Pebblebrook Hotel Trust (PEB) FY 2024 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this report. Pebblebrook Hotel Trust is a Maryland real estate investment trust that conducts its operations so as to qualify as a REIT under the Code. Substantially all of the operations are conducted through Pebblebrook Hotel, L.P. (our "Operating Partnership"), a Delaware limited partnership of which Pebblebrook Hotel Trust is the sole general partner. In this report, we use the terms "the Company", "we" or "our" to refer to Pebblebrook Hotel Trust and its subsidiaries, unless the context indicates otherwise.

Overview

Our 2024 operating results showed continued improvement in group and business transient demand. Leisure demand remained healthy and was boosted by customers returning to the cities for cultural, sporting and entertainment events. Our recently redeveloped properties performed well, gaining market share versus the prior year. Our properties in San Francisco, Los Angeles and Portland muted our overall performance, but strong markets such as San Diego, Boston, and Chicago helped to offset the weaker results.

Certain of our properties experienced demand headwinds in 2024, including our Los Angeles properties, which were affected by the entertainment industry strikes in 2023, which slowed production into 2024, and our LaPlaya Beach Resort & Club ("LaPlaya"), which was impacted by Hurricane Helene on September 26, 2024 and Hurricane Milton on October 9, 2024. The damage to LaPlaya primarily impacted the ground floor of the Beach House, pool complex, landscaping and parking garage. LaPlaya closed following Hurricane Milton to facilitate clean-up, repairs and a full assessment of damage. The property's Bay Tower and Gulf Tower reopened November 1, 2024 and the upper floors of the Beach House reopened in January 2025. The ground floor of the Beach House is expected to open in the second quarter of 2025. In 2024, we recorded a loss of $10.0 million related to the damage from Hurricanes Helene and Milton, and we expect our property and flood insurance proceeds to cover the physical damage and business interruption losses from the hurricanes in excess of the applicable deductibles.

During 2024, we had the following transactions and events:

•We finalized a settlement agreement with our insurance carriers for damage caused by Hurricane Ian in 2022 totaling $146.5 million and recognized business interruption insurance income of $23.8 million and a gain on insurance settlement of $24.8 million.

•We repurchased 1,127,255 common shares for an aggregate purchase price of $15.0 million, or an average of $13.31 per share, under our common share repurchase program.

•We paid down $463.3 million of our term loans.

•We extended the maturity of $356.7 million of our Term Loan 2024 to January 2028 and extended $185.2 million of our Term Loan 2025 to January 2029.

•We issued $400.0 million aggregate principal amount of 6.375% senior notes due October 2029.

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While we do not operate our hotel properties, both our asset management team and our executive management team monitor and work cooperatively with our hotel managers by advising and making recommendations in all aspects of our hotels’ operations, including property positioning and repositioning, revenue and expense management, operations analysis, physical design, renovation and capital improvements, guest experience and overall strategic direction. Through these efforts, we seek to improve property efficiencies, lower costs, maximize revenues and enhance property operating margins, which we expect will enhance returns to our shareholders.

Key Indicators of Financial Condition and Operating Performance

We measure hotel results of operations and the operating performance of our business by evaluating financial and non-financial metrics such as room revenue per available room ("RevPAR"); total revenue per available room ("Total RevPAR"); average daily rate ("ADR"); occupancy rate ("Occupancy"); funds from operations ("FFO"); Adjusted FFO; earnings before interest, income taxes, depreciation and amortization ("EBITDA"); and EBITDA for real estate ("EBITDAre"); Adjusted EBITDAre; and hotel-level EBITDA (“Hotel EBITDA”). We evaluate individual hotel and company-wide performance with comparisons to budgets, prior periods and competing properties. ADR, occupancy and RevPAR may be impacted by macroeconomic factors as well as regional and local economies and events. See Non-GAAP Financial Measures for further discussion of FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDAre and Hotel EBITDA.

Hotel Operating Statistics

The following table represents the key same-property hotel operating statistics for our hotels for the years ended December 31, 2024 and 2023:

The above table of hotel operating statistics includes information from all hotels owned as of December 31, 2024, except for LaPlaya Beach Resort & Club which was excluded for both years due to disruption from Hurricane Ian and Newport Harbor Island Resort which was excluded for the first, second and fourth quarters only due to its redevelopment.

