# EDGAR Filing Document

**Accession Number:** 0001474098
**File Stem:** 0001474098-23-000095
**Filing Date:** 2023-3
**Character Count:** 36254
**Document Hash:** 9e3cb78842ed4db8c1a82fcc4b5374d1
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001474098-23-000095.hdr.sgml**: 20230331

**ACCESSION NUMBER**: 0001474098-23-000095

**CONFORMED SUBMISSION TYPE**: ARS

**PUBLIC DOCUMENT COUNT**: 1

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230331

**DATE AS OF CHANGE**: 20230331

**EFFECTIVENESS DATE**: 20230331

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Pebblebrook Hotel Trust
- **CENTRAL INDEX KEY:** 0001474098
- **STANDARD INDUSTRIAL CLASSIFICATION:** REAL ESTATE INVESTMENT TRUSTS [6798]
- **IRS NUMBER:** 271055421
- **STATE OF INCORPORATION:** MD
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** ARS
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-34571
- **FILM NUMBER:** 23783369

**BUSINESS ADDRESS:**
- **STREET 1:** 4747 BETHESDA AVENUE
- **STREET 2:** SUITE 1100
- **CITY:** BETHESDA
- **STATE:** MD
- **ZIP:** 20814
- **BUSINESS PHONE:** 240-507-1300

**MAIL ADDRESS:**
- **STREET 1:** 4747 BETHESDA AVENUE
- **STREET 2:** SUITE 1100
- **CITY:** BETHESDA
- **STATE:** MD
- **ZIP:** 20814

### Attached PDF Documents

**Attachment 1:** `a2022annualreportfinalwdes.pdf`

![img-0.jpeg](img-0.jpeg)

2022 Annual Report

# Property Locations

pebblebrook
HOTEL TRUST

![img-1.jpeg](img-1.jpeg)

Boston, MA

Hyatt Regency Boston Harbor
Revere Hotel Boston Common
The Liberty, a Luxury Collection Hotel, Boston
The Westin Copley Place, Boston
W Boston

Chicago, IL

Hotel Chicago Downtown, Autograph Collection
The Westin Michigan Avenue Chicago

Los Angeles, CA

Chamberlain West Hollywood Hotel
Hotel Palomar Los Angeles Beverly Hills
Hotel Ziggy
Le Méridien Delfina Santa Monica
Le Parc Suite Hotel
Mondrian Los Angeles
Montrose West Hollywood
Viceroy Santa Monica Hotel
W Los Angeles - West Beverly Hills

Newport, RI

Newport Harbor Island Resort

Portland, OR

Skamania Lodge
The Hotel Zags
The Nines, a Luxury Collection Hotel, Portland

San Diego, CA

Embassy Suites San Diego Bay - Downtown
Estancia La Jolla Hotel & Spa
Hilton San Diego Gaslamp Quarter
L'Auberge Del Mar
Paradise Point Resort & Spa
San Diego Mission Bay Resort
Solamar Hotel
The Westin San Diego Gaslamp Quarter

San Francisco, CA

Argonaut Hotel
Chaminade Resort & Spa
Harbor Court Hotel San Francisco
Hotel Zelos San Francisco
Hotel Zephyr Fisherman's Wharf
Hotel Zeppelin San Francisco
Hotel Zetta San Francisco
Hotel Zoe Fisherman's Wharf
1 Hotel San Francisco

Seattle, WA

Hotel Monaco Seattle
Hotel Vintage Seattle

Southeast

Hotel Colonnade Coral Gables, Autograph Collection
Inn on Fifth
Jekyll Island Club Resort
LaPlaya Beach Resort & Club
Margaritaville Hollywood Beach Resort
Southernmost Beach Resort
The Marker Key West Harbor Resort

Washington, DC

George Hotel
Hotel Monaco Washington DC
Hotel Zena Washington DC
Viceroy Washington DC

## TO OUR FELLOW SHAREHOLDERS

2022 was a year of significant progress on our road to recovery following the pandemic. Same-Property Total Revenues increased by 65% to 2021, recovering to 93% vs. 2019. Same-Property Hotel EBITDA climbed by 123% from 2021 and recovered to 84% vs. 2019. The performance of our hotels in our urban markets was the primary driver behind last year's recovery, just as the resorts were the primary driver behind our recovery in 2021. While leisure travel was robust throughout the year, including returning to the cities, business travel, both transient and group, accelerated late in the first quarter throughout our urban markets following Omicron's early year surge. San Diego, Boston, and Los Angeles lead the way. Our average daily rates strengthened as the year progressed, evident by the very substantial rate premiums compared to 2019 throughout our resorts. On the labor side, our hotel operating teams were finally able to hire desperately needed hotel-level employees, successfully filling open hourly and managerial positions throughout our portfolio. Adding this staff is critical to supporting the increased hotel demand we expect in 2023 and beyond as we get past the lingering effects of the pandemic.

