RLJ Lodging Trust Annual Report 2020

FY2020 Annual Report · RLJ Lodging Trust

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2020 ANNUAL REPORT

RLJ LODGING TRUST (“RLJ”) is a self-advised, publicly traded real estate investment trust that
owns primarily premium-branded, high-margin, focused-service and compact full-service
hotels. Our hotels are geographically diverse and concentrated in major urban markets that
provide multiple demand generators from business, leisure and other travelers.

URBAN MARKETS
(NUMBER OF HOTELS)

STATES

101

HOTELS

22K+

ROOMS

LODGING SEGMENTS
(% OF HOTEL ROOMS)

BRAND

41%
HILTON
36%
MARRIOTT
14%
OTHER
9%
HYATT

NOTE: AS OF MARCH 2021

55%
COMPACT
FULL-SERVICE

42%
FOCUSED-
SERVICE

3%
FULL-SERVICE

SERVICE
LEVEL

EXPERIENCED
LEADERSHIP
Track record of consistently and seamlessly
executing on stated objectives

$1B+

IN LIQUIDITY

Embassy Suites Tampa Downtown, Tampa, FL

TO OUR SHAREHOLDERS

By all measures, 2020 was a year like no other. The far-reaching
impact of the pandemic was felt across the lodging industry, the
nation and the entire world. Like so many other industries, lodging
demand evaporated. Given the severity of the pandemic’s impact,
I am proud of how well our team responded. Our priorities were
focused on protecting our people, our guests and our liquidity.
We were nimble and quickly pivoted to redirect all our efforts to
preserving our platform and navigating the uncertainty of
the pandemic.

The tremendous response by our team to this crisis has allowed us to
emerge in a relative position of strength. We are not only positioned
to benefit early during the recovery, but are also poised to outperform
throughout the entire lodging cycle as we advance our long-term
growth opportunities.

RLJ LODGING TRUST 2020 ANNUAL REPORT

~50%

SUITES

~35%

DRIVE-TO
MARKETS

10%

RESORTS

AS A PERCENTAGE OF
2019 REVENUES

OUR COVID RESPONSE

At the onset of this crisis, we took several decisive steps operationally.
Working with our operating partners, we implemented a number of
aggressive cost containment initiatives including reducing staffing
levels, closing F&B outlets, eliminating all non-essential services and
closing floors to reduce room inventory. As the operating environment
became more difficult, we made the prudent decision to suspend
operations at 57 hotels. As many states began lifting restrictions, we
developed a thoughtful framework to reopen our hotels in a socially
and financially responsible manner. Our approach was focused on
minimizing our operating shortfalls by reopening those hotels that
were best positioned to control costs and capture available demand
in this low occupancy environment, while maintaining guest and
employee safety. We ended the year with 93% of our hotels open.

In conjunction with our operational response, we took a number of
steps to bolster our liquidity and to preserve balance sheet flexibility.
We reduced our 2020 capital plan by over 80%, limiting capital
spending largely to in-flight projects that were nearing completion.
Additionally, we decreased our quarterly common dividend and
strategically drew down on our line of credit to shore up our liquidity
position. Finally, we secured covenant waivers to create incremental
balance sheet capacity given the ongoing uncertainty around the
duration and depth of this crisis.

The successful execution of all of these efforts improved our liquidity,
minimized our cash burn and allowed us to end the year with over
$1 billion of liquidity, which will enable us to take advantage of both
internal and external value creation opportunities.

Embassy Suites Minneapolis Airport, Minneapolis, MN

STRONG LIQUIDITY
Provides flexibility and optionality to
drive internal and external growth

EMBEDDED VALUE
Multiple conversion and ROI
opportunities to drive incremental
growth throughout the cycle

Courtyard Charleston Historic District, Charleston, SC

EARLY RECOVERY

Although the extreme challenges facing our industry are ongoing, as
2021 unfolds, we expect our relative positioning to continue to allow
us to rebound more quickly than many of our peers. Our confidence
draws from our lean operating model and the construct and
geographic diversification of our portfolio. In particular:

• our portfolio of focused-service and compact full-service hotels, which
have smaller footprints and are less operationally complex, allows
our properties to achieve break-even at lower occupancy levels;

96%

OPEN HOTELS

AS OF MARCH, 2021

• our lean operating model allows our hotels to achieve profitability

earlier; and,

~80%

TRANSIENT

AS A PERCENTAGE
OF 2019 REVENUES

• our transient orientation and exposure to many leisure-oriented
markets positions us to ramp up early during recovery, and the
attractiveness of our all-suite products will further bolster this ramp
as the new normal unfolds.

The relative advantages that our portfolio offers are already proving
out, as demonstrated throughout the year by the number of hotels
reopened, the pace of our occupancy ramp up and the number
of assets that achieved positive EBITDA. Our recent performance
illustrates that when a sustained recovery does unfold, our portfolio
will benefit earlier than our peers.

RLJ LODGING TRUST 2020 ANNUAL REPORT 3

POSITIONED TO
OUTPERFORM
Portfolio construct positions RLJ to
outperform throughout the entire cycle

LOOKING FORWARD

Looking ahead, we continue to believe that the
pace of vaccine distribution and the reopening of
offices will be critical to the recovery of our industry.
We are encouraged by the significant progress
that has been made towards the distribution of
vaccines since the beginning of this year. Given
this progress, our confidence, relative to the
recovery accelerating during the back half of 2021,
is incrementally more positive today.

While the road to recovery will span several years,
we are confident that our industry will fully return
to pre-pandemic demand levels. As this recovery
takes hold, our portfolio construct will allow us to
grow revenues earlier, achieve overall profitability
quicker and position us to take advantage of
growth opportunities sooner.

More importantly, we are poised to outperform
throughout the lodging cycle given the following:
first, our strong liquidity of over $1 billion will allow
us to emerge with a healthy and flexible balance
sheet and enable us to pursue our growth strategy;
second, our large asset base will allow us the
optionality to recycle capital; third, the improved
overall long-term growth profile of our portfolio
will allow us to achieve stronger top line
performance; and finally, our EBITDA growth will
be amplified by the execution of our embedded
growth catalysts, including the conversions at
Mandalay Beach, Santa Monica and Charleston,
all of which will allow us to create significant value
for our shareholders throughout the cycle.

RLJ LODGING TRUST 2020 ANNUAL REPORT

Renaissance Boulder Flatiron, Boulder, CO

Now, I would be remiss to not acknowledge that
this past year was also marked by social unrest
highlighting racial inequality. Racial equality and
diversity have always been core tenets of RLJ. We
maintain an unwavering commitment to diversity
throughout the organization, including at the
Board level. This is reflected in over half of our
employees being ethnically diverse and over half
being women, with a similar profile for our Board.
We are proud to be one of the most diverse
companies (public or private) in the entire real
estate industry and are committed to maintaining
and expanding our diversity.

Although 2020 was a difficult year, we are pleased
with how we performed and our ability to navigate
this crisis, which was made possible by the
tremendous efforts of our dedicated team of
seasoned professionals and the ongoing support of
our partners and stakeholders. We are encouraged
by the opportunities that lie ahead and thank you
for your continued support of RLJ. We look
forward to continuing to work tirelessly on your
behalf to create meaningful shareholder value.

LESLIE D. HALE
PRESIDENT & CEO

ROBERT L. JOHNSON
EXECUTIVE CHAIRMAN

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

(cid:1) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

(cid:2) 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 001-35169
RLJ LODGING TRUST
(Exact Name of Registrant as Specified in Its Charter)

Maryland
(State or Other Jurisdiction of
Incorporation or Organization)

3 Bethesda Metro Center, Suite 1000
Bethesda, Maryland
(Address of Principal Executive Offices)

27-4706509
(I.R.S. Employer
Identification No.)

20814
(Zip Code)

(301) 280-7777
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Class

Trading Symbol

Name of Exchange on Which Registered

Common Shares of beneficial interest, par value
$0.01 per share
$1.95 Series A Cumulative Convertible Preferred
Shares, par value $0.01 per share

RLJ

RLJ-A

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes (cid:1) No (cid:2)

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

Yes (cid:2) No (cid:1)

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. (cid:1) Yes (cid:2) 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). (cid:1) Yes (cid:2) 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 (cid:1)

Non-accelerated filer (cid:2)

Accelerated filer (cid:2)

Smaller reporting company (cid:2)
Emerging growth company (cid:2)

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. (cid:2)

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b))
by the registered public accounting firm that prepared or issued its audit report. (cid:2)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange

Act). (cid:2) Yes (cid:1) No

The aggregate market value of the 161,745,955 common shares of beneficial interest held by non-affiliates of the

Registrant was approximately $1,526,881,815 based on the closing price of $9.44 as reported on the New York Stock Exchange
for such common shares of beneficial interest on June 30, 2020.

As of February 19, 2021, 164,972,516 common shares of beneficial interest of the Registrant, $0.01 par value per share,

were outstanding.

Portions of the Definitive Proxy Statement for our 2021 Annual Meeting of Shareholders are incorporated by reference

into Part III of this report. We expect to file our proxy statement within 120 days after December 31, 2020.

Documents Incorporated by Reference

Item No.

TABLE OF CONTENTS

PART I

Form 10-K
Report Page

Item 1.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4.

PART II

Item 5.

Market for Registrant’s Common Equity, Related Shareholder Matters and

Item 6.
Item 7.

Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of

Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial
Item 9.

Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11.
Security Ownership of Certain Beneficial Owners and Management and
Item 12.

Item 13.
Item 14.

Related Shareholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions and Director Independence . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 15.
Item 16.

Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . .
Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV

4
11
30
30
35
35

36
38

38
55
56

56
56
57

58
58

58
58
58

58
64

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Report on Form 10-K, other than purely historical information,

including estimates, projections, statements relating to our business plans, objectives and expected
operating results, and the assumptions upon which those statements are based, are ‘‘forward-looking
statements’’ within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking statements generally are identified by the use of the words ‘‘believe,’’
‘‘project,’’ ‘‘expect,’’ ‘‘anticipate,’’ ‘‘estimate,’’ ‘‘plan,’’ ‘‘may,’’ ‘‘will,’’ ‘‘will continue,’’ ‘‘intend,’’ ‘‘should,’’
‘‘may’’ or similar expressions. Although we believe that the expectations reflected in such forward-
looking statements are based upon reasonable assumptions, beliefs and expectations, such forward-
looking statements are not predictions of future events or guarantees of future performance and our
actual results could differ materially from those set forth in the forward-looking statements.

Currently, one of the most significant factors that could cause actual outcomes to differ materially

from our forward-looking statements is the continued adverse effect of the current pandemic of the
novel coronavirus (‘‘COVID-19’’) on our financial condition, results of operations, cash flows and
performance, the real estate market and the global economy and financial markets. The extent to which
the COVID-19 pandemic will continue to impact us will depend on future developments, which are
highly uncertain and cannot be predicted with confidence. These future developments may include,
among others, the duration of the pandemic and its impact on the demand for travel and on levels of
consumer confidence, the actions governments, businesses and individuals take in response to the
pandemic, the impact of the pandemic on global and regional economies, travel and economic activity,
and the pace of recovery when the COVID-19 pandemic subsides. Moreover, investors are cautioned to
interpret many of the risks identified under the section entitled ‘‘Risk Factors’’ within this Annual
Report on Form 10-K as being heightened as a result of the ongoing and numerous adverse impacts of
the COVID-19 pandemic.

Additional factors that might cause actual outcomes to differ materially from our forward-looking

statements include the following: the current global economic uncertainty, increased direct competition,
changes in government regulations or accounting rules, changes in local, national and global real estate
conditions, declines in the lodging industry, seasonality of the lodging industry, risks related to natural
disasters, such as earthquakes and hurricanes, hostilities, including future terrorist attacks or fear of
hostilities that affect travel, our ability to obtain lines of credit or permanent financing on satisfactory
terms, changes in interest rates, access to capital through offerings of our common and preferred shares
of beneficial interest, or debt, our ability to identify suitable acquisitions, our ability to close on
identified acquisitions and integrate those businesses, and inaccuracies of our accounting estimates. A
discussion of these and other risks and uncertainties that could cause actual results and events to differ
materially from such forward-looking statements is included in ‘‘Risk Factors’’ and ‘‘Management’s
Discussion and Analysis of Financial Condition and Results of Operations’’ within this Annual Report
on Form 10-K. Given these uncertainties, undue reliance should not be placed on such statements.
Except as required by law, we undertake no obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events or otherwise. Except where the
context suggests otherwise, we define certain terms in this Annual Report on Form 10-K as follows:

(cid:127) ‘‘our company,’’ ‘‘we,’’ ‘‘us’’ and ‘‘our’’ refer to RLJ Lodging Trust, a Maryland real estate

investment trust, together with its consolidated subsidiaries, including RLJ Lodging Trust, L.P., a
Delaware limited partnership, which we refer to as the ‘‘Operating Partnership’’;

(cid:127) ‘‘our hotel properties’’ refers to the 103 hotels owned by us as of December 31, 2020;

(cid:127) a ‘‘compact full-service hotel’’ typically refers to any hotel with (1) less than 300 guestrooms and
less than 12,000 square feet of meeting space, or (2) more than 300 guestrooms where, unlike
traditional full-service hotels, the operations focus primarily on the rental of guestrooms such

that a significant majority of its total revenue is generated from room rentals rather than other
sources, such as food and beverage;

(cid:127) a ‘‘focused-service hotel’’ typically refers to any hotel where the operations focus primarily on

the rental of guestrooms and that offers services and amenities to a lesser extent than a
traditional full-service or compact full-service hotel. For example, a focused-service hotel may
have a restaurant, but, unlike a restaurant in a traditional full-service or compact full-service
hotel, it may not offer three meals per day and may not offer room service. In addition, a
focused-service hotel differs from a compact full-service hotel in that it typically has less than
2,000 square feet of meeting space, if any at all;

(cid:127) ‘‘TRS’’ refers to each of our taxable REIT subsidiaries that are wholly-owned, directly or
indirectly, by the Operating Partnership and any disregarded subsidiaries of our TRSs;

(cid:127) ‘‘Average Daily Rate’’ (‘‘ADR’’) represents the total hotel room revenues divided by the total

number of rooms sold in a given period;

(cid:127) ‘‘Occupancy’’ represents the total number of hotel rooms sold in a given period divided by the

total number of rooms available; and

(cid:127) ‘‘Revenue Per Available Room’’ (‘‘RevPAR’’) is the product of ADR and Occupancy.

For a more in depth discussion of ADR, Occupancy and RevPAR, please refer to the ‘‘Key Indicators
of Operating Performance’’ section.

Item 1. Business

Our Company

PART I

We are a self-advised and self-administered Maryland real estate investment trust (‘‘REIT’’) that

owns primarily premium-branded, high-margin, focused-service and compact full-service hotels. We are
one of the largest U.S. publicly-traded lodging REITs in terms of both number of hotels and number of
rooms. Our hotels are concentrated in markets that we believe exhibit multiple demand generators and
attractive long-term growth prospects. We believe premium-branded, focused-service and compact
full-service hotels with these characteristics generate high levels of RevPAR, strong operating margins
and attractive returns.

As of December 31, 2020, we owned 103 hotel properties with approximately 22,700 rooms,
located in 23 states and the District of Columbia. We owned, through wholly-owned subsidiaries, a
100% interest in 99 of our hotel properties, a 98.3% controlling interest in the DoubleTree
Metropolitan Hotel New York City, a 95.0% controlling interest in The Knickerbocker, and 50%
interests in entities owning two hotel properties. We consolidate our real estate interests in the
101 hotel properties in which we hold a controlling financial interest, and we record the real estate
interests in the two hotel properties in which we hold an indirect 50% interest using the equity method
of accounting. We lease 102 of the 103 hotel properties to our TRSs, of which we own a controlling
financial interest.

For U.S. federal income tax purposes, we elect to be taxed as a REIT. Substantially all of our

assets and liabilities are held by, and all of our operations are conducted through, the Operating
Partnership. We are the sole general partner of the Operating Partnership. As of December 31, 2020,
we owned, through a combination of direct and indirect interests, 99.5% of the units of limited
partnership interest in the Operating Partnership (‘‘OP units’’).

COVID-19

The global outbreak of a novel strain of coronavirus (COVID-19) and the public health measures

that have been undertaken in response have had, and will likely continue to have, a material adverse
impact on the global economy and all aspects of our business.

Significant events affecting travel, including the COVID-19 pandemic, typically have an impact on
booking patterns, with the full extent of the impact generally determined by the duration of the event
and its impact on travel decisions. The effects of the COVID-19 pandemic, including related
government restrictions, border closings, quarantining, ‘‘shelter-in-place’’ orders and ‘‘social distancing,’’
have significantly limited non-essential travel and also resulted in increased national unemployment and
possible lasting changes in consumer behavior that will create headwinds for our hotel properties even
after government restrictions are lifted. Since we cannot estimate when the COVID-19 pandemic and
the responsive measures to combat it will end, we cannot estimate the ultimate operational and
financial impact of COVID-19 on our business. The effects of the COVID-19 pandemic have
significantly impacted our operations in 2020, and combined with macroeconomic trends such as the
current economic recession, reduced consumer spending, including on travel, and increased
unemployment, lead us to believe that the ongoing effects of the COVID-19 pandemic on our
operations continue to have a material adverse impact on our financial results and liquidity and such
adverse impact may continue well beyond the containment of such outbreak and vaccination
distribution.

The Lodging Industry

The lodging industry in the United States consists of public and private entities that operate in an

extremely diversified market under a variety of brand names. The key participants in the lodging
industry are as follows:

(cid:127) Owners—own the hotel property and typically enter into a management agreement with an

independent third party to manage the hotel property. The hotel properties may be branded and
operated under the manager’s brand or branded under a separate franchise agreement.

(cid:127) Franchisors—own a brand or brands and provide the franchised hotels with brand recognition,

marketing support and worldwide reservation systems.

(cid:127) Managers—responsible for the day-to-day operation of the hotel property, including the

employment of the hotel staff, the determination of room rates, the development of sales and
marketing plans, the preparation of operating and capital expenditure budgets and the
preparation of financial reports for the owner.

Our Investment and Business Strategies

Our objective is to generate strong returns for our shareholders by acquiring and owning primarily

premium-branded, focused-service and compact full-service hotels at prices where we believe we can
generate attractive returns on investment and long-term value appreciation through proactive asset
management. We also intend to selectively dispose of hotel properties when we believe the returns have
been maximized or the hotel properties no longer meet our strategy in order to have investment
capacity for other opportunities, which may include acquisitions. We intend to pursue this objective
through the following investment and business strategies:

Investment Strategies

(cid:127) Targeted ownership of premium-branded, focused-service and compact full-service hotels. We believe

that premium-branded, focused-service and compact full-service hotels have the potential to
generate attractive returns relative to other types of hotels due to their ability to achieve
RevPAR levels at or close to those generated by traditional full-service hotels, while achieving
higher profit margins due to their more efficient operating model and less volatile cash flows.

(cid:127) Use of premium hotel brands. We believe in affiliating our hotels with premium brands owned by
leading international franchisors such as Marriott, Hilton and Hyatt. We believe that utilizing
premium brands provides significant advantages because of their guest loyalty programs,
worldwide reservation systems, effective product segmentation, global distribution and strong
customer awareness.

(cid:127) Focus on high-growth markets. We focus on owning and acquiring hotel properties in markets

that we believe exhibit multiple demand generators and attractive long-term growth prospects.
As a result, we believe that these hotel properties generate higher returns on investment.

Business Strategies

(cid:127) Maximize returns from our hotel properties. We believe that our hotel properties have the

potential to generate improvements in RevPAR and earnings before interest, taxes, depreciation
and amortization (‘‘EBITDA’’) as a result of our proactive asset management and the anticipated
long-term recovery of the United States economy. We actively monitor and advise our third-
party management companies on most aspects of our hotels’ operations, including property
positioning, physical design, capital planning and investment, guest experience and overall
strategic direction. We regularly review opportunities to further invest in our hotel properties in

an effort to enhance quality and attractiveness, increase long-term value and generate attractive
returns on investment.

(cid:127) Pursue a disciplined hotel acquisition strategy. We seek to acquire additional hotel properties at

prices below replacement cost where we believe we can generate attractive returns on
investment. We intend to target acquisition opportunities where we can enhance value by
pursuing proactive investment strategies such as renovation, repositioning or rebranding.

