ANNUAL
REPORT
2019
T O OUR SH A R EHOL DER S:
Given the business initiatives undertaken, and decisions made
by Condor and the Board of Directors during 2019, I did not
expect to be writing this communication to shareholders. In
the second half of 2018 we decided and announced that
Condor would be exploring strategic alternatives and then, after
completing an extensive process with our investment bankers,
we signed a contract in July of 2019 for shareholders to sell the
company in a merger transaction that we concluded was very
favorable and that was expected to close before the end of the
calendar year. Although the closing was subsequently extended
into the first quarter of 2020, closing the merger would mean
that there would not be an annual report and communication
to shareholders. There were significant changes subsequent to
year end unfortunately that evolved rapidly, including a merger
transaction that did not close. Considerable time was spent
attempting to either cause a closing of the original merger
transaction or to negotiate a revised transaction that we could
conclude was in the best interest of shareholders. In September
2020 we terminated the original merger agreement giving rise to
a termination payment right which we then negotiated with the
original buyer for Condor to receive $7 million in a settlement as
announced in October.
The year 2019 was a year of intended transition for Condor due to
the merger contract. As part of the expected transaction, in order
to fulfill our contractual obligations and to make the company
more attractive to the buyer, Condor terminated or did not renew
hotel management contracts on 7 of our 15 hotels. Changing
management companies can be disruptive and affect operations
due to personnel departures, accruals requiring recognition,
transition in marketing and revenue management oversight, just
to identify a few of the challenges. We undertook making these
hotel management company changes on almost half of our
hotels in one calendar year and knowingly absorbed the negative
affects as part of the process of positioning the company for the
merger closing. Our same store hotel operating margins declined
in 2019 to 36.8% from 37.8% the previous year with the bulk
of the decline occurring in the last two quarters with margins
of approximately 35% and 32% in the third and fourth quarters,
respectively, compared to approximately 40% operating margins
in the first two quarters1. While some of the margins decrease
in 2019 compared to 2018 of 100 basis points was caused by
inflationary pressures during the year, as evidenced by our public
select service hotel REIT peer group experiencing 40 to 100 basis
point margins declines, we estimate that more than half of our
margins decline was caused by the hotel management company
changes disruption.
including an occupancy level of approximately 80% for the year.
With already high occupancy levels across the country, and
especially in our portfolio, and the addition of significant new
hotel room supply in the industry causing rate competition, the
industry lost pricing power and our portfolio was not immune to
these conditions. Our 15 hotels revenue was essentially flat with
same store RevPAR increasing only .1% for the year comparing
favorably to the national average change of negative .5%
RevPAR for upscale hotels and negative .2% Re vPAR for
upper midscale hotels as reported by Smith Travel Research.
Given the industry conditions and the disruption encountered
from the hotel management company changes our revenues
were very satisfactory when com paring to the industry and
peer group RevPAR change changes year over year.
In retrospect, so much of 2019 was tied to our process of moving
the company forward for a merger closing. Examples of this are
the previously mentioned hotel management company changes,
the suspension of dividends as required by the merger contract,
capital improvements to comply with contract requirements,
significant legal expenses to negotiate contracts and deliver
required closing documentation, franchise expenses for PIP’s
required for the transaction and the enormous amount of time
of the Condor team which is something very difficult to quantify.
Subsequent to year end 2019, late in the first quarter of 2020
when the merger did not close, and the industry was affected
by unprecedented demand collapse connected to the COVID 19
pandemic, our focus shifted immediately to portfolio stabilization
and survival. Fortunately our investment strategy that we followed
in our portfolio acquisitions resulted in our portfolio locations and
characteristics allowing us to capture more than our fair share
of the tepid demand and over the second and third quarters
generally outperform. The mission then became continuing to
drive outperformance in order to maximize valuation recovery over
time and therefore increase shareholder value.
I would like to once again extend my gratitude to the Condor
team, our Board, the management company alliance partners,
advisors, lenders, hospitality brokers, consultants, lawyers and
accountants that contributed significantly to the 2019 results and
accomplishments.
The year 2019 was also challenging in the industry for revenue
growth. Our portfolio achieved very impressive results in 2018
J. William Blackham
President & CEO
1 Please see the Regulation G reconciliations at the end of this Annual Report
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-K
(Mark one)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2019
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: 001-34087
Condor Hospitality Trust, Inc.
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of
incorporation or organization)
1800 West Pasewalk Avenue, Ste. 200, Norfolk, NE
(Address of principal executive offices)
52-1889548
(I.R.S. Employer
Identification No.)
68701
(Zip Code)
(301) 861-3305
(Registrant’s telephone number, including area code)
Title of each class
Common Stock, $.01 par value per share
Trading Symbol
CDOR
Name of each exchange on which registered
NYSE American
Securities registered pursuant to Section 12(b) of the Act:
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 [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes [ ] No [X]
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 [X] 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 [X] 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 [ ]
Non-accelerated filer [X]
Accelerated filer [ ]
Smaller reporting company [X]
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 [X]
As of June 30, 2019 the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $49.6 million based
on the price at which the common stock was last sold on that date as reported on the NYSE American. At March 25, 2020, there were 11,996,823
shares of the registrant’s common stock outstanding.
Portions of the Registrant’s definitive Proxy Statement for the Registrant’s 2020 Annual Meeting of Stockholders to be filed within 120 days of
the fiscal year ended December 31, 2019, are incorporated into Part III.
DOCUMENTS INCORPORATED BY REFERENCE
[THIS PAGE INTENTIONALLY LEFT BLANK]
TABLE OF CONTENTS
Item No.
1
1A.
1B.
2
3
4
5
6
7
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART I
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
7A.
Quantitative and Qualitative Disclosures about Market Risk
8
9
9A.
9B.
10
11
12
13
14
15
16
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
PART III
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
PART IV
Exhibits and Financial Statement Schedules
Form 10-K Summary
Form 10-K
Report
Page
2
8
23
23
24
24
25
28
29
39
41
83
83
84
85
85
85
86
86
86
N/A
1
FORWARD-LOOKING STATEMENTS
Certain information both included and incorporated by reference in this Form 10-K may contain 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, and as such may involve known and unknown risks, uncertainties,
and other factors which may cause our actual results, performance, or achievements to be materially different from
future results, performance, or achievements expressed or implied by such forward-looking statements. These
forward-looking statements are based on assumptions that management has made in light of experience in the
business in which we operate, as well as management’s perceptions of historical trends, current conditions, expected
future developments, and other factors believed to be appropriate under the circumstances. These statements are not
guarantees of performance or results. They involve risks, uncertainties (some of which are beyond our control), and
assumptions. Management believes that these forward-looking statements are based on reasonable assumptions.
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,” “expect,” “anticipate,”
“estimate,” “believe,” “intend,” or “project” or the negative thereof or other variations thereon or comparable
terminology. Factors which could have a material adverse effect on our operations and future prospects include, but
are not limited to, changes in economic conditions generally and the real estate market specifically,
legislative/regulatory changes (including changes to laws governing the taxation of real estate investment trusts),
availability of capital, risks associated with debt financing, interest rates, competition, supply and demand for hotel
rooms in our current and proposed market areas, policies and guidelines applicable to real estate investment trusts,
risks related to uncertainty and disruption in global economic markets as a result of COVID-19 (commonly referred
to as the coronavirus), and other risks and uncertainties described herein, and in our filings with the Securities and
Exchange Commission (“SEC”) from time to time. These risks and uncertainties should be considered in evaluating
any forward-looking statements contained or incorporated by reference herein. We caution readers not to place
undue reliance on any forward-looking statements included in this report which speak only as of the date of this
report.
ITEM 1. BUSINESS
PART I
References to the “Company”, “we,” “our,” and “us,” refer to Condor Hospitality Trust, Inc., including, as the
context requires, its direct and indirect subsidiaries. The descriptions of the Company in this Part I are as of the
filing of this Form 10-K on March 31, 2020.
On July 19, 2019, the Company, the Company’s operating partnership (the Company and operating partnership, the
“Company Parties”), NHT Operating Partnership, LLC (“NHT Parent”), NHT REIT Merger Sub, LLC (“NHT
Merger Sub”) and NHT Operating Partnership II, LLC (“NHT Merger OP,” and together with NHT Parent and NHT
Merger Sub, the “NHT Parties”), entered into an Agreement and Plan of Merger (as amended from time to time, the
“Merger Agreement”), pursuant to which the NHT Parties agreed to acquire all of the outstanding equity interests of
the Company and the operating partnership by merger (the “Company merger” and the “Partnership merger”,
respectively). If the acquisition is consummated under the terms of the Merger Agreement, the holders of our
common stock would receive in exchange for their shares $11.10 per share, the holders of our Series E preferred
stock would receive in exchange for their shares $10.00 per share, and the holders of the operating partnership
common units of our operating partnership would receive in exchange for their common units $0.21346 per unit,
each without interest and less any applicable withholding taxes.
Closing of the acquisition did not occur on March 23, 2020, the contemplated closing date of the acquisition, and has
not occurred as of the time of this filing. The Company Parties and the NHT Parties are in discussions concerning
potential amendments to restructure the transaction, which will be disclosed if and when such amendments are agreed.
There can be no assurance with respect to the outcome of such discussions, and the Company continues reviewing its
options and reserves all rights and remedies under the Merger Agreement.
The outbreak of the novel coronavirus (COVID-19) has reduced travel and adversely affected the hospitality
industry in general. The actual and threatened spread of coronavirus globally or in the regions in which we operate,
2
or future widespread outbreak of infectious or contagious disease, can continue to reduce national and international
travel in general. The extent to which our business may be affected by the coronavirus will largely depend on
future developments which we cannot accurately predict, and its impact on customer travel, including the duration
of the outbreak, the continued spread and treatment of the coronavirus, and new information and developments that
may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact,
among others. To the extent that travel activity in the U.S. is materially and adversely affected by the coronavirus,
business and financial results of the hospitality industry, and thus our business and financial results, could be
materially and adversely impacted.
In late March 2020, prior to the filing of this report, similar to the conditions affecting the hospitality industry as a
whole, we experienced dramatic occupancy declines at many of our properties which will require us to adjust our
business operations, and will have impact on our operating income and may potentially impact future compliance
with our debt covenants.
Overview
Condor Hospitality Trust, Inc. was incorporated in Virginia on August 23, 1994 and was reincorporated in Maryland
on November 19, 2014. Our common stock began trading on October 30, 1996 and today trades under the symbol
“CDOR” on the NYSE American stock exchange.
The Company is a self-administered real estate investment trust (“REIT”) for federal income tax purposes that
specializes in the investment and ownership of high-quality select-service, limited-service, extended stay, and
compact full service hotels. As of December 31, 2019, the Company owned 15 hotels, representing 1,908 rooms, in
eight states, including one hotel owned through an 80% interest in an unconsolidated joint venture (the “Atlanta
JV”). On February 14, 2020, the Company acquired the remaining 20% ownership interest in the Atlanta JV.
We conduct our business through a traditional umbrella partnership REIT, or UPREIT, in which our hotel properties
are owned by our operating partnership, Condor Hospitality Limited Partnership and its subsidiaries (the “operating
partnership”), for which we serve as general partner. As of December 31, 2019, we owned an approximate 99.9%
ownership interest in the operating partnership. In the future, the operating partnership may issue limited
partnership interests to third parties from time to time in connection with our acquisition of hotel properties or the
raising of capital.
In order for the income from our hotel property investments to constitute “rents from real properties” for purposes of the
gross income tests required by the Internal Revenue Service (“IRS”) for REIT qualification, the income we earn cannot
be derived from the operation of any of our hotels. Therefore, the operating partnership and its subsidiaries lease our
hotel properties to the Company’s wholly owned taxable REIT subsidiary, TRS Leasing, Inc., and its wholly owned
subsidiaries (“the TRS”). The TRS in turn engages third-party eligible independent contractors to manage the hotels.
Our independent management companies are not affiliated with us or our management team. The operating partnership,
the TRS, and their respective subsidiaries are consolidated into the Company’s financial statements.
We are engaged primarily in the business of owning equity interests in hotel properties and therefore our business is
disclosed as one reportable segment. See the consolidated financial statements and notes thereto included in Item 8
of this Annual Report on Form 10-K for certain financial information required in this Item 1.
Mission Statement
Our mission is to provide to our shareholders attractive total returns for the lodging sector through (1) disciplined
investment in high-quality select-service, limited-service, extended stay, and compact full service hotels, and (2)
intensive asset management to achieve enhanced results.
We strive to achieve this mission through the disciplined and efficient execution of the following Core Strategies:
• Acquisition Strategy
• Disposition Strategy
• Asset Management Strategy
3
• Financing Strategy
We understand that we cannot achieve our mission alone and therefore work with the following independent
businesses, who we collectively refer to as Business Partners, in the execution of our mission:
• Franchise Partners
• Hotel Management Company Partners
Core Strategies
Acquisition Strategy
The objective of our acquisition strategy is to enable us to acquire assets that meet our target property characteristics
and investment criteria at attractive valuations. We believe that our existing relationships with owners, operators,
and developers of select-service hotels will provide us with access to certain off-market acquisition opportunities
ahead of other real estate investors. Typically, off-market transactions lead to more attractive valuation outcomes.
Our organizational documents do not limit the types of investments we can make; however, our intent is to execute
the acquisition strategy as detailed herein.
We believe our target property characteristics and investment criteria, coupled with our ability to source off-market
transactions, differentiates us from our peers and will enable us to achieve our mission to obtain attractive returns to
our shareholders.
Hotels purchased in and since 2012 are referred to throughout as “new investment platform” properties while
properties owned prior to 2012 are referred to as “legacy” properties. The Company’s last remaining legacy
property was sold in 2019.
Target Property Characteristics
Our target properties are high-quality select-service, limited-service, extended stay, and compact full service hotels
located primarily in the top 100 Metropolitan Statistical Areas (“MSAs”), with a focus on the top 21 – 60 MSAs.
From time to time, we may acquire assets outside these target MSAs if we are able to acquire the asset at an
attractive valuation and have confidence in the value proposition of the property. If within a top 25 MSA, the asset
will typically be located within an attractive sub- market of the larger MSA. The hotels we will look to acquire will
be franchised under premium flags by brands such as Hilton, Marriott, IHG, and Hyatt and operated by third-party
management companies.
Investment Criteria
We perform thorough due diligence and utilize extensive research to evaluate any target market or property. This
due diligence and research may include, but is not limited to, analyzing the long-term economic outlook of an MSA,
reviewing trends in local lodging demand and supply, assessing property condition and required capital investment,
and understanding historical property financial performance. Specific investment criteria for hotels we are looking
to acquire may include but are not limited to hotels that:
•
•
operate under leading premium franchise brands and possess key attributes such as building design and
décor that is consistent with current generation brand standards;
are located within the top 100 MSAs, in close proximity to multiple demand drivers, including large
corporations, regional hospitals, regional business hubs, recreational travel destinations, significant retail
centers, and military installations, among others;
•
are located within markets that have favorable economic, job growth, and demographic factors;
•
have illustrated an ability to generate stabilized and dependable revenue and net operating income;
• were constructed less than ten years prior to our acquisition or have been recently significantly renovated
to current brand standards, and have significant time (generally ten or more years) remaining on the
existing franchise license;
4
•
•
•
have some value-added growth potential through operating efficiencies, institutional asset management,
repositioning, renovations, or rebranding;
can be acquired at a discount to replacement cost; and/or
can be acquired in off-market transactions.
Select-service hotels typically generate most of their revenue from room rentals, have limited food and beverage
outlets, contain less meeting space, and require fewer employees than traditional full-service hotels. We believe
premium-branded upper-midscale and upscale select-service hotels have the potential to generate attractive risk-
adjusted returns relative to other types of hotels due to their ability to achieve Revenue per Available Room
(“RevPAR”) levels at or close to those achieved by traditional full-service hotels while achieving higher profit
margins due to their more efficient operating model and less volatile cash flows.
Disposition Strategy
In 2019 we completed an approximate ten year process of transitioning our portfolio from economy hotels to high-
quality select-service, limited-service, extended stay, and compact full service hotels. In order to achieve this
objective, we have focused on disposing of legacy assets that do not meet the property characteristics and
investment criteria discussed above. Since January 1, 2009, we have sold 123 hotels, of which 55 have been sold
since January 1, 2015. The value unlocked from asset sales has been redeployed into newer, higher-quality assets
meeting the acquisition strategy discussed above. Just as we carefully evaluate the hotels we plan to acquire, our
asset management team has evaluated the timing and composition of the legacy hotels to be disposed of in a manner
we believe will maximize returns for our shareholders.
Additionally, from time to time, we may undertake the sale of one or more hotels that meet the property
characteristics and investment criteria discussed above. These disposition decisions are the result of a thorough
analysis and typically in response to changes in market conditions, our current or projected return on our investment
in the hotel, or other factors which we deem relevant to the disposition decision.
Asset Management Strategy
Through collaboration with our third-party operators, we seek to maximize value to our shareholders through
improvements to our existing hotels’ operating results. We work toward this goal by constantly monitoring the
performance of each individual hotel and identifying opportunities for value-enhancement through intensive asset
management strategies. We will make recommendations to our third-party operators in all aspects of our hotels
operations, including revenue management, physical design, guest experience, market positioning, and overall
property strategy. Fundamentally, all strategies are focused on growing the revenue of a hotel, controlling expenses,
and/or maximizing the guest experience to drive returns.
We work with our third-party operators to develop short-term and long-term capital investment plans that are
focused on generating positive returns for our shareholders. The capital improvements may involve investments in
expansions, additions, renovations, technology upgrades, and/or energy efficiency improvements.
Additionally, from time to time, we may come to the conclusion that a particular asset may provide greater returns to
our shareholders after an extensive repositioning of the asset in the market. In these instances, capital investment in
a greater amount than typical for an asset may be required to achieve the desired repositioning. These decisions will
be made after a thorough analysis of the property, market conditions, and the potential for a positive return on
investment that exceeds our investment hurdle rates.
Financing Strategy
Our financing strategy is to seek to minimize the cost of our capital in order to maximize the returns generated for
our shareholders. We intend to finance our long-term growth with equity capital raises and debt financings that have
staggered maturities. From time to time, when purchasing hotel properties, we may issue limited partnership
interests in our operating partnership to third parties as full or partial consideration to sellers. Currently, our debt
includes a revolving line of credit secured by certain hotels and mortgages secured by our hotel properties. In the
5
future we plan on using the revolving credit facility, term loans, equity issuances, and mortgage debt financings to
fund future acquisitions as well as for property redevelopments, return on investment initiatives, and working capital
requirements.
Since we are structured as an UPREIT, we may seek to issue limited partnership interest of our operating partnership
for raising capital, or when acquiring hotel assets as full or partial consideration to sellers who may desire to take
advantage of tax deferral on the sale of a hotel or participate in the income, and potential value appreciation, of our
common stock.
Business Partners
Franchise Partners
We believe that in order to achieve our mission we must partner with the right franchisors of quality brands in our
target segments. To this end, we have built strong relationships with many of who we believe are the leading
franchisors of the strongest brands in the segments we target, including Hilton, Marriott, IHG, and Hyatt. The
franchisors provide a variety of benefits and value which include national advertising, marketing programs to
increase brand awareness, personnel training, and centralized reservation systems. We are constantly monitoring
and evaluating the performance of these franchisors and their respective brands so that, when necessary, we can
adapt our franchise partner strategy to maximize returns to our shareholders.
Under our franchise agreements, we are required to pay franchise fees generally between 3.3% and 5.5% of room
revenue, plus additional fees for marketing, central reservation systems, and other franchisor programs and services
that amount to between 2.5% and 6.0% of room revenue. The franchise agreements typically have 10 to 25 year
terms although certain agreements may be terminated by either party on certain anniversary dates specified in the
agreements. Further, each agreement provides for early termination fees in the event the agreement is terminated
before the stated term.
Our 15 hotels owned at December 31, 2019, including the hotel owned through the Atlanta JV, operate under the
following national and independent brands:
Franchise Brand
Number of
Hotels
Number of
Rooms
New Investment Platform Properties:
Aloft (1)
Courtyard by Marriott (1)
Fairfield Inn & Suites (1)
Hampton Inn & Suites (2)
Hilton Garden Inn (2)
Home2 Suites (2)
Hotel Indigo (3)
Residence Inn (1)
SpringHill Suites (1)
TownePlace Suites (1)
Total
2
1
1
1
1
5
1
1
1
1
15
410
120
124
130
100
524
142
120
116
122
1,908
(1) Aloft®, Courtyard by Marriott®, Fairfield Inn & Suites®, Residence Inn®, Springhill Suites®, and TownePlace Suites® are registered
trademarks of Marriott International
(2) Hampton Inn®, Hilton Garden Inn®, and Home2 Suites® are registered trademarks of Hilton Hotels Corporation
(3) Hotel Indigo® is a registered trademark of InterContinental Hotels Group
The franchisor of two of our hotels advised us in February 2019 that both of the hotels had dropped below the
required level for guest satisfaction surveys, and that if the hotels do not achieve compliance, it reserves the right to
elect to terminate the relevant franchise agreements. The Company is actively addressing the matter relating to the
surveys and has plans in place which it believes will resolve these issues.
6
Hotel Management Company Partners
As a REIT, we are not permitted to directly operate any of our hotels. We partner closely with some of who we
believe are the leading hotel management companies in order to operate our hotels with the ultimate objective of
improving same-store hotel performance throughout our portfolio. Each management agreement provides for a set
term and is subject to early termination upon the occurrence of defaults and certain other events. As required under
the REIT qualification rules, each manager must qualify as an “eligible independent contractor” during the term of
the management agreement.
Our 15 hotels owned at December 31, 2019, including the hotel owned through the Atlanta JV, are operated by the
following third-party management companies:
Management Company
Aimbridge Hospitality
Boast Hotel Management Company
Cherry Cove Hospitality Management, LLC
InnVentures
Peachtree Hospitality Management, LLC
Total
Seasonality of Hotel Business
Number of
Hotels
Number of
Rooms
11
1
1
1
1
15
1,331
254
100
93
130
1,908
Historically, as a result of the geographic areas in which we operate, the operations of our hotels have been seasonal
in nature. Generally, occupancy rates, revenue, and operating income have been greater in the second and third
quarters of the calendar year than in the first and fourth quarters, with the exception of our hotels located in Florida,
which experience peak demand in the first and fourth quarters of the year. The results of our new investment
platform hotels, because of their locations and chain scale, are less seasonal in nature than our legacy portfolio of
assets.
Competition
The hotel industry is highly competitive. Each of our hotels is located in a developed area that includes other hotel
properties. The number of competitive hotel properties in a particular area could have a material adverse effect on
revenue, occupancy, and the average daily room rate of our hotels or of hotel properties acquired in the future, and
thus our financial results.
We may compete for investment opportunities with entities that have substantially greater financial resources than
us. These entities generally may be able to accept more risk than we can prudently manage. Competition in general
may reduce the number of suitable investment opportunities for us and increase the bargaining power of property
owners seeking to sell.
Tax Status
The Company qualifies and intends to continue to qualify as a REIT under the applicable provisions of the Internal
Revenue Code (the “Code”), as amended. In general, under such Code provisions, a trust which has made the
required election and, in the taxable year, meets certain requirements and distributes to its shareholders at least 90%
of its REIT taxable income, will not be subject to federal income tax to the extent of the income currently distributed
to shareholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our
taxable income at regular corporate income tax rates and generally will be unable to re-elect REIT status until the
fifth calendar year after the year in which we failed to qualify as a REIT, unless we satisfy certain relief provisions.
Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes
on its income and property, and to federal income and excise taxes on its undistributed taxable income. Taxable
income from non-REIT activities managed through the TRS, which is taxed as a C-Corporation, is subject to federal,
state, and local income taxes.
7
Employees
At December 31, 2019, the Company had 14 employees. The staff at our hotels are employed by our third-party
hotel managers.
Available Information
Our executive offices are located at 1800 West Pasewalk Avenue, Suite 200, Norfolk, Nebraska 68701, our
telephone number is (301) 861-3305, and we maintain an Internet website located at www.condorhospitality.com.
Our annual reports on Form 10-K and quarterly reports on Form 10-Q, current reports on Form 8-K, and
amendments to these reports are available free of charge on our website as soon as reasonably practicable after they
are filed with the SEC. We also make available the charters of our board committees and our Code of Business
Conduct and Ethics on our website. Copies of these documents are available in print to any shareholder who
requests them. Requests should be sent to Condor Hospitality Trust, Inc., 1800 West Pasewalk Avenue, Suite 200,
Norfolk, NE 68701, Attn: Corporate Secretary.
Item 1A. Risk Factors
The following discussion concerns the risks associated with our business that should be reviewed and considered
carefully. Our business faces many risks and the risks described below may not be the only risks we face. Other
risks and uncertainties not presently known to us may also materially and adversely affect our business, the value of
our shares, and our ability to pay dividends to our shareholders. Additionally, the risks detailed below are
interrelated and should be considered as a whole. In connection with the forward-looking statements that appear in
this Annual Report on Form 10-K, you should carefully review the section entitled “Forward-Looking Statements.”
For presentation purposes only, we categorize the risk factors into four broad categories:
• Risk Related to Our Business & Operations
• Risks Related to the Hotel Industry
• Risks Related to the Real Estate Industry
• Risks Related to Our Structure & Organization
Risks Related to Our Business & Operations
On July 19, 2019, the Company executed a definitive agreement to be acquired by merger with certain affiliates
of NexPoint Hospitality Trust, and the merger may not occur on acceptable terms or at all
On July 19, 2019, the Company and the Operating Partnership executed the Merger Agreement with certain
affiliates of NexPoint Hospitality Trust (“NHT”) under which the Company would become a wholly-owned
subsidiary of NHT’s operating partnership. If the acquisition is consummated under the terms of the Merger
Agreement, the holders of common stock would receive in exchange for their shares $11.10 per share, the holders of
our Series E preferred stock would receive in exchange for their shares $10.00 per share, and the holders of the
operating partnership common units of our operating partnership would receive in exchange for their common units
$0.21346 per unit, each without interest and less any applicable withholding taxes. Closing of the acquisition did
not occur on March 23, 2020, the contemplated closing date of the acquisition, and has not occurred as of the time of
this filing. The Company Parties and the NHT Parties are in discussions concerning potential amendments to
restructure the transaction, which will be disclosed if and when such amendments are agreed. There can be no
assurance with respect to the outcome of such discussions, and the Company continues reviewing its options and
reserves all rights and remedies under the Merger Agreement.
We may not be able to complete the proposed transaction pursuant to the terms of the Merger Agreement or other
acceptable terms or at all because of a number of factors, including without limitation, the following: (i) the
occurrence of any event, change or other circumstances that could give rise to the termination of the merger
agreement; (ii) unknown, underestimated or undisclosed commitments or liabilities; (iii) the inability to complete the
proposed transaction due to the failure to satisfy the closing conditions to the proposed transaction; (iv) risks related
8
to disruption of management’s attention from Condor’s ongoing business operations due to the proposed transaction;
(v) the effect of the announcement of the proposed transaction on the ability of the parties to retain and hire key
personnel, maintain relationships with their franchisors, management companies and suppliers, and maintain their
operating results and business generally; (vi) the risk that certain approvals or consents will not be received in a
timely manner or that the proposed transaction will not be consummated in a timely manner; (vii) adverse changes
in U.S. and non-U.S. governmental laws and regulations; (viii) the risk of litigation, including shareholder litigation
in connection with the proposed transaction, and the impact of any adverse legal judgments, fines, penalties,
injunctions or settlements; and (ix) risks related to uncertainty and disruption in global economic markets as a result
of COVID-19 (commonly referred to as the coronavirus).
Failure of the economy to improve or remain stable may adversely affect our ability to execute our business
strategies, which in turn would adversely affect our ability to make distributions to our stockholders.
Our ability to execute our business strategy is affected by economic conditions, and we cannot assure you that
economic fundamentals will improve or remain stable. The coronavirus pandemic and world events outside our
control, such as terrorism, have adversely affected the economy. If events like these continue or reoccur, they may
continue to adversely affect the economy in the future. An economic recession could have a dramatic impact on our
financial results. In the event conditions in the economy do not improve or remain stable, our ability to execute our
business strategies will be adversely effected, which in turn would adversely affect our ability to make distributions
to our stockholders.
The departure of any of our key personnel who have significant experience and relationships in the lodging
industry, particularly our Chief Executive Officer, J. William Blackham, could materially and adversely affect
us.
We depend on the experience and relationships of our executive officers, especially J. William Blackham, our Chief
Executive Officer and a member of our board of directors, to manage our day-to-day operations and strategic
business direction. Mr. Blackham has extensive experience in the lodging industry, during which time he has
established an extensive network of lodging industry contacts and relationships, including relationships with
national hotel brands, hotel owners, financiers, operators, commercial real estate brokers, developers and
management companies. We can provide no assurances that Mr. Blackham, or any of our key personnel, will
continue their employment with us. The loss of the services of any of the members of our management team, or any
difficulty attracting and retaining other talented and experienced personnel, could adversely affect our ability to
source potential investment opportunities, our relationship with national hotel brands and other industry participants
and the execution of our business strategy. Our ability to replace key individuals may be difficult because of the
limited number of individuals with the breadth of skills and experience needed to excel in the hotel industry and
there can be no assurance that we would be able to hire, train, retain, or motivate such individuals. Further, such a
loss could be negatively perceived by investors, which could reduce the market value of our common shares.
If we are unable to successfully manage our growth, our operating results and financial condition could be
adversely affected.
Our ability to implement our business strategy and grow our business depends upon our senior executive officers’
business contacts and their ability to successfully hire, train, supervise and manage additional personnel. We may
not be able to hire and train sufficient personnel or develop management, information and operating systems suitable
for our expected growth. If we are unable to manage any future growth effectively, our operating results and
financial condition could be adversely affected.
Our future growth is dependent on obtaining new financing and if we cannot secure financing in the future, our
growth will be limited.
The success of our growth strategy will depend on access to capital through use of excess cash flow, borrowings or
subsequent issuances of common shares or other securities. Acquisitions of new hotel properties will require
significant additional capital and existing hotels will require periodic capital improvement initiatives to remain
competitive. We may not be able to fund acquisitions or capital improvements solely from cash provided from our
9
operating activities because we must distribute at least 90% of our taxable income (determined before the deduction
for dividends paid and excluding any net capital gains) each year to satisfy the requirements for qualification as a
REIT for federal income tax purposes. As a result, our ability to fund capital expenditures for acquisitions through
retained earnings is very limited. Our ability to grow through acquisitions of hotels will be limited if we cannot
obtain satisfactory debt or equity financing, which will depend on capital markets conditions. We cannot assure you
that we will be able to obtain additional equity or debt financing or that we will be able to obtain such financing on
favorable terms.
Our lack of industry, brand, and/or geographic diversification could have an adverse effect on results.
Historically, we have exclusively bought ownership interest in hotels in the United States. As a result, we are
subject to the risks inherent in investing in a single industry. A downturn in the U.S. hotel industry may have a
pronounced effect on the amount of funds available to us for distribution or on the value of Company’s assets. Our
business is subject to the risks that are common to the hotel industry and that are out of our control. Additionally,
we may face risks associated with any geographic concentration or franchisor concentration.
Our returns depend on management of our hotels by third parties.
In order to qualify as a REIT, we cannot operate any hotel or participate in the decisions effecting the daily
operations of any hotel. Under the REIT Modernization Act of 1999, REITs are permitted to lease their hotels to
TRSs. However, a TRS, such as our TRS, may not operate or manage the leased hotels and, therefore, must enter
into management agreements with third-party eligible independent contractors to manage the hotels. Thus, an
independent operator under a management agreement with our TRS controls the daily operations of each of our
hotels.
Under the terms of our management agreements, our ability to participate in operating decisions regarding the hotels
is limited. We depend on our management companies to adequately operate our hotels as provided in the
management agreements. We do not have the authority to require any hotel to be operated in a particular manner or
to govern any particular aspect of the daily operations of any hotel (for instance, setting room rates). Thus, even if
we believe our hotels are being operated inefficiently or in a manner that does not result in satisfactory occupancy
rates, revenue per available room, and average daily rates, we may not be able to force our management companies
to change their methods of operation of our hotels. We can only seek redress if a management company violates the
terms of the management agreement with our TRS, and then only to the extent of the remedies provided for under
the terms of the applicable management agreement. If any of the foregoing occurs at franchised hotels, our
relationship with the franchisors may be damaged, and we may be in breach of one or more of our franchise
agreements. Additionally, in the event that we need to replace a management company due to the termination of an
existing management agreement, we may experience decreased occupancy and other significant disruptions at our
hotels and in our operations generally.
We face competition for the acquisition of hotels and we may not be successful in identifying or completing hotel
acquisitions that meet our criteria, which may impede our growth.
One component of our business strategy is expansion through acquisitions, and we may not be successful in
identifying or completing acquisitions that are consistent with our strategy. We compete with institutional pension
funds, private equity investors, other REITs, hotel companies, and others who are engaged in the acquisition of
hotels, most of whom have greater financial resources than we do. This competition for hotel investments may
increase the price we pay for hotels and these competitors may succeed in acquiring the hotels we seek to acquire.
Furthermore, our potential acquisition targets may find our competitors to be more attractive suitors because they
may have greater marketing and financial resources, may be willing to pay more, or may have a more compatible
operating philosophy. In addition, the number of entities competing for suitable hotels may increase in the future,
which would increase demand for these hotels and the prices we must pay to acquire them. If we pay higher prices
for hotels, our returns on investment and profitability may be reduced.
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Future acquisitions may not yield the returns expected, may result in disruptions to our business, may strain
management resources, may not be efficiently integrated into operations, and may result in stockholder dilution.
Our business strategy may not ultimately be successful and may not provide positive returns on our investments.
Acquisitions may cause disruptions in our operations and divert management’s attention away from day-to-day
operations. If the integration of our acquisitions into our management companies’ operations is not accomplished as
efficiently as planned, we will not achieve the expected operating results from the acquisitions. The issuance of
equity securities in connection with any acquisition could be substantially dilutive to our stockholders.
We may not be able to sell hotels on favorable terms.
Since January 1, 2015 through the date of this document, we have sold 55 hotels and our business strategy includes
the disposition of assets. We may not be able to sell such hotels on favorable terms, and such hotels may be sold at
a loss. As with acquisitions, we face competition for buyers of our hotel properties. Other sellers of hotels may have
the financial resources to dispose of their hotels on unfavorable terms that we would be unable to accept. If we
cannot find buyers for any properties that are designated for sale, we will not be able to implement our disposition
strategy. In the event that we cannot fully execute our disposition strategy or realize the benefits therefrom, we may
not be able to fully execute our growth strategy. There cannot be any assurances that we will sell any hotels,
including the hotels currently under contract for sale on the contracted terms or at all as the closing of the sale of
such hotels is subject to the satisfaction of customary closing conditions, some of which may not be satisfied.
We may record additional impairment charges on our properties which will negatively impact our results of
operations.
We analyze our assets for impairment when events or circumstances occur that indicate an asset’s carrying value
may not be recoverable. For impaired assets, we record an impairment charge equal to the excess of the property’s
carrying value over its fair value. Factors, many of which are outside our control, such as increased local
competition, age and condition of hotels, and national and local declines in the economy, may result in additional
impairment charges, which will negatively affect our results of operations. We can provide no assurance that any
impairment loss recognized would not be material to our results of operations.
We will likely seek to sell equity and/or debt securities to meet our need for additional cash, and we cannot assure
you that such financing will be available and further, in connection with such sales our current shareholders
could experience a material amount of dilution.
We may require additional cash resources based on business conditions and any acquisitions we may decide to
pursue. We will likely seek to sell additional equity and/or debt securities. We cannot assure you that the sale of
such securities will be available in amounts or on terms acceptable to us, if at all. If our board determines to sell
additional shares of common stock or other debt or equity securities, a material amount of dilution may cause the
market price of the common stock to decline.
We face risks associated with the use of debt, including the ability to obtain debt financing and refinancing risk.
We may not be able to successfully obtain debt financing or we may not be able to extend, refinance, or repay our
existing debt due to a number of factors, including decreased property valuations, limited availability of credit,
tightened lending standards, or deteriorating economic conditions. If we are unable to refinance our debt on
acceptable terms, we may be forced to dispose of hotel properties on disadvantageous terms, potentially resulting in
losses. We have placed mortgages on certain of our hotel properties, have assumed mortgages on other hotels we
acquired and may place additional mortgages on certain of our hotels to secure other debt. To the extent we cannot
meet any future debt service obligations, we will risk losing some or all of our hotel properties that are pledged to
secure our obligations to foreclosure. If we lack the ability to raise debt or refinance existing debt, our ability to
execute our business strategy will be significantly hampered and our financial results may be significantly affected.
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Our debt service obligations could adversely affect our operating results, may require us to liquidate our
properties, and could limit our ability to make distributions to our stockholders.
We seek to maintain a total stabilized debt level of no more than 70% of our aggregate property investment at cost.
We, however, may change or eliminate this target at any time without the approval of our stockholders. In the future,
we and our subsidiaries may incur substantial additional debt, including secured debt. Incurring such debt could
subject us to many risks, including the risks that:
our cash flow from operations will be insufficient to make required payment of principal and interest;
•
• we may be more vulnerable to adverse economic and industry conditions;
• we may be required to dedicate a substantial portion of our cash flow from operations to the repayment of our
debt, thereby reducing the cash available for distribution to our stockholders, funds available for operations
and capital expenditures, future investment opportunities, or other purposes;
the terms of any refinancing may not be as favorable as the terms of the debt being refinanced; and
the use of leverage could adversely affect our stock price and our ability to make distributions to our
stockholders
•
•
Our results may be negatively affected by interest rate fluctuations and our attempts to hedge this risk may not be
effective.
At December 31, 2019, we had long-term debt related to held for use assets of $135.4 million, of which $86.8
million is variable rate debt without an interest rate swap in place that effectively locks its interest rate. We may
enter into new credit facilities or loans where the debt accrues interest at floating rates, or we may refinance debt
that currently accrues interest at lower fixed rates. Higher interest rates could increase our debt service requirements
and could reduce the amounts available for distribution to our stockholders, as well as reduce funds available for our
operations, future investment opportunities, or other purposes. We may obtain in the future one or more forms of
interest rate protection—in the form of swap agreements, interest rate cap contracts, or similar agreements—to
“hedge” against the possible negative effects of interest rate fluctuations. However, we cannot assure you that any
hedging will adequately mitigate the adverse effects of interest rate increases or that counterparties under these
agreements will honor their obligations. In addition, we may be subject to risks of default by hedging counterparties.
Adverse economic conditions could also cause the terms on which we borrow to be unfavorable.
Operating our hotels under franchise agreements could adversely affect distributions to our shareholders.
At December 31, 2019, all of our hotels operate under third party franchise agreements and we are subject to the
risks of concentrating our hotel investments in several franchise brands. These risks include reductions in business
following negative publicity related to any one of our particular brands. Risks associated with our brands could
adversely affect our lease revenues and the amounts available for distribution to our shareholders.
The maintenance of the franchise licenses for our hotels is subject to our franchisors’ operating standards and other
terms and conditions. Our franchisors periodically inspect our hotels to ensure that we and the TRS follow their
standards. Failure to maintain these standards or other terms and conditions could result in a franchise license being
canceled. For example, one of our franchisors advised us in February 2019 that two of our hotels have dropped
below the required level for guest satisfaction surveys, and that if the hotels do not achieve compliance, it reserves
the right to elect to terminate the franchise agreements. As a condition of our continued holding of a franchise
license, a franchisor could possibly require us to make capital expenditures, even if we do not believe the capital
improvements are necessary or desirable or will result in an acceptable return on our investment. Nonetheless, we
may risk losing a franchise license if we do not make franchisor-required capital expenditures.
If a franchisor terminates the franchise license, we may try either to obtain a suitable replacement franchise or to
operate the hotel without a franchise license. The loss of a franchise license could materially and adversely affect the
operations or the underlying value of the hotel because of the loss of associated name recognition, marketing
support, and centralized reservation systems provided by the franchisor. Loss of a franchise license for several of our
hotels could materially and adversely affect our revenue. This loss of revenue could, therefore, also adversely affect
our cash available for distribution to shareholders.
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Unanticipated expenses and insufficient demand for hotels we acquire in new geographic markets could
adversely affect our profitability and our ability to make distributions to our stockholders.
We may develop or acquire hotels in geographic areas in which our management may have little or no operating
experience and in which potential customers may not be familiar with our franchise brands. As a result, we may
have to incur costs relating to the opening, operation and promotion of those new hotel properties that are
substantially greater than those incurred in other areas. These hotels may attract fewer customers than our existing
hotels, while at the same time, we may incur substantial additional costs with these new hotel properties.
Unanticipated expenses and insufficient demand at a new hotel property, therefore, could adversely affect our
profitability and our ability to make distributions to our stockholders.
The growth of Internet travel intermediaries could adversely affect the Company’s business and profitability.
Although a majority of rooms sold via the Internet are sold through hotel franchisor websites, some of the
Company’s hotel rooms are booked through Internet travel intermediaries, including but not limited to
Travelocity.com, Expedia.com, and Priceline.com. These Internet travel intermediaries purchase rooms at a
negotiated, net of fees, discount from participating hotels, which typically results in lower room rates than the
Company’s franchisor or manager otherwise could have obtained. Although the Company’s managers and
franchisors may have established agreements with many of these intermediaries that limit transaction fees for hotels,
there be no assurance that the Company’s managers and franchisors will be able to renegotiate such agreements
upon their expirations with terms as favorable as the provisions that exist today. Moreover, some of these Internet
travel intermediaries are attempting to offer hotel guestrooms as a commodity, by increasing the importance of price
and general indicators of quality (such as “three-star downtown hotel”) at the expense of brand identification. These
agencies hope that consumers will eventually develop brand loyalties to their reservations system rather than to the
brands under which our hotels are franchised. If the amount of sales made through Internet intermediaries increases
significantly, guestroom revenue may flatten or decrease and our profitability may be adversely affected.
We and our hotel managers rely on information technology in our operations, and any material failure,
inadequacy, interruption or security failure of that technology could harm our business.
We and our hotel managers rely on information technology networks and systems, including the Internet, to process,
transmit and store electronic information, and to manage or support a variety of business processes, including
financial transactions and records, personal identifying information, reservations, billing and operating data. We
purchase some of our information technology from vendors, on whom our systems depend. We rely on
commercially available systems, software, tools and monitoring to provide security for processing, transmission and
storage of confidential customer information, such as individually identifiable information, including information
relating to financial accounts. Although we have taken steps to protect the security of our information systems and
the data maintained in those systems, it is possible that our safety and security measures will not be able to prevent
the systems’ improper functioning or damage, or the improper access or disclosure of personally identifiable
information such as in the event of cyber-attacks. In November 2018, Marriott announced a data security incident
involving a guest reservation database. Security breaches, such as the one that occurred at Marriott, including
physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches, can create system
disruptions, shutdowns or unauthorized disclosure of confidential information. Any failure to maintain proper
function, security and availability of our information systems could interrupt our operations, damage our reputation,
subject us to liability claims or regulatory penalties and could have a material adverse effect on our business,
financial condition and results of operations and our ability to make distributions to our shareholders.