On the investment side, in a very challenging transaction market, we successfully sold four hotels - two in San Francisco, one in Portland and one in Philadelphia, generating $260.9 million of proceeds. These proceeds were reallocated into two leisure-focused resorts. We acquired the Inn on Fifth in May for $156 million. This luxury property is in excellent condition and is extremely well located in the heart of charming Old Naples, one of the country's most exclusive and wealthy communities. In June, we acquired Gurney's Newport Resort & Marina, an irreplaceable ten-acre resort located on historic Goat Island in world-famous Newport, Rhode Island, for $174 million. This independent waterfront resort, now known as Newport Harbor Island Resort, boasts 360-degree unobstructed water views of Narragansett Bay and Newport Harbor. We plan to redevelop and dramatically upgrade Newport Harbor Island Resort over the next two years, with improvements already underway. Since 2021, we've completed $570 million of dispositions in urban markets and acquired $802 million of resorts and leisure-oriented properties. This very substantial recycling of properties has allowed us to increase the guest segmentation across our portfolio to a more even balance between leisure and business-oriented travelers, lowering overall risk in our portfolio.

In late September 2022, Hurricane Irma slammed into Naples and unfortunately caused significant damage to our best-performing and highest EBITDA generating property - the 189-room LaPlaya Beach Resort & Club ('LaPlaya'), a beachfront luxury resort and membership club in Naples, Florida. As a result, we were forced to close the property to complete significant remediation, repair and rebuilding work. We have made tremendous progress and reopened portions of the resort in March for guests, though guest amenities and services are still limited. We anticipate these amenities and services will be restored over the coming months, with a complete restoration of LaPlaya by late 2023. Outside of the cost of our insurance deductibles, we expect that the cost to

restore LaPlaya, and the lost business income during this period, will be fully reimbursed by our existing insurance programs.

On the capital markets and balance sheet side of our business, in October 2022, we successfully refinanced and extended $2 billion of credit facilities and term loans with our bank group, which is led by Bank of America, Wells Fargo, PNC, Truist Bank, US Bank, Capital One and Raymond James. This broad-based leadership group highlights the importance of our long-term relationships with our bank group, and the strong support and confidence that our banks have with our Company. We have no meaningful debt maturities until 2024. Over the last few years, we have locked approximately 75% of our debt at fixed rates, which has helped reduce our weighted average cost of debt, which was 3.5%, when we reported our 2022 results. This hedging strategy removes significant risk and cost from higher rates. This has clearly been an advantage for us in this recent rising interest rate environment.

While we are very disappointed with the significant decline in our share price during the last year, we took advantage of this opportunity by repurchasing 5.5 million common shares, representing just over 4% of our outstanding shares, at a weighted average share price of $15.12, which is an approximate 50% discount to our most recent estimate of our Company's net asset value. In addition, taking advantage of a similar opportunity with our preferred shares, we repurchased 1.0 million shares of our Series H preferred shares at a 36% discount, or $16.00 per share compared with the $25.00 liquidation preference value of the shares.

To add future organic growth for the Company, we continued our strategic portfolio redevelopment program by reinvesting $108.4 million in 2022. A significant portion of this investment is expected to generate an attractive 10% or better cash-on-cash return when these assets stabilize over the next few years. Our major projects in 2022 included the $28 million transformation of Hotel Vitale into the luxury eco-focused 1 Hotel San Francisco, which offers nature-inspired design and environmentally focused services and aesthetics throughout the public areas as well as our guest rooms and suites. This sustainability-focused luxury hotel with incredible views overlooking the Bay Bridge and iconic Ferry Building opened in June 2022 to rave reviews by the travel media and hotel guests, and its performance continues to ramp up as we introduce new guests to this special property. We also completed the conversion of Grafton on Sunset in West Hollywood to Hotel Ziggy. Hotel Ziggy represents the eighth member of the Unofficial Z Collection, our proprietary brand of individually curated, unique urban lifestyle hotels. We encourage our shareholders to experience these fantastic, redeveloped hotels firsthand the next time they travel to San Francisco or West Hollywood.

For 2023, we plan to invest approximately $150 million into our portfolio, highlighted by several major redevelopment and expansion projects such as the addition of tree houses, luxury

glamping units and cabins and villas at Skamania Lodge, the conversion of Solamar Hotel in San Diego into a Margaritaville, the transformation of Hilton Gaslamp San Diego into a lifestyle hotel, the dramatic restoration and upgrading of the historic Jekyll Island Club Resort, restoring the luxury Viceroy Santa Monica to its iconic place as Santa Monica's leading luxury lifestyle hotel, substantially upgrading and repositioning the recently purchased Estancia La Jolla, and finally, fully renovating and upgrading the four private guesthouses at Southernmost Resort Key West, two of which we acquired in late 2021. We're excited about these upcoming projects and the improved performance and outsized growth these projects will drive for our Company in future years.

Curator Hotel & Resort Collection, our recently founded distinct collection of hand-selected hotels and resorts participating in best-in-class operating agreements, services, and technology, grew to almost 100 member hotels in 2022. This is great progress for a company that is just two years old. We also negotiated and now have over 100 preferred operating agreements and 85 vendor relationships that provide value through lower costs and better services to Curator member hotels, including our own independent and small brand hotels. We are excited about additional growth opportunities for Curator in 2023 and beyond.

This was the fourth year of our formalized corporate Environmental, Social, and Governance ('ESG') program. Most notably, we're committed to long-term environmental targets, including a 35% reduction target for GHG emissions intensity by 2030. We remain committed to environmental protection, awareness, and reducing greenhouse gas emissions. As part of this focus, we became an investor in Fifth Wall's Climate Fund, which targets new technology in the real estate industry to reduce carbon emissions and other initiatives. This $10 million investment commitment has also provided us with new opportunities to reduce GHG emissions at our properties through collaboration with Fifth Wall and their research team.

We also progressed with our Racial Equity & Inclusion Team ('REIT') that we formed in 2021 to ensure that we foster an inclusive work environment and identify opportunities for improvement. The REIT is making strides in four areas: development, education, recruitment, and reporting. We look forward to updating you on our progress toward expanding equity and inclusion for our corporate and hotel-level associates.

Shifting to 2023, demand and operating trends have generally been in line with expectations, excluding the impact of the severe storms we experienced this winter and in early spring. Overall demand trends are improving, but we remain wary of widespread concerns about a slowing or recessionary macro economy that would serve as a headwind to our ongoing recovery. The economic environment continues to remain challenging to navigate. As of the end of the first quarter, we have yet to see any material impact from the changing economic environment on our hotel fundamentals despite the layoffs across the tech and

banking sectors. Group, business transient, convention calendars, and international inbound travel continue to recover, and leisure demand remains healthy. As we progress into 2023, we continue to market additional hotels for sale. If we continue to be successful with sales and to the extent the macro economy and our underlying lodging business continue to recover, we may use net sales proceeds to reduce our leverage and for additional common and preferred share repurchases to create value for our existing shareholders.

We continue to stay true to our mission and vision for Pebblebrook, even in the most trying times, by celebrating the hard work and collaboration of our hotel operators and their property teams, who continue to excel. On March 13, 2023, we honored the leadership teams at our properties who exceeded expectations this past year with our 11th Annual Pebby Awards. The Liberty, a Luxury Collection Hotel in Boston, won Best Picture for the second year in a row. Our Best Director Award was shared between Paradise Point Resort and Spa and the W Boston / Westin Copley Place jointly managed properties. Additional Pebby award winners are celebrated on our website and social media platforms. We thank our hotel teams for their hard work and creativity and celebrate their many successes!

As we move forward in 2023, the many properties redeveloped and repositioned in the last few years, along with our current projects, combined with the substantial transformation of our portfolio to a better-balanced business and leisure mix, position us exceedingly well to increase market share across our portfolio, which will drive both increased cash flow and the value of Pebblebrook over the next few years. We thank you for your continuing support and confidence in our team.

Sincerely,

Chief Executive Officer

# **UNITED STATES**
**SECURITIES AND EXCHANGE COMMISSION**

Washington, D.C. 20549

# **FORM 10-K**

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022

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 001-34571

# **PEBBLEBROOK HOTEL TRUST**

(Exact Name of Registrant as Specified in Its Charter)

Maryland

(State of Incorporation or Organization)

27-1055421

(I.R.S. Employer Identification No.)

4747 Bethesda Avenue, Suite 1100, Bethesda, Maryland

(Address of Principal Executive Offices)

20814

(Zip Code)

(240) 507-1300

(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 Shares, $0.01 par value per share | PEB | New York Stock Exchange |
| Series E Cumulative Redeemable Preferred Shares, $0.01 par value | PEB-PE | New York Stock Exchange |
| Series F Cumulative Redeemable Preferred Shares, $0.01 par value | PEB-PF | New York Stock Exchange |
| Series G Cumulative Redeemable Preferred Shares, $0.01 par value | PEB-PG | New York Stock Exchange |
| Series H Cumulative Redeemable Preferred Shares, $0.01 par value | PEB-PH | New York Stock Exchange |

# **Securities registered pursuant to Section 12(g) of the Act: None**

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☑ Yes ☐ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☑ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

| 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 262(b)) by the registered public accounting firm that prepared or issued its audit report.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑

The aggregate market value of the 129,544,221 common shares of beneficial interest of the registrant held by non-affiliates of the registrant was $2.1 billion based on the closing sale price on the New York Stock Exchange for such common shares of beneficial interest as of June 30, 2022.

The number of common shares of beneficial interest outstanding as of February 16, 2023 was 125,982,790.

#### **DOCUMENTS INCORPORATED BY REFERENCE**

Portions of the registrant’s Definitive Proxy Statement for its 2023 Annual Meeting of Shareholders (to be filed with the Securities and Exchange Commission on or before April 30, 2023) are incorporated by reference into this Annual Report on Form 10-K in response to Part III, Items 10, 11, 12, 13 and 14.

# Pebblebrook Hotel Trust

# TABLE OF CONTENTS

| Item No. | Page |
| --- | --- |
| Forward-Looking Statements | 4 |
| PART I |  |
| 1. Business | 5 |
| 1A. Risk Factors | 9 |
| 1B. Unresolved Staff Comments | 32 |
| 2. Properties | 32 |
| 3. Legal Proceedings | 35 |
| 4. Mine Safety Disclosures | 35 |
| PART II |  |
| 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities | 36 |
| 6. [Reserved] | 38 |
| 7. Management's Discussion and Analysis of Financial Condition and Results of Operations | 38 |
| 7A. Quantitative and Qualitative Disclosures About Market Risk | 46 |
| 8. Financial Statements and Supplementary Data | 46 |
| 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | 46 |
| 9A. Controls and Procedures | 46 |
| 9B. Other Information | 47 |
| 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 47 |
| PART III |  |
| 10. Trustees, Executive Officers and Corporate Governance | 48 |
| 11. Executive Compensation | 48 |
| 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters | 48 |
| 13. Certain Relationships and Related Transactions, and Trustee Independence | 48 |
| 14. Principal Accountant Fees and Services | 48 |
| PART IV |  |
| 15. Exhibits and Financial Statement Schedules | 49 |

3

## FORWARD-LOOKING STATEMENTS

This report, together with other statements and information publicly disseminated by us, contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), 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", "will", "should", "potential", "could", "seek", "assume", "forecast", "believe", "expect", "intend", "anticipate", "estimate", "project" 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, estimated costs and durations of renovation or restoration projects, estimated insurance recoveries, our ability to realize deferred tax assets and expected liquidity needs and sources (including capital expenditures and our 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. These factors include, but are not limited to, the following:

- the COVID-19 pandemic has had, and may continue to have, a significant negative impact on our financial condition and operations, which impacts our ability to obtain acceptable financing to fund resulting reductions in cash from operations. The current and uncertain future impact of the COVID-19 pandemic, including its effect on the ability or desire of people to travel, is expected to continue to negatively affect our results, operations, outlooks, plans, goals, growth, reputation, cash flows, liquidity and share price;
- as a result of the COVID-19 pandemic, we suspended operations at most of our hotels and resorts. Operations have recommenced and are improving. However, if continued improvement is interrupted, we may become out of compliance with maintenance covenants in certain of our debt facilities;
- world events impacting the ability or desire of people to travel may lead to a decline in demand for hotels;
- risks associated with the hotel industry, including competition, changes in visa and other travel policies by the U.S. government making it less convenient, more difficult or less desirable for international travelers to enter the U.S., increases in employment costs, energy costs and other operating costs, or decreases in demand caused by events beyond our control, including, without limitation, actual or threatened terrorist attacks, natural disasters, cyber attacks, any type of flu or disease-related pandemic, or downturns in general and local economic conditions;
- the availability and terms of financing and capital and the general volatility of securities markets;
- our dependence on third-party managers of our hotels, including our inability to implement strategic business decisions directly;
- risks associated with the U.S. and global economies, the cyclical nature of hotel properties and the real estate industry, including environmental contamination and costs of complying with new or existing laws, including the Americans with Disabilities Act and similar laws;
- interest rate increases;
- our possible failure to qualify as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended ("the Code") and the risk of changes in laws affecting REITs;
- the timing and availability of potential hotel acquisitions, our ability to identify and complete hotel acquisitions and our ability to complete hotel dispositions in accordance with our business strategy;
- the possibility of uninsured losses;
- risks associated with redevelopment and repositioning projects, including delays and cost overruns; and
- the other factors discussed under Risk Factors in Part I, Item 1A of this Annual Report on Form 10-K.

Accordingly, there is no assurance that our expectations will be realized. Except as otherwise required by the federal securities laws, we disclaim any obligations 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.

The "Company", "we" or "us" mean Pebblebrook Hotel Trust, a Maryland real estate investment trust, and one or more of its subsidiaries (including Pebblebrook Hotel, L.P., our operating partnership), or, as the context may require, Pebblebrook Hotel Trust only or Pebblebrook Hotel, L.P. only.

4

PART I

Item 1. Business.

General

Pebblebrook Hotel Trust is an internally managed hotel investment company, formed as a Maryland real estate investment trust in October 2009 to opportunistically acquire and invest in hotel properties located primarily in major United States cities and resort properties located near our primary target urban markets and select destination resort markets, with an emphasis on major gateway coastal markets. As of December 31, 2022, the Company owned interest in 51 hotels with a total of 12,756 guest rooms.

Substantially all of the Company's assets are held by, and all of the Company's operations are conducted through, Pebblebrook Hotel, L.P. (our "Operating Partnership"). The Company is the sole general partner of the Operating Partnership. At December 31, 2022, the Company owned 99.3% of the common limited partnership units issued by the Operating Partnership ("common units"). The remaining 0.7% of the common units are owned by the other limited partners of the Operating Partnership. For the Company to maintain its qualification as a REIT under the Code, it cannot operate the hotels it owns. Therefore, the Operating Partnership and its subsidiaries lease the hotel properties to subsidiaries of Pebblebrook Hotel Lessee, Inc. (collectively with its subsidiaries, "PHL"), our taxable REIT subsidiary ("TRS"), which in turn engage third-party eligible independent contractors to manage the hotels. PHL is consolidated into the Company's financial statements.

In March 2020, the World Health Organization declared the novel coronavirus ("COVID-19") to be a global pandemic and the virus spread throughout the United States and the world. As a result of this pandemic and subsequent government mandates, health official recommendations, corporate policy changes and individuals' responses, hotel demand dramatically declined. Demand has since improved as a result of an increase in vaccinations and corresponding lifting of governmental restrictions and recommendations. See further discussion in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II of this Annual Report on Form 10-K.

Business Objectives and Strategies

Acquisitions/Investments

We invest in hotel properties located primarily within major United States cities and resort properties located near our primary target urban markets and select destination resort markets, with an emphasis on major gateway coastal markets and leisure destinations. Our hotel properties are located in Boston, Massachusetts; Chicago, Illinois; Hollywood, Florida; Jekyll Island, Georgia; Key West, Florida; Los Angeles, California (Beverly Hills, Santa Monica, and West Hollywood); Miami (Coral Gables), Florida; Naples, Florida; Newport, Rhode Island; Portland, Oregon; San Diego, California; San Francisco, California; Santa Cruz, California; Seattle, Washington; Stevenson, Washington; and Washington, D.C. We believe these markets have barriers-to-entry and provide diverse sources of meeting and room night demand generators. In addition, we also opportunistically target investments in resort properties located near our primary urban target markets and select destination resort markets such as southern Florida and southern California. We focus on both branded and independent full-service hotels in the "upper-upscale" segment of the lodging industry. The full-service hotels on which we focus our investment activity generally have one or more restaurants, lounges, meeting facilities and other amenities, as well as high levels of customer service. We believe that our target markets, including the major gateway markets and leisure destinations, are characterized by barriers-to-entry and that room-night demand and average daily rate ("ADR") growth of these types of hotels and resorts will outperform the national average over the long-term, as they have in past cyclical recoveries and growth periods.

We perform and utilize extensive research to evaluate any target market and property, including a detailed review of the long-term economic outlook, trends in local demand generators, competitive environment, property systems and physical condition and property financial performance. Specific acquisition criteria may include, but are not limited to, the following:

- premier locations, facilities and other competitive advantages that are not easily replicated;
- barriers-to-entry in the market, such as scarcity of development sites, regulatory hurdles, high per-room development costs and long lead times for new development;
- acquisition prices at a discount to replacement cost;
- properties not subject to long-term management contracts with hotel management companies;
- potential return on investment initiatives, including redevelopment, rebranding, redesign, expansion and change of management;
- opportunities to implement value-added operational improvements; and
- strong demand growth characteristics supported by favorable demographic indicators.

5

We believe that upper-upscale, full-service hotels and resorts and upscale hotels located in major U.S. urban, convention and drive-to and destination resort markets are likely to generate some of the most favorable risk-adjusted returns in the lodging industry over the long-term. As discussed in *Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations* in Part II of this Annual Report on Form 10-K, the COVID-19 pandemic has materially disrupted hotel occupancy and daily rates, particularly in urban markets in which we have invested. Despite the dramatic decline in demand, revenue and operating income as a result of COVID-19 as well as uncertainty related to international travel restrictions and political factors, the successful vaccination distribution and effective therapeutics throughout the U.S. and the world have gradually allowed for a steady return to normalcy. We believe that portfolio diversification will allow us to benefit from growth in various customer segments, including business transient, leisure transient and group and convention room-night demand. We believe that hotel supply growth, following the delivery of current supply construction, will decline from the historical growth rate prior to the pandemic for the foreseeable future.

We generally seek to enter into flexible management contracts, when possible, with third-party hotel management companies for the operation of our hotels and resorts that provide us with the ability to replace operators and/or reposition properties, to the extent that we determine to do so and align our operators with our objective of maximizing our return on investment. In addition, we believe that flexible management contracts facilitate the sale of hotels, and we may seek to sell hotels opportunistically if we believe sales proceeds may be used to repay debt or invest in other hotel properties that offer more attractive risk-adjusted returns.

We may engage in full or partial redevelopment, renovation and repositioning of certain properties, as we seek to maximize the financial performance of our hotels and resorts. In addition, we may acquire properties that require significant capital improvement, renovation or refurbishment. We also may acquire hotel and resort properties that we believe would benefit from significant redevelopment or expansion, including, for example, adding guest rooms, meeting facilities or other amenities.

We may consider acquiring outstanding debt secured by a hotel or resort property from lenders and investors if we believe the returns will be attractive or if we can foreclose on or acquire ownership of the property in the near-term. In connection with our acquisitions, generally we do not, but we may choose to opportunistically, originate or purchase any debt financing or preferred equity. Additionally, we have co-invested, and may in the future co-invest, in hotels and debt with third parties through partnerships, joint ventures or other entities, acquiring non-controlling interests in or sharing responsibility for a property, partnership, joint venture or other entity.

### Asset Management

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. We believe we can add significant value to our portfolio through our intensive asset management strategies. Our executives and asset management team have significant experience in hotel operations and creating and implementing innovative asset management initiatives.

We have developed strategic short- and long-term capital investment plans to enhance our hotels' profitability through the strategic use of, among others, expansions, additions, renovations, technology upgrades and modifications, and energy efficiency improvements. We are also focused on revenue and expense management at our properties. We work closely with our hotel operators to evaluate optimal market mix and pricing strategies, ensure quality staffing and appropriate management focus, implement best practices to minimize expenses and aggressively monitor and evaluate our hotels' operations and performance.

### Curator

In 2020, we and five industry-leading hotel operators jointly launched Curator Hotel & Resort Collection, a collection of small brands and independent lifestyle hotels and resorts worldwide. Curator's distinct owner-centric platform offers an alternative for independent lifestyle hotels seeking to strengthen their performance, providing its members with best-in-class agreements, services and technology, while allowing members to retain their unique identities. We own a majority of the equity interests in Curator, which is consolidated in our consolidated financial statements.

### Financing Strategies

Over time, we intend to finance our long-term growth with issuances of common and preferred equity securities and debt financings having staggered maturities. Our debt includes senior unsecured credit facilities, term loans, convertible debt, unsecured notes and mortgage debt secured by our hotel properties, and may in the future include other unsecured debt.

6