a 90% equity interest in the AC/Element Hotel. Our joint venture partner, C-F Brickell, owns the remaining 10% equity interest in the Brickell Joint Venture. The Company has an option to purchase the remaining 10% equity interest in the Brickell Joint Venture from C-F Brickell in December 2026 with the exercise of a second purchase option at its market value on the exercise date. The Company serves as the managing member of the Brickell Joint Venture.

Onera Joint Venture

In October 2022, the Company entered into a joint venture with Onera (the "Onera Joint Venture"), developers of alternative accommodation properties, with the acquisition of a 90% equity interest in the Onera Joint Venture for $5.2 million in cash, plus additional contingent consideration of $1.8 million paid in September 2023. The $1.8 million contingent consideration paid represents our 90% pro rata share of the maximum increase in value of the property of $2.0 million as a result of the property outperforming a pre-established threshold over a twelve-month period after the closing of the transaction.

The Onera Joint Venture owns a 100% fee simple interest in real property and improvements located in Fredericksburg, TX (the "Onera Property") consisting of 11 glamping lodging units and a 6.4-acre parcel of undeveloped land that is being developed as phase two of the lodging property. The Onera Joint Venture incurred $2.5 million of development costs during the six months ended June 30, 2024, and $4.0 million from inception of the development related to the development of phase two of a property that is recorded as Investment in lodging property under development in our Condensed Consolidated Balance Sheets at June 30, 2024. The Company serves as the managing member of the Onera Joint Venture.

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Redeemable Non-controlling Interests

In connection with the NCI Transaction, Summit Hotel GP, LLC, a wholly-owned subsidiary of the Company and the sole general partner of the Operating Partnership, on its own behalf as general partner of the Operating Partnership and on behalf of the limited partners of the Operating Partnership, on January 13, 2022, entered into the Tenth Amendment (the “Tenth Amendment”) to the First Amended and Restated Agreement of Limited Partnership of the Operating Partnership, to provide for the issuance of up to 2,000,000 Series Z Preferred Units. The Series Z Preferred Units rank on a parity with the Operating Partnership’s 6.25% Series E and 5.875% Series F Preferred Units and holders will receive quarterly distributions at a rate of 5.25% per year. From issuance until the tenth anniversary of their issuance, the Series Z Preferred Units will be redeemable at the holder’s request at any time, or in connection with a change of control of the Company, for cash or shares of the Company’s 5.25% Series Z Cumulative Perpetual Preferred Stock (which will be designated and authorized following notice of redemption by holder of the Series Z Preferred Units) at the Company’s election, on a one-for-one basis. After the fifth anniversary of their issuance, the Company may redeem the Series Z Preferred Units for cash at a redemption amount of $25 per unit. For a 90-day period immediately following both the tenth and the eleventh anniversaries of their issuance or in connection with a change of control of the Company, the Series Z Preferred Units will be redeemable at the holder’s request for cash at a redemption amount of $25 per unit. On January 13, 2022 and March 23, 2022, in connection with the NCI Transaction, the Operating Partnership issued an aggregate of 2,000,000 Series Z Preferred Units as partial consideration for the purchase. At June 30, 2024, the redeemable Series Z Preferred Units issued in connection with the NCI Transaction are recorded as temporary equity and reflected as Redeemable non-controlling interests on our Condensed Consolidated Balance Sheets.

NOTE 10 - FAIR VALUE MEASUREMENT
 
The following table presents information about our financial instruments measured at fair value on a recurring basis at June 30, 2024 and December 31, 2023. In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, we classify assets and liabilities based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
 
Disclosures concerning financial instruments measured at fair value are as follows (in thousands):
 
Fair Value Measurements at June 30, 2024 using
Level 1 Level 2 Level 3 Total
Assets:
Interest rate swaps $ —  $ 19,091  $ —  $ 19,091 
Onera Purchase Option —  —  931  931 
 
Fair Value Measurements at December 31, 2023 using
Level 1 Level 2 Level 3 Total
Assets:
Interest rate swaps $ —  $ 13,958  $ —  $ 13,958 
Onera Purchase Option $ —  $ —  $ 931  $ 931 

The Onera Purchase Option does not have a readily determinable fair value. The fair value was estimated using the Black-Scholes model and was based on unobservable inputs for which there is little or no market information available. As such, we were required to develop assumptions to determine the fair value of the Onera Purchase Option as follows (dollars in thousands):
Exercise price $ 8,206 
First option exercise date (1)
 10/1/2024
Expected volatility 52.20  %
Risk free rate 4.15  %
Expected annualized equity dividend yield —  %
(1)The first option exercise date is the date used for estimating the fair value of the purchase option. The Onera Purchase Option is exercisable when the lodging development is fully constructed and open for business and expires one year from the date that it is initially exercisable.

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NOTE 11 - COMMITMENTS AND CONTINGENCIES
 
Franchise Agreements
 
All of our lodging properties (with the exception of the Onera Joint Venture property and the Nordic Lodge - Steamboat Springs, CO) operate under franchise agreements with major hotel franchisors. The initial terms of our franchise agreements generally range from 10 to 30 years with various extension provisions. Each franchisor receives franchise fees ranging from 3% to 6% of each lodging property’s room revenue, and some agreements require that we pay marketing fees of up to 4% of room revenue. In addition, some of these franchise agreements require that we deposit into a reserve fund for capital expenditures up to 5% of the lodging property's gross room revenue to ensure that we comply with the franchisor's standards and requirements. We also pay fees to our franchisors for services related to reservation and information systems. We expensed fees related to our franchise agreements of $14.2 million and $14.0 million for the three months ended June 30, 2024 and 2023, respectively, and $27.6 million and $27.1 million for the six months ended June 30, 2024 and 2023, respectively.

Management Agreements
 
Our lodging properties operate pursuant to management agreements with various professional third-party management companies. The remaining terms of our management agreements range from month-to-month to 12 years and have various extension provisions. Each management company receives a base management fee, which is a percentage of total lodging property revenues. In addition, our lodging property management agreements generally provide that the lodging property manager can earn an incentive fee for hotel-level Earnings Before Interest, Taxes, Depreciation and Amortization over certain thresholds of a required investment return. In some cases, there are also monthly fees for certain services, such as accounting and shared services, based on the number of guestrooms. Generally, there are also incentive fees payable to our property managers based on attaining certain financial thresholds at lodging properties under their management. Management fee expenses were $4.4 million and $5.0 million for the three months ended June 30, 2024 and 2023, respectively, and $9.3 million and $9.8 million for the six months ended June 30, 2024 and 2023, respectively.

Litigation
 
We are involved from time to time in litigation arising in the ordinary course of business. There are currently no pending legal actions that we believe would have a material effect on our consolidated financial position or results of operations.
 
NOTE 12 - EQUITY-BASED COMPENSATION
 
Our currently outstanding equity-based awards were issued under the prior Summit Hotel Properties, Inc. 2011 Equity Incentive Plan, and future awards will be issued under the Summit Hotel Properties, Inc. 2024 Equity Incentive Plan effective May 22, 2024 (the "Equity Plan"), which provides for the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, and other equity-based awards or incentive awards. Stock options granted may be either incentive stock options or non-qualified stock options. Vesting terms may vary with each grant. At June 30, 2024, we only have outstanding restricted stock awards. All of our outstanding equity-based awards are classified as equity awards.

Time-Based Restricted Stock Awards Made Pursuant to Our Equity Plan
 
The following table summarizes time-based restricted stock award activity under our Equity Plan:

 
  Number
 of Shares		 Weighted-Average
Grant Date 
Fair Value		 Aggregate
Current Value
    (per share) (in thousands)
Non-vested at December 31, 2023 861,713  $ 8.79  $ 5,791 
Granted 548,138  6.56 
Vested (369,312) 9.24 
Forfeited (31,891) 7.20 
Non-vested at June 30, 2024 1,008,648  $ 7.46  $ 6,042 

The awards granted to our non-executive employees prior to 2022 vest over a four-year period based on continuous service (20% on the first, second and third anniversary of the grant date and 40% on the fourth anniversary of the grant date).
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The awards granted to our non-executive employees in 2022 and thereafter vest over a three-year period based on continuous service (25% on the first and second anniversary of the grant date and 50% on the third anniversary of the grant date).

The awards granted to our executive officers generally vest over a three-year period based on continuous service (25% on the first and second anniversary of the grant date and 50% on the third anniversary of the grant date) or in certain circumstances upon a change in control.

The holders of these time-based restricted stock awards have the right to vote their unvested restricted shares of Common Stock and receive all dividends declared and paid whether or not vested. The fair value of time-based restricted stock awards granted is calculated based on the market value of our Common Stock on the date of grant.

Performance-Based Restricted Stock Awards Made Pursuant to Our Equity Plan

The following table summarizes performance-based restricted stock activity under the Equity Plan: 
  Number 
of Shares
Weighted-Average
Grant Date 
Fair Value (1)
 Aggregate
Current Value
    (per share) (in thousands)
Non-vested at December 31, 2023 1,056,272  $ 11.93  $ 7,098 
Granted 507,406  7.40 
Forfeited (323,930) 14.05 
Non-vested at June 30, 2024 1,239,748  $ 9.52  $ 7,426 

(1)    The amounts included in this column represent the expected future value of the performance-based restricted stock awards calculated using the Monte Carlo simulation valuation model.

Our performance-based restricted stock awards are market-based awards and are accounted for based on the fair value of our Common Stock on the grant date. The fair value of the performance-based restricted stock awards granted was estimated using a Monte Carlo simulation valuation model. These awards cliff vest on the third anniversary of the grants based on our total shareholder return relative to the total shareholder return of companies within the Dow Jones U.S. Hotels Index (the "Index") at the end of the period or upon a change in control. The awards generally require continuous service during the measurement period and are subject to the other conditions described in the Equity Plan or award document.

The number of shares the executive officers may earn under these awards range from zero shares to twice the number of shares granted based on our percentile ranking within the Index at the end of the measurement period. In addition, a portion of the performance-based shares may be earned based on the Company's absolute total shareholder return calculated during the performance period.

The holders of these performance-based restricted stock awards have the right to vote their unvested restricted shares of Common Stock and any dividends declared accrue and will be subject to the same vesting conditions as the performance awards. Further, if additional shares are earned based on our percentile ranking within the index, dividend payments will be paid as if the additional shares had been held throughout the measurement period.

Equity-Based Compensation Expense
 
Equity-based compensation expense included in Corporate general and administrative expenses in the Condensed Consolidated Statements of Operations is as follows (in thousands):
 
Three Months Ended
June 30,		 Six Months Ended
June 30,
2024 2023 2024 2023
Time-based restricted stock $ 618  $ 847  $ 1,488  $ 1,538 
Performance-based restricted stock 1,250  976  2,228  1,753 
Director stock 767  755  767  755 
$ 2,635  $ 2,578  $ 4,483  $ 4,046 

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We recognize equity-based compensation expense ratably over the vesting periods. The amount of expense may be subject to adjustment in future periods due to forfeitures of time-based restricted stock.

Unrecognized equity-based compensation expense for all non-vested awards pursuant to our Equity Plan was $12.3 million at June 30, 2024 and will be recorded as follows (in thousands):
  Total 2024 2025 2026 2027
Time-based restricted stock $ 5,664  $ 1,670  $ 2,428  $ 1,354  $ 212 
Performance-based restricted stock 6,626  1,981  2,904  1,512  229 
  $ 12,290  $ 3,651  $ 5,332  $ 2,866  $ 441 

NOTE 13 - INCOME TAXES
 
We have elected to be taxed as a REIT. As a REIT, we are generally not subject to corporate-level income taxes on taxable income we distribute to our stockholders.

Income related to our TRS Lessees is subject to federal, state and local taxes at applicable corporate tax rates. Our consolidated tax provision includes the income tax provision related to the operations of the TRS Lessees as well as state and local income taxes related to the Operating Partnership.

Where required, we account for federal and state income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for: i) the future tax consequences attributable to differences between carrying amounts of existing assets and liabilities based on GAAP and the respective carrying amounts for tax purposes, and ii) operating losses and tax-credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date of the change in tax rates. However, deferred tax assets are recognized only to the extent that it is more likely than not they will be realized based on consideration of available evidence. Valuation allowances are provided if, based upon the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

We consider all available evidence, both positive and negative, to determine whether, based on the weight of that evidence, a valuation allowance for deferred tax assets is needed. Certain of our TRS Lessees have incurred operating losses in the past and the realizability of our deferred tax assets as of June 30, 2024 is not reasonably assured. Therefore, we have recorded a valuation allowance against substantially all our deferred tax assets at June 30, 2024.

The Company recorded an income tax expense of $2.4 million and $0.8 million for the three months ended June 30, 2024 and 2023, respectively, and $2.6 million and $0.3 million for the six months ended June 30, 2024 and 2023, respectively.

We file U.S. and state income tax returns in jurisdictions with varying statutes of limitations. In general, we are not subject to tax examinations by tax authorities for years before 2018. In the normal course of business, we are subject to examination by federal, state, and local jurisdictions where applicable. We had no unrecognized tax benefits at June 30, 2024. We expect no significant increase or decrease in unrecognized tax benefits due to changes in tax positions within the next year.

NOTE 14 - EARNINGS PER SHARE

Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted-average number of shares of Common Stock outstanding for the period. We apply the two-class method of computing EPS, which requires the calculation of separate EPS amounts for participating securities. Under the two-class computation method, net losses are not allocated to participating securities unless the holder of the security has a contractual obligation to share in the losses. Any anti-dilutive securities are excluded from the basic EPS calculation.

Diluted EPS is computed by dividing net income (loss) available to common stockholders, as adjusted for dilutive securities, by the weighted-average number of shares of Common Stock outstanding plus dilutive securities. Any anti-dilutive securities are excluded from the diluted EPS calculation. Potentially dilutive shares include unvested restricted share grants and unvested performance share grants, calculated using the treasury stock method, shares of Common Stock issuable upon conversion of convertible debt and shares of Common Stock issuable upon conversion of Common Units of our Operating Partnership.
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Below is a summary of the components used to calculate basic and diluted earnings per share (in thousands, except per share amounts):
Three Months Ended
June 30,		 Six Months Ended
June 30,
2024 2023 2024 2023
Numerator:
Net income (loss) attributable to common stockholders $ 30,849  $ (753) $ 28,733  $ (5,981)
Adjusted for:
Allocation of income to participating securities (311) —  (269) — 
Net income (loss) allocated to common stockholders - basic 30,538  (753) 28,464  (5,981)
Adjusted for:
Adjustment for income allocated to dilutive participating securities 3,533  —  2,180  — 
Net income (loss) allocated to common stockholders - diluted $ 34,071  $ (753) $ 30,644  $ (5,981)
Denominator:
Weighted average common shares outstanding - basic 105,918  105,562  105,819  105,438 
Adjusted for:
Dilutive effect of equity-based compensation awards 1,968  —  1,896  — 
Effect of assumed conversion of convertible debt 25,617  —  25,448  — 
Effect of assumed conversion of Operating Partnership units 15,948  —  15,949  — 
Weighted average common shares outstanding - diluted 149,451  105,562  149,112  105,438 
Net income (loss) per share available to common stockholders:
Basic $ 0.29  $ (0.01) $ 0.27  $ (0.06)
Diluted $ 0.23  $ (0.01) $ 0.21  $ (0.06)

The effect of the conversion of the Convertible Notes has been included in the denominator of diluted earnings per share for the three and six months ended June 30, 2024. Due to the net loss attributable to common stockholders for basic earnings per share for the three and six months ending June 30, 2023, equity shares computed under the treasury stock method, shares issuable upon conversion of the Convertible Notes, and the effect of the conversion of Common Units of the Operating partnership have been excluded from the number of shares used in calculating diluted loss per share as their inclusion would be antidilutive.

NOTE 15 - SUPPLEMENTAL CASH FLOW INFORMATION

We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. Restricted cash consists of certain funds maintained in escrow for property taxes, insurance, and certain capital expenditures. Funds may be disbursed from the account upon proof of expenditures and approval from the lender or other party requiring the restricted cash reserves.

Supplemental cash flow information is as follows:
Six Months Ended
June 30,
2024 2023
Cash payments for interest $ 42,619  $ 38,250 
Insurance premium financing $ —  $ 10,877 
Accrued acquisitions and improvements to lodging properties $ 10,054  $ 8,820 
Increase in carrying amount of lodging property related to contingent consideration $ —  $ 2,000 
Cash payments for income taxes, net of refunds $ 1,377  $ 1,925 
Accrued and unpaid dividends $ 44  $ 58 

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NOTE 16 - SUBSEQUENT EVENTS

Dividends
 
On July 25, 2024, our Board of Directors declared quarterly cash dividends and distributions of $0.08 per share on our Common Stock and per Common Unit of the Operating Partnership and cash dividends of $0.390625 per share of 6.25% Series E Preferred Stock and $0.3671875 per share of 5.875% Series F Preferred Stock. The Board of Directors also declared on behalf of the Operating Partnership, a cash distribution of $0.328125 per share of the Operating Partnership's unregistered 5.25% Series Z Cumulative Perpetual Preferred Units. The dividends and distributions are payable on August 30, 2024 to holders of record as of August 16, 2024.
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PART I - FINANCIAL INFORMATION

Item 2.         Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our audited Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the year ended December 31, 2023, and our unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
 
Unless stated otherwise or the context otherwise requires, references in this report to “we,” “our,” “us,” “our company” or “the company” mean Summit Hotel Properties, Inc. and its consolidated subsidiaries.
 
Cautionary Statement about Forward-Looking Statements
 
This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “forecast,” “project,” “potential,” “continue,” “likely,” “will,” “would” or similar expressions. Forward-looking statements in this report include, among others, statements about our business strategy, including acquisition and development strategies, industry trends, estimated revenues and expenses, ability to realize deferred tax assets and expected liquidity needs and sources (including capital expenditures and the ability to obtain financing or raise capital). You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control and which could materially affect actual results, performance or achievements. Factors that may cause actual results to differ materially from current expectations include, but are not limited to:

•global, national, regional and local economic and political conditions and events, including wars or potential hostilities, such as terrorist attacks, that may affect business transient, group and other travel or consumer behavior;
•macroeconomic conditions related to, and our ability to manage, inflationary pressures for labor, commodities, and other costs of our business;
•consumer purchasing power and overall behavior, or a potential recessionary environment, which could adversely affect our costs, liquidity, consumer confidence, and demand for travel and lodging;
•levels of spending for business and leisure travel;
•adverse changes in occupancy, average daily rate (“ADR”) and revenue per available room (“RevPAR”) and other lodging property operating metrics;
•potential changes in operations as a result of new regulations or changes in brand standards;
•financing risks, including the risk of leverage and the corresponding risk of default on our existing indebtedness and potential inability to refinance or extend the maturities of our existing indebtedness;
•effects of infectious disease outbreaks or pandemics;
•default by borrowers to which we lend;
•supply and demand factors in our markets or sub-markets;
•the effect of alternative accommodations on our business;
•financial condition of, and our relationships with third-party property managers and franchisors;
•the degree and nature of our competition;
•increased interest rates or continued high rates of interest;
•increased renovation costs, which may cause actual renovation costs to exceed our current estimates;
•supply-chain disruption, which may reduce access to operating supplies or construction materials and increase related costs;
•changes in zoning laws;
•significant increases in the cost of real property taxes and/or insurance;
•risks associated with lodging property acquisitions, including the ability to ramp up and stabilize newly acquired lodging properties with limited or no operating history or that require substantial amounts of capital improvements for us to earn economic returns consistent with our expectations at the time of acquisition;
•risks associated with dispositions of lodging properties, including our ability to successfully complete the sale of lodging properties under contract to be sold, including the risk that the purchaser may not have access to the capital needed to complete the purchase;
•the nature of our structure and transactions such that our federal and state taxes are complex and there is risk of successful challenges to our tax positions by the Internal Revenue Service or other federal and state taxing authorities;
30

•availability of and the abilities of our property managers and us to retain qualified personnel at our lodging property and corporate offices;
•our failure to maintain our qualification as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “IRC”);
•changes in our business or investment strategy;
•availability, terms and deployment of capital;
•general volatility of the capital markets and the market price of our common stock;
•environmental uncertainties and risks related to natural disasters;
•our ability to recover fully under third-party indemnities or our existing insurance policies for insurable losses and our ability to maintain adequate or full replacement cost "all-risk" property insurance policies on our properties on commercially reasonable terms;
•the effect of a data breach or significant disruption of property operator information technology networks as a result of cyber-attacks that are greater than insurance coverages or indemnities from service providers;
•our ability to effectively manage our joint ventures with our joint venture partners;
•current and future changes to the IRC;
•our ability to continue to effectively manage our Environmental, Social and Governance program to achieve expected social, environment and governance objectives and goals; and
•the other factors discussed under the heading "Risk Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2023.
 
Accordingly, there is no assurance that our expectations will be realized. Except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Overview
 
Summit Hotel Properties, Inc. is a self-managed lodging property investment company that was organized in June 2010 and completed its initial public offering in February 2011. We focus on owning lodging properties with efficient operating models that generate strong margins and investment returns. Our lodging properties are typically located in markets with multiple demand generators such as corporate offices and headquarters, retail centers, airports, state capitols, convention centers, and leisure attractions. Substantially all of our assets are held by, and all of our operations are conducted through, our operating partnership, Summit Hotel OP, LP (the “Operating Partnership”). Through a wholly-owned subsidiary, we are the sole general partner of the Operating Partnership. At June 30, 2024, we owned, directly and indirectly, approximately 87% of the Operating Partnership’s issued and outstanding common units of limited partnership interest (“Common Units”), and all of the Operating Partnership’s issued and outstanding 6.25% Series E and 5.875% Series F preferred units of limited partnership interest. NewcrestImage Image Holdings, LLC owns all of the issued and outstanding 5.25% Series Z Cumulative Perpetual Preferred Units (liquidation preference $25 per unit) of the Operating Partnership ("Series Z Preferred Units"), which was issued as part of the NCI Transaction (as defined in Note 5 -Debt to the accompanying Condensed Consolidated Financial Statements). We collectively refer to preferred units of limited partnership interests of our Operating Partnership as "Preferred Units."

At June 30, 2024, our portfolio consisted of 96 lodging properties with a total of 14,256 guestrooms located in 24 states. We own our lodging properties in fee simple, except for seven lodging properties which are subject to ground leases or subleases. As of June 30, 2024, we own 100% of the outstanding equity interests in 54 of the 96 lodging properties. We own a 51% controlling interest in 39 lodging properties through a joint venture that was formed in July 2019 with USFI G-Peak, Ltd. ("GIC"), a private limited company incorporated in the Republic of Singapore (the “GIC Joint Venture”). We also own 90% equity interests in two separate joint ventures (the "Brickell Joint Venture" and the "Onera Joint Venture"). The Brickell Joint Venture owns two lodging properties, and the Onera Joint Venture owns one lodging property.

Our hotel properties primarily operate under premium franchise brands owned by Marriott® International, Inc. (“Marriott”), Hilton® Worldwide (“Hilton”), Hyatt® Hotels Corporation (“Hyatt”) and InterContinental® Hotels Group (“IHG”). We own one glamping property that operates under the independent brand of Onera Escapes ("Onera"), and the Nordic Lodge in Steamboat Springs, CO that we acquired in June 2023, which is an independent lodging property.
 
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We have elected to be taxed as a REIT for federal income tax purposes commencing with our short taxable year ended December 31, 2011. To qualify as a REIT, we cannot operate or manage our lodging properties. Accordingly, all of our lodging properties are leased to our taxable REIT subsidiaries ("TRS Lessees or TRSs"). All of our lodging properties are operated pursuant to lodging property management agreements between our TRS Lessees and professional, third-party lodging property management companies that are not affiliated with us as follows:
Management Company Number of
Properties		 Number of
Guestrooms
Affiliates of Aimbridge Hospitality, LLC 55  8,235 
OTO Development, LLC 11  1,559 
Stonebridge Realty Advisors, Inc. and affiliates 8  1,143 
Crestline Hotels & Resorts, LLC 7  928 
Affiliates of Marriott, including Courtyard Management Corporation, SpringHill SMC Corporation and Residence Inn by Marriott, Inc. 4  563 
Affiliates of Magna Hospitality Group, L.C. 3  510 
White Lodging Services Corporation 2  453 
Hersha Hospitality Management 2  338 
Concord Hospitality Enterprises Company, LLC 2  264 
InterContinental Hotel Group Resources, Inc., an affiliate of IHG 1  252 
Blink Data Services, LLC 1  11 
Total 96  14,256 

Our typical lodging property management agreement requires us to pay a base fee to our lodging property manager calculated as a percentage of lodging property revenues. In addition, our typical lodging property management agreements generally provide that the lodging property manager can earn an incentive fee for hotel-level Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") over certain thresholds of a required investment return to us. Our TRS Lessees may employ other lodging property managers in the future. We currently do not have any ownership or economic interest in any of the lodging property management companies engaged by our TRS Lessees. However, we have a purchase option to acquire a 10% to 15% equity interest in the entity that owns the Onera brand, which is an affiliate of Blink Data Services, LLC, if we reach certain investment thresholds in Onera-branded properties.

Our revenues are derived from lodging property operations and consist of room revenue, food and beverage revenue and other lodging property operations revenue. Revenues from our other lodging property operations consist of ancillary revenues related to parking, cancellation fees, meeting rooms and other guest services provided at certain of our lodging properties.

Industry Trends and Outlook
 
Room-night demand in the U.S. lodging industry is generally correlated to certain macroeconomic trends. Key drivers of lodging demand, and therefore hotel revenues, include changes in gross domestic product, corporate profits, capital investments, and employment. From a cost perspective, elevated inflation has been pervasive since 2022, increasing the cost of salaries, wages, supplies, material, freight, insurance and energy. Higher costs from broad inflationary pressures have been partially offset by lodging price increases. While growth rates have decelerated, inflation is still increasing faster than historical norms, which may continue throughout 2024.

During the six months ended June 30, 2024, we experienced continued revenue growth as a result of strong group travel and improvements in business transient demand which offset normalization in leisure demand. We expect room night demand growth, coupled with minimal forecasted supply growth, to drive continued industry RevPAR growth over the next several years.



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Our Lodging Property Portfolio
 
According to current chain scales as defined by Smith Travel Research, Inc. ("STR"), as of June 30, 2024, six of our lodging properties with a total of 953 guestrooms are categorized as Upper-upscale hotels, 74 of our lodging properties with a total of 11,247 guestrooms are categorized as Upscale hotels and 14 of our lodging properties with a total of 1,998 guestrooms are categorized as Upper-midscale hotels. We have one lodging asset that is an 11-unit glamping property, and one 47-unit independent lodging property that are not categorized by STR. Lodging property information as of June 30, 2024 is as follows:
 
Franchise/Brand Number of Lodging
Properties		 Number of
Guestrooms
Marriott
Courtyard by Marriott 16  2,847 
Residence Inn by Marriott 16  2,256 
AC Hotel by Marriott 6  1,026 
SpringHill Suites by Marriott 6  775 
TownePlace Suites 2  225 
Marriott 1  165 
Fairfield Inn & Suites by Marriott 1  140 
Element by Marriott 1  108 
Four Points by Sheraton 1  101 
Total Marriott 50  7,643 
Hilton
Hampton Inn & Suites 8  1,162 
Hilton Garden Inn 7  1,075 
Homewood Suites 3  369 
Embassy Suites 2  346 
Canopy Hotel 2  326 
DoubleTree by Hilton 1  210 
Total Hilton 23  3,488 
Hyatt
Hyatt Place 13  1,893 
Hyatt House 3  466 
Total Hyatt 16  2,359 
IHG
Holiday Inn Express & Suites 3  471 
Staybridge Suites 1  121 
Hotel Indigo 1  116 
Total IHG 5  708 
Independent
Nordic Lodge 1  47 
Onera 1  11 
Total Independent 2  58 
Total 96  14,256 

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Lodging Property Portfolio Activity
 
We continually evaluate alternatives to refine our portfolio to drive growth and create value. In the normal course of business, we evaluate opportunities to acquire additional properties that meet our investment criteria and opportunities to recycle capital through the disposition of properties. As such, the composition and size of our portfolio of properties may change materially over time. Significant changes to our portfolio of properties could have a material effect on our Condensed Consolidated Financial Statements.

See "Note 3 - Investments in Lodging Property, net" to the Condensed Consolidated Financial Statements for further information related to lodging property acquisitions and dispositions.

Results of Operations
 
The comparisons that follow should be reviewed in conjunction with the unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.
 
Comparison of the Three Months Ended June 30, 2024 with the Three Months Ended June 30, 2023
 
The following table contains key operating metrics for our total portfolio for the three months ended June 30, 2024 compared with the three months ended June 30, 2023 (dollars in thousands, except ADR and RevPAR). 
 
 
Three Months Ended June 30,
 Quarter-over-Quarter Quarter-over-Quarter
  2024 2023 Dollar Change Percentage Change
Total Portfolio
(96 properties)
Same-Store
Portfolio
(94 properties)
Total Portfolio
(101 properties)
Same-Store
Portfolio
(94 properties)
Total Portfolio
(96/101
properties)
Same-Store
Portfolio
(94 properties)
Total 
Portfolio
(96/101 
properties)
Same-Store
Portfolio
(94 properties)
Revenues:
Room $ 173,025 $ 169,989 $ 174,181 $ 164,588 $ (1,156) $ 5,401 (0.7) % 3.3  %
Food and beverage 10,069 10,025 10,269 10,016 (200) 9 (1.9) % 0.1  %
Other 10,809 10,679 10,043 9,567 766 1,112 7.6  % 11.6  %
Total $ 193,903 $ 190,693 $ 194,493 $ 184,171 $ (590) $ 6,522 (0.3) % 3.5  %
Expenses:
Room $ 38,044 $ 37,239 $ 38,788 $ 36,115 $ (744) $ 1,124 (1.9) % 3.1  %
Food and beverage 7,639 7,589 8,040 7,744 (401) (155) (5.0) % (2.0) %
Other lodging property operating expenses 57,470 56,016 57,829 54,283 (359) 1,733 (0.6) % 3.2  %
Total $ 103,153 $ 100,844 $ 104,657 $ 98,142 $ (1,504) $ 2,702 (1.4) % 2.8  %
Operational Statistics:
Occupancy 77.7  % 77.8  % 75.5  % 76.0  % n/a n/a 2.9  % 2.4  %
ADR $ 170.49  $ 170.53  $ 167.64  $ 169.01  $ 2.85  $ 1.52  1.7  % 0.9  %
RevPAR $ 132.41  $ 132.59  $ 126.51  $ 128.38  $ 5.90  $ 4.21  4.7  % 3.3  %

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The total portfolio information above for the three months ended June 30, 2024 and 2023 reflects operating results for various portions of each period for certain lodging properties as a result of the sales and acquisitions of lodging properties. The following table details how the acquisition and disposition transactions affect each reporting period:

Portion of Operating Results Included
For the Three Months Ended
Transaction June 30,
Date 2024 2023
Sold Properties: (Total Portfolio)
Courtyard by Marriott and SpringHill Suites - New Orleans, LA April 2024 Partial Period Full Period
Hilton Garden Inn - College Station, TX April 2024 Partial Period Full Period
Hyatt Place - Dallas (Plano), TX February 2024 None Full Period
Hyatt Place - Baltimore (Owings Mills), MD December 2023 None Full Period
Portfolio of Four Lodging Properties May 2023 None Partial Period
Acquired Properties:
Residence Inn - Scottsdale, AZ June 2023 Full Period Partial Period
Nordic Lodge - Steamboat Springs, CO June 2023 Full Period Partial Period

Changes from the three months ended June 30, 2024 compared with the three months ended June 30, 2023 were due to the following:

•Revenues and RevPAR. Room revenues for our total portfolio during the second quarter of 2024 compared with the second quarter of 2023 decreased by $1.2 million as a result of a $5.4 million increase in same-store revenues driven by improving business transient and group demand, offset by a $6.6 million decline in room revenues due to the net effect of the sales and acquisitions of lodging properties. For the applicable periods, the number of properties in our total portfolio declined from 101 lodging properties at June 30, 2023 to 96 lodging properties at June 30, 2024.

The increase in RevPAR for our total portfolio during the second quarter of 2024 compared with the second quarter of 2023 was due to a 2.9% increase in occupancy and a 1.7% increase in ADR driven by improving business transient and group demand. The result was a 4.7% increase in RevPAR for the three months ended June 30, 2024 in comparison with the same period of the prior year. On a same store basis, the improvements in our business resulted in an increase of 2.4% in occupancy and an increase of 0.9% in ADR in the second quarter of 2024, which resulted in a 3.3% increase in same-store RevPAR. See "Industry Trends and Outlook" for further information.

•Room Expenses. Room expenses for our total portfolio for the second quarter of 2024 compared with the second quarter of 2023 decreased by $0.7 million as a result of a $1.1 million increase in same-store room expenses driven by a 2.4% increase in same-store occupancy, offset by a $1.8 million decline in room expenses due to the net effect of the sales and acquisitions of lodging properties.

•Food and Beverage Revenues and Expenses. The $0.2 million decrease in total portfolio food and beverage revenues during the second quarter of 2024 compared with the second quarter of 2023 was driven by the net effect of the sales and acquisitions of lodging properties. Same-store food and beverage revenues were flat for the three months ended June 30, 2024 and 2023.

Total portfolio food and beverage expenses decreased by $0.4 million as a result of a $0.2 million decrease in same-store food and beverage expenses driven by successful expense management related to food and beverage costs, and a $0.2 million decline in food and beverage expenses due to the net effect of the sales and acquisitions of lodging properties.

35

•Other Lodging Property Operating Revenues and Expenses. Other lodging property and operating revenues for our total portfolio during the second quarter of 2024 compared with the second quarter of 2023 increased by $0.8 million as a result of a $1.1 million increase in same-store other lodging property operating revenues driven by an increase in parking and resort fees as a result of higher occupancy, offset by a $0.3 million decline in other lodging property operating revenues due to the net effect of the sales and acquisitions of lodging properties.

The $0.4 million decrease in other lodging property operating expenses for the total portfolio for the three months ended June 30, 2024 in comparison with the three months ended June 30, 2023 was attributable to a $1.7 million increase in same-store other lodging property operating expenses driven by increased marketing costs, labor costs, credit card commissions and other increases primarily from higher same-store occupancy, offset by a $2.1 million decline in other lodging property operating expenses due to the net effect of the sales and acquisitions of lodging properties.

The following table includes other consolidated income and expenses for the three months ended June 30, 2024 compared with the three months ended June 30, 2023 (dollars in thousands):

Three Months Ended June 30,
2024 2023 Dollar Change Percentage Change
Property taxes, insurance and other $ 13,287  $ 14,215  $ (928) (6.5) %
Management fees 4,434  4,992  (558) (11.2) %
Depreciation and amortization 36,458  37,510  (1,052) (2.8) %
Corporate general and administrative 8,704  9,100  (396) (4.4) %
Gain (loss) on disposal of assets, net 28,342  (320) 28,662  nm¹
Interest expense 20,830  22,248  (1,418) (6.4) %
Interest income 565  411  154  37.5  %
Gain on extinguishment of debt 3,000  —  3,000  nm¹
Other income, net 2,129  79  2,050  nm¹
Income tax expense 2,375  791  1,584  nm¹

¹ Not meaningful.

Changes from the three months ended June 30, 2024 compared with the three months ended June 30, 2023 were due to the following:

•Property Taxes, Insurance and Other. The decrease in Property taxes, insurance and other during the three months ended June 30, 2024 is primarily due to an increase in property tax refunds and lower property assessments of $0.5 million as a result of successful appeal efforts to reduce property tax assessments, coupled with a reduction of state franchise taxes and other tax accruals during the period of $0.3 million, and a decrease in property and casualty insurance premiums.

•Management Fees. Management fees decreased during the current period due to the net effect of the sales and acquisitions of lodging properties, and a re-negotiation of certain property management agreements in 2023 and 2024 that resulted in lower property management fees in the current period.

•Depreciation and Amortization. Depreciation and amortization had a minimal decrease during the three months ended June 30, 2024 compared to the three months ended June 30, 2023, which was primarily the net effect of the sales and acquisitions of lodging properties, and renovation costs incurred during the three months ended June 30, 2023 and thereafter.

•Corporate General and Administrative. Corporate general and administrative expenses decreased during the three months ended June 30, 2024 primarily due to a decrease in legal and professional fees and a decrease in corporate employee-related costs.

36

•Interest Expense. Interest expense decreased during the three months ended June 30, 2024 due to lower average outstanding debt for the current period compared with the three months ended June 30, 2023.

•Gain on Extinguishment of Debt. The gain on extinguishment of debt for the three months ended June 30, 2024 was the result of the repayment of the MetaBank Loan in June 2024 prior to its scheduled maturity date, which resulted in a gain on extinguishment of debt of $3.0 million after legal fees and unamortized debt issuance costs that were written-off on the closing date. See Note 5 - Debt to the accompanying Condensed Consolidated Financial Statements.

•Other Income, net. Other income, net for the three months ended June 30, 2024 consists primarily of $0.7 million of third-party tenant income, $0.4 million in state grants awarded during the period, and net casualty income of $0.6 million.

•Income Tax Expense. Income taxes in interim quarters are based on an estimated annual effective tax rate. The Company recorded a $2.4 million income tax expense during the three months ended June 30, 2024, which represents an increase of $1.6 million when compared with the same period in the previous year. Seasonality in quarterly net income (loss), and changes in the forecasted earnings causes variability in income taxes recorded in each quarter.

Comparison of the Six Months Ended June 30, 2024 with the Six Months Ended June 30, 2023

The following table contains key operating metrics for our total portfolio for the six months ended June 30, 2024 compared with the six months ended June 30, 2023 (dollars in thousands, except ADR and RevPAR):

Six Months Ended June 30,
2024 2023 Dollar Change Percentage Change
Total Portfolio
(96 properties)
Same-Store
Portfolio
(94 properties)
Total Portfolio
(101 properties)
Same-Store
Portfolio
(94 properties)
Total Portfolio
(96/101
properties)
Same-Store
Portfolio
(94 properties)
Total 
Portfolio
(96/101 
properties)
Same-Store
Portfolio
(94 properties)
Revenues:
Room $ 340,456 $ 327,495 $ 337,270 $ 318,271 $ 3,186 $ 9,224 0.9  % 2.9  %
Food and beverage 20,902 20,639 20,899 20,349 3 290 —  % 1.4  %
Other 20,687 20,181 18,707 17,936 1,980 2,245 10.6  % 12.5  %
Total $ 382,045 $ 368,315 $ 376,876 $ 356,556 $ 5,169 $ 11,759 1.4  % 3.3  %
Expenses:
Room $ 74,017 $ 71,420 $ 74,697 $ 69,366 $ (680) $ 2,054 (0.9) % 3.0  %
Food and beverage 15,841 15,607 15,995 15,362 (154) 245 (1.0) % 1.6  %
Other lodging property operating expenses 113,731 109,620 113,954 106,886 (223) 2,734 (0.2) % 2.6  %
Total $ 203,589 $ 196,647 $ 204,646 $ 191,614 $ (1,057) $ 5,033 (0.5) % 2.6  %
Operational Statistics:
Occupancy 74.7  % 74.7  % 72.2  % 72.9  % n/a n/a 3.5  % 2.5  %
ADR $ 171.57  $ 170.99  $ 169.55  $ 171.27  $ 2.02  $ (0.28) 1.2  % (0.2) %
RevPAR $ 128.09  $ 127.72  $ 122.34  $ 124.82  $ 5.75  $ 2.90  4.7  % 2.3  %

37

The total portfolio information above for the six months ended June 30, 2024 and 2023 reflects operating results for various portions of each period for certain lodging properties as a result of the sales and acquisitions of lodging properties. The following table details how the acquisition and disposition transactions affect each reporting period:

Portion of Operating Results Included
For the Six Months Ended
Transaction June 30,
Date 2024 2023
Sold Properties: (Total Portfolio)
Courtyard by Marriott and SpringHill Suites - New Orleans, LA April 2024 Partial Period Full Period
Hilton Garden Inn - College Station, TX April 2024 Partial Period Full Period
Hyatt Place - Dallas (Plano), TX February 2024 Partial Period Full Period
Hyatt Place - Baltimore (Owings Mills), MD December 2023
None
 Full Period
Portfolio of Four Lodging Properties May 2023
None
 Partial Period
Acquired Properties:
Residence Inn - Scottsdale, AZ June 2023 Full Period Partial Period
Nordic Lodge - Steamboat Springs, CO June 2023 Full Period Partial Period

Changes from the six months ended June 30, 2024 compared with the six months ended June 30, 2023 were due to the following:

•Revenues and RevPAR. Room revenues for our total portfolio for the six months ended June 30, 2024 compared with the six months ended June 30, 2023 increased by $3.2 million as a result of a $9.2 million increase in same-store revenues driven by improving business transient and group demand, offset by a $6.0 million decline in room revenues due to the net effect of the sales and acquisitions of lodging properties. For the applicable periods, the number of properties in our total portfolio declined from 101 lodging properties at June 30, 2023 to 96 lodging properties at June 30, 2024.

The increase in RevPAR for our total portfolio for the six months ended June 30, 2024 compared with the six months ended June 30, 2023 was due to a 3.5% increase in our occupancy and a 1.2% increase in ADR driven by improving business transient and group demand. The result was an increase in RevPAR of 4.7% for the six months ended June 30, 2023 in comparison with the same period of the prior year. On a same store basis, the improvements in our business resulted in an increase of approximately 2.5% in occupancy, partially offset by a 0.2% decrease in ADR during the six months ended June 30, 2024, which resulted in a 2.3% increase in same-store RevPAR.

•Room Expenses. Room expenses for our total portfolio for the six months ended June 30, 2024 compared with the six months ended June 30, 2023 decreased by $0.7 million as a result of a $2.1 million increase in same-store room expenses driven by a 2.5% increase in same-store occupancy, offset by a $2.8 million decline in room expenses due to the net effect of the sales and acquisitions of lodging properties.

•Food and Beverage Revenues and Expenses. Total portfolio food and beverage revenues were flat during the six months ended June 30, 2024 and 2023 as a result of an increase in same-store food and beverage revenues of $0.3 million driven by an increase in occupancy and group-related catering, offset by a $0.3 million decrease in food and beverage revenues due to the net effect of the sales and acquisitions of lodging properties.

Same-store portfolio food and beverage expenses increased by $0.2 million as a result of a $0.2 million increase in food and beverage expenses driven by an increase in occupancy, and offset by a $0.4 million decline in food and beverage expenses due to the net effect of the sales and acquisitions of lodging properties.

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•Other Revenues and Other Lodging Property Operating Expenses. Other lodging property operating revenues for our total portfolio during the six months ended June 30, 2024 compared with the six months ended June 30, 2023 increased by $2.0 million as a result of a $2.2 million increase in same-store other lodging property and operating revenues driven by an increase in parking and resort fees as a result of higher occupancy, offset by a $0.2 million decline in other lodging property operating revenues due to the net effect of the sales and acquisitions of lodging properties.

The $0.2 million decrease in other lodging property operating expenses for the total portfolio for the six months ended June 30, 2024 in comparison with the six months ended June 30, 2023 was attributable to a $2.7 million increase in same-store other lodging property operating expenses driven by increased marketing costs, labor costs, credit card commissions and other increases primarily from higher occupancy, offset by a $2.9 million decline in other lodging property operating expenses due to the net effect of the sales and acquisitions of lodging properties.

The following table is a comparison of other consolidated income and expenses (dollars in thousands).

Six Months Ended June 30,
2024 2023 Dollar Change Percentage Change
Property taxes, insurance and other $ 27,572  $ 28,939  $ (1,367) (4.7) %
Management fees 9,331  9,797  (466) (4.8) %
Depreciation and amortization 73,257  74,418  (1,161) (1.6) %
Corporate general and administrative 17,015  17,099  (84) (0.5) %
Gain (loss) on disposal of assets, net 28,417  (320) 28,737  nm¹
Interest expense 42,412  43,157  (745) (1.7) %
Interest income 1,023  717  306  42.7  %
Gain on extinguishment of debt 3,000  —  3,000  nm¹
Other income, net 2,814  38  2,776  nm¹
Income tax expense 2,592  319  2,273  nm¹

¹ Not meaningful.

Changes from the six months ended June 30, 2024 compared with the six months ended June 30, 2023 were due to the following:

•Property Taxes, Insurance and Other. The decrease in Property taxes, insurance and other during the six months ended June 30, 2024 is primarily due to an increase in property tax refunds of $0.6 million as a result of successful appeal efforts to reduce property tax assessments, coupled with a reduction of state franchise taxes and other tax accruals during the period of $0.5 million, partially offset by an increase in property and casualty insurance premiums of $0.3 million.

•Management Fees. Management fees decreased during the current period due to the net effect of the sales and acquisitions of lodging properties, and a re-negotiation of property management agreements with two of our properties managers in the third quarter of 2023 that resulted in lower property management fees in the current period.

•Depreciation and Amortization. Depreciation and amortization had a minimal decrease between the six months ended June 30, 2024 and the six months ended June 30, 2023, primarily due to the net effect of the sales and acquisitions of lodging properties and renovation costs incurred during the six months ended June 30, 2023 and thereafter.

•Corporate General and Administrative. Corporate general and administrative expenses were flat for the six months ended June 30, 2024 compared with the six months ended June 30, 2023 due to an increase in employee compensation and non-cash stock-based compensation expenses of $0.8 million during the six months ended June 30, 2024, mostly offset by a decrease in legal and professional fees of $0.7 million.

•Interest Expense. Interest expense decreased during the six months ended June 30, 2024 due to lower average outstanding debt for the current period compared with the same period of the prior year.
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•Gain on Extinguishment of Debt. The gain on extinguishment of debt for the six months ended June 30, 2024 was the result of the repayment of the MetaBank Loan in June 2024 prior to its scheduled maturity date, which resulted in a gain on extinguishment of debt of $3.0 million after legal fees and unamortized debt issuance costs that were written-off on the closing date. See Note 5 - Debt to the accompanying Condensed Consolidated Financial Statements.

•Other Income, net. Other income, net for the six months ended June 30, 2024 consists primarily of $0.7 million in state grants awarded during the period, and net casualty income of $0.9 million. Other income for the six months ended June 30, 2024 also includes third-party tenant income of $1.3 million, and the realization of approximately $0.8 million of tax incentives related to the NCI Transaction, partially offset by other net expense items totaling $0.7 million.

•Income Tax Expense (Benefit). Income taxes in interim quarters are based on an estimated annual effective tax rate. The Company recorded $2.6 million in income tax expense for the six months ended June 30, 2024, which represents an increase of $2.3 million from the six months ended June 30, 2023. Seasonality in quarterly net income (loss), and changes in the forecasted earnings causes variability in income taxes recorded in each quarter.

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Non-GAAP Financial Measures
 
We disclose certain “non-GAAP financial measures,” which are measures of our historical financial performance. Non-GAAP financial measures are financial measures not prescribed by Generally Accepted Accounting Principles ("GAAP"). These measures are as follows: (i) Funds From Operations (“FFO”) and Adjusted Funds from Operations ("AFFO"), (ii) Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA"), Earnings before Interest, Taxes, Depreciation and Amortization for Real Estate ("EBITDAre") and Adjusted EBITDAre (as described below). We caution investors that amounts presented in accordance with our definitions of non-GAAP financial measures may not be comparable to similar measures disclosed by other companies, since not all companies calculate these non-GAAP financial measures in the same manner. Our non-GAAP financial measures should be considered along with, but not as alternatives to, net income (loss) as a measure of our operating performance. Our non-GAAP financial measures may include funds that may not be available for our discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, debt service obligations and other commitments and uncertainties. Although we believe that our non-GAAP financial measures can enhance the understanding of our financial condition and results of operations, these non-GAAP financial measures are not necessarily better indicators of any trend as compared to a comparable measure prescribed by GAAP such as net income (loss).

FFO and AFFO
 
As defined by the National Association of Real Estate Investment Trusts ("Nareit"), FFO represents net income or loss (computed in accordance with GAAP), excluding preferred dividends, gains (or losses) from sales of real property, impairment losses on real estate assets, items classified by GAAP as extraordinary, the cumulative effect of changes in accounting principles, plus depreciation and amortization related to real estate assets, and adjustments for unconsolidated partnerships, and joint ventures. AFFO represents FFO excluding amortization of deferred financing costs, franchise fees, equity-based compensation expense, debt transaction costs, premiums on redemption of preferred shares, losses from net casualties, non-cash lease expense, non-cash interest income and non-cash income tax related adjustments to our deferred tax assets. Unless otherwise indicated, we present FFO and AFFO applicable to our Common Stock and Common Units. We present FFO and AFFO because we consider FFO and AFFO important supplemental measures of our operational performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO and AFFO when reporting their results. FFO and AFFO are intended to exclude GAAP historical cost depreciation and amortization, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO and AFFO exclude depreciation and amortization related to real estate assets, gains and losses from real property dispositions and impairment losses on real estate assets, FFO and AFFO provide performance measures that, when compared year over year, reflect the effect to operations from trends in occupancy, guestroom rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income. Our computation of FFO differs slightly from the computation of Nareit-defined FFO related to the reporting of corporate depreciation and amortization expense, which is de minimus. Our computation of FFO may also differ from the methodology for calculating FFO used by other equity REITs and, accordingly, may not be comparable to such other REITs. FFO and AFFO should not be considered as alternatives to net income (loss) (computed in accordance with GAAP), as an indicator of our liquidity, nor are they indicative of funds available to meet our cash needs, including our ability to pay dividends or make distributions. Where indicated in this Quarterly Report on Form 10-Q, FFO is based on our computation of FFO and not the computation of Nareit-defined FFO unless otherwise noted.

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The following is an unaudited reconciliation of our Net income (loss), determined in accordance with GAAP, to FFO and AFFO (in thousands, except per share/unit amounts): 

Three Months Ended June 30, Six Months Ended
June 30,
2024 2023 2024 2023
Net income (loss) $ 38,698  $ 890  $ 41,531  $ (1,080)
Preferred dividends (3,968) (3,968) (7,938) (7,938)
Distributions to and accretion of redeemable non-controlling interests (657) (657) (1,314) (1,314)
Loss related to non-controlling interest in consolidated joint ventures 1,375  2,971  737  3,651 
Net income (loss) applicable to Common Stock and Common Units 35,448  (764) 33,016  (6,681)
Real estate-related depreciation 35,266  36,327  70,869  72,054 
(Gain) loss on disposal of assets and other dispositions, net (28,342) 320  (28,417) 368 
Adjustments related to non-controlling interests in consolidated joint ventures (7,438) (8,036) (15,046) (15,818)
FFO applicable to Common Stock and Common Units 34,934  27,847  60,422  49,923 
Recoveries of credit losses —  —  —  (250)
Amortization of debt issuance costs 1,621  1,386  3,240  2,785 
Amortization of franchise fees 161  144  325  286 
Amortization of intangible assets, net 911  919  1,822  1,822 
Equity-based compensation 2,635  2,578  4,483  4,046 
Transaction costs and other —  18  —  24 
Debt transaction costs 17  241  581  328 
Gain on extinguishment of debt (3,000) —  (3,000) — 
Non-cash interest income, net (133) (133) (266) (263)
Non-cash lease expense, net 149  129  222  262 
Casualty (gain) loss (607) 935  (881) 1,471 
Other non-cash items, net 50  —  359  768 
Adjustments related to non-controlling interests in consolidated joint ventures (368) (913) (941) (1,791)
AFFO applicable to Common Stock and Common Units $ 36,370  $ 33,151  $ 66,366  $ 59,411 
FFO per share of Common Stock and Common Units $ 0.28  $ 0.23  $ 0.49  $ 0.41 
AFFO per share of Common Stock and Common Units $ 0.29  $ 0.27  $ 0.54  $ 0.49 
Weighted-average diluted shares of Common Stock and Common Units:
FFO(1) and AFFO (1)
 123,834  122,432  123,664  122,223 
(1)    The weighted-average diluted shares of Common Stock and Common Units used to calculate FFO and AFFO per share of Common Stock and Common Units for the three and six months ended June 30, 2023 includes the dilutive effect of our outstanding restricted stock awards. These shares were excluded from our weighted-average shares outstanding used to calculate net loss per share because they would have been antidilutive. The weighted-average shares of Common Stock and Common Units used to calculate FFO and AFFO per share of Common Stock and Common Units for the three and six months ended June 30, 2024 and 2023 exclude the potential dilution related to our Convertible Notes as we intend to settle the principal value of the Convertible Notes in cash.


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The following is an unaudited reconciliation of weighted-average diluted shares of Common Stock to non-GAAP weighted-average diluted shares of Common Stock and Common Units for FFO and AFFO (in thousands):

Three Months Ended
June 30,		 Six Months Ended
June 30,
2024 2023 2024 2023
Weighted-average shares of Common Stock outstanding 105,918  105,562  105,819  105,438 
Dilutive effect of unvested restricted stock awards 1,072  29  1,000  122 
Dilutive effect of performance stock awards 896  —  896  — 
Dilutive effect of Common Units of Operating Partnership 15,948  15,977  15,949  15,977 
Dilutive effect of shares of Common Stock issuable upon conversion of convertible debt 25,617  24,540  25,448  24,433 
Adjusted weighted diluted shares of Common Stock 149,451  146,108  149,112  145,970 
Non-GAAP adjustment for dilutive effects of restricted stock awards —  864  —  686 
Non-GAAP adjustment for dilutive effect of shares of Common Stock issuable upon conversion of convertible debt (25,617) (24,540) (25,448) (24,433)
Non-GAAP weighted diluted share of Common Stock and Common Units 123,834  122,432  123,664  122,223 

AFFO applicable to shares of Common Stock and Common Units increased by $3.2 million and $7.0 million for the three and six months ended June 30, 2024 in comparison with the three and six months ended June 30, 2023 primarily as a result of the improvement in our business that was primarily driven by improving demand for business transient and group travel, and the net effect of the sales and acquisitions of lodging properties.

EBITDA, EBITDAre and Adjusted EBITDAre

EBITDA

EBITDA represents net income or loss, excluding: (i) interest, (ii) income tax expense and (iii) depreciation and amortization. We believe EBITDA is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results. Our management team also uses EBITDA as one measure in determining the value of acquisitions and dispositions.

EBITDAre and Adjusted EBITDAre
 
EBITDAre is based on EBITDA and is expected to provide additional relevant information about REITs as real estate companies in support of growing interest among generalist investors. EBITDAre is intended to be a supplemental non-GAAP performance measure that is independent of a company’s capital structure and will provide a uniform basis to measure the enterprise value of a company compared to other REITs.

EBITDAre, as defined by Nareit, is calculated as EBITDA, excluding: (i) loss and gains on disposition of property and (ii) asset impairments, if any. We believe EBITDAre is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results.

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We make additional adjustments to EBITDAre when evaluating our performance, such as adjustments related to the provision for credit losses, because we believe that the exclusion of certain additional non-recurring or certain non-cash items described below provides useful supplemental information to investors regarding our ongoing operating performance. We believe that the presentation of Adjusted EBITDAre, when combined with the primary GAAP presentation of net income, is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results.

The following is an unaudited reconciliation of our Net income (loss), determined in accordance with GAAP, to EBITDA, EBITDAre and Adjusted EBITDAre, (in thousands):
 
Three Months Ended
June 30,		 Six Months Ended
June 30,
2024 2023 2024 2023
Net income (loss) $ 38,698  $ 890  $ 41,531  $ (1,080)
Depreciation and amortization 36,458  37,510  73,257  74,418 
Interest expense 20,830  22,248  42,412  43,157 
Interest income on cash deposits (264) (157) (421) (240)
Income tax expense 2,375  791  2,592  319 
EBITDA 98,097  61,282  159,371  116,574 
(Gain) loss on disposal of assets and other dispositions, net (28,342) 320  (28,417) 368 
EBITDAre
 69,755  61,602  130,954  116,942 
Recoveries of credit losses —  —  —  (250)
Amortization of key money liabilities (121) (121) (242) (257)
Equity-based compensation 2,635  2,578  4,483  4,046 
Transaction costs and other —  18  —  24 
Debt transaction costs 17  241  581  328 
Gain on extinguishment of debt (3,000) —  (3,000) — 
Non-cash interest income, net (133) (133) (266) (263)
Non-cash lease expense, net 149  129  222  262 
Casualty (gain) loss (607) 935  (881) 1,471 
Loss related to non-controlling interest in consolidated joint ventures 1,375  2,971  737  3,651 
Other non-cash items, net 50  —  362  705 
Adjustments related to non-controlling interests in consolidated joint ventures (14,200) (15,324) (28,229) (29,336)
Adjusted EBITDAre
 $ 55,920  $ 52,896  $ 104,721  $ 97,323 

The increase in Adjusted EBITDAre for the three and six months ended June 30, 2024 in comparison with the three and six months ended June 30, 2023 is primarily a result of the improvement in our business that was primarily driven by improving demand for business transient and group travel, and the net effect of the sales and acquisitions of lodging properties.



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Liquidity and Capital Resources
  
Our short-term cash obligations consist primarily of operating expenses and other expenditures directly associated with our lodging properties, recurring maintenance and capital expenditures necessary to maintain our lodging properties in accordance with internal and brand standards, capital expenditures to improve our lodging properties, interest payments, settlement of interest rate swaps, scheduled principal payments on outstanding indebtedness, restricted cash funding obligations, our joint venture acquisitions and capital requirements, contractual lease payments, corporate overhead, and dividends and distributions to our stockholders and unitholders when declared and paid. Our corporate overhead primarily consists of employee compensation expenses, professional fees, corporate insurance and rent expenses. Cash requirements for our corporate overhead expenses (excluding non-cash equity-based compensation), which are generally paid from operating cash flows, were $12.5 million and $13.1 million, for the six months ended June 30, 2024 and 2023, respectively. We generally expect our corporate overhead expenses to remain consistent with the level of our operating activities and market conditions for goods and services.

Our long-term cash obligations consist primarily of dividends and distributions, scheduled debt payments, including maturing loans, capital required for renovations and other non-recurring capital expenditures that periodically are made with respect to our lodging properties, and lease obligations.

Our sources of cash are primarily from operating cash flows, sales of lodging properties, principal and interest payments from borrowers on notes receivable, and debt financing.

To satisfy the requirements for qualification as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute annually at least 90% of our REIT taxable income to our stockholders, determined without regard to the deduction for dividends paid and excluding any net capital gains. We intend to distribute a sufficient amount of our taxable income to maintain our status as a REIT and to avoid tax on undistributed income. Because we anticipate distributing a substantial amount of our available cash from operations, if sufficient funds are not available to us from lodging property dispositions, our senior revolving credit and term loan facilities and other loans, we may need to raise additional capital to grow our business.

Outstanding Indebtedness
 
At June 30, 2024, we had $10.0 million in borrowings under our $400 Million Revolver, $200.0 million outstanding on our $200 Million Term Loan, and $200.0 million outstanding on our 2024 Term Loan (each of such credit facilities are defined in "Note 5 - Debt" to the accompanying Condensed Consolidated Financial Statements). Each of the credit facilities was supported by the 53 lodging properties included in the credit facility borrowing base. We also had $287.5 million of Convertible Notes outstanding. In April 2024, we repaid the $55.0 million outstanding balance on our $400 Million Revolver from the net proceeds of the sale of a portfolio of two lodging properties in New Orleans, LA.

For more information concerning the 2023 Senior Credit and Term Loan Facility and the 2024 Term Loan, see "Note 5 - Debt" to the accompanying Condensed Consolidated Financial Statements.
    
At June 30, 2024, the GIC Joint Venture had $200.0 million outstanding under the GIC Joint Venture Credit Facility (defined in "Note 5 - Debt" to the accompanying Condensed Consolidated Financial Statements), which included borrowings of $75.0 million on its $75 Million Term Loan and $125.0 million on its $125 Million Revolver. The GIC Joint Venture Credit Facility (as defined in "Note 5 - Debt" to the accompanying Condensed Consolidated Financial Statements) is secured primarily by a first priority pledge of the equity interests in the subsidiaries that own the 13-lodging property borrowing base assets, and the related TRS entities, which wholly own the TRS Lessees. See "Note 5 - Debt" to the accompanying Condensed Consolidated Financial Statements for additional information.

To complete the NCI Transaction during the first quarter of 2022, the GIC Joint Venture entered into the $410.0 million GIC Joint Venture Term Loan (as defined in "Note 5 - Debt" to the accompanying Condensed Consolidated Financial Statements) that was originally secured by the 27 lodging properties (two of which have since been sold) and two parking garages acquired in the transaction and assumed a Property Assessed Clean Energy ("PACE") loan totaling $6.5 million. The outstanding balance of the PACE loan is $6.0 million at June 30, 2024. See "Note 5 - Debt" to the accompanying Condensed Consolidated Financial Statements.

Additionally, the GIC Joint Venture has a mortgage loan outstanding totaling $12.7 million at June 30, 2024 related to the acquisition of the Embassy Suites in Tucson, AZ in December 2021.

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In June 2017, Summit Meta 2017, LLC, a subsidiary of our Operating Partnership, entered into a $47.6 million secured, non-recourse loan with MetaBank (the "MetaBank Loan"). In June 2024, the outstanding balance of the loan was $42.3 million at which time we repaid the MetaBank Loan for $39.1 million prior to its scheduled maturity date, which represented a discount of $3.2 million and resulted in a gain on extinguishment of debt of $3.0 million after legal fees and unamortized debt issuance costs that were written-off on the closing date. As a result of this repayment, the three lodging properties previously held as collateral for the MetaBank Loan were released.

As of June 30, 2024, we have scheduled debt principal amortization payments during the next twelve months totaling $2.7 million. Currently, we have the capacity to pay these scheduled principal payments using cash on hand or draws under our $400 Million Revolver (as defined in "Note 5 - Debt" to the accompanying Condensed Consolidated Financial Statements). Our outstanding indebtedness requires us to comply with various financial and other covenants. We are in compliance with our various financial and other covenants and expect to continue to be in compliance over the next four quarters.
    
We have obtained financing through debt instruments having staggered maturities and intend to continue to do so in the future. Our debt includes, and may include in the future, debt secured by equity pledges, debt secured by first priority mortgage liens on certain lodging properties and unsecured debt. We believe that we will have adequate liquidity to meet the requirements for scheduled maturities and principal repayments. However, we can provide no assurance that we will be able to refinance our indebtedness as it becomes due and, if refinanced, whether such refinancing will be available on favorable terms.
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A summary of our gross debt at June 30, 2024 is as follows (dollars in thousands):
Lender Interest Rate Initial Maturity Date Fully Extended Maturity Date Number of
Encumbered  Properties		 Principal Amount
Outstanding
OPERATING PARTNERSHIP DEBT:
2023 Senior Credit and Term Loan Facility
Bank of America, NA
$400 Million Revolver (1)
7.38% Variable
 6/21/2027 6/21/2028 n/a $ 10,000 
$200 Million Term Loan (1)
7.34% Variable
 6/21/2026 6/21/2028 n/a 200,000 
Total Senior Credit and Term Loan Facility 210,000 
Term Loans
Regions Bank 2024 Term Loan Facility (1)
7.33% Variable
 2/26/2027 2/26/2029 n/a 200,000 
Convertible Notes
1.50% Fixed
 2/15/2026 2/15/2026 n/a 287,500 
697,500 
JOINT VENTURE DEBT:
Brickell Joint Venture Mortgage Loan
City National Bank of Florida
8.29% Variable
 6/9/2025 6/9/2025 2  47,000 
GIC Joint Venture Credit Facility and Term Loans
Bank of America, N.A.
$125 Million Revolver (2)
7.59% Variable
 9/15/2027 9/15/2028 n/a 125,000 
$75 Million Term Loan (2)
7.54% Variable
 9/15/2027 9/15/2028 n/a 75,000 
Bank of America, N.A. Term Loan (3)
8.21% Variable
 1/13/2026 1/13/2027 n/a 396,037 
Wells Fargo
4.99% Fixed
 6/6/2028 6/6/2028 1  12,657 
PACE loan
6.10% Fixed
 7/31/2040 7/31/2040 n/a 5,992 
Total GIC Joint Venture Credit Facility and Term Loans 1  614,686 
Total Joint Venture Debt 3  661,686 
Total Debt 3  $ 1,359,186 

(1) The 2023 Senior Credit and Term Loan Facility and the 2024 Term Loan Facility are supported by a borrowing base of 53 unencumbered hotel properties.
(2) The $125 Million Revolver and the $75 Million Term Loan are secured by pledges of the equity in the entities and affiliated entities that own 13 lodging properties.
(3) The GIC Joint Venture Term Loan is secured by pledges of the equity in the entities (and affiliated entities) that own 25 lodging properties and two parking garages.

We are exposed to interest rate risk through our variable-rate debt. We manage this risk primarily by managing the amount, sources, and duration of our debt funding and through the use of derivative financial instruments. Specifically, we enter into derivative financial instruments to manage our exposure to known or expected cash payments related to our variable-rate debt.
In January 2024, subsidiaries of the GIC Joint Venture that are the borrowers under the GIC Joint Venture Term Loan entered into a $100.0 million interest rate swap to fix one-month term SOFR until January 2026. The interest rate swap has an effective date of October 1, 2024 and a termination date of January 13, 2026. Pursuant to the interest rate swap, we will pay a fixed rate of 3.77% and receive the one-month term SOFR floating rate index.

During the six months ended June 30, 2024, the fair value of our interest rate swaps increased $5.1 million due to a change in interest rate expectations. Each interest rate swap fixes the interest rates on portions of our variable interest rate indebtedness and converts SOFR from a floating rate to average fixed rates ranging from 2.56% to 3.77%.

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Capital Expenditures
 
During the six months ended June 30, 2024, we funded $39.0 million in capital expenditures ($33.0 million on a pro rata basis) at our lodging properties. We anticipate spending approximately $65.0 million to $85.0 million on capital expenditures on a pro rata basis during 2024. We expect to fund these expenditures through a combination of cash flows from operations and borrowings under our $400 Million Revolver, or other potential sources of capital, to the extent available to us.
 
Cash Flows

Unaudited cash flow information is as follows (in thousands):
Six Months Ended
June 30,
2024 2023 Change
Net cash provided by operating activities $ 78,475  $ 79,054  $ (579)
Net cash provided by (used in) investing activities 50,658  (60,730) 111,388 
Net cash used in financing activities (124,262) (9,723) (114,539)
Net change in cash, cash equivalents and restricted cash $ 4,871  $ 8,601  $ (3,730)

Changes from the six months ended June 30, 2024 compared with the six months ended June 30, 2023 were due to the following:

•Cash provided by operating activities. Cash provided by operating activities for the six months ended June 30, 2024 was the result of net income of $91.4 million, after adjusting for non-cash items such as depreciation and amortization and equity-based compensation, and a net change in working capital of $12.9 million. Cash provided by operating activities for the six months ended June 30, 2023 was the result of net income of $80.8 million, after adjusting for non-cash items such as depreciation and amortization and equity-based compensation, and a net change in working capital of $1.7 million.

•Cash provided by (used in) investing activities. The increase in cash provided by investing activities was primarily due to the sales of lodging properties during the six months ended June 30, 2024. Cash used in investing activities for the six months ended June 30, 2023 was due the acquisitions of the Residence Inn by Marriott in Scottsdale, AZ and the Nordic Lodge in June 2023. We incurred a comparable amount of capital expenditures for the renovation of our lodging properties in both periods.

•Cash used in financing activities. Cash used in financing activities for the six months ended June 30, 2024 was primarily related to the repayment of our MetaBank and Bank of the Cascades term loans of $93.5 million, the payment of dividends and distributions of approximately $37.5 million, financing costs of approximately $2.5 million related to the 2024 Term Loan and our $200 Million GIC Joint Venture Credit Facility (as defined in "Note 5 - Debt" to the accompanying Condensed Consolidated Financial Statements), and $0.9 million related to shares acquired for employee withholding requirements, net of net borrowings of $10.0 million on our $400 Million Revolver.

Cash used in financing activities for the six months ended June 30, 2023 was primarily the net result of contributions by our GIC Joint Venture partner of $20.3 million and net borrowings of $3.8 million to complete the acquisitions of the Residence Inn by Marriott in Scottsdale, AZ and the Nordic Lodge in June 2023, offset by financing fees of approximately $7.6 million related to the amendment of our prior senior credit facility that was in effect during the six months ended June 30, 2023 and was replaced by the 2024 Senior Credit Facility (as defined in "Note 5 - Debt" to the accompanying Condensed Consolidated Financial Statements), dividends and distributions of approximately $25.8 million, and $1.4 million related to shares acquired for employee withholding requirements.

Critical Accounting Policies

For critical accounting policies, see "Note 2 - Basis of Presentation and Significant Accounting Policies" to the accompanying Condensed Consolidated Financial Statements and our Annual Report on Form 10-K for the year ended December 31, 2023.
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Cybersecurity

The hospitality industry and certain of the major brand and franchise companies have in the past experienced cybersecurity breaches. We are not aware of any material cybersecurity losses at any of our properties. Cybersecurity risks at our lodging properties are managed through our franchisors and property management companies. An important part of our cybersecurity risk mitigation efforts includes maintaining cybersecurity insurance and indemnifications in certain of our property management agreements. Our Board of Directors, primarily through the Audit Committee, oversees management's approach to managing cybersecurity risks.

Item 3.         Quantitative and Qualitative Disclosures about Market Risk.
 
Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market-sensitive instruments. In pursuing our business strategies, the primary market risk to which we are exposed is interest rate risk. All of our outstanding loans are now indexed to SOFR, and therefore, our primary interest rate exposure is to SOFR. We primarily use derivative financial instruments to manage interest rate risk.

At June 30, 2024, we were party to seven interest rate derivative agreements, of which six were in effect, pursuant to which we receive variable-rate payments in exchange for making fixed-rate payments (dollars in thousands):     
Contract date Effective Date Expiration Date Average Annual Effective Fixed Rate Notional Amount
Operating Partnership:
June 11, 2018 September 28, 2018 September 30, 2024 2.86  % $ 75,000 
June 11, 2018 December 31, 2018 December 31, 2025 2.92  % 125,000 
July 26, 2022 January 31, 2023 January 31, 2027 2.60  % 100,000 
July 26, 2022 January 31, 2023 January 31, 2029 2.56  % 100,000 
Total Operating Partnership
 400,000 
GIC Joint Venture:
March 24, 2023 July 1, 2023 January 13, 2026 3.35  % 100,000 
March 24, 2023 July 1, 2023 January 13, 2026 3.35  % 100,000 
January 19, 2024 October 1, 2024 January 13, 2026 3.77  % 100,000 
Total GIC Joint Venture
 300,000 
Total $ 700,000 

At June 30, 2024, after giving effect to our interest rate derivative agreements, $906.1 million, or 67%, of our consolidated debt had fixed interest rates and $453.0 million, or 33%, had variable interest rates. At June 30, 2024, debt related to our wholly-owned properties and our pro rata share of joint venture debt has a fixed-rate debt ratio of approximately 76% of our total pro rata indebtedness when taking into consideration interest rate swaps that are currently in effect.

Taking into consideration our existing interest rate swaps an increase or decrease in interest rates of 1.0% would decrease or increase, respectively, our cash flows by approximately $4.5 million per year. See "Note 7 - Derivative Financial Instruments and Hedging" to the accompanying Condensed Consolidated Financial Statements for additional information.

As our fixed-rate debts mature, they will become subject to interest rate risk. In addition, as our variable-rate debts mature, lenders may impose interest rate floors on new financing arrangements because of the low interest rates experienced a few years ago. As of June 30, 2024, we have scheduled debt principal amortization payments during the next twelve months totaling $2.7 million.

In January 2024, subsidiaries of the GIC Joint Venture that are the borrowers under the GIC Joint Venture Term Loan entered into a $100.0 million interest rate swap to fix one-month term SOFR until January 2026. The interest rate swap has an effective date of October 1, 2024 and a termination date of January 13, 2026. Pursuant to the interest rate swap, we will pay a fixed rate of 3.77% and receive the one-month term SOFR floating rate index.

49

Item 4.  Controls and Procedures.
 
Controls and Procedures
 
Disclosure Controls and Procedures
 
Our management team evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of June 30, 2024. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of June 30, 2024, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Security Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.
 
Changes in Internal Control Over Financial Reporting
 
There were no changes in our internal control over financial reporting during the three-month period covered by this Quarterly Report on Form 10-Q, which were identified in connection with management’s evaluation required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


50

PART II — OTHER INFORMATION

Item 1.                                                         Legal Proceedings.
 
We are involved from time to time in litigation arising in the ordinary course of business; however, there are currently no pending legal actions that we believe would have a material adverse effect on our financial position or results of operations.
 
Item 1A.                                                Risk Factors.
     
There have been no material changes from the risk factors disclosed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2023.

Item 2.                                                         Unregistered Sales of Equity Securities and Use of Proceeds.
     
None.

Item 3.                                                         Defaults Upon Senior Securities.
 
None.
 
Item 4.                                                         Mine Safety Disclosures.
 
Not applicable.
 
Item 5.                                                         Other Information.
 
During the quarter ended June 30, 2024, there were no adoptions, modifications, or terminations by directors or officers of Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements, each as defined in Item 408 of Regulation S-K.

51

Item 6.                                                         Exhibits.
 
The following exhibits are filed as part of this report:
 
Exhibit    
Number   Description of Exhibit
101.INS The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document (1)
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document (1)
101.LAB
Inline XBRL Taxonomy Extension Labels Linkbase Document (1)
101.PRE
Inline XBRL Taxonomy Presentation Linkbase Document (1)
104 Cover Page Interactive Data File (the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
† - Filed herewith
†† - Furnished herewith
(1) - Submitted electronically herewith Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


52

SIGNATURES
 
 
 
 
SUMMIT HOTEL PROPERTIES, INC. (registrant)
     
Date: July 29, 2024 By: /s/ William H. Conkling
    William H. Conkling
Executive Vice President and Chief Financial Officer
(principal financial officer)

53
EX-31.1 2 exhibit31106-30x2024.htm EX-31.1 Document

Exhibit 31.1
 
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
I, Jonathan P. Stanner, certify that:
 
1.I have reviewed this Quarterly Report on Form 10-Q of Summit Hotel Properties, Inc.;
 
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:
 
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statement for external purposes in accordance with generally accepted accounting principles;
 
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by the report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
 
     
Date: July 29, 2024 /s/ Jonathan P. Stanner
    Jonathan P. Stanner
President, Chief Executive Officer and Director
    (principal executive officer)


EX-31.2 3 exhibit31206-30x2024.htm EX-31.2 Document

Exhibit 31.2
 
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
I, William H. Conkling, certify that:
 
1.I have reviewed this Quarterly Report on Form 10-Q of Summit Hotel Properties, Inc.;
 
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:
 
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statement for external purposes in accordance with generally accepted accounting principles;
 
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by the report based on such evaluation; and
 
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
   
     
Date: July 29, 2024 /s/ William H. Conkling
  William H. Conkling
  Executive Vice President and Chief Financial Officer
  (principal financial officer)


EX-32.1 4 exhibit32106-30x2024.htm EX-32.1 Document

Exhibit 32.1
 
Certification Pursuant To
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of The Sarbanes-Oxley Act of 2002
 
In connection with the Quarterly Report of Summit Hotel Properties, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended June 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jonathan P. Stanner, President, Chief Executive Officer and Director of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
(1)                   the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
 
(2)                   the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
   
     
Date: July 29, 2024 /s/ Jonathan P. Stanner
    Jonathan P. Stanner
President, Chief Executive Officer and Director
(principal executive officer)


EX-32.2 5 exhibit32206-30x2024.htm EX-32.2 Document

Exhibit 32.2
 
Certification Pursuant To
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of The Sarbanes-Oxley Act of 2002
 
In connection with the Quarterly Report of Summit Hotel Properties, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended June 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William H. Conkling, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
(1)                   the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
 
(2)                   the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
   
     
Date: July 29, 2024 /s/ William H. Conkling
  William H. Conkling
Executive Vice President and Chief Financial Officer
 (principal financial officer)