Uninsured and underinsured losses and our ability to satisfy our obligations could adversely affect our operating
results and our ability to make distributions to our stockholders.
We intend to maintain comprehensive insurance on each of our hotel properties, including liability, fire, and
extended coverage, of the type and amount we believe are customarily obtained for or by hotel owners. There are no
assurances that current coverage will continue to be available at reasonable rates. Various types of catastrophic
losses, like earthquakes and floods, or losses from foreign or domestic terrorist activities, may not be insurable or
13
may not be economically insurable. Initially, we do not expect to obtain terrorism insurance on our hotel properties
because it is costly. Lenders may require such insurance and our failure to obtain such insurance could constitute a
default under loan agreements, if required by such agreements. Depending on our access to capital, liquidity and the
value of the properties securing the effected loan in relation to the balance of the loan, a default could reduce our net
income and limit our ability to obtain future financing.
In the event of a substantial loss, our insurance coverage may not be sufficient to cover the full current market value
or replacement cost of our lost investment or the cash flows lost due to the interruption in operations. Should an
uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have
invested in a hotel, as well as the anticipated future revenue from the hotel. In that event, we might nevertheless
remain obligated for any mortgage debt or other financial obligations related to the property. Inflation, changes in
building codes and ordinances, environmental considerations and other factors might also keep us from using
insurance proceeds to replace or renovate a hotel after it has been damaged or destroyed. Under those circumstances,
the insurance proceeds we receive might be inadequate to restore our economic position on the damaged or
destroyed property.
Risks Related to the Hotel Industry
The outbreak of the novel coronavirus (COVID-19) has reduced travel and adversely affected the hospitality
industry in general.
The outbreak of the novel coronavirus (COVID-19) has reduced travel and adversely affected the hospitality
industry in general. The actual and threatened spread of coronavirus globally or in the regions in which we operate,
or future widespread outbreak of infectious or contagious disease, such as influenza, coronavirus, measles, mumps,
zika virus, or similar viruses, can continue to reduce national and international travel in general.
The extent to which our business may be affected by the coronavirus will largely depend on future developments
which we cannot accurately predict, and its impact on customer travel, including the duration of the outbreak, the
continued spread and treatment of the coronavirus, and new information and developments that may emerge
concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among
others. To the extent that travel activity in the U.S. is materially and adversely affected by the coronavirus, business
and financial results of the hospitality industry, and thus our business and financial results, could be materially and
adversely impacted.
In late March 2020, prior to the filing of this report, similar to the conditions affecting the hospitality industry as a
whole, we experienced dramatic occupancy declines at many of our properties which will require us to adjust our
business operations, and will have impact on our operating income and may potentially impact future compliance
with our debt covenants.
A recession could have a material adverse effect on the hotel industry and our results of operations.
The performance of the hotel industry usually follows the general economy. During the recession of 2008 and 2009,
overall travel was reduced, which had a significant effect on our results of operations. A stall in the economic
recovery or a resurgent recession could have a material adverse effect on the hotel industry and, thus, on our results
of operations.
Our ability to make distributions to our shareholders may be affected by factors in the hotel industry that are
beyond our control.
Our hotels are subject to various operating risks found throughout the hotel industry. Many of these risks are beyond
our control. These include, among other things, the following:
•
•
•
•
competitors with substantially greater marketing and financial resources than us;
over-building in our markets, which adversely effects occupancy and revenues at our hotels;
dependence on business and commercial travelers and tourism;
terrorist incidents which may deter travel;
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• widespread outbreaks of infectious or contagious disease, such as influenza, Coronavirus, measles, or
mumps;
increases in hotel operating costs, energy costs, airline fares and other expenses, which may affect travel
patterns and reduce the number of business and commercial travelers and tourists; and
adverse effects of general, regional and local economic conditions.
•
•
These factors could adversely affect the amount of rent we receive from leasing our hotels and reduce the net
operating profits of the TRS, which in turn could adversely affect our ability to make distributions to our
shareholders. Decreases in room revenues of our hotels will result in reduced operating profits for the TRS and
decreased lease revenues to our company under our current percentage leases with the TRS.
The hotel industry is seasonal in nature and may affect our cash flow.
Demand for our hotels is seasonal. We generally expect that we will have lower revenue, operating income, and cash
flow in the first and fourth quarters and higher revenue, operating income and cash flow in the second and third
quarters. These general trends are, however, influenced by overall economic cycles and the geographic locations of
our hotels. To the extent that cash flow from operations is insufficient during any quarter, due to temporary or
seasonal fluctuations in revenue, we expect to utilize cash on hand or borrowings under our credit facility to pay
expenses, debt service or to make distributions to our equity holders.
The cyclical nature of the lodging industry may cause fluctuations in our operating performance, which could
have a material adverse effect on us.
The hotel industry is highly cyclical in nature. Fluctuations in lodging demand and, therefore, operating
performance, are caused largely by general economic and local market conditions, which subsequently affects levels
of business and leisure travel. In addition to general economic conditions, hotel room supply growth is an important
factor that can affect the lodging industry's performance. Overbuilding has, in the past and will continue to have, the
potential to further exacerbate the negative impact of an economic recession. Room rates and occupancy, and thus
RevPAR, tend to increase when demand growth exceeds supply growth. We can provide no assurances regarding
whether, or the extent to which, lodging demand will rebound or whether any such rebound will be sustained. An
adverse change in lodging fundamentals in our markets could result in returns that are substantially below our
expectations or result in losses, which could have a material adverse effect on us.
Competition from other hotels in the markets in which we operate could have a material adverse effect on our
results of operations.
The lodging industry is highly competitive. Our hotels compete with other hotels for guests in each market in which
our hotels operate based on a number of factors, including location, convenience, brand affiliation, guestroom rates,
range of services and guest amenities or accommodations offered and quality of customer service. Competition is
often specific to the individual markets in which our hotels are located and includes competition from existing and
new hotels. Our competitors may have an operating model that enables them to offer guestrooms at lower rates than
we can, which could result in our competitors increasing their occupancy at our expense. Competition could
adversely affect our occupancy, Average Daily Rate (“ADR”) and RevPAR, and may require us to provide
additional amenities or make capital improvements that we otherwise would not have to make, which could reduce
our profitability and could materially and adversely affect our results of operations.
The increasing use by consumers of alternative lodging market places may adversely affect our profitability.
Additional sources of competition, including alternative lodging marketplaces, such as HomeAway and Airbnb,
which operate websites that market available furnished, privately-owned residential properties, including homes and
condominiums, that can be rented on a nightly, weekly or monthly basis, may, as they become more accepted, lead
to a reduced demand for conventional hotel guest rooms and to an increased supply of lodging alternatives. If the
amount of bookings made through the use of alternative lodging market places increases significantly, room
revenues may flatten or decrease and our profitability may be adversely affected.
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In the past, economic trends, terrorist acts, and military action have adversely affected the hotel industry
generally, and similar future events could adversely affect the industry in the future.
Terrorist attacks and the after-effects (including the prospects for more terror attacks in the United States and
abroad) have, in the past, substantially reduced business and leisure travel and lodging industry RevPAR generally.
We cannot predict the extent to which these factors will directly or indirectly impact your investment in our
securities, the lodging industry or our operating results in the future.
Declining RevPAR at our hotels would reduce our net income and restrict our ability to fund capital improvements
at our hotels and our ability to make distributions to stockholders necessary to maintain our status as a REIT.
Additional terrorist attacks, acts of war or similar events could have further material adverse effects on the markets
on which shares of our stock will trade, as well as on the lodging industry in general and our operations in particular.
The hotel business is capital intensive.
Our hotels have an ongoing need for renovations and other capital improvements, including replacements, from time
to time, of furniture, fixtures and equipment. The franchisors of our hotels also require periodic capital
improvements as a condition of keeping the franchise licenses. The costs of all of these capital improvements could
adversely affect our financial condition and reduce the amounts available for distribution to our shareholders. These
renovations may give rise to the following risks:
possible environmental problems;
construction cost overruns and delays;
a possible shortage of available cash to fund renovations and the related possibility that financing for these
renovations may not be available to us on affordable terms; and
uncertainties as to market demand or a loss of market demand after renovations have begun
•
•
•
•
The lenders under some of the mortgage debt that we will assume will require us to set aside varying amounts each
year for capital improvements at our hotels. We may not be able to fund capital improvements or acquisitions solely
from cash provided from our operating activities and, thus, may need to raise capital in order to finance any required
capital expenditures.
Noncompliance with governmental regulations could adversely affect our operating results.
Environmental Matters
Our hotel properties are subject to various federal, state, and local environmental laws. Under these laws, courts and
government agencies have the authority to require the owner of a contaminated property to clean up the property,
even if the owner did not know of or was not responsible for the contamination. These laws also apply to persons
who owned a property at the time it became contaminated. In addition to the costs of cleanup, contamination can
affect the value of a property and, therefore, an owner’s ability to borrow funds using the property as collateral.
Under these environmental laws, courts and government agencies also have the authority to require that a person
who sent waste to a waste disposal facility, like a landfill or an incinerator, pay for the clean-up of that facility if it
becomes contaminated and threatens human health or the environment. Furthermore, court decisions have
established that third parties may recover damages for injury caused by property contamination. For instance, a
person exposed to asbestos while staying in a hotel may seek to recover damages if he suffers injury from the
asbestos. Lastly, some of these environmental laws restrict the use of a property or place conditions on various
activities at a property. One example is laws that require a business using chemicals to manage them carefully and to
notify local officials that the chemicals are being used.
Our Company could be responsible for the costs discussed above if it found itself in one or more of these situations.
The costs to clean up a contaminated property, to defend against a claim, or to comply with environmental laws
could be material and could affect the funds available for distribution to our shareholders. To determine whether any
costs of this nature might be required, we commission Phase I environmental site assessments, or “ESAs”, before we
acquire our hotels, and at certain times have commissioned new ESAs for certain of our hotels in conjunction with a
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refinancing of the debt obligations of those hotels. These studies typically included a review of historical
information and a site visit, but not soil or groundwater testing. We obtain the ESAs to help us identify whether we
might be responsible for cleanup costs or other costs in connection with our hotels. The ESAs on our hotels did not
reveal any environmental conditions that are likely to have a material adverse effect on our business, assets, results
of operations, or liquidity. However, ESAs do not always identify all potential problems or environmental liabilities.
Consequently, we may have material environmental liabilities of which we are unaware.
Americans with Disabilities Act and Other Changes in Governmental Rules and Regulations
Under the Americans with Disabilities Act of 1990, or ADA, all public accommodations must meet various federal
requirements related to access and use by disabled persons. Compliance with the ADA’s requirements could require
removal of access barriers and non-compliance could result in the U.S. government imposing fines or in private
litigants obtaining damages. If we were required to make substantial modifications to our hotels, whether to comply
with the ADA or other changes in governmental rules and regulations, our ability to make distributions to our
shareholders and meet our other obligations could be adversely affected.
Risks Related to the Real Estate Industry
Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the
performance of our properties and harm our financial condition.
Because real estate investments are relatively illiquid, our ability to promptly sell one or more hotel properties or
investments in our portfolio in response to changing economic, financial and investment conditions may be
limited. The real estate market is affected by many factors that are beyond our control, including:
•
•
•
•
•
•
adverse changes in international, national, regional and local economic and market conditions;
changes in interest rates and in the availability, cost and terms of debt financing;
changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of
compliance with laws and regulations, fiscal policies and ordinances;
the ongoing need for capital improvements, particularly in older structures;
changes in operating expenses; and
civil unrest, acts of God, including earthquakes, floods and other natural disasters and acts of war or
terrorism, including the consequences of terrorist acts such as those that occurred on September 11, 2001,
which may result in uninsured losses.
We cannot predict whether we will be able to sell any hotel property or investment for the price or on the terms set
by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We also
cannot predict the length of time needed to find a willing purchaser and to close the sale of a hotel property or loan.
We may be required to expend funds to correct defects or to make improvements before a hotel property can be sold.
We cannot assure you that we will have funds available to correct those defects or to make those improvements. In
acquiring a hotel property, we may agree to lock-out provisions that materially restrict us from selling that hotel
property for a period of time or impose other restrictions, such as limitation on the amount of debt that can be placed
or repaid on that hotel property. These facts and any others that would impede our ability to respond to adverse
changes in the performance of our hotel properties could have a material adverse effect on our operating results and
financial condition, as well as our ability to make distributions to stockholders.
Increases in property taxes would adversely affect our ability to make distributions to our shareholders.
Hotel properties are subject to real and personal property taxes. These taxes may increase as tax rates change and as
the properties are assessed or reassessed by taxing authorities. In particular, our property taxes could increase
following our hotel purchases as the acquired hotels are reassessed. If property taxes increase, our financial
condition, results of operations, and our ability to make distributions to our shareholders could be materially and
adversely affected.
17
Our real estate may contain or develop harmful environmental challenges which could lead to liability for
adverse health effects and costs of remediating the problem.
The presence or development of significant environmental challenges at any of our properties could require us to
undertake a costly program to remediate the environmental challenge, which would reduce our cash available for
distribution. In addition, the presence of a significant environmental challenge could expose us to liability from our
guests, employees or our management companies and others if property damage or health concerns arise.
Environmental challenges for hotels may include, but is not limited to, mold and bed bugs.
Risks Related to our Organization and Structure
Our failure to qualify as a REIT under the federal tax laws would result in adverse tax consequences.
The federal income tax laws governing REITs are complex and subject to revision.
We currently operate as a REIT under the federal income tax laws. The REIT qualification requirements are
extremely complex and interpretations of the federal income tax laws governing qualification as a REIT are limited.
Accordingly, we cannot be certain that we would be successful in operating so that we can qualify as a REIT. At any
time, new laws, interpretations, or court decisions may change the federal tax laws or the federal income tax
consequences of our qualification as a REIT. We have not applied for or obtained rulings from the IRS that we will
qualify as a REIT.
Failure to qualify as a REIT would subject us to federal income tax.
If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income.
We might need to borrow money or sell assets in order to pay any such tax. If we cease to be a REIT, we no longer
would be required to distribute most of our taxable income to our stockholders. Unless we were entitled to relief
under certain federal income tax laws, we could not re-elect REIT status during the four calendar years after the year
in which we failed to qualify as a REIT.
Failure to make required distributions would subject us to tax.
In order to qualify as a REIT, we generally are required to distribute at least 90% of our REIT taxable income,
determined without regard to the dividends paid deduction, each year to our stockholders. To the extent that we
satisfy this distribution requirement, but distribute less than 100% of our taxable income, we will be subject to
federal income tax on our undistributed taxable income. In addition, we will be subject to a 4% non-deductible
excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount
specified under federal tax laws. As a result, for example, of differences between cash flow and the accrual of
income and expenses for tax purposes, or of nondeductible expenditures, our REIT taxable income in any given year
could exceed our cash available for distribution. In addition, to the extent we may retain earnings of the TRS in
those subsidiaries, such amount of cash would not be available for distribution to our stockholders to satisfy the 90%
distribution requirement. Accordingly, we may be required to borrow money or sell assets to make distributions
sufficient to enable us to pay out enough of our taxable income to satisfy the distribution requirement and to avoid
federal corporate income tax and the 4% non-deductible excise tax in a particular year.
The formation of the TRS increases our overall tax liability.
The TRS is subject to federal and state income tax on its taxable income, which in the case of the TRS currently
consists and generally will continue to consist of revenues from the hotel properties leased by the TRS, net of the
operating expenses for such properties and rent payments to us. Accordingly, although our ownership of the TRS
allows us to participate in the operating income from our hotel properties in addition to receiving rent, that operating
income is fully subject to income tax. Such taxes could be substantial. The after-tax net income of the TRS is
available for distribution to us.
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We incur a 100% excise tax on transactions with the TRS that are not conducted on an arm’s-length basis. For
example, to the extent that the rent paid by the TRS exceeds an arm’s-length rental amount, such amount potentially
is subject to the excise tax. We intend that all transactions between us and the TRS will continue to be conducted on
an arm’s-length basis and, therefore, that the rent paid by the TRS to us will not be subject to the excise tax.
Our TRS lessee structure subjects us to the risk of increased operating expenses.
Our hotel management agreements require us to bear the operating risks of our hotel properties. Our operating risks
include not only changes in hotel revenue and changes in the TRS’s ability to pay the rent due under the leases, but
also increased operating expenses, including, among other things:
• wage and benefits costs;
•
•
•
•
•
repair and maintenance expenses;
energy costs;
property taxes;
insurance costs; and
other operating expenses.
Any decreases in hotel revenue or increases in operating expenses could have a material adverse effect on our
earnings and cash flows.
Our ability to make distributions on our common and preferred stock is subject to fluctuations in our financial
performance, operating results, and capital improvement requirements.
As a REIT, we generally are required to distribute annually at least 90% of our REIT taxable income, determined
without regard to the dividends paid deduction, to our stockholders. Downturns in our operating results and financial
performance or unanticipated capital improvements to our hotel properties may affect our ability to declare or pay
distributions to our stockholders. Further, we may not generate sufficient cash in order to fund distributions to our
stockholders, which may require us to sell assets or borrow money to satisfy the REIT distribution requirements.
Among the factors which could adversely affect our results of operations and our distributions to stockholders are
reduced net operating profits or operating losses, increased debt service requirements, and capital expenditures at
our hotel properties. Among the factors which could reduce our net operating profits are decreases in hotel property
revenue and increases in hotel property operating expenses. Hotel property revenue can decrease for a number of
reasons, including increased competition from a new supply of rooms and decreased demand for rooms. These
factors can reduce both occupancy and room rates at our hotel properties.
The timing and amount of distributions are at the sole discretion of our Board of Directors, which will consider,
among other factors, our actual results of operations, debt service requirements, capital expenditure requirements for
our properties, and our operating expenses. We cannot guarantee future distributions.
We have restrictive debt covenants that could adversely affect our ability to run our business.
We are required to meet or maintain quarterly loan covenants with certain of our lenders. Weakness in the economy
and the lodging industry at large may result in non-compliance with our loan covenants. Such noncompliance with
our loan covenants may result in our lenders restricting the use of our operating funds for capital improvements to
our existing hotels, including improvements required by our franchise agreements, or causing the debt maturity to
accelerate. We cannot assure you that we can maintain compliance with our loan covenants and maintain our
business strategy.
Our restrictive debt covenants may jeopardize our tax status as a REIT.
To maintain our REIT status, we generally must distribute at least 90% of our REIT taxable income to our
stockholders annually. In addition, we are subject to a 4% non-deductible excise tax if the actual amount distributed
to stockholders in a calendar year is less than a minimum amount specified under federal income tax laws. In the
19
event we do not comply with our debt service obligations, our lenders may limit our ability to make distributions to
our stockholders, which could adversely affect our REIT status.
Our two largest shareholders hold significant voting power and have the right to designate seven of our nine
directors, which provides these shareholders with significant power to influence our business and affairs.
Real Estate Strategies, L.P. (“RES”, which also includes affiliated entities) holds 29% and SREP III Flight-Investco,
L.P. (“SREP”, which also includes affiliated entities) holds 24% of the common stock as of December 31, 2019.
RES and SREP each have a contractual preemptive right, but not the obligation, to purchase up to their pro rata
share (based on their ownership on a fully diluted basis) of any equity securities we offer in future offerings on the
same terms as other investors. RES has had the right to designate up to four directors, and SREP has had the right to
designate up to three directors, with the number of directors that each may designate based on their respective voting
power. RES and SREP will each have the right to separately designate three directors to our board of directors at the
annual meeting of shareholders currently scheduled for May 23, 2019. Each of RES and SREP in their respective
agreements with us has agreed to vote for the election of the incumbent members of the board of directors and their
successors nominated by the nominating committee of the board of directors. As a consequence, the election of the
six directors designated by RES and SREP is assured.
By virtue of their voting power and board designation rights, preemptive right to purchase additional equity
securities in future stock offerings and approval rights, RES and SREP, collectively and separately, have the power
to significantly influence our business and affairs and the outcome of matters required to be submitted to
shareholders for approval, including the election of our directors, amendments to our charter, mergers, or sales of
assets. Their influence over our business and affairs may not be consistent with the interests of some or all of our
other shareholders and might negatively affect the market price of our common stock.
The holders of the Series E Preferred Stock have rights senior to holders of common stock.
RES and SREP, our two largest shareholders, own all of the issued and outstanding shares our 6.25% Series E
Cumulative Convertible Preferred Stock (“Series E Preferred Stock”). The Series E Preferred Stock ranks senior to
our common stock and any other preferred stock issuances and receives preferential cumulative cash dividends at a
rate of 6.25% annually per annum of the $10.00 face value per share. If we fail to pay a dividend, then during the
period that dividends are not paid, the dividend rate increases to 9.50%. Dividends on the Series E Preferred Stock
accrue whether or not we have earnings, whether or not there are funds legally available for the payment of such
dividends, whether or not such dividends are declared, and whether or not such dividends are prohibited by
agreement.
The Series E Preferred Stock votes as a class on matters generally affecting the Series E Preferred Stock, and as long
as 434,750 shares of Series E Preferred Stock (47% of the originally issued shares of Series E Preferred Stock)
remain outstanding, then 75% approval of the Series E Preferred Stock will be required to approve merger,
consolidation, liquidation or winding up of Condor, related party transactions exceeding $120,000, payment of
dividends on common stock except from funds from operations or to maintain REIT status, the grant of exemptions
from Condor’s charter limitation on ownership of 9.9% of any class or series of its securities (exclusive of persons
currently holding exemptions), issuance of preferred stock, or commitment or agreement to do any of the foregoing.
We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability, reduce
our operating flexibility and reduce the market price of our shares.
At any time, the federal income tax laws governing REITs or the administrative and judicial interpretations of those
laws may be amended or changed. We cannot predict when or if any new federal income tax law, regulation or
administrative and judicial interpretation, or any amendment to any existing federal income tax law, regulation or
administrative or judicial interpretation, will be adopted, promulgated or become effective and any such law,
regulation or interpretation may take effect retroactively. We and our shareholders could be adversely affected by
any such change in, or any new, federal income tax law, regulation or administrative and judicial interpretation.
20
If our hotel managers do not qualify as "eligible independent contractors” the Company would likely fail to
qualify as a REIT.
Rent paid by a lessee that is a "related party tenant" of ours will not be qualifying income for purposes of the two
gross income tests applicable to REITs. We lease substantially all of our hotels to our TRS. The TRS will not be
treated as a "related party tenant," and will not be treated as directly operating a lodging facility to the extent the
TRS leases properties from us that are managed by an "eligible independent contractor." In addition, our TRS
holding companies will fail to qualify as “taxable REIT subsidiaries” if they lease or own a lodging facility that is
not managed by an “eligible independent contractor.”
If our hotel managers do not qualify as "eligible independent contractors," we would fail to qualify as a REIT. Each
of the hotel management companies that enters into a management contract with our TRS must qualify as an
"eligible independent contractor" under the REIT rules in order for the rent paid to us by our TRS to be qualifying
income for our REIT income test requirements and for our TRS holding companies to qualify as “taxable REIT
subsidiaries”. Among other requirements, in order to qualify as an eligible independent contractor a manager must
not own more than 35% of our outstanding shares (by value) and no person or group of persons can own more than
35% of our outstanding shares and the ownership interests of the manager, taking into account only owners of more
than 5% of our shares and, with respect to ownership interests in such managers that are publicly traded, only
holders of more than 5% of such ownership interests. Complex ownership attribution rules apply for purposes of
these 35% thresholds. Although we intend to monitor ownership of our shares by our property managers and their
owners, there can be no assurance that these ownership levels will not be exceeded.
If our leases with our TRS are not respected as true leases for federal income tax purposes, we would fail to
qualify as a REIT.
To qualify as a REIT, we are required to satisfy two gross income tests, pursuant to which specified percentages of
our gross income must be passive income, such as rent. For the rent paid pursuant to the hotel leases with our TRS,
which should constitute substantially all of our gross income, to qualify for purposes of the gross income tests, the
leases must be respected as true leases for federal income tax purposes and must not be treated as service contracts,
joint ventures or some other type of arrangement. We have structured our leases, and intend to structure any future
leases, so that the leases will be respected as true leases for federal income tax purposes, but there can be no
assurance that the IRS will agree with this characterization, not challenge this treatment or that a court would not
sustain such a challenge. If the leases were not respected as true leases for federal income tax purposes, we would
not be able to satisfy either of the two gross income tests applicable to REITs and likely would fail to qualify for
REIT status.
We may be subject to the 100% prohibited transaction tax on the gain recognized on the hotels we sold.
A REIT will incur a 100% tax on the net income derived from any sale or other disposition of property that the
REIT holds primarily for sale to customers in the ordinary course of a trade or business. We undertook specific
disposition programs beginning in 2001 (that included the sale of 23 hotels through December 31, 2004) and 2008
(that included the sale of 125 hotels through December 31, 2019). We held the disposed hotels for an average period
of 14.5 years and did not acquire the hotels for purposes of resale. We believe that such sales are not prohibited
transactions. However, if the IRS would successfully assert that we held such hotels primarily for sale in the
ordinary course of our business, the gain from such sales could be subject to a 100% prohibited transaction tax.
Complying with REIT requirements may cause us to forego attractive opportunities that could otherwise generate
strong risk-adjusted returns and instead pursue less attractive opportunities, or none at all.
To continue to qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning,
among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute
to our stockholders and the ownership of our stock. Thus, compliance with the REIT requirements may hinder our
ability to operate solely on the basis of generating strong risk-adjusted returns on invested capital for our
stockholders.
21
Complying with REIT requirements may force us to liquidate otherwise attractive investments, which could result
in an overall loss on our investments.
To continue to qualify as a REIT, we must also ensure that at the end of each calendar quarter at least 75% of the
value of our assets consists of cash, cash items, government securities and qualified REIT real estate assets. The
remainder of our investment in securities (other than government securities and qualified real estate assets) generally
cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total
value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our
assets (other than government securities and qualified real estate assets) can consist of the securities of any one
issuer, and no more than 25% of the value of our total securities can be represented by securities of one or more
TRSs. If we fail to comply with these requirements at the end of any calendar quarter, we must correct such failure
within 30 days after the end of the calendar quarter to avoid losing our REIT status and suffering adverse tax
consequences. If we fail to comply with these requirements at the end of any calendar quarter, we may be able to
preserve our REIT status by benefiting from certain statutory relief provisions. Except with respect to a de minimis
failure of the 5% asset test or the 10% vote or value test, we can maintain our REIT status only if the failure was due
to reasonable cause and not to willful neglect. In that case, we will be required to dispose of the assets causing the
failure within six months after the last day of the quarter in which we identified the failure, and we will be required
to pay an additional tax of the greater of $50,000 or the product of the highest applicable tax rate (currently 35%)
multiplied by the net income generated on those assets. As a result, we may be required to liquidate otherwise
attractive investments.
Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.
The maximum U.S. federal income tax rate applicable to qualified dividend income payable to certain non-corporate
U.S. holders is 20%. Dividends payable by REITs, however, generally are not eligible for the reduced qualified
dividend rates. For taxable years beginning after December 31, 2017 and before January 1, 2026, under the recently
enacted law informally known as the Tax Cuts and Jobs Act (“TCJA”), non-corporate taxpayers may deduct up to
20% of certain pass-through business income, including “qualified REIT dividends” (generally, dividends received
by a REIT shareholder that are not designated as capital gain dividends or qualified dividend income), subject to
certain limitations, resulting in an effective maximum U.S. federal income tax rate of 29.6% on such income.
Although the reduced U.S. federal income tax rate applicable to qualified dividend income does not adversely affect
the taxation of REITs or dividends payable by REITs, the more favorable rates applicable to regular corporate
qualified dividends and the reduced corporate tax rate (currently 21%) could cause certain non-corporate investors to
perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT
corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our shares.
Provisions of our charter and substantial voting power held by two shareholders may limit the ability of a third
party to acquire control of our company.
In order to maintain our REIT qualification, no more than 50% in value of our outstanding capital stock may be
owned, directly or indirectly, by five or fewer individuals (as defined in the federal income tax laws to include
various kinds of entities) during the last half of any taxable year. Our articles of incorporation contain the ownership
limitation, which prohibits both direct and indirect ownership of more than 9.9% of the outstanding shares of our
common stock or 9.9% of any series of our preferred stock by any person, subject to several exceptions. Generally,
any shares of our capital stock owned by affiliated owners will be added together for purposes of the ownership
limitation.
Our articles of incorporation permit our board, in its sole discretion, to exempt a person from the 9.9% ownership
limitation if the person provides representations and undertakings that enable our board to determine that granting
the exemption would not result in the loss of our REIT qualification. Under the IRS rules, REIT shares owned by
certain entities are considered owned proportionately by owners of the entities for REIT qualification purposes. RES
and SREP each provided a letter at the time of the issuance of the 6.25% Series D Cumulative Convertible Preferred
Stock (“Series D Preferred Stock”) that permitted our board to grant such an exemption. The stock ownership by
RES and SREP, which was permitted with our board’s approval, represents such substantial voting power that it
may limit the ability of a third party to acquire control of our company.
22
These ownership limitations may prevent an acquisition of control of our company by a third party without our
board of directors’ approval, even if our stockholders believe the change of control is in their best interests. Our
charter authorizes our board of directors to issue shares of common stock and shares of preferred stock, and to set
the preferences, rights and other terms of the preferred stock. Furthermore, our board of directors may, without any
action by the stockholders, amend our charter from time to time to increase or decrease the aggregate number of
shares of stock of any class or series of preferred stock that we have authority to issue. Issuances of additional shares
of stock may have the effect of delaying, deferring or preventing a transaction or a change in control of our company
that might involve a premium to the market price of our common stock or otherwise be in our stockholders’ best
interests.
Our ownership limitation may prevent a shareholder from engaging in certain transfers of our capital stock.
If anyone transfers shares in a way that would violate the ownership limitation described above or prevent us from
continuing to qualify as a REIT under the federal income tax laws, we will consider the transfer to be null and void
from the outset, and the intended transferee of those shares will be deemed never to have owned the shares. Those
shares instead will be transferred to a trust for the benefit of a charitable beneficiary and will be either redeemed by
our company or sold to a person whose ownership of the shares will not violate the ownership limitation. Anyone
who acquires shares in violation of the ownership limitation or the other restrictions on transfer in our articles of
incorporation bears the risk that he will suffer a financial loss when the shares are redeemed or sold if the market
price of our stock falls between the date of purchase and the date of redemption or sale.
The ability of our board of directors to change our major corporate policies may not be in your interest.
Our board of directors determines our major corporate policies, including our acquisition, financing, growth,
operations and distribution policies. Our board may amend or revise these and other policies from time to time
without the vote or consent of our stockholders.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our Company headquarters is located in Norfolk, Nebraska, with additional office space in Bethesda, Maryland and
Omaha, Nebraska. The following table sets forth certain information with respect to the hotels owned by us as of
December 31, 2019:
Hotel Name
Hilton Garden Inn
SpringHill Suites
Courtyard by Marriott
Hotel Indigo
Aloft (1)
Aloft
Home2 Suites
Home2 Suites
Home2 Suites
Home2 Suites
Hampton Inn & Suites
Fairfield Inn & Suites
Residence Inn
TownePlace Suites
Home2 Suites
Total Rooms
State
City
Dowell/Solomons MD
TX
San Antonio
FL
Jacksonville
GA
College Park
GA
Atlanta
KS
Leawood
KY
Lexington
TX
Round Rock
FL
Tallahassee
MS
Southaven
FL
Lake Mary
TX
El Paso
TX
Austin
TX
Austin
SC
Summerville
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Rooms
Acquisition Date
05/25/2012
10/01/2015
10/02/2015
10/02/2015
08/22/2016
12/14/2016
03/24/2017
03/24/2017
03/24/2017
04/14/2017
06/19/2017
08/31/2017
08/31/2017
01/18/2018
02/21/2018
100
116
120
142
254
156
103
91
132
105
130
124
120
122
93
1,908
Purchase Price
(in thousands)
$11,500
$17,500
$14,000
$11,000
$43,550
$22,500
$16,500
$16,750
$21,500
$19,000
$19,250
$16,400
$22,400
$19,750
$16,325
$287,925
(1)
This property is owned through an 80% interest in our unconsolidated Atlanta JV. On February 14, 2020, the Company acquired the
remaining 20% ownership interest in the Atlanta JV
All of our properties are encumbered by either our revolving credit agreement or by mortgage debt at December 31,
2019. Additional property information is found in Item 8 Schedule III of this Annual Report on Form 10-K.
ITEM 3. LEGAL PROCEEDINGS
Various claims and legal proceedings arise in the ordinary course of business and may be pending against the
Company and its properties. We are not currently involved in any material litigation, nor, to our knowledge, is any
material litigation threatened against us. The Company has insurance to cover potential material losses and we
believe it is not reasonably possible that such matters will have a material impact on our financial condition or
results of operations.
On August 20, 2019, a putative class action complaint was filed against the Company and each of the Company
directors, our operating partnership, NHT Parent, NHT Merger Sub, and NHT Merger Op in the United States
District Court for the District of Delaware under the caption Graham v. Condor Hospitality Trust, Inc., et al., Civil
Action No. 1:19-cv-01552. The case was voluntarily dismissed by plaintiffs on January 28, 2020.
A second putative class action complaint was filed on August 23, 2019 against the Company and each of the
Company directors, the Operating Partnership, Parent, Merger Sub and Merger OP in the United States District
Court for the District of Delaware under the caption Sabatini v. Condor Hospitality Trust, Inc., et al., Civil Action
No. 1:19-cv-01564. These complaints asserted claims, purportedly brought on behalf of a class of shareholders,
under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 14a-9, and alleged that the
preliminary proxy statement filed by the Company with the Securities and Exchange Commission (“SEC”) on
Schedule 14A on August 9, 2019 (the “Preliminary Proxy Statement”) contained materially incomplete and
misleading disclosures. Each of the complaints sought, among other things, injunctive relief enjoining defendants
from taking steps to consummate the proposed transactions and damages, along with fees and costs. The case was
voluntarily dismissed by plaintiffs on January 28, 2020.
On August 26, 2019, a putative class action was filed against the Company and each of the Company’s directors in
the United States District Court for the Southern District of New York under the caption Raul v. Condor Hospitality
Trust, Inc., et al., Civil Action No. 1:19-cv-07968. The complaint asserted claims, purportedly brought on behalf of
a class of shareholders, under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 14a-9
and alleged that the Preliminary Proxy Statement contained materially incomplete and misleading disclosures. The
complaint sought, among other things, injunctive relief enjoining defendants from taking steps to consummate the
proposed transaction and damages, along with fees and costs. The case was voluntarily dismissed by plaintiffs on
November 19, 2019.
Pursuant to a Confidential Memorandum of Understanding dated September 16, 2019 between the plaintiffs in the
above three actions and the Company, if the parties do not resolve any claim for fees and expenses related to the
dismissed actions, the plaintiff may assert claims for fees, if at all, in the United States District Court of the District
of Delaware.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY / RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Effective on March 15, 2017, the Company effected a reverse stock split of its common stock at a ratio of 1-for-6.5.
No fractional shares of common stock were issued as fractional shares were settled in cash. Share and per share
information included below has been adjusted for the stock split as if such stock split occurred on the first day of the
periods presented.
The Company’s common stock began trading on the NYSE American under its current symbol “CDOR” at the open
of market trading on July 21, 2017. The Company’s common stock previously traded on the
Stock Market under the same symbol.
Shareholder Information
As of March 25, 2020, the approximate number of holders of record of our common stock was 67. However,
because the vast majority of our common shares are held by brokers and other institutions on behalf of shareholders,
we believe that there are considerably more beneficial holders of our common shares than record holders.
Distribution Information
Distributions to the extent of our current and accumulated earnings and profits for federal income tax purposes
generally will be taxable to a shareholder as ordinary income. Distributions in excess of current and accumulated
earnings and profits generally will be treated as a nontaxable reduction of the shareholder’s basis in such
shareholder’s shares, to the extent thereof, and thereafter as taxable capital gain. Distributions that are treated as a
reduction of the shareholder’s basis in its shares will have the effect of increasing the amount of gain, or reducing
the amount of loss, recognized upon the sale of the shareholder’s shares.
The actual amount of future dividends will be determined by the Board of Directors based on the actual results of
operations, economic conditions, capital expenditure requirements, the annual distribution requirements under the
REIT provisions of the Code, and other factors that the Board of Directors deems relevant. As discussed in the
Subsequent Events footnote to the consolidated financial statements, on March 30, 2020, the Sixth Amendment to
the Key Bank credit facility was signed which provides that no cash dividends or distributions may be made to
common or preferred shareholders for the remaining term of the debt.
For income tax purposes, distributions paid per share for the years ended December 31, 2019, 2018, and 2017 were
characterized as follows:
2019
For the year ended December 31,
2018
2017
Amount
%
Amount
%
Amount
%
Common Shares:
Ordinary income
Capital gain
Return of capital
Total
Series D Preferred Stock:
Ordinary income
Capital gain
Return of capital
Total
$
$
$
$
-
-
0.585000
0.585000
- $
-
100%
100% $
-
-
0.975000
0.975000
- $
-
100%
100% $
0.117000
-
0.468000
0.585000
-
-
-
-
- $
-
-
- $
0.104160
-
-
0.104160
-
-
-
-
- $
-
-
- $
25
20%
-
80%
100%
100%
-
-
100%
Series E Preferred Stock:
Ordinary income
Capital gain
Return of capital
Total
$
$
-
-
0.468750
0.468750
- $
-
100%
100% $
-
-
0.625000
0.625000
- $
-
100%
100% $
0.522569
-
-
0.522569
100%
-
-
100%
The common and preferred share distributions declared on December 11, 2018 and paid on January 3, 2019 and
December 31, 2018, respectively, were treated as 2018 distributions for tax purposes. The common share
distribution declared on December 19, 2017 and paid on January 10, 2018 was treated as a 2018 distribution for tax
purposes. The preferred share distribution declared on December 19, 2017 and paid on January 2, 2018 was treated
as a 2017 distribution for tax purposes.
Shares Authorized for Issuance Under Equity Compensation Plans
See Part III, Item 12 for a description of securities authorized for issuance under our 2016 Stock Plan.
Share Performance
The following graph compares the yearly percentage change in the cumulative total shareholder return on our
common stock for the period December 31, 2014 through December 31, 2019, with the cumulative total return on
the SNL Securities Hotel REIT Index, the Russell 2000 Index, and the NYSE Composite Index for the same period.
The SNL Hotel REIT Index is comprised of publicly traded REITs that focus on investments in hotel properties.
The comparison assumes a starting investment of $100 on December 31, 2014 in our common stock and in each of
the indices shown and assumes that all dividends are reinvested. The performance graph is not necessarily
indicative of future investment performance.
26
27
ITEM 6. SELECTED FINANCIAL DATA
The following sets forth selected financial and operating data on a historical consolidated basis. The following
information should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and our audited consolidated financial statements and related notes thereto,
appearing elsewhere in this document.
In thousands, except per share data
As of and for the years ended December 31,
2019
2018
2017
2016
2015
Revenue
Room rentals and other hotel services
Operating expense
Hotel and property operations
Depreciation and amortization
General and administrative
Acquisitions and terminated transactions
Equity and terminated transactions
Total operating expenses
Operating income
Net gain (loss) on disposition of assets
Equity in earnings (loss) of joint venture
Net gain (loss) on derivatives and convertible debt
Other income (expense), net
Interest expense
Loss on debt extinguishment
Impairment (loss) recovery, net
Earnings (loss) from continuing operations before income taxes
Income tax (expense) benefit
Earnings (loss) from continuing operations
Gain from discontinued operations, net of tax
Net earnings (loss)
(Earnings) loss attributable to noncontrolling interest
Net earnings (loss) attributable to controlling interests
Dividends declared and undeclared and in kind dividends
deemed on preferred stock
Net earnings (loss) attributable to common shareholders
$ 61,052 $ 65,057 $
38,769
9,568
5,700
38
2,110
56,185
4,867
(36)
190
(1,071)
(104)
(7,976)
-
-
(4,130)
(937)
(5,067)
-
(5,067)
19
(5,048)
41,008
9,475
6,217
205
-
56,905
8,152
5,570
(218)
317
(83)
(8,326)
-
93
5,505
(335)
5,170
-
5,170
195
5,365
55,453 $
50,647 $
58,714
37,134
6,898
6,552
1,250
343
52,177
3,276
6,807
190
436
(111)
(5,174)
(967)
(2,151)
2,306
595
2,901
-
2,901
(20)
2,881
37,092
5,190
5,792
550
-
48,624
2,023
23,132
(244)
6,377
55
(4,710)
(2,187)
(1,477)
22,969
(125)
22,844
678
23,522
(727)
22,795
43,367
5,400
5,493
684
246
55,190
3,524
4,798
-
11,578
114
(5,522)
(213)
(3,829)
10,450
-
10,450
3,872
14,322
(1,197)
13,125
(578)
$ (5,626) $
(578)
4,787 $
(12,243)
(20,748)
(9,362) $
2,047 $
(3,632)
9,493
Weighted average number of common shares - basic
Weighted average number of common shares - diluted
11,856
11,856
11,784
11,886
9,438
9,438
761
5,536
752
3,575
Earnings per Share
Continuing operations - Basic
Discontinued operations - Basic
Total - Basic Earnings (Loss) per Share
Diluted Earnings Per Share (EPS)
Continuing operations - Diluted
Discontinued operations - Diluted
Total - Diluted Earnings (Loss) per Share
Balance sheet data
Total investment in hotel properties, net
Cash and cash equivalents
Total assets
Total debt, net of deferred financing costs, including convertible
debt at fair value
Total equity
$
$
$
$
(0.48) $
0.40 $
(1.00) $
-
-
-
(0.48) $
0.40 $
(1.00) $
1.82 $
0.85
2.67 $
8.06
4.55
12.61
(0.48) $
0.40 $
(1.00) $
-
-
-
(0.48) $
0.40 $
(1.00) $
0.78 $
0.13
0.91 $
(0.98)
0.98
-
$ 222,063 $ 234,270 $ 219,580 $ 114,871 $ 130,699
$
4,870
$ 236,941 $ 253,448 $ 242,980 $ 140,665 $ 142,346
2,584 $
5,441 $
8,326 $
4,151 $
$ 135,081 $ 137,930 $ 121,650 $
$ 95,826 $ 107,852 $ 111,814 $
64,035 $
70,799 $
86,011
34,495
28
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated Financial Statement and Notes
thereto. This section includes discussion of financial information as of and for the year ended December 31, 2019
and provides comparisons to the same information as of and for the year ended December 31, 2018. Comparisons of
2018 financial information to the same information for 2017 can be found in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on
Form 10-K for the year ended December 31, 2018 as filed with the Securities and Exchange Commission on March
11, 2019.
Overview
Condor Hospitality Trust, Inc. is a self-administered REIT for federal income tax purposes that specializes in the
investment and ownership of high-quality select-service, limited-service, extended stay, and compact full service
hotels. Substantially all of our operations are conducted through Condor Hospitality Limited Partnership, our
operating partnership, for which we serve as general partner. As of December 31, 2019, the Company owned 15
hotels, representing 1,908 rooms, in eight states, including one hotel owned through an 80% interest in an
unconsolidated joint venture.
Agreement and Plan of Merger
On July 19, 2019, Company Parties and the NHT Parties entered into the Merger Agreement. Closing of the
acquisition did not occur on March 23, 2020, the contemplated closing date of the acquisition, and has not occurred
as of the time of this filing. The Company Parties and the NHT Parties are in discussions concerning potential
amendments to restructure the transaction, which will be disclosed if and when such amendments are agreed. There
can be no assurance with respect to the outcome of such discussions, and the Company continues reviewing its
options and reserves all rights and remedies under the Merger Agreement.
There can be no assurances that the acquisition of the Company will be completed.
Hotel Property Portfolio Activity
Acquisitions
During the year ended December 31, 2019, there were no hotel acquisitions.
Subsequent to year end, on February 14, 2020, the Company purchased our joint venture partner’s interest in the
Atlanta JV for $7.3 million.
Dispositions
Pursuant to our disposition strategy, the following hotel sales were completed in 2019:
Date of sale
03/22/2019
Location
Solomons, MD
Brand
Condor lender
Quality Inn
Credit facility
Number of
rooms
Gross proceeds
(in thousands)
59
$
4,320
Net proceeds, after the payment of related expenses, totaled $4.2 million in 2019. The net proceeds were used to
repay borrowings under the Company’s credit facility.
Based on the criteria discussed in the footnotes to the consolidated financial statements, as of December 31, 2019,
the Company had no hotels classified as held for sale. As of December 31, 2018, the Company had one hotel held
for sale which was sold in 2019. If a hotel is considered held for sale as of the most recent balance sheet presented
29
or was sold in any period presented, the hotel property and the debt it collateralizes are shown as held for sale in all
periods presented.
Operating Performance Metrics
The following table presents our comparative same-store occupancy, ADR, and RevPAR for all our hotels owned
at December 31, 2019. Same-store occupancy, ADR, and RevPAR reflect the performance of hotels during the
entire period, regardless of our ownership during the period presented. Results for the hotels for periods prior to our
ownership were provided to us by prior owners and have not been adjusted by us or audited or reviewed by our
independent auditors. The performance metrics for the hotel acquired through 80% ownership of the Atlanta
Aloft JV, also presented below, reflect 100% of the operating results of the property, including our interest and the
interest of our partner.
Wholly owned new investment platform properties
Atlanta Aloft JV
Total Same-Store Portfolio
79.29% $
76.21% $
78.88% $
121.25 $
151.09 $
125.09 $
96.15
115.15
98.68
80.52% $
75.37% $
79.84% $
Occupancy
2019
ADR
Year ended December 31,
RevPAR
Occupancy
2018
ADR
120.53 $
144.43 $
123.24 $
RevPAR
97.05
108.85
98.63
Total same-store RevPAR remained almost consistent between the periods, increasing by 0.1% during 2019, driven
by a 1.3% increase in ADR which was partially offset by a decrease in occupancy of 1.2%. The largest RevPAR
increases during this period were the El Paso Fairfield Inn (increase of 9.6%) and the Atlanta Aloft JV (increase of
5.8%). These increases were partially offset by a decrease at the San Antonio SpringHilll Suites (decrease of
12.3%). At the El Paso Fairfield Inn, the increase in RevPAR was driven by both increases in occupancy (4.4%)
and ADR (5.0%) resulting from increased business in the market due to border and immigration issues and increased
activity at Fort Bliss. The performance of the Atlanta Aloft, which was driven by an increase in ADR of 4.6%, was
largely the result of the 2019 Super Bowl in the market. At the San Antonio SpringHill Suites, the decrease was
driven by a much weaker 2019 convention schedule and the timing of athletic events when compared to 2018.
Results of Operations
Revenue
Hotel and property operations expense
Depreciation and amortization expense
General and administrative expense
Acquisition and terminated transactions expense
Equity transaction and strategic alternatives
Net gain (loss) on disposition of assets
Equity (loss) in earnings of joint venture
Net gain (loss) on derivatives and convertible debt
Other expense, net
Interest expense
Impairment recovery, net
Income tax expense
Net earnings (loss)
Year ended December 31,
2019
2018
Variance
$
$
61,052
(38,769)
(9,568)
(5,700)
(38)
(2,110)
(36)
190
(1,071)
(104)
(7,976)
-
(937)
(5,067)
$
$
65,057
(41,008)
(9,475)
(6,217)
(205)
-
5,570
(218)
317
(83)
(8,326)
93
(335)
5,170
$
$
(4,005)
2,239
(93)
517
167
(2,110)
(5,606)
408
(1,388)
(21)
350
(93)
(602)
(10,237)
Comparison of the year ended December 31, 2019 to the year ended December 31, 2018 (in thousands, except per
share amounts)
Revenue
Revenue decreased by a total of $4,005 primarily as a result of decreased revenue from properties sold during and
between the periods of $4,090 which was partially offset by revenue from properties acquired during the first quarter
of 2018 which increased by $512. Revenue related to new investment platform properties owned throughout both
periods decreased by $427 as a result of the changes in RevPar discussed above.
30
Expenses
Hotel and property operations expense also decreased by $2,239 as a result of decreased expenses from properties
sold during and between the periods of $3,013 which was partially offset by expenses from properties acquired
during the first quarter of 2018 which increased by $405. In total, hotel and property operations expenses increased
slightly as consistent as a percentage of total revenue from 63.0% in 2018 to 63.5% in 2019.
General and administrative expense decreased by $517 between the periods largely due to decreased compensation
costs as well as decreased professional services and travel costs as a result of decreased transactional activity.
Acquisition costs typically consist of transfer taxes, legal fees, and other costs associated with acquiring a hotel
property as well as transactions that were terminated during the year and expense incurred pursuing potential
acquisitions. Prior to January 1, 2018, hotel acquisition costs were expensed for both completed and potential
acquisitions. Beginning on January 1, 2018, with the implementation of ASU No. 2017-01, these costs are
capitalized if they relate to completed hotel acquisitions accounted for as asset acquisitions and expensed
only when related to potential acquisitions not subsequently pursued or terminated transactions, leading to the period
over period decrease in these expenses. See further discussion of ASU No. 2017-01 in Note 1, Organization and
Summary of Significant Accounting Policies, to our consolidated financial statements.
In 2019, $2,110 of expenses were recognized as Equity transaction and strategic alternatives expenses which
included the removal of previously capitalized costs related to the Company’s shelf registration and at-the-market
offering program and costs incurred related to the Company’s strategic alternatives initiative.
Interest expense decreased by $350 between the periods, driven by a decrease in debt outstanding as a result of the
smaller property portfolio.
Net Gain (Loss) on Disposition of Assets
During the years ended December 31, 2019 and 2018, the Company sold one hotel and four hotels, respectively,
resulting in total gains of $62 and $5,707, respectively. The net gains (losses) appearing in the financial statements
also include net losses on disposals due to repairs, replacements, and other renovations. One of the properties sold
in the first quarter of 2018 had been previously impaired and a recovery of impairment of $93 was recognized upon
the sale.
Net Gain (Loss) on Derivatives and Convertible Debt
In 2019, the net loss on derivatives and convertible debt was driven by increases in the Company’s common stock
price. The net gain on derivatives and convertible debt in 2018 was driven by changes in value of the Company’s
interest rate swap on its Wells Fargo debt which is adjusted to fair market value each period.
Non-GAAP Financial Measures
Non-GAAP financial measures are measures of our historical financial performance that are different from measures
calculated and presented in accordance with accounting principles generally accepted in the United States of
America (“GAAP”). We report Funds from Operations (“FFO”), Adjusted FFO (“AFFO”), Earnings Before
Interest, Taxes, Depreciation, and Amortization (“EBITDA”), EBITDA for real estate (“EBITDAre”), Adjusted
EBITDAre, and Hotel EBITDA as non-GAAP measures that we believe are useful to investors as key measures of
our operating results and which management uses to facilitate a periodic evaluation of our operating results relative
to those of our peers. Our non-GAAP measures should not be considered as an alternative to U.S. GAAP net
earnings as an indication of financial performance or to U.S. GAAP cash flows from operating activities as a
measure of liquidity. Additionally, these measures are not indicative of funds available to fund cash needs or our
ability to make cash distributions as they have not been adjusted to consider cash requirements for capital
expenditures, property acquisitions, debt service obligations, or other commitments.
31
FFO and AFFO
We calculate FFO in accordance with the standards established by the National Association of Real Estate
Investment Trusts (“NAREIT”), which defines FFO as net earnings or loss computed in accordance with GAAP,
excluding gains or losses from sales of real estate assets, impairment, and the depreciation and amortization of real
estate assets. FFO is calculated both for the Company in total and as FFO attributable to common shares and
common units, which is FFO reduced by preferred stock dividends. AFFO is FFO attributable to common shares
and common units adjusted to exclude items we do not believe are representative of the results from our core
operations, including non-cash gains or losses on derivatives and convertible debt, stock-based compensation
expense, amortization of certain fees, losses on debt extinguishment, and in-kind dividends above stated rates, and
cash charges for acquisition and equity transaction and strategic alternatives costs. All REITs do not calculate FFO
and AFFO in the same manner; therefore, our calculation may not be the same as the calculation of FFO and AFFO
for similar REITs.
We consider FFO to be a useful additional measure of performance for an equity REIT because it facilitates an
understanding of the operating performance of our properties without giving effect to real estate depreciation and
amortization, which assumes that the value of real estate assets diminishes predictably over time. Since real estate
values have historically risen or fallen with market conditions, we believe that FFO provides a meaningful indication
of our performance. We believe that AFFO provides useful supplemental information to investors regarding our
ongoing operating performance that, when considered with net earnings and FFO, is beneficial to an investor’s
understanding of our operating performance.
The following table reconciles net earnings to FFO and AFFO for the years ended December 31 (in thousands). All
amounts presented include our portion of the results of our unconsolidated Atlanta JV.
Reconciliation of Net Earnings (Loss) to FFO and AFFO
Net earnings (loss)
Depreciation and amortization expense
Depreciation and amortization expense from JV
Net loss (gain) on disposition of assets
Net loss on disposition of assets from JV
Impairment loss (recovery), net
FFO
Dividends declared and undeclared and in kind dividends deemed on preferred stock
FFO attributable to common shares and common units
Net loss (gain) on derivatives and convertible debt
Net loss on derivatives from JV
Acquisitions and terminated transactions expense
Equity transaction and strategic alternatives
Loss on debt extinguishment
Loss on extinguishment of debt from JV
Stock-based compensation and LTIP expense
Amortization of deferred financing fees
Amortization of deferred financing fees from JV
Non-recurring dividends above stated rates declared and undeclared and in kind dividends
deemed on preferred stock
AFFO attributable to common shares and common units
Year ended December 31,
2018
2017
2019
$
(5,067) $
9,568
1,195
36
2
-
5,734
(578)
5,156
1,071
1
38
2,110
-
138
1,026
1,267
444
5,170 $
9,475
1,155
(5,570)
157
(93)
10,294
(578)
9,716
(317)
22
205
-
-
-
974
1,443
181
2,901
6,898
1,140
(6,807)
7
2,151
6,290
(12,244)
(5,954)
(436)
2
1,250
343
967
-
1,237
1,066
181
-
11,251 $
-
12,224 $
11,110
9,766
$
Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBTIDA”), EBITDAre, Adjusted EBITDAre,
and Hotel EBITDA
We calculate EBITDA, EBITDAre, and Adjusted EBITDAre by adding back to net earnings or loss certain non-
operating expenses and certain non-cash charges which are based on historical cost accounting that we believe may
be of limited significance in evaluating current performance. We believe these adjustments can help eliminate the
accounting effects of depreciation and amortization and financing decisions and facilitate comparisons of core
operating profitability between periods. In calculating EBITDA, we add back to net earnings or loss interest
expense, loss on debt extinguishment, income tax expense, and depreciation and amortization expense. NAREIT
adopted EBITDAre in order to promote an industry-wide measure of REIT operating performance. We adjust
32
EBITDA by adding back net gain/loss on disposition of assets and impairment charges to calculate EBITDAre. To
calculate Adjusted EBITDAre, we adjust EBITDAre to add back acquisition and terminated transactions expense
and equity transaction and strategic alternatives expense, which are cash charges. We also add back stock –based
compensation expense and gain/loss on derivatives and convertible debt, which are non-cash charges. EBITDA,
EBITDAre, and Adjusted EBITDAre, as presented, may not be comparable to similarly titled measures of other
companies.
We believe EBITDA, EBITDAre, and Adjusted EBITDAre to be useful additional measures of our operating
performance, excluding the impact of our capital structure (primarily interest expense), our asset base (primarily
depreciation and amortization expense), and other items we do not believe are representative of the results from our
core operations.
The Company further excludes general and administrative expenses, other non-operating income or expense, and
certain hotel and property operations expenses that are not allocated to individual properties in assessing hotel
performance (primarily certain general liability and other insurance costs, land lease costs, and office and banking
fees) from Adjusted EBITDAre to calculate Hotel EBITDA. Hotel EBITDA, as presented, may not be comparable
to similarly titled measures of other companies.
Hotel EBITDA is intended to isolate property level operational performance over which the Company’s hotel
operators have direct control. We believe Hotel EBITDA is helpful to investors as it better communicates the
comparability of our hotels’ operating results for all of the Company’s hotel properties and is used by management
to measure the performance of the Company’s hotels and the effectiveness of the operators of the hotels.
The following table reconciles net earnings to EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel EBITDA for
the years ended December 31 (in thousands). All amounts presented include our portion of the results of our
unconsolidated Atlanta JV.
Reconciliation of Net earnings (loss) to EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel
EBITDA
Net earnings (loss)
Interest expense
Interest expense from JV
Loss on debt extinguishment
Loss on extinguishment of debt from JV
Income tax expense (benefit)
Depreciation and amortization expense
Depreciation and amortization expense from JV
EBITDA
Net (gain) loss on disposition of assets
Net loss on disposition of assets from JV
Impairment loss (recovery), net
EBITDAre
Net (gain) loss on derivatives and convertible debt
Net loss on derivative from JV
Stock-based compensation and LTIP expense
Acquisition and terminated transactions expense
Equity transaction and strategic alternatives
Adjusted EBITDAre
General and administrative expense, excluding stock compensation and LTIP expense
Other expense (income), net
Unallocated hotel and property operations expense
Hotel EBITDA
Revenue
JV revenue
Total Company and JV revenue
Hotel EBITDA as a percentage of revenue
Year ended December 31,
2019
2018
2017
(5,067) $
7,976
2,140
-
138
937
9,568
1,195
16,887
36
2
-
16,925
1,071
1
1,026
38
2,110
21,171
4,674
104
227
26,176 $
5,170 $
8,326
2,109
-
-
335
9,475
1,155
26,570
(5,570)
157
(93)
21,064
(317)
22
974
205
-
21,948
5,243
83
364
27,638 $
61,052 $
10,133
71,185 $
36.8%
65,057 $
9,510
74,567 $
37.1%
2,901
5,174
1,941
967
-
(595)
6,898
1,140
18,426
(6,807)
7
2,151
13,777
(436)
2
1,237
1,250
343
16,173
5,315
111
351
21,950
55,453
9,266
64,719
33.9%
$
$
$
$
33
Liquidity and Capital Resources
Agreement and Plan of Merger
The Merger Agreement among the Company, our operating partnership and certain affiliates of NHT provides that,
upon consummation of the Mergers, the holders of our common stock would receive in exchange for their shares
$11.10 per share in cash, the holders of our Series E preferred stock would receive in exchange for their shares
$10.00 per share in cash, and the holders of the operating partnership would receive in exchange for their common
units $0.21346 per unit in cash, each without interest and less any applicable withholding taxes. The transactions
pursuant to by the Merger Agreement also contemplate that, upon closing, the NHT Parties would assume or
otherwise payoff substantially all of the debt of the Company. As disclosed in this Annual Report on Form 10-K,
the Mergers have not been consummated, and there can be no assurances that the acquisition of the Company will be
completed.
Liquidity Requirements
We expect to meet our short-term liquidity requirements through net cash provided by operations, existing cash balances
and working capital, and the release of restricted cash upon the satisfaction of usage requirements. At December 31,
2019, the Company had $2.6 million of cash and cash equivalents, $5.8 million of restricted cash on hand, and
$9.0 million of unused availability under its credit facility. As discussed further in the Subsequent Events footnote of the
consolidated financial statements, on March 30, 2020, our credit facility was amended to, among other things, remove
the ability to reborrow in the future (without Lender approval). Our short-term liquidity requirements consist primarily
of operating expenses and other expenditures directly associated with our hotel properties, recurring maintenance and
capital expenditures necessary to maintain our hotels in accordance with brand standards, interest expense and scheduled
principal payments on outstanding indebtedness, restricted cash funding obligations, and the payment of dividends in
accordance with the REIT requirements of the Code and as required in connection with our Series E Preferred Stock.
We also presently expect to invest approximately $0.5 million to $1.5 million in capital expenditures related to hotel
properties we currently own through March 31, 2021.
To maintain our REIT tax status, we generally must distribute at least 90% of our taxable income to our shareholders
annually. In addition, we are subject to a 4% non-deductible excise tax if the actual amount distributed to shareholders in
a calendar year is less than a minimum amount specified under the federal income tax laws. We have a general dividend
policy of paying out approximately 100% of annual REIT taxable income. The actual amount of any future dividends
will be determined by the Board of Directors based on our actual results of operations, economic conditions, capital
expenditure requirements, and other factors that the Board of Directors deems relevant.
Our longer-term liquidity requirements consist primarily of the cost of acquiring additional hotel properties, renovations
and other one-time capital expenditures that periodically are made related to our hotel properties, and scheduled debt
payments, including maturing loans. Possible sources of liquidity to fund debt maturities and acquisitions and to meet
other obligations include additional secured or unsecured debt financings, and proceeds from public or private issuances
of debt or equity securities.
Prior to the consideration of any asset sales or our ability to refinance debt subsequent to December 31, 2019, contractual
principal payments on our debt outstanding, including normal amortization, totaled $88.4 million through March 31,
2021, including the October 2020 maturity of our Key Bank credit facility. As discussed further in the Subsequent
Events footnote of the consolidated financial statements, on March 30, 2020, the Key Bank credit facility was amended
to, among other things, extend the maturity date of the facility to April 1, 2021, providing also for two extension options
(six months and five months). Following this modification, contractual principal payments on our debt outstanding at
December 31, 2019 through March 31, 2021 totaled $1.6 million.
Sources and Uses of Cash
Cash provided by Operating Activities. Our cash provided by operations was $9.3 million and $10.7 million for the
years ended December 31, 2019 and 2018, respectively, a decrease of $1.4 million. This change in operating cash
flow was driven by a change in net income, after adjusting for non-cash items, which decreased by $3.0
34
million. This decrease was partially offset by differing changes in liabilities between the periods, driven most
significantly by differences in the timing of the payment of property taxes. Other changes in operating assets and
liabilities between the periods discussed were individually insignificant.
Cash provided by (used in) Investing Activities. Our cash provided by (used in) investing activities was $4.4 million
and ($16.5 million) for the years ended December 31, 2019 and 2018, respectively, an increase of $20.9 million.
The increase in these cash flows was driven by decreased cash spent on hotel acquisitions of $35.6 million, partially
offset by a decrease in net proceeds from the sale of hotels of $15.5 million between the periods.
Cash provided by (used in) Financing Activities. Our cash provided by (used in) financing activities was ($14.4
million) and $4.6 million for the years ended December 31, 2019 and 2018, respectively, a decrease of $19.0
million. The decrease was driven by decreased debt proceeds of $33.8 million due to a decrease in hotel
acquisitions, partially offset by a decrease in repayments of debt of $15.0 million due to a decrease in hotel sales.
Outstanding Indebtedness
At December 31, 2019, we had long-term debt of $135.4 million with a weighted average term to maturity of 1.5
years and a weighted average interest rate of 4.22%. Of this total, at December 31, 2019, $22.9 million was fixed
rate debt with a weighted average term to maturity of 2.3 years and a weighted average interest rate of 4.41% and
$112.5 million was variable rate debt with a weighted average term to maturity of 1.2 years and a weighted average
interest rate of 4.18%. At December 31, 2018, we had long-term debt of $138.0 million associated with assets held
for use with a weighted average term to maturity of 2.1 years and a weighted average interest rate of 5.15%. Of this
total, at December 31, 2018, $23.6 million was fixed rate debt with a weighted average term to maturity of 1.9 years
and a weighted average interest rate of 4.41% and $114.4 million was variable rate debt with a weighted average
term to maturity of 2.9 years and a weighted average interest rate of 5.30%.
Debt is classified as held for sale if the properties collateralizing it are held for sale. Debt associated with assets held
for sale is classified in the table below based on its contractual maturity although the balances are expected to be
repaid within one year upon the sale of the related hotel properties. Aggregate annual principal payments on debt
for the next five years and thereafter are as follows (in thousands):
2020 $
2021
2022
2023
2024
Thereafter
Total $
Total
88,076
14,341
24,886
214
7,840
-
135,357
Financial Covenants
We are required to satisfy various financial covenants within our debt agreements, including the following financial
covenants within our credit facility with KeyBank:
• Debt Yield: The ratio of adjusted net operating income for the borrowing base properties to indebtedness
outstanding under the credit facility cannot be less than 10%. The covenant is first tested on September 30,
2020 and for purposes of calculating compliance with the covenant, annualized results are used until June
30, 2021 when the calculation is based on the most recently ended four fiscal quarters.
• Consolidated Leverage Ratio: The ratio of consolidated total indebtedness to consolidated total asset value
cannot exceed 60%.
• Fixed Charge Coverage Ratio: The ratio of adjusted consolidated EBITDA to consolidated fixed charges
cannot be less than (a) 1.25 to 1 as of the end of the fiscal quarter ending September 30, 2020 and (b) 1.50
to 1 as of the end of the fiscal quarter ending December 31, 2020 and each fiscal quarter thereafter. For
purposes of calculating compliance with the covenant, annualized results are used until June 30, 2021 when
the calculation is based on the most recently ended four fiscal quarters.
35
• Borrowing Base Leverage Ratio: The ratio of indebtedness outstanding under the credit facility to
borrowing base asset value (based on updated appraisals required by the lenders) cannot exceed 65%. The
covenant is first tested on June 30, 2021.
On March 30, 2020, our credit facility with KeyBank was amended to, among other things:
•
Implement a collateral-specific minimum debt yield (ratio of adjusted net operating income for the
borrowing base properties to indebtedness outstanding under the credit facility) of 10%. The covenant is
first tested on September 30, 2020 and for purposes of calculating compliance with the covenant,
annualized results are used until June 30, 2021 when the calculation is based on the most recently ended
four fiscal quarters.
• Maintain the maximum consolidated leverage ratio (ratio of consolidated total indebtedness to consolidated
total asset value) of 60% but provide for updated appraisals to determine consolidated total asset value (if
required by the lenders).
• Modify the fixed charge coverage ratio (ratio of adjusted consolidated EBITDA to consolidated fixed
charges) to (a) 1.25 to 1 as of the end of the fiscal quarter ending September 30, 2020 and (b) 1.50 to 1 as
of the end of the fiscal quarter ending December 31, 2020 and each fiscal quarter thereafter. For purposes
of calculating compliance with the covenant, annualized results are used until June 30, 2021 when the
calculation is based on the most recently ended four fiscal quarters. The covenant was previously 1.50 to 1
tested at the end of each fiscal quarter based on the most recently ended four fiscal quarters.
Implement a maximum borrowing base leverage ratio (ratio of indebtedness outstanding under the credit
facility to borrowing base asset value (based on updated appraisals required by the lenders) of 65%. The
covenant is first tested on June 30, 2021.
•
• Eliminate the financial covenants regarding secured leverage ratio, tangible net worth and variable rate
debt.
• Modify the covenant on dividends and distributions to provide that no cash dividends or distributions may
be made to common or preferred shareholders.
• Modify the covenants on recourse debt and investments to provide that no additional recourse debt or
investments will be permitted.
As a result of the anticipated impact of the COVID-19 virus on the hotel industry generally, the Company has
received waivers from Great Western Bank with respect to compliance with its quarterly debt service coverage
ratios (consolidated and for the Leawood Aloft collateral) for March 31, 2020 and June 30, 2020 and modifications
for September 30, 2020 and December 31, 2020 (providing for lower collateral covenant and use of annualized
results). The modification also provides for a three month deferral of principal and interest payments.
Certain of the terms used in the foregoing descriptions of the financial covenants within our credit facility have the
meanings given to them in the credit facility, and certain of the financial covenants are subject to pro forma
adjustments for acquisitions and sales of hotel properties and for specific capital events.
If we fail to pay our indebtedness when due, fail to comply with covenants or otherwise default on our loans, unless
waived, we could incur higher interest rates during the period of such loan defaults, be required to immediately pay
our indebtedness, and ultimately lose our hotels through lender foreclosure if we are unable to obtain alternative
sources of financing with acceptable terms. Our credit facility contains cross-default provisions which would allow
the lenders under our credit facility to declare a default and accelerate our indebtedness to them if we default on our
other loans and such default would permit that lender to accelerate our indebtedness under any such loan.
As of December 31, 2019, we are not in default of any of our loans.
Significant Debt Transactions
During 2019, net proceeds from the Company’s hotel sale were used to pay down a total of $4.2 million on the
credit facility and an additional $1.5 million was drawn under the facility for corporate purposes. Available
borrowing capacity under the credit facility is based on a borrowing base formula for the pool of hotel properties
securing the facility. As of December 31, 2019, the collateral pool consisted of nine hotel properties and total
36
available borrowing capacity under the credit facility was $9.0 million. At December 31, 2019, $86.8 million was
outstanding under the credit facility.
On March 8, 2019, the credit facility was amended to extend its maturity from March 1, 2020 to April 1, 2020. On
May 3, 2019, the maturity of the credit facility was further extended to October 1, 2020. Two extension options,
extending the maturity of the credit facility to March 1, 2021 and March 1, 2022, remain available subject to certain
conditions including the completion of specific capital achievements.
Additionally, as discussed further in the Subsequent Events footnote to the consolidated financial statements, on
March 30, 2020, the Key Bank credit facility was amended to, among other things, extend the maturity date of the
facility to April 1, 2021, providing also for two extension options (six months and five months). Following this
modification, contractual debt maturities on debt outstanding at December 31, 2019 were as follows:
$
2020
2021
2022
2023
2024
Thereafter
Total $
Total
1,231
101,186
24,886
214
7,840
-
135,357
Contractual Obligations
Below is a summary of certain obligations that will require capital as of December 31, 2019, without consideration
of debt amendments that took place subsequent to year end, and the effect such obligations are expected to have on
our future liquidity and cash flows (in thousands):
Contractual obligations
Long-term debt including interest (1)
Equipment leases
Total contractual obligations
Total
142,850 $
96
142,946 $
$
$
2020
2021-2022
2023-2024
91,480 $
22
91,502 $
42,711 $
41
42,752 $
8,659 $
8
8,667 $
2025 and After
-
25
25
(1)
Interest rate payments on our variable rate debt have been estimated using interest rates in effect at December 31, 2019. As previously
discussed, the Company’s Key Bank credit facility was amended subsequent to year end to move the maturity of $86,845 of debt
outstanding at December 31, 2019 from 2020 to 2021.
We have various standing or renewable contracts with vendors. These contracts are all cancelable with immaterial or
no cancellation penalties. Contract terms are generally one year or less. We also have management agreements in
place for the management and operation of our hotel properties.
Inflation
We rely on the performance of our hotels to increase revenues to keep pace with inflation. Generally, our hotel
operators possess the ability to adjust room rates daily to reflect the effects of inflation. However, competitive
pressures may limit the ability of our management companies to raise room rates.
Off Balance Sheet Financing Transactions
We have not entered into any off balance sheet financing transactions.
37
Critical Accounting Policies
Our consolidated financial statements have been prepared in conformity with U.S. GAAP, which requires
management to make estimates and assumptions that effect the reported amount of assets and liabilities at the date of
our financial statements and the reported amounts of revenues and expenses during the reporting period. While we
do not believe the reported amounts would be materially different, application of these policies involves the exercise
of judgment and the use of assumptions as to future uncertainties and, as a result, actual results could differ from
these estimates. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on experience
and on various other assumptions that are believed to be reasonable under the circumstances.
Critical accounting policies are those that are both important to the presentation of our financial condition and
results of operations and require management’s most difficult, complex, or subjective judgments. We have
identified the following principal accounting policies that have a material effect on our consolidated financial
statements.
Investment in Hotel Properties
At the time of acquisition, the Company allocates the purchase price of assets to asset classes based on the fair value
of the acquired real estate, furniture, fixtures, and equipment, and intangible assets, if any, and the fair value of
liabilities assumed, including debt. Acquisition date fair values are determined based on replacement costs,
appraised values, and estimated fair values using methods similar to those used by independent appraisers including
discounted cash flows and capitalization rates.
Effective January 1, 2018, we adopted Financial Accounting Standards Board (“FASB”) ASU No. 2017-01,
Clarifying the Definition of a Business. As such, if substantially all of the fair value of the gross assets acquired are
concentrated in a single identifiable asset or group of similar identifiable assets, the set is not considered a business.
When we conclude that an acquisition meets this threshold, acquisition costs will be capitalized as part of our
allocation of the purchase price of the acquired hotel properties. This guidance is applied prospectively. We
concluded that all hotel acquisitions in 2018 were acquisitions of assets and as such acquisition costs were
capitalized as part of these transactions.
Prior to January 1, 2018, hotel acquisitions were considered business combinations and acquisition costs, such as
transfer taxes, title insurance, environmental and property condition reviews, and legal and accounting fees, were
expensed as incurred. These types of costs continue to be expensed if they are related to potential acquisitions that
are not completed.
The Company’s investments in hotel properties are recorded at cost and are depreciated using the straight-line
method over an estimated useful life of 15 to 40 years for buildings and improvements and 3 to 12 years for
furniture and equipment.
Renovations and/or replacements that improve or extend the life of the hotel properties are capitalized and
depreciated over their useful lives. Repairs and maintenance are expensed as incurred.
The initial fees incurred to enter into the franchise agreements are capitalized and amortized over the life of the
franchise agreements using the straight-line method. Amortization expense is included in depreciation and
amortization in the consolidated statements of operations.
On an ongoing basis, the Company reviews the carrying value of each held for use hotel to determine if certain
circumstances, known as triggering events, exist indicating impairment to the carrying value of the hotel or that
depreciation periods should be modified. These triggering events include a significant change in the cash flows of
or a significant adverse change in the business climate for a hotel. If facts or circumstances support the possibility
of impairment, the Company will prepare an estimate of the undiscounted future cash flows, without interest
charges, of the specific hotel and determine if the investment in such hotel is recoverable based on these
undiscounted future cash flows. If the investment is not recoverable based on this analysis, an impairment charge
will be taken, if necessary, to reduce the carrying value of the hotel to the hotel’s estimated fair value.
38
Assets Held for Sale
A hotel is considered held for sale (a) when a contract for sale is entered into, a substantial, nonrefundable deposit
has been committed by the purchaser, and sale is expected to occur within one year, or (b) if management has
committed to and is actively engaged in a plan to sell the property, the property is available for sale in its current
condition, and it is probable the sale will be completed within one year. If a hotel is considered held for sale as of
the most recent balance sheet presented or was sold in any period presented, the hotel property and the debt it
collateralizes are shown as held for sale in all periods presented. Depreciation of our hotels is discontinued at the
time they are considered held for sale.
At the end of each reporting period, if the fair value of the held for sale property less costs to sell is lower than the
carrying value of the hotel, the Company will record an impairment loss. Impairment losses on held for sale
properties may be subsequently recovered up to the amount of the cumulative impairment losses taken while the
property is held for sale should future revisions to fair value estimates be required. If active marketing ceases or the
property no longer meets the criteria to be classified as held for sale, the property is reclassified to held for use and
measured at the lower of its (a) carrying amount before the property was classified as held for sale, adjusted for any
depreciation expense that would have been recognized had the property been continuously classified as held for use,
or (b) its fair value at the date of the subsequent decision not to sell.
Gains on the sale of real estate are recognized when a property is sold or are deferred and recognized as income in
subsequent periods as conditions requiring deferral are satisfied or expire without further cost to us.
ITEM 7A. 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 effect market-sensitive instruments. At December 31, 2019, our
market risk arises primarily from interest rate risk relating to variable rate borrowings and the market risk related to
our convertible debt and the embedded redemption right in the Series E Preferred Stock that fair value will fluctuate
following changes in the Company’s common stock price or changes in interest rates.
Interest Rate Sensitivity
We seek to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing
costs by closely monitoring our variable rate debt and converting such debt to fixed rates when we deem such
conversion advantageous. From time to time, we may enter into interest rate swap agreements or other interest rate
hedging agreements. At December 31, 2019, we have an interest rate swap in place which effectively locks the
variable interest rate on our Wells Fargo debt (December 31, 2019 balance of $25.6 million) at 4.44% and an
interest rate cap in place which caps the 30-day LIBOR interest rate on $30.0 million of our credit facility
(December 31, 2019 balance of $86.4 million) at 3.35%. We do not intend to enter into derivative or interest rate
transactions for speculative purposes.
39
The table below provides information about financial instruments that are sensitive to changes in interest rates. The
table presents scheduled maturities, including the amortization of principal and related weighted-average interest
rates for the debt maturing in each specified period (dollars in thousands) as of December 31, 2019, without
consideration of debt amendments that took place subsequent to year end. As previously discussed, the Company’s
Key Bank credit facility was amended subsequent to year end to move the maturity of $86,845 of variable rate debt
outstanding from 2020 to 2021. For the purposes of this presentation, the Wells Fargo debt is considered fixed rate
debt as the variable interest rate is effectively locked with the previously discussed interest rate swap.
Fixed rate debt
Average fixed interest rate
Variable rate debt
Average variable interest rate
Total debt
Total average interest rate
$
2020
1,231
4.40 %
$ 86,845
$
4.30 %
2021
$ 14,341
2022
$ 24,886
$
4.34 %
-
- %
$
4.44 %
-
- %
$
2023
$
$
214
4.54 %
-
- %
2024
7,840
4.54 %
-
- %
$ 88,076
$ 14,341
$ 24,886
$
4.31 %
4.34 %
4.44 %
$
214
4.54 %
7,840
4.54 %
$
Thereafter
$
Total
$ 48,512
$
$ 86,845
-
- %
-
- %
-
- %
4.43 %
4.30 %
4.35 %
$ 135,357
At December 31, 2019, approximately 35.8% of our outstanding debt is subject to fixed interest rates or effectively
locked with an interest rate swap, while 64.2% of our debt is subject to floating rates. Assuming no increase in the
level of our variable debt outstanding at December 31, 2019 and after giving effect to our interest rate swap, if
interest rates increased by 1.0% our cash flow related to hotel properties held for use would decrease by
approximately $0.9 million per year.
40
Condor Hospitality Trust, Inc. and Subsidiaries
Index to Consolidated Financial Statements and Schedule III
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2019 and 2018
Consolidated Statements of Operations for years ended December 31, 2019, 2018, and 2017
Consolidated Statements of Equity for the years ended December 31, 2019, 2018, and 2017
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018, and
2017
Notes to Consolidated Financial Statements
Schedule III – Real Estate and Accumulated Depreciation
Notes to Schedule III – Real Estate and Accumulated Depreciation
Page
42
43
44
45
46
47
80
82
41
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Condor Hospitality Trust, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Condor Hospitality Trust, Inc. and subsidiaries
(the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations, equity, and
cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes and
financial statement schedule, Schedule III – Real Estate and Accumulated Depreciation (collectively, the
consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations
and its cash flows for each of the years in the three-year period ended December 31, 2019, in conformity with U.S.
generally accepted accounting principles.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these consolidated financial statements based on our audits. We are a public accounting
firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to
be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an
understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that
our audits provide a reasonable basis for our opinion.
(signed) KPMG LLP
We have served as the Company’s auditor since 2001.
McLean, Virginia
March 31, 2020
42
Condor Hospitality Trust, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per share data)
Assets
Investment in hotel properties, net
Investment in unconsolidated joint venture
Cash and cash equivalents
Restricted cash, property escrows
Accounts receivable, net
Prepaid expenses and other assets
Derivative assets, at fair value
Investment in hotel properties held for sale, net
Total Assets
Liabilities and Equity
Liabilities
Accounts payable, accrued expenses, and other liabilities
Dividends and distributions payable
Derivative liabilities, at fair value
Convertible debt, at fair value
Long-term debt, net of deferred financing costs
Long-term debt related to hotel properties held for sale, net of deferred financing costs
Total Liabilities
Equity
Shareholders' Equity
Preferred stock, 40,000,000 shares authorized:
$
$
$
As of December 31,
2019
2018
222,063 $
4,244
2,584
5,811
1,099
1,118
22
-
236,941 $
230,178
5,866
4,151
5,005
1,290
2,227
639
4,092
253,448
5,523 $
145
366
1,080
134,001
-
141,115
5,336
2,330
-
1,000
135,810
1,120
145,596
6.25% Series E, 925,000 shares authorized, $.01 par value, 925,000 shares outstanding, liquidation
preference of $9,395 and $9,250
Common stock, $.01 par value, 200,000,000 shares authorized;11,993,608 and 11,833,573 shares
outstanding
Additional paid-in capital
Accumulated deficit
Total Shareholders' Equity
Noncontrolling interest in consolidated partnership (Condor Hospitality Limited Partnership),
redemption value of $47 and $435
Total Equity
10,050
10,050
120
233,189
(147,582)
95,777
49
95,826
119
231,805
(134,970)
107,004
848
107,852
Total Liabilities and Equity
$
236,941 $
253,448
See accompanying notes to consolidated financial statements.
43
Condor Hospitality Trust, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
asd
Year ended December 31,
2018
2019
2017
Revenue
Room rentals and other hotel services
Operating Expenses
Hotel and property operations
Depreciation and amortization
General and administrative
Acquisition and terminated transactions
Equity transaction and strategic alternatives
Total operating expenses
Operating income
Net gain (loss) on disposition of assets
Equity in earnings (loss) of joint venture
Net gain (loss) on derivatives and convertible debt
Other income (expense), net
Interest expense
Loss on debt extinguishment
Impairment recovery (loss), net
Earnings (loss) before income taxes
Income tax benefit (expense)
Net earnings (loss)
Loss (earnings) attributable to noncontrolling interest
Net earnings (loss) attributable to controlling interests
Dividends declared and undeclared and in kind dividends deemed on preferred
stock
Net earnings (loss) attributable to common shareholders
$
61,052 $
65,057
$
55,453
38,769
9,568
5,700
38
2,110
56,185
4,867
(36)
190
(1,071)
(104)
(7,976)
-
-
(4,130)
(937)
(5,067)
19
(5,048)
41,008
9,475
6,217
205
-
56,905
8,152
5,570
(218)
317
(83)
(8,326)
-
93
5,505
(335)
5,170
195
5,365
37,134
6,898
6,552
1,250
343
52,177
3,276
6,807
190
436
(111)
(5,174)
(967)
(2,151)
2,306
595
2,901
(20)
2,881
(578)
(5,626) $
$
(578)
4,787
$
(12,243)
(9,362)
Earnings (Loss) per Share
Total - Basic Earnings (Loss) per Share
Total - Diluted Earnings (Loss) per Share
See accompanying notes to consolidated financial statements.
$
$
(0.48) $
(0.48) $
0.40
0.40
$
$
(1.00)
(1.00)
44
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45
Condor Hospitality Trust, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Year ended December 31,
2018
2019
2017
$
(5,067) $
5,170
$
2,901
9,568
36
1,071
(190)
170
1,267
-
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1,026
-
821
1,172
(622)
9,252
(1,475)
-
1,643
-
4,191
4,359
(415)
1,500
(5,281)
-
-
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(42)
(356)
(9,304)
(36)
(434)
-
(4)
(14,372)
9,475
(5,570)
(317)
218
187
1,443
-
(93)
974
-
260
582
(1,665)
10,664
(1,982)
-
1,475
(35,643)
19,696
(16,454)
(147)
35,318
(20,265)
-
260
-
(298)
(205)
(9,257)
(72)
(723)
-
-
4,611
6,898
(6,807)
(436)
(190)
51
1,066
967
2,151
1,237
289
(660)
(350)
2,500
9,617
(2,814)
(810)
1,428
(122,269)
27,630
(96,835)
(4,404)
174,000
(122,400)
(454)
47,468
(1,210)
-
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(6,944)
-
(1,965)
(155)
(59)
83,877
(761)
9,156
8,395 $
(1,179)
10,335
9,156
$
(3,341)
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6,732 $
307 $
6,091
42
$
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203
- $
- $
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- $
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-
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$
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435
-
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$
$
$
$
$
$
$
Cash flows from operating activities:
Net earnings (loss)
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization expense
Net gain on disposition of assets
Net gain on derivatives and convertible debt
Equity in (earnings) loss of joint venture
Distributions from cumulative earnings of joint venture
Amortization of deferred financing costs
Loss on extinguishment of debt
Impairment (recovery) loss, net
Stock-based compensation and long-term incentive plan expense
Warrant issuance cost
Provision for deferred taxes
Changes in operating assets and liabilities:
(Increase) decrease in assets
Increase (decrease) in liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Additions to hotel properties
Deposit on hotel property and franchise fees
Distributions in excess of cumulative earnings from joint venture
Hotel acquisitions
Net proceeds from sale of hotel assets
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Deferred financing costs
Proceeds from long-term debt
Principal payments on long-term debt
Debt early extinguishment penalties
Proceeds from common stock issuance
Series E Preferred Stock issuance costs
Redemption of common units
Tax withholdings on stock compensation
Cash dividends paid to common shareholders
Cash dividends paid to common unit holders
Cash dividends paid to preferred shareholders
Contingent consideration paid subsequent to acquisition
Other items
Net cash provided by (used in) financing activities
Decrease in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash beginning of period
Cash, cash equivalents, and restricted cash end of period
Supplemental cash flow information:
Interest paid, net of amounts capitalized
Income taxes paid
Schedule of noncash investing and financing activities:
Debt assumed in acquisitions
Fair value of operating partnership common units issued in acquisitions
Fair value of operating partnership common units converted to common stock
In kind dividends deemed on preferred stock
See accompanying notes to consolidated financial statements.