(cid:127) Pursue a disciplined capital recycling program. We intend to continue to pursue a disciplined
capital allocation strategy designed to maximize the return on our investments by selectively
selling hotel properties that are no longer consistent with our investment strategy or whose
returns appear to have been maximized. To the extent that we sell our hotel properties, except
as may be required by our debt agreements, we intend to redeploy the capital into other
investment opportunities, including without limitation, acquisitions, brand conversions, green
initiatives and space configuration opportunities.

(cid:127) Continue to improve our balance sheet. We intend to continue to maintain a flexible capital

structure that allows us to execute our strategy. We believe that a strong balance sheet is a key
competitive advantage that affords us a lower cost of capital and positions us for growth. We
structure our debt profile to maintain financial flexibility and a balanced maturity schedule with
access to different forms of financing.

Our Hotels

Our hotel properties operate under strong, premium brands, with approximately 87% of our hotel

properties operating under existing relationships with Marriott, Hilton or Hyatt. The following table
sets forth the brand affiliations of our hotel properties as of December 31, 2020:

Brand Affiliations

Marriott

Residence Inn . . . . . . . . . . . . . . . . . .
Courtyard . . . . . . . . . . . . . . . . . . . . .
Fairfield Inn & Suites . . . . . . . . . . . .
Marriott . . . . . . . . . . . . . . . . . . . . . .
Renaissance . . . . . . . . . . . . . . . . . . .
SpringHill Suites . . . . . . . . . . . . . . . .

Subtotal . . . . . . . . . . . . . . . . . . . .

Hilton

Embassy Suites . . . . . . . . . . . . . . . . .
Hilton Garden Inn . . . . . . . . . . . . . .
DoubleTree . . . . . . . . . . . . . . . . . . .
Hampton Inn/Hampton Inn & Suites .
Homewood Suites . . . . . . . . . . . . . . .
Hilton . . . . . . . . . . . . . . . . . . . . . . .

Subtotal . . . . . . . . . . . . . . . . . . . .

Hyatt

Hyatt House . . . . . . . . . . . . . . . . . . .
Hyatt Place . . . . . . . . . . . . . . . . . . . .
Hyatt Centric . . . . . . . . . . . . . . . . . .

Subtotal . . . . . . . . . . . . . . . . . . . .

Wyndham

Wyndham . . . . . . . . . . . . . . . . . . . . .

Subtotal . . . . . . . . . . . . . . . . . . . .
Other Brand Affiliation . . . . . . . . . . . .

Number of
hotels

Percentage of
total hotels

Number of
rooms

Percentage of
total rooms

13
14
5
5
3
3

21
5
4
2
2
1

7
3
2

8
5

12.6%
13.5%
4.9%
4.9%
2.9%
2.9%

41.7%

20.4%
4.9%
3.9%
1.9%
1.9%
1.0%

34.0%

6.8%
2.9%
1.9%

11.6%

7.8%

7.8%
4.9%

1,730
2,860
646
1,738
782
437

8,193

5,790
1,100
1,397
313
345
231

9,176

1,188
466
266

1,920

2,528

2,528
858

7.6%
12.6%
2.8%
7.7%
3.4%
2.0%

36.1%

25.5%
4.9%
6.2%
1.4%
1.5%
1.0%

40.5%

5.2%
2.1%
1.2%

8.5%

11.1%

11.1%
3.8%

Total . . . . . . . . . . . . . . . . . . . . .

103

100.0%

22,675

100.0%

Asset Management

We have a dedicated team of asset management professionals that proactively work with our third-

party management companies to maximize profitability at each of our hotels to the extent permitted
under the REIT rules. Our asset management team monitors the performance of our hotels on a daily
basis and holds frequent ownership meetings with corporate operations executives and key personnel at
the hotels. Our asset management team works closely with our third-party management companies on
key aspects of each hotel’s operation, including, among others, revenue management, market
positioning, cost structure, capital and operational budgeting, as well as the identification and
evaluation of return on investment initiatives and overall business strategy. In addition, we retain
approval rights on key staffing positions at many of our hotels, such as the hotel’s general manager and
director of sales. We believe that our strong asset management process helps to ensure that each hotel
is being operated to our and our franchisors’ standards, that our hotel properties are being adequately
maintained in order to preserve the value of the asset and to ensure the safety of our customers, and
that our management companies are maximizing revenues, profits and operating margins.

Competition

The U.S. lodging industry is highly competitive. Our hotel properties compete with other

participants in the lodging industry for guests in each of their markets on the basis of several factors,
including, among others, location, quality of accommodations, convenience, brand affiliation, room
rates, service levels, amenities and the availability of lodging and event space. Competition is often
specific to the individual markets in which our hotel properties are located and includes competition
from existing and new hotels in the focused-service and compact full-service hotel segments and
non-traditional accommodations for travelers, such as online services that market homes and
condominiums as an alternative to hotel rooms. We believe that hotels, such as our hotels, that are
affiliated with leading national brands, such as the Marriott, Hilton and Hyatt brands, will enjoy
competitive advantages associated with operating under such brands.

We face competition for the acquisition of hotel properties from institutional pension funds,
private equity funds, REITs, hotel companies and other parties who are engaged in the acquisition of
hotel properties. Some of these competitors may have substantially greater financial and operational
resources and access to capital, a lower cost of capital and/or greater knowledge of the markets in
which we seek to invest. This competition may reduce the number of suitable investment opportunities
offered to us and decrease the attractiveness of the terms on which we may acquire our targeted hotel
investments, including the cost thereof.

Seasonality

The lodging industry is seasonal in nature, which can cause quarterly fluctuations in our revenues.

For example, our hotels in the Chicago, Illinois metropolitan area experience lower revenues and
profits during the winter months of December through March, while our hotels in Florida generally
have higher revenues in the months of January through April. This seasonality can be expected to
cause periodic fluctuations in a hotel’s room revenues, occupancy levels, room rates, operating expenses
and cash flows.

Our Financing Strategy

Over time, we intend to finance our long-term growth with equity issuances and debt financing
with staggered maturities. Our strategy with respect to our debt profile is to primarily have unsecured
debt and a greater percentage of fixed rate and hedged floating rate debt as compared to unhedged
floating rate debt. Our debt is currently comprised of unsecured senior notes, unsecured credit
agreements, and mortgage loans secured by certain hotel properties. We have a mix of fixed and
floating rate debt; however, the majority of our debt either bears interest at fixed rates or effectively
bears interest at fixed rates due to interest rate swaps on the debt.

Organizational Structure

We were formed as a Maryland REIT in January 2011. We conduct our business through a

traditional umbrella partnership real estate investment trust (‘‘UPREIT’’) in which our hotel properties
are indirectly owned by the Operating Partnership, through limited partnerships, limited liability
companies or other subsidiaries. We are the sole general partner of the Operating Partnership and, as
of December 31, 2020, we owned 99.5% of the OP units in the Operating Partnership. In the future,
we may issue OP units from time to time in connection with acquiring hotel properties, financing,
compensation or other reasons.

In order for the income from our hotel operations to constitute ‘‘rents from real property’’ for
purposes of the gross income tests required for REIT qualification, we cannot directly or indirectly
operate any of our hotel properties. Accordingly, we lease our hotels, and we intend to lease any hotels
we acquire in the future, to subsidiaries of our TRSs (‘‘TRS lessees’’), which are wholly-owned by us.

Our TRS lessees have engaged, or will engage, third-party management companies to manage our hotel
properties, and any hotel properties we acquire in the future, on market terms.

Our TRS lessees pay rent to us that we intend to treat as ‘‘rents from real property,’’ provided that
the third-party management companies engaged by our TRS lessees to manage our hotel properties are
deemed to be ‘‘eligible independent contractors’’ and certain other requirements are met. Our TRSs
are subject to U.S. federal, state and local income taxes applicable to corporations.

Regulation

General

Our hotel properties are subject to various U.S. federal, state and local laws, ordinances and
regulations, including regulations relating to common areas and fire and life safety requirements. We
believe that each of our hotel properties has the necessary permits and approvals to operate its
business.

Americans with Disabilities Act

Our hotel properties must comply with the applicable provisions of the Americans with Disabilities

Act of 1990 and the Accessibility Guidelines promulgated thereunder (the ‘‘ADA’’), to the extent that
such hotels are ‘‘public accommodations’’ as defined by the ADA. The ADA may require the removal
of structural barriers to access by persons with disabilities in certain public areas of our hotels where
such removal is readily achievable. We believe that our hotel properties are in substantial compliance
with the ADA and that we will not be required to make substantial capital expenditures to address the
requirements of the ADA. However, non-compliance with the ADA could result in imposition of fines
or an award of damages to private litigants. The obligation to make readily achievable accommodations
is an ongoing one, and we will continue to assess our hotels and to make alterations as appropriate in
this respect.

Environmental Matters

Under various federal, state and local laws, ordinances and regulations relating to the protection of

the environment, a current or previous owner or operator (including tenants) of real estate may be
subject to liability related to contamination resulting from the presence or discharge of hazardous or
toxic substances at that property and may be required to investigate and clean up such contamination
at that property or emanating from that property. These costs could be substantial and liability under
these laws may attach without regard to whether the owner or operator knew of, or was responsible
for, the presence of the contaminants, and the liability may be joint and several. The presence of
contamination or the failure to remediate contamination at our hotels may expose us to third-party
liability for cleanup costs, property damage or bodily injury, natural resource damages and costs or
expenses related to liens or property use restrictions and materially and adversely affect our ability to
sell, lease or develop the real estate or to incur debt using the real estate as collateral.

Our hotel properties are subject to various federal, state, and local environmental, health and
safety laws and regulations. Our hotel properties incur costs to comply with these laws and regulations
and could be subject to fines and penalties for non-compliance. The costs of complying with
environmental, health and safety laws could increase as new laws are enacted and existing laws are
modified.

Some of our hotel properties contain asbestos-containing building materials. We believe that the
asbestos is appropriately contained in accordance with current environmental regulations and that we
have no need for any immediate remediation or current plans to remove the asbestos.

We believe that our hotel properties are in compliance, in all material respects, with all federal,

state and local environmental ordinances and regulations regarding hazardous or toxic substances and
other environmental matters, the violation of which could have a material adverse effect on us.
Although we have not received written notice from any governmental authority of any material
noncompliance, liability or claim relating to hazardous or toxic substances or other environmental
matters in connection with any of our present properties, we can offer no assurance that a material
environmental claim will not be asserted against us in the future.

Insurance

We carry comprehensive general liability, fire, extended coverage, business interruption, rental loss

of income coverage and umbrella liability coverage on all of our hotels, including earthquake, wind,
flood and hurricane coverage on hotels in areas where we believe such coverages are warranted, in
each case with limits of liability that we deem adequate. Similarly, we are insured against the risk of
direct physical damage in amounts we believe to be adequate to reimburse us, on a replacement cost
basis, for the costs incurred to repair or rebuild each hotel, including loss of income during the
reconstruction period. We have selected policy specifications and insured limits which we believe to be
appropriate given the relative risk of loss, the cost of the coverage and industry practice. We do not
carry insurance for generally uninsurable risks, including, but not limited to losses caused by
communicable or infectious diseases, war or governmental actions such as government seizures of
property. In the opinion of our management, our hotels are adequately insured.

Human Capital

As of December 31, 2020, we had 77 employees. We strive to maintain a workplace that is free

from discrimination or harassment on the basis of race, color, sex, religion, age, ethnicity, national
origin, disability, sexual orientation, gender identification or any other status protected by applicable
laws. We conduct annual trainings to prevent discrimination and harassment and monitor employee
conduct year-round.

Our key human capital management objectives are to attract, recruit, hire, develop and promote a

deep and diverse bench of talent that translates into a strong and successful workforce. To support
these objectives, our human resources programs are designed to develop talent to prepare them for
critical roles and leadership positions for the future; reward and support employees through
competitive pay and benefit programs; enhance our culture through efforts to foster, promote, and
preserve a culture of diversity and inclusion; and evolve and invest in technology, tools, and resources
to enable employees at work.

Environmental, Social, and Governance (‘‘ESG’’)

We set ESG objectives to integrate sustainability across our portfolio. We intend to enhance
strategic decision making by identifying and addressing material risks and opportunities that mitigate
long-term environmental damage to our hotel properties. We seek to minimize our business impacts by
implementing relevant practices that build the resilience of our hotels and stakeholders.

Corporate Information

Our principal executive offices are located at 3 Bethesda Metro Center, Suite 1000, Bethesda,

Maryland 20814. Our telephone number is (301) 280-7777. Our website is located at
www.rljlodgingtrust.com. The information that is found on or accessible through our website is not
incorporated into, and does not form a part of, this Annual Report on Form 10-K or any other report
or document that we file with or furnish to the SEC. We have included our website address in this
Annual Report on Form 10-K as an inactive textual reference and do not intend it to be an active link
to our website.

We make available on our website, free of charge, our Annual Report on Form 10-K, Quarterly

Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable
after we electronically file such material with, or furnish it to, the SEC. We also make available on our
website on the Corporate Governance page under the Investor Relations section various documents
related to our corporate governance including our: Board Committee Charters; Corporate Governance
Guidelines; Code of Business Conduct and Ethics; Complaint Procedures for Financial and Auditing
Matters; Declaration of Trust; and Bylaws.

This Annual Report on Form 10-K and other reports filed with the SEC are available on the

SEC’s website, which contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The SEC’s website address is www.sec.gov.

Item 1A. Risk Factors

Set forth below are the risks that we believe are material to our shareholders. You should carefully
consider the following risks in evaluating our Company and our business. The occurrence of any of the
following risks could materially and adversely impact our financial condition, results of operations, cash
flows, the market price of our common shares, and our ability to, among other things, satisfy our debt
service obligations and to make distributions to our shareholders, which in turn could cause our
shareholders to lose all or a part of their investment. Some statements in this report including statements in
the following risk factors constitute forward-looking statements. Please refer to the section entitled ‘‘Special
Note About Forward-Looking Statements’’ at the beginning of our Annual Report on Form 10-K.

Risks Related to Our Business and Hotel Properties

The current outbreak of the novel coronavirus (COVID-19) has significantly adversely impacted and
disrupted, and is expected to continue to significantly adversely impact and disrupt, our business, financial
performance and condition, operating results and cash flows. Further, the spread of the COVID-19 outbreak
has caused severe disruptions in the U.S. and global economy and financial markets and could result in the
continuation of widespread business continuity issues for an unknown duration.

Since first being reported in December 2019, the novel strain of coronavirus (COVID-19) has
spread globally, including to every state in the United States. The outbreak of COVID-19 has had, and
another pandemic in the future could similarly have, significant repercussions across regional and global
economies and financial markets. The global impact of the outbreak has been rapidly evolving and
many countries, including the United States, have reacted by instituting a wide variety of control
measures including states of emergency, mandatory quarantines, implementing ‘‘shelter in place’’
orders, border closures, and restricting travel and large gatherings. Furthermore, the outbreak has
triggered a global economic recession.

COVID-19 has disrupted our business and has had a material adverse effect, and will continue to

materially adversely impact and disrupt, our business, financial performance and condition, operating
results and cash flows. The effects of the pandemic on the hotel industry are unprecedented. Global
demand for lodging has been drastically reduced and occupancy levels have reached historic lows. Since
late February 2020, we have experienced a significant decline in occupancy and RevPAR associated with
COVID-19 throughout our portfolio. As of December 31, 2020, 7 of our 103 hotel properties remain
closed. All of our open hotels are currently operating at significantly reduced occupancy levels. In
addition, we may need or elect to temporarily suspend the operations at our hotels in the future as a
result of the COVID-19 pandemic. It is not currently known when the suspended operations at our
closed hotels will resume at any level, or if we will need to suspend operations at additional hotels.

Additional factors that would negatively impact our ability to operate successfully during or

following the COVID-19 pandemic or another pandemic, or that could otherwise significantly adversely

impact and disrupt our business, financial performance and condition, operating results and cash flows,
include:

(cid:127) sustained negative consumer or business sentiment, economic metrics or demand for travel,
including beyond the end of the COVID-19 pandemic, which could further adversely impact
demand for lodging;

(cid:127) our ability to reopen our hotels in a timely manner, or at all, and our ability to attract customers

to our hotels when we are able to reopen;

(cid:127) increased operational costs to maintain hotels, including hotels that are no longer in operation,

and increased sanitation measures at hotels that continue to operate;

(cid:127) the scaling back or delay of a significant amount of planned capital expenditures, including

planned renovation projects, which could adversely affect the value of our properties;

(cid:127) continued reduction or the elimination of quarterly dividends;

(cid:127) our increased indebtedness and decreased operating revenues, which could increase our risk of

default on our loans;

(cid:127) continued volatility of our stock price;

(cid:127) our dependence on our third-party management companies, which are facing similar challenges

from the COVID-19 pandemic;

(cid:127) disruptions in our supply chains, which may impact our hotels that are still operating or have

re-opened;

(cid:127) fluctuations in regional and local economies;

(cid:127) the continued service and availability of personnel, including our senior leadership team, and our
ability to recruit, attract and retain skilled personnel to the extent our management or personnel
are impacted by the outbreak of pandemic or epidemic disease and are not available or allowed
to conduct work;

(cid:127) our ability to ensure business continuity in the event our continuity of operations plan is not

effective or improperly implemented or deployed during a disruption;

(cid:127) disruptions as a result of corporate employees working remotely, including risk of cybersecurity

incidents and disruptions to internal control procedures; and

(cid:127) difficulty accessing debt and equity capital on attractive terms, or at all, and a severe disruption
and instability in the global financial markets or deteriorations in credit and financing conditions
may affect our ability to meet our liquidity needs by restricting or otherwise limiting our access
to capital necessary to fund business operations and affect the availability and terms of future
borrowings, renewals or refinancings.

Any of the negative impacts of the COVID-19 pandemic, including those described above, alone or

in combination with others, may have a material adverse effect on our results of operations, financial
condition and cash flows.

The significance, extent and duration of the impacts caused by the COVID-19 pandemic on our
business, financial condition, operating results and cash flows, remains largely uncertain and dependent
on future developments that cannot be accurately predicted at this time, such as the continued severity,
duration, transmission rate and geographic spread of COVID-19 in the United States, the extent and
effectiveness of the containment measures taken, the effectiveness of the distribution and efficacy of
vaccines, and the responses of the overall economy, the financial markets and the population,
particularly in areas in which we operate, as containment measures are lifted and, in some cases,

reinstated. Furthermore, there can be no guarantee that the demand for lodging, and consumer
confidence in travel generally, will recover as quickly as other industries after the COVID-19 pandemic
has largely subsided. As a result, we cannot provide an estimate of the overall impact of the COVID-19
pandemic on our business or when, or if, we will be able to resume normal operations. Nevertheless,
the COVID-19 pandemic presents material uncertainty and risk with respect to our business, financial
performance and condition, operating results and cash flows.

We require a significant amount of cash to service our debt and sustain our operations. Our ability to
generate cash depends on many factors beyond our control, and we may not be able to generate cash required
to service our debt.

Our ability to meet our debt service obligations or refinance our debt depends on our future
operating and financial performance and capacity to generate cash. Our performance and capacity to
generate cash will be affected by our ability to implement our business strategy successfully, but also
certain general economic, financial, competitive, regulatory and other factors beyond our control,
including the disruption caused by the COVID-19 pandemic. If we cannot generate sufficient cash to
meet our debt service obligations or fund our other business needs, we may, among other things, need
to refinance all or a portion of our debt, obtain additional financing, or continue to delay planned
capital expenditures. We cannot assure you that we will be able to generate sufficient cash through any
of the foregoing. If we are unable to refinance any of our debt or obtain additional financing on
reasonable terms or at all, we may not be able to satisfy our debt obligations.

We will continue to be significantly influenced by the economies and other conditions in the specific markets
in which we operate, particularly in the metropolitan areas where we have high concentrations of hotels.

Our hotels located in the Northern California, Southern California, South Florida, Chicago,
Illinois, New York, New York, and Houston, Texas metropolitan areas accounted for approximately
12.2%, 10.4%, 8.5%, 8.1%, 7.6%, and 6.2%, respectively, of our total number of rooms available for
the fiscal year ended December 31, 2020. As a result, we are particularly susceptible to adverse market
conditions in these areas, including industry downturns, relocation of businesses, localized COVID-19
infection rates and governmental actions to address the pandemic, any oversupply of hotel rooms,
political unrest or a reduction in lodging demand. Adverse economic developments in the markets in
which we have a concentration of hotels, or in any of the other markets in which we operate, or any
increase in hotel supply or decrease in lodging demand resulting from the local, regional or national
business or political climate, could materially and adversely affect us.