Results of Operations

This section includes comparisons of certain 2024 financial information to the same information for 2023. Year-to-year comparisons of the 2023 financial information to the same information for 2022 are contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 21, 2024.

At December 31, 2024 and 2023, our consolidated financial statements included the operations of 46 hotel properties, which have been included in our results of operations during the respective periods since their dates of acquisition or through their dates of disposition. Based on when a property was acquired or disposed, operating results for certain properties are not comparable for the years ended December 31, 2024 and 2023. The properties listed in the table below are hereinafter referred to as "non-comparable properties" for the periods indicated and all other properties are referred to as "comparable properties":

Comparison of the year ended December 31, 2024 to the year ended December 31, 2023

Revenues — Total revenues increased by $33.4 million primarily due to increases at LaPlaya Beach Resort & Club, which was partially closed in 2023 due to Hurricane Ian, at Margaritaville Hotel San Diego Gaslamp Quarter and Hilton San Diego Gaslamp Quarter, which were both under renovation in 2023, and at The Westin Michigan Avenue Chicago. This increase was partially offset by a $23.7 million decrease due to the sales of our non-comparable properties in 2023 and the decrease at Hyatt Centric Delfina Santa Monica as a result of disruption from the brand conversion in 2024.

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Hotel operating expenses — Total hotel operating expenses increased by $19.9 million primarily due to increased operations at LaPlaya Beach Resort & Club, Margaritaville Hotel San Diego Gaslamp Quarter, The Westin Michigan Avenue Chicago and Hilton San Diego Gaslamp Quarter, as well as an increase in staffing, wage rates and benefits at our comparable properties due to higher demand levels. This increase was partially offset by a $18.0 million decrease due to the sales of our non-comparable properties in 2023.

Depreciation and amortization — Depreciation and amortization expense decreased by $11.1 million due to Newport Harbor Island Resort's useful life reduction of its furniture, fixtures and equipment in 2023 due to its scheduled renovation in November 2023, as well as the sales of our non-comparable properties in 2023.

Real estate taxes, personal property taxes, property insurance and ground rent — Real estate taxes, personal property taxes, property insurance and ground rent increased by $1.6 million primarily due to a $3.9 million increase in property insurance due to higher insurance premiums. This increase was partially offset by a $2.1 million decrease in real estate taxes as a result of tax appeals and lower tax assessments.

General and administrative — General and administrative expense increased by $3.3 million primarily due to an increase in employee compensation expense. General and administrative expenses consist of employee compensation costs, legal and professional fees, insurance and other expenses.

Impairment — In 2024, we recognized a loss of $10.0 million related to damage caused by Hurricane Helene and Hurricane Milton at LaPlaya Beach Resort & Club and an impairment loss of $38.1 million related to one hotel property. In 2023 we recognized an impairment loss of $81.8 million on three hotels and one retail component of a hotel property.

Gain on sale of hotel properties — We recognized a gain on sale of $30.4 million primarily due to the sales of five hotels and two retail components of our hotels in 2023.

Business interruption insurance income and gain on insurance settlement — We recognized business interruption insurance income and gain on insurance settlement in 2024 and 2023 of $48.6 million and $33.0 million, respectively, related to the settlement of property damage, business interruption and other costs sustained at LaPlaya Beach Resort & Club resulting from Hurricane Ian.

Other operating expenses — Other operating expenses decreased by $7.7 million primarily due to a decrease in hurricane related payroll costs and claims administration costs at LaPlaya Beach Resort & Club.

Interest expense — Interest expense decreased by $3.2 million due to pay-downs on our term loans during the first quarter of 2024, pay-downs of our senior notes during the fourth quarter of 2023 and interest being capitalized related to our Newport Harbor Island Resort redevelopment. This decrease was partially offset by an increase resulting from costs associated with the extensions of the revolver and term loans and higher interest rates on our unhedged floating rate debt.

Other — Other decreased by $1.4 million due to a decrease in interest income earned as a result of lower excess cash balances in 2024.

Income tax (expense) benefit — In 2024, we recognized an income tax benefit due to a $31.7 million reduction in the valuation allowance, offset by $6.1 million of income tax expense.

Non-controlling interests — Non-controlling interests represent the allocation of income or loss of our Operating Partnership to third-party common OP unit holders and to the preferred OP unit holders.

Distributions to preferred shareholders — Distributions to preferred shareholders decreased by $1.1 million as result of the redemption of one million of our 5.70% Series H Cumulative Redeemable Preferred Shares in November 2023.

Issuance costs of redeemed preferred shares — Issuance costs of redeemed preferred shares decreased due to the redemption of one million of our 5.70% Series H Cumulative Redeemable Preferred Shares in November 2023. These costs are included in the determination of net income (loss) attributable to common shareholders.

Non-GAAP Financial Measures

Non-GAAP financial measures are measures of our historical or future financial performance that are different from measures calculated and presented in accordance with U.S. GAAP. We report FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDAre and Hotel EBITDA, which are non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance.

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We calculate FFO in accordance with standards established by Nareit, formerly known as the National Association of Real Estate Investment Trusts, which defines FFO as net income (calculated in accordance with U.S. GAAP), excluding real estate related depreciation and amortization, gains (losses) from sales of real estate, impairments of real estate assets (including impairment of real estate related joint ventures), the cumulative effect of changes in accounting principles and adjustments for unconsolidated affiliates. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. By excluding the effect of real estate related depreciation and amortization including our share of the joint venture depreciation and amortization, gains (losses) from sales of real estate and impairments of real estate assets (including impairment of real estate related joint ventures), all of which are based on historical cost accounting and which may be of lesser significance in evaluating current performance, we believe that FFO provides investors a useful financial measure to evaluate our operating performance.

Adjusted FFO is defined as FFO, as adjusted for transaction costs, non-cash ground rent on operating and capital leases, management/franchise contract transition costs, interest expense adjustment for acquired liabilities, finance lease adjustment, non-cash amortization of acquired intangibles, gain on insurance settlement, early extinguishment of debt, amortization of share-based compensation expense, issuance costs of redeemed preferred shares, hurricane-related costs, non-cash interest expense and deferred tax asset provision (benefit). We believe Adjusted FFO provides useful supplemental information regarding our ongoing operating performance.

The following table reconciles net income (loss) to FFO, FFO available to common share and unit holders and Adjusted FFO available to common share and unit holders for the years ended December 31, 2024, 2023 and 2022 (in thousands):

EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. We calculate EBITDAre in accordance with standards established by Nareit. EBITDAre is defined as EBITDA as adjusted for gain on sale of hotel properties and impairment loss. Adjusted EBITDAre is defined as EBITDAre, as adjusted for transaction costs, non-cash ground rent on operating and capital leases, management/franchise contract transition costs, non-cash amortization of acquired intangibles, gain on insurance settlement, amortization of share-based compensation expense, and hurricane-related costs. Hotel EBITDA is defined as Adjusted EBITDAre plus corporate general and administrative expenses less interest income, business interruption insurance income, and other. We believe that EBITDA, EBITDAre, Adjusted EBITDAre and Hotel EBITDA provide investors useful financial measures to evaluate our operating performance, excluding the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization).

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The following table reconciles net income (loss) to EBITDA, EBITDAre, Adjusted EBITDAre and Hotel EBITDA for the years ended December 31, 2024, 2023 and 2022 (in thousands):

FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDAre and Hotel EBITDA do not represent cash generated from operating activities as determined by U.S. GAAP and should not be considered as alternatives to U.S. GAAP net income (loss), as indications of our financial performance, or to U.S. GAAP cash flow from operating activities, as measures of liquidity. In addition, FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDAre and Hotel EBITDA are not indicative of funds available to fund cash needs, including the ability to make cash distributions.

Critical Accounting Policies

We consider these policies critical because they require estimates about matters that are inherently uncertain, involve various assumptions and require significant management judgment, and because they are important for understanding and evaluating our reported financial results. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Applying different estimates or assumptions may result in materially different amounts reported in our financial statements.

Investment in Hotel Properties

Estimation and judgment are required to determine the fair values of our acquired hotel properties. Upon acquiring a business or hotel property, we measure and recognize the fair value of the acquired land, land improvements, building, furniture, fixtures and equipment, identifiable intangible assets or liabilities, other assets and assumed liabilities. Identifiable intangible assets or liabilities typically arise from contractual arrangements assumed in connection with the transaction, including terms that are above or below market compared to an estimated market agreement at the acquisition date. We determine the acquisition-date fair values of all assets and assumed liabilities using a combination of the market, cost and income approaches. These valuation methodologies are based on significant Level 2 and Level 3 inputs in the fair value hierarchy, such as estimates of future income growth, capitalization rates, discount rates, capital expenditures and cash flow projections, including hotel revenues and net operating income, at the respective hotel properties. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. Transaction costs are expensed for acquisitions that are considered business combinations and capitalized for asset acquisitions.

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Impairment

We review our investments in hotel properties for impairment whenever events or changes in circumstances indicate that the carrying value of the hotel properties may not be recoverable. Events or circumstances that may cause a review include, but are not limited to, when a hotel property experiences a current or projected loss from operations, when it becomes more likely than not that a hotel property will be sold before the end of its useful life, adverse changes in the demand for lodging at the properties due to declining national or local economic conditions and/or new hotel construction in markets where the hotels are located. When such conditions exist, we perform an analysis to determine if the estimated undiscounted future cash flows from operations and the proceeds from the ultimate disposition of a hotel exceed its carrying value. If the estimated undiscounted future cash flows are less than the carrying amount of the asset, an adjustment to reduce the carrying amount to the related hotel's estimated fair market value is recorded and an impairment loss recognized. In the evaluation of impairment of our hotel properties, we make many assumptions and estimates including projected cash flows both from operations and eventual disposition, expected useful life and holding period, future required capital expenditures, and fair values, including consideration of capitalization rates, discount rates, and comparable selling prices. We will adjust our assumptions with respect to the remaining useful life of the hotel property when circumstances change, such as an expiring ground lease or it is more likely than not that the hotel property will be sold prior to its previously expected useful life.

New Accounting Pronouncements

See Note 2. Summary of Significant Accounting Policies to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K for recently issued accounting pronouncements that may affect us.

Liquidity and Capital Resources

Our primary sources of liquidity are cash provided by our operations, borrowings under our credit facilities, net proceeds from equity and debt offerings, and net proceeds from property sales. Our primary cash requirements in the short term (i.e., those requiring cash on or before December 31, 2025) will be to fund property lease obligations, interest and current principal on debt, capital improvements, dividends on common and preferred shares, and working capital of our property operations. We believe our cash and cash equivalents, restricted cash and the amount available on our senior unsecured revolving credit facility, which totaled $860.2 million as of December 31, 2024, along with cash generated from ongoing operations will be sufficient to satisfy our short-term cash requirements. As of December 31, 2024 we had no off-balance sheet arrangements.

In order to maintain our qualification as a REIT, we must pay dividends to our shareholders of at least 90% of our taxable income. As a result of this requirement, we cannot rely on retained earnings to fund long-term liquidity requirements such as hotel property acquisitions, redevelopments and repayments of long-term debt. As such, we expect to continue to raise capital through equity and debt offerings to fund our growth.

Our material cash requirements include the following contractual and other obligations.

Debt

Our outstanding debt consisted of floating- and fixed-rate unsecured term loans, convertible senior notes, senior unsecured notes and mortgage loans with varying maturities. Our total debt had an aggregate face value of $2.3 billion as of December 31, 2024, as summarized below:

For further discussion on the components of our debt, see Note 5. Debt to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

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We have the option to extend certain of our current debt maturities with the payment of extension fees. Assuming we exercise all extension options available in our debt agreements, we expect that future principal and interest payments associated with our remaining debt obligations outstanding as of December 31, 2024 will be $2.6 billion through their maturity, with $19.2 million of principal and $95.3 million of interest payable on or before December 31, 2025. We intend to pay amounts due with available cash, borrowings under our revolving credit facility or proceeds from property sales or to refinance amounts due with long-term debt.

We are in compliance with all covenants governing our existing credit facilities, term loans, senior note facilities and mortgage loans.

Our mortgage loans contain customary provisions regarding events of default, as well as customary cash management, cash trap and lockbox provisions. Cash trap provisions may be triggered if the hotel's performance is below a certain threshold. Once triggered, all of the cash flow generated by the hotel is deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of our lender. As of December 31, 2024, none of the mortgage loans were in a cash trap.

Hotel, ground and finance lease obligations

Our properties that are subject to hotel, ground or finance leases, as noted in Note 11. Commitment and Contingencies to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K, may require minimum fixed rent payments, percentage rent payments based on a percentage of revenues in excess of certain thresholds or rent payments equal to the greater of a minimum fixed rent or percentage rent. Minimum fixed rent may be adjusted annually by increases in consumer price index ("CPI") and may be subject to minimum and maximum increases.

Future fixed minimum payments associated with our hotel, ground and finance leases total $1.8 billion as of December 31, 2024, with $23.0 million payable on or before December 31, 2025.

Purchase commitments

As of December 31, 2024, we had $9.1 million of outstanding purchase commitments, all of which will be paid on or before December 31, 2025. These purchase commitments represent outstanding purchase orders and contracts that have been executed for capital and renovation projects at our properties. See Capital Investments for discussion on planned capital investments.

Preferred dividends and Series Z preferred operating partnership units

We expect to pay aggregate annual dividends and distributions of approximately $47.2 million on our outstanding Series E, Series F, Series G and Series H Cumulative Redeemable Preferred Shares and Series Z Cumulative Perpetual Preferred Units on or before December 31, 2025 and in future years until the shares/units are redeemed. For further discussion on our preferred shares and preferred units, see Note 7. Equity to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Sources and Uses of Cash

Our principal sources of cash are cash from operations, draws on our credit facilities, net proceeds from equity and debt offerings, and net proceeds from property sales. Our principal uses of cash are asset acquisitions, debt service payments, the redemption of equity securities, capital investments, operating costs, corporate expenses and dividends.

Operating Activities. Our net cash provided by operating activities was $275.0 million for the year ended December 31, 2024 and $236.2 million for the year ended December 31, 2023. Fluctuations in our net cash provided by operating activities are primarily the result of changes in hotel revenues, operating cash requirements and corporate expenses. The increase in cash provided by operating activities in 2024 is primarily due to an increase in operations at our hotel properties that had been under renovation in 2023.

Investing Activities. Our net cash provided by (used in) investing activities was $(92.8) million for the year ended December 31, 2024 and $142.0 million for the year ended December 31, 2023. Fluctuations in our net cash provided by (used in) investing activities are primarily the result of acquisition and disposition activities, as well as capital improvements and additions to our properties.

•During the year ended December 31, 2024, we invested $128.8 million in improvements to our hotel properties and received $36.8 million in property insurance proceeds.

•During the year ended December 31, 2023, we invested $200.6 million in improvements to our hotel properties, received $314.9 million from the sale of five hotel properties and two retail components of our hotel properties and received $30.2 million in property insurance proceeds.

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Financing Activities. Our net cash used in financing activities was $158.2 million for the year ended December 31, 2024 and $236.8 million for the year ended December 31, 2023. Fluctuations in our net cash used in financing activities are primarily the result of our issuance and repurchase of debt and equity securities and distributions paid on our preferred and common shares.

•During the year ended December 31, 2024, we borrowed $400.0 million and repaid $465.4 million in other debt, repurchased $16.9 million of common shares through our common share repurchase program and for tax withholding purposes in connection with vestings of share-based equity awards, paid $52.0 million in preferred and common distributions and paid $22.1 million in financing costs.

•During the year ended December 31, 2023, we borrowed and repaid $10.0 million of revolving credit facility borrowings, borrowed $140.0 million and repaid $211.1 million in other debt, repurchased $92.8 million of common shares through our common share repurchase program and for tax withholding purposes in connection with vestings of share-based equity awards, repurchased $15.8 million of preferred shares through our preferred share repurchase program and paid $53.6 million in common and preferred distributions.

Capital Investments

We maintain and intend to continue maintaining all of our hotels in good repair and condition, in conformity with applicable laws and regulations, in accordance with franchisor standards when applicable and in accordance with agreed-upon requirements in our management agreements. Routine capital investments will be administered by the hotel management companies. However, we maintain approval rights over the capital investments as part of the annual budget process and as otherwise required from time to time.

Certain of our hotel properties may undergo renovations as a result of our decision to upgrade portions of the hotels, such as guest rooms, meeting space and restaurants, in order to better compete with other hotels in our markets. In addition, after we acquire a hotel property, we are often required by the franchisor or brand manager, if any, to complete a property improvement plan (“PIP”) in order to bring the hotel property up to the franchisor’s or brand’s standards. Generally, we expect to fund renovations and improvements with available cash, restricted cash, borrowings under our credit facility or proceeds from new debt or equity offerings.

For the year ended December 31, 2024, we invested $128.8 million in capital investments (or $104.0 million excluding the repair and remediation of LaPlaya Beach Resort & Club) to reposition and/or improve our properties, including the renovations of Newport Harbor Island Resort, Skamania Lodge, Estancia La Jolla Hotel & Spa, Southernmost Beach Resort and Hyatt Centric Delfina Santa Monica.

Depending on market conditions, and in some instances subject to approval from governmental authorities, we expect to invest an additional $65.0 million to $75.0 million in capital investments in 2025, which includes normal hotel capital refurbishments and repositioning projects and excludes capital expenditures related to the repair and remediation of LaPlaya Beach Resort & Club. The following capital projects are expected to be completed in 2025:

•$16.0 million conversion of Hyatt Centric Delfina Santa Monica, which commenced in the fourth quarter of 2024 and is expected to be completed in the first quarter of 2025; and

•The refurbishment of Paradise Point Resort & Spa's convention center space, and guestroom refurbishments at Chaminade Resort & Spa and Argonaut Hotel.

Common Share Repurchase Programs and Preferred Share Repurchase Program

Common Share Repurchase Programs

On July 27, 2017, our board of trustees authorized a share repurchase program of up to $100.0 million of common shares. Under this program, we could repurchase common shares from time to time in transactions on the open market or by private agreement. As of June 30, 2023, no common shares remained available for repurchase under this program.

On February 17, 2023, our board of trustees authorized a share repurchase program of up to $150.0 million of common shares. Under this program, we may repurchase common shares from time to time in transactions on the open market or by private agreement. We may suspend or discontinue this program at any time. Repurchased common shares cease to be outstanding and become authorized but unissued common shares.

During the year ended December 31, 2024, we repurchased 1,127,255 common shares for an aggregate purchase price of $15.0 million, or an average of approximately $13.31 per share. As of December 31, 2024, $131.0 million of common shares remained available for repurchase under this program.

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The timing, manner, price and amount of any repurchases will be determined by us in our discretion and will depend on a variety of factors, including legal requirements, price, liquidity and economic considerations and market conditions. The program does not require us to repurchase any specific number of common shares. The program does not have an expiration date and may be suspended, modified or discontinued at any time.

Preferred Share Repurchase Program

On February 17, 2023, our board of trustees authorized a share repurchase program of up to $100.0 million of preferred shares. Under the terms of the program, we may repurchase up to an aggregate of $100.0 million of our 6.375% Series E Cumulative Redeemable Preferred Shares, 6.30% Series F Cumulative Redeemable Preferred Shares, 6.375% Series G Cumulative Redeemable Preferred Shares and 5.70% Series H Cumulative Redeemable Preferred Shares from time to time in transactions on the open market or by private agreement.

During the year ended December 31, 2024, no preferred shares were repurchased under this program. As of December 31, 2024, $84.2 million of preferred shares remained available for repurchase under this program.

The timing, manner, price and amount of any repurchases will be determined by us in our discretion and will depend on a variety of factors, including legal requirements, price, liquidity and economic considerations, and market conditions. The program does not require us to repurchase any specific number of preferred shares. The program does not have an expiration date and may be suspended, modified or discontinued at any time.

Inflation

We rely on the performance of the hotels to increase revenues to keep pace with inflation. Generally, our hotel operators possess the ability to adjust room rates daily, except for group or corporate rates contractually committed to in advance, although competitive pressures may limit the ability of our operators to raise rates faster than inflation or even at the same rate.

Seasonality

For discussion on the seasonality of our hotels' operations, see Part I, Item 1 of this Annual Report on Form 10-K.

Derivative Instruments

In the normal course of business, we are exposed to the effects of interest rate changes. We may enter into derivative instruments including interest rate swaps, caps and collars to manage or hedge interest rate risk. Derivative instruments are subject to fair value reporting at each reporting date and the increase or decrease in fair value is recorded in net income (loss) or accumulated other comprehensive income (loss), based on the applicable hedge accounting guidance. Derivatives expose the Company to credit risk in the event of non-performance by the counter parties under the terms of the interest rate hedge agreements. We believe we minimize the credit risk by transacting with major credit-worthy financial institutions.

As of December 31, 2024, we have interest rate swap agreements with an aggregate notional amount of $855.0 million to hedge variable interest rates on our unsecured term loans and a mortgage loan. We have designated these pay-fixed, receive-floating interest rate swap derivatives as cash flow hedges. For a further discussion of our derivative instruments see Note 5. Debt, to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.