46
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Condor Hospitality Trust, Inc. (“Condor”) was incorporated in Virginia on August 23, 1994 and was reincorporated
in Maryland on November 19, 2014. Condor is a self-administered real estate investment trust (“REIT”) for federal
income tax purposes that specializes in the investment and ownership of high-quality select-service, limited-service,
extended stay, and compact full service hotels. As of December 31, 2019, the Company owned 15 hotels in eight
states, including one hotel owned through an 80% interest in an unconsolidated joint venture (the “Atlanta JV”).
References to the “Company”, “we,” “our,” and “us” herein refer to Condor Hospitality Trust, Inc., including as the
context requires, our direct and indirect subsidiaries.
The Company, through its wholly owned subsidiary, Condor Hospitality REIT Trust, owns a controlling interest in
Condor Hospitality Limited Partnership (the “operating partnership”), and serves as its general partner. The
operating partnership, including its various subsidiary partnerships, holds substantially all of the Company’s assets
(with the exception of the furniture and equipment of all properties held by TRS Leasing, Inc.) and conducts all of
its operations. At December 31, 2019, the Company owned 99.9% of the common operating units (“common
units”) of the operating partnership with the remaining common units owned by other limited partners.
In order for the income from our hotel property investments to constitute “rents from real properties” for purposes of
the gross income tests required by the Internal Revenue Service (“IRS”) for REIT qualification, the income we earn
cannot be derived from the operation of any of our hotels. Therefore, the operating partnership and its subsidiaries
lease our hotel properties to the Company’s wholly owned taxable REIT subsidiary, TRS Leasing, Inc., and its
wholly owned subsidiaries (the “TRS”). The TRS in turn engages third-party eligible independent contractors to
manage the hotels. The operating partnership, the TRS, and their respective subsidiaries are consolidated into the
Company’s financial statements.
Historically, as a result of the geographic areas in which we operate, the operations of our hotels have been seasonal
in nature. Generally, occupancy rates, revenue, and operating income have been greater in the second and third
quarters of the calendar year than in the first and fourth quarters, with the exception of our hotels located in Florida,
which experience peak demand in the first and fourth quarters of the year. The results of the hotels acquired in and
since 2015, because of their locations and chain scale, are less seasonal in nature than our legacy portfolio of assets.
Agreement and Plan of Merger
On July 19, 2019, the Company, the operating partnership (the Company and operating partnership, the “Company
Parties”), NHT Operating Partnership, LLC (“NHT Parent”), NHT REIT Merger Sub, LLC (“NHT Merger Sub”)
and NHT Operating Partnership II, LLC (“NHT Merger OP,” and together with NHT Parent and NHT Merger Sub,
the “NHT Parent Parties”), entered into an Agreement and Plan of Merger (as amended from time to time, the
“Merger Agreement”).
Closing of the acquisition did not occur on March 23, 2020, the contemplated closing date of the acquisition, and
has not occurred as of the time of this filing. The Company Parties and the NHT Parties are in discussions
concerning potential amendments to restructure the transaction, which will be disclosed if and when such
amendments are agreed. There can be no assurance with respect to the outcome of such discussions, and the
Company continues reviewing its options and reserves all rights and remedies under the Merger Agreement.
The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Merger OP will
merge with and into the operating partnership (the “Partnership Merger”), and, Merger Sub will merge with and into
the Company (the “Company Merger” and, together with the Partnership Merger, the “Mergers”). Upon completion
of the Partnership Merger, Merger OP will survive and the separate existence of the operating partnership will cease.
Upon completion of the Company Merger, the Company will survive and the separate existence of Merger Sub will
cease. The Mergers and the other transactions contemplated by the Merger Agreement were unanimously approved
47
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
by the Company’s Board of Directors (the “Company Board”, and subsequently approved by the holders of the
Company’s common stock (the “Company common stock”) and 6.25% Series E Cumulative Convertible Preferred
Stock (the “Series E Preferred Stock”) at a special meeting of shareholders held on September 23, 2019.
Pursuant to the terms and conditions in the Merger Agreement, if the Company Merger is consummated, each share
of the Company common stock (other than treasury shares and shares held by the NHT Parent Parties, which will be
cancelled and retired and will cease to exist with no consideration being delivered in exchange therefor), will be
converted into the right to receive $11.10 per share in cash, and each share of Series E Preferred Stock will be
converted into the right to receive $10.00 in cash, each without interest and less any applicable withholding taxes. If
the Partnership Merger consummated, each common unit of partnership interest in the operating partnership
(excluding operating partnership common units held by the general partner of the operating partnership) will be
converted into the right to receive $0.21346 in cash, without interest and less any applicable withholding taxes.
Pursuant to the terms and conditions of the Merger Agreement, each of the outstanding awards granted pursuant to
the Company’s equity incentive plans will automatically become fully vested and all restrictions thereon will lapse,
and thereafter, all Company common stock represented thereby will be considered outstanding for all purposes
under the Merger Agreement and will only have the right to receive an amount equal to $11.10 in cash, without
interest and less any applicable withholding taxes.
Pursuant to the terms of the Merger Agreement, the Company exercised its right to acquire the remaining 20%
equity interest of the Atlanta JV that it did not own.
The Merger Agreement contains customary representations, warranties and covenants, including, among others,
covenants by the Company to in all material respects carry on its business in the ordinary course of business
consistent with past practice, subject to certain exceptions, during the period between the execution of the Merger
Agreement and the consummation of the Mergers. The obligations of the parties to consummate the Mergers are not
subject to any financing condition or the receipt of any financing by Parent, Merger Sub or Merger OP.
Upon a termination of the Merger Agreement, under certain circumstances, the Company will be required to pay a
termination fee to Parent of $9.54 million. In certain other circumstances, including termination by the Company for
the NHT Parties’ failure to close or for a material breach by the NHT Parties, NHT Parent will be required to pay the
Company a termination fee of $11.925 million upon termination of the Merger Agreement.
During the term of the Merger Agreement, without the consent of the NHT Parties, the Company may not pay cash
dividends to holders of the Company common stock or the Series E Preferred Stock. The holders of the Series E
Preferred Stock have agreed to waive accrual of any unpaid dividends between signing and closing.
Basis of Presentation
The consolidated financial statements have been prepared in accordance with U.S. general accepted accounting
principles (“U.S. GAAP”) and include the accounts of the Company, as well as the accounts of the operating
partnership and its subsidiaries and our wholly owned TRS and its subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
Effective on March 15, 2017, the Company effected a reverse stock split of its common stock at a ratio of 1-for-6.5.
No fractional shares of common stock were issued as fractional shares were settled in cash. Impacted amounts and
share information included in the consolidated financial statements and notes thereto have been adjusted for the
stock split as if such stock split occurred on the first day of the periods presented. Certain amounts in the notes to the
consolidated financial statements may be slightly different than previously reported due to rounding of fractional
shares as a result of the reverse stock split.
48
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
Estimates, Risks, and Uncertainties
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to
make estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial statements as well as revenue and expenses
recognized during the reporting period. Actual results could differ from those estimates. Because the state of the
economy and of the real estate market can significantly impact hotel operational performance and the estimated fair
value of our assets, it is possible that the estimates and assumptions that have been utilized in the preparation of the
consolidated financial statements could change.
The outbreak of the novel coronavirus (COVID-19) has reduced travel and adversely affected the hospitality
industry in general. The actual and threatened spread of coronavirus globally or in the regions in which we operate,
or future widespread outbreak of infectious or contagious disease, can continue to reduce national and international
travel in general. The extent to which our business may be affected by the coronavirus will largely depend on
future developments which we cannot accurately predict, and its impact on customer travel, including the duration
of the outbreak, the continued spread and treatment of the coronavirus, and new information and developments that
may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact,
among others. To the extent that travel activity in the U.S. is materially and adversely affected by the coronavirus,
business and financial results of the hospitality industry, and thus our business and financial results, could be
materially and adversely impacted.
In late March 2020, prior to the filing of this report, similar to the conditions affecting the hospitality industry as a
whole, we experienced dramatic occupancy declines at many of our properties which will require us to adjust our
business operations, and will have impact on our operating income and may potentially impact future compliance
with our debt covenants.
Investment in Hotel Properties
At the time of acquisition, the Company allocates the purchase price of assets to asset classes based on the fair value
of the acquired real estate, furniture, fixtures, and equipment, and intangible assets, if any, and the fair value of
liabilities assumed, including debt. Acquisition date fair values are determined based on replacement costs,
appraised values, and estimated fair values using methods similar to those used by independent appraisers including
discounted cash flows and capitalization rates.
Effective January 1, 2018, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards
Update (“ASU”) No. 2017-01, Clarifying the Definition of a Business. As such, if substantially all of the fair value
of the gross assets acquired are concentrated in a single identifiable asset or group of similar identifiable assets, the
set is not considered a business. When we conclude that an acquisition meets this threshold, acquisition costs will be
capitalized as part of our allocation of the purchase price of the acquired hotel properties. This guidance is applied
prospectively. We concluded that all hotel acquisitions in 2018 were acquisitions of assets and as such acquisition
costs were capitalized as part of these transactions.
Prior to January 1, 2018, hotel acquisitions were considered business combinations and acquisition costs, such as
transfer taxes, title insurance, environmental and property condition reviews, and legal and accounting fees, were
expensed as incurred. These types of costs continue to be expensed if they are related to potential acquisitions that
are not completed.
The Company’s investments in hotel properties are recorded at cost and are depreciated using the straight-line
method over an estimated useful life of 15 to 40 years for buildings and improvements and 3 to 12 years for
furniture and equipment.
Renovations and/or replacements that improve or extend the life of the hotel properties are capitalized and
depreciated over their useful lives. Repairs and maintenance are expensed as incurred.
49
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
The initial fees incurred to enter into the franchise agreements are capitalized and amortized over the life of the
franchise agreements using the straight-line method. Amortization expense is included in depreciation and
amortization in the consolidated statements of operations.
On an ongoing basis, the Company reviews the carrying value of each held for use hotel to determine if certain
circumstances, known as triggering events, exist indicating impairment to the carrying value of the hotel or that
depreciation periods should be modified. These triggering events include a significant change in the cash flows of
or a significant adverse change in the business climate for a hotel. If facts or circumstances support the possibility
of impairment, the Company will prepare an estimate of the undiscounted future cash flows, without interest
charges, of the specific hotel and determine if the investment in such hotel is recoverable based on these
undiscounted future cash flows. If the investment is not recoverable based on this analysis, an impairment charge
will be taken, if necessary, to reduce the carrying value of the hotel to the hotel’s estimated fair value.
Investment in Joint Venture
If it is determined that we do not have a controlling interest in a joint venture, either through our financial interest in
a variable interest entity (“VIE”) or through our voting interest in a voting interest entity (“VOE”) and we have the
ability to provide significant influence, the equity method of accounting is used. Under this method, the investment,
originally recorded at cost, is adjusted to recognize our share of net earnings or losses of the affiliate as they occur,
with losses limited to the extent of our investment in, advances to, and commitments to the investee. Pursuant to our
Atlanta JV agreement, allocations of the profits and losses of our Atlanta JV may be allocated disproportionately to
nominal ownership percentages due to specified preferred return rate thresholds.
Distributions received from a joint venture are classified in the statements of cash flows using the cumulative
earnings approach. Distributions are classified as cash inflows from operating activities unless cumulative
distributions, including those from prior periods not designated as a return of investment, exceed cumulative
recognized equity in earnings of the joint venture. Excess distributions are classified as cash inflows from investing
activities as a return of investment.
On an annual basis or at interim periods if events and circumstances indicate that the investment may be impaired,
the Company reviews the carrying value of its investment in unconsolidated joint venture to determine if
circumstances indicate impairment to the carrying value of the investment that is other than temporary. The
investment is considered impaired if its estimated fair value is less than the carrying amount of the investment and
that impairment is other than temporary.
Assets Held for Sale
A hotel is considered held for sale (a) when a contract for sale is entered into, a substantial, nonrefundable deposit
has been committed by the purchaser, and sale is expected to occur within one year, or (b) if management has
committed to and is actively engaged in a plan to sell the property, the property is available for sale in its current
condition, and it is probable the sale will be completed within one year. If a hotel is considered held for sale as of
the most recent balance sheet presented or was sold in any period presented, the hotel property and the debt it
collateralizes are shown as held for sale in all periods presented. Depreciation of our hotels is discontinued at the
time they are considered held for sale.
At the end of each reporting period, if the fair value of the held for sale property less costs to sell is lower than the
carrying value of the hotel, the Company will record an impairment loss. Impairment losses on held for sale
properties may be subsequently recovered up to the amount of the cumulative impairment losses taken while the
property is held for sale should future revisions to fair value estimates be required. If active marketing ceases or the
property no longer meets the criteria to be classified as held for sale, the property is reclassified to held for use and
measured at the lower of its (a) carrying amount before the property was classified as held for sale, adjusted for any
depreciation expense that would have been recognized had the property been continuously classified as held for use,
or (b) its fair value at the date of the subsequent decision not to sell.
50
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
Gains on the sale of real estate are recognized when a property is sold or are deferred and recognized as income in
subsequent periods as conditions requiring deferral are satisfied or expire without further cost to us.
Cash and Cash Equivalents and Restricted Cash
Cash and cash equivalents includes cash and highly liquid investments with original maturities of three months or
less when acquired, and are carried at cost which approximates fair value. The Company maintained a major portion
of its deposits with Huntington Bancshares Incorporated at December 31, 2019 and 2018. The balances on deposit
at Huntington Bancshares Incorporated may at times exceed the federal deposit insurance limit, however,
management believes that no significant credit risk exists with respect to the uninsured portion of these cash
balances.
Restricted cash consists of cash held in escrow for the replacement of furniture and fixtures or for real estate taxes
and property insurance as required under certain loan agreements.
Deferred Financing Costs
Direct costs incurred in financing transactions are capitalized as deferred financing costs and amortized to interest
expense over the term of the related loan using the effective interest method. Deferred financing costs are presented
on the balance sheets as a direct deduction from the associated debt liability.
Derivative Assets and Liabilities
In the normal course of business, the Company is exposed to the effects of interest rate changes, and the Company
may enter into derivative instruments including interest rate swaps, caps, and collars to manage or economically
hedge interest rate risk. Additionally, the Company is required to include on the balance sheets certain bifurcated
embedded derivative instruments such as conversion and redemption features in convertible instruments and certain
common stock warrants.
All derivatives recognized by the Company are reported as derivative assets and liabilities on the balance sheets and
are adjusted to their fair value at each reporting date. Realized and unrealized gains and losses on derivative
instruments are included in net gain on derivatives and convertible debt with the exception of realized gains and
losses related to interest rate instruments which are included in interest expense on the statements of operations.
Noncontrolling Interest
Noncontrolling interest in the operating partnership represents the limited partners’ proportionate share of the equity
in the operating partnership and long-term incentive plan (“LTIP”) units (see Note 12). Earnings and losses are
allocated to noncontrolling interest in accordance with the weighted average percentage ownership of the operating
partnership during the period.
Revenue Recognition
Revenue consists of amounts derived from hotel operations, including the sales of rooms, food and beverage, and
other ancillary services. Room revenue is recognized over a customer's hotel stay at the daily contract rate.
Revenue from food and beverage and other ancillary services is generated when a customer chooses to purchase
goods or services separately from a hotel room and revenue is recognized on these distinct goods and services at the
contract rate at the point in time or over the time period that goods or services are provided to the customer and the
related performance obligations are fulfilled. Certain ancillary services are provided by third parties and the
Company assesses whether it is the principal or agent in these arrangements. If the Company is the agent, revenue is
recognized based upon the commission earned from the third party. If the Company is the principal, the Company
recognizes revenue based upon the gross sales price. Accounts receivable primarily represents receivables from
hotel guests who occupy hotel rooms and utilize hotel services. The Company maintains an allowance for doubtful
accounts sufficient to cover estimated potential credit losses.
51
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
Sales, use, occupancy, and similar taxes collected from customers and remitted to governmental authorities are
accounted for on a net basis and therefore are excluded from revenue in the consolidated statements of operations.
Hotel operating revenues can be disaggregated into the following categories to demonstrate how economic factors
affect the nature, amount, timing, and uncertainty of revenue and cash flows:
Rooms
Food and beverage
Other
Total revenue
Income Taxes
$
$
2019
For the year ended December 31,
2018
2017
58,353 $
1,370
1,329
61,052 $
62,036
1,524
1,497
65,057
$
$
52,509
1,554
1,390
55,453
The Company qualifies and intends to continue to qualify as a REIT under applicable provisions of the Internal
Revenue Code (the “Code”), as amended. In general, under such Code provisions, a trust which has made the
required election and, in the taxable year, meets certain requirements and distributes to its shareholders at least 90%
of its REIT taxable income, will not be subject to federal income tax to the extent of the income currently distributed
to shareholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our
taxable income at regular corporate income tax rates and generally will be unable to re-elect REIT status until the
fifth calendar year after the year in which we failed to qualify as a REIT, unless we satisfy certain relief provisions.
Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes
on its income and property, and to federal income and excise taxes on its undistributed taxable income. Except with
respect to the TRS, the Company does not believe that it will be liable for significant federal or state income taxes in
future years.
A REIT will incur a 100% tax on the net gain derived from any sale or other disposition of property that the REIT
holds primarily for sale to customers in the ordinary course of a trade or business. We do not believe any of our
hotels were held primarily for sale in the ordinary course of our trade or business. However, if the IRS would
successfully assert that we held such hotels primarily for sale in the ordinary course of our business, the gain from
such sales could be subject to a 100% prohibited transaction tax.
Taxable income from non-REIT activities managed through the TRS, which is taxed as a C-Corporation, is subject
to federal, state, and local income taxes. We account for the federal income taxes of our TRS using the asset and
liability method. Under this method, deferred income taxes are recognized for temporary differences between the
financial reporting bases of assets and liabilities of the TRS and their respective tax bases and for operating loss and
tax credit carryforwards based on enacted tax rates expected to be in effect when such amounts are realized or
settled. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be
realized based on consideration of available evidence, including tax planning strategies and projections for future
taxable income over the periods in which the remaining deferred tax assets are deductible. In assessing the
realizability of deferred tax assets, the Company considers whether it is more likely than not (defined as a likelihood
of more than 50%) that some portion or all of the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable income.
The Company may recognize a tax benefit from an uncertain tax position when it is more-likely-than-not (defined as
a likelihood of more than 50%) that the position will be sustained upon examination, including resolution of any
related appeals or litigation processes, based on its technical merits. If a tax position does not meet the more-likely-
than-not recognition threshold, despite the Company’s belief that its filing position is supportable, the benefit of that
tax position is not recognized in the statements of operations. The Company recognizes interest and penalties, as
applicable, related to unrecognized tax benefits as a component of income tax expense. The Company recognizes
52
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
unrecognized tax benefits in the period that the uncertainty is eliminated by either affirmative agreement to the
uncertain tax position by the applicable taxing authority or by expiration of the applicable statute of limitations. For
the years ended December 31, 2019, 2018, and 2017, the Company did not record any uncertain tax positions.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. Fair value measurements are utilized to determine
the value of certain assets, liabilities, and equity instruments, to perform impairment assessments, to account for
hotel acquisitions, in the valuation of stock-based compensation, and for disclosure purposes. Fair value
measurements are classified into a three-tiered fair value hierarchy, which prioritizes the inputs used in measuring
fair value as follows:
Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Directly or indirectly observable inputs other than quoted prices included in Level 1. Level 2 inputs
may include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or
similar assets or liabilities in markets that are not active, and model-derived valuations whose inputs are
observable.
Level 3: Unobservable inputs for which there is little or no market data, which require a reporting entity to
develop its own assumptions.
Our estimates of fair value were determined using available market information and appropriate valuation methods.
Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different
market assumptions or valuation techniques may have a material effect on estimated fair value measurements. We
classify assets and liabilities in the fair value hierarchy based on the lowest level of input that is significant to the
fair value measurement.
With the exception of fixed rate debt (see Note 8) and other financial instruments carried at fair value, the carrying
amounts of the Company’s financial instruments approximates their fair values due to their short-term nature or
variable market-based interest rates.
Fair Value Option
Under U.S. GAAP, the Company has the irrevocable option to report most financial assets and financial liabilities at
fair value on an instrument by instrument basis, with changes in fair value reported in net earnings. This option was
elected for the treatment of the Company’s convertible debt entered into on March 16, 2016 (see Note 7).
Stock-Based Compensation
Stock-based compensation is measured at the fair value of the award on the date of grant and recognized as
compensation expense on a straight-line basis over the requisite service period. Awards that contain a performance
condition are reviewed at least quarterly to assess the achievement of the performance condition. Compensation
expense will be adjusted when a change in the assessment of achievement of the specific performance condition
level is determined to be probable. The determination of fair value of these awards is subjective and involves
significant estimates and assumptions including expected volatility of our stock, expected dividend yield, expected
term, and assumptions of whether these awards will achieve performance thresholds. We believe that the
assumptions and estimates utilized are appropriate based on the information available to management at the point of
measurement. Compensation cost is recognized as additional paid-in capital for awards of the Company’s common
stock and as noncontrolling interest for LTIP awards of common units. The Company has elected to account for
forfeitures of stock-based compensation as they occur.
53
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
Recently Adopted Accounting Standards
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which requires an entity to
recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to
customers. The ASU replaced most existing revenue recognition guidance in U.S. GAAP when it became effective.
The standard was effective for the Company on January 1, 2018 and was adopted on that date using the modified
retrospective transition method. Due to the short-term nature of the Company’s revenue streams, the adoption of
this standard had no impact on the Company’s revenue or net income, and therefore, no adjustment was recorded to
the Company’s opening accumulated deficit. The adoption of this standard resulted in additional disclosures.
Furthermore, for real estate sales to third parties, primarily a result of disposition of real estate in exchange for cash
with few contingencies, the standard did not impact the recognition of our accounting for these sales.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain
Cash Receipts and Payment, which clarifies and provides specific guidance on eight cash flow classification issues
with an objective to reduce the current diversity in practice. This guidance is effective for the Company for years
beginning after December 15, 2017. The Company has adopted ASU 2016-15 for the year beginning on January 1,
2018. The adoption of ASU 2016-15 did not have a material impact on our consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash,
which clarifies how companies should present restricted cash and restricted cash equivalents in the statement of cash
flows. This guidance requires companies to show the changes in the total of cash, cash equivalents, and restricted
cash equivalents in the statement of cash flows. This guidance is effective for the Company for years beginning after
December 15, 2017, including interim periods within those years. The Company has adopted ASU 2016-18 for the
year beginning on January 1, 2018. The adoption of ASU No. 2016-18 changed the presentation of the consolidated
statements of cash flows for the Company to include changes to cash and cash equivalents and restricted cash for all
periods presented.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a
Business, which clarifies the definition of a business to assist entities with evaluating whether transactions should be
accounted for as acquisitions of assets or business combinations. As a result of the standard, we anticipate that the
majority of our hotel purchases will be considered asset purchases as opposed to business combinations and as such
the related acquisition costs will be capitalized. However, the determination will be made on a transaction-by-
transaction basis. This standard is applied on a prospective basis and, therefore, it does not affect the accounting for
any of our previous transactions. This standard was effective for annual periods beginning after December 15, 2017,
although early adoption is permitted. The Company has adopted ASU 2017-01 for the year beginning on January 1,
2018.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which superseded most existing lease
guidance in U.S. GAAP. ASU 2016-02 requires, among other changes to the lease accounting guidance, lessees to
recognize most leases on-balance sheet via a right of use asset and lease liability and additional qualitative and
quantitative disclosures. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842,
Leases, to clarify how to apply certain aspects of the new leases standard, and ASU 2018-11, Leases (Topic 842):
Targeted Improvements, to give companies another option for transition and to provide lessors with a practical
expedient to reduce the cost and complexity of implementing the new standard. The transition option allows
companies to not apply the new leases standard in the comparative periods they present in their financial statements
in the year of adoption. The Company adopted this standard on January 1, 2019. The Company elected the practical
expedients allowed under the guidance and retained the original lease classification and historical accounting for
initial direct costs for leases existing prior to the adoption date. The Company also elected not to restate prior
periods for the impact of the adoption of the new standard. The adoption of this standard has resulted in the
recognition of right-of-use assets and related liabilities to account for the Company's future obligations under the
operating leases for which the Company is the lessee. See Notes 2 and 15 to the accompanying consolidated
financial statements for additional disclosures related to the adoption of this standard.
54
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
NOTE 2. INVESTMENT IN HOTEL PROPERTIES
Investments in hotel properties consisted of the following at December 31:
Land
Buildings, improvements, vehicle
Furniture and equipment
Initial franchise fees
Construction-in-progress
Right of use asset
Investment in hotel properties
Less accumulated depreciation
Investment in hotel properties, net
$
$
December 31, 2019
Total
Held for sale
December 31, 2018
Held for use
Total
As of
20,200 $
206,971
21,805
1,784
100
80
250,940
(28,877)
222,063 $
2,304 $
4,462
719
25
7
-
7,517
(3,425)
4,092 $
20,200 $
206,821
20,554
1,784
323
-
249,682
(19,504)
230,178 $
22,504
211,283
21,273
1,809
330
-
257,199
(22,929)
234,270
On January 1, 2019, the Company adopted ASU 842, Leases, and applied it prospectively. At adoption, the
Company also elected the practical expedients which permitted it to not reassess its prior conclusions about lease
identification, classification, and initial direct costs. Consequently on January 1, 2019, the Company recognized
right-of-use assets and related liabilities related to its operating leases. Since most of the Company's leases do not
provide an implicit rate, the Company used incremental borrowing rates, with a weighted average rate of 5.24% at
December 31, 2019. The right-of-use assets and liabilities are amortized to rent expense, included in either Hotel
and property operations expenses or General and administrative expenses depending on the nature of the lease, over
the term of the underlying lease agreements. The weighted average remaining life of the Company’s operating
leases, including options to extend when it is reasonably certain the Company will exercise such options, was 7.3
years at December 31, 2019.
As of December 31, 2019, the Company's right-of-use assets, net of $80 are included in Investment in hotel
properties, net and its related lease liabilities of $81 are presented in Accounts payable, accrued expenses, and other
liabilities in the Company's consolidated balance sheets. The adoption of this standard had minimal impact on the
Company's consolidated statements of operations.
NOTE 3. ACQUISITION OF HOTEL PROPERTIES
The Company did not acquire any properties during the year ended December 31, 2019.
During the year ended December 31, 2018, the Company acquired two wholly owned hotel properties. The
allocation of the purchase price based on fair value was as follows:
Date of
acquisition
Land
Buildings,
improvements,
and vehicle
Furniture
and
equipment
Intangible
asset
Total
purchase
price &
acquisition
costs (1)
Debt at
acquisition
(2)
Issuance
of
common
units (3)
Net cash
paid
01/18/2018
$ 1,435 $
16,459
$
1,729 $
190
$ 19,813 $ 19,813 $
-
$
-
02/21/2018
998
13,485
1,854
53
16,390
14,818
50
1,522
$ 2,433 $
29,944
$
3,583 $
243
$ 36,203 $ 34,631 $
50
$
1,522
TownePlace
Suites
Austin, TX
Home2 Suites
Summerville, SC
Total
(1) Contractual purchase price of $19,750 and $16,325 for Austin TownePlace Suites and Summerville Home2 Suites, respectively.
(2) All debt was drawn from the $150,000 secured revolving credit facility (the “credit facility”) at acquisition.
(3) Total issuance of 259,685 common units. Common units may be redeemed at a rate of one common share for 52 common units (see
Note 11).
Included in the consolidated statement of operations for the year ended December 31, 2018 are total revenues of
$7,071 and total operating income of $1,610 which represent the results of operations for the two hotels acquired in
2018 since the date of acquisition.
55
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
During the year ended December 31, 2017, the Company acquired seven wholly owned hotel properties. The
allocation of the purchase price based on fair value was as follows:
Date of
acquisition
03/24/2017
Land
$ 905 $
Buildings,
improvements,
and vehicle
14,204
Furniture
and
equipment
$
1,351 $
Intangible
asset
40
Estimated
earn out
(1)
-
$
Total
purchase
price
Debt at
acquisition
(2)
$ 16,500 $ 16,455 $
Issuance
of
common
units (3)
45
03/24/2017
1,087
14,345
1,285
33
03/24/2017
1,519
18,229
1,727
25
-
-
16,750
16,705
45
21,500
21,442
58
Net
cash
paid
-
$
-
-
04/14/2017
1,311
16,792
897
-
-
19,000
9,096
52
9,852
06/19/2017
1,200
16,432
1,773
-
(155) 19,250
19,165
85
08/31/2017
1,014
14,297
1,089
08/31/2017
1,495
19,630
1,275
-
-
-
-
16,400
16,336
64
22,400
22,314
86
-
-
-
Hotel
Home2 Suites
Lexington, KY
Home2 Suites
Round Rock, TX
Home2 Suites
Tallahassee, FL
Home 2 Suites
Southaven, MS
Hampton Inn &
Suites
Lake Mary, FL
Fairfield Inn &
Suites
EL Paso, TX
Residence Inn
Austin, TX
Total
$ 8,531 $
113,929
$
9,397 $
98
$
(155) $
131,800 $ 121,513 $
435
$
9,852
(1) The Lake Mary purchase price was subject to a post-closing adjustment of up to $250 to be paid to the seller if the hotel achieved a
stipulated hotel net operating income level in 2017. This contingent consideration was included in the purchase price allocation at its
estimated fair value on the date of the acquisition. The full amount of $250 was paid to the seller in December of 2017 with the
incremental amount paid over the estimated fair value included in acquisition and terminated transactions expenses.
(2) Debt of $9,096 with Morgan Stanley Bank of America Merrill Lynch Trust 2014-C18 was assumed related to the Home2 Suites
Southaven, MS acquisition. This loan remains outstanding at December 31, 2018. All other debt was drawn from the credit facility at
acquisition.
(3) Total issuance of 1,940,451 common units. Common units may be redeemed at a rate of one common share for 52 common units (see
Note 11).
Included in the consolidated statement of operations for the year ended December 31, 2017 are total revenues of
$17,455 and total operating income of $4,508 which represent the results of operations for the seven hotels acquired
in 2017 since the date of acquisition.
All purchase price allocations were determined using Level 3 fair value inputs.
Pro Forma Results (Unaudited)
The following condensed pro forma financial data is presented as if the two acquisitions completed during the year
ended December 31, 2018 were completed on January 1, 2017. Supplemental pro forma earnings in 2018 were
adjusted to exclude all acquisition expenses recognized in the periods presented as if these acquisition costs had
been incurred in prior periods but were not adjusted to remove the results of hotels sold during the periods
presented. Results for periods prior to the Company’s ownership are based on information provided by the prior
owners, adjusted for differences in interest expense, depreciation expense, and management fees following the
Company’s ownership, and have not been audited or reviewed by our independent auditors. All hotels were in
operation for all periods presented.
The condensed pro forma financial data is not necessarily indicative of what the actual results of operations of the
Company would have been assuming the acquisitions had been consummated on January 1, 2017, nor do they
purport to represent the results of operations for future periods.
56
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
Total revenue
Operating income
Net earnings (loss) attributable to common shareholders
Net earnings (loss) per share - Basic
Net earnings (loss) per share - Diluted
NOTE 4: DISPOSITION OF HOTEL PROPERTIES
Year ended December 31,
2018
$
$
$
$
$
65,700
8,500
5,002
0.42
0.41
As of December 31, 2019, the Company had no hotels classified as held for sale. As of December 31, 2018, the
Company had one hotel held for sale.
In 2019, 2018, and 2017, the Company sold one hotel, four hotels, and eight hotels, respectively, resulting in total gains
of $62, $5,707, and $7,049, respectively.
NOTE 5. INVESTMENT IN UNCONSOLIDATED JOINT VENTURE
On August 1, 2016, the Company entered into a joint venture with Three Wall Capital LLC and certain of its affiliates
(“TWC”) to acquire an Aloft hotel in downtown Atlanta, Georgia. The Company accounts for the Atlanta JV under the
equity method. The Company owns 80% of the Atlanta JV with TWC owning the remaining 20%. The Atlanta JV is
comprised of two companies: Spring Street Hotel Property II LLC, of which our operating partnership indirectly owns an
80% equity interest, and Spring Street Hotel OpCo II LLC, of which our TRS indirectly owns an 80% equity interest.
TWC owns the remaining 20% equity interest in these two companies.
On August 22, 2016, the Atlanta JV closed on the acquisition of the Atlanta Aloft for a purchase price of $43,550,
subject to working capital and similar adjustments. The purchase was partially funded with a $33,750 term loan secured
by the property. The term loan (the “Old Term Loan”), obtained from LoanCore Capital Credit REIT LLC, had an
initial term of 24 months with three 12-month extension periods, which could be exercised at the Atlanta JV’s option
subject to certain conditions and fees. The first of these extension options was exercised by the Atlanta JV on September
9, 2018. The loan was non-recourse to the Atlanta JV, subject to specified exceptions. The loan was also non-recourse
to Condor, except for certain customary carve-outs which are guaranteed by the Company.
On August 9, 2019, the operating partnership and the owner and lessee of the Aloft Atlanta hotel in the Atlanta JV
(Spring Street Hotel Property LLC and Spring Street Hotel OpCo LLC, respectively), as Borrowers, closed on a $34,080
term loan pursuant to a term loan agreement with KeyBank National Association and the other lenders party thereto, as
Lenders, and KeyBank National Association, as Agent for the Lenders (the “New Term Loan”). The proceeds of the
New Term Loan were used to repay the Old Term Loan, which was terminated following the repayment. The New
Term Loan is included in full on the balance sheet of the Atlanta JV at December 31, 2019.
The New Term Loan matures upon the earlier to occur of (a) consummation of the merger under the Merger Agreement
(see Note 1) and (b) February 9, 2020. The New Term Loan bears interest, at the Borrower’s option, at either LIBOR
plus 2.25% or a base rate plus 1.25%. The New Term Loan requires monthly interest payments and principal is due on
the maturity date. The Borrowers may, at any time, voluntarily prepay the New Term Loan in whole or in part without
premium or penalty (other than customary LIBOR breakage costs). The current interest rate on the New Term Loan on
December 31, 2019 was 3.99%. The New Term Loan is secured by a first priority lien and security interest on the Aloft
Atlanta hotel and the tangible and intangible personal property used in connection with such hotel, including inventory,
equipment, fixtures, accounts and general intangibles. The New Term Loan is guaranteed by the Company and certain
of its subsidiaries. On February 6, 2020, the maturity of the New Term Loan was extended to May 8, 2020. The
Company plans to refinance this loan prior to maturity with our KeyBank credit facility if approved by the lenders. In
the event this refinancing is not completed prior to maturity, KeyBank has provided a binding commitment to extend the
maturity of the loan to April 1, 2021.
57
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
The Atlanta JV agreement also includes buy-sell rights for both members (generally after three years of hotel ownership
for Condor and after five years for TWC) and Condor has a purchase option for TWC’s Atlanta JV ownership interest
exercisable between the third and fifth anniversary of the hotel closing. Subsequent to year end, on February 14, 2020,
the Company purchased TWC’s interest in the Atlanta JV (see Note 17).
Under the Atlanta JV agreement, the Atlanta JV is managed by TWC in accordance with business plans and budgets
approved by both partners. Major decisions as detailed in the agreement also require joint approval. Condor may
remove TWC as manager of the Atlanta JV and appoint a new manager only upon the occurrence of certain events. The
Atlanta Aloft hotel is managed by Boast Hotel Management Company LLC (“Boast”), an affiliate of TWC. The Atlanta
JV paid to Boast total management fees of $380, $333 and $348 during the years ended December 31, 2019, 2018, and
2017, respectively.
Net cash flow from the Atlanta JV is distributed each fiscal year first with a 10% preferred return on capital contributions
to Condor, second with a 10% preferred return on capital contributions to TWC, and third with any remainder distributed
to the partners based on their pro-rata equity ownership. Profits are allocated in the same proportion as net cash flow.
Losses are allocated based on pro-rata equity ownership. Cash distributions totaling $1,813, $1,662 and $1,479 were
received by the Company from the Atlanta JV during the years ended December 31, 2019, 2018, and 2017, respectively.
The following table represents the total assets, liabilities, and equity, including the Company’s share, of the Atlanta
JV as of December 31, 2019 and 2018:
As of December 31,
2019
2018
Investment in hotel properties, net
Cash and cash equivalents
Restricted cash, property escrows
Accounts receivable, prepaid expenses, and other assets
Total Assets
Accounts payable, accrued expenses, and other liabilities
Land option liability
Long-term debt, net of deferred financing costs
Total Liabilities
Condor equity
TWC equity
Total Equity
Total Liabilities and Equity
$
$
$
$
45,547
661
-
279
46,487
1,026
6,190
33,966
41,182
4,244
1,061
5,305
46,487
$
$
$
$
46,933
913
366
294
48,506
1,375
6,190
33,608
41,173
5,866
1,467
7,333
48,506
The table below provides the components of net earnings (loss), including the Company’s share of the Atlanta
JV, for the years ended December 31, 2019, 2018 and 2017:
58
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
Revenue
Room rentals and other hotel services
Operating Expenses
Hotel and property operations
Depreciation and amortization
Total operating expenses
Operating income
Net loss on disposition of assets
Net loss on derivative
Interest expense
Loss on extinguishment of debt
Net earnings (loss)
Condor allocated earnings (loss)
TWC allocated earnings (loss)
Net earnings (loss)
NOTE 6. LONG-TERM DEBT
Year ended December 31,
2019
2018
2017
$
12,666
$
11,888 $
11,582
8,084
1,494
9,578
3,088
(2)
(1)
(2,675)
(172)
238
$
190 $
48
238 $
7,855
1,444
9,299
2,589
(197)
(27)
(2,637)
-
(272) $
(218) $
(54)
(272) $
7,585
1,425
9,010
2,572
(8)
(3)
(2,323)
-
238
190
48
238
$
$
$
Long-term debt related to wholly owned properties, including debt related to hotel properties held for sale, consisted
of the following loans payable at December 31:
Balance at
December 31,
2019
Interest rate
at December
31, 2019
Maturity
Amortization
provision
Properties
encumbered
at December
31, 2019
Balance at
December 31,
2018
Lender
Fixed rate debt
Morgan Stanley Bank of America Merrill
Lynch Trust 2014-C18
Great Western Bank (1)
Great Western Bank (1)
Total fixed rate debt
Variable rate debt
Wells Fargo
KeyBank credit facility (3)
Total variable rate debt
Total long-term debt
Less: Deferred financing costs
Total long-term debt, net of deferred
financing costs
Less: Long-term debt related to hotel
properties held for sale, net of deferred
financing costs of $0 and $18
4.54%
4.33%
4.33%
08/2024
12/2021 (5)
12/2021 (5)
25 years
25 years
7 years
3.76% (2)
4.30% (4)
11/2022 (6)
10/2020 (7)
30 years
Interest only
1
1
-
3
9
14
$
$
8,639
13,290
971
22,900
25,612
86,845
112,457
135,357
(1,356)
134,001
-
Long-term debt related to hotel properties
held for use, net of deferred financing costs
of $1,356 and $2,190
$
134,001
$
$
8,817
13,615
1,171
23,603
26,048
89,487
115,535
139,138
(2,208)
136,930
(1,120)
$
135,810
(1) Both loans are collateralized by Aloft Leawood.
(2) Variable rate of 30-day LIBOR plus 2.39%, effectively fixed at 4.44% after giving effect to interest rate swap (see Note 8).
(3) $150,000 credit facility that includes an accordion feature that would allow the credit facility to be increased to $400,000 with additional
lender commitments. Available borrowing capacity under the credit facility is based on a borrowing base formula for the pool of hotel properties
securing the facility. Total unused availability under this credit facility was $9,020 at December 31, 2019. The commitment fee on unused
facility is 0.20%. See Note 17 for changes occurring subsequent to December 31, 2019.
59
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
(4) Borrowings under the facility accrue interest based on a leverage-based pricing grid, at the Company’s option, at either LIBOR plus a spread
ranging from 2.25% to 3.00% (depending on leverage) or a base rate plus a spread ranging from 1.25% to 2.00% (depending on leverage); 30-day
LIBOR for $30,000 notional capped at 3.35% after giving effect to market rate cap (see Note 8). See Note 17 for changes occurring subsequent
to December 31, 2019.
(5) Term may be extended for additional two years subject to interest rate adjustments.
(6) Two one-year extension options subject to the satisfaction of certain conditions.
(7) See Note 17 for changes occurring subsequent to December 31, 2019.
At December 31, 2019, we had long-term debt of $135,357 with a weighted average term to maturity of 1.5 years
and a weighted average interest rate of 4.22%. Of this total, at December 31, 2019, $22,900 was fixed rate debt with
a weighted average term to maturity of 2.3 years and a weighted average interest rate of 4.41% and $112,457 was
variable rate debt with a weighted average term to maturity of 1.2 years and a weighted average interest rate of
4.18%. At December 31, 2018, we had long-term debt of $138,000 associated with assets held for use with a
weighted average term to maturity of 2.1 years and a weighted average interest rate of 5.15%. Of this total, at
December 31, 2018, $23,604 was fixed rate debt with a weighted average term to maturity of 1.9 years and a
weighted average interest rate of 4.41% and $114,396 was variable rate debt with a weighted average term to
maturity of 2.9 years and a weighted average interest rate of 5.30%.
Debt is classified as held for sale if the properties collateralizing it are held for sale. Debt associated with assets held
for sale is classified in the table below based on its contractual maturity although the balances are expected to be
repaid within one year upon the sale of the related hotel properties. Aggregate annual principal payments on debt
for the next five years and thereafter are as follows:
2020 $
2021
2022
2023
2024
Thereafter
Total $
Total
88,076
14,341
24,886
214
7,840
-
135,357
As discussed further in the Subsequent Events footnote (see Note 17), on March 30, 2020, the Key Bank credit
facility was amended to, among other things, extend the maturity date of the facility to April 1, 2021, providing also
for two extension options (six months and five months). Following this modification, contractual debt maturities on
debt outstanding at December 31, 2019 were as follows:
$
2020
2021
2022
2023
2024
Thereafter
Total $
Total
1,231
101,186
24,886
214
7,840
-
135,357
Financial Covenants
We are required to satisfy various financial covenants within our debt agreements, including the following financial
covenants within our credit facility with KeyBank:
• Debt Yield: The ratio of adjusted net operating income for the borrowing base properties to indebtedness
outstanding under the credit facility cannot be less than 10%. The covenant is first tested on September 30,
60
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
2020 and for purposes of calculating compliance with the covenant, annualized results are used until June
30, 2021 when the calculation is based on the most recently ended four fiscal quarters.
• Consolidated Leverage Ratio: The ratio of consolidated total indebtedness to consolidated total asset value
cannot exceed 60%.
• Fixed Charge Coverage Ratio: The ratio of adjusted consolidated EBITDA to consolidated fixed charges
cannot be less than (a) 1.25 to 1 as of the end of the fiscal quarter ending September 30, 2020 and (b) 1.50
to 1 as of the end of the fiscal quarter ending December 31, 2020 and each fiscal quarter thereafter. For
purposes of calculating compliance with the covenant, annualized results are used until June 30, 2021 when
the calculation is based on the most recently ended four fiscal quarters.
• Borrowing Base Leverage Ratio: The ratio of indebtedness outstanding under the credit facility to
borrowing base asset value (based on updated appraisals required by the lenders) cannot exceed 65%. The
covenant is first tested on June 30, 2021.
On March 30, 2020, our credit facility with KeyBank was amended to, among other things:
•
Implement a collateral-specific minimum debt yield (ratio of adjusted net operating income for the
borrowing base properties to indebtedness outstanding under the credit facility) of 10%. The covenant is
first tested on September 30, 2020 and for purposes of calculating compliance with the covenant,
annualized results are used until June 30, 2021 when the calculation is based on the most recently ended
four fiscal quarters.
• Maintain the maximum consolidated leverage ratio (ratio of consolidated total indebtedness to consolidated
total asset value) of 60% but provide for updated appraisals to determine consolidated total asset value (if
required by the lenders).
• Modify the fixed charge coverage ratio (ratio of adjusted consolidated EBITDA to consolidated fixed
charges) to (a) 1.25 to 1 as of the end of the fiscal quarter ending September 30, 2020 and (b) 1.50 to 1 as
of the end of the fiscal quarter ending December 31, 2020 and each fiscal quarter thereafter. For purposes
of calculating compliance with the covenant, annualized results are used until June 30, 2021 when the
calculation is based on the most recently ended four fiscal quarters. The covenant was previously 1.50 to 1
tested at the end of each fiscal quarter based on the most recently ended four fiscal quarters.
Implement a maximum borrowing base leverage ratio (ratio of indebtedness outstanding under the credit
facility to borrowing base asset value (based on updated appraisals required by the lenders) of 65%. The
covenant is first tested on June 30, 2021.
•
• Eliminate the financial covenants regarding secured leverage ratio, tangible net worth and variable rate
debt.
• Modify the covenant on dividends and distributions to provide that no cash dividends or distributions may
be made to common or preferred shareholders.
• Modify the covenants on recourse debt and investments to provide that no additional recourse debt or
investments will be permitted.
As a result of the anticipated impact of the COVID-19 virus on the hotel industry generally, the Company has
received waivers from Great Western Bank with respect to compliance with its quarterly debt service coverage
ratios (consolidated and for the Leawood Aloft collateral) for March 31, 2020 and June 30, 2020 and modifications
for September 30, 2020 and December 31, 2020 (providing for lower collateral covenant and use of annualized
results). The modification also provides for a three month deferral of principal and interest payments.
Certain of the terms used in the foregoing descriptions of the financial covenants within our credit facility have the
meanings given to them in the credit facility, and certain of the financial covenants are subject to pro forma
adjustments for acquisitions and sales of hotel properties and for specific capital events.
If we fail to pay our indebtedness when due, fail to comply with covenants or otherwise default on our loans, unless
waived, we could incur higher interest rates during the period of such loan defaults, be required to immediately pay
our indebtedness, and ultimately lose our hotels through lender foreclosure if we are unable to obtain alternative
sources of financing with acceptable terms. Our credit facility contains cross-default provisions which would allow
61
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
the lenders under our credit facility to declare a default and accelerate our indebtedness to them if we default on our
other loans and such default would permit that lender to accelerate our indebtedness under any such loan.
As of December 31, 2019, we are not in default of any of our loans.
NOTE 7: CONVERTIBLE DEBT AT FAIR VALUE
As part of an agreement entered into on March 16, 2016 (the “Exchange Agreement”) with Real Estate Strategies,
L.P. (“RES”, which also includes affiliated entities) (see Note 10), the Company issued to RES a Convertible
Promissory Note (the “Note”), bearing interest at 6.25% per annum, in the principal amount of $1,012 initially
convertible into shares of Series D Preferred Stock, which could be subsequently converted into 97,269 shares of
common stock. Following the conversion of all of the outstanding Series D Preferred Stock into common stock and
the issuance of the Series E Preferred Stock on March 1, 2017, the Note was amended to be convertible directly into
97,269 shares of common stock at any time at the option of RES or automatically when the Series E Preferred Stock
is required to be converted or is redeemed in whole (see Note 10). The Note is not convertible to the extent that a
conversion would cause RES, together with its affiliates, to beneficially own more than 49% of the voting stock of
the Company at the time of the conversion. Any conversion reduces the principal amount of the Note
proportionally.
The Company has made an irrevocable election to record this Note in its entirety at fair value utilizing the fair value
option available under U.S. GAAP in order to more accurately reflect the economic value of this Note. As such,
gains and losses on the Note are included in net gain on derivatives and convertible debt within net earnings each
reporting period. Gains (losses) related to this Note were recognized totaling $(80), $69, and $246 during the years
ended December 31, 2019, 2018, and 2017, respectively. The fair value of the Note is determined using a trinomial
lattice-based model, which is a generally accepted computational model typically used for pricing options and is
considered a Level 3 fair value measurement. The fair value of the Note on the date of issuance was determined to
be equal to its principal amount. Interest expense related to this Note is recorded separately from other changes in its
fair value within interest expense each period.
The following table represents the difference between the fair value and the unpaid principal balance of the Note as
of December 31, 2019:
6.25% Convertible Debt
$
1,080
$
1,012
$
(68)
Fair value as of
December 31, 2019
Unpaid principal
balance as of
December 31, 2019
Fair value carrying
amount (over)/under
unpaid principal
NOTE 8: FAIR VALUE MEASUREMENTS AND DERIVATIVE INSTRUMENTS
Our determination of fair value measurements is based on the assumptions that market participants would use in
pricing the asset or liability. At December 31, 2019, the Company’s convertible debt (see Note 7) and certain
derivative instruments were the only financial instruments measured in the consolidated financial statements at fair
value on a recurring basis. Nonrecurring fair value measurements were utilized in the determination of the fair value
of acquired hotel properties and related assumed debt in 2018 and 2017 (see Note 3), in accounting for the equity
transactions that occurred in March 2017 (see Note 10), in the valuation of stock-based compensation grants (see
Note 12), and in the assessment of impaired and potentially impaired hotels during the years ended December 31,
2019, 2018, and 2017.
Derivative Instruments
Currently, the Company uses derivatives, such as interest rate swaps and caps, to manage its interest rate risk. The
fair value of interest rate positions is determined using the standard market methodology of netting the discounted
expected future cash receipts and payments. Variable interest rates used in the calculation of projected receipts and
62
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
payments on the positions are based on an expectation of future interest rates derived from observable market
interest rate curves and volatilities. Derivatives expose the Company to credit risk in the event of non-performance
by the counterparties under the terms of the agreements. The Company believes it minimizes this credit risk by
transacting with major creditworthy financial institutions. These interest rate positions at December 31, 2019 and
2018 are as follows:
Associated
debt
Wells Fargo
Credit facility Cap Caps 30-day LIBOR at 2.50%
Credit facility Cap Caps 30-day LIBOR at 3.35%
Type Terms
Swap Swaps 30-day LIBOR for fixed rate of 2.053%
Effective
Date
11/2017
03/2017
4/1/2019
Maturity
Date
11/2022
03/2019
10/2020
Notional amount
at December 31,
2019
Notional amount
at December 31,
2018
$
25,612 (1) $
Not applicable $
$
30,000
26,048 (1)
50,000
Not applicable
(1) Notional amounts amortize consistently with the principal amortization of the associated loans.
Included in the Series E Preferred Stock issued on March 1, 2017 is a redemption right that allows the Company to
redeem up to a total of 490,250 shares of Series E Preferred Stock for specific percentages of its liquidation
preference (see Note 10). This option requires bifurcation and was determined to be an asset with a fair value on the
date of issuance of $150 using a trinomial lattice-based model, considered a Level 3 fair value measurement.
All derivatives recognized by the Company are reported as either derivative assets or liabilities on the balance sheets
and are adjusted to their fair value at each reporting date. All gains and losses on derivative instruments are
included in net gain on derivatives and convertible debt and with the exception of realized gains and losses related to
the interest rate instruments, which are included in interest expense on the statements of operations. Net gains (loss)
of $(991), $248, and $190 were recognized related to derivative instruments for the years ended December 31, 2019,
2018, and 2017, respectively.
Recurring Fair Value Measurements
The following tables provide the fair value of the Company’s financial assets and (liabilities) carried at fair value
and measured on a recurring basis:
Fair value at
December 31, 2019 Level 1
Level 2
Level 3
Interest rate derivatives
Series E Preferred embedded redemption option
Convertible debt
Total
$
$
(366) $
22
(1,080)
(1,424) $
- $
-
-
- $
(366) $
-
-
(366) $
-
22
(1,080)
(1,058)
Fair value at
December 31, 2018 Level 1
Level 2
Level 3
Interest rate derivatives
Series E Preferred embedded redemption option
Convertible debt
Total
$
$
350 $
289
(1,000)
(361) $
- $
-
-
- $
350 $
-
-
350 $
-
289
(1,000)
(711)
There were no transfers between levels during the years ended December 31, 2019, 2018, or 2017.
The following tables present a reconciliation of the beginning and ending balances of items measured at fair value
on a recurring basis that use significant unobservable inputs (Level 3) and the related gains and losses recorded in
the statements of operations during the periods:
63
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
Year ended December 31,
2019
2018
Series E
Preferred
embedded
redemption
option
Convertible
debt
Total
Series E
Preferred
embedded
redemption
option
Convertible
debt
Total
$
$
289 $
(267)
-
-
-
-
22 $
(1,000) $
(80)
-
-
-
-
(1,080) $
(711) $
(347)
-
-
-
-
(1,058) $
314 $
(25)
-
-
-
-
289 $
(1,069) $
69
-
-
-
-
(1,000) $
(755)
44
-
-
-
-
(711)
Fair value, beginning of period
Net gains (losses) recognized in earnings
Purchase and issuances
Sales and settlements
Gross transfers into Level 3
Gross transfers out of Level 3
Fair value, end of period
Total unrealized gains (losses) during the period
included in earnings related to instruments held at end
of period
$
Fair Value of Debt
(267) $
(80) $
(347) $
(25) $
69 $
44
The Company estimates the fair value of its fixed rate debt by discounting the future cash flows of each instrument
at estimated market rates or credit spreads consistent with the maturity of debt obligations with similar credit risks.
Credit spreads take into consideration general market conditions and maturity. The inputs utilized in estimating the
fair value of debt are classified in Level 2 of the fair value hierarchy. Both the carrying value and the estimated fair
value of the Company’s long-term debt, excluding convertible debt which is presented in the balance sheets at fair
value, are presented in the table below net of deferred financing costs.
Carrying value at December 31,
Estimated fair value at December 31,
2019
2018
2019
2018
$
$
134,001
-
134,001
$
$
135,810
1,120
136,930
$
$
134,288
-
134,288
$
$
134,773
1,120
135,893
Held for use
Held for sale
Total
Impaired Hotel Properties
In the performance of impairment analysis for both held for sale and held for use properties, fair value is determined
with the assistance of independent real estate brokers and through the use of operating results and revenue multiples
based on the Company’s experience with hotel sales as well as available industry information. For held for sale
properties, estimated selling costs are based on our experience with similar asset sales. These are considered Level
3 fair value measurements. The amount of impairment and recovery of previously recorded impairment recognized
in the years ended December 31, 2019, 2018, and 2017 is shown in the tables below:
2019
Year ended December 31,
2018
2017
Number
of hotels
Impairment
(loss)
recovery
Number
of hotels
Impairment
(loss)
recovery
Number
of hotels
Impairment
(loss)
recovery
- $
-
- $
-
-
-
- $
1
1 $
-
93
93
3 $
2
5 $
(2,231)
80
(2,151)
Continuing Operations:
Sold hotels:
Impairment loss
Recovery of impairment
Total net impairment (loss) recovery:
NOTE 9. COMMON STOCK
The Company’s common stock is duly authorized, full paid, and non-assessable.
64
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
On January 24, 2017, the Company exchanged 23,160 warrants (the “New Warrants”) to purchase common stock of
the Company for 576,923 warrants (the “Old Warrants”) held by RES. The number of New Warrants issued in
exchange for the Old Warrants equaled the number of shares of common stock issuable upon exercise of the Old
Warrants pursuant to a cashless exercise provisions of the Old Warrants. The New Warrants were exercisable for
23,160 shares of common stock, had an exercise price of $0.0065 for each common share, and would have expired
on January 24, 2019. On the date of the exchange, the New Warrants had a fair value in excess of the Old Warrants
of $289, which is reflected as equity transactions expense and an increase in additional paid-in capital as the
exchange is assumed to be equivalent to the modification of an equity classified instrument. The New Warrants
were exercised in full on September 28, 2017.
On February 28, 2017, the holders of the Series D Preferred Stock voluntarily converted their shares into 6,004,957
shares of common stock at $10.40 per share pursuant to the terms of the preferred stock (see Note 10).
Effective on March 15, 2017, the Company effected a reverse stock split of its common stock at a ratio of 1-for-6.5.
No fractional shares of common stock were issued as fractional shares were settled in cash. A total of 73 shares
were settled for $1. Impacted amounts and share information included in the consolidated financial statements and
notes thereto have been adjusted for the stock split as if such stock split occurred on the first day of the periods
presented.
On March 29, 2017, the Company sold in an underwritten public offering 4,772,500 shares of its common stock,
including 622,500 shares issued pursuant to the full exercise of an option to purchase additional shares of common
stock granted to the underwriters, at a public offering price per share of $10.50. Net proceeds, after the payment of
related expenses, from this offering totaled $45,850.
The Company’s common stock began trading on the NYSE American under its current symbol “CDOR” beginning
at the open of market trading on July 21, 2017. The Company’s common stock previously traded on the NASDAQ
Stock Market.
On September 20, 2017, the Company entered into an equity distribution agreement with KeyBanc Capital Markets
Inc. and BMO Capital Markets Corp. (collectively, the “Sales Agents”), pursuant to which we may sell, from time to
time, up to an aggregate sales price of $50,000, subject to decrease in compliance with General Instruction I.B.6 of
Registration Statement on Form S-3, of shares of our common stock pursuant to a prospectus supplement we filed
with the Securities and Exchange Commission (“SEC”) through the Sales Agents acting as sales agent and/or
principal, through an at-the-market offering program (our “ATM program”). Pursuant to Instruction I.B.6 to
Registration Statement on Form S-3, we may not sell more than the equivalent of one-third of our public float during
any 12 consecutive months so long as our public float is less than $75,000.
During the year ended December 31, 2017, we sold 169,004 shares of common stock under the ATM program at an
average sales price of $10.15 per share for gross proceeds totaling $1,715 and net proceeds of $1,619. During the
year ended December 31, 2018, we sold 28,474 shares of common stock under the ATM program at an average
sales price of $10.40 per share, for gross proceeds totaling $296 and net proceeds totaling $260. There were no sales
under the ATM program in 2019. Since the inception of the ATM program, we have sold 197,478 shares of
common stock at an average sales price of $10.18 per share for gross proceeds totaling $2,011 and net proceeds
totaling $1,879.
NOTE 10. PREFERRED STOCK
On March 16, 2016, the Company entered into a series of agreements providing for:
•
•
the issuance and sale of the Company’s Series D Preferred Stock under a private transaction to SREP III
Flight-Investco, L.P. (“SREP”), an affiliate of StepStone Group LP;
the exchange of all of the Company’s outstanding Series C Preferred Stock for Series D Preferred Stock;
and
65
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
•
the cash redemption of all of the Company’s outstanding 8% Series A Cumulative Preferred Stock (“Series
A Preferred Stock”) and 10% Series B Cumulative Preferred Stock (“Series B Preferred Stock”).
In connection with these transactions, the Company and SREP entered into a Stock Purchase Agreement (the “Stock
Purchase Agreement”) dated March 16, 2016 pursuant to which the Company issued and sold 3,000,000 shares of
Series D Preferred Stock to SREP on the March 16, 2016 for an aggregate purchase price of $30,000. The Stock
Purchase Agreement required that $20,147 of the purchase price be deposited into an escrow account for the purpose
of effecting the redemption of the Series A and Series B Preferred Stock, which was completed on April 15, 2016,
and that the remaining amount of the purchase price be delivered to the Company.
Simultaneously, the Company entered into the Exchange Agreement with RES pursuant to which all 3,000,000
outstanding shares of Series C Preferred Stock were exchanged for 3,000,000 shares of Series D Preferred Stock.
Under the Exchange Agreement, in lieu of payment of accrued and unpaid dividends in the amount of $4,947 on the
Series C Preferred Stock, the Company (a) paid to RES an amount of cash equal to $1,484, (b) issued to RES
245,156 shares of Series D Preferred Stock (such that RES, IRSA Inversiones y Representaciones Sociedad
Anónima (“IRSA”), and their affiliates do not beneficially own in excess of 49% of the voting stock of the
Company) and (c) issued to RES a convertible promissory note, bearing interest at 6.25% per annum, in the
principal amount of $1,012 (see Note 7).
On February 28, 2017, the holders of the Series D Preferred Stock voluntarily converted their shares into 6,004,957
shares of common stock at $10.40 per share pursuant to the terms of the preferred stock. The terms of the Series D
Preferred Stock provided for automatic conversion following certain future common stock offerings, and also
provided for potential additional payments to the holders depending on the sales price of common stock in the
offerings. As a result of the voluntary conversion, the holders are no longer entitled to the potential payments. To
induce the holders of the Series D Preferred Stock to voluntarily convert their shares, the Company issued the
holders 925,000 shares of a new series of preferred stock, the Series E Preferred Stock.
The key terms of the remaining series of the Company’s preferred stock are discussed individually below.
Series D Preferred Stock
Following the execution of the Stock Purchase Agreement and Exchange Agreement on March 16, 2016, there were
6,245,156 shares of Series D Preferred Stock outstanding at December 31, 2016.
The Series D Preferred stockholders ranked senior to the Company’s common stock and any other preferred stock
issuances and received preferential cumulative cash dividends at a rate of 6.25% per annum, payable quarterly in
arrears on each March 31, June 30, September 30, and December 31, or, if not a business day, the next succeeding
business day, of the $10.00 face value per share. Dividends on the Series D Preferred Stock accrued whether or not
the Company had earnings, whether or not there were funds legally available for the payment of such dividends,
whether or not such dividends were declared, and whether or not such dividends were prohibited by agreement.
Whenever the dividends on the Series D Preferred Stock were in arrears for four consecutive quarters, then upon
notice by holders of in the aggregate not less than 40% of the outstanding Series D Preferred Stock, the Company
would (a) take all appropriate action reasonably within its means to maximize the assets legally available for paying
such dividends and to monetize such assets (for example, but without limiting the generality of the foregoing, by
selling or liquidating all of some of the Company’s assets or by selling the Company as a going concern), (b) pay
out of all such assets legally available (including any proceeds from any sale or liquidation of such assets) the
maximum possible amount of such unpaid dividends, and (c) thereafter, at any time and from time to time when
additional assets of the Company (including any proceeds from any sale or liquidation of such assets) become
legally available to pay such unpaid dividends, pay such remaining unpaid dividends until all dividends accumulated
on the Series D Preferred Stock had been fully paid. Dividends on the Series D Preferred Stock were paid when due
throughout the life of the instrument.
Each share of Series D Preferred Stock was convertible, at the option of the holder, at any time into a number of
shares of common stock determined by dividing the conversion price of $10.40 into an amount equal to the $10.00
66
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
face value per share plus accrued and unpaid dividends, if any. The conversion price was subject to anti-dilution
adjustments upon the occurrence of stock splits and stock dividends. Each outstanding share of Series D Preferred
Stock would be converted into a number of shares of common stock determined by dividing the conversion price of
$10.40 into the $10.00 face value per share, which is equal to a rate of 0.9615385 shares of common stock for each
share of Series D Preferred Stock, automatically upon closing of a Qualified Offering (defined as a single offering of
common stock of at least $50,000 or up to three offerings in the aggregate of at least $75,000, all with certain
minimum prices per share and a potential make whole payment required in certain scenarios) without any further
action by the holders of such shares or the Company.
The Series D Preferred Stock was redeemable by the Company at any time subject to certain restrictions, in whole or
in a partial redemption of up to $30,000, at $12.00 per share on or before March 16, 2019, $13.00 per share from
March 16, 2019 to March 16, 2020, and $14.00 per share on or after March 16, 2020, plus all accrued and unpaid
dividends. If a Qualified Offering has not occurred on or before September 30, 2021, holders that hold in the
aggregate not less than 40% of the outstanding shares of the Series D Preferred Stock have the right to elect to have
the Company fully liquidate in a commercially reasonable manner as determined by the Board of Directors of the
Company to provide for liquidation distributions to the holders of the Series D Preferred Stock in an amount per
share equal to $14.00 in cash plus accrued and unpaid dividends. Once this right had been exercised and the
Company had been notified, the dividend rate on the Series D Preferred Stock after September 30, 2021 would
increase from 6.25% per annum to 12.5% per annum. The holders of Series D Preferred Stock voted their Series D
Preferred Stock as a single class with the holders of the common stock on all matters submitted to such holders for
vote or consent. For each such vote or consent, each share of Series D Preferred Stock entitled the holder to cast one
vote for each whole vote (rounded to the nearest whole number) that such holder would be entitled to cast had such
holder converted its Series D Preferred Stock into shares of common stock as of the date immediately prior to the
record date for determining the shareholders of the Company eligible to vote on any such matter.
The fair value of the Series D Preferred Stock was determined to be equal to its face value on the date of issuance.
As discussed above, on February 28, 2017, the holders of the Series D Preferred Stock voluntarily converted their
shares into 6,004,957 shares of common stock at $10.40 per share pursuant to the terms of the preferred stock. At
the time of conversion, the Series D holders were granted $9,250 of newly created Series E Preferred Stock.
Series E Redeemable Convertible Preferred Stock
Following the voluntary conversion of the Series D Preferred Stock on February 28, 2017, the only shares of
preferred stock outstanding are 925,000 shares of Series E Preferred Stock.
The Series E Preferred Stock ranks senior to the Company’s common stock and any other preferred stock issuances
and receives preferential cumulative cash dividends at a rate of 6.25% per annum, payable quarterly of the $10.00
face value per share. If the Company fails to pay a dividend then during the period that dividends are not paid, the
dividend rate increases to 9.50% per annum. Dividends on the Series E Preferred Stock accrue whether or not the
Company has earnings, whether or not there are funds legally available for the payment of such dividends, whether
or not such dividends are declared, and whether or not such dividends are prohibited by agreement.
Each share of Series E Preferred Stock is convertible, at the option of the holder, at any time on or after February 28,
2019, into a number of shares of common stock determined by dividing the conversion price of $13.845 into an
amount equal to the $10.00 face value per share plus accrued and unpaid dividends, if any. Upon liquidation, each
share of Series E Preferred Stock is entitled to $10.00 per share and accrued and unpaid dividends. The conversion
price is subject to anti-dilution adjustments upon the occurrence of stock splits and stock dividends. Following a
specific equity offering or offerings, from time to time a number of shares of Series E Preferred Stock automatically
converts into common stock if the common stock trades at 120% of the conversion price for 60 trading days, and the
number of shares converted will be determined by certain trading volumes measures.
The Company has rights to redeem up to 490,250 shares of the Series E Preferred Stock at prices from 110% to
130% of its liquidation value. The holders have put rights commencing March 16, 2021 to put the Series E
67
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
Preferred Stock to the Company at 130% of its liquidation preference, which the Company can satisfy with cash or
common stock. The Series E Preferred Stock votes as a class on matters generally affecting the Series E Preferred
Stock, and as long as 434,750 shares of Series E Preferred Stock (47% of the originally issued shares of Series E
Preferred Stock) remain outstanding, then 75% approval of the Series E Preferred Stock will be required to approve
merger, consolidation, liquidation or winding up of the Company, related party transactions exceeding $120,
payment of dividends on common stock except from funds from operations or to maintain REIT status, the grant of
exemptions from the Company’s charter limitation on ownership of 9.9% of any class or series of its securities
(exclusive of persons currently holding exemptions), issuance of preferred stock or commitment or agreement to do
any of the foregoing.
The Series E Preferred Stock was determined to have a fair value of $9,900 on the date of issuance as measured
using a trinomial lattice-based model. From this value, the embedded redemption option (see Note 8), which was
determined to be an asset with a fair value on the date of issuance of $150 using the same model, was bifurcated and
will be accounted for at fair value at each period end. These are considered Level 3 fair value measurements. The
issuance of the Series E Preferred Stock is considered an inducement to convert the Series D Preferred Stock to
common stock and as such, its fair value at issuance, plus related expenses totaling $1,210 in the year ended
December 31, 2017, are reflected as a reduction of retained earnings and an increase in dividends declared and
undeclared and in kind dividends deemed on preferred stock.
Impact of Preferred Stock on Net Earnings (Loss) Attributable to Common Shareholders
The components of dividends declared and undeclared and in kind dividends deemed on preferred stock are as
follows:
Year ended December 31,
2018
2019
2017
Preferred D dividends accrued at stated rate
Preferred D inducement to convert
Preferred E dividends accrued at stated rate
Dividends declared and undeclared and in kind dividends deemed on preferred
stock
$
- $
-
578
- $
-
578
650
11,110
483
$
578 $
578 $
12,243
NOTE 11. NONCONTROLLING INTEREST OF COMMON UNITS IN THE OPERATING
PARTNERSHIP
At December 31, 2019 and 2018, 219,183 and 3,281,124 of the operating partnership’s common units were
outstanding, respectively, all of which were held by limited partners. All LTIP units previously were cancelled on
June 28, 2017 (see Note 12). The total redemption value for the common units was $47 and $435 at December 31,
2019 and 2018, respectively. Our ownership interest in the operating partnership as of December 31, 2019 and 2018
was 99.9% and 99.5%, respectively.
Each limited partner of the operating partnership may, subject to certain limitations, require that the operating
partnership redeem all or a portion of his or her common units at any time after a specified period following the date
the units were acquired, by delivering a redemption notice to the operating partnership. When a limited partner
tenders common units for redemption, the Company can, at its sole discretion, choose to purchase the units for either
(1) a number of shares of Company common stock at a rate of one share of common stock for each 52 common units
redeemed or (2) cash in an amount equal to the market value of the number of shares of Company common stock the
limited partner would have received if the Company chose to purchase the units for common stock.
During the year ended December 31, 2019, 259,685 common units were redeemed for cash totaling $42 and
2,802,256 common units were converted into 53,891 shares of common stock. During the year ended December 31,
2018, 1,528,803 common units were redeemed for cash totaling $298. No common units were redeemed in 2017.
68
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
NOTE 12. STOCK-BASED COMPENSATION
The Company currently has in place the Condor 2016 Stock Plan, which was approved by the Company’s
shareholders at the annual shareholders meeting on June 15, 2016. The 2016 Stock Plan authorizes the issuance of
stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, deferred stock
units, and other forms of stock-based compensation. The maximum number of shares of the Company’s common
stock that may be issued under the 2016 Stock Plan is 761,538 following an amendment to the plan to increase the
number of available shares by 300,000 that was approved by shareholders on May 17, 2018 at the annual meeting of
shareholders. As of December 31, 2019, there were 511,518 common shares available for issuance under the 2016
Stock Plan.
Options
At December 31, 2016, the Company had a total of 865 vested stock options outstanding with a weighted average
exercise price of $48.945 per share. These options expired unexercised on July 15, 2017.
Service Condition Share Awards
From time to time, the Company awards restricted shares of common stock to employees, officers, and members of
the Board of Directors under the 2016 Stock Plan. These shares generally vest ratably over five years for employees
and officers and three years for members of the Board of Directors based on continued service or employment.
Dividends paid on these restricted shares during the vesting period are not forfeited in the event that the shares fail
to vest. The following table presents a summary of the service condition unvested share activity for the years ended
December 31, 2019, 2018, and 2017:
Shares
Weighted-average grant
date fair value
Unvested at December 31, 2016
Granted
Vested
Forfeited
Unvested at December 31, 2017
Granted
Vested
Forfeited
Unvested at December 31, 2018
Granted
Vested
Forfeited
Unvested at December 31, 2019
- $
$
$
$
$
$
$
$
$
$
$
$
$
96,286
(234)
(220)
95,832
23,191
(30,879)
(11,644)
76,500
21,917
(50,328)
(1,407)
46,682
-
10.54
10.60
10.54
10.54
10.28
10.56
10.33
10.48
8.48
9.94
9.23
10.16
The fair value of the service condition unvested share awards was determined based on the closing price of the
Company’s common stock on the grant date.
Market Based Share Awards
Pursuant to an amendment of an employment agreement on June 28, 2017, an executive officer may earn shares of
common stock if certain market share prices of common stock are attained. Any such shares, if earned, will be
issued under the 2016 Stock Plan or another shareholder approved plan. The executive officer will earn and be
issued 36,692 common shares each time stock market price targets of $11.00 to $18.00 (in one dollar increments)
per common share are first achieved prior to March 31, 2022 based on the weighted-average common stock price for
60 consecutive trading days. Additionally, the shares vest to the extent of the value received per share of common
stock in connection with a change in control, with the payout in such case to be prorated for the portion of the value
69
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
above a stock market price target but below the next stock market price target. The $11.00 tranche of this award
vested on November 22, 2019.
The compensation cost related to awards that are contingent upon achieving a market based criteria is measured at
the fair value of the award on the date of grant using the Monte Carlo simulation, including consideration of the
market criteria, and amortized on a straight line basis over the derived performance period which is also estimated
using this model. The Monte Carlo simulation method is a generally accepted statistical method used to generate a
defined number of stock price paths in order to develop a reasonable estimate of the range of future expected stock
prices of the Company and its peer group and minimize standard error and is considered a Level 3 fair value
measurement.
The grant date fair value of this award, including additional value assessed at the time of subsequent amendment of
the award, totaling $1,380, was determined using the following assumptions:
Volatility
Stock price
Dividend yield
Risk free interest rate
Performance Based Share Awards
$ 10.60
25.0 %
7.4 %
0.89% - 1.81% based upon expected time of vesting
Pursuant to an amendment of an employment agreement on June 28, 2017, an executive officer may earn shares of
common stock if certain operating results of the Company are obtained. Any such shares, if earned, will be issued
under the 2016 Stock Plan or another shareholder approved plan. For each of the Company’s fiscal years 2017
through 2021, if the Company achieves between 85% and 101% of budgeted Funds from Operations (“FFO”) as
approved by the Board of Directors, the executive shall earn and be issued between 11,741 and 19,569 shares of
common stock, determined on a straight-line basis based on the percentage of budgeted FFO achieved. In addition,
for any fiscal year in which the Company achieves in excess of 101% of budgeted FFO, an additional 391 shares of
common stock will be earned for each two percent actual FFO exceeds 101% of budgeted FFO, up to a total of
3,910 additional shares of common stock per year.
The fair value of the performance based share awards is based on the closing price of the Company’s common stock
on the grant date, discounted for estimated common stock dividends to be declared prior to the shares being issued.
The grant date occurs on an annual basis when budgeted FFO is approved by the Board of Directors. The total grant
date fair value of the 2019, 2018, and 2017 portions of this performance based share award, assuming that 100% of
budgeted FFO is achieved, was $147, $169 and $191, respectively. During the first quarter of 2019, 13,778 shares
with a grant date fair value totaling $122 were awarded to the executive based on 2018 FFO. Simultaneously, 2,550
fully vested shares were issued to the executive with a fair value of $22 as a discretionary award. During the first
quarter of 2018, 21,133 shares with a grant date fair value totaling $212 were awarded to the executive based on
2017 FFO.
Warrants
On March 2, 2015, the Company granted a warrant to an executive officer of the Company as an inducement
material to the executive’s acceptance of employment. The Black-Scholes option pricing model was utilized at
issuance for the determination of the fair value of the award. The warrant entitled the executive to purchase a total
of 101,213 authorized but previously unissued shares of the Company’s common stock at a price of (i) $9.88 per
share (the adjusted closing bid price of the common stock on Nasdaq on March 2, 2015) if at least one-third but not
more than one-half of the shares were purchased on or prior to March 17, 2015, and (ii) $12.48 per share for shares
purchased after that date. The warrant had a three-year term. The executive officer exercised the warrant in part to
purchase 35,060 shares on March 11, 2015 at the price of $9.88 per share. The remaining warrant expired
unexercised on March 2, 2018.
70
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
LTIP Awards
On March 2, 2015, the Company granted an equity award of 5,263,152 LTIP units, representing profit interests in
the operating partnership, to an executive officer of the Company. A Monte Carlo simulation was utilized at
issuance for the determination of the fair value of the award. The LTIP units were to be earned in one-third
increments upon the Company’s common stock achieving price per share milestones of $22.75, $29.25, and $35.75,
respectively. Earned LTIP units were to vest in March 2018, or earlier upon a change in control of the Company,
and upon vesting could be converted into operating partnership common units which could be redeemed at the rate
of one share of common stock for each 52 earned LTIP units for up to 101,213 common shares. These LTIP units
were cancelled on June 28, 2017 pursuant to an amendment of the employment agreement with the executive
officer.
Director Fully Vested Share Compensation
Independent directors serving as members of the Investment Committee of the Board of Directors receive their
monthly Investment Committee fees in the form of shares of the Company’s common stock. Certain independent
directors serving as members of the Board of Directors also elect to receive a portion of their director fees in the
form of shares of the Company’s common stock.
A total of 15,240, 11,503 and 5,369 shares were issued to independent directors under the 2016 Stock Plan with
respect to these fees during the years ended December 31, 2019, 2018, and 2017, respectively.
Stock-Based Compensation Expense
The expense recognized in the consolidated financial statements for stock-based compensation, including the LTIP,
related to employees and directors for the years ended December 31, 2019, 2018, and 2017 was $1,026, $974, and
$1,237, respectively, all of which is included in general and administrative expense. Total unrecognized
compensation cost related to all awards at December 31, 2019 was $527, which is expected to be recognized over a
weighted-average remaining service period of 2.6 years.
NOTE 13. INCOME TAXES
For the years ended December 2019, 2018, and 2017, the income tax expense related to the operating partnership,
including primarily Alternative Minimum Tax (“AMT”) in the years prior to 2018 and certain state and local taxes,
totaled $175, $83, and $20, respectively.
The components of the income tax expense (benefit) from the TRS from continuing operations for the years ended
December 31, 2019, 2018, and 2017 were as follows:
Federal:
Current
Deferred
State and local:
Current
Deferred
Income tax expense (benefit)
2019
Year ended December 31,
2018
2017
$
$
- $
817
2
(57)
762 $
$
-
202
(8)
58
252
$
33
(615)
12
(45)
(615)
Actual income tax expense of the TRS for the years ended December 31, 2019, 2018, and 2017 differs from the
“expected” income tax expense (benefit) (computed by applying the appropriate U.S. federal income tax rate of 21%
in 2019 and 2018 and 34% in 2017 to earnings before income taxes) as a result of the following:
71
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
Computed "expected" income tax (benefit) expense
State income taxes, net of federal income tax (benefit)
expense
(Decrease) increase in valuation allowance
Return to provision adjustments
Other
AMT
Total income tax expense (benefit)
2019
Year ended December 31,
2018
2017
$
403 $
191
$
546
62
(124)
431
(10)
-
762 $
40
29
(16)
8
-
252
$
47
(1,097)
-
(145)
34
(615)
$
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax
liabilities at December 31, 2019 and 2018 are as follows:
Deferred Tax Assets
Accrued expenses and other
Net operating losses carried forward for federal income tax purposes
Net operating losses carried forward for state income tax purposes
AMT
Subtotal deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred Liabilities
Tax depreciation in excess of book depreciation
Atlanta JV basis difference
Total deferred tax liabilities
Net deferred tax assets (liabilities)
As of December 31,
2018
2019
$
$
100 $
374
455
58
987
(359)
628
909
140
1,049
(421) $
84
1,004
615
117
1,820
(483)
1,337
714
223
937
400
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that
some portion or all of the deferred tax assets will not be realized. The Company considers projected reversals of
deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this
assessment. As a result of this analysis, the Company believed that a full valuation allowance against the net
deferred tax asset position was necessary at December 31, 2016 and as such no current or deferred federal income
tax other than AMT was recognized in the year then ended. At December 31, 2017 and all subsequent periods, it
was determined by management that a valuation allowance against deferred tax assets was no longer required, with
the exception of an allowance against certain state net operating losses, as management believes that it is more likely
than not that remaining deferred tax assets will be realized.
After consideration of limitations related to a change in control as defined under Internal Revenue Code Section 382
following the Company’s common and preferred equity transactions, the TRS’s net operating loss carryforward at
December 31, 2019 as determined for federal income tax purposes was $1,779. The availability of the loss
carryforwards will expire in 2027 through 2034.
On December 22, 2017, H.R. 1, originally known as the Tax Cuts and Jobs Act (“TCJA”), was enacted. The TCJA
made many significant changes to the U.S. federal income tax laws as of January 1, 2018. Pursuant to this
legislation, the federal income tax rate applicable to corporations was permanently reduced to 21% and the corporate
alternative minimum tax was repealed, and the deduction of net interest expense was limited for all businesses,
provided that certain businesses, including real estate businesses, may elect not to be subject to such limitations and
72
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
instead to depreciate their real property related assets over longer depreciable lives. The interest limitation was
determined not to have an impact on the Company’s calculation of taxable income.
The reduced 21% federal income tax rate applicable to corporations applied to taxable earnings reported for the full
2018 fiscal year. Accordingly, the Company has remeasured its net deferred tax assets using the lower federal tax
rate that will apply when these amounts are expected to reverse. As a result, in the fourth quarter of 2017, we
recognized tax expense of $304 resulting from the revaluation of U.S. net deferred tax assets.
As of December 31, 2019, the tax years that remain subject to examination by major tax jurisdictions generally include
2016 through 2019.
Distributions to the extent of our current and accumulated earnings and profits for federal income tax purposes
generally will be taxable to a shareholder as ordinary income. Distributions in excess of current and accumulated
earnings and profits generally will be treated as a nontaxable reduction of the shareholder’s basis in such
shareholder’s shares, to the extent thereof, and thereafter as taxable capital gain. Distributions that are treated as a
reduction of the shareholder’s basis in its shares will have the effect of increasing the amount of gain, or reducing
the amount of loss, recognized upon the sale of the shareholder’s shares.
For income tax purposes, distributions paid per share for the years ended December 31, 2019, 2018, and 2017 were
characterized as follows:
2019
For the year ended December 31,
2018
2017
Amount
%
Amount
%
Amount
%
Common Shares:
Ordinary income
Capital gain
Return of capital
Total
Series D Preferred Stock:
Ordinary income
Capital gain
Return of capital
Total
Series E Preferred Stock:
Ordinary income
Capital gain
Return of capital
Total
$
$
$
$
$
$
-
-
0.585000
0.585000
- $
-
100%
100% $
-
-
0.975000
0.975000
- $
-
100%
100% $
0.117000
-
0.468000
0.585000
-
-
-
-
- $
-
-
- $
-
-
-
-
- $
-
-
- $
0.104160
-
-
0.104160
-
-
0.468750
0.468750
- $
-
100%
100% $
-
-
0.625000
0.625000
- $
-
100%
100% $
0.522569
-
-
0.522569
20%
-
80%
100%
100%
-
-
100%
100%
-
-
100%
The common and preferred share distributions declared on December 11, 2018 and paid on January 3, 2019 and
December 31, 2018, respectively, were treated as 2018 distributions for tax purposes. The common share
distribution declared on December 19, 2017 and paid on January 10, 2018 was treated as a 2018 distribution for tax
purposes. The preferred share distribution declared on December 19, 2017 and paid on January 2, 2018 was treated
as a 2017 distribution for tax purposes.
73
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
NOTE 14. EARNINGS PER SHARE
The two-class method is utilized to compute earnings per common share (“EPS”) as our unvested restricted stock
awards with non-forfeitable dividends are considered participating securities. Under the two-class method, losses
are allocated only to those securities that have a contractual obligation to share in the losses of the Company. Our
unvested restricted stock is not obligated to absorb Company losses and accordingly is not allocated losses. The
following is a reconciliation of basic and diluted EPS:
Numerator: Basic (1)
Net earnings (loss) attributable to common shareholders
Less: Allocation to participating securities
Net earnings (loss) attributable to common shareholders, net of amount allocated to
participating securities
$
$
(5,626)
(38)
4,787 $
(67)
(9,362)
(56)
$
(5,664)
$
4,720 $
(9,418)
Year ended December 31,
2018
2019
2017
Numerator: Diluted (1)
Net earnings (loss) attributable to common shareholders, net of amount allocated to
participating securities
Interest and fair value adjustment on Convertible Debt
Total Diluted
$
$
$
(5,664)
-
(5,664)
$
4,720 $
(6)
4,714 $
(9,418)
-
(9,418)
Denominator
Weighted average number of common shares - Basic
Performance Based Share Awards
Convertible Note
11,856,113
-
-
11,784,222
4,285
97,269
9,437,824
-
-
Weighted average number of common shares - Diluted
11,856,113
11,885,776
9,437,824
Earnings Per Share
Basic Earnings (Loss) per Share
Diluted Earnings (Loss) per Share
$
$
(0.48)
(0.48)
$
$
0.40 $
0.40 $
(1.00)
(1.00)
The following table summarizes the weighted average number of potentially dilutive securities that have been
excluded from the denominator for the purpose of computing diluted EPS as they are antidilutive:
Outstanding stock options (2)
Unvested restricted stock
Warrants - RES (2)
Warrants - Employees (2)
Series D Preferred Stock (2)
Series E Preferred Stock
Convertible debt
LTIP common units (1) (2)
Operating partnership common units (1)
Total potentially dilutive securities excluded from the denominator
Year ended December 31,
2018
2019
2017
-
62,742
-
-
-
668,111
97,269
-
54,330
882,452
-
79,456
-
11,056
-
668,111
-
-
86,255
844,878
258
48,869
53,608
66,153
970,606
560,115
97,269
49,636
70,722
1,917,236
(1) LTIP and common units have been omitted from the denominator for the purpose of computing diluted EPS since the effect of including
these amounts in the numerator and denominator would have no impact on calculated EPS.
(2) Amounts above are weighted average amounts outstanding for the period presented. These instruments were no longer outstanding at
December 31, 2019.
74
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
NOTE 15. COMMITMENTS AND CONTINGENCIES
Management Agreements
Our TRS engages eligible independent contractors as property managers for each of our hotels in accordance with
the requirements for qualification as a REIT. The hotel management agreements provide that the management
companies have control of all operational aspects of the hotels, including employee-related matters. The
management companies must generally maintain each hotel under their management in good repair and condition
and perform routine maintenance, repairs, and minor alterations. Additionally, the management companies must
operate the hotels in accordance with the national franchise agreements that cover the hotels, which includes, as
applicable, using franchisor sales and reservation systems and abiding by franchisors’ marketing standards. The
management agreements generally require the TRS to fund debt service, working capital needs, and capital
expenditures and to fund the management companies’ third-party operating expenses, except those expenses not
related to the operation of hotels. The TRS also is responsible for obtaining and maintaining certain insurance
policies with respect to the hotels.
Each of the management companies employed by the TRS at December 31, 2019 receives a base monthly
management fee of 3.0% to 3.5% of gross hotel revenue, with incentives for performance which increase such fee to
a maximum of 5.0%. For the years ended December 31, 2019, 2018, and 2017, base management fees incurred
totaled $1,813, $1,779, and $1,700, respectively, all of which was included in continuing operations as hotel and
property operations expense. For the years ended December 31, 2019, 2018, and 2017, incentive management fees
totaled $141, $333, and $306, respectively.
The management agreements generally have initial terms of one to three years and renew for additional terms of one
year unless either party to the agreement gives the other party written notice of termination at least 90 days before
the end of a term. The Company may terminate a management agreement, subject to cure rights, if certain
performance metrics tied to both individual hotel and total managed portfolio performance are not met. The
Company may also terminate a management agreement with respect to a hotel at any time without reason upon
payment of a termination fee. The management agreements terminate with respect to a hotel upon sale of the hotel,
subject to certain notice requirements.
Franchise Agreements
As of December 31, 2019, all of our wholly owned properties operate under franchise licenses from national hotel
companies. Under our franchise agreements, we are required to pay franchise fees generally between 3.3% and
5.5% of room revenue, plus additional fees for marketing, central reservation systems, and other franchisor
programs and services that amount to between 2.5% and 6.0% of room revenue. The franchise agreements typically
have 10 to 25 year terms although certain agreements may be terminated by either party on certain anniversary dates
specified in the agreements. Further, each agreement provides for early termination fees in the event the agreement
is terminated before the stated term. Franchise fee expense totaled $4,685, $4,834, and $3,800, for the years ended
December 31, 2019, 2018, and 2017, respectively, all of which was included in continuing operations as hotel and
property operations expense.
The franchisor of two of our hotels advised us in February 2019 that both of the hotels had dropped below the
required level for guest satisfaction surveys, and that if the hotels do not achieve compliance, it reserves the right to
elect to terminate the relevant franchise agreements. The Company is actively addressing the matter relating to the
surveys and has plans in place which it believes will resolve these issues.
Leases
The Company has no land lease agreements in place related to properties owned at December 31, 2019. Land lease
expense related to properties previously owned totaled $0, $0, and $9 for the years ended December 31, 2019, 2018,
and 2017, respectively, included in hotel and property operations expense.
75
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
The Company entered into three new office lease agreements in 2016, replacing all existing office lease agreements.
All of these leases expired in 2019 with space currently being rented month to month. Office lease expense totaled
$133, $160, and $154 in the years ended December 31, 2019, 2018, and 2017, respectively, and is included in
general and administrative expense. The Company also has in place operating leases for miscellaneous equipment at
its hotel properties.
The maturity of the lease liabilities for the Company’s operating leases is as follows:
Maturity of lease liabilities
Year ended December 31,
Thereafter
Total lease payments
Less: Imputed interest
Present value of lease liabilities
2020 $
2021
2022
2023
2024
$
$
22
21
20
4
4
25
96
(15)
81
As of December 31, 2018, prior to the adoption of ASC 842, the future minimum lease payments applicable to non-
cancellable leases were as follows:
2020
2021
2022
2023
2024
$
$
Lease rents
138
61
47
-
-
246
Benefit Plans
The Company has a qualified contributory retirement plan under Section 401(k) of the Code (the “401(k) Plan”)
which covers all employees who meet certain eligibility requirements. Voluntary contributions may be made to the
401(k) Plan by employees. The 401(k) Plan is a Safe Harbor Plan and requires a mandatory employer
contribution. The employer contribution expense for the years ended December 31, 2019, 2018, and 2017 was $52,
$71, and $67, respectively, and is included in general and administrative expenses.
Litigation
Various claims and legal proceedings arise in the ordinary course of business and may be pending against the
Company and its properties. We are not currently involved in any material litigation, nor, to our knowledge, is any
material litigation threatened against us. The Company has insurance to cover potential material losses and we
believe it is not reasonably possible that such matters will have a material impact on our financial condition or
results of operations.
On August 20, 2019, a putative class action complaint was filed against the Company and each of the Company
directors, operating partnership, NHT Parent, NHT Merger Sub and NHT Merger Op, in the United States District
Court for the District of Delaware under the caption Graham v. Condor Hospitality Trust, Inc., et al., Civil Action
No. 1:19-cv-01552. The case was voluntarily dismissed by plaintiffs on January 28, 2020.
76
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
A second putative class action complaint was filed on August 23, 2019 against the Company and each of the
Company directors, the Operating Partnership, Parent, Merger Sub and Merger OP in the United States District
Court for the District of Delaware under the caption Sabatini v. Condor Hospitality Trust, Inc., et al., Civil Action
No. 1:19-cv-01564. These complaints asserted claims, purportedly brought on behalf of a class of shareholders,
under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 14a-9, and alleged that the
preliminary proxy statement filed by the Company with the Securities and Exchange Commission (“SEC”) on
Schedule 14A on August 9, 2019 (the “Preliminary Proxy Statement”) contained materially incomplete and
misleading disclosures. Each of the complaints sought, among other things, injunctive relief enjoining defendants
from taking steps to consummate the proposed transactions and damages, along with fees and costs. The case was
voluntarily dismissed by plaintiffs on January 28, 2020.
On August 26, 2019, a putative class action was filed against the Company and each of the Company’s directors in
the United States District Court for the Southern District of New York under the caption Raul v. Condor Hospitality
Trust, Inc., et al., Civil Action No. 1:19-cv-07968. The complaint asserted claims, purportedly brought on behalf of
a class of shareholders, under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 14a-9
and alleged that the Preliminary Proxy Statement contained materially incomplete and misleading disclosures. The
complaint sought, among other things, injunctive relief enjoining defendants from taking steps to consummate the
proposed transaction and damages, along with fees and costs. The case was voluntarily dismissed by plaintiffs on
November 19, 2019.
Pursuant to a Confidential Memorandum of Understanding dated September 16, 2019 between the plaintiffs in the
above three actions and the Company, if the parties do not resolve any claim for fees and expenses related to the
dismissed actions, the plaintiff may assert claims for fees, if at all, in the United States District Court of the District
of Delaware.
NOTE 16. QUARTERLY OPERATING RESULTS (UNAUDITED)
March 31,
2018
Quarter ended (unaudited)
September
30, 2018
December 31,
2018
June 30, 2018
Total 2018
Revenue
Operating expenses
Operating income
$
16,679 $
14,561
2,118
17,834 $
14,876
2,958
15,462 $
14,266
1,196
15,082 $
13,202
1,880
Net gain (loss) on dispositions of assets
Equity in earnings (loss) of joint venture
Net gain (loss) on derivatives and convertible debt
Other expense
Interest expense
Impairment recovery, net
Earnings (loss) before income taxes
Income tax expense
Net earnings (loss)
(Earnings) loss attributable to noncontrolling interest
Earnings (loss) attributable to controlling interests
Dividends declared on preferred stock
Net earnings (loss) attributable to common shareholders
Earnings (loss) per Share (1)
Total - Basic Earnings (loss) per Share
Total - Diluted Earnings (loss) per Share
$
$
$
(24)
229
447
(14)
(1,928)
93
921
(129)
792
(6)
786
(144)
642 $
1,895
63
156
(20)
(2,091)
-
2,961
(54)
2,907
(21)
2,886
(145)
2,741 $
3,716
(41)
116
(23)
(2,154)
-
2,810
(132)
2,678
(20)
2,658
(145)
2,513 $
(17)
(469)
(402)
(26)
(2,153)
-
(1,187)
(20)
(1,207)
242
(965)
(144)
(1,109) $
65,057
56,905
8,152
5,570
(218)
317
(83)
(8,326)
93
5,505
(335)
5,170
195
5,365
(578)
4,787
0.05 $
0.05 $
0.23 $
0.23 $
0.21 $
0.21 $
(0.10) $
(0.10) $
0.40
0.40
(1) Quarterly and total annual EPS are based on the weighted average number of shares outstanding during each quarter and the annual period. Due to rounding and
differences in earnings and losses between the quarterly and annual periods, the sum of the quarterly EPS amounts may not equal the reported amounts for the year.
77
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
March 31,
2019
Quarter ended (unaudited)
September
30, 2019
December 31,
2019
June 30, 2019
Total 2019
Revenue
Operating expenses
Operating income
$
15,903 $
13,825
2,078
16,177 $
14,562
1,615
14,666 $
14,386
280
14,306 $
13,412
894
Net gain (loss) on dispositions of assets
Equity in earnings (loss) of joint venture
Net loss on derivatives and convertible debt
Other expense, net
Interest expense
Earnings (loss) before income taxes
Income tax expense
Net earnings (loss)
Loss attributable to noncontrolling interest
Earnings (loss) attributable to controlling interests
Dividends declared and undeclared on preferred stock
Net loss attributable to common shareholders
Earnings (loss) per Share (1)
Total - Basic Earnings (loss) per Share
Total - Diluted Earnings (loss) per Share
$
$
$
39
513
(237)
(29)
(2,163)
201
(186)
15
1
16
(145)
(129) $
(16)
166
(456)
(24)
(2,094)
(809)
(461)
(1,270)
6
(1,264)
(144)
(1,408) $
(14)
(84)
(223)
(27)
(1,912)
(1,980)
(8)
(1,988)
10
(1,978)
(145)
(2,123) $
(45)
(405)
(155)
(24)
(1,807)
(1,542)
(282)
(1,824)
2
(1,822)
(144)
(1,966) $
61,052
56,185
4,867
(36)
190
(1,071)
(104)
(7,976)
(4,130)
(937)
(5,067)
19
(5,048)
(578)
(5,626)
(0.01) $
(0.01) $
(0.12) $
(0.12) $
(0.18) $
(0.18) $
(0.17) $
(0.17) $
(0.48)
(0.48)
(1) Quarterly and total annual EPS are based on the weighted average number of shares outstanding during each quarter and the annual period. Due to rounding and
differences in earnings and losses between the quarterly and annual periods, the sum of the quarterly EPS amounts may not equal the reported amounts for the year.
NOTE 17. SUBSEQUENT EVENTS
Purchase of Atlanta Aloft
On February 14, 2020, the Company purchased our joint venture partner’s interest in the Atlanta JV for $7,300. The
purchase price was funded with cash drawn from the credit facility.
Agreement and Plan of Merger
As previously disclosed, the Company Parties and the NHT Parties entered into the Merger Agreement on July 19,
2019 and, since then, have agreed to multiple extensions of the closing of the mergers pursuant to amendments to
the Merger Agreement.
Modification of KeyBank Credit Facility
On March 30, 2020, the Company entered into a Sixth Amendment to Credit Agreement among the operating
partnership, as borrower, the Company and the subsidiary guarantors party thereto, as guarantors, KeyBank National
Association and the other lenders party thereto, as lenders, and KeyBank National Association, as administrative
agent (the “Sixth Amendment”). The Sixth Amendment amends the Credit Agreement dated as of March 1, 2017,
as amended by the First Amendment dated as of May 11, 2017, Second Amendment dated as of December 13, 2017,
Third Amendment dated as of March 8, 2019, Fourth Amendment dated as of May 3, 2019 and Fifth Amendment
dated as of August 9, 2019 (collectively, the “Credit Agreement”). The Credit Agreement is described in the
Company’s Current Reports on Form 8-K dated March 1, 2017, May 11, 2017, December 13, 2017 and March 5,
2019 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2019 and June 30, 2019, and is
incorporated herein by reference.
The Sixth Amendment, among other things, makes the following changes to the Credit Agreement:
• Sets the size of the credit facility provided under the Credit Agreement at $102,000,000 and removes the
ability to reborrow under the credit facility in the future (without lender approval).
78
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
• Extends the maturity date of the credit facility to April 1, 2021, and provides for two extension options (six
months and five months).
• Provides for principal prepayments with certain proceeds and cash flows through a cash management
•
system / cash flow waterfall.
Implements a collateral-specific minimum debt yield (ratio of adjusted net operating income for the
borrowing base properties to indebtedness outstanding under the credit facility) of 10%. The covenant is
first tested on September 30, 2020 and for purposes of calculating compliance with the covenant,
annualized results are used until June 30, 2021 when the calculation is based on the most recently ended
four fiscal quarters.
• Maintains the maximum consolidated leverage ratio (ratio of consolidated total indebtedness to
consolidated total asset value) of 60% but provides for updated appraisals to determine consolidated total
asset value (if required by the lenders).
• Modifies the fixed charge coverage ratio (ratio of adjusted consolidated EBITDA to consolidated fixed
charges) to (a) 1.25 to 1 as of the end of the fiscal quarter ending September 30, 2020 and (b) 1.50 to 1 as
of the end of the fiscal quarter ending December 31, 2020 and each fiscal quarter thereafter. For purposes
of calculating compliance with the covenant, annualized results are used until June 30, 2021 when the
calculation is based on the most recently ended four fiscal quarters.
Implements a maximum borrowing base leverage ratio (ratio of indebtedness outstanding under the credit
facility to borrowing base asset value (based on updated appraisals required by the lenders) of 65%. The
covenant is first tested on June 30, 2021.
•
• Eliminates the financial covenants regarding secured leverage ratio, tangible net worth and variable rate
debt.
• Modifies the covenant on dividends and distributions to provide that no cash dividends or distributions may
be made to common or preferred shareholders.
• Modifies the covenants on recourse debt and investments to provide that no additional recourse debt or
investments will be permitted.
• Adds certain monthly reporting obligations.
•
Increases the interest rate for the credit facility to LIBOR plus 3.25% or a base rate plus 2.25%, and further
increases the interest rate spreads by 0.25% at six month intervals. The LIBOR rate is subject to a floor of
0.25%.
Additionally, our mortgage loan with KeyBank which finances the Atlanta Aloft matures on May 8, 2020. The
Company plans to refinance this loan prior to maturity with our KeyBank credit facility if approved by the lenders. In
the event this refinancing is not completed prior to maturity, KeyBank has provided a binding commitment to extend the
maturity of the loan to April 1, 2021.
79
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81
Condor Hospitality Trust, Inc. and Subsidiaries
Notes to Schedule III Real Estate and Accumulated Depreciation
As of December 31, 2019
(In thousands)
ASSET BASIS
(a) Balance at January 1, 2017
Additions
Disposals
Impairment loss, net
Balance at December 31, 2017
Additions
Disposals
Impairment recovery, net
Balance at December 31, 2018
Additions
Disposals
Balance at December 31, 2019
ACCUMULATED DEPRECIATION
(b) Balance at January 1, 2017
Depreciation for the period ended December 31, 2017
Depreciation on assets sold or disposed
Balance at December 31, 2017
Depreciation for the period ended December 31, 2018
Depreciation on assets sold or disposed
Balance at December 31, 2018
Depreciation for the period ended December 31, 2019
Depreciation on assets sold or disposed
Balance at December 31, 2019
$
$
$
$
Total
Total
143,384
134,709
(34,814)
(2,151)
241,128
38,198
(22,220)
93
257,199
1,504
(7,843)
250,860
28,513
6,898
(13,863)
21,548
9,475
(8,094)
22,929
9,563
(3,615)
28,877
(a) The aggregate cost of land, buildings, furniture and equipment for Federal income tax purposes is
approximately $253 million (unaudited).
(b) Depreciation is computed based upon the following useful lives:
Buildings and improvements 15 - 40 years
Furniture and equipment 3 - 12 years
(c) The Company has mortgages payable on the properties as noted. Additional mortgage information can be
found in Note 6 to the consolidated financial statements.
82
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
An evaluation was performed under the supervision of management, with the participation of our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and
procedures as defined in Rule 13a-15 of the rules promulgated under the Securities and Exchange Act of 1934, as
amended. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as
of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective to
provide reasonable assurance that information required to be disclosed by the Company in the reports the Company
files or submits under the Securities Exchange Act of 1934 was (a) accumulated and communicated to management,
including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding
required disclosures and (b) recorded, processed, summarized, and reported within the time periods specified in the
Securities and Exchange Commission’s rules and forms.
Other than as discussed below, no changes in the Company’s internal controls over financial reporting occurred
during the last fiscal quarter covered by this report that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial reporting.
Management’s Annual Report On Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial
reporting as such term is defined in Securities Exchange Act Rule 13a-15(f). The Company carried out an evaluation
under the supervision and with the participation of the Company’s management, including the Company’s Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2019. The Company’s management used the framework in Internal Control—
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations (COSO) to perform this
evaluation. Based on that evaluation, the Company’s management concluded that the Company’s internal control
over financial reporting was effective as of December 31, 2019.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may
deteriorate.
This annual report does not include an attestation report of our registered public accounting firm regarding internal
control over financial reporting. Internal control over financial reporting was not subject to attestation by our
registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to
provide only management’s report in this annual report.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the last fiscal
quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
83
ITEM 9B. OTHER INFORMATION
Because this Annual Report on Form 10-K is being filed within four business days after the applicable triggering
events, the information below is being disclosed under this Item 9B instead of under Item 1.01 (Entry into a Material
Definitive Agreement) of Form 8-K.
On March 30, 2020, the Company entered into a Sixth Amendment to Credit Agreement among the operating
partnership, as borrower, the Company and the subsidiary guarantors party thereto, as guarantors, KeyBank National
Association and the other lenders party thereto, as lenders, and KeyBank National Association, as administrative
agent (the “Sixth Amendment”). The Sixth Amendment amends the Credit Agreement dated as of March 1, 2017,
as amended by the First Amendment dated as of May 11, 2017, Second Amendment dated as of December 13, 2017,
Third Amendment dated as of March 8, 2019, Fourth Amendment dated as of May 3, 2019 and Fifth Amendment
dated as of August 9, 2019 (collectively, the “Credit Agreement”). The Credit Agreement is described in the
Company’s Current Reports on Form 8-K dated March 1, 2017, May 11, 2017, December 13, 2017 and March 5,
2019 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2019 and June 30, 2019, and is
incorporated herein by reference.
The Sixth Amendment, among other things, makes the following changes to the Credit Agreement:
• Sets the size of the credit facility provided under the Credit Agreement at $102,000,000 and removes the
ability to reborrow under the credit facility in the future (without lender approval).
• Extends the maturity date of the credit facility to April 1, 2021, and provides for two extension options (six
months and five months).
• Provides for principal prepayments with certain proceeds and cash flows through a cash management
•
system / cash flow waterfall.
Implements a collateral-specific minimum debt yield (ratio of adjusted net operating income for the
borrowing base properties to indebtedness outstanding under the credit facility) of 10%. The covenant is
first tested on September 30, 2020 and for purposes of calculating compliance with the covenant,
annualized results are used until June 30, 2021 when the calculation is based on the most recently ended
four fiscal quarters.
• Maintains the maximum consolidated leverage ratio (ratio of consolidated total indebtedness to
consolidated total asset value) of 60% but provides for updated appraisals to determine consolidated total
asset value (if required by the lenders).
• Modifies the fixed charge coverage ratio (ratio of adjusted consolidated EBITDA to consolidated fixed
charges) to (a) 1.25 to 1 as of the end of the fiscal quarter ending September 30, 2020 and (b) 1.50 to 1 as
of the end of the fiscal quarter ending December 31, 2020 and each fiscal quarter thereafter. For purposes
of calculating compliance with the covenant, annualized results are used until June 30, 2021 when the
calculation is based on the most recently ended four fiscal quarters.
Implements a maximum borrowing base leverage ratio (ratio of indebtedness outstanding under the credit
facility to borrowing base asset value (based on updated appraisals required by the lenders) of 65%. The
covenant is first tested on June 30, 2021.
•
• Eliminates the financial covenants regarding secured leverage ratio, tangible net worth and variable rate
debt.
• Modifies the covenant on dividends and distributions to provide that no cash dividends or distributions may
be made to common or preferred shareholders.
• Modifies the covenants on recourse debt and investments to provide that no additional recourse debt or
investments will be permitted.
• Adds certain monthly reporting obligations.
•
Increases the interest rate for the credit facility to LIBOR plus 3.25% or a base rate plus 2.25%, and further
increases the interest rate spreads by 0.25% at six month intervals. The LIBOR rate is subject to a floor of
0.25%.
Some of the lenders in the Credit Agreement and / or their affiliates have other business relationships with the
Company involving the provision of financial and bank-related services, including cash management and treasury
services, and have participated in the Company’s prior debt financings and sales of securities.
84
As a result of the anticipated impact of the COVID-19 virus on the hotel industry generally, the Company has
received waivers from Great Western Bank with respect to compliance with its quarterly debt service coverage
ratios (consolidated and for the Leawood Aloft collateral) for March 31, 2020 and June 30, 2020 and modifications
for September 30, 2020 and December 31, 2020 (reducing the collateral covenant from 1.35x to 1.00x and providing
for use of annualized results). The modification also provides for a three month deferral of principal and interest
payments.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
The information required by this item is incorporated by reference to the Company’s definitive Proxy Statement for
the 2020 Annual Meeting of Stockholders.
The Company has adopted a Code of Business Conduct and Ethics and Whistleblower Policy that applies to the
Company’s Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer and has posted the code
on its website at www.condorhospitality.com through the “Investors” link. The Company intends to satisfy the
disclosure requirement under Item 5.05 of Form 8-K relating to amendments to or waivers from any provision of the
Code of Business Conduct and Ethics and Whistleblower Policy applicable to the Company’s Chief Executive
Officer, Chief Financial Officer or Chief Accounting Officer by posting that information on the Company’s Web
site at www.condorhospitality.com through the “Investors” link.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the Company’s definitive Proxy Statement for
the 2020 Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Certain of the information required by this item is incorporated by reference to the Company’s definitive Proxy
Statement for the 2020 Annual Meeting of Stockholders.
85
Equity Compensation Plan Information
The following table provides information about the Company’s common stock that may be issued upon exercise of
options, warrants, and rights under existing equity compensation plans as of December 31, 2019:
Number of securities
to be issued
upon exercise of outstanding
options, warrants, and
rights
(a)
Weighted average
exercise price of
outstanding options,
warrants, and rights
(b)
Number of securities
remaining available
for future
issuance under equity
compensation
plans (including
securities plans reflected
in column(a))
(c)
-
-
-
$
$
-
-
-
511,518 (1)
-
511,518
Plan category
Equity compensation plans
approved by security
holders
Equity compensation plans
not approved by security
holders
Total
(1) Represents shares issuable under the Company’s 2016 Stock Plan. The maximum number of shares of the Company’s
common stock that may be issued under the 2016 Stock Plan is 761,538. Additionally, an executive officer will be
issued shares under the 2016 Stock Plan, if sufficient shares are then available under the 2016 Stock Plan, of 36,692
common shares each time stock market price targets of $12.00 to $18.00 (in one dollar increments) per common share
are first achieved prior to March 31, 2022 based on the weighted-average common stock price for 60 consecutive
trading days (or upon a change in control with the award prorated for the portion between price targets), and between
11,741 and 23,479 shares annually if budgeted Funds from Operations targets are achieved.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by this item is incorporated by reference to the Company’s definitive Proxy Statement for
the 2020 Annual Meeting of Stockholders.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is incorporated by reference to the Company’s definitive Proxy Statement for
the 2020 Annual Meeting of Stockholders.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Financial Statements and Financial Statement Schedules
PART IV
The following financial statements and financial statement schedule are included in this report on the pages listed
below:
86
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2019 and 2018
Consolidated Statements of Operations for the Years Ended December 31, 2019, 2018, and
2017
Consolidated Statements of Equity for the Years Ended December 31, 2019, 2018, and 2017
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018, and
2017
Notes to Consolidated Financial Statements
Schedule III – Real Estate and Accumulated Depreciation
Notes to Schedule III – Real Estate and Accumulated Depreciation
Page
42
43
44
45
46
47
80
82
All other schedules for which provision is made in Regulation S-X are either not required to be included herein
pursuant to the related instructions are inapplicable, or the related information is included in the footnotes to the
applicable financial statement, and, therefore, have been omitted from this Item 15.
Exhibits
2.1
2.2
2.3
2.4
2.5
3.1
Agreement and Plan of Merger dated as of July 19, 2019 by and among NHT Operating Partnership,
LLC, NHT REIT Merger Sub, LLC, NHT Operating Partnership II, LLC, the Company and Condor
Hospitality Limited Partnership (incorporated herein by reference to Exhibit 2.1 to the Company’s
Current Report on Form 8-K (Commission file number 001-34087) dated July 18, 2019).
Amendment No. 1 dated as of September 13, 2019 to Agreement and Plan of Merger dated as of July
19, 2019 by and among NHT Operating Partnership, LLC, NHT REIT Merger Sub, LLC, NHT
Operating Partnership II, LLC, the Company and Condor Hospitality Limited Partnership
(incorporated herein by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K
(Commission file number 001-34087) dated September 13, 2019).
Amendment No. 2 dated as of December 17, 2019 to Agreement and Plan of Merger dated as of July
19, 2019 by and among NHT Operating Partnership, LLC, NHT REIT Merger Sub, LLC, NHT
Operating Partnership II, LLC, the Company and Condor Hospitality Limited Partnership
(incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K
(Commission file number 001-34087) dated December 17, 2019).
Amendment No. 3 dated as of January 30, 2020 to Agreement and Plan of Merger dated as of July
19, 2019 by and among NHT Operating Partnership, LLC, NHT REIT Merger Sub, LLC, NHT
Operating Partnership II, LLC, the Company and Condor Hospitality Limited Partnership
(incorporated herein by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K
(Commission file number 001-34087) dated January 30, 2020).
Amendment No. 4 dated as of March 15, 2020 to Agreement and Plan of Merger dated as of July 19,
2019 by and among NHT Operating Partnership, LLC, NHT REIT Merger Sub, LLC, NHT
Operating Partnership II, LLC, the Company and Condor Hospitality Limited Partnership
(incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K
(Commission file number 001-34087) dated March 15, 2020).
Amended and Restated Articles of Incorporation of the Company, as amended (incorporated herein
by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (Commission file number
001-34087) dated May 24, 2017).
87
3.2
4.1*
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Bylaws of the Company, as amended (incorporated herein by reference to Exhibit 3.1 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated July 18, 2019).
Description of the Company’s Securities Registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended.
Third Amended and Restated Agreement of Limited Partnership of Condor Hospitality Limited
Partnership, as amended (incorporated herein by reference to Exhibit 10.1 to the Company’s
Quarterly Report on Form 10-Q (Commission file number 001-34087) for the quarter ended
September 30, 2016).
Amended and Restated Limited Liability Company Agreement of Spring Street Hotel Property II
LLC dated as of August 22, 2016 (incorporated herein by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K (Commission file number 001-34087) dated August 22, 2016).
Limited Liability Company Agreement of Spring Street Hotel OpCo II LLC dated as of August 22,
2016 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-
K (Commission file number 001-34087) dated August 22, 2016).
Hotel Management Agreement dated June 29, 2016 by and between TRS Leasing, Inc., TRS
Subsidiary, LLC and Kinseth Hotel Corporation (incorporated herein by reference to Exhibit 10.1 to
the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated June 29,
2016).
Hotel Management Agreement dated June 29, 2016 by and between TRS Leasing, Inc., TRS
Subsidiary, LLC and Strand Development Company, LLC (incorporated herein by reference to
Exhibit 10.5 to the Company’s Current Report on Form 8-K (Commission file number 001-34087)
dated June 29, 2016).
Hotel Management Agreement dated June 29, 2016 by and between TRS Leasing, Inc., TRS
Subsidiary, LLC, SPPR TRS Subsidiary, LLC, BMI Alexandria TRS Subsidiary, LLC and
Hospitality Management Advisors, Inc. (incorporated herein by reference to Exhibit 10.3 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated June 29, 2016).
Hotel Management Agreement dated June 29, 2016 by and between SPPR-Dowell TRS Subsidiary,
LLC and Cherry Cove Hospitality Management, LLC (incorporated herein by reference to Exhibit
10.4 to the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated
June 29, 2016).
Hotel Management Agreement dated October 1, 2015 between TRS San Spring, LLC and Peachtree
Hospitality Management, LLC (incorporated herein by reference to Exhibit 10.4 to the Company’s
Current Report on Form 8-K (Commission file number 001-34087) dated October 1, 2015).
Hotel Management Agreement dated October 1, 2015 between TRS Atl Indy, LLC and Peachtree
Hospitality Management, LLC (incorporated herein by reference to Exhibit 10.5 to the Company’s
Current Report on Form 8-K (Commission file number 001-34087) dated October 1, 2015).
10.10
Hotel Management Agreement dated October 1, 2015 between TRS Jax Court, LLC and Peachtree
Hospitality Management, LLC (incorporated herein by reference to Exhibit 10.6 to the Company’s
Current Report on Form 8-K (Commission file number 001-34087) dated October 1, 2015).
10.11
Hotel Management Agreement, dated June 29, 2016, by and between TRS Leasing, Inc., TRS
Subsidiary, LLC and K Partners Hospitality Group LP (incorporated herein by reference to Exhibit
88
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.2 to the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated
June 29, 2016).
Agreement between Spring Street Hotel OpCo LLC and Boast Hotel Management Company LLC
dated effective August 19, 2016 (incorporated herein by reference to Exhibit 10.3 to the Company’s
Current Report on Form 8-K (Commission file number 001-34087) dated August 22, 2016).
Hotel Management Agreement dated as of December 14, 2016 between TRS KCI Loft, LLC and
Presidian Destinations, Ltd. (incorporated herein by reference to Exhibit 10.2 to the Company’s
Current Report on Form 8-K (Commission file number 001-34087) dated December 14, 2016).
Hotel Management Agreement dated as of March 24, 2017 between TRS TLH Magnolia, LLC and
Vista Host Inc. (incorporated herein by reference to Exhibit 10.4 to the Company’s Current Report on
Form 8-K (Commission file number 001-34087) dated March 24, 2017).
Hotel Management Agreement dated as of March 24, 2017 between TRS AUS Louis, LLC and Vista
Host Inc. (incorporated herein by reference to Exhibit 10.5 to the Company’s Current Report on
Form 8-K (Commission file number 001-34087) dated March 24, 2017).
Hotel Management Agreement dated as of March 24, 2017 between TRS LEX Lowry, LLC and
Vista Host Inc. (incorporated herein by reference to Exhibit 10.6 to the Company’s Current Report on
Form 8-K (Commission file number 001-34087) dated March 24, 2017).
Hotel Management Agreement dated as of April 14, 2017 between TRS MEM Southcrest, LLC and
Vista Host Inc. (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on
Form 8-K/A (Commission file number 001-34087) dated March 24, 2017).
Hotel Management Agreement dated as of June 19, 2017 between TRS MCO Village, LLC and
Peachtree Hospitality Management, LLC. (incorporated herein by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated June 19, 2017).
Hotel Management Agreement dated as of August 31, 2017 between TRS ELP Edge, LLC and Pillar
Hotels & Resorts, LLC (incorporated by reference to Exhibit 10.7 filed with the Company’s Form 8-
K (Commission file number 001-34087) dated August 31, 2017).
Hotel Management Agreement dated as of August 31, 2017 between TRS AUS Casey, LLC and
Pillar Hotels & Resorts, LLC (incorporated by reference to Exhibit 10.8 filed with the Company’s
Form 8-K (Commission file number 001-34087) dated August 31, 2017).
Hotel Management Agreement dated as of January 17, 2018 between TRS AUS Tech, LLC and Pillar
Hotels & Resorts, LLC (incorporated herein by reference to Exhibit 10.3 to the Company’s Current
Report on Form 8-K/A (Commission file number 001-34087) dated August 31, 2017).
Loan Agreement dated as of August 22, 2016 between Spring Street Hotel Property LLC, Spring
Street Hotel Opco LLC and LoanCore Capital Credit REIT LLC (incorporated herein by reference to
Exhibit 10.4 to the Company’s Current Report on Form 8-K (Commission file number 001-34087)
dated August 22, 2016).
Guaranty of Recourse Obligations by the Company and Alan Kanders and Raviraj Kiran Dave dated
August 22, 2016 in favor of LoanCore Capital Credit REIT LLC (incorporated herein by reference to
Exhibit 10.5 to the Company’s Current Report on Form 8-K (Commission file number 001-34087)
dated August 22, 2016).
89
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
Loan Agreement dated as of December 14, 2016 among CDOR KCI Loft, LLC, TRS KCI Loft, LLC
and Great Western Bank (incorporated herein by reference to Exhibit 10.3 to the Company’s Current
Report on Form 8-K (Commission file number 001-34087) dated December 14, 2016).
Springing Unconditional Guaranty of Payment and Performance dated as of December 14, 2016 by
the Company in favor of Great Western Bank (incorporated herein by reference to Exhibit 10.4 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated December 14,
2016).
Limited Guaranty of Payment and Performance dated as of December 14, 2016 by the Company in
favor of Great Western Bank (incorporated herein by reference to Exhibit 10.5 to the Company’s
Current Report on Form 8-K (Commission file number 001-34087) dated December 14, 2016).
First Amendment to Loan Agreement dated as of March 9, 2019 among CDOR KCI Loft, LLC, TRS
KCI Loft, LLC and Great Western Bank (incorporated herein by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated March 5,
2019).
Credit Agreement dated as of March 1, 2017 by and among Condor Hospitality Limited Partnership,
as Borrower, Keybank National Association and the other lenders party thereto, as Lenders, and
Keybank National Association, as Administrative Agent (incorporated herein by reference to Exhibit
10.1 to the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated
March 1, 2017).
Unconditional Guaranty of Payment and Performance dated as of March 1, 2017 by Condor
Hospitality REIT Trust, the Company and the subsidiary guarantors party thereto (incorporated
herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (Commission file
number 001-34087) dated March 1, 2017).
First Amendment to Credit Agreement dated as of May 11, 2017 among Condor Hospitality Limited
Partnership, as Borrower, the Company and the subsidiary guarantors party thereto, as Guarantors,
Keybank National Association and the other lenders party thereto, as Lenders, and Keybank National
Association, as Administrative Agent (incorporated herein by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated May 11, 2017).
Second Amendment to Credit Agreement dated as of December 13, 2017 among Condor Hospitality
Limited Partnership, as Borrower, the Company and the subsidiary guarantors party thereto, as
Guarantors, Keybank National Association and the other lenders party thereto, as Lenders, and
Keybank National Association, as Administrative Agent (incorporated herein by reference to Exhibit
10.1 to the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated
December 13, 2017).
Third Amendment to Credit Agreement dated as of March 9, 2019 among Condor Hospitality
Limited Partnership, as Borrower, the Company and the subsidiary guarantors party thereto, as
Guarantors, KeyBank National Association and the other lenders party thereto, as Lenders, and
KeyBank National Association, as Administrative Agent (incorporated herein by reference to Exhibit
10.1 to the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated
March 5, 2019).
Fourth Amendment to Credit Agreement dated as of May 3, 2019 among Condor Hospitality Limited
Partnership, as Borrower, the Company and the subsidiary guarantors party thereto, as Guarantors,
KeyBank National Association and the other lenders party thereto, as Lenders, and KeyBank
National Association, as Administrative Agent (incorporated herein by reference to Exhibit 10.3 to
90
10.34
10.35
10.36
10.37
10.38
10.39
10.40
10.41
10.42
the Company’s Quarterly Report on Form 10-Q (Commission file number 001-34087) for the quarter
ended March 31, 2019).
Fifth Amendment to Credit Agreement dated as of August 9, 2019 among Condor Hospitality
Limited Partnership, as Borrower, the Company and the subsidiary guarantors party thereto, as
Guarantors, KeyBank National Association and the other lenders party thereto, as Lenders, and
KeyBank National Association, as Administrative Agent (incorporated herein by reference to Exhibit
10.2 to the Company’s Quarterly Report on Form 10-Q (Commission file number 001-34087) for the
quarter ended June 30, 2019).
Loan Agreement dated as of October 4, 2017 between CDOR Jax Court, LLC, TRS Jax Court, LLC,
CDOR Atl Indy, LLC, TRS Atl Indy, LLC, CDOR San Spring, LLC and TRS San Spring, LLC and
Wells Fargo Bank, National Association (incorporated herein by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated October 4,
2017).
Guaranty of Recourse Obligations dated as of October 4, 2017 by the Company to Wells Fargo Bank,
National Association (incorporated herein by reference to Exhibit 10.2 to the Company’s Current
Report on Form 8-K (Commission file number 001-34087) dated October 4, 2017).
Cash Management Agreement dated as of October 4, 2017 by and among Wells Fargo Bank,
National Association and CDOR Jax Court, LLC, TRS Jax Court, LLC, CDOR Atl Indy, LLC, TRS
Atl Indy, LLC, CDOR San Spring, LLC and TRS San Spring, LLC (incorporated herein by reference
to Exhibit 10.3 to the Company’s Current Report on Form 8-K (Commission file number 001-34087)
dated October 4, 2017).
Term Loan Agreement dated as of August 9, 2019 among Condor Hospitality Limited Partnership,
Spring Street Hotel Property LLC and Spring Street Hotel OpCo LLC, as Borrowers, KeyBank
National Association and the other lenders party thereto, as Lenders, and KeyBank National
Association, as Administrative Agent (incorporated herein by reference to Exhibit 10.3 to the
Company’s Quarterly Report on Form 10-Q (Commission file number 001-34087) for the quarter
ended June 30, 2019).
Unconditional Guaranty of Payment and Performance dated as of August 9, 2019 by the Company
and Condor Hospitality REIT Trust to KeyBank National Association (incorporated herein by
reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q (Commission file
number 001-34087) for the quarter ended June 30, 2019).
First Amendment to Term Loan Agreement dated as of February 6, 2020 by and among Condor
Hospitality Limited Partnership, Spring Street Hotel Property LLC and Spring Street Hotel OpCo
LLC, as Borrowers, Condor Hospitality REIT Trust and the Company, as Guarantors, and KeyBank
National Association, as Administrative Agent (incorporated herein by reference to Exhibit 10.1 to
the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated February 6,
2020).
Purchase Agreement, dated November 16, 2011, by and among the Company, Condor Hospitality
Limited Partnership and Real Estate Strategies L.P. (incorporated herein by reference to Exhibit 10.1
to the Company’s Current Report on Form 8-K/A (Commission file number 001-34087) dated
November 16, 2011).
Warrants issued to Real Estate Strategies L.P. dated February 1, 2012 and February 15, 2012
(incorporated herein by reference to Exhibit 10.39 to the Company’s Annual Report on Form 10-K
(Commission file number 001-34087) for the year ended December 31, 2011).
91
10.43
10.44
10.45
10.46
10.47
10.48
10.49
10.50
10.51
10.52
10.53
Investor Rights and Conversion Agreement, dated February 1, 2012, by and among the Company,
Real Estate Strategies L.P. and IRSA Inversiones y Representaciones Sociedad Anónima
(incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
(Commission file number 001-34087) dated January 30, 2012).
Registration Rights Agreement, dated February 1, 2012, by and among the Company, Real Estate
Strategies L.P. and IRSA Inversiones y Representaciones Sociedad Anónima (incorporated herein by
reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K (Commission file number
001-34087) dated January 30, 2012).
Directors Designation Agreement, dated February 1, 2012, by and among the Company, Real Estate
Strategies L.P. and IRSA Inversiones y Representaciones Sociedad Anónima (incorporated herein by
reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K (Commission file number
001-34087) dated January 30, 2012).
Agreement, dated August 9, 2013, by and among the Company, Real Estate Strategies L.P. and IRSA
Inversiones y Representaciones Sociedad Anonima (incorporated herein by reference to Exhibit 10.1
to the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated August
9, 2013).
Agreement, dated July 23, 2015, between Real Estate Strategies L.P., IRSA Inversiones y
Representaciones Sociedad Anonima and the Company (incorporated herein by reference to Exhibit
10.1 to the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated July
23, 2015).
Warrant dated January 24, 2017 issued to Real Estate Strategies L.P. (incorporated herein by
reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K (Commission file number
001-34087) dated January 23, 2017).
Agreement, dated as of February 28, 2017, by and among Real Estate Strategies L.P., IRSA
Inversiones y Representaciones Sociedad Anónima and the Company (incorporated herein by
reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (Commission file number
001-34087) dated February 28, 2017).
Joinder Agreement dated June 29, 2018 by and among the Company, Real Estate Strategies L.P.,
IRSA Inversiones y Representaciones Sociedad Anonima, and Real Estate Investment Group VII
L.P. (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
(Commission file number 001-34087) dated June 29, 2018).
Stock Purchase Agreement, dated as of March 16, 2016, between SREP III Flight-Investco, L.P. and
the Company (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K (Commission file number 001-34087) dated March 16, 2016).
Investor Rights Agreement, dated as of March 16, 2016, by and among SREP III Flight-Investco,
L.P., StepStone Group Real Estate LP and the Company (incorporated herein by reference to Exhibit
10.2 to the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated
March 16, 2016).
Agreement, dated as of March 16, 2016, by and among Real Estate Strategies L.P., IRSA Inversiones
y Representaciones Sociedad Anónima and the Company (incorporated herein by reference to Exhibit
10.3 to the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated
March 16, 2016).
92
10.54
10.55
10.56
10.57
10.58
10.59
10.60
10.61
10.62
10.63
10.64
10.65
10.66
Agreement, dated as of February 28, 2017, between SREP III Flight-Investco, L.P., StepStone Group
Real Estate LP and the Company (incorporated herein by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K (Commission file number 001-34087) dated February 28, 2017).
The Company’s 2006 Stock Plan (incorporated herein by reference to Exhibit 10.31 to the
Company’s Annual Report on Form 10-K (Commission file number 001-34087) for the year ended
December 31, 2011).
Amendment to the Company’s 2006 Stock Plan dated May 28, 2009 (incorporated herein by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (Commission file number
001-34087) dated May 28, 2009).
Amendment to the Company’s 2006 Stock Plan dated May 22, 2012 (incorporated herein by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (Commission file number
001-34087) dated May 22, 2012).
Form of Stock Option Agreement (incorporated herein by reference to Exhibit 10.32 to the
Company’s Annual Report on Form 10-K (Commission file number 001-34087) for the year ended
December 31, 2011).
The Company’s 2016 Stock Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K (Commission file number 001-34087) dated June 15, 2016).
Amendment to the Company’s 2016 Stock Plan (incorporated herein by reference to Exhibit 10.1 to
the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated May 17,
2018.
Jeffrey W. Dougan Employment Agreement dated July 15, 2013 (incorporated herein by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K (Commission file number 001-34087)
dated July 9, 2013).
Jeffrey W. Dougan Restricted Stock Agreement dated July 15, 2013 (incorporated herein by
reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (Commission file number
001-34087) dated July 9, 2013).
Jeffrey W. Dougan Stock Option Agreement dated July 15, 2013 (incorporated herein by reference to
Exhibit 10.3 to the Company’s Current Report on Form 8-K (Commission file number 001-34087)
dated July 9, 2013).
Amended and Restated Employment Agreement dated March 2, 2015 by and between the Company
and J. William Blackham, as amended and restated on September 16, 2016 (incorporated herein by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (Commission file number
001-34087) dated September 16, 2016).
Common Stock Purchase Warrant dated March 2, 2015 between the Company and J. William
Blackham (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on
Form 8-K (Commission file number 001-34087) dated March 2, 2015).
Amendment of Employment Agreement dated June 28, 2017 between J. William Blackham and the
Company (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K (Commission file number 001-34087) dated June 28, 2017).
93
10.67
10.68
10.69
10.70
10.71
10.72
10.73
10.74
10.75
10.76
10.77
10.78
Amendment of Employment Agreement dated April 10, 2018 between J. William Blackham and the
Company (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K (Commission file number 001-34087) dated April 10, 2018.
Form of Executive Officer and Director Indemnification Agreement (incorporated herein by
reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q (Commission file
number 001-34087) for the quarter ended March 31, 2016).
Form of Restricted Stock Agreement (incorporated herein by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated March 29,
2017).
Form of Director Restricted Stock Agreement (incorporated herein by reference to Exhibit 10.3 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated June 19, 2017).
Agreement of Purchase and Sale dated as of August 29, 2016 between Leawood ADP, Ltd. and
Condor Hospitality Limited Partnership (incorporated herein by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated August 29,
2016).
Purchase and Sale Agreement dated as of January 23, 2017 between Condor Hospitality Limited
Partnership and VHRMR TALL, LLC (incorporated herein by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated January 23,
2017).
Purchase and Sale Agreement dated as of January 23, 2017 between Condor Hospitality Limited
Partnership and EASTVHR HS ROUND ROCK, LLC (incorporated herein by reference to Exhibit
10.2 to the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated
January 23, 2017).
Purchase and Sale Agreement dated as of January 23, 2017 between Condor Hospitality Limited
Partnership and CVH LEXINGTON, LLC (incorporated herein by reference to Exhibit 10.3 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated January 23,
2017).
Purchase and Sale Agreement dated as of January 23, 2017 between Condor Hospitality Limited
Partnership and CVH SOUTHAVEN, LLC (incorporated herein by reference to Exhibit 10.4 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated January 23,
2017).
Purchase and Sale Agreement dated as of April 29, 2017 between Condor Hospitality Limited
Partnership and SI Lake Mary, LP. (incorporated herein by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated April 29,
2017).
Purchase and Sale Agreement Fairfield Inn & Suites El Paso Airport dated as of July 17, 2017
between Condor Hospitality Limited Partnership and MB Hospitality (EP), LP (incorporated herein
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (Commission file
number 001-34087) dated July 17, 2017).
First Amendment to Purchase and Sale Agreement Fairfield Inn & Suites El Paso Airport dated as of
August 31, 2017 between Condor Hospitality Limited Partnership and MB Hospitality (EP), LP
(incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
(Commission file number 001-34087) dated August 31, 2017).
94
10.79
10.80
10.81
10.82
10.83*
10.84*
10.85*
Purchase and Sale Agreement Residence Inn Austin Airport dated as of July 17, 2017 between
Condor Hospitality Limited Partnership and MB Hospitality (AUSAP), LP (incorporated herein by
reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (Commission file number
001-34087) dated July 17, 2017).
First Amendment to Purchase and Sale Agreement Residence Inn Austin Airport dated as of August
31, 2017 between Condor Hospitality Limited Partnership and MB Hospitality (AUSAP), LP
(incorporated herein by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K
(Commission file number 001-34087) dated August 31, 2017).
Purchase and Sale Agreement TownePlace Suites Austin North Tech Ridge dated as of July 17, 2017
between Condor Hospitality Limited Partnership and MB Hospitality (AUSN), LP (incorporated
herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (Commission file
number 001-34087) dated July 17, 2017).
First Amendment to Purchase and Sale Agreement TownePlace Suites Austin North Tech Ridge
dated as of August 31, 2017 between Condor Hospitality Limited Partnership and MB Hospitality
(AUSN), LP (incorporated herein by reference to Exhibit 10.6 to the Company’s Current Report on
Form 8-K (Commission file number 001-34087) dated August 31, 2017).
Sixth Amendment to Credit Agreement dated as of March 30, 2020 among Condor Hospitality
Limited Partnership, as Borrower, the Company and the subsidiary guarantors party thereto, as
Guarantors, KeyBank National Association and the other lenders party thereto, as Lenders, and
KeyBank National Association, as Administrative Agent.
Exhibit A to Sixth Amendment to Credit Agreement dated as of March 30, 2020 among Condor
Hospitality Limited Partnership, as Borrower, the Company and the subsidiary guarantors party
thereto, as Guarantors, KeyBank National Association and the other lenders party thereto, as Lenders,
and KeyBank National Association, as Administrative Agent.
Exhibit B to Sixth Amendment to Credit Agreement dated as of March 30, 2020 among Condor
Hospitality Limited Partnership, as Borrower, the Company and the subsidiary guarantors party
thereto, as Guarantors, KeyBank National Association and the other lenders party thereto, as Lenders,
and KeyBank National Association, as Administrative Agent.
10.86*
Second Amendment to Loan Agreement dated as of March 30, 2020 among CDOR KCI Loft, LLC,
TRS KCI Loft, LLC and Great Western Bank.
14.1
Code of Business Conduct and Ethics and Whistleblower Policy (incorporated herein by reference to
Exhibit 14.1 to the Company’s Current Report on Form 8-K (Commission file number 001-34087)
dated May 17, 2018.
21.0*
Subsidiaries.
23.1*
Consent of KPMG LLP
31.1*
Section 302 Certification of Chief Executive Officer.
31.2*
Section 302 Certification of Chief Financial Officer.
32.1*
Section 906 Certifications.
95
99.1
Form of Voting Agreement (incorporated herein by reference to Exhibit 99.1 to the Company’s
Current Report on Form 8-K (Commission file number 001-34087) dated July 18, 2019).
101.1*
The following materials from the Company’s Annual Report on Form 10-K for the year ended
December 31, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) the
Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated
Statements of Equity, (iv) the Consolidated Statements of Cash Flows and (v) Notes to Consolidated
Financial Statements.
Pursuant to Item 601 (b)(4) of Regulation S-K, certain instruments with respect to the Company’s long-term debt are
not filed with this Form 10-K. The Company will furnish a copy of any such long-term debt agreement to the Securities
and Exchange Commission upon request.
Management contracts and compensatory plans are set forth as Exhibits 10.48 through 10.63.
* Filed herewith.
96
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 dually
authorized
March 31, 2020 /s/J. William Blackham
J. William Blackham
Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed
by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/J. William Blackham
J. William Blackham
/s/Arinn A. Cavey
Arinn A. Cavey
/s/Daphne J. Dufresne
Daphne J. Dufresne
/s/Thomas Calahan
Thomas Calahan
/s/Noah Davis
Noah Davis
/s/Daniel R. Elsztain
Daniel R. Elsztain
/s/Donald J. Landry
Donald J. Landry
/s/Matias I. Gaivironsky
Matias I. Gaivironsky
/s/Brendan MacDonald
Brendan MacDonald
/s/Benjamin Wall
Benjamin Wall
Chief Executive Officer
(Principal Executive
Officer)
Chief Accounting Officer
& Chief Financial
Officer
(Principal Accounting
Officer & Principal
Financial Officer)
March 31, 2020
March 31, 2020
Chair of the Board
March 31, 2020
Board Member
March 31, 2020
Board Member
March 31, 2020
Board Member
March 31, 2020
Board Member
March 31, 2020
Board Member
March 31, 2020
Board Member
March 31, 2020
Board Member
March 31, 2020
97
[THIS PAGE INTENTIONALLY LEFT BLANK]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-K/A (Amendment No. 1)
(Mark one)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2019
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: 001-34087
Condor Hospitality Trust, Inc.
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of
incorporation or organization)
1800 West Pasewalk Avenue, Ste. 200, Norfolk, NE
(Address of principal executive offices)
52-1889548
(I.R.S. Employer
Identification No.)
68701
(Zip Code)
(301) 861-3305
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $.01 par value per share
Trading Symbol
CDOR
Name of each exchange on which registered
NYSE American
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 [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes [ ] No [X]
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 [X] 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 [X] 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 [ ]
Non-accelerated filer [X]
Accelerated filer [ ]
Smaller reporting company [X]
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 [X]
As of June 30, 2019 the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $49.6 million based
on the price at which the common stock was last sold on that date as reported on the NYSE American. At March 25, 2020, there were 11,996,823
shares of the registrant’s common stock outstanding.
None
DOCUMENTS INCORPORATED BY REFERENCE
[THIS PAGE INTENTIONALLY LEFT BLANK]
EXPLANATORY NOTE
Condor Hospitality Trust, Inc. (references to “we,” “our,” “us,” and “Company” refer to Condor Hospitality Trust,
Inc., including, as the context requires, its direct and indirect subsidiaries) is filing this Amendment No. 1 on Form
10-K/A (this “Amendment”) to amend our Annual Report on Form 10-K for the year ended December 31, 2019,
originally filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2020 (the “Original 10-K
Filing”), solely for the purpose of including the information required by Part III of Form 10-K. Such information
was previously omitted from the Original 10-K Filing in reliance on General Instruction G(3) to Form 10-K, which
permits the information in the above referenced items to be incorporated in the Form 10-K by reference to our
definitive proxy statement for the 2020 Annual Meeting of Stockholders if such proxy statement is filed no later
than 120 days after our fiscal year end. We are filing this Amendment to include Part III information in our Form
10-K. The reference on the cover of the Original 10-K Filing to the incorporation by reference to portions of our
definitive proxy statement into Part III of the Original 10-K Filing is hereby deleted.
In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Part
III, Items 10 through 14 of the Original 10-K Filing are hereby amended and restated in their entirety, and Part IV,
Item 15 of the Original 10-K Filing is hereby amended and restated in its entirety, with the only changes being the
addition of new certifications by our principal executive officer and principal financial officer filed herewith and
related footnotes. This Amendment does not amend or otherwise update any other information in the Original 10-K
Filing. Accordingly, this Amendment should be read in conjunction with the Original 10-K Filing and with our
filings with the SEC subsequent to the Original 10-K Filing.
FORWARD-LOOKING STATEMENTS
Certain information both included and incorporated by reference in this Form 10-K may contain 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, and as such may involve known and unknown risks, uncertainties,
and other factors which may cause our actual results, performance, or achievements to be materially different from
future results, performance, or achievements expressed or implied by such forward-looking statements. These
forward-looking statements are based on assumptions that management has made in light of experience in the
business in which we operate, as well as management’s perceptions of historical trends, current conditions, expected
future developments, and other factors believed to be appropriate under the circumstances. These statements are not
guarantees of performance or results. They involve risks, uncertainties (some of which are beyond our control), and
assumptions. Management believes that these forward-looking statements are based on reasonable assumptions.
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,” “expect,” “anticipate,”
“estimate,” “believe,” “intend,” or “project” or the negative thereof or other variations thereon or comparable
terminology. Factors which could have a material adverse effect on our operations and future prospects include, but
are not limited to, changes in economic conditions generally and the real estate market specifically,
legislative/regulatory changes (including changes to laws governing the taxation of real estate investment trusts),
availability of capital, risks associated with debt financing, interest rates, competition, supply and demand for hotel
rooms in our current and proposed market areas, policies and guidelines applicable to real estate investment
trusts, risks related to uncertainty and disruption in global economic markets as a result of COVID-19 (commonly
referred to as the coronavirus), and other risks and uncertainties described herein, and in our filings with the
Securities and Exchange Commission (“SEC”) from time to time. These risks and uncertainties should be
considered in evaluating any forward-looking statements contained or incorporated by reference herein. We caution
readers not to place undue reliance on any forward-looking statements included in this report which speak only as of
the date of this report.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Executive Officers of the Company
Information on our President and Chief Executive Officer, Mr. Blackham, is included below with information on our
directors. The other executive officer at April 29, 2020, her age, positions held, and the business experience during
the past five years are, as follows:
Arinn Cavey, age 40, interim Chief Financial Officer since May 2019 and Chief Accounting Officer since
September 2015. Prior to joining the Company, Ms. Cavey was employed with KPMG LLP beginning in September
2002, last serving as an Audit Senior Manager. She has extensive audit experience in the consumer and industrial
markets industries. She has provided professional audit services to publicly-held SEC registrants in accordance with
PCAOB requirements and U.S. GAAP as well as to private companies in accordance with AICPA requirements.
She is a Certified Public Accountant and holds a Bachelor of Science degree in Accounting from Drake University.
Directors
The names of the Company’s nine directors and certain information about the directors, as of April 29, 2020, are set
forth below.
J. William Blackham, Director, President and Chief Executive Officer. Mr. Blackham, age 66, was appointed
President and Chief Executive Officer and a member of the board of directors on March 2, 2015. Mr. Blackham,
since 2008 to present, is a co-owner and the managing member of Trinity Investment Partners, LLC. Also since
early 2011, he has served as the owner and managing member of Proximo Investments & Advisors, LLC, an
investment and advisory company, and in various roles, including consultant, trustee and manager of affiliates, for
Assured Administration, LLC. He was president and CEO of Eagle Hospitality, a hotel REIT which traded on the
NYSE until its sale in 2007 and has been active for several decades in entities involved in real estate and hospitality
development, acquisition and advisory services.
Mr. Blackham’s extensive experience as a leader of real estate ventures, his public hospitality REIT experience, and
his proven capital raising experience provides the board with strong leadership and expertise in the hospitality REIT
industry.
Thomas Calahan, Director. Mr. Calahan, age 38, is a partner of Balboa Real Estate Partners, a real estate firm. He
previously served as the Vice President - Portfolio Management of StepStone Group Real Estate LP since March 1,
2018 until November 30, 2018. Mr. Calahan was appointed to the board of directors on March 14, 2018. Mr.
Calahan served as a Vice President of Green Street Investors, the investment management affiliate of Green Street
Advisors, known for its equity research coverage of publicly traded REITs in the United States and Europe from
May 2016 to February 2018. He was Vice President - Global Indirect Real Estate at Aviva Investors, a global asset
manager from June 2012 to April 2016. Mr. Calahan has a Masters of Business Administration degree from
Columbia Business School, a Masters of Science, Real Estate Finance & Investment degree from New York
University and a Bachelor of Science degree from Cornell University.
Mr. Calahan’s extensive experience in REITs, real estate and asset management provides the board with
considerable expertise with respect to the Company’s business.
Committee: Investment Committee
Noah Davis, Director. Mr. Davis, age 44, is the Managing Director & Head of US Office, IRSA International
LLC., the US office of IRSA - Inversiones y Representaciones Sociedad Anónima (NYSE: IRS), the largest
diversified real estate company in Argentina. Mr. Davis is responsible for managing the existing portfolio as well as
sourcing new acquisition and development opportunities within the firms target markets. Prior to joining IRSA in
November 2010, Mr. Davis spent most of the prior decade in real estate primarily at Lone Star Funds and The
Chetrit Group. Mr. Davis began his career practicing law at Morgan, Lewis & Bockius LLP and consulting at
2
McKinsey & Company. Mr. Davis holds an LL.B. from the Faculty of Law at Bar-Ilan University and an MBA
from the Wharton School at the University of Pennsylvania.
His extensive experience in portfolio management, with significant real estate experience, provides the board with
substantial assistance on these matters.
Committee: Audit Committee
Daphne J. Dufresne, Chair of the Board. Ms. Dufresne, age 47, is a Managing Partner of GenNx360 Capital
Partners, a private equity firm focused on acquiring middle market industrial and business services companies, since
January 2017. Prior to joining GenNx360 Capital Partners, Ms. Dufresne was a Managing Director of RLJ Equity
Partners (“RLJ”), a private equity fund from December 2005 to June 2016. Ms. Dufresne participated in building
the RLJ investment team, raising $230 million of institutional capital, and constructing a partnership with The
Carlyle Group, a global private equity firm. Prior to RLJ, Ms. Dufresne was a Venture Partner during 2005 with
Parish Capital Advisors, a $425 million fund of funds for emerging and experienced institutional investors and a
Principal from 1999 to 2005 at Weston Presidio Capital, a private equity organization with $3.4 billion of assets
under management. She also served as Associate Director in 1997 in the Bank of Scotland’s Structured Finance
Group. Ms. Dufresne has been a director of United Natural Foods, Inc. since October 2016. Ms. Dufresne received
her B.S. from the University of Pennsylvania and her M.B.A. from the Harvard Business School. Ms. Dufresne has
been a director of the Company since June 2015.
Ms. Dufresne extensive experience with capital sources and capital raising provides the board with substantial
experience and expertise in reviewing and improving the Company’s capital structure.
Committee: Investment Committee
Daniel R. Elsztain, Director. Mr. Elsztain, age 47, obtained a degree in Economic Sciences from the Torcuato Di
Tella University and has a Masters in Business Administration from the Austral IAE University. At present, he is a
member of the board of IRSA Inversiones y Representaciones Sociedad Anónima (“IRSA”), a real estate public
company listed both on the New York Stock Exchange (“NYSE”) and the Buenos Aires Stock Exchange (“BASE”),
as well as its Chief Operating Officer and other executive capacities since 2004. He is a board member of Alto
Palermo S.A. (APSA), a retail public company listed both on NASDAQ and BASE. Mr. Elsztain has been a
director of the Company since February 2012.
His extensive experience in IRSA’s real estate operations and his participation on other public company boards
provides the board with a source of substantial lodging and real estate knowledge.
Committees: Compensation Committee, Investment Committee, Nominating Committee
Matías Iván Gaivironsky, Director. Mr. Matías Gaivironsky, age 44, obtained a degree in business administration
from the University of Buenos Aires. He has a master’s degree in finance from CEMA University. Since 1997 he
has served in different positions at Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agrícola
(NASDAQ: CRESY), IRSA (NYSE: IRS) and IRSA Propiedades Comerciales S.A. (“IRSA CP”) (NASDAQ:
IRCP). He was appointed Chief Financial Officer in December 2011 and Chief Financial and Administrative Officer
in early 2016 of Cresud, IRSA and IRSA CP. Previously, Mr. Gaivironsky acted as Chief Financial Officer of
Tarshop S.A. until 2010.
Mr. Gaivironsky has substantial finance and accounting experience which provides the board substantial insight on
these matters.
Committee: Audit Committee
Donald J. Landry, Director. Mr. Landry, age 71, is president and owner of Top Ten Hospitality Advisors, an
independent hospitality industry consulting company. Mr. Landry has over 45 years of lodging and hospitality
experience in a variety of leadership positions. Most recently, Mr. Landry was the Chief Executive Officer,
President and Vice Chairman of Sunburst Hospitality Inc. Mr. Landry has also served as President of Choice Hotels
3
International, Inc., Manor Care Hotel Division and Richfield Hotel Management. Mr. Landry currently serves on
the corporate advisory boards of Campo Architects, UniFocus, First Hospitality Group and Windsor Capital Group
and numerous nonprofit boards. Mr. Landry is a member of the board of trustees of Hersha Hospitality Trust. Mr.
Landry is a frequent guest lecturer at the University of New Orleans where he serves on the board of the School of
Hospitality, Restaurant and Tourism. Mr. Landry holds a bachelor of science from the University of New Orleans,
which awarded him Alumnus of the Year in 1999. Mr. Landry is a Certified Hotel Administrator. Mr. Landry has
been a director of the Company since February 2012.
Mr. Landry’s more than 45 years of experience in the lodging and real estate industries, including his roles as Chief
Executive Officer, President and Vice Chairman of Sunburst Hospitality Inc. and President of Choice Hotels
International, Inc., Manor Care Hotel Division and Richfield Hotel Management provides the board with an
experienced source on lodging and real estate industries.
Committees: Compensation Committee, Investment Committee, Nominating Committee
Brendan MacDonald, Director. Mr. MacDonald, age 41, is a Partner of StepStone Real Estate LP since June 2014,
a member of the real estate investment committee, with a primary focus on sourcing and executing investments on
behalf of StepStone’s real estate fund and separate account vehicles. Mr. MacDonald was a founding partner of
Clairvue Capital Partners since April 2010, a real estate investment manager which integrated with StepStone to
establish StepStone Real Estate. At Clairvue, he was an investment committee member and focused on sourcing,
underwriting and managing investments in the U.S., Europe and Latin America. Before Clairvue, he was a Director
at Liquid Realty Partners, from January 2007 to October 2009, an investment manager focused on real estate private
equity secondaries and held an acquisitions role at Babcock and Brown. Earlier in his career he completed GE
Capital’s Financial Management Program and was part of GE’s global Sponsor Finance business. Mr. MacDonald
received an MBA from Harvard Business School and a BS from Indiana University. Mr. MacDonald has been a
director of the Company since March 2016.
Mr. MacDonald’s years of experience in real estate investment and capital raising provides the board with
significant expertise in growing the Company.
Committees: Compensation Committee, Nominating Committee
Benjamin Wall, Director. Mr. Wall, age 44, is Co-Founder and Managing Partner of WJ Partners, LLC, a private
investment firm based in Spartanburg, SC since 2008. He is responsible for deal sourcing, executing investments,
and portfolio management. Mr. Wall is a director of Mobile Communications America, Inc. since August 2013, and
previously served as director of Global Medical Imaging, LLC. Prior to founding WJ Partners, Mr. Wall worked for
OTO Development, a national hotel developer and operator, from 2006 to 2008. Before OTO Development, Mr.
Wall worked for Endurance Capital Management, a private equity firm in New York focused on the financial
services sector, from 2002 to 2004. Mr. Wall started his career at Goldman Sachs in the investment banking
division, beginning in 2000 through 2002, and was a member of GS Strategy Group with responsibility for
evaluating and executing strategic acquisitions for Goldman Sachs. Mr. Wall earned a B.A. from Davidson College
and an M.B.A from Harvard Business School. He currently is a member of the Board of Trustees of Davidson
College. Mr. Wall is a Liberty Fellow of the Aspen Institute.
Mr. Wall’s extensive deal sourcing and investment experience provides valuable support to the evaluation of
transactions by the board of directors.
Committee: Audit Committee
Corporate Governance
The Company has adopted a Code of Business Conduct and Ethics that applies to the Company’s Chief Executive
Officer, Chief Financial Officer and Chief Accounting Officer and has posted the Code of Business Conduct and
Ethics on its Web site at www.condorhospitality.com. The Company intends to satisfy the disclosure requirement
under Item 5.05 of Form 8-K relating to amendments to or waivers from any provision of the Code of Business
4
Conduct and Ethics applicable to the Company’s Chief Executive Officer, Chief Financial Officer and Chief
Accounting Officer by posting that information on the Company’s Web site at www.condorhospitality.com.
Audit Committee
Currently, the Audit Committee consists of Messrs. Davis (Chairman), Gaivironsky, and Wall. All members of the
Audit Committee are independent within the meaning of the NYSE American listing standards. The Audit
Committee is responsible for the engagement of the independent registered public accounting firm, reviews with the
independent registered public accounting firm the plans and results of the audit engagement, approves professional
services provided by the independent registered public accounting firm, reviews the independence of the
independent registered public accounting firm, considers the range of audit and non-audit fees and reviews the
adequacy of the Company’s internal accounting controls. The Audit Committee pre-approves all audit and non-audit
services performed by the independent auditor either directly or through authority delegated to its Chairman. The
board of directors has determined that Mr. Gaivironsky is an audit committee financial expert within the meaning of
regulations of the SEC and all members of the Audit Committee are financially literate. The Audit Committee
operates pursuant to a written charter adopted by the board of directors. A copy of the charter is available on our
website at http://condorhospitality.com in the Investor Relations section under “Governance Docs.” The Audit
Committee held four meetings during 2019. The Audit Committee has a written policy with respect to its review
and approval or ratification of transactions between the Company and a director, executive officer or related person
covered by the SEC’s rule S-K 404(a).
ITEM 11. EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The following compensation discussion and analysis provides information relevant to an assessment and
understanding of compensation awarded to, earned by or paid to the Company’s executive officers listed in the
summary compensation table (the “named executive officers”). This discussion should be read in conjunction with
the summary compensation table and related tables below.
Compensation Practice
The Compensation Committee has developed and evolved compensation practices following significant senior level
management changes in 2015 and the Company’s implementation of its current business strategy.
Compensation Overview and Objective
The Compensation Committee has the responsibility for developing and maintaining an executive compensation
policy for named executive officers that creates a direct relationship between pay levels and corporate performance
and returns to shareholders. The objective of the Company’s compensation program is to attract and retain a high
caliber of management who will manage the Company in a manner that will promote its goals to achieve long term
profitability and to advance the interest of the Company’s shareholders. The compensation program for named
executive officers seeks to achieve the objective of retaining a high caliber of management by:
• providing overall competitive pay levels,
• creating proper incentives to enhance shareholder value,
• rewarding superior performance, and
• compensating at levels that are justified by the returns available to shareholders.
Components of Compensation
The Company’s executive compensation is intended to support the overall compensation objective of retaining a
high caliber of management.
Base Salary. Base salary is targeted to be competitive to attract and retain executives qualified to manage a hotel
REIT. Base salary is intended to compensate the executive for satisfying the requirements of the position. Salaries
for executive officers are typically reviewed by the Compensation Committee on an annual basis and may be
5
changed based on the individual’s performance or a change in competitive pay levels in the marketplace. No
changes were made to base salaries during 2019 except the base salary for 2019 for Arinn Cavey, Chief Financial
Officer and Chief Accounting Officer, was increased from $175,000 to $185,000 upon her assumption of additional
duties as Chief Financial Officer in May 2019.
Annual Incentive Plans. In March 2019, the Compensation Committee established and approved 2019 incentive
compensations plans for the named executive officers. A target incentive was established for each executive ranging
from 50% to 100% of base salary, with a portion of the incentive allocated to each executive’s individual
performance objective. The performance objectives consist of implementing strategic alternatives pursued by the
Company, maintaining corporate overhead within budget, achieving adjusted EBITDA pursuant to budgeted and
underwriting targets and accounting, audit and regulatory filings. An executive must achieve the particular
performance objectives established for the executive to earn the portion of the executive’s target incentive allocated
to that performance objective. Payout under the plans to an executive will be in cash and/or equity (from
shareholder approved employee stock plans). The Compensation Committee has discretion, including to make
partial awards, and to take into account events and circumstances not contemplated when performance objectives
were set.
On July 19, 2019, the Company, the Company’s operating partnership (the Company and operating partnership, the
“Company Parties”), NHT Operating Partnership, LLC (“NHT Parent”), NHT REIT Merger Sub, LLC (“NHT
Merger Sub”) and NHT Operating Partnership II, LLC (“NHT Merger OP,” and together with NHT Parent and NHT
Merger Sub, the “NHT Parties”), entered into an Agreement and Plan of Merger (as amended from time to time, the
“Merger Agreement”), pursuant to which the NHT Parties agreed to acquire all of the outstanding equity interests of
the Company and the operating partnership by merger. Closing of the acquisition did not occur on March 23, 2020,
the contemplated closing date of the acquisition, and has not occurred as of the time of this filing. There can be no
assurance with respect to the foregoing, and the Company continues reviewing its options and reserves all rights and
remedies under the Merger Agreement.
In November 2019, the Compensation Committee reviewed the executives’ performance against their performance
goals of their 2019 incentive plans and also with respect to Mr. Blackham reviewed achievement of adjusted funds
from operations performance targets pursuant to his employment agreement. The Compensation Committee
conditionally approved a cash payout for Mr. Blackham of 96.5% of his base salary with respect to his 2019
incentive plan, and an award of 18,101 shares of common stock for achievement of adjusted funds from operations
performance pursuant to his employment agreement, and a cash payment for Ms. Cavey of 50% of her base salary
with respect to her 2019 incentive plan, the payment and issuance conditioned on, and to be paid and issued at the
time of, the closing of the Company’s completion of the merger pursuant to the Merger Agreement.
Equity Incentive Plans. Equity stock incentives are paid to executive officers from the shareholder approved
Company 2016 Stock Plan. The Committee recognizes the value of equity incentives in assisting the Company in
the hiring and retaining of management personnel and in enhancing the long-term mutuality of interest between the
Company shareholders and its directors, officers and employees. On November 22, 2019, the Compensation
Committee awarded 36,692 shares of common stock to Mr. Blackham pursuant to his employment agreement for
shares earned following the attainment of $11.00 per share market price based on the weighted-average common
stock price for 60 consecutive trading days.
The Company does not have a pension plan. The Company’s executive officers may participate in its 401(k) Plan on
the same terms as other participating employees. The Company does not maintain a perquisite program for its
executive officers.
6
Name and Principal Position Year
J. William Blackham
President and Chief Executive
Officer
($)
2019 400,000
2018 400,000
Jonathan J. Gantt
Chief Financial Officer and
Senior Vice President
2017 350,000
96,731
2019
2018 251,500
Arinn Cavey
Chief Financial Officer and Chief
Accounting Officer
2017 226,500
2019 181,539
2018 175,000
2017 165,000
Summary Compensation Table
Option
Awards
($)(1)
-
Stock
Awards
($)(1)
139,016
($)
-
Bonus
Salary
Non-Equity
Incentive Plan
Compensation(2)
386,000
All Other
Compensation
($)(3)
Total ($)
16,534 941,550
-
217,247
- 2,300,128
-
-
-
-
-
-
-
62,375
129,105
-
39,375
15,994
-
-
-
-
-
-
-
372,000
339,500
-
93,558
86,070
92,500
39,375
32,557
16,334 1,005,581
14,430 3,004,058
6,804 103,535
7,872 415,305
9,942 451,617
9,223 283,262
11,324 265,074
7,686 221,237
(1) These columns reflect the grant date fair value of the stock awards granted in accordance with FASB Accounting Standards
Codification Topic 718. Reflects conditionally approved stock award for Mr. Blackham for 2019 as described above in our
Compensation Discussion and Analysis. Mr. Gantt’s stock awards include the value of restricted stock awarded to Mr.
Gantt in 2017, 2018 and 2019, and to Ms. Cavey in 2017 and 2019 and stock awarded to Mr. Blackham in 2018. Mr.
Blackham’s stock awards for 2017 consist of $777,881 of restricted stock and the balance of Mr. Blackham’s stock awards
for 2017 may be earned in increments based on common stock market price achieving targets from $11.00 to $18.00 per
share prior to March 31, 2022, and for Company achievement of budgeted performance. See footnote 12 to the Company’s
consolidated financial statements for the fiscal year ended December 31, 2019 for the assumptions used in the valuation of
these awards.
(2) Reflects conditionally approved cash amounts earned by the executive officers under their annual incentive plans. A
description of these plans is included above in our Compensation Discussion and Analysis.
(3) Amounts for the named executive officers represent contributions credited by the Company during 2019, 2018, and 2017 to
its 401(k) plan ($11,200 for Mr. Blackham, $6,647 for Mr. Gantt, and $8,862 Ms. Cavey for 2019), life insurance and long-
term disability plan.
(4) Mr. Gantt was our Chief Financial Officer until May 2019, and Ms. Cavey commenced serving as our Chief Financial
Officer in May 2019.
Grants of Plan-Based Awards for Fiscal 2019
Estimated Future Payout
Under Non-Equity Incentive
Plan Awards ($)(1)
Estimated Future Payout
Under Equity Incentive Plan
Awards (# of shares)(1)
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units(#)(1)
Grant Date
Fair Value of
Stock
Awards($)(2)
Name
Grant
Date Threshold Target Maximum Threshold Target Maximum
J. William Blackham
03/28/2019
-
400,000 400,000
-
-
-
18,101
199,654
Jonathan Gantt
Arinn Cavey
03/28/2019
03/04/2019
-
100,600 100,600
92,500
- 92,500
-
-
150,900 150,900
-
-
(1) Non-equity incentive awards were made with respect to the executive officers’ 2019 incentive plans. See Compensation
(2)
Discussion and Analysis for a description of these plans.
Based on the number of shares on the grant date fair value per share ($11.03). See footnote 12 to the Company’s
consolidated financial statements for the assumptions used in valuing these awards.
7
Outstanding Equity Awards at Fiscal Year-End
Stock Awards
Equity Incentive Plan Awards:
Number of Unearned Shares, Units or
Other Rights That Have Not Vested (#)
(1)
33,025
3,433
Equity Incentive Plan Awards: Market or
Payout Value of Unearned Shares, Units
or Other Rights That Have Not Vested ($)
(2)
364,596
37,900
Name
J. William Blackham
Arinn Cavey
(1)
(2)
Restricted stock grants vests in five equal installments on each anniversary of issuance beginning on the first
anniversary of the grant. Mr. Blackham’s remaining unvested restricted stock vests in 1,223 share monthly increments.
Ms. Cavey’s remaining unvested restricted stock vests in 326 share increments on 12/06/2020, 12/06/2021 and
12/06/2022. Restricted stock grants may vest earlier upon termination and change of control events.
Based on the number of shares at the closing market price at the end of 2019 fiscal year ($11.04)
Employment Agreement and Potential Payments upon Termination or Change-in-Control
Chief Executive Officer Employment Agreement
On March 2, 2015, J. William Blackham was appointed Chief Executive Officer of the Company by the board of
directors. Mr. Blackham’s employment agreement, entered into on March 2, 2015, and subsequently amended, has a
term until March 31, 2022. Under the employment agreement he (i) receives an annual base salary, (ii) receives
consideration for an annual bonus and (iii) is eligible to participate in any Company long-term incentive programs.
The terms of Mr. Blackham’s employment were approved by the Compensation Committee and provide:
•
•
•
•
•
•
•
•
•
•
$400,000 annual base salary for 2019;
participation in annual incentive plan;
$500,000, and at the sole discretion of the Compensation Committee up to $1,000,000, upon a
Change in Control prior to March 31, 2022 based on his inability to earn future stock awards
under his employment agreement.
issuance on June 28, 2017 of 73,385 restricted shares of common stock, with vesting commencing
March 29, 2018 through March 29, 2022, subject to continued employment, with vesting
acceleration on Change in Control, termination without Cause or Good Reason, death or disability;
up to 36,692 shares of common stock earned each time share price target achieved from $11 to
$18 when first achieved, if achieved prior to March 31, 2022, based on weighted market sales
price over 60 consecutive trading days;
11,741 shares to 19,569 shares of common stock which are earned each time the Company
achieves 85% to 101% of budgeted funds from operation for a fiscal year, 2017 through 2021;
with an additional 391 shares earned for a fiscal year for each 2% above 101% target achieved, up
to a maximum of additional 3,910 shares for the year;
if his employment is terminated with Cause, he will receive (i) accrued and unpaid base salary to
the date of termination, (ii) the accrued and unused vacation to the date of termination, (iii) unpaid
expense reimbursements, and (iv) vested amounts under qualified retirement plans;
if he voluntarily terminates employment, he will receive the amounts referenced in the preceding
bullet point plus unpaid bonuses earned for completed prior fiscal years;
if his employment is terminated without Cause or if he terminates employment with Good Reason,
in addition to the items referenced in the foregoing two bullet points, he will receive: (i) an amount
equal to one times (1x) base salary, (ii) an amount equal to one times (1x) the average annual
bonus previously earned for up to the prior three (3) years, (iii) the immediate vesting of equity
awards solely subject to time vesting, (iv) any awards, not yet earned but which may be earned
based on the achievement of the applicable performance criteria, vested at a pro rata amount based
on the performance period to the date of termination, and (v) COBRA premiums during the period
that he elects to receive COBRA coverage under the Company’s group health plans, not to exceed
18 months;
if within 12 months following a Change in Control his employment is terminated other than for
Cause or by reason of death or disability or he terminates his employment for Good Reason, the
additional base salary payment will be increased to two times (2x) base salary and the annual
8
bonus payment will be increased to two times (2x) the average annual bonus previously earned for
up to the prior three (3) years;
“Cause” under Mr. Blackham’s employment agreement includes certain (i) dishonest or fraudulent actions or a
felony conviction, (ii) a material failure to devote substantially all of his business time to the business of the
Company or to follow the Company’s good faith instructions and directives, (iii) unreasonable and material neglect,
refusal or failure to perform assigned duties, (iv) material breach by him of his employment agreement, the
Company’s Code of Business Conduct and Ethics or similar codes, (v) any act bringing substantial public disrespect
or scandal or ridicule of the Company, or (vi) any governmental regulatory agency recommends or orders that the
Company terminate his employment or relieve him of his duties.
“Change in Control” under his employment agreement includes certain acquisitions of 50% or more of common
stock or voting power of the Company, or certain changes in the board of directors, or certain mergers or similar
transactions if the shareholders prior to the transaction do not hold 50% of the voting power afterwards, or a
liquidation or sale of more than 50% of the Company assets.
“Good Reason” under his employment agreement means the occurrence of one of the following events, without his
prior written consent, provided such event is not corrected within 60 days following the board’s receipt of written
notice of his intention to terminate his employment with the Company for Good Reason, which notice must be
provided within ninety (90) days of the initial existence of one of the following events: (i) a material breach of his
employment agreement by the Company, (ii) a diminution of, or reduction or adverse alteration of his compensation,
duties or responsibilities, or the Company’s assignment of duties, responsibilities or reporting requirements that are
materially inconsistent with his positions or that materially expand his duties, responsibilities, or reporting
requirements, (iii) a Change in Control has occurred and he is involuntarily removed from the board or at any time
he has requested to be nominated but is not nominated for election to the board at the subsequent election of
directors, (iv) a Change in Control has occurred and within 12 months thereafter he is required to relocate more than
50 miles from his first relocation site, or (v) a Change in Control occurs on or before March 31, 2019: (A) if no later
than 10 days after the date he is advised by the board that a Change in Control will be considered for approval by the
board, he notifies the board in writing that if that Change in Control occurs, he terminates his employment pursuant
to this provision, and (B) with the termination date to be effective date of the Change in Control, unless the board,
for purposes of an orderly management transition within 7 days after his notice specifies a later termination date,
provided that the extended termination date may not be later than 60 days following the Change in Control.
Potential Payments Upon Termination or Change of Control for Chief Financial Officer and Chief Accounting
Officer
With respect to Arinn Cavey, Chief Accounting Officer:
•
•
upon the occurrence of a Change of Control (as defined below), she will receive (i) a cash payment up to
one times (1x) her most recent incentive compensation, determined based on the recommendation of the
Chief Executive Officer and then at the sole discretion of the Compensation Committee and (ii) the
immediate vesting of equity awards solely subject to time vesting; and
if within 12 months following a Change of Control (as defined below) her employment by the Company or
its successor is terminated other than for Cause, or if she elects to terminate her employment upon a
Change of Control (as defined below), she will receive (i) one times (1x) her base salary, (ii) one times (1x)
her most recent annual bonus, (iii) the immediate vesting of equity awards solely subject to time vesting,
and (iv) COBRA premiums during the period that she elects to receive COBRA coverage under the
Company’s group health plans, not to exceed 12 months.
With respect to Ms. Cavey, “Change of Control” means:
(i) consummation of a reorganization, merger or consolidation, or sale or other disposition of substantially all
of the assets of the Company (a “Business Combination”), in each case, unless following such Business
Combination, the persons who were the beneficial owners of outstanding voting securities of the Company
immediately prior to such Business Combination beneficially own directly or indirectly more than 50% of
the combined voting power of the then outstanding voting securities entitled to vote generally in the
election of directors, of the Company resulting from such Business Combination (including a company
which, as a result of such transaction, owns the Company or substantially all of the Company’s assets either
9
directly or through one or more subsidiaries), in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the outstanding voting securities of the Company;
(ii) the complete liquidation or dissolution of the Company; or
(iii) the board of directors of the Company in existence prior to any transaction or event that would seem to
satisfy the definition of a Business Combination may determine, in good faith, that such event does not
constitute a Business Combination provided that at least a majority of the members of such board of
directors will remain in office after such Business Combination.
Director Compensation
Name
Thomas Calahan
Noah Davis
Daphne J. Dufresne
Daniel R. Elsztain
James H. Friend
Matias I. Gaivironsky
Donald J. Landry
Brendan MacDonald
John M. Sabin
Benjamin Wall
Director Compensation
Fees Earned of Paid in
Cash($)(1)
Stock
Awards ($)(2)(3)
10,500
27,143
28,250
34,500
18,500
21,500
32,911
10,500
22,250
13,500
37,581
3,055
19,809
12,309
2,500
3,055
21,964
39,728
2,500
35,000
Option Awards
($)
-
-
-
-
-
-
-
-
-
-
Total ($)
48,081
30,198
48,059
46,809
21,000
24,555
54,875
50,228
24,750
48,500
Messrs. Davis and Gaivironsky joined the board of directors in May 2019. Messrs. Sabin and Friend served on the
board of directors until May 2019.
(1) Directors receive an annual retainer of $30,000 paid in quarterly installments in cash and common
stock. Additionally, directors received fees of $1,000 per board meeting attended in person and $500
per telephonic board meeting. From time to time, directors, as authorized representatives of the board,
engage in board duties outside of meetings, and receive fees for the performance of such additional
board duties in an hourly or daily amount previously set by the board. Committee chairmen received
compensation as follows: Audit Committee chairman annual retainer of $9,000, Nominating
Committee chairman annual retainer of $1,500 and Compensation Committee chairman annual retainer
of $1,500. Each Audit Committee member, other than the chairman, receives a fee of $750 per
quarter. The chairman of the Investment Committee receives a monthly fee of $750, and the other
members of the Investment Committee who are independent directors each receive a monthly fee of
$500.
(2) Stock awards consist of the grant date fair value of common stock issued as fees to independent
directors. $5,000 of the annual retainer is paid in shares of restricted common stock of the Company,
vesting in equal monthly installments over 3 years, subject to continuous board membership. The
number of restricted shares were determined for 2019 based on the closing price of the common stock
on March 4, 2019 of $8.20. The directors may also make an annual voluntary election to receive any
portion of the remaining balance of their annual retainer in the form of common stock valued at a 20%
premium to the cash that would have otherwise been received, with the shares valued at the closing
price of the common stock on the last trading day of the applicable calendar quarter. The fees of the
members of the Investment Committee are paid quarterly in common stock issued under the 2016
Stock Plan, based on a value per share equal to the average of the closing price of the common stock
during the first 20 trading days of the year.
(3) Unexercised stock awards, consisting of unvested restricted stock for each director as of December 31,
2019 were as follows:
10
Thomas Calahan
Noah Davis
Daphne J. Dufresne
Daniel R. Elsztain
Matias I. Gaivironsky
Donald J. Landry
Brendan MacDonald
Unvested Restricted Stock
413
193
748
748
193
748
748
ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of our common stock and Series E Preferred Stock as of
April 29, 2020, by the following persons (a) each shareholder known to us to beneficially own more than 5% of the
outstanding shares of our common stock, (b) each director or nominee, (c) each executive officer named in the
Summary Compensation Table and (d) all directors and executive officers as a group. A person has beneficial
ownership over shares if he or she has or shares voting or investment power over the shares, or the right to acquire
that power within 60 days of April 29, 2020.
With respect to our continuing qualification as a real estate investment trust, our Amended and Restated Articles of
Incorporation (the “Articles”) contain an ownership limitation, which prohibits both direct and indirect ownership of
more than 9.9% of the outstanding shares of our common stock or 9.9% of any series of our preferred stock. Our
Articles permit the board of directors, in its sole discretion, to exempt a person from this ownership limit if the
person provides representations and undertakings that enable the board to determine that granting the exemption
would not result in the Company losing its qualification as a real estate investment trust (a “REIT”). Under the
Internal Revenue Service rules, REIT shares owned by certain entities are considered owned proportionately by
owners of the entities for REIT qualification purposes. The holder of securities in excess of the ownership limit in
the following table provided representations and undertakings necessary for the board to grant such an exemption.
Name of Beneficial Owner
Real Estate Strategies L.P.
2 Church Street Hamilton DO HM CX,
Bermuda
SREP III Flight – Investco, L.P.
Two Embarcadero Center, Suite 480 San
Francisco, CA
Brendan MacDonald
Two Embarcadero Center, Suite 480 San
Francisco, CA
Gardner Lewis Asset Management, L.P.
285 Wilmington-West Chester Pike Chadds
Ford, PA
J. William Blackham
Donald J. Landry
Daniel R. Elsztain
Daphne J. Dufresne
Benjamin Wall
Thomas Calahan
Noah Davis
Matias Gaivironsky
Arinn Cavey
Common
Stock
Beneficially
Owned
Percent of
Common
Class (1)
Series E
Preferred
Stock
Beneficially
Owned
Percent of
Preferred
Class
3,787,166 (2)
30.41%
487,738
52.70%
3,217,703 (3)
3,217,703 (4)
26.12%
26.12%
437,262
437,262
47.30%
47.30%
817,837 (6)
6.81%
1.87%
224,118
12,851
5,523
11,209
9,386
6,346
3,521
632
7,160
-
-
-
-
-
-
-
-
-
-
-
-
All directors and executive officers as a
group (10 persons)
3,498,449 (5)
28.40%
11
(1) Unless otherwise indicated, beneficial ownership of any named individual does not exceed 1% of the
outstanding class of securities. In calculating the indicated percentage, the denominator includes the shares of
common stock that could be acquired by the person through the exercise of options or warrants within 60 days
of April 29, 2020. The denominator excludes the shares of common stock that would be acquired by any other
person upon a similar exercise.
(2) Based on information appearing in Amendment No. 8 to a Schedule 13D filed on July 19, 2019 by Real Estate
Strategies L.P. (“RES”), an investment vehicle indirectly controlled by IRSA Inversiones y Representaciones
Sociedad Anónima (“IRSA”), an Argentinean-based publicly traded company, with the Securities and
Exchange Commission (“SEC”), RES and its affiliates have shared voting and shared dispositive power over
3,787,166 shares of common stock. RES and its affiliates, for purposes of Section 13(d)(3) of the Exchange
Act, consists of Eduardo S. Elsztain, and the following entities controlled, either directly or indirectly, by Mr.
Elsztain: Consultores Assets Management S.A. , Consultores Venture Capital Uruguay S.A., Agroinvestment
S.A., Idalgir S.A., Consultores Venture Capital Ltd., Ifis Limited, Inversiones Financieras del Sur S.A.,
Cresud Sociedad Anónima Comercial, Inmobiliaria, Financiera y Agropecuaria, IRSA, Tyrus S.A., Jiwin
S.A., Efanur SA and RES. RES holds 487,738 shares of 6.25% Series E Cumulative Convertible Preferred
Stock (the “Series E Preferred Stock”), which is convertible in whole or part in up to 352,283 shares of
common stock that are included in the share totals. RES and affiliates also hold a convertible promissory
note, convertible into 97,269 shares of common stock that are included in the share totals.
(3) Based on information appearing in Amendment No. 3 to a Schedule 13D filed on July 19, 2019, and
subsequent Form 4s, SREP III Flight-Investco, L.P. (“SREP”), an affiliate of StepStone Group LP. SREP and
affiliates have shared voting and shared dispositive power over 2,901,877 shares of common stock. SREP
holds 437,262 shares of Series E Preferred Stock, which is convertible in whole or part in up to 315,826
shares of common stock that are included in the share totals.
(4) Mr. MacDonald is a member of StepStone Group Real Estate Holdings LLC, general partner of StepStone
Group Real Estate LP, the sole member and investment manager of StepStone REP III (GP), LLC, the general
partner of SREP. Mr. MacDonald may be deemed a participant in the control of the voting, disposition or
purchase of the shares held by SREP and thus may be deemed to share beneficial ownership of these shares.
Mr. MacDonald disclaims beneficial ownership of these shares except to the extent of his pecuniary interest
therein, and the inclusion of these shares in this table shall not be an admission of beneficial ownership of all
of the reported securities for any purpose.
Includes 3,217,703 shares of common stock listed above for Mr. MacDonald (see footnote 4 above).
(5)
(6) Based on information appearing in a Schedule 13G filed on February 14, 2020 by Gardner Lewis Asset
Management, L.P. and Gardner Lewis Asset Management, Inc. having shared voting and dispositive power with
respect to 817,837 shares of common stock and Gardner Lewis Merger Arbitrage Ex Holdings, LLC and
Gardner Lewis Merger Arbitrage EX Master Fund, Ltd with having shared voting and dispositive power with
respect to 617,479 shares of common stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
Independence
The Company’s Articles of Incorporation (“Articles”) and the NYSE American exchange listing standards each
require that a majority of the board of directors are independent directors. The Articles define an independent
director as a person who is not an officer or employee of the Company or an affiliate of (a) any advisor to the
Company under an advisory agreement, (b) any lessee of any property of the Company, (c) any subsidiary of the
Company, or (d) any partnership which is an affiliate of the Company.
Board of Directors
The current nine-member board of directors is comprised of a majority of independent directors, as defined by the
NYSE American listing standards and the Articles. The board of directors has determined that the following
12
directors are independent under the NYSE American listing standards and the Articles: Ms. Dufresne and Messrs.
Calahan, Davis, Elsztain, Gaivironsky, Landry, MacDonald and Wall.
The board of directors held seventeen meetings in 2019. During 2019, all directors attended at least 75% of all
board meetings and meetings of the committees on which they served. The non-employee directors met in executive
session at a majority of the board meetings in 2019 without management present, and intend to meet in executive
session without management present at future board meetings.
The Company has not adopted a formal policy on board members’ attendance at its annual meetings of shareholders,
although all board members are encouraged to attend and historically most have done so. Seven board members
attended the Company’s 2019 Annual Meeting of Shareholders.
The Company’s board of directors has four standing committees: an Investment Committee, Compensation
Committee, Nominating Committee and an Audit Committee. The board of directors may, from time to time, form
other committees as circumstances warrant. Such committees have the authority and responsibility delegated to them
by the board of directors.
Certain Relationships and Related Transactions
As of the date of this report, RES and SREP, by virtue of their significant voting power and certain governance
rights, each have the power to significantly influence our business and affairs and the outcome of matters required to
be submitted to shareholders for approval, including the election of our directors, amendments to our charter,
mergers or sales of assets. RES or SREP’s influence over our business and affairs may not be consistent with the
interests of some or all of our shareholders.
Voting Rights of Series E Preferred Stock
RES and SREP beneficially own all outstanding shares of the Series E Preferred Stock. On February 28, 2017, the
Company entered into agreements with RES and IRSA and with SREP and StepStone for the voluntary conversion
by them of all of the shares of the Company’s 6.25% Series D Cumulative Convertible Preferred Stock (the “Series
D Preferred Stock”) into common stock, pursuant to the terms of the Series D Preferred Stock, and for the issuance
of shares of the Series E Preferred Stock to RES and SREP.
The holders of the Series E Preferred Stock have the right to vote separately as a class on matters generally affecting
the Series E Preferred Stock. Additionally, as long as 434,750 shares of Series E Preferred Stock (47% of the
originally issued shares of Series E Preferred Stock) remain outstanding, then 75% approval of the Series E
Preferred Stock will be required to approve significant corporate events as follows: merger, consolidation,
liquidation or winding up of Condor, related party transactions exceeding $120,000, payment of dividends on
common stock except from funds from operations or to maintain REIT status, the grant of exemptions from
Condor’s charter limitation on ownership of 9.9% of any class or series of its securities (exclusive of SREP and
RES), issuance of preferred stock, or commitment or agreement to do any of the foregoing.
Directors Designation Rights
The Company entered into an agreement on February 1, 2012 with RES and IRSA pursuant to which RES may
designate the following number of directors to the board of directors if it beneficially owns the indicated percentage
of voting power of the Company.
Voting Power
34% or more
22% or more but less than 34%
14% or more but less than 22%
7% or more but less than 14%
No. of Directors
4
3
2
1
The Company entered into an agreement on March 16, 2016 with SREP and StepStone pursuant to which StepStone
may nominate the following number of directors if it beneficially owns the indicated percentage of voting power of
the Company:
13
Voting Power
22% or more but less than 34%
14% or more but less than 22%
7% or more but less than 14%
No. of Directors
3
2
1
Each of RES and StepStone in their respective agreements with us has agreed to vote for the election of the
incumbent members of the board of directors and their successors nominated by the Nominating Committee.
Board Size
We have agreed with each of RES and StepStone to maintain the size of our board of directors at nine members. If
the outstanding shares of Series E Preferred Stock declines below 434,750 shares (47% of the original outstanding
shares of Series E Preferred Stock), the holders of the Series E Preferred Stock will no longer have rights for a class
vote to approve or consent to certain actions by the Company described above. If those voting rights are no longer
available and SREP holds 15% or more of the voting power of the Company, the Company has agreed with SREP to
reduce the size of board of directors to seven members. Similarly, if those voting rights are no longer available and
RES holds 15% or more of the voting power of the Company, the Company has agreed with RES to reduce the size
of the board of directors to seven members. If the size of the board of directors of the Company is reduced to seven
members, StepStone’s and RES’s respective rights to designate directors for election to the board of directors based
on their percentage of voting power would also change to the following:
Voting Power
29% or more
Less than 29% but 15% or more
Less than 15% but 7% or more
No. of Directors
3
2
1
Future Offerings
Prior to March 16, 2021, and provided that the Series E Preferred Stock is outstanding and SREP holds 14% or more
of the voting control of the Company, the Company has agreed with SREP and StepStone that with respect to the
issuance of common stock, or securities convertible into common stock (“Future Offering”) (exclusive of the
issuance of common stock with respect to certain commitments, and certain existing long-term incentive plan or
operating units of the Company’s operating partnership and certain future compensation awards), the Company will
not without the consent of SREP:
•
•
until an aggregate of $100 million of common stock has been sold, issue common stock below the
price of $10.40 per share, or securities convertible into common stock with a real or effective
conversion or strike price below $10.40 per share of common stock; and
thereafter issue common stock below the price of $11.18 per share, or securities convertible into
common stock with a real or effective conversion or strike price below $11.18 per share of common
stock.
If SREP does not consent with respect to a Future Offering that requires its consent, then the Company may make an
irrevocable offer to SREP to repurchase all shares of Series E Preferred Stock and common stock received by SREP
on conversion of Series E Preferred Stock and Series D Preferred Stock. The repurchase price will be equal to the
greater of:
•
•
an aggregate amount equal to (A) 120% of the liquidation preference of Series E Preferred Stock
beneficially owned by SREP plus (B) 120% of the then-current conversion price of the Series E
Preferred Stock for each share of common stock beneficially owned by SREP that were issued upon
conversion of any Series D Preferred Stock or Series E Preferred Stock, or
in exchange for the Series E Preferred Stock and common stock issued upon conversion of any Series
D Preferred Stock and Series E Preferred Stock, an amount equal to 95% of the aggregate net asset
value of the Company per share multiplied by the number of shares of common stock beneficially
owned by SREP that were issued upon conversion of any Series D Preferred Stock and Series E
Preferred Stock, and shares of common stock issuable upon conversion of Series E Preferred Stock
(regardless of whether the Series E Preferred Stock is convertible at such time).
14
Such repurchase offer, if accepted by SREP, will be conditioned upon, and the repurchase will occur concurrently
with, the closing of the Future Offering.
The Company also has an agreement with RES and IRSA with respect to a Future Offering which provides the same
consent and repurchase rights with respect to RES.
Preemptive Rights
Pursuant to agreements with RES and StepStone, the Company granted each of RES and StepStone the right to
purchase the Company’s equity shares or securities convertible into its equity shares in the Company’s public and
non-public offerings of its equity securities or securities convertible into its equity securities for cash proportional to
their respective combined fully diluted beneficial ownership of our common stock (including common stock
issuable upon conversion of the Series E Preferred Stock, if then convertible) at the same price and on the same
terms as offered to others in the offering. The purchase rights terminate with respect to StepStone on March 16,
2021 and with respect to RES on March 1, 2022. The purchase right does not apply to issuances of equity securities
(a) as employee equity awards or (b) for consideration in acquisition transactions.
Registration Rights
The Company has agreed with RES and IRSA to register for resale the shares of common stock issued to RES upon
request. The Company has also agreed with SREP and StepStone to register for resale the shares of common stock
issued to SREP upon request.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICE
The following table presents the fees for professional audit services rendered by KPMG LLP for the audit of the
Company’s consolidated financial statements for the fiscal years ended December 31, 2019 and 2018, and fees
billed for other services rendered by KPMG during those periods.
Year Ended December 31,
Audit Fees(1)
Audit Related Fees
Tax Fees(2)
All Other Fees
Total
$
$
2019
2018
375,000
-
247,651
-
622,651
$
$
361,398
-
184,755
-
546,153
(1)
(2)
Includes fees billed for professional services rendered by KPMG for the audit of the Company’s fiscal 2019 and 2018
annual financial statements, and review of the Company’s quarterly financial statements during 2019 and 2018.
Includes fees billed for professional services rendered by KPMG for tax compliance, tax advice, and tax planning.
The Audit Committee has determined that the provision of the non-audit services performed by KPMG during the
2019 and 2018 fiscal years is compatible with maintaining KPMG’s independence from the Company.
Pursuant to the terms of the Company’s Audit Committee Charter, the Audit Committee is responsible for the
appointment, compensation and oversight of the work performed by the Company’s independent accountants. The
Audit Committee, or a designated member of the Audit Committee, must pre-approve all audit (including audit-
related) and non-audit services performed by the independent accountants in order to assure that the provisions of
such services do not impair the accountants’ independence. The Audit Committee has delegated interim pre-
approval authority to the Chairman of the Audit Committee. Any interim pre-approval of permitted non-audit
services is required to be reported to the Audit Committee at its next scheduled meeting.
KPMG’s principal function is to audit the consolidated financial statements of the Company and its subsidiaries and,
in connection with that audit, to review certain related filings with the SEC and to conduct limited reviews of the
financial statements included in the Company’s quarterly reports.
15
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibits
2.1
2.2
2.3
2.4
2.5
3.1
3.2
4.1
10.1
10.2
Agreement and Plan of Merger dated as of July 19, 2019 by and among NHT Operating Partnership,
LLC, NHT REIT Merger Sub, LLC, NHT Operating Partnership II, LLC, the Company and Condor
Hospitality Limited Partnership (incorporated herein by reference to Exhibit 2.1 to the Company’s
Current Report on Form 8-K (Commission file number 001-34087) dated July 18, 2019).
Amendment No. 1 dated as of September 13, 2019 to Agreement and Plan of Merger dated as of July
19, 2019 by and among NHT Operating Partnership, LLC, NHT REIT Merger Sub, LLC, NHT
Operating Partnership II, LLC, the Company and Condor Hospitality Limited Partnership
(incorporated herein by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K
(Commission file number 001-34087) dated September 13, 2019).
Amendment No. 2 dated as of December 17, 2019 to Agreement and Plan of Merger dated as of July
19, 2019 by and among NHT Operating Partnership, LLC, NHT REIT Merger Sub, LLC, NHT
Operating Partnership II, LLC, the Company and Condor Hospitality Limited Partnership
(incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K
(Commission file number 001-34087) dated December 17, 2019).
Amendment No. 3 dated as of January 30, 2020 to Agreement and Plan of Merger dated as of July
19, 2019 by and among NHT Operating Partnership, LLC, NHT REIT Merger Sub, LLC, NHT
Operating Partnership II, LLC, the Company and Condor Hospitality Limited Partnership
(incorporated herein by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K
(Commission file number 001-34087) dated January 30, 2020).
Amendment No. 4 dated as of March 15, 2020 to Agreement and Plan of Merger dated as of July 19,
2019 by and among NHT Operating Partnership, LLC, NHT REIT Merger Sub, LLC, NHT
Operating Partnership II, LLC, the Company and Condor Hospitality Limited Partnership
(incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K
(Commission file number 001-34087) dated March 15, 2020).
Amended and Restated Articles of Incorporation of the Company, as amended (incorporated herein
by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (Commission file number
001-34087) dated May 24, 2017).
Bylaws of the Company, as amended (incorporated herein by reference to Exhibit 3.1 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated July 18, 2019).
Description of the Company’s Securities Registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended.
Third Amended and Restated Agreement of Limited Partnership of Condor Hospitality Limited
Partnership, as amended (incorporated herein by reference to Exhibit 10.1 to the Company’s
Quarterly Report on Form 10-Q (Commission file number 001-34087) for the quarter ended
September 30, 2016).
Amended and Restated Limited Liability Company Agreement of Spring Street Hotel Property II
LLC dated as of August 22, 2016 (incorporated herein by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K (Commission file number 001-34087) dated August 22, 2016).
16
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
Limited Liability Company Agreement of Spring Street Hotel OpCo II LLC dated as of August 22,
2016 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-
K (Commission file number 001-34087) dated August 22, 2016).
Hotel Management Agreement dated June 29, 2016 by and between TRS Leasing, Inc., TRS
Subsidiary, LLC and Kinseth Hotel Corporation (incorporated herein by reference to Exhibit 10.1 to
the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated June 29,
2016).
Hotel Management Agreement dated June 29, 2016 by and between TRS Leasing, Inc., TRS
Subsidiary, LLC and Strand Development Company, LLC (incorporated herein by reference to
Exhibit 10.5 to the Company’s Current Report on Form 8-K (Commission file number 001-34087)
dated June 29, 2016).
Hotel Management Agreement dated June 29, 2016 by and between TRS Leasing, Inc., TRS
Subsidiary, LLC, SPPR TRS Subsidiary, LLC, BMI Alexandria TRS Subsidiary, LLC and
Hospitality Management Advisors, Inc. (incorporated herein by reference to Exhibit 10.3 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated June 29, 2016).
Hotel Management Agreement dated June 29, 2016 by and between SPPR-Dowell TRS Subsidiary,
LLC and Cherry Cove Hospitality Management, LLC (incorporated herein by reference to Exhibit
10.4 to the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated
June 29, 2016).
Hotel Management Agreement dated October 1, 2015 between TRS San Spring, LLC and Peachtree
Hospitality Management, LLC (incorporated herein by reference to Exhibit 10.4 to the Company’s
Current Report on Form 8-K (Commission file number 001-34087) dated October 1, 2015).
Hotel Management Agreement dated October 1, 2015 between TRS Atl Indy, LLC and Peachtree
Hospitality Management, LLC (incorporated herein by reference to Exhibit 10.5 to the Company’s
Current Report on Form 8-K (Commission file number 001-34087) dated October 1, 2015).
Hotel Management Agreement dated October 1, 2015 between TRS Jax Court, LLC and Peachtree
Hospitality Management, LLC (incorporated herein by reference to Exhibit 10.6 to the Company’s
Current Report on Form 8-K (Commission file number 001-34087) dated October 1, 2015).
Hotel Management Agreement, dated June 29, 2016, by and between TRS Leasing, Inc., TRS
Subsidiary, LLC and K Partners Hospitality Group LP (incorporated herein by reference to Exhibit
10.2 to the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated
June 29, 2016).
Agreement between Spring Street Hotel OpCo LLC and Boast Hotel Management Company LLC
dated effective August 19, 2016 (incorporated herein by reference to Exhibit 10.3 to the Company’s
Current Report on Form 8-K (Commission file number 001-34087) dated August 22, 2016).
Hotel Management Agreement dated as of December 14, 2016 between TRS KCI Loft, LLC and
Presidian Destinations, Ltd. (incorporated herein by reference to Exhibit 10.2 to the Company’s
Current Report on Form 8-K (Commission file number 001-34087) dated December 14, 2016).
Hotel Management Agreement dated as of March 24, 2017 between TRS TLH Magnolia, LLC and
Vista Host Inc. (incorporated herein by reference to Exhibit 10.4 to the Company’s Current Report on
Form 8-K (Commission file number 001-34087) dated March 24, 2017).
17
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
Hotel Management Agreement dated as of March 24, 2017 between TRS AUS Louis, LLC and Vista
Host Inc. (incorporated herein by reference to Exhibit 10.5 to the Company’s Current Report on
Form 8-K (Commission file number 001-34087) dated March 24, 2017).
Hotel Management Agreement dated as of March 24, 2017 between TRS LEX Lowry, LLC and
Vista Host Inc. (incorporated herein by reference to Exhibit 10.6 to the Company’s Current Report on
Form 8-K (Commission file number 001-34087) dated March 24, 2017).
Hotel Management Agreement dated as of April 14, 2017 between TRS MEM Southcrest, LLC and
Vista Host Inc. (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on
Form 8-K/A (Commission file number 001-34087) dated March 24, 2017).
Hotel Management Agreement dated as of June 19, 2017 between TRS MCO Village, LLC and
Peachtree Hospitality Management, LLC. (incorporated herein by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated June 19, 2017).
Hotel Management Agreement dated as of August 31, 2017 between TRS ELP Edge, LLC and Pillar
Hotels & Resorts, LLC (incorporated by reference to Exhibit 10.7 filed with the Company’s Form 8-
K (Commission file number 001-34087) dated August 31, 2017).
Hotel Management Agreement dated as of August 31, 2017 between TRS AUS Casey, LLC and
Pillar Hotels & Resorts, LLC (incorporated by reference to Exhibit 10.8 filed with the Company’s
Form 8-K (Commission file number 001-34087) dated August 31, 2017).
Hotel Management Agreement dated as of January 17, 2018 between TRS AUS Tech, LLC and Pillar
Hotels & Resorts, LLC (incorporated herein by reference to Exhibit 10.3 to the Company’s Current
Report on Form 8-K/A (Commission file number 001-34087) dated August 31, 2017).
Loan Agreement dated as of August 22, 2016 between Spring Street Hotel Property LLC, Spring
Street Hotel Opco LLC and LoanCore Capital Credit REIT LLC (incorporated herein by reference to
Exhibit 10.4 to the Company’s Current Report on Form 8-K (Commission file number 001-34087)
dated August 22, 2016).
Guaranty of Recourse Obligations by the Company and Alan Kanders and Raviraj Kiran Dave dated
August 22, 2016 in favor of LoanCore Capital Credit REIT LLC (incorporated herein by reference to
Exhibit 10.5 to the Company’s Current Report on Form 8-K (Commission file number 001-34087)
dated August 22, 2016).
Loan Agreement dated as of December 14, 2016 among CDOR KCI Loft, LLC, TRS KCI Loft, LLC
and Great Western Bank (incorporated herein by reference to Exhibit 10.3 to the Company’s Current
Report on Form 8-K (Commission file number 001-34087) dated December 14, 2016).
Springing Unconditional Guaranty of Payment and Performance dated as of December 14, 2016 by
the Company in favor of Great Western Bank (incorporated herein by reference to Exhibit 10.4 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated December 14,
2016).
Limited Guaranty of Payment and Performance dated as of December 14, 2016 by the Company in
favor of Great Western Bank (incorporated herein by reference to Exhibit 10.5 to the Company’s
Current Report on Form 8-K (Commission file number 001-34087) dated December 14, 2016).
10.27
First Amendment to Loan Agreement dated as of March 9, 2019 among CDOR KCI Loft, LLC, TRS
KCI Loft, LLC and Great Western Bank (incorporated herein by reference to Exhibit 10.2 to the
18
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated March 5,
2019).
Credit Agreement dated as of March 1, 2017 by and among Condor Hospitality Limited Partnership,
as Borrower, Keybank National Association and the other lenders party thereto, as Lenders, and
Keybank National Association, as Administrative Agent (incorporated herein by reference to Exhibit
10.1 to the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated
March 1, 2017).
Unconditional Guaranty of Payment and Performance dated as of March 1, 2017 by Condor
Hospitality REIT Trust, the Company and the subsidiary guarantors party thereto (incorporated
herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (Commission file
number 001-34087) dated March 1, 2017).
First Amendment to Credit Agreement dated as of May 11, 2017 among Condor Hospitality Limited
Partnership, as Borrower, the Company and the subsidiary guarantors party thereto, as Guarantors,
Keybank National Association and the other lenders party thereto, as Lenders, and Keybank National
Association, as Administrative Agent (incorporated herein by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated May 11, 2017).
Second Amendment to Credit Agreement dated as of December 13, 2017 among Condor Hospitality
Limited Partnership, as Borrower, the Company and the subsidiary guarantors party thereto, as
Guarantors, Keybank National Association and the other lenders party thereto, as Lenders, and
Keybank National Association, as Administrative Agent (incorporated herein by reference to Exhibit
10.1 to the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated
December 13, 2017).
Third Amendment to Credit Agreement dated as of March 9, 2019 among Condor Hospitality
Limited Partnership, as Borrower, the Company and the subsidiary guarantors party thereto, as
Guarantors, KeyBank National Association and the other lenders party thereto, as Lenders, and
KeyBank National Association, as Administrative Agent (incorporated herein by reference to Exhibit
10.1 to the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated
March 5, 2019).
Fourth Amendment to Credit Agreement dated as of May 3, 2019 among Condor Hospitality Limited
Partnership, as Borrower, the Company and the subsidiary guarantors party thereto, as Guarantors,
KeyBank National Association and the other lenders party thereto, as Lenders, and KeyBank
National Association, as Administrative Agent (incorporated herein by reference to Exhibit 10.3 to
the Company’s Quarterly Report on Form 10-Q (Commission file number 001-34087) for the quarter
ended March 31, 2019).
Fifth Amendment to Credit Agreement dated as of August 9, 2019 among Condor Hospitality
Limited Partnership, as Borrower, the Company and the subsidiary guarantors party thereto, as
Guarantors, KeyBank National Association and the other lenders party thereto, as Lenders, and
KeyBank National Association, as Administrative Agent (incorporated herein by reference to Exhibit
10.2 to the Company’s Quarterly Report on Form 10-Q (Commission file number 001-34087) for the
quarter ended June 30, 2019).
Loan Agreement dated as of October 4, 2017 between CDOR Jax Court, LLC, TRS Jax Court, LLC,
CDOR Atl Indy, LLC, TRS Atl Indy, LLC, CDOR San Spring, LLC and TRS San Spring, LLC and
Wells Fargo Bank, National Association (incorporated herein by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated October 4,
2017).
19
10.36
10.37
10.38
10.39
10.40
10.41
10.42
10.43
10.44
10.45
Guaranty of Recourse Obligations dated as of October 4, 2017 by the Company to Wells Fargo Bank,
National Association (incorporated herein by reference to Exhibit 10.2 to the Company’s Current
Report on Form 8-K (Commission file number 001-34087) dated October 4, 2017).
Cash Management Agreement dated as of October 4, 2017 by and among Wells Fargo Bank,
National Association and CDOR Jax Court, LLC, TRS Jax Court, LLC, CDOR Atl Indy, LLC, TRS
Atl Indy, LLC, CDOR San Spring, LLC and TRS San Spring, LLC (incorporated herein by reference
to Exhibit 10.3 to the Company’s Current Report on Form 8-K (Commission file number 001-34087)
dated October 4, 2017).
Term Loan Agreement dated as of August 9, 2019 among Condor Hospitality Limited Partnership,
Spring Street Hotel Property LLC and Spring Street Hotel OpCo LLC, as Borrowers, KeyBank
National Association and the other lenders party thereto, as Lenders, and KeyBank National
Association, as Administrative Agent (incorporated herein by reference to Exhibit 10.3 to the
Company’s Quarterly Report on Form 10-Q (Commission file number 001-34087) for the quarter
ended June 30, 2019).
Unconditional Guaranty of Payment and Performance dated as of August 9, 2019 by the Company
and Condor Hospitality REIT Trust to KeyBank National Association (incorporated herein by
reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q (Commission file
number 001-34087) for the quarter ended June 30, 2019).
First Amendment to Term Loan Agreement dated as of February 6, 2020 by and among Condor
Hospitality Limited Partnership, Spring Street Hotel Property LLC and Spring Street Hotel OpCo
LLC, as Borrowers, Condor Hospitality REIT Trust and the Company, as Guarantors, and KeyBank
National Association, as Administrative Agent (incorporated herein by reference to Exhibit 10.1 to
the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated February 6,
2020).
Purchase Agreement, dated November 16, 2011, by and among the Company, Condor Hospitality
Limited Partnership and Real Estate Strategies L.P. (incorporated herein by reference to Exhibit 10.1
to the Company’s Current Report on Form 8-K/A (Commission file number 001-34087) dated
November 16, 2011).
Warrants issued to Real Estate Strategies L.P. dated February 1, 2012 and February 15, 2012
(incorporated herein by reference to Exhibit 10.39 to the Company’s Annual Report on Form 10-K
(Commission file number 001-34087) for the year ended December 31, 2011).
Investor Rights and Conversion Agreement, dated February 1, 2012, by and among the Company,
Real Estate Strategies L.P. and IRSA Inversiones y Representaciones Sociedad Anónima
(incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
(Commission file number 001-34087) dated January 30, 2012).
Registration Rights Agreement, dated February 1, 2012, by and among the Company, Real Estate
Strategies L.P. and IRSA Inversiones y Representaciones Sociedad Anónima (incorporated herein by
reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K (Commission file number
001-34087) dated January 30, 2012).
Directors Designation Agreement, dated February 1, 2012, by and among the Company, Real Estate
Strategies L.P. and IRSA Inversiones y Representaciones Sociedad Anónima (incorporated herein by
reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K (Commission file number
001-34087) dated January 30, 2012).
10.46
Agreement, dated August 9, 2013, by and among the Company, Real Estate Strategies L.P. and IRSA
Inversiones y Representaciones Sociedad Anonima (incorporated herein by reference to Exhibit 10.1
20
10.47
10.48
10.49
10.50
10.51
10.52
10.53
10.54
10.55
10.56
10.57
to the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated August
9, 2013).
Agreement, dated July 23, 2015, between Real Estate Strategies L.P., IRSA Inversiones y
Representaciones Sociedad Anonima and the Company (incorporated herein by reference to Exhibit
10.1 to the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated July
23, 2015).
Warrant dated January 24, 2017 issued to Real Estate Strategies L.P. (incorporated herein by
reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K (Commission file number
001-34087) dated January 23, 2017).
Agreement, dated as of February 28, 2017, by and among Real Estate Strategies L.P., IRSA
Inversiones y Representaciones Sociedad Anónima and the Company (incorporated herein by
reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (Commission file number
001-34087) dated February 28, 2017).
Joinder Agreement dated June 29, 2018 by and among the Company, Real Estate Strategies L.P.,
IRSA Inversiones y Representaciones Sociedad Anonima, and Real Estate Investment Group VII
L.P. (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
(Commission file number 001-34087) dated June 29, 2018).
Stock Purchase Agreement, dated as of March 16, 2016, between SREP III Flight-Investco, L.P. and
the Company (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K (Commission file number 001-34087) dated March 16, 2016).
Investor Rights Agreement, dated as of March 16, 2016, by and among SREP III Flight-Investco,
L.P., StepStone Group Real Estate LP and the Company (incorporated herein by reference to Exhibit
10.2 to the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated
March 16, 2016).
Agreement, dated as of March 16, 2016, by and among Real Estate Strategies L.P., IRSA Inversiones
y Representaciones Sociedad Anónima and the Company (incorporated herein by reference to Exhibit
10.3 to the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated
March 16, 2016).
Agreement, dated as of February 28, 2017, between SREP III Flight-Investco, L.P., StepStone Group
Real Estate LP and the Company (incorporated herein by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K (Commission file number 001-34087) dated February 28, 2017).
The Company’s 2006 Stock Plan (incorporated herein by reference to Exhibit 10.31 to the
Company’s Annual Report on Form 10-K (Commission file number 001-34087) for the year ended
December 31, 2011).
Amendment to the Company’s 2006 Stock Plan dated May 28, 2009 (incorporated herein by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (Commission file number
001-34087) dated May 28, 2009).
Amendment to the Company’s 2006 Stock Plan dated May 22, 2012 (incorporated herein by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (Commission file number
001-34087) dated May 22, 2012).
21
10.58
10.59
10.60
10.61
10.62
10.63
10.64
10.65
10.66
10.67
10.68
10.69
10.70
10.71
Form of Stock Option Agreement (incorporated herein by reference to Exhibit 10.32 to the
Company’s Annual Report on Form 10-K (Commission file number 001-34087) for the year ended
December 31, 2011).
The Company’s 2016 Stock Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K (Commission file number 001-34087) dated June 15, 2016).
Amendment to the Company’s 2016 Stock Plan (incorporated herein by reference to Exhibit 10.1 to
the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated May 17,
2018.
Jeffrey W. Dougan Employment Agreement dated July 15, 2013 (incorporated herein by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K (Commission file number 001-34087)
dated July 9, 2013).
Jeffrey W. Dougan Restricted Stock Agreement dated July 15, 2013 (incorporated herein by
reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (Commission file number
001-34087) dated July 9, 2013).
Jeffrey W. Dougan Stock Option Agreement dated July 15, 2013 (incorporated herein by reference to
Exhibit 10.3 to the Company’s Current Report on Form 8-K (Commission file number 001-34087)
dated July 9, 2013).
Amended and Restated Employment Agreement dated March 2, 2015 by and between the Company
and J. William Blackham, as amended and restated on September 16, 2016 (incorporated herein by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (Commission file number
001-34087) dated September 16, 2016).
Common Stock Purchase Warrant dated March 2, 2015 between the Company and J. William
Blackham (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on
Form 8-K (Commission file number 001-34087) dated March 2, 2015).
Amendment of Employment Agreement dated June 28, 2017 between J. William Blackham and the
Company (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K (Commission file number 001-34087) dated June 28, 2017).
Amendment of Employment Agreement dated April 10, 2018 between J. William Blackham and the
Company (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K (Commission file number 001-34087) dated April 10, 2018.
Form of Executive Officer and Director Indemnification Agreement (incorporated herein by
reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q (Commission file
number 001-34087) for the quarter ended March 31, 2016).
Form of Restricted Stock Agreement (incorporated herein by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated March 29,
2017).
Form of Director Restricted Stock Agreement (incorporated herein by reference to Exhibit 10.3 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated June 19, 2017).
Agreement of Purchase and Sale dated as of August 29, 2016 between Leawood ADP, Ltd. and
Condor Hospitality Limited Partnership (incorporated herein by reference to Exhibit 10.1 to the
22
10.72
10.73
10.74
10.75
10.76
10.77
10.78
10.79
10.80
10.81
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated August 29,
2016).
Purchase and Sale Agreement dated as of January 23, 2017 between Condor Hospitality Limited
Partnership and VHRMR TALL, LLC (incorporated herein by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated January 23,
2017).
Purchase and Sale Agreement dated as of January 23, 2017 between Condor Hospitality Limited
Partnership and EASTVHR HS ROUND ROCK, LLC (incorporated herein by reference to Exhibit
10.2 to the Company’s Current Report on Form 8-K (Commission file number 001-34087) dated
January 23, 2017).
Purchase and Sale Agreement dated as of January 23, 2017 between Condor Hospitality Limited
Partnership and CVH LEXINGTON, LLC (incorporated herein by reference to Exhibit 10.3 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated January 23,
2017).
Purchase and Sale Agreement dated as of January 23, 2017 between Condor Hospitality Limited
Partnership and CVH SOUTHAVEN, LLC (incorporated herein by reference to Exhibit 10.4 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated January 23,
2017).
Purchase and Sale Agreement dated as of April 29, 2017 between Condor Hospitality Limited
Partnership and SI Lake Mary, LP. (incorporated herein by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K (Commission file number 001-34087) dated April 29,
2017).
Purchase and Sale Agreement Fairfield Inn & Suites El Paso Airport dated as of July 17, 2017
between Condor Hospitality Limited Partnership and MB Hospitality (EP), LP (incorporated herein
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (Commission file
number 001-34087) dated July 17, 2017).
First Amendment to Purchase and Sale Agreement Fairfield Inn & Suites El Paso Airport dated as of
August 31, 2017 between Condor Hospitality Limited Partnership and MB Hospitality (EP), LP
(incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
(Commission file number 001-34087) dated August 31, 2017).
Purchase and Sale Agreement Residence Inn Austin Airport dated as of July 17, 2017 between
Condor Hospitality Limited Partnership and MB Hospitality (AUSAP), LP (incorporated herein by
reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (Commission file number
001-34087) dated July 17, 2017).
First Amendment to Purchase and Sale Agreement Residence Inn Austin Airport dated as of August
31, 2017 between Condor Hospitality Limited Partnership and MB Hospitality (AUSAP), LP
(incorporated herein by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K
(Commission file number 001-34087) dated August 31, 2017).
Purchase and Sale Agreement TownePlace Suites Austin North Tech Ridge dated as of July 17, 2017
between Condor Hospitality Limited Partnership and MB Hospitality (AUSN), LP (incorporated
herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (Commission file
number 001-34087) dated July 17, 2017).
10.82
First Amendment to Purchase and Sale Agreement TownePlace Suites Austin North Tech Ridge
dated as of August 31, 2017 between Condor Hospitality Limited Partnership and MB Hospitality
23
10.83*
10.84*
10.85*
(AUSN), LP (incorporated herein by reference to Exhibit 10.6 to the Company’s Current Report on
Form 8-K (Commission file number 001-34087) dated August 31, 2017).
Sixth Amendment to Credit Agreement dated as of March 30, 2020 among Condor Hospitality
Limited Partnership, as Borrower, the Company and the subsidiary guarantors party thereto, as
Guarantors, KeyBank National Association and the other lenders party thereto, as Lenders, and
KeyBank National Association, as Administrative Agent.
Exhibit A to Sixth Amendment to Credit Agreement dated as of March 30, 2020 among Condor
Hospitality Limited Partnership, as Borrower, the Company and the subsidiary guarantors party
thereto, as Guarantors, KeyBank National Association and the other lenders party thereto, as Lenders,
and KeyBank National Association, as Administrative Agent.
Exhibit B to Sixth Amendment to Credit Agreement dated as of March 30, 2020 among Condor
Hospitality Limited Partnership, as Borrower, the Company and the subsidiary guarantors party
thereto, as Guarantors, KeyBank National Association and the other lenders party thereto, as Lenders,
and KeyBank National Association, as Administrative Agent.
10.86*
Second Amendment to Loan Agreement dated as of March 30, 2020 among CDOR KCI Loft, LLC,
TRS KCI Loft, LLC and Great Western Bank.
14.1
Code of Business Conduct and Ethics and Whistleblower Policy (incorporated herein by reference to
Exhibit 14.1 to the Company’s Current Report on Form 8-K (Commission file number 001-34087)
dated May 17, 2018.
21.0*
Subsidiaries.
23.1*
Consent of KPMG LLP
31.1**
Section 302 Certification of Chief Executive Officer.
31.2**
Section 302 Certification of Chief Financial Officer.
32.1**
Section 906 Certifications.
99.1
Form of Voting Agreement (incorporated herein by reference to Exhibit 99.1 to the Company’s
Current Report on Form 8-K (Commission file number 001-34087) dated July 18, 2019).
101.1*
The following materials from the Company’s Annual Report on Form 10-K for the year ended
December 31, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) the
Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated
Statements of Equity, (iv) the Consolidated Statements of Cash Flows and (v) Notes to Consolidated
Financial Statements.
Pursuant to Item 601 (b)(4) of Regulation S-K, certain instruments with respect to the Company’s long-
term debt are not filed with this Form 10-K. The Company will furnish a copy of any such long-term
debt agreement to the Securities and Exchange Commission upon request.
Management contracts and compensatory plans are set forth as Exhibits 10.48 through 10.63.
*
**
Previously Filed
Filed Herewith
24
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 dually authorized
April 29, 2020 /s/J. William Blackham
J. William Blackham
Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature
/s/J. William Blackham
J. William Blackham
/s/Arinn A. Cavey
Arinn A. Cavey
Title
Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer & Chief Accounting Officer
(Principal Financial and Accounting Officer)
Date
April 29, 2020
April 29, 2020
25
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*
BOARD OF DIRECTORS
EXECUTIVE OFFICERS
TRANSFER AGENT
J. WILLIAM BLACKHAM
President, Chief Executive Officer, Condor
Hospitality Trust, Inc.
THOMAS CALAHAN
Partner, Balboa Real Estate Partners
NOAH DAVIS 1*
Chief Investment Officer, The Heyman
Enterprise
DAPHNE DUFRESNE
Managing Partner, GenNx360 Capital
Partners
CB, 3
DANIEL ELSZTAIN 2,3,4
Chief Real Estate Business Officer, IRSA
MATIAS GAIVIRONSKY 1
Chief Financial and Administrative Officer of
Cresud, IRSA, and IRSA CP.
DREW IADANZA 1
Vice President, StepStone Group
DONALD LANDRY 2*,3*,4*
President and Owner, Top Ten Hospitality
Advisors
BRENDAN MACDONALD 2,3,4
Partner, StepStone Group
COMMITTEE MEMBERSHIP
1 Audit Committee
2 Compensation Committee
3
Investment Committee
4 Nominating Committee
* D enotes Chair of Committee
CB Chair of the Board
J. WILLIAM BLACKHAM
President, Chief Executive Officer
JILL BURGER
Interim Chief Financial Officer and Chief
Accounting Officer
CORPORATE
HEADQUARTERS
1800 West Pasewalk Avenue
Suite 120
Norfolk, NE 68701
Phone: (301) 861-3305
Website: www.condorhospitality.com
STOCK EXCHANGE
LISTING
Condor Hospitality Trust, Inc. trades on the
NYSE American Exchange under the symbol
“CDOR”.
American Stock Transfer and Trust
Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
Phone: (800) 937-5449
www.amstock.com
INVESTOR RELATIONS
CONTACT
Jill Burger
Interim Chief Financial Officer and Chief
Accounting Officer
1800 West Pasewalk Avenue
Suite 120
Norfolk, NE 68701
Phone: (301) 861-3305
Email: investors@trustcondor.com
FORM 10-K
Additional copies of the Company’s 2019
Annual Report on Form 10-K, as filed with
the SEC, are available on the Company’s
website or in print by contacting Investor
Relations:
1800 West Pasewalk Avenue
Suite 120
Norfolk, NE 68701
Phone: (301) 861-3305
Email: investors@trustcondor.com
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
KPMG LLP
1676 International Drive
McLean, VA 22102
1 8 0 0 W E S T P A S E W A L K A V E N U E , S T E 1 2 0
N O R F O L K , N E 6 8 7 0 1
www.condorhospitality.com