We are dependent on the performance of the third-party management companies that manage the operations
of each of our hotels and we could be materially and adversely affected if such third-party hotel managers do
not manage our hotels in our best interests.

Because U.S. federal income tax laws restrict REITs and their subsidiaries from operating or
managing hotel properties, we do not operate or manage our hotel properties. Instead, we retain third-
party hotel managers to operate our hotel properties pursuant to management agreements. As of
December 31, 2020, all of our hotel properties had individual management agreements, 35 of which
were with Aimbridge Hospitality (‘‘Aimbridge’’).

The success of our hotel properties depends largely on our ability to establish and maintain good

relationships with the hotel managers. From time to time, disputes may arise between us and our third-
party managers regarding their performance or compliance with the terms of the management
agreements, which in turn could adversely affect our results of operations. We generally will attempt to
resolve any such disputes through discussions and negotiations; however, if we are unable to reach
satisfactory results through discussions and negotiations, we may choose to terminate our management

agreement, litigate the dispute or submit the matter to third-party dispute resolution, the outcome of
which may be unfavorable to us.

In the event that any of our management agreements are terminated, we can provide no
assurances that we could find a replacement manager or that our franchisors will consent to a
replacement manager in a timely manner, or at all, or that any replacement manager will be successful
in operating our hotels. Furthermore, if Aimbridge, as our largest provider of management services, is
financially unable or unwilling to perform its obligations pursuant to our management agreements, our
ability to find a replacement manager or managers for our Aimbridge-managed hotels could be
challenging, costly and time consuming.

We are subject to the risks associated with the employment of hotel personnel, particularly with hotels that
employ unionized labor.

Our third-party management companies are responsible for hiring and maintaining the labor force
at each of our hotels. Although we do not directly employ or manage the employees at our hotels, we
still are subject to many of the costs and risks generally associated with the hotel labor force,
particularly those hotels with unionized labor. From time to time, the hotel operations may be
disrupted as a result of strikes, lockouts, public demonstrations or other negative actions and publicity.
The resolution of labor disputes or re-negotiated labor contracts could lead to higher labor costs, either
by increases in wages or benefits or by changes in work rules that raise hotel operating costs. We do
not have the ability to affect the outcome of these negotiations.

Restrictive covenants in certain of our management and franchise agreements contain provisions limiting or
restricting the sale or financing of our hotels, which could have a material and adverse effect on us.

Our management and franchise agreements may contain restrictive covenants that limit or restrict
our ability to sell or refinance a hotel without the consent of the management company or franchisor.
Some of our franchise agreements provide the franchisor with a right of first offer in the event of
certain sales or transfers of a hotel and provide that the franchisor has the right to approve any change
in the management company engaged to manage the hotel. Generally, we may not agree to sell, lease
or otherwise transfer particular hotels unless the transferee is not a competitor of the management
company or franchisor and the transferee assumes the related management and/or franchise
agreements. If the management company or franchisor does not consent to the sale or financing of our
hotels, we may still sell the hotels, but there could be adverse consequences.

Substantially all of our hotel properties operate under either Marriott, Hilton or Hyatt brands; therefore, we
are subject to the risks associated with concentrating our portfolio in just three brand families.

90 of the 103 hotel properties that we owned as of December 31, 2020 utilize brands owned by
Marriott, Hilton or Hyatt. As a result, our success is dependent in part on the continued success of
Marriott, Hilton or Hyatt and their respective brands. We believe that building brand value is critical to
increasing demand and building customer loyalty. Consequently, if market recognition or the positive
perception of Marriott and/or Hilton and/or Hyatt is reduced or compromised, the goodwill associated
with the Marriott-, Hilton-, or Hyatt-branded hotels in our portfolio may be adversely affected.
Furthermore, if our relationship with Marriott, Hilton or Hyatt were to deteriorate or terminate as a
result of disputes regarding the management of our hotels or for other reasons, Marriott and/or Hilton
and/or Hyatt could, under certain circumstances, terminate our current franchise licenses with them or
decline to provide franchise licenses for hotels that we may acquire in the future. If any of the
foregoing were to occur, it could have a material adverse effect on us.

The failure to make and integrate acquisitions of additional hotels could materially and adversely impede our
growth.

We can provide no assurances that we will be successful in identifying attractive hotel properties or

portfolios of hotel properties or that, once identified, we will be successful in consummating an
acquisition or integrating the acquired property or portfolio into our business. We face significant
competition for attractive investment opportunities from other investors, some of which have greater
financial resources, a lower cost of capital and greater access to debt and equity capital than we do. As
a result, we may be unable to acquire certain hotel properties or portfolios of hotel properties that we
deem attractive or the purchase price may be significantly elevated or other terms may be substantially
more onerous. In addition, we expect to finance future acquisitions through a combination of
borrowings under our unsecured revolving credit facility or other secured or unsecured borrowings, the
use of retained cash flows, and offerings of equity and debt securities, which may not be available on
advantageous terms, or at all. Any delay or failure on our part to identify, negotiate, finance on
favorable terms, consummate and integrate such acquisitions could materially and adversely impede our
growth. Following an acquisition or expansion, we may incur acquisition-related costs and assume
potential unknown liabilities and unforeseen increased costs or expenses. The integration of such
acquisitions, especially acquisitions of portfolios of hotel properties, may cause disruptions to our
business, strain management time and resources and materially and adversely affect our operating
results and financial condition.

Any delay in demand growth due to weaker than anticipated economic growth could materially and adversely
affect us and our growth prospects.

The operating performance of our hotel properties in various U.S. markets has significantly

declined during the COVID-19 pandemic. Our business strategy depends on achieving revenue and net
income growth from anticipated improvement in demand for hotel rooms as part of the growth of the
U.S. economy as well as the global economy. Accordingly, any delay or weaker than anticipated
economic growth could materially and adversely affect us and our growth prospects. Furthermore, even
if the U.S. economy and the global economy continue to grow, we cannot provide any assurances that
demand for hotel rooms will increase from current levels. If demand does not increase in the near
future, or if demand weakens, our future results of operations and our growth prospects could be
materially and adversely affected.

Any difficulties in obtaining the capital necessary to make required periodic capital expenditures and to
renovate our hotel properties could materially and adversely affect our financial condition and results of
operations.

Our hotel properties have an ongoing need for renovations and other capital improvements,

including the replacement of furniture, fixtures and equipment (‘‘FF&E’’), franchisor-required
improvements, and renovation or redevelopment of acquisitions. Our lenders will also likely require
that we set aside annual amounts for capital improvements to our hotel properties. The costs of these
capital improvements could materially and adversely affect us.

We may not be able to fund the capital improvements to our hotel properties or acquisitions solely

from the cash provided from our operating activities because we must distribute annually at least 90%
of our REIT taxable income to shareholders in order to maintain our qualification as a REIT.
Consequently, we expect to rely upon the availability of debt or equity capital to fund capital
improvements and acquisitions. If we are unable to obtain the capital necessary to make the required
periodic capital expenditures and to renovate our hotel properties on favorable terms, or at all, our
financial condition, liquidity and results of operations could be materially and adversely affected.

Competition from other lodging industry participants in the markets in which we operate could adversely
affect occupancy levels and/or ADRs, which could have a material and adverse effect on us.

We face significant competition from owners and operators of other hotels and other lodging

industry participants. In addition, we face competition from non-traditional accommodations for
travelers, such as online services that market homes and condominiums as an alternative to hotel
rooms. Our competitors may have an operating model that enables them to offer accommodations at
lower rates than we can, which could result in our competitors increasing their occupancy at our
expense and adversely affecting our ADRs. Given the importance of occupancy and ADR at focused-
service and compact full-service hotels, this competition could adversely affect our ability to attract
prospective guests, which could materially and adversely affect our business, financial condition and
results of operations.

At December 31, 2020, we had approximately $2.6 billion of debt outstanding, which could materially and
adversely affect our operating performance and put us at a competitive disadvantage.

Required repayments of debt and related interest may materially and adversely affect our

operating performance. At December 31, 2020, we had approximately $2.6 billion of outstanding debt.
In addition, we may incur substantial additional debt, including secured debt, in the future. After taking
into consideration the effect of interest rate swaps, approximately 81.3% of our borrowings are fixed.
Increases in interest rates on our existing or future variable rate debt would increase our interest
expense, which could adversely affect our cash flows and our ability to pay distributions to
shareholders.

Because we anticipate that our operating cash flow will be adequate to repay only a portion of our

debt at maturity, we expect that we will be required to repay debt through debt refinancings and/or
offerings of our securities. The amount of our outstanding debt may adversely affect our ability to
refinance our debt.

If we are unable to refinance our debt on acceptable terms, or at all, we may be forced to dispose

of one or more of our hotels on disadvantageous terms, which may result in losses to us and may
adversely affect the cash available for distributions to our shareholders. In addition, if the prevailing
interest rates or other factors at the time of refinancing result in higher interest rates upon refinancing,
our interest expense would increase, which would adversely affect our future operating results and
liquidity.

Our outstanding debt, and any additional debt borrowed in the future, may subject us to many

risks, including the risk that:

(cid:127) our cash flows from operations may be insufficient to make required payments of principal and

interest;

(cid:127) we may be required to use a substantial portion of our cash flows to pay principal and interest,

which would reduce the cash available for distributions to our shareholders;

(cid:127) we may be at a competitive disadvantage compared to our competitors that have less debt;

(cid:127) we may be vulnerable to economic volatility, particularly if growth were to slow or stall and

reduce our flexibility to respond to difficult market, industry, or economic conditions;

(cid:127) the terms of any refinancing may not be in the same amount or on terms as favorable as the

terms of the debt being refinanced; and

(cid:127) the use of leverage could adversely affect our ability to borrow more money for operations,

capital improvements, to finance future acquisitions of hotel properties, to make distributions to

our shareholders, to repurchase common shares, and it could adversely affect the market price
of our common shares.

Disruptions in the financial markets could adversely affect our ability to obtain sufficient third-party financing
for our capital needs on favorable terms, or at all, which could materially and adversely affect us.

In recent years, the U.S. financial markets experienced significant price volatility, dislocations and

liquidity disruptions, which caused stock market prices to fluctuate substantially and the spreads on
prospective debt financings to widen considerably. Renewed volatility and uncertainty in the financial
markets may negatively impact our ability to access additional financing for our capital needs, including
growth, acquisition activities and other business initiatives, on favorable terms or at all, which may
negatively affect our business. A prolonged downturn in the financial markets may cause us to seek
alternative capital sources of potentially less attractive financing and may require us to further adjust
our business plan accordingly. These events also may make it more difficult or costly for us to raise
capital through the issuance of new equity or the incurrence of additional secured or unsecured debt,
which could materially and adversely affect us.

Replacement of the LIBOR benchmark interest rate could materially and adversely affect our business,
financial condition, results of operations and cash flows.

In 2017, the United Kingdom’s Financial Conduct Authority, which regulates the London
Interbank Offered Rate (‘‘LIBOR’’), announced it would phaseout LIBOR by the end of 2021.
Consequently, at this time, it is not possible to predict whether LIBOR will continue to be viewed as
an acceptable market benchmark or what rate or rates may become acceptable alternatives to LIBOR.

The transition from LIBOR, or any changes or reforms to the determination or supervision of

LIBOR, could have an adverse impact on our current interest rate hedging arrangements. The
transition from LIBOR could also create considerable costs and additional risk, which could materially
and adversely impact our financial condition or results of operations. Since the proposed alternative
rates are calculated differently, the payments under interest rate hedging arrangements that reference
the new rates will differ from those that reference LIBOR. We can provide no assurance regarding the
future of LIBOR, whether our current interest rate hedging arrangements will continue to use LIBOR
as a reference rate or whether any reliance on such rate will be appropriate. Although we are currently
unable to assess what the ultimate impact of the transition from LIBOR will be, failure to adequately
manage the transition could hinder our ability to establish effective hedges on our variable rate debt.

Our existing indebtedness contains covenants and our failure to comply with all covenants in our debt
agreements could materially and adversely affect us.

Our existing indebtedness contains customary and financial covenants that may limit our ability to
enter into future indebtedness. In addition, our ability to borrow under our unsecured revolving credit
facility is subject to compliance with our financial and other covenants, including covenants relating to
debt service coverage ratios and leverage ratios. During the year ended December 31, 2020, we
amended our unsecured credit facilities to suspend the testing of all existing financial maintenance
covenants for all periods through and including the fourth quarter of 2021 and provides for less
restrictive covenants through the first quarter of 2023. Due to the expected impact of the COVID-19
pandemic into 2021 and beyond, we may not be able to meet the terms of the amended financial
covenants once they are effective in 2022. Our failure to comply with covenants in our existing or
future indebtedness, as well as our inability to make required principal and interest payments, could
cause a default under the applicable debt agreement, which could result in the acceleration of the debt
and require us to repay such debt with capital obtained from other sources, which may not be available
to us or may be available only on unattractive terms. Furthermore, if we default on secured debt,
lenders can take possession of the hotel(s) securing such debt. In addition, debt agreements may

contain specific cross-default provisions with respect to specified other indebtedness, giving the lenders
the right to declare a default on its debt and to enforce remedies, including accelerating the maturity of
such debt upon the occurrence of a default under such other indebtedness. If we default on several of
our debt agreements or any significant debt agreement, we could be materially and adversely affected.

Costs associated with, or failure to maintain, franchisor operating standards may materially and adversely
affect us.

Under the terms of our franchise license agreements, we are required to meet specified operating
standards and other terms and conditions. We expect that our franchisors will periodically inspect our
hotel properties to ensure that we and the hotel management companies follow brand standards.
Failure by us, or any management company that we engage, to maintain these standards or other terms
and conditions could result in a franchise license being canceled or the franchisor requiring us to
undertake a costly property improvement program. If a franchise license is terminated due to our
failure to make required improvements or to otherwise comply with its terms, we also may be liable to
the franchisor for a termination payment, which will vary by franchisor and by hotel. If the funds
required to maintain franchisor operating standards are significant, we could be materially and
adversely affected.

In addition, if we were to lose a franchise license, the underlying value of a particular hotel
property could decline significantly from the loss of the associated name recognition, marketing
support, participation in guest loyalty programs and the centralized reservation system provided by the
franchisor, which could require us to recognize an impairment charge on the hotel property.
Furthermore, the loss of a franchise license at a particular hotel property could harm our relationship
with the franchisor, which could impede our ability to operate other hotels under the same brand, limit
our ability to obtain new franchise licenses from the franchisor in the future on favorable terms, or at
all, and cause us to incur significant costs to obtain a new franchise license for the particular hotel.

U.S. federal income tax provisions applicable to REITs may restrict our business decisions regarding the
potential sale of a hotel property.

The provisions of the Internal Revenue Code of 1986, as amended (the ‘‘Code’’), applicable to
REITs require that we hold our hotel properties for investment, rather than primarily for sale in the
ordinary course of business, which may cause us to forego or defer sales of hotel properties that
otherwise would be in our best interests. Therefore, we may not be able to vary our portfolio promptly
in response to economic or other conditions or on favorable terms, which may materially and adversely
affect our cash flows, our ability to make distributions to shareholders and the market price of our
common shares.

The U.S. federal income tax provisions applicable to REITs provide that any gain realized by a

REIT on the sale of property held as inventory or other property held primarily for sale to customers
in the ordinary course of business is treated as income from a ‘‘prohibited transaction’’ that is subject
to a 100% excise tax. We intend to hold our hotel properties for investment with a view of long-term
appreciation, to engage in the business of acquiring and owning hotel properties, and to make
occasional sales of hotel properties consistent with our investment objectives. There can be no
assurance, however, that the Internal Revenue Service (the ‘‘IRS’’) might not contend that one or more
of these sales are subject to the 100% excise tax. Moreover, the potential to incur this penalty tax could
deter us from selling one or more hotel properties even though it would be in the best interests of us
and our shareholders for us to do so. There is a statutory safe harbor available for a limited number of
sales in a single taxable year of properties that have been owned by a REIT for at least two years, but
that safe harbor likely would not apply to all sale transactions that we might otherwise consider.

Joint venture investments could be adversely affected by our lack of sole decision-making authority, our
reliance on joint venture partners’ financial condition and liquidity and disputes between us and our joint
venture partners.

We own certain hotel properties and other real estate investments through joint ventures. In the

future, we may enter into additional joint ventures to acquire, develop, improve or partially dispose of
hotel properties, thereby reducing the amount of capital required by us to make investments and
diversifying our capital sources for growth. Such joint venture investments involve risks not otherwise
present in a wholly-owned hotel property or a redevelopment project, including the following:

(cid:127) we may not have exclusive control over the hotel property or the joint venture, which may
prevent us from taking actions that are in our best interest but opposed by our partners;

(cid:127) joint venture agreements often restrict the transfer of a partner’s interest or may otherwise

restrict our ability to sell the interest when we desire, or on advantageous terms;

(cid:127) joint venture agreements may contain provisions pursuant to which one partner may initiate

procedures requiring the other partner to choose between buying the other partner’s interest or
selling its interest to that partner;

(cid:127) a partner may, at any time, have economic or business interests or goals that are, or that may

become, inconsistent with our business interests or goals;

(cid:127) a partner may fail to fund its share of required capital contributions or may become bankrupt,
which would mean that we and any other remaining partners generally would remain liable for
the joint venture’s liabilities; or

(cid:127) we may, in certain circumstances, be liable for the actions of a partner, and the activities of a
partner could adversely affect our ability to qualify as a REIT, even though we do not control
the joint venture.

Any of the above might subject a hotel property to liabilities in excess of those contemplated and
adversely affect the value of our current and future joint venture investments.

Risks Related to the Lodging Industry

Our ability to make distributions to our shareholders may be adversely affected by various operating risks
common to the lodging industry, including competition, over-building and dependence on business travel and
tourism.

Our hotel properties have different economic characteristics than many other real estate assets.

Unlike other real estate assets, hotels generate revenue from guests that typically stay at the hotel
property for only a few nights, which causes the room rate and occupancy levels at each of our hotels
to change every day, and results in earnings that can be highly volatile.

In addition, our hotel properties are subject to various operating risks common to the lodging

industry, many of which are beyond our control, including, among others, the following:

(cid:127) seasonality of the lodging industry may cause quarterly fluctuations in our operating results;

(cid:127) over-building of hotels in the markets in which we operate, which results in an increased supply

of hotels that will adversely affect occupancy and revenues at our hotel properties;

(cid:127) consolidation among companies in the lodging industry may increase the resulting companies’

negotiating power relative to ours, and decrease competition among those companies for
management and franchise agreements, which could result in higher management or franchise
fees;

(cid:127) increase in the number of brands owned by Marriott, Hilton and Hyatt, which could result in

increased competition for our hotels;

(cid:127) competition from non-traditional accommodations for travelers, such as online services that

market homes and condominiums as an alternative to hotel rooms;

(cid:127) dependence on business and leisure travelers;

(cid:127) increases in energy costs and other expenses affecting travel, which may affect travel patterns

and reduce the number of business and leisure travelers;

(cid:127) increases in operating costs due to inflation and other factors that may not be offset by

increased room rates;

(cid:127) 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;

(cid:127) adverse effects of international, national, regional and local economic and market conditions;

(cid:127) adverse effects of worsening conditions in the lodging industry; and

(cid:127) risks generally associated with the ownership of hotels and real estate, as we discuss in detail

below.

The occurrence of any of the foregoing could materially and adversely affect us.

The cyclical nature of the lodging industry may cause fluctuations in our operating performance, which could
have a material and adverse effect on us.

The lodging industry historically has been highly cyclical in nature. Fluctuations in lodging demand

and, therefore, operating performance, are caused largely by general economic and local market
conditions, which subsequently affect levels of business and leisure travel. In addition to general
economic conditions, new hotel room supply is an important factor that can affect the lodging
industry’s performance, and overbuilding has 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 could result in returns that are substantially below our expectations or result in
losses, which could have a material and adverse effect on us.

Our ownership of hotel properties with ground leases exposes us to the risks that we may be forced to sell such
hotel properties for a lower price, we may have difficulties financing such hotel properties, we may be unable
to renew a ground lease or we may lose such hotel properties upon breach of a ground lease.

As of December 31, 2020, 12 of our consolidated hotel properties and two of our unconsolidated

hotel properties were on land subject to ground leases. Accordingly, we only own a leasehold or similar
interest in those 14 hotel properties. Our ground lease agreements require the consent of the lessor or
sub-lessor prior to transferring our interest in the ground lease. These provisions may impact our ability
to sell our hotel properties which, in turn, could adversely impact the price realized from any such sale.
In addition, at any given time, investors may be disinterested in buying hotel properties subject to a
ground lease and may pay a lower price for such hotel properties than for a comparable hotel property
with a fee simple interest or they may not purchase such hotel properties at any price. Secured lenders
may be unwilling to lend, or otherwise charge higher interest rates, for loans secured by a leasehold
mortgage as compared to loans secured by a fee simple mortgage. If we are found to be in breach of a
ground lease, we could lose the right to use the hotel property. In addition, unless we can purchase a
fee simple interest in the underlying land and improvements or extend the terms of these leases before

their expiration, as to which no assurance can be given, we will lose our right to own these hotel
properties and our interest in the improvements upon expiration of the leases. If we were to lose the
right to use a hotel property due to a breach or non-renewal of the ground lease, we would be unable
to derive income from such hotel property and we would be required to purchase an interest in
another hotel property in an attempt to replace that income, which could materially and adversely
affect us.

Technology is used in our operations, and any material failure, inadequacy, interruption or security failure of
that technology could harm the business.

We, and our hotel managers and franchisors, rely on information technology networks and systems

to process, transmit and store electronic information, and to manage or support a variety of business
processes. These information technology networks and systems can be vulnerable to threats such as
system, network or internet failures; computer hacking or business disruption; cyber-terrorism; viruses,
worms or other malicious software programs; and employee error, negligence or fraud. Although we
believe we and our hotel managers and franchisors have taken commercially reasonable steps to protect
the security of our systems, there can be no assurance that such security measures will prevent failures,
inadequacies or interruptions in system services, or that system security will not be breached.

Any failure to maintain proper function, security and availability of information technology
networks and systems could interrupt our operations, our financial reporting and compliance, damage
our reputation, and subject us to liability claims or regulatory penalties, which could have a material
and adverse effect on our business, financial condition and results of operations.

Future terrorist attacks or changes in terror alert levels could materially and adversely affect us.

Historically, terrorist attacks and subsequent terrorist alerts have adversely affected the U.S. travel
and hospitality industries, often disproportionately to the effect on the overall economy. The extent of
the impact that actual or threatened terrorist attacks in the U.S. or elsewhere could have on domestic
and international travel and our business in particular cannot be determined, but any such attacks or
the threat of such attacks could have a material and adverse effect on travel and hotel demand and our
ability to insure our hotel properties, which could materially and adversely affect us.

We face possible risks associated with natural disasters, weather events, and the physical effects of climate
change.

We are subject to the risks associated with natural disasters, weather events, and the physical

effects of climate change, any of which could have a material adverse effect on our properties,
operations and business. Over time, our hotel properties located in coastal markets and other areas
that may be impacted by climate change are expected to experience increases in storm intensity and
rising sea-levels causing damage to our hotel properties. As a result, we could become subject to
significant losses and/or repair costs that may or may not be fully covered by insurance. Other markets
may experience prolonged variations in temperature or precipitation that may limit access to the water
needed to operate our hotel properties or significantly increase energy costs, which may subject those
properties to additional regulatory burdens, such as limitations on water usage or stricter energy
efficiency standards. Weather events and climate change may also affect our business by increasing the
cost of (or making unavailable) property insurance on terms we find acceptable in areas most
vulnerable to such events, increasing operating costs at our hotel properties, such as the cost of water
or energy, and requiring us to expend funds as we seek to repair and protect our hotel properties
against such risks. There can be no assurance that natural disasters, weather events, or climate change
will not have a material adverse effect on our hotel properties, operations or business.

Risks Related to Our Organization and Structure

The share ownership limits imposed by the Code for REITs and our declaration of trust may restrict share
transfers and/or business combination opportunities.

In order for us to maintain our qualification as a REIT under the Code, not more than 50% in
value of our outstanding shares may be owned, directly or indirectly, by five or fewer individuals (as
defined in the Code to include certain entities) at any time during the last half of each taxable year
following our first year of taxation as a REIT. Our declaration of trust, with certain exceptions,
authorizes our board of trustees to take the necessary actions to preserve our qualification as a REIT.
Unless exempted by our board of trustees, no person or entity (other than a person or entity who has
been granted an exception) may directly or indirectly, beneficially or constructively, own more than
9.8% of the aggregate of our outstanding common shares, by value or by number of shares, whichever
is more restrictive, or 9.8% of the aggregate of the outstanding preferred shares of any class or series,
by value or by number of shares, whichever is more restrictive.

Our board of trustees may, in its sole discretion, grant an exemption to the share ownership limits,

subject to certain conditions and the receipt by our board of trustees of certain representations and
undertakings. During the time that such waiver is effective, the excepted holders will be subject to an
increased ownership limit. As a condition to granting such limited exemptions, the excepted holders are
required to make representations and warranties to us, which are intended to ensure that we will
continue to meet the REIT ownership requirements. The excepted holders must inform us if any of
these representations becomes untrue or is violated, in which case such excepted holder will lose its
limited exemption from the share ownership limits.

It may be difficult or impractical to effect a change in our control under circumstances that otherwise could
provide the holders of our common shares with the opportunity to realize a premium over the then-prevailing
market price of our common shares.

Certain advance notice provisions of our bylaws may inhibit a change in control. These advance

notice provisions 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 shareholders’ best interests.

Termination of the employment agreements with our executive officers could be costly and prevent

a change in control. The employment agreements that we entered into with each of our executive
officers provide that, if their employment with us terminates under certain circumstances (including
upon a change in our control), we are required to pay them severance compensation, including
accelerating the vesting of their respective equity awards, thereby making it costly to terminate their
employment without cause. Furthermore, these provisions could delay or prevent a transaction or a
change in control that might involve a premium paid for our common shares or otherwise be in the
best interests of our shareholders.

Our declaration of trust contains provisions that make the removal of our trustees difficult, which
could make it difficult for our shareholders to effect changes to our management. Our declaration of
trust provides that, subject to the rights of the holders of one or more classes or series of preferred
shares to elect or remove one or more trustees, a trustee may be removed only for cause and only by
the affirmative vote of the holders of at least two-thirds of the votes entitled to be cast in the election
of trustees and that our board of trustees has the exclusive power to fill vacant trusteeships, even if the
remaining trustees do not constitute a quorum. These provisions make it more difficult to change our
management by removing and replacing trustees and it may delay or prevent a change in control that is
in the best interests of our shareholders.

Our rights and the rights of our shareholders to take action against our trustees and officers are limited,
which could limit our shareholders’ recourse in the event of actions not in our shareholders’ best interests.

Under Maryland law, generally, a trustee is required to perform his or her duties in good faith, in

a manner he or she reasonably believes to be in our best interest and with the care that an ordinarily
prudent person in a like position would use under similar circumstances. Under Maryland law, trustees
are presumed to have acted with this standard of care. In addition, our declaration of trust limits the
liability of our trustees and officers to us and our shareholders for monetary damages, except for
liability resulting from the:

(cid:127) actual receipt of an improper benefit or profit in money, property or services; or

(cid:127) active and deliberate dishonesty by the trustee or officer that was established by a final judgment

as being material to the cause of action adjudicated.

Our declaration of trust and bylaws obligate us, to the fullest extent permitted by Maryland law in
effect from time to time, to indemnify and to pay or reimburse reasonable expenses in advance of the
final disposition of a proceeding to any present or former trustee or officer who is made or threatened
to be made a party to the proceeding by reason of his or her service to us in that capacity. In addition,
we may be obligated to advance the defense costs incurred by our trustees and officers. As a result, we
and our shareholders may have more limited rights against our trustees and officers than might
otherwise exist absent the current provisions in our declaration of trust and bylaws or that might exist
with other companies.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to
accurately report our financial results.

To monitor the accuracy and reliability of our financial reporting, we have established an internal

audit function that oversees our internal controls. In addition, we have developed policies and
procedures with respect to company-wide business processes and cycles in order to implement an
effective system of internal control over financial reporting. We have established, or caused our third-
party management companies to establish, controls and procedures designed to ensure that hotel
revenues and expenses are properly recorded at our hotels. We cannot be certain that we will be
successful in maintaining effective internal control over financial reporting and we may determine in
the future that our existing internal controls need improvement. If we fail to maintain an effective
system of internal control, we could be materially harmed or we could fail to meet our reporting
obligations. In addition, the existence of a material weakness or significant deficiency in our internal
controls could result in errors to our financial statements that could require a restatement, cause us to
fail to meet our reporting obligations, result in increased costs to remediate any deficiencies, attract
regulatory scrutiny or lawsuits and cause investors to lose confidence in our reported financial
information, any of which could lead to a substantial decline in the market price of our common
shares.

Risks Related to the Real Estate Industry

The illiquid nature of real estate investments could significantly impede our ability to respond to changing
economic, financial, and investment conditions or changes in the operating performance of our hotel
properties, which could materially and adversely affect our cash flows and results of operations.

Real estate investments, including the focused-service and compact full-service hotels in our
portfolio, are relatively illiquid. As a result, we may not be able to sell a hotel or hotels quickly or on
favorable terms in response to the changing economic, financial and investment conditions or changes
in the hotel’s operating performance when it otherwise may be prudent to do so. We cannot predict
whether we will be able to sell any hotel property we desire to sell 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 may be required to expend funds to correct defects or to make improvements before a hotel can be
sold, and we cannot provide any assurances that we will have the funds available to correct such defects
or to make such improvements. Our inability to dispose of assets at opportune times or on favorable
terms could materially and adversely affect our cash flows and results of operations.

In some cases, we may be restricted from disposing of properties contributed to us in the future in
exchange for our OP units under tax protection agreements with contributors unless we incur additional
costs related to indemnifying those contributors.

Uninsured and underinsured losses at our hotel properties could materially and adversely affect us.

We maintain comprehensive property insurance on all of our hotel properties and we intend to
maintain comprehensive property insurance on any hotels that we acquire in the future, including fire,
terrorism, and extended coverage. Our comprehensive property insurance program has a $250,000
deductible per claim. In addition to the comprehensive property insurance, we maintain general liability
insurance at all of our hotel properties. Our general liability insurance program has no deductible.
Certain types of catastrophic losses, such as windstorms, earthquakes, floods, and losses from foreign
and domestic terrorist activities may not be insurable or may not be economically insurable. Even when
insurable, these policies may have high deductibles and/or high premiums. Our coastal hotel properties
each have a deductible of 5% of total insured value for a named storm. Our lenders may require such
insurance and our failure to obtain such insurance could constitute a default under the loan
agreements, which could have a material and adverse effect on us.

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, which could have a material and
adverse effect on us. Should an uninsured loss or a loss in excess of insured limits occur, or should we
be unsuccessful in obtaining coverage from an insurance carrier, we could lose all or a portion of the
capital we have invested in a hotel property, as well as the anticipated future revenue from the hotel
property. In that event, we might nevertheless remain obligated for any mortgage debt or other
financial obligations related to the hotel property.

We could incur significant costs related to government regulation and litigation with respect to environmental
matters, which could have a material and adverse effect on us.

Our hotel properties are subject to various U.S. federal, state and local environmental, health and

safety laws and regulations that impose liability for contamination. Under these laws, governmental
entities have the authority to require us, as the current owner of a hotel property, to perform or pay
for the clean-up of contamination at, on, under or emanating from the hotel and to pay for natural
resource damages arising from such contamination. Because these laws also impose liability on persons
who owned or operated a property at the time it became contaminated, it is possible we could incur
cleanup costs or other environmental liabilities even after we sell or no longer operate the hotel
properties.

The liabilities and the costs associated with environmental contamination at our hotel properties,

defending against the claims related to alleged or actual environmental issues, or complying with
environmental, health and safety laws could be material and could materially and adversely affect us.
The discovery of material environmental liabilities at our hotel properties could subject us to
unanticipated costs, which could significantly reduce or eliminate our profitability and the cash available
for distribution to our shareholders.

We may from time to time be subject to litigation that could expose us to uncertain or uninsured costs.

As owners of hotel properties, we may from time to time face potential claims, litigation and
threatened litigation from guests, visitors to our hotel properties, contractors, sub-contractors and
others. These claims and proceedings are inherently uncertain and their costs and outcomes cannot be
predicted with certainty. Some of these claims may result in defense costs, settlements, fines or
judgments against us, and some of which are not, or cannot be, covered by insurance. Payment of any
such costs, settlements, fines or judgments that are not insured could have a material and adverse
impact on our financial position and results of operations. In addition, certain litigation or the
resolution of certain litigation may affect the availability or cost of some of our insurance coverage,
which could materially and adversely impact our results of operations and cash flows, expose us to
increased risks that would be uninsured, and/or adversely impact our ability to attract officers and
trustees.

Risks Related to Our Status as a REIT

If we do not qualify as a REIT, or if we fail to remain qualified as a REIT, we will be subject to U.S. federal
income tax and potentially state and local taxes, which would reduce our earnings and the amount of cash
available for distribution to our shareholders.

If we were to fail to qualify as a REIT in any taxable year and any available relief provisions do
not apply, we would be subject to U.S. federal and state corporate income tax, and dividends paid to
our shareholders would not be deductible by us in computing our taxable income. Unless we were
entitled to statutory relief under certain Code provisions, we also would be disqualified from taxation
as a REIT for the four taxable years following the year in which we failed to qualify as a REIT.

Any determination that we do not qualify as a REIT would have a material adverse effect on our
results of operations and could materially reduce the value of our common shares. Our additional tax
liability could be substantial and would reduce our net earnings available for investment, debt service or
distributions to shareholders.

REIT distribution requirements could adversely affect our ability to execute our business plan or require us to
make distributions of our shares or other securities.

We generally must distribute to our shareholders annually at least 90% of our ‘‘REIT taxable
income,’’ subject to certain adjustments and excluding any net capital gain. From time to time, we may
generate taxable income greater than our cash flow. In addition we may be subject to limitations on the
ability to use our net operating loss carryovers to offset taxable income that we do not distribute. If we
do not have other funds available in these situations we could be required to (i) borrow funds on
unfavorable terms, (ii) sell investments at disadvantageous prices, (iii) distribute amounts that would
otherwise be invested in future acquisitions, or (iv) make a taxable distribution of our common shares
as part of a distribution in which shareholders may elect to receive our common shares or (subject to a
limit measured as a percentage of the total distribution) cash to make distributions sufficient to enable
us to pay out enough of our REIT taxable income to satisfy the REIT distribution requirements. These
alternatives could increase our costs or reduce our shareholders’ equity. Thus, compliance with the
REIT distribution requirements may hinder our ability to grow, which could adversely affect the value
of our shares.

If our leases are not respected as true leases for U.S. federal income tax purposes, we would likely fail to
qualify as a REIT.

To qualify as a REIT, we must 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 TRSs, which we currently expect will continue to 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 U.S. federal income tax purposes and must not be treated as service contracts, joint
ventures or some other type of arrangement. We believe that the leases will be respected as true leases
for U.S. federal income tax purposes. There can be no assurance, however, that the IRS will agree with
this characterization. If the leases were not respected as true leases for U.S. federal income tax
purposes, we would not be able to satisfy either of the two gross income tests applicable to REITs and
would likely lose our REIT status. Additionally, we could be subject to a 100% excise tax for any
adjustment to our leases.

To comply with the restrictions imposed on REITs, we may have to conduct certain activities and own certain
assets through TRSs, which will be subject to normal corporate income tax, and we could be subject to a
100% penalty tax on certain income if those transactions are not conducted on arm’s-length terms.

A TRS is a corporation in which a REIT directly or indirectly holds stock and which has elected,

with the REIT to be taxable as a regular corporation, at regular corporate income tax rates. As a
REIT, we cannot own certain assets or conduct certain activities directly, without risking failing the
income or asset tests that apply to REITs. We can, however, hold these assets or undertake these
activities through a TRS.

As noted, the income earned through our TRSs will be subject to corporate income taxes. In
addition, a 100% excise tax will be imposed on certain transactions between us and our TRSs that are
not conducted on an arm’s length basis.

If our TRSs fail to qualify as ‘‘taxable REIT subsidiaries’’ under the Code, we would likely fail to qualify as a
REIT.

Rent paid by a lessee that is a ‘‘related party tenant’’ will not be qualifying income for purposes of

the gross income tests applicable to REITs. We currently lease and expect to continue to lease
substantially all of our hotels to our TRSs, which will not be treated as ‘‘related party tenants’’ so long
as they qualify as ‘‘taxable REIT subsidiaries’’ under the Code. To qualify as such, most significantly, a
TRS cannot engage in the operation or management of hotels. We believe that our TRSs qualify to be
treated as ‘‘taxable REIT subsidiaries’’ for U.S. federal income tax purposes. There can be no
assurance, however, that the IRS will not challenge the status of a TRS for U.S. federal income tax
purposes or that a court would not sustain such a challenge. If the IRS were successful in disqualifying
any of our TRSs from treatment as a ‘‘taxable REIT subsidiary,’’ it is likely that we would fail to meet
the asset tests applicable to REITs and substantially all of our income would fail to qualify for the gross
income tests. If we failed to meet either the asset tests or the gross income tests, we would likely lose
our REIT status.

If any management companies that we engage do not qualify as ‘‘eligible independent contractors,’’ or if our
hotel properties are not ‘‘qualified lodging facilities,’’ we would likely fail to qualify as a REIT.

Rent paid by a lessee that is a ‘‘related party tenant’’ of ours generally will not be qualifying
income for purposes of the gross income tests applicable to REITs. An exception is provided, however,
for leases of ‘‘qualified lodging facilities’’ to a TRS so long as the hotels are managed by an ‘‘eligible
independent contractor’’ and certain other requirements are satisfied. We currently lease and expect to
continue to lease all or substantially all of our hotels to TRS lessees and we currently engage and
expect to continue to engage management companies that are intended to qualify as ‘‘eligible
independent contractors.’’ In addition, for a management company to qualify as an eligible independent
contractor, (i) the management company must not own, directly or through its shareholders, more than
35% of our outstanding shares, and no person or group of persons can own more than 35% of our
outstanding shares and the shares (or ownership interest) of the management company and (ii) such
company or a related person must be actively engaged in the trade or business of operating ‘‘qualified

lodging facilities’’ (as defined below) for one or more persons not related to the REIT or its TRSs at
each time that such company enters into a management contract with a TRS or its TRS lessee. Finally,
each hotel with respect to which our TRS lessees pay rent must be a ‘‘qualified lodging facility.’’ A
‘‘qualified lodging facility’’ is a hotel, motel, or other establishment in which more than one-half of the
dwelling units are used on a transient basis, including customary amenities and facilities, provided that
no wagering activities are conducted at or in connection with such facility by any person who is
engaged in the business of accepting wagers and who is legally authorized to engage in such business at
or in connection with such facility. As of the date hereof, we believe the management companies
operate qualified lodging facilities for certain persons who are not related to us or our TRS. As of the
date hereof, we believe that all of the hotels leased to our TRS lessees will be qualified lodging
facilities. Although we intend to monitor future acquisitions and improvements of hotels, the REIT
provisions of the Code provide only limited guidance for making determinations under the
requirements for qualified lodging facilities, and there can be no assurance that these requirements will
be satisfied in all cases.

Complying with REIT requirements may force us to forgo and/or liquidate otherwise attractive investment
opportunities.

To qualify as a REIT, we must ensure that we meet the gross income tests annually and 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 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, no more than 20% of the value of our total assets can be represented by securities of
one or more TRSs, and no more than 25% of the value of our total assets may be represented by debt
instruments issued by publicly offered REITs that are ‘‘nonqualified’’ (i.e., not secured by real property
or interests in real property). If we fail to comply with these requirements at the end of any calendar
quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for
certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax
consequences. As a result, we may be required to liquidate from our portfolio, or contribute to a TRS,
otherwise attractive investments in order to maintain our qualification as a REIT. These actions could
have the effect of reducing our income and amounts available for distribution to our shareholders. In
addition, we may be required to make distributions to shareholders at disadvantageous times or when
we do not have funds readily available for distribution, and may be unable to pursue investments that
would otherwise be advantageous to us. Thus, compliance with the REIT requirements may hinder our
ability to make, and, in certain cases, maintain ownership of, certain attractive investments.

We would incur adverse tax consequences if FelCor Lodging Trust Incorporated (‘‘FelCor’’) failed to qualify as
a REIT for U.S. federal income tax purposes prior to our merger with FelCor.

In connection with the closing of the merger with FelCor on the acquisition date, FelCor received

an opinion of counsel to the effect that it qualified as a REIT for U.S. federal income tax purposes
under the Code through the acquisition date. FelCor, however, did not request a ruling from the IRS
that it qualified as a REIT. If, notwithstanding this opinion, FelCor’s REIT status prior to the
acquisition date were successfully challenged, we would face serious tax consequences that would
substantially reduce our core funds from operations, and cash available for distribution, including cash
available to pay dividends to our shareholders, because:

(cid:127) FelCor, would be subject to U.S. federal, state and local income tax on its net income at regular
corporate rates for the years that it did not qualify as a REIT (and, for such years, would not be

allowed a deduction for dividends paid to shareholders in computing its taxable income) and we
would succeed to the liability for such taxes;

(cid:127) the deemed sale of assets by FelCor on the acquisition date would be subject to U.S. federal,
state and local income tax at regular corporate rates (and FelCor would not be allowed a
deduction for dividends paid for the deemed liquidating distribution paid to its shareholders)
and we would succeed to the liability for such taxes; and

(cid:127) we would succeed to any earnings and profits accumulated by FelCor, as applicable, for the tax
periods that FelCor did not qualify as a REIT and we would have to pay a special dividend
and/or employ applicable deficiency dividend procedures (including interest payments to the
IRS) to eliminate such earnings and profits to maintain our REIT qualification.

As a result of these factors, FelCor’s failure to qualify as a REIT prior to the acquisition date
could impair our ability to expand our business and raise capital and could materially adversely affect
the value of our stock. In addition, even if FelCor qualified as a REIT for the duration of its existence,
if there is an adjustment to FelCor’s taxable income or dividends-paid deductions, we could be required
to elect to use the deficiency dividend procedure to maintain FelCor’s REIT status. That deficiency
dividend procedure could require us to make significant distributions to our shareholders and pay
significant interest to the IRS.

Risks Related to Our Common Shares

Our cash available for distribution to shareholders may not be sufficient to pay distributions at expected or
required levels, and we may need to borrow funds or rely on other external sources in order to make such
distributions, or we may not be able to make such distributions at all, which could cause the market price of
our common shares to decline significantly.

We intend to continue to pay regular quarterly distributions to holders of our common shares. All

distributions will be made at the discretion of our board of trustees and will depend on our historical
and projected results of operations, EBITDA, FFO, liquidity and financial condition, REIT
qualification, debt service requirements, capital expenditures and operating expenses, prohibitions and
other restrictions under financing arrangements and applicable law and other factors as our board of
trustees may deem relevant from time to time. No assurance can be given that our projections will
prove to be accurate or that any level of distributions or particular yield will be made or sustained. We
may not be able to make distributions in the future or we may need to fund such distributions through
borrowings or other external financing sources, which may be available only at unattractive terms, if at
all. Any of the foregoing could cause the market price of our common shares to decline significantly.

Future issuances of debt securities, which would rank senior to our common shares upon our liquidation, and
future issuances of equity securities (including OP units), which would dilute the holdings of our existing
common shareholders and may be senior to our common shares for the purposes of making distributions,
periodically or upon liquidation, may negatively affect the market price of our common shares.

In the future, we may issue debt or equity securities or incur additional borrowings. Upon our

liquidation, holders of our debt securities and other loans and preferred shares will receive a
distribution of our available assets before common shareholders. If we incur debt in the future, our
future interest costs could increase, and adversely affect our liquidity, FFO and results of operations.
We are not required to offer any additional equity securities to existing common shareholders on a
preemptive basis. Therefore, additional common share issuances, directly or through convertible or
exchangeable securities (including OP units), warrants or options, will dilute the holdings of our
existing common shareholders, and such issuances or the perception of such issuances may reduce the
market price of our common shares. Our preferred shares, if issued, would likely have a preference on
distribution payments, periodically or upon liquidation, which could eliminate or otherwise limit our

ability to make distributions to common shareholders. Because our decision to issue debt or equity
securities or incur additional borrowings in the future will depend on market conditions and other
factors beyond our control, we cannot predict or estimate the amount, timing, nature or success of any
future capital raising efforts. Thus, the common shareholders bear the risk that our future issuances of
debt or equity securities or our incurrence of additional borrowings will negatively affect the market
price of our common shares.

We cannot guarantee that we will repurchase our common shares pursuant to our share repurchase program
or that our share repurchase program will enhance long-term shareholder value. Share repurchases could also
increase the volatility of the price of our common shares and could diminish our cash reserves.

Our board of trustees authorized a share repurchase program to repurchase up to $250.0 million
of our common shares. Although our board of trustees authorized our share repurchase program, our
share repurchase program does not obligate us to repurchase any specific dollar amount or to acquire
any specific number of shares. Our share repurchase program may be limited, suspended, or
discontinued at any time without prior notice. In addition, repurchases of our common shares pursuant
to our share repurchase program could affect our share price and increase its volatility. The existence
of our share repurchase program could cause our share price to be higher than it would be in the
absence of such a program. Additionally, our share repurchase program could diminish our cash
reserves, which may impact our ability to finance future growth and to pursue possible future strategic
opportunities and acquisitions. There can be no assurance that any share repurchases will enhance
shareholder value because the market price of our common shares may decline below the levels at
which we repurchased the common shares.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our Hotel Properties

The following table provides a comprehensive list of our hotel properties as of December 31, 2020:

Hotel Property Name

Rooms

State

Hotel Property Name

Rooms

State

Alabama

Arizona

California

Colorado

Embassy Suites Birmingham . . . . . . . . . .

242

Indiana

Embassy Suites Phoenix—Biltmore . . . . . .

232

Courtyard San Francisco . . . . . . . . . . . .
Embassy Suites Irvine Orange County . . . .
Embassy Suites Los Angeles Downey . . . .
Embassy Suites Los Angeles—International
Airport South . . . . . . . . . . . . . . . . .

Embassy Suites Mandalay Beach—Hotel &

Resort . . . . . . . . . . . . . . . . . . . . . .
Embassy Suites Milpitas Silicon Valley . . . .
Embassy Suites San Francisco Airport—

166
293
220

349 Kentucky

Courtyard Chicago Southeast Hammond . .
Courtyard Indianapolis @ The Capitol
. . .
Fairfield Inn & Suites Chicago SE

Hammond . . . . . . . . . . . . . . . . . . .

Residence Inn Chicago Southeast

Hammond . . . . . . . . . . . . . . . . . . .

Residence Inn Indianapolis Downtown On

The Canal

. . . . . . . . . . . . . . . . . . .
Residence Inn Indianapolis Fishers . . . . . .
Residence Inn Merrillville . . . . . . . . . . .

85
124

134
78
78

250
267

Marriott Louisville Downtown . . . . . . . . .
Residence Inn Louisville Downtown . . . . .

616
140

South San Francisco . . . . . . . . . . . . .

316

Louisiana

Embassy Suites San Francisco Airport—

Chateau LeMoyne—French Quarter, New

Waterfront . . . . . . . . . . . . . . . . . . .

340

Orleans(1) . . . . . . . . . . . . . . . . . . .

171

Hilton Garden Inn Los Angeles Hollywood .
Hilton Garden Inn San Francisco Oakland

Bay Bridge . . . . . . . . . . . . . . . . . . .
Hyatt House Cypress Anaheim . . . . . . . .
Hyatt House Emeryville San Francisco Bay

Area . . . . . . . . . . . . . . . . . . . . . . .
Hyatt House San Diego Sorrento Mesa . . .
Hyatt House San Jose Silicon Valley . . . . .
Hyatt House San Ramon . . . . . . . . . . . .
Hyatt House Santa Clara . . . . . . . . . . . .

Hyatt Place Fremont Silicon Valley . . . . . .
Residence Inn Palo Alto Los Altos . . . . . .
San Francisco Marriott Union Square . . . .
Wyndham San Diego Bayside . . . . . . . . .
. . . .
Wyndham Santa Monica At The Pier

160

278
142

234 Massachusetts
193
164
142 Maryland
150

151
156 Minnesota
401
600
132

New Jersey

New York

Fairfield Inn & Suites Denver Cherry Creek

134

Marriott Denver Airport @ Gateway Park .
Marriott Denver South @ Park Meadows . .
Renaissance Boulder Flatiron Hotel
. . . . .
SpringHill Suites Denver North Westminster

238
279
232
164

North Carolina

Hilton Garden Inn New Orleans

Convention Center . . . . . . . . . . . . . .

286

Hotel Indigo New Orleans Garden District .
Wyndham New Orleans—French Quarter . .

132
374

Embassy Suites Boston Waltham . . . . . . .
Wyndham Boston Beacon Hill . . . . . . . . .

Residence Inn Bethesda Downtown . . . . .
Residence Inn National Harbor Washington
DC . . . . . . . . . . . . . . . . . . . . . . . .

275
304

188

162

Embassy Suites Minneapolis—Airport . . . .

310

Embassy Suites Secaucus—Meadowlands(2)

261

Courtyard New York Manhattan Upper

East Side . . . . . . . . . . . . . . . . . . . .

226

DoubleTree Metropolitan Hotel New York

City(3)

. . . . . . . . . . . . . . . . . . . . .
Hampton Inn Garden City . . . . . . . . . . .
The Knickerbocker New York(4) . . . . . . .

764
143
330

District of Columbia

Hyatt House Charlotte Center City . . . . . .

163

Fairfield Inn & Suites Washington DC

Downtown . . . . . . . . . . . . . . . . . . .

198 Oregon

Homewood Suites Washington DC

Downtown . . . . . . . . . . . . . . . . . . .

175

Courtyard Portland City Center . . . . . . . .

256

Hyatt Place Washington DC Downtown K

Street . . . . . . . . . . . . . . . . . . . . . .

164

SpringHill Suites Portland Hillsboro . . . . .

106

State

Florida

Georgia

Hawaii

Illinois

Hotel Property Name

Rooms

State

Hotel Property Name

Rooms

DoubleTree Grand Key Resort
DoubleTree Suites by Hilton Orlando—

. . . . . . . .

Lake Buena Vista . . . . . . . . . . . . . . .
Embassy Suites Deerfield Beach—Resort &
Spa . . . . . . . . . . . . . . . . . . . . . . .
Embassy Suites Fort Lauderdale 17th Street
Embassy Suites Fort Myers Estero . . . . . .
Embassy Suites Miami—International

216

229

244
361
150

Pennsylvania

South Carolina

Hilton Garden Inn Pittsburgh University

Place . . . . . . . . . . . . . . . . . . . . . .

202

Renaissance Pittsburgh Hotel

. . . . . . . . .

300

Wyndham Philadelphia Historic District . . .
Wyndham Pittsburgh University Center . . .

364
251

Airport

. . . . . . . . . . . . . . . . . . . . .

318

Courtyard Charleston Historic District . . . .

176

Embassy Suites Orlando—International

Drive South/Convention Center
Embassy Suites Tampa Downtown

. . . . . .

244

The Mills House Wyndham Grand Hotel

. .

216

Convention Center . . . . . . . . . . . . . .

360

Texas

Embassy Suites West Palm Beach Central . .
. . . . . . .
Fairfield Inn & Suites Key West

Hilton Cabana Miami Beach . . . . . . . . .
Renaissance Fort Lauderdale Plantation

194
106

231

Hotel

. . . . . . . . . . . . . . . . . . . . . .

250

Courtyard Atlanta Buckhead . . . . . . . . .
Embassy Suites Atlanta—Buckhead . . . . .

Hyatt Centric Midtown Atlanta . . . . . . . .
Residence Inn Atlanta Midtown Historic . .

181
316

194
90

Courtyard Austin Downtown Convention

Center . . . . . . . . . . . . . . . . . . . . . .
Courtyard Houston By The Galleria . . . . .
Courtyard Houston Downtown Convention

270
190

Center . . . . . . . . . . . . . . . . . . . . . .

191

Courtyard Houston Sugarland . . . . . . . . .
DoubleTree Suites by Hilton Austin . . . . .
Embassy Suites Dallas—Love Field . . . . .
Hyatt Centric The Woodlands . . . . . . . . .
Residence Inn Austin Downtown

Convention Center . . . . . . . . . . . . . .
Residence Inn Houston By The Galleria . .
Residence Inn Houston Downtown

112
188
248
70

179
146

Convention Center . . . . . . . . . . . . . .

171

SpringHill Suites Houston Downtown

Courtyard Waikiki Beach . . . . . . . . . . . .

403

Convention Center . . . . . . . . . . . . . .

167

Courtyard Chicago Downtown Magnificent

Mile . . . . . . . . . . . . . . . . . . . . . . .
Courtyard Midway Airport . . . . . . . . . . .
Fairfield Inn & Suites Chicago Midway

Airport

. . . . . . . . . . . . . . . . . . . . .
Hampton Inn Chicago Midway Airport
. . .
Hilton Garden Inn Chicago Midway Airport
Holiday Inn Express & Suites Midway

Airport

. . . . . . . . . . . . . . . . . . . . .
Marriott Chicago Midway . . . . . . . . . . .
Residence Inn Chicago Naperville . . . . . .
Sleep Inn Midway Airport . . . . . . . . . . .

306 Washington
174

114 Wisconsin
170
174

104
200
130
121

Wyndham Houston—Medical Center

Hotel & Suites

. . . . . . . . . . . . . . . .

287

Homewood Suites Seattle Lynnwood . . . . .

170

Hyatt Place Madison Downtown . . . . . . .

151

(1) We own an indirect 50% ownership interest in this hotel property and we account for the ownership interest using the equity

method of accounting. This hotel property is operated without a lease.

(2) We own an indirect 50% ownership interest in the real estate at this hotel property and we record the real estate interests using the
equity method of accounting. We lease the hotel property to its TRS, of which we own a controlling financial interest in the
operating lessee, so we consolidate the ownership interest in the leased hotel.

(3) We own a 98.3% controlling ownership interest in this hotel property.

(4) We own a 95.0% controlling ownership interest in this hotel property.

Management Agreements

In order to qualify as a REIT, we cannot directly or indirectly operate any of our hotel properties.

We lease all but one of our hotel properties to TRS lessees, which in turn engage hotel property
management companies to manage our hotel properties. All of our hotel properties are operated

pursuant to a management agreement with one of 14 independent management companies. 29 of our
hotel properties receive the benefits of a franchise agreement pursuant to a management agreement
with Hilton, Hyatt, or Marriott.

As of December 31, 2020, Aimbridge was the management company for 35 of our hotel properties.

Our remaining 68 hotel properties were managed by 13 other management companies, including
Hilton, Hyatt, Marriott and Wyndham.

The management agreements have initial terms that range from one to 25 years, and some provide

for one or two automatic extension periods ranging from one to 10 years each.

Each management company receives a base management fee between 1.75% and 3.5% of hotel
revenues. The management agreements that include the benefits of a franchise agreement incur a base
management fee between 3.0% and 7.0% of hotel revenues.

The management companies are also eligible to receive an incentive management fee upon the
achievement of certain financial thresholds as set forth in each applicable management agreement. The
incentive management fee is generally calculated as a percentage of hotel net operating income after
we have received a priority return on our investment in the hotel.

Each of the management agreements provides us with a right to terminate such management
agreement if the management company fails to reach certain performance targets (as provided in the
applicable management agreement). Certain management agreements also provide us with a right to
terminate the management agreement in our sole and absolute discretion. In addition, certain
management agreements give us the right to terminate the management agreement upon the sale of
the hotel property or for any reason upon payment of a stipulated termination fee. Subject to certain
qualifications and applicable cure periods, the management agreements are generally terminable by
either party upon material casualty, or condemnation of the hotel property, or the occurrence of certain
customary events of default. Certain management agreements also stipulate that in the event that a
management company elects to terminate a management agreement due to an event of default by us,
the management company may elect to recover a termination fee, as liquidated damages, equal to 2.5
times the actual base management fee and incentive management fee earned by the management
company under that management agreement in the fiscal year immediately preceding the fiscal year in
which such termination occurred.

Many of our Aimbridge and White Lodging Services (‘‘WLS’’) management agreements state that
we cannot sell the applicable hotel property to any unrelated third party or engage in certain change of
control actions (1) if we are in default under the management agreement, or (2) with or to a person or
entity that is known in the community as being of bad moral character or has been convicted of a
felony or is in control of or controlled by persons convicted of a felony or would be in violation of any
franchise agreement requirements applicable to us. In addition, those Aimbridge and WLS
management agreements further require that any future owner of the applicable hotel property, at the
option of the management company, assume the management agreement or enter into a new
management agreement for such hotel property.

Prior to January 1, 2020, the Wyndham management agreements guaranteed minimum levels of
annual net operating income at each of the Wyndham-managed hotels. In 2019, we entered into an
agreement with Wyndham to terminate the net operating income guarantee, effective December 31,
2019 and received termination payments totaling $36.0 million from Wyndham, of which $35.0 million
was received in 2019 and $1.0 million was received in 2020. In addition, we entered into eight separate
transitional franchise and management agreements effective January 1, 2020 through December 31,
2020. During the year ended December 31, 2020, we exercised our option to extend these agreements
through December 31, 2021. The transitional franchise and management fees are 3% and 2%,
respectively, of hotel revenues. Effective January 1, 2020, we began recognizing the termination

payments over the estimated term of the transitional agreements as a reduction to management and
franchise fee expense. For the year ended December 31, 2020, we recognized approximately
$17.8 million as a reduction to management and franchise fee expense related to the amortization of
the termination payments.

Franchise Agreements

As of December 31, 2020, 73 of our hotels operated under franchise agreements with Marriott,
Hilton, Hyatt or other hotel brands. This excludes 29 hotel properties that receive the benefits of a
franchise agreement pursuant to management agreements with Hilton, Hyatt, or Marriott. In addition,
The Knickerbocker is not operated with a hotel brand so the hotel does not have a franchise
agreement.

The franchisors provide a variety of benefits to the franchisees, including centralized reservation
systems, national advertising, marketing programs and publicity designed to increase brand awareness,
personnel training and operational quality at the hotels across the brand system. The franchise
agreements generally specify management, operational, record-keeping, accounting, reporting and
marketing standards and procedures, all of which our TRS lessees, as the franchisees, must follow. The
franchise agreements require our TRS lessees to comply with the franchisors’ standards and
requirements, including the training of operational personnel, safety, maintaining specified insurance,
the types of services and products ancillary to guest room services that may be provided by the TRS
lessee, the display of signage and the type, quality and age of furniture, fixtures and equipment
included in the guest rooms and the nature of the lobbies and other common areas. The franchise
agreements have initial terms ranging from 1 to 30 years. Each of our franchise agreements require
that we pay a royalty fee between 3.0% and 6.0% of room revenue, plus additional fees for marketing,
central reservation systems and other franchisor costs between 1.0% and 4.3% of room revenue.
Certain hotels are also charged a royalty fee of 3.0% of food and beverage revenues.

The franchise agreements also provide for termination at the applicable franchisor’s option upon
the occurrence of certain events, including the failure to pay royalties and fees, the failure to perform
our obligations under the franchise license, bankruptcy and the abandonment of the franchise, or a
change in control. The TRS lessee is responsible for making all payments under the applicable
franchise agreement to the franchisor; however, we are required to guarantee the obligations under
each of the franchise agreements. In addition, many of our existing franchise agreements provide the
franchisor with a right of first offer in the event of certain sales or transfers of a hotel and provide the
franchisor the right to approve a change in the management company who manages the hotel.

TRS Leases

In order for us to qualify as a REIT, neither our company nor any of our subsidiaries may directly

or indirectly operate any of our hotels. The subsidiaries of the Operating Partnership, as the lessors,
lease our hotels to our TRS lessees, which, in turn, are the parties to the existing management
agreements with the third-party management companies at each of our hotels. The TRS leases contain
the provisions that are described below. For the hotels that are acquired in the future, we intend for
the leases to contain substantially similar provisions as to those described below; however, we may, in
our discretion, alter any of these provisions with respect to any particular lease.

Lease Terms

Our TRS leases have initial terms that range from three to five years and a majority of the leases
can be renewed by our TRS lessees for three successive five-year renewal terms unless the lessee is in
default at the expiration of the then-current term. In addition, our TRS leases are subject to early
termination by us in the event that we sell the hotel to an unaffiliated party, a change in control occurs

or the applicable provisions of the Code are amended to permit us to operate our hotels. Our TRS
leases are also subject to early termination upon the occurrence of certain events of default and/or
other contingencies described in the lease.

Amounts Payable under the Leases

During the term of each TRS lease, our TRS lessees are obligated to pay us a fixed annual base

rent plus a percentage rent and certain other additional charges that our TRS lessees agree to pay
under the terms of the respective TRS lease. The percentage rent is calculated based on the revenues
generated from the rental of guest rooms, food and beverage sales, and certain other sources, including
meeting room rentals.

The TRS leases require our TRS lessees to pay rent, all costs and expenses, management fees,

franchise fees, personal property taxes, certain insurance policies and all utility and other charges
incurred in the operation of the hotels. The leases also provide for rent reductions and abatements in
the event of damage to, destruction, or a partial taking of, any hotel. All of the above mentioned
intercompany transactions eliminate in consolidation.

As a result of the ongoing COVID-19 pandemic, we granted base rent abatement concessions to

all of our TRS lessees in each of the quarters ending June 30, 2020, September 30, 2020 and
December 31, 2020. Given the current economic environment, we are continuing to evaluate whether
future lease abatements may be granted.

Maintenance and Modifications

Under each TRS lease, the TRS lessee may, at its expense, make additions, modifications or
improvements to the hotel that it deems desirable, and that we approve. In addition, our TRS lessees
are required, at their expense, to maintain the hotels in good order and repair, except for ordinary
wear and tear, and to make repairs that may be necessary and appropriate to keep the hotel in good
order and repair. Under the TRS lease, we are responsible for maintaining, at our cost, any
underground utilities or structural elements, including the exterior walls and the roof of the hotel
(excluding, among other things, windows and mechanical, electrical and plumbing systems). Each TRS
lessee, when and as required to meet the standards of the applicable management agreement, any
applicable hotel franchise agreement, or to satisfy the requirements of any lender, must establish an
FF&E reserve in an amount equal to up to 5% of gross revenue for the purpose of periodically
repairing, replacing or refurbishing the furnishings and equipment.

Events of Default

The events of default under each of the leases include, among others: the failure by a TRS lessee

to pay rent when due; the breach by a TRS lessee of a covenant, condition or term under the lease,
subject to the applicable cure period; the bankruptcy or insolvency of a TRS lessee; cessation of
operations by a TRS lessee of the leased hotel for more than 30 days, except as a result of damage,
destruction, or a partial or complete condemnation; or the default by a TRS lessee under a franchise
agreement subject to any applicable cure period.

Termination of Leases on Disposition of the Hotels or Change of Control

In the event that we sell a hotel to a non-affiliate or a change of control occurs, we generally have

the right to terminate the lease by paying the applicable TRS lessee a termination fee to be governed
by the terms and conditions of the lease.

Ground Leases

As of December 31, 2020, 12 of our consolidated hotel properties and two of our unconsolidated

hotel properties were subject to ground lease agreements that cover the land under the respective hotel
properties. During the year ended December, 31, 2020, one of the unconsolidated joint ventures did
not exercise its right to extend the term of the ground lease. Accordingly the ground lease will
terminate on October 31, 2021 and the property will revert to the ground lessor at that time.
Additional information on the ground leases can be found in Note 10 to our accompanying
consolidated financial statements.

Item 3. Legal Proceedings

The nature of the operations of our hotels exposes our hotel properties, us and the Operating
Partnership to the risk of claims and litigation in the normal course of business. Other than routine
litigation arising out of the ordinary course of business, we are not presently subject to any material
litigation nor, to our knowledge, is any material litigation threatened against us.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases

of Equity Securities

Our common shares are traded on the New York Stock Exchange (‘‘NYSE’’) under the symbol

‘‘RLJ.’’ For each quarterly period during the year ended December 31, 2020, we paid a cash dividend
of $0.01 per common share. For each quarterly period during the year ended December 31 2019, we
paid a cash dividend of $0.33 per common share.

On December 31, 2020 and February 19, 2021, the closing price of our common shares as reported

on the NYSE was $14.15 and $15.40, respectively.

Share Return Performance

The graph and the table set forth below assume $100 was invested on December 31, 2015 in
RLJ Lodging Trust’s common shares. The graph and the table compare the total shareholder return of
our common shares against the cumulative total returns of the Standard & Poor’s 500 Index (‘‘S&P
500 Index’’) and the Dow Jones U.S. Select Real Estate Hotels Index (‘‘Dow Jones US REIT Hotels
Index’’) between December 31, 2015 and December 31, 2020. The graph assumes an initial investment
of $100.00 in our common shares and in each of the indices, and it also assumes the reinvestment of
dividends.

$220.00

$200.00

$180.00

$160.00

$140.00

$120.00

$100.00

$80.00

$60.00

12/31/2015

12/31/2016

12/31/2017

12/31/2018

12/31/2019

12/31/2020

RLJ Lodging Trust

S&P 500 Index

Dow Jones US REIT Hotels Index

Name

RLJ Lodging Trust . .
S&P 500 Index . . . . .
Dow Jones US REIT
Hotels Index . . . . .

Initial
Investment at
December 31,
2015

Value of
Initial
Investment at
December 31,
2016

Value of
Initial
Investment at
December 31,
2017

Value of
Initial
Investment at
December 31,
2018

Value of
Initial
Investment at
December 31,
2019

Value of
Initial
Investment at
December 31,
2020

$100.00
$100.00

$120.22
$111.96

$114.62
$136.40

$ 91.45
$130.43

$106.46
$171.50

$ 85.37
$203.05

$100.00

$108.60

$114.11

$108.89

$137.03

$126.66

This performance graph shall not be deemed to be ‘‘filed’’ for the purposes of Section 18 of the

Securities Exchange Act of 1934, as amended, or incorporated by reference into any filing by us under
the Securities Act of 1933, as amended, or the Securities Exchange Act, except as shall be expressly set
forth by specific reference in such filing.

Shareholder Information

At February 19, 2021, we had 188 holders of record of our common shares. However, because

many of our common shares are held by brokers and other institutions on behalf of shareholders, we
believe there are substantially more beneficial holders of our common shares than holders of record. At
February 19, 2021, there were 13 holders (other than our company) of our OP units. Our OP units are
redeemable for cash or, at our election, for our common shares.

In order to comply with certain requirements related to our qualification as a REIT, our
declaration of trust provides that, subject to certain exceptions, no person or entity (other than a
person or entity who has been granted an exception) may directly or indirectly, beneficially or
constructively, own more than 9.8% of the aggregate of our outstanding common shares, by value or by
number of shares, whichever is more restrictive, or 9.8% of the aggregate of the outstanding preferred
shares of any class or series, by value or by number of shares, whichever is more restrictive.

Distribution Information

We intend, over time, to make quarterly distributions to our common shareholders. In order to
qualify and maintain our qualification for taxation as a REIT, we intend to make annual distributions to
our shareholders of at least 90% of our REIT taxable income, determined without regard to the
deduction for dividends paid and excluding any net capital gain.

The credit agreements governing our $600 million unsecured revolving credit facility (the

‘‘Revolver’’) and our unsecured term loans (the ‘‘Term Loans’’) limit our ability to pay dividends under
certain circumstances. If an event of default exists, we may only pay cash dividends in an aggregate
amount with respect to any fiscal year not to exceed the greater of (a) the minimum amount required
for us to maintain our status as a REIT under Sections 856 through 860 of the Code, or (b) the
amount necessary to avoid income or excise tax under the Code. However, if the event of default is a
payment default or bankruptcy related, we may not make any cash dividend payments. So long as no
event of default exists, the credit agreements do not restrict our ability to pay cash dividends.

The terms of our outstanding preferred stock prohibit us from paying dividends on our common

shares unless all accrued preferred dividends then payable have been paid.

Any future distributions will be at the sole discretion of our board of trustees, and their form,

timing and amount, if any, will depend upon a number of factors, including our actual and projected
financial condition, liquidity, EBITDA, FFO and results of operations, the revenue we actually receive
from our properties, our operating expenses, our debt service requirements, our capital expenditures,
prohibitions and other limitations under our financing arrangements, as described above, our REIT
taxable income, the annual REIT distribution requirements, applicable law and such other factors as
our board of trustees deems relevant. To the extent that our cash available for distribution is less than
90% of our REIT taxable income, we may consider various means to cover any such shortfall, including
borrowing under the Revolver or other loans, selling certain of our assets, or using a portion of the net
proceeds we receive from offerings of equity, equity-related or debt securities or declaring taxable share
dividends.

Unregistered Sales of Equity Securities

The Company did not sell any securities during the fiscal year ended December 31, 2020 that were

not registered under the Securities Act of 1933, as amended (the ‘‘Securities Act’’).

Issuer Purchases of Equity Securities

The following table summarizes all of the share repurchases during the quarter ended

December 31, 2020:

Period

October 1, 2020 through October 31, 2020 . . .
November 1, 2020 through November 30,

Total number
of shares

Average price
purchased(1) paid per share

7,740

$ 8.51

2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11,185

$11.65

December 1, 2020 through December 31,

2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

$ —

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18,925

Total number of Maximum number
shares purchased of shares that may
as part of publicly
yet be purchased
announced plans under the plans or

or programs

programs(2)

—

26,085,190

17,305,503

15,079,636

(1) Includes surrendered common shares owned by certain employees to satisfy their statutory

minimum federal and state tax obligations associated with the vesting of restricted common shares
of beneficial interest issued under the RLJ Lodging Trust 2015 Equity Incentive Plan (‘‘2015
Plan’’).

(2) The maximum number of shares that may yet be repurchased under the share repurchase program
is calculated by dividing the total dollar amount available to repurchase shares by the closing price
of our common shares on the last business day of the respective month.

Item 6. Selected Financial Data

Intentionally omitted.

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

The following discussion and analysis should be read in conjunction with our accompanying
consolidated financial statements, the related notes included thereto, and Item 1A., ‘‘Risk Factors’’, all
of which appear elsewhere in this Annual Report on Form 10-K.

Overview

We are a self-advised and self-administered Maryland REIT that owns primarily premium-branded,

high-margin, focused-service and compact full-service hotels. Our hotels are concentrated in markets
that we believe exhibit multiple demand generators and attractive long-term growth prospects. We
believe premium-branded, focused-service and compact full-service hotels with these characteristics
generate high levels of RevPAR, strong operating margins and attractive returns. Focused-service and
compact full-service hotels typically generate most of their revenue from room rentals, have limited
food and beverage outlets and meeting space and require fewer employees than traditional full-service
hotels. We believe these types of hotels have the potential to generate attractive returns relative to
other types of hotels due to their ability to achieve 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.

COVID-19

The global outbreak of a novel strain of coronavirus (COVID-19) and the public health measures

that have been undertaken in response have had, and will likely continue to have, a material adverse
impact on the global economy and all aspects of our business.

We have taken various actions to mitigate the effects of the COVID-19 pandemic by strengthening

our balance sheet and liquidity position. Operational measures we have taken include:

(cid:127) Suspension of Hotel Operations: We previously announced the suspension of operations at 57 of

our hotel properties. The decision to suspend operations was made in response to the
elimination of lodging demand resulting from the COVID-19 pandemic and the related
government and health official mandates in many markets. As government mandated
stay-in-place restrictions were lifted, we developed a framework to open hotels in a socially and
financially responsible way. We have reopened 50 of the 57 suspended hotel properties as of
December 31, 2020, and subsequent to the end of the year have reopened 2 additional hotel
properties. We will continue to evaluate reopening the remaining 5 suspended hotel properties
based on market conditions. In the markets where stay-in-place restrictions are reinstated, we
would consider temporarily re-suspending hotel operations where demand is inadequate.

(cid:127) Cost Containment Initiatives: We continue to work in concert with our hotel management

companies to materially reduce operating expenses and preserve liquidity by putting stringent
operational cost containment measures in place. Such measures include significantly reducing
staffing at our hotel properties, reducing energy costs, eliminating non-essential amenities and
services, and closing several floors and most food and beverage outlets at our hotel properties
that remain open.

(cid:127) Capital Investment Reduction: We reduced our 2020 capital expenditure program by deferring
all capital investments, other than completing projects that were substantially underway and
nearing completion. Near-term, we will take appropriate steps to protect and preserve the hotel
properties.

(cid:127) Return On Investment (‘‘ROI’’) Project Suspensions: We reviewed all 2020 ROI initiatives and

suspended most of these projects.

At the corporate level, we have taken and continue to take aggressive actions to increase liquidity

and preserve cash including:

(cid:127) Common Stock Dividend: Our board of trustees authorized first, second, third and fourth
quarter common cash dividends of $0.01 per common share, which reflects a significant
reduction compared to our dividend payout prior to the COVID-19 pandemic. We will continue
to monitor our financial performance and the economic outlook to assess whether it is
appropriate to resume a regular quarterly common dividend at a level determined to be prudent
based on the economic outlook.

(cid:127) Share Repurchase: We suspended all repurchases of our common shares and our $1.95 Series A

Cumulative Convertible Preferred Shares (the ‘‘Series A Preferred Shares’’), as applicable.

(cid:127) Increased Liquidity: We enhanced our liquidity position by drawing $400.0 million on our
$600.0 million corporate line of credit. As of December 31, 2020, we had approximately
$934.8 million of cash and cash equivalents and restricted cash reserves. By drawing
$400.0 million on our credit facility, we have ensured significant liquidity to meet our obligations
over an extended period of time.

For more information, see ‘‘Part I—Item 1A. Risk Factors’’ included elsewhere in this Annual

Report on Form 10-K.

Our Customers

The majority of our hotels consist of premium-branded, focused-service and compact full-service

hotels. As a result of this property profile, the majority of our customers are transient in nature.
Transient business typically represents individual business or leisure travelers. The majority of our
hotels are located in business districts within major metropolitan areas. Accordingly, business travelers
represent the majority of the transient demand at our hotels. As a result, the effects of COVID-19 and
other factors impacting business travel have a greater effect on our business than factors impacting
leisure travel.

Group business is typically defined as a minimum of 10 guestrooms booked together as part of the

same piece of business. Group business may or may not use the meeting space at any given hotel.
Given the limited meeting space at the majority of our hotels, group business that utilizes meeting
space represents a small component of our customer base.

A number of our hotel properties are affiliated with brands marketed toward extended-stay
customers. Extended-stay customers are generally defined as those staying five nights or longer.

Key Indicators of Operating Performance

We use a variety of operating, financial and other information to evaluate the operating
performance of our business. These key indicators include financial information that is prepared in
accordance with accounting principles generally accepted in the United States of America (‘‘GAAP’’) as
well as other financial measures that are non-GAAP measures. In addition, we use other information
that may not be financial in nature, including industry standard statistical information and comparative
data. We use this information to measure the operating performance of our individual hotels, groups of
hotels and/or business as a whole. We also use these metrics to evaluate the hotels in our portfolio and
potential acquisition opportunities to determine each hotel’s contribution to cash flow and its potential
to provide attractive long-term total returns. The key indicators include:

(cid:127) Average Daily Rate—ADR represents the total hotel room revenues divided by the total number
of rooms sold in a given period. ADR measures the average room price attained by a hotel and
ADR trends provide useful information concerning the pricing environment and the nature of

the customer base at a hotel or group of hotels. We use ADR to assess the pricing levels that we
are able to generate, as changes in rates have a greater impact on operating margins and
profitability than changes in occupancy.

(cid:127) Occupancy—Occupancy represents the total number of hotel rooms sold in a given period
divided by the total number of rooms available. Occupancy measures the utilization of our
hotels’ available capacity. We use occupancy to measure demand at a specific hotel or group of
hotels in a given period. Additionally, occupancy levels help us determine the achievable ADR
levels.

(cid:127) Revenue Per Available Room—RevPAR is the product of ADR and occupancy. RevPAR does not

include non-room revenues, such as food and beverage revenue or other revenue. We use
RevPAR to identify trend information with respect to room revenues from comparable hotel
properties and to evaluate hotel performance on a regional basis.

RevPAR changes that are primarily driven by changes in occupancy have different implications for

overall revenues and profitability than the changes that are driven primarily by changes in ADR. For
example, an increase in occupancy at a hotel would lead to additional variable operating costs
(including housekeeping services, utilities and room supplies) and could also result in an increase in
other revenue and other operating expense. Changes in ADR typically have a greater impact on
operating margins and profitability as they only have a limited effect on variable operating costs.

ADR, Occupancy and RevPAR are commonly used measures within the lodging industry to

evaluate operating performance. RevPAR is an important statistic for monitoring operating
performance at the individual hotel property level and across our entire business. We evaluate
individual hotel RevPAR performance on an absolute basis with comparisons to budget and prior
periods, as well as on a regional and company-wide basis. ADR and RevPAR include only room
revenue. Room revenue comprised approximately 84.1% of our total revenues for the year ended
December 31, 2020, and it is dictated by demand (as measured by occupancy), pricing (as measured by
ADR) and our available supply of hotel rooms.

We also use non-GAAP measures such as FFO, Adjusted FFO, EBITDA, EBITDAre and Adjusted
EBITDA to evaluate the operating performance of our business. For a more in depth discussion of the
non-GAAP measures, please refer to the ‘‘Non-GAAP Financial Measures’’ section.

Principal Factors Affecting Our Results of Operations

The principal factors affecting our operating results include the overall demand for lodging

compared to the supply of available hotel rooms and other lodging options, and the ability of our third-
party management companies to increase or maintain revenues while controlling expenses.

(cid:127) Demand—The demand for lodging, especially business travel, generally fluctuates with the overall

economy. Historically, periods of declining demand are followed by extended periods of
relatively strong demand, which typically occurs during the growth phase of the lodging cycle.

(cid:127) Supply—The development of new hotels is driven largely by construction costs, the availability of

financing, the expected performance of existing hotels and other lodging options.

We expect that our ADR, Occupancy and RevPAR performance will be impacted by

macroeconomic factors such as regional and local employment growth, government spending, personal
income and corporate earnings, office vacancy rates, business relocation decisions, airport activity,
business and leisure travel demand, new hotel construction and the pricing strategies of our
competitors. In addition, our ADR, Occupancy and RevPAR performance are dependent on the
continued success of the Marriott, Hilton and Hyatt hotel brands.

(cid:127) Revenues—Substantially all of our revenues are derived from the operation of hotels. Specifically,

our revenues are comprised of:

(cid:127) Room revenue—Occupancy and ADR are the major drivers of room revenue. Room revenue

accounts for the majority of our total revenues.

(cid:127) Food and beverage revenue—Occupancy, the nature of the hotel property and the type of

customer staying at the hotel are the major drivers of food and beverage revenue
(i.e., group business typically generates more food and beverage revenue through catering
functions as compared to transient business, which may or may not utilize the hotel’s food
and beverage outlets).

(cid:127) Other revenue—Occupancy and the nature of the hotel property are the main drivers of
other ancillary revenue, such as parking fees, resort fees, gift shop sales and other guest
service fees. Some hotels, due to the limited focus of the services offered and size or space
limitations at the hotel, may not have the type of facilities that generate other revenue.

(cid:127) Property Operating Expenses—The components of our property operating expenses are as follows:

(cid:127) Room expense—These expenses include housekeeping and front office wages and payroll
taxes, reservation systems, room supplies, laundry services and other room-related costs.
Like room revenue, occupancy is the major driver of room expense. These costs can
increase based on an increase in salaries and wages, as well as the level of service and
amenities that are provided at the hotel property.

(cid:127) Food and beverage expense—These expenses primarily include food, beverage and labor

costs. Occupancy and the type of customer staying at the hotel (i.e., catered functions are
generally more profitable than restaurant, bar, and other food and beverage outlets that are
located on the hotel property) are the major drivers of food and beverage expense, which
correlates closely with food and beverage revenue.

(cid:127) Management and franchise fee expense—A base management fee is computed as a

percentage of gross hotel revenues. An incentive management fee is typically paid when the
hotel’s operating income exceeds certain thresholds, and it is generally calculated as a
percentage of hotel operating income after we have received a priority return on our
investment in the hotel. A franchise fee is computed as a percentage of room revenue, plus
an additional percentage of room revenue for marketing, central reservation systems and
other franchisor costs. Certain hotels will also pay an additional franchise fee which is
computed as a percentage of food and beverage revenue. For a more in depth discussion of
the management and franchise fees, please refer to the ‘‘Our Hotel Properties—
Management Agreements’’ and ‘‘Our Hotel Properties—Franchise Agreements’’ sections.

(cid:127) Other operating expense—These expenses include labor and other costs associated with the

sources of our other revenue, as well as the labor and other costs associated with the
administrative departments, sales and marketing, repairs and maintenance, and utility costs
at the hotel properties.

Most categories of variable operating expenses, including labor costs, fluctuate with changes in

occupancy. Increases in occupancy are accompanied by increases in most categories of variable
operating expenses, while increases in ADR typically only result in increases in certain categories of
operating costs and expenses, such as management fees, franchise fees, travel agency commissions, and
credit card processing fees, all of which are based on hotel revenues. Therefore, changes in ADR have
a more significant impact on operating margins than changes in occupancy.

Results of Operations

At December 31, 2020 and 2019, we owned 103 and 104 hotel properties, respectively. Based on
when a hotel property is acquired, sold, or closed for renovation, the operating results for certain hotel
properties are not comparable for the years ended December 31, 2020 and 2019. For the comparison
between the years ended December 31, 2020 and 2019, the non-comparable properties include
48 hotels that were sold between January 1, 2019 and December 31, 2020.

For similar operating and financial data and discussion of our results for the year ended

December 31, 2019 compared to our results for the year ended December 31, 2018, refer to Item 7,
‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ under
Part II of our annual report on Form 10-K for the year ended December 31, 2019, which was filed with
the SEC on February 26, 2020 and is incorporated herein by reference.

COVID-19

We believe the ongoing effects of the COVID-19 pandemic on our operations continue to have a

material adverse impact on our financial results and liquidity, and such adverse impact may continue
well beyond the containment of such outbreak. The economic downturn resulting from the COVID-19
pandemic has significantly impacted our business and the overall lodging industry. Certain of our hotel
properties have temporarily suspended all operations and, while our other hotel properties are
operating in a limited capacity, as a result of these operational changes, the results of operations for
the year ended December 31, 2020 will not be comparable to the same period in 2019.

Comparison of the year ended December 31, 2020 to the year ended December 31, 2019

For the year ended
December 31,

2020

2019

$ Change

% Change

(amounts in thousands)

Revenues

Operating revenues

Room revenue . . . . . . . . . . . . . . . . . . . . . . . . .
Food and beverage revenue . . . . . . . . . . . . . . . .
Other revenue . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 397,754
40,384
34,949

$1,317,085
177,499
71,608

$ (919,331)
(137,115)
(36,659)

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .

473,087

1,566,192

(1,093,105)

Expenses

Operating expenses

Room expense . . . . . . . . . . . . . . . . . . . . . . . . .
Food and beverage expense . . . . . . . . . . . . . . . .
Management and franchise fee expense . . . . . . .
Other operating expense . . . . . . . . . . . . . . . . . .

Total property operating expenses . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . .
Impairment loss . . . . . . . . . . . . . . . . . . . . . . . . . .
Property tax, insurance and other . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . .
Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . .

124,063
35,220
21,057
211,216

391,556
194,168
—
103,470
41,141
(158)

329,077
134,206
120,797
373,130

957,210
211,584
13,500
119,287
45,252
1,211

(205,014)
(98,986)
(99,740)
(161,914)

(565,654)
(17,416)
(13,500)
(15,817)
(4,111)
(1,369)

(69.8)%
(77.2)%
(51.2)%

(69.8)%

(62.3)%
(73.8)%
(82.6)%
(43.4)%

(59.1)%
(8.2)%
(100.0)%
(13.3)%
(9.1)%
—%

Total operating expenses . . . . . . . . . . . . . . . . .

730,177

1,348,044

(617,867)

(45.8)%

Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain (loss) on sale of hotel properties, net . . . . . . .
. . . . .
Loss on extinguishment of indebtedness, net

(Loss) income before equity in loss from

unconsolidated joint ventures . . . . . . . . . . . . . . . .
Equity in loss from unconsolidated joint ventures . . . .

(Loss) income before income tax (expense) benefit . .
Income tax (expense) benefit . . . . . . . . . . . . . . . . . .

Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss (income) attributable to noncontrolling

interests:
Noncontrolling interest in consolidated joint

ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Noncontrolling interest in the Operating

Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred distributions—consolidated joint venture .
Redemption of preferred equity—consolidated joint
venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,941
4,237
(100,169)
2,703
—

(348,378)
(8,454)

(356,832)
(51,970)

(408,802)

2,327

2,034
—

—

Net (loss) income attributable to RLJ . . . . . . . . . . . .
Preferred dividends . . . . . . . . . . . . . . . . . . . . . . . . .

(404,441)
(25,115)

Net (loss) income attributable to common

699
(4,483)
(8,874)
12,003
214

56.3%
(51.4)%
9.7%
—%
(100.0)%

1,242
8,720
(91,295)
(9,300)
(214)

127,301
(1,673)

125,628
3,751

129,379

(475,679)
(6,781)

(482,460)
(55,721)

(538,181)

—%
—%

—%

—%
(100.0)%

289

(487)
(186)

2,038

2,521
186

(1,153)

127,842
(25,115)

1,153

(100.0)%

(532,283)
—

—%
—%

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(429,556) $ 102,727

$ (532,283)

—%

Revenues

Total revenues decreased $1.1 billion, or 69.8%, to $473.1 million for the year ended December 31,

2020, from $1.6 billion for the year ended December 31, 2019. The decrease was a result of a
$919.3 million decrease in room revenue, a $137.1 million decrease in food and beverage revenue, and
a $36.7 million decrease in other revenue.

Room Revenue

Beginning in March 2020, we experienced a significant decline in occupancy and RevPAR due to

the COVID-19 pandemic. Room revenue decreased $919.3 million, or 69.8%, to $397.8 million for the
year ended December 31, 2020 from $1.3 billion for the year ended December 31, 2019. The decrease
was a result of a $126.5 million decrease in room revenue attributable to the non-comparable
properties and a $792.8 million decrease in room revenue attributable to the comparable properties.
The decrease in room revenue from the comparable properties was attributable to a 66.8% decrease in
RevPAR primarily due to a decline in demand as a result of the COVID-19 pandemic.

The following are the key hotel operating statistics for the comparable properties owned at

December 31, 2020 and 2019, respectively:

For the year ended
December 31,

2020

2019

% Change

Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ADR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RevPAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Food and Beverage Revenue

33.8% 79.1% (57.2)%
(22.3)%
(66.8)%

$183.18
$144.80

$142.41
$ 48.13

Food and beverage revenue decreased $137.1 million, or 77.2%, to $40.4 million for the year
ended December 31, 2020, from $177.5 million for the year ended December 31, 2019. The decrease
was a result of a $13.8 million decrease in food and beverage revenue attributable to the
non-comparable properties and a $123.3 million decrease in food and beverage revenue attributable to
the comparable properties. The decrease in food and beverage revenue attributable to the comparable
properties was primarily due to the impact of the COVID-19 pandemic.

Other Revenue

Other revenue, which includes revenue derived from ancillary sources such as parking fees, resort

fees, gift shop sales and other guest service fees, decreased $36.7 million, or 51.2%, to $34.9 million for
the year ended December 31, 2020, from $71.6 million for the year ended December 31, 2019. The
decrease was due to a $6.9 million decrease in other revenue attributable to the non-comparable
properties and a $29.7 million decrease in other revenue attributable to the comparable properties
primarily due to the impact of the COVID-19 pandemic.

Property Operating Expenses

Property operating expenses decreased $565.7 million, or 59.1%, to $391.6 million for the year

ended December 31, 2020, from $957.2 million for the year ended December 31, 2019. The decrease
was due to a $91.1 million decrease in property operating expenses attributable to the non-comparable
properties and a $474.5 million decrease in property operating expenses attributable to the comparable
properties.

The components of our property operating expenses for the comparable properties owned at

December 31, 2020 and 2019, respectively, were as follows (in thousands):

For the year ended
December 31,

2020

2019

$ Change

% Change

Room expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Food and beverage expense . . . . . . . . . . . . . . . . . . . . . .
Management and franchise fee expense . . . . . . . . . . . . . .
Other operating expense . . . . . . . . . . . . . . . . . . . . . . . . .

$123,728
35,226
20,977
210,393

$300,505
125,316
104,994
334,019

$(176,777)
(90,090)
(84,017)
(123,626)

(58.8)%
(71.9)%
(80.0)%
(37.0)%

Total property operating expenses . . . . . . . . . . . . . . . . . .

$390,324

$864,834

$(474,510)

(54.9)%

The decrease in property operating expenses attributable to the comparable properties was due to

the impact of the COVID-19 pandemic and the cost savings measures we adopted in response to the
COVID-19 pandemic. Management and franchise fee expense for the year ended December 31, 2020
included a reduction in management and franchise fee expense of $17.8 million related to the
recognition of the Wyndham termination payment. Other operating expense for the year ended
December 31, 2020 included property-level severance expense of approximately $8.2 million. This
amount included $6.7 million related to severance for associates at our New York City hotels operating
under collective bargaining agreements.

Depreciation and Amortization

Depreciation and amortization expense decreased $17.4 million, or 8.2%, to $194.2 million for the

year ended December 31, 2020, from $211.6 million for the year ended December 31, 2019. The
decrease was a result of a $16.4 million decrease in depreciation and amortization expense attributable
to the non-comparable properties and a $1.0 million decrease in depreciation and amortization expense
attributable to the comparable properties.

Impairment Loss

During the year ended December 31, 2019, we recorded an impairment loss of $13.5 million

related to two hotel properties. The impairment was due to adverse changes in the operating
performance of the hotels. There was no impairment loss recorded for the year ended December 31,
2020.

Property Tax, Insurance and Other

Property tax, insurance and other expense decreased $15.8 million, or 13.3%, to $103.5 million for

the year ended December 31, 2020, from $119.3 million for the year ended December 31, 2019. The
decrease was attributable to an $8.7 million decrease in property tax, insurance and other expense
attributable to the non-comparable properties and a $7.1 million decrease in property tax, insurance
and other expense attributable to the comparable properties. The decrease in property tax, insurance
and other expense attributable to the comparable properties was primarily due to changes to
pre-merger insurance reserves in the prior year and a decrease in rent expense related to rent
abatements and the impact of COVID-19 on percentage rent obligations in the current year, which
were partially offset by an increase in property insurance premiums.

General and Administrative

General and administrative expense decreased $4.1 million, or 9.1%, to $41.1 million for the year
ended December 31, 2020, from $45.3 million for the year ended December 31, 2019. The decrease in
general and administrative expense was primarily attributable to the reversal of an accrued liability

related to the settlement of a dispute with the National Retirement Fund of $1.8 million and a net
decrease in other general and administrative expenses resulting from our response to COVID-19.

Interest Expense

The components of our interest expense for the years ended December 31, 2020 and 2019 were as

follows (in thousands):

For the year ended
December 31,

2020

2019

$ Change % Change

Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revolver and Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred financing costs . . . . . . . . . . . . . . .
Undesignated interest rate swaps . . . . . . . . . . . . . . . . . . . . .

$ 23,767
55,413
16,949
4,416
(376)

$23,793
42,272
20,754
4,100
376

(26)
13,141
(3,805)
316
(752)

(0.1)%
31.1%
(18.3)%
7.7%
—%

Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$100,169

$91,295

$ 8,874

9.7%

Interest expense increased $8.9 million, or 9.7%, to $100.2 million for the year ended

December 31, 2020, from $91.3 million for the year ended December 31, 2019. The increase in interest
expense was primarily attributable to the outstanding balance of $400.0 million on the Revolver, the
entirety of which was incurred in March 2020, and an increase in pricing as a result of the amendments
of the Revolver and Term Loans during the year ended December 31, 2020. The Revolver had no
outstanding balance for the year ended December 31, 2019. These increases were partially offset by a
decrease in interest expense related to refinancing transactions that occurred during the year ended
December 31, 2019, and unrealized gains on certain discontinued cash flow hedges.

Gain (Loss) on Sale of Hotel Properties, net

During the year ended December 31, 2020, we sold one hotel property for a sales price of
approximately $4.9 million. During the year ended December 31, 2019, we sold 47 hotel properties in
five separate transactions for a total sales price of approximately $721.0 million. In connection with
these transactions, we recorded a net gain on sale of $2.7 million and a net loss on sale of $9.3 million
for the years ended December 31, 2020 and 2019, respectively.

Equity in Loss from Unconsolidated Joint Ventures

Equity in loss from unconsolidated joint ventures increased $6.8 million to a loss of $8.5 million
for the year ended December 31, 2020 from a loss of $1.7 million for the year ended December 31,
2019. The increase was primarily attributable to the impact of COVID-19 and an impairment loss of
$6.5 million related to one of our unconsolidated joint ventures during the year ended December 31,
2020. The impairment loss was related to the write down of our investment in this joint venture as we
determined the property ground lease will terminate on October 31, 2021 and the property will revert
to the ground lessor at that time. This was partially offset by the impact of a loss on the sale of certain
assets in June 2019 by unconsolidated joint ventures that did not recur in 2020.

Income Taxes

As part of our structure, we own TRSs that are subject to U.S. federal and state income taxes.

Income tax expense increased $55.7 million to a $52.0 million expense for the year ended
December 31, 2020, from a $3.8 million benefit for the year ended December 31, 2019. The increase in
income tax expense was primarily due to recording a valuation allowance on 100% of our deferred tax
assets during the year ended December 31, 2020.

Non-GAAP Financial Measures

We consider the following non-GAAP financial measures useful to investors as key supplemental

measures of our performance: (1) FFO, (2) Adjusted FFO, (3) EBITDA, (4) EBITDAre and
(5) Adjusted EBITDA. These non-GAAP financial measures should be considered along with, but not
as alternatives to, net income as a measure of our operating performance. FFO, Adjusted FFO,
EBITDA, EBITDAre, and Adjusted EBITDA, as calculated by us, may not be comparable to FFO,
Adjusted FFO, EBITDA, EBITDAre and Adjusted EBITDA as reported by other companies that do
not define such terms exactly as we define such terms.

Funds From Operations

We calculate funds from operations (‘‘FFO’’) in accordance with standards established by the
National Association of Real Estate Investment Trusts (‘‘NAREIT’’), which defines FFO as net income
or loss, excluding gains or losses from sales of real estate, impairment, the cumulative effect of changes
in accounting principles, plus depreciation and amortization, and adjustments for unconsolidated
partnerships and joint ventures. Historical cost accounting for real estate assets implicitly assumes that
the value of real estate assets diminishes predictably over time. Since real estate values instead have
historically risen or fallen with market conditions, most real estate industry investors consider FFO to
be helpful in evaluating a real estate company’s operations. We believe that the presentation of FFO
provides useful information to investors regarding our operating performance and can facilitate
comparisons of operating performance between periods and between REITs, even though FFO does
not represent an amount that accrues directly to common shareholders. Our calculation of FFO may
not be comparable to measures calculated by other companies who do not use the NAREIT definition
of FFO or do not calculate FFO per diluted share in accordance with NAREIT guidance. Additionally,
FFO may not be helpful when comparing us to non-REITs. We present FFO attributable to common
shareholders, which includes our OP units, because our OP units may be redeemed for common shares.
We believe it is meaningful for the investor to understand FFO attributable to all common shares and
OP units.

We further adjust FFO for certain additional items that are not in NAREIT’s definition of FFO,
such as hotel transaction costs, non-cash income tax expense or benefit, the amortization of share-based
compensation, and certain other income or expenses that we consider outside the normal course of
operations. We believe that Adjusted FFO provides useful supplemental information to investors
regarding our ongoing operating performance that, when considered with net income and FFO, is
beneficial to an investor’s understanding of our operating performance.

The following table is a reconciliation of our GAAP net income to FFO attributable to common

shareholders and unitholders and Adjusted FFO attributable to common shareholders and unitholders
for the years ended December 31, 2020 and 2019 (in thousands):

Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred distributions—consolidated joint venture . . . . . . . .
Redemption of preferred equity—consolidated joint venture . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . .
Impairment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on sale of hotel properties, net . . . . . . . . . . . . . .
Noncontrolling interest in consolidated joint ventures
. . . . . .
Adjustments related to consolidated joint ventures(1) . . . . . . .
Adjustments related to unconsolidated joint ventures(2) . . . . .

FFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of indebtedness, net . . . . . . . . . . . . .
Amortization of share-based compensation . . . . . . . . . . . . . .
Non-cash income tax expense (benefit)(3) . . . . . . . . . . . . . . .
Unrealized (gain) loss on discontinued cash flow hedges . . . .
Corporate and property-level severance(4)
. . . . . . . . . . . . . .
Other (income) expenses(5) . . . . . . . . . . . . . . . . . . . . . . . . .

For the year ended
December 31,

2020

2019

$(408,802) $129,379
(25,115)
(186)
(1,153)
211,584
13,500
9,300
289
(298)
4,379

(25,115)
—
—
194,168
—
(2,703)
2,327
(298)
8,299

(232,124)
(158)
—
12,200
51,486
(376)
8,653
(1,125)

341,679
1,211
214
11,459
(6,818)
394
—
2,144

Adjusted FFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(161,444) $350,283

(1) Includes depreciation and amortization expense allocated to the noncontrolling interest in

the consolidated joint ventures.

(2) Includes our ownership interest in the depreciation and amortization expense, impairment

loss, and loss on sale of the unconsolidated joint ventures.

(3) Includes non-cash income tax expense of $59.3 million for the year ended December 31,

2020 due to recording a valuation allowance on 100% of deferred tax assets.

(4) Includes corporate-level severance of $0.5 million and property-level severance of

$8.2 million for the year ended December 31, 2020. Property-level severance for the year
ended December 31, 2020 includes $6.7 million related to severance for associates at our
New York City hotels operating under collective bargaining agreements.

(5) Represents income and expenses outside of the normal course of operations, including

debt modification costs, legal and other costs, non-cash changes to pre-merger insurance
reserves, and hurricane-related costs that were not reimbursed by insurance. Other
expenses for the year ended December 31, 2020 includes a benefit of $1.8 million due to
the reversal of an accrued liability related to the settlement of the National Retirement
Fund matter.

EBITDA and EBITDAre

Earnings before interest, taxes, depreciation and amortization (‘‘EBITDA’’) is defined as net
income or loss excluding: (1) interest expense; (2) provision for income taxes, including income taxes
applicable to sales of assets; and (3) depreciation and amortization. We consider EBITDA useful to an
investor in evaluating and facilitating comparisons of our operating performance between periods and
between REITs by removing the impact of our capital structure (primarily interest expense) and asset
base (primarily depreciation and amortization) from our operating results. In addition, EBITDA is used
as one measure in determining the value of hotel acquisitions and disposals.

In addition to EBITDA, we present EBITDAre in accordance with NAREIT guidelines, which
defines EBITDAre as net income or loss excluding interest expense, income tax benefit or expense,
depreciation and amortization expense, gains or losses from sales of real estate, impairment, and
adjustments for unconsolidated joint ventures. We believe that the presentation of EBITDAre provides
useful information to investors regarding our operating performance and can facilitate comparisons of
operating performance between periods and between REITs.

We also present Adjusted EBITDA, which includes additional adjustments for items such as gains

or losses on extinguishment of indebtedness, transaction costs, the amortization of share-based
compensation, and certain other income or expenses that we consider outside the normal course of
operations. We believe that Adjusted EBITDA provides useful supplemental information to investors
regarding our ongoing operating performance that, when considered with net income, EBITDA and
EBITDAre, is beneficial to an investor’s understanding of our operating performance.

The following table is a reconciliation of our GAAP net income to EBITDA, EBITDAre and

Adjusted EBITDA for the years ended December 31, 2020 and 2019 (in thousands):

For the year ended
December 31,

2020

2019

Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments related to unconsolidated joint ventures(1) . . . . .

$(408,802) $129,379
211,584
82,575
(3,751)
2,799

194,168
95,932
51,970
2,237

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on sale of hotel properties, net . . . . . . . . . . . . . .
Impairment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on sale of unconsolidated joint ventures(2) . . . . . . . . . .
Impairment loss of unconsolidated joint ventures(3) . . . . . . . .

EBITDAre . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of indebtedness, net . . . . . . . . . . . . .
Amortization of share-based compensation . . . . . . . . . . . . . .
Corporate and property-level severance(4)
. . . . . . . . . . . . . .
Other (income) expenses(5) . . . . . . . . . . . . . . . . . . . . . . . . .

(64,495)
(2,703)
—
—
6,546

(60,652)
(158)
—
12,200
8,653
(1,125)

422,586
9,300
13,500
2,075
—

447,461
1,211
214
11,459
—
2,144

Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (41,082) $462,489

(1) Includes our ownership interest in the interest, depreciation, and amortization expense of

the unconsolidated joint ventures.

(2) Includes our ownership interest in the loss on sale of the unconsolidated joint ventures

associated with two resort hotel properties we owned in Myrtle Beach, SC.

(3) Includes our ownership interest in the impairment loss of one of our unconsolidated joint

ventures.

(4) Includes corporate-level severance of $0.5 million and property-level severance of

(5) Represents income and expenses outside of the normal course of operations, including

Liquidity and Capital Resources

Our short-term liquidity requirements consist primarily of the funds necessary to pay for operating

expenses and other expenditures directly associated with our hotel properties, including:

(cid:127) recurring maintenance and capital expenditures necessary to maintain our hotel properties in

accordance with brand standards;

(cid:127) operating lease obligations that mainly consist of ground lease agreements for 12 of our hotel

properties;

(cid:127) operating shortfalls in hotel properties where operations were suspended and hotels with low

occupancy;

(cid:127) interest expense and scheduled principal payments on outstanding indebtedness;

(cid:127) distributions necessary to qualify for taxation as a REIT; and

(cid:127) corporate and other general and administrative expenses.

We expect to meet our short-term liquidity requirements generally through the net cash provided
by operations, existing cash balances, short-term borrowings under our Revolver, proceeds from the sale
of hotel properties, proceeds from financings, and proceeds from public offerings of common shares.

Our long-term liquidity requirements consist primarily of the funds necessary to pay for costs of

acquiring additional hotel properties, renovations and other capital expenditures that need to be made
periodically with respect to our hotel properties, and scheduled debt payments, at maturity or
otherwise.

Due to the COVID-19 pandemic and the effects of government and health official mandates to

avoid nonessential travel, we continue to operate open hotels under aggressive operating cost
containment plans, including significantly reduced staffing, elimination of non-essential amenities and
services, and the closure of several floors and most food and beverage outlets. Significant events
affecting travel, including the COVID-19 pandemic, typically have an impact on booking patterns, with
the full extent of the impact generally determined by the duration of the event and its impact on travel
decisions. We believe the ongoing effects of the COVID-19 pandemic on our operations continue to
have a material adverse impact on our financial results and liquidity, and such adverse impact may
continue well beyond the containment of such outbreak.

We can make no assurances that the assumptions used to estimate our liquidity requirements will

remain accurate because the magnitude, duration and spread of the COVID-19 pandemic are
uncertain. These uncertainties make it difficult to predict the impact on our business, financial
condition or near- or longer-term financial or operational results with certainty.

We have taken further actions to improve our liquidity position, including capital expenditure and

operating expense reductions, suspending ROI initiatives, and reducing dividend payments on our
common shares.

As of December 31, 2020, we had $934.8 million of cash and cash equivalents and restricted cash

reserves, including $400.0 million drawn from our $600.0 million Revolver.

During the year ended December 31, 2020, we entered into two amendments to our Revolver and

unsecured Term Loans. Key terms of the most recent amendments include the following:

(cid:127) Waiver of quarterly financial covenants through the fourth quarter of 2021 (the ‘‘covenant waiver
period’’), unless we satisfy the requirements for early termination of the covenant waiver period.

(cid:127) After the end of the covenant waiver period, certain covenant thresholds have been modified

through the first quarter of 2023.

(cid:127) Covenant to maintain a minimum liquidity of $125.0 million through the end of the covenant

waiver period.

(cid:127) An increase in pricing until such time that certain requirements are met to revert back to the

pre-amendments pricing grid.

(cid:127) Imposition of certain restrictions during the covenant relief period including restrictions on share

repurchases, dividend and distribution payments (with certain exceptions, including for the
payment of a quarterly cash dividend of $0.01 per common share, the payment of a quarterly
cash dividend of $0.4875 per Series A Preferred Share and other payments for purposes of
maintaining REIT status).

(cid:127) Addition of limitations on the incurrence of additional indebtedness, usage of proceeds from
asset sales, investments and discretionary capital expenditures, in each case subject to various
exceptions and requiring certain mandatory repayments, and a requirement to pledge the equity
interests in certain subsidiaries that own unencumbered properties to secure the Revolver and
Term Loans until such time that our leverage ratio is no greater than 6.50x for two consecutive
quarters.

(cid:127) We are permitted to make investments during the covenant relief period, including up to

$200.0 million of hotel acquisitions, depending on the outstanding balance on the Revolver, and
approximately $175.0 million of capital expenditures, depending on overall liquidity.

Based on these actions and our assumptions regarding the impact of the COVID-19 pandemic, we

expect to have sufficient liquidity to satisfy our obligations over an extended period of time.

Sources and Uses of Cash

As of December 31, 2020, we had $934.8 million of cash, cash equivalents, and restricted cash

reserves as compared to $927.2 million at December 31, 2019.

Cash flows from Operating Activities

The net cash flow used in operating activities totaled $168.7 million and the net cash flow provided

by operating activities totaled $397.3 million for the years ended December 31, 2020 and 2019,
respectively. The cash flows used in or provided by operating activities generally consist of the

operating shortfalls as a result of our hotels operating in the current low demand environment due to
the impact of the COVID-19 pandemic, cash paid for corporate expenses and other working capital
changes. Cash flow from operating activities for the year ended December 31, 2019 included a one-time
termination payment of $35.0 million from Wyndham. Refer to the ‘‘Results of Operations’’ section for
further discussion of our operating results for the years ended December 31, 2020 and 2019.

Cash flows from Investing Activities

The net cash flow used in investing activities totaled $66.7 million for the year ended

December 31, 2020 primarily due to $73.3 million in routine capital improvements and additions to our
hotel properties, partially offset by $5.2 million of net cash proceeds from the sale of a hotel property.

The net cash flow provided by investing activities totaled $530.4 million for the year ended
December 31, 2019 primarily due to $685.9 million of net cash proceeds from the sale of hotel
properties, partially offset by $157.4 million in routine capital improvements and additions to our hotel
properties.

Cash flows from Financing Activities

The net cash flow provided by financing activities totaled $243.0 million for the year ended
December 31, 2020 primarily due to $400.0 million in borrowings on our revolving credit facility. This
was offset by $86.5 million in distributions to shareholders and unitholders, $64.2 million paid to
repurchase common shares, $4.1 million in deferred financing cost payments, and $3.4 million in
scheduled mortgage loan principal payments.

The net cash flow used in financing activities totaled $385.4 million for the year ended

December 31, 2019 primarily due to $254.6 million in distributions to shareholders and unitholders,
$79.6 million paid to repurchase common shares, a payment of $45.6 million to redeem the preferred
equity in a consolidated joint venture, and $10.1 million in deferred financing cost payments.

Capital Expenditures and Reserve Funds

We maintain each of our hotel properties in good repair and condition and in conformity with
applicable laws and regulations, franchise agreements and management agreements. The cost of all
such routine improvements and alterations are paid out of FF&E reserves, which are funded by a
portion of each hotel property’s gross revenues. Routine capital expenditures are administered by the
property management companies. However, we have approval rights over the capital expenditures as
part of the annual budget process for each of our hotel properties.

From time to time, certain of our hotel properties may undergo renovations as a result of our
decision to upgrade portions of the hotels, such as guestrooms, public space, meeting space, and/or
restaurants, in order to better compete with other hotels and alternative lodging options in our
markets. In addition, upon acquisition of a hotel property we often are required to complete a property
improvement plan in order to bring the hotel up to the respective franchisor’s standards. If permitted
by the terms of the management agreement, funding for a renovation will first come from the FF&E
reserves. To the extent that the FF&E reserves are not available or sufficient to cover the cost of the
renovation, we will fund all or the remaining portion of the renovation with cash and cash equivalents
on hand, our Revolver and/or other sources of available liquidity.

With respect to some of our hotels that are operated under franchise agreements with major
national hotel brands and for some of our hotels subject to first mortgage liens, we are obligated to
maintain FF&E reserve accounts for future capital expenditures at these hotels. The amount funded
into each of these reserve accounts is generally determined pursuant to the management agreements,
franchise agreements and/or mortgage loan documents for each of the respective hotels, and typically

ranges between 3.0% and 5.0% of the respective hotel’s total gross revenue. As of December 31, 2020,
approximately $29.9 million was held in FF&E reserve accounts for future capital expenditures. In
addition, due to the effects of the COVID-19 pandemic on our operations, we have worked with the
brands, third-party managers, and lenders to allow the use of available restricted cash reserves to cover
operating shortfalls at certain hotels.

Critical Accounting Policies and Estimates

The preparation of the financial statements in conformity with GAAP requires management to
make estimates and assumptions that affect 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. We consider our accounting policies over investment in hotel properties and revenue
recognition to be our critical accounting policies. See Note 2 to our consolidated financial statements
for further descriptions of such accounting policies. We have set forth below the accounting policies
that we believe require material subjective or complex judgments and have the most significant impact
on our financial condition and results of operations. It is possible that the actual amounts may differ
significantly from these estimates and assumptions. We evaluate our estimates, assumptions and
judgments on an ongoing basis, based on information that is available to us, our business and industry
experience, and various other matters that we believe are reasonable and appropriate for consideration
under the circumstances.

Impairment

We assess the carrying value of our investments in hotel properties whenever events or changes in

circumstances indicate that the carrying amounts may not be recoverable. The recoverability is
measured by comparing the carrying amount to the projected undiscounted future cash flows expected
to be generated from the operations and the eventual disposition of the hotel properties over the
estimated hold period, which take into account current market conditions and our intent with respect
to holding or disposing of the hotel properties. If our analysis indicates that the carrying value is not
recoverable on a projected undiscounted cash flow basis, we will recognize an impairment loss for the
amount by which the carrying value exceeds the fair value. The determination of fair value is subjective
and is based in part on assumptions and estimates that could differ materially from actual results in
future periods. The fair value is determined through various valuation techniques, including internally
developed discounted cash flow models, comparable market transactions, third-party appraisals, the net
sales proceeds from pending offers, or the net sales proceeds from transactions that closed subsequent
to the end of the reporting period. The use of projected future cash flows is based on assumptions that
are consistent with a market participant’s future expectations for the travel industry and the economy in
general, including discount rates, sales proceeds in the reversion year, average daily rates, occupancy
rates, operating expenses and capital expenditures, and our intent with respect to holding or disposing
of the underlying hotel properties. Fair value may also be based on assumptions including, but not
limited to, room revenue multiples and comparable sales adjusted for capital expenditures, if necessary.

Purchase Price Allocation

Our acquisitions generally consist of land, land improvements, buildings, building improvements,

furniture, fixtures and equipment, and inventory. We allocate the purchase price among the assets
acquired and the liabilities assumed based on their respective fair values at the date of acquisition. We
estimate the fair values of the assets acquired and the liabilities assumed by using a combination of the
market, cost and income approaches. We determine the fair value by using market data and
independent appraisals available to us and making numerous estimates and assumptions, such as
estimates of future income growth, capitalization rates, discount rates, capital expenditures and cash
flow projections at the respective hotel properties. The determination of fair value is subjective and is

based in part on assumptions and estimates that could differ materially from actual results in future
periods.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market risk includes the risks that arise from changes in interest rates, equity prices and other

market changes that affect market sensitive instruments. Our primary market risk exposure is to
changes in interest rates on our variable rate debt. As of December 31, 2020, we had approximately
$2.0 billion of total variable rate debt outstanding (or 76.0% of total indebtedness) with a weighted-
average interest rate of 3.72% per annum.

Our interest rate risk objectives are to limit the impact of interest rate fluctuations on earnings
and cash flows and to lower our overall borrowing costs. To achieve these objectives, we manage our
exposure to fluctuations in market interest rates through the use of fixed rate debt instruments to the
extent that reasonably favorable rates are obtainable. We have entered into derivative financial
instruments such as interest rate swaps to mitigate our interest rate risk or to effectively lock the
interest rate on a portion of our variable rate debt. We do not enter into derivative or interest rate
transactions for speculative purposes. After taking into consideration the effect of interest rate swaps,
81.3% of our total indebtedness was fixed or effectively fixed. Excluding the $400.0 million outstanding
balance on our revolving credit facility and taking into consideration the effect of interest rate swaps,
97% of our total indebtedness was fixed or effectively fixed. As of December 31, 2020, if market
interest rates on our variable rate debt not subject to interest rate swaps were to increase by 1.00%, or
100 basis points, interest expense would decrease future earnings and cash flows by less than
$5.8 million annually, taking into account our existing contractual hedging arrangements.

The following table provides information about our financial instruments that are sensitive to
changes in interest rates. For debt obligations outstanding as of December 31, 2020, the following table
presents the principal repayments and related weighted-average interest rates by contractual maturity
dates (in thousands):

Fixed rate debt(1) . . . . . . . . .

$3,279

$140,386

— $

— $474,888

$ 618,553

2021

2022

2023

2024

2025

Total

Weighted-average

interest rate . . . . . . . . . . .
Variable rate debt(1) . . . . . . .

5.01%

—%

6.00%

5.77%

$ — $350,000

$625,000

$581,000

$400,000

$1,956,000

Weighted-average

interest rate(2) . . . . . . . .

—%

2.68%

4.73%

2.85%

3.92%

3.72%

Total(3) . . . . . . . . . . . . . . . . .

$3,279

$490,386

$625,000

$581,000

$874,888

$2,574,553

(1) Excludes $6.7 million and $2.4 million of net deferred financing costs on the Term Loans and

mortgage loans, respectively.

(2) The weighted-average interest rate gives effect to interest rate swaps, as applicable.

(3) Excludes a total of $22.3 million related to fair value adjustments on debt.

Our ultimate realized gain or loss with respect to interest rate fluctuations will depend on the
exposures that arise during future periods, prevailing interest rates, and our hedging strategies at that
time.

Changes in market interest rates on our fixed rate debt impact the fair value of our debt, but such

changes have no impact to our consolidated financial statements. As of December 31, 2020, the
estimated fair value of our fixed rate debt was $628.0 million, which is based on having the same debt

service requirements that could have been borrowed at the date presented, at prevailing current market
interest rates. If interest rates were to rise by 1.00%, or 100 basis points, and our fixed rate debt
balance remained constant, we expect the fair value of our debt would decrease by approximately
$2.4 million.

Item 8. Financial Statements and Supplementary Data

Refer to the Index to Financial Statements on page F-1.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management, under the supervision and with the participation of the Company’s

Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the
Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended, or the Exchange Act), as required by paragraph (b) of
Rules 13a-15 and 15d-15 of the Exchange Act. Based on this evaluation, the Company’s Chief
Executive Officer and Chief Financial Officer have concluded that as of December 31, 2020, the
Company’s disclosure controls and procedures were effective to ensure that the information we are
required to disclose in reports filed or submitted with the Securities and Exchange Commission (i) is
recorded, processed, summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms, and (ii) is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding disclosure.

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 defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act). The
Company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with accounting principles generally accepted in the United States of
America.

Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluations 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 the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of its internal control over financial
reporting as of December 31, 2020. In making this assessment, management used the criteria set forth
by the Committee of Sponsoring Organizations of the Treadway Commission (‘‘COSO’’) in Internal
Control—Integrated Framework (2013). Based on this assessment, management has concluded that, as of
December 31, 2020, our internal control over financial reporting is effective based on those criteria.

The effectiveness of the Company’s internal control over financial reporting as of December 31,
2020 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting
firm, as stated in their report which appears on page F-2 of this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting (as defined
in Rule 13a-15 and 15d-15 of the Exchange Act) during the period ended December 31, 2020 that have
materially affected, or are reasonably likely to materially affect, the Company’s internal control over
financial reporting.

Item 9B. Other information

None.

Item 10. Directors, Executive Officers and Corporate Governance

PART III

The information called for by this Item is contained in our definitive Proxy Statement for our 2021

Annual Meeting of Shareholders, and is incorporated herein by reference.

Item 11. Executive Compensation

The information called for by this Item is contained in our definitive Proxy Statement for our 2021

Annual Meeting of Shareholders, and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder

Matters

The information called for by this Item is contained in our definitive Proxy Statement for our 2021
Annual Meeting of Shareholders, or in Item 5 of this Annual Report on Form 10-K for the year ended
December 31, 2020, and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions and Director Independence

The information called for by this Item is contained in our definitive Proxy Statement for our 2021

Annual Meeting of Shareholders, and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information called for by this Item is contained in our definitive Proxy Statement for our 2021

Annual Meeting of Shareholders, and is incorporated herein by reference.

Item 15. Exhibits and Financial Statement Schedules

The following is a list of documents filed as a part of this report:

PART IV

(1) Financial Statements—Refer to the Index to Financial Statements on page F-1

(2) Financial Statement Schedules—The following financial statement schedule is included herein

on pages F-40 through F-44:

Schedule III—Real Estate and Accumulated Depreciation for RLJ Lodging Trust

All other schedules for which a provision is made in Regulation S-X are either not required to
be included herein under the related instructions, are inapplicable, or the related information
is included in the footnotes to the applicable financial statement and, therefore, have been
omitted.

(3) Exhibits—The exhibits required to be filed by Item 601 of Regulation S-K are noted below:

Exhibit
Number

Exhibit Index

Description of Exhibit

3.1 Articles of Amendment and Restatement of Declaration of Trust of RLJ Lodging Trust
(incorporated by reference to Exhibit 3.1 to Amendment No. 4 to the Registrant’s
Registration Statement on Form S-11 (File No. 333-172011) filed on May 5, 2011)

3.2 Articles of Amendment to Articles of Amendment and Restatement of Declaration of Trust
of RLJ Lodging Trust (incorporated by reference to Exhibit 3.1 to the Registrant’s Current
Report on Form 8-K filed on May 7, 2015)

3.3 Articles of Amendment to Articles of Amendment and Restatement of Declaration of Trust
of RLJ Lodging Trust (incorporated by reference to Exhibit 3.1 to the Registrant’s Current
Report on Form 8-K filed on May 5, 2016)

3.4 Articles Supplementary to Articles of Amendment and Restatement of Declaration of Trust

(incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K
filed on February 26, 2015)

3.5 Articles Supplementary designating RLJ Lodging Trust’s $1.95 Series A Cumulative

Convertible Preferred Shares, par value $0.01 per share (incorporated by reference to
Exhibit 3.5 to the Registrant’s Form 8-A filed on August 30, 2017)

3.6 Third Amended and Restated Bylaws of RLJ Lodging Trust (incorporated by reference to
Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed on May 5, 2016)

4.1 Form of Specimen Common Share Certificate (incorporated by reference to Exhibit 4.1 to

the Registrant’s Registration Statement on Form S-11/A (File. No. 333-172011) filed on
April 29, 2011)

4.2 Form of stock certificate evidencing the $1.95 Series A Cumulative Convertible Preferred
Shares, par value $0.01 per share (incorporated by reference to Exhibit 4.2 to the
Registrant’s Form 8-A filed on August 30, 2017)

4.3 Registration Rights Agreement, dated May 16, 2011, by and among RLJ Lodging Trust and

the persons listed on Schedule I thereto (incorporated by reference to Exhibit 10.2 to the
Registrant’s Current Report on Form 8-K filed on May 19, 2011)

4.4 Registration Rights Agreement, dated May 16, 2011, by and among RLJ Lodging Trust and

the persons listed on Schedule I thereto (incorporated by reference to Exhibit 10.3 to the
Registrant’s Current Report on Form 8-K filed on May 19, 2011)

4.5

4.6

Second Supplemental Indenture with respect to FelCor Lodging Limited Partnership’s
5.625% Senior Secured Notes due 2023, dated as of August 31, 2017, by and among FelCor
Lodging Limited Partnership, Rangers Sub I, LLC, the other guarantors party thereto and
U.S. Bank National Association (incorporated by reference to Exhibit 4.1 to the Registrant’s
Current Report on Form 8-K filed on September 1, 2017)

Second Supplemental Indenture with respect to FelCor Lodging Limