Company: DRH-PA
Filing Date: 2025-05-02
Form Type: 10-Q
Source: 0001298946-25-000049
Chunk: 105

Company: DiamondRock Hospitality Co
Filing Date: 2025-05-02
Form: 10-Q
Item: Part I, Item 2
Chunk 105
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5. However, the effect of inflation on interest rates could increase our financing costs over time, either through near-term borrowings under our Credit Agreement or refinancing of our existing borrowings that may incur higher interest expenses related to the issuance of new debt. For more information, see “Risk Factors—Risks Related to our Debt and Financing— Future debt service obligations may adversely affect our operating results, require us to liquidate our properties, jeopardize our ability to make cash distributions necessary to 

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maintain our tax status as a REIT and limit our ability to make distributions to our stockholders.” in our Annual Report on Form 10-K for the year ended December 31, 2024.

In addition, historically, during periods of increasing interest rates, real estate valuations have generally decreased as a result of rising capitalization rates, which tend to be positively correlated with interest rates. Consequently, prolonged periods of higher interest rates may negatively impact the valuation of our portfolio and result in the decline of the quoted trading price of our securities and market capitalization, as well as lower sales proceeds from future dispositions.

We are subject to risks associated with our ongoing need for renovations and capital improvements as well as financing for such expenditures.

In order to remain competitive, our hotels have an ongoing need for renovations and other capital improvements, including replacements, from time to time, of furniture, fixtures and equipment. These capital improvements may give rise to the following risks:

•construction cost overruns and delays, including those caused by supply chain disruptions, uncertainty around tariffs or inflationary price increases;

•increased costs resulting from proposed or enacted tariffs on imported goods such as construction materials, furniture, fixtures, and equipment;

•a possible shortage of available cash to fund capital improvements and the related possibility that financing for these capital improvements may not be available to us on affordable terms;

•the renovation investment failing to produce the returns on investment that we expect;

•disruptions in the operations of the hotel as well as in demand for the hotel while capital improvements are underway; and

•disputes with franchisors/hotel managers regarding compliance with relevant franchise/management agreements.

The costs of these capital improvements or profit displacements during the completion of these capital improvements could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our stockholders.

In addition, we may not be able to fund capital improvements or acquisitions solely from cash provided from our operating activities because we generally must distribute at least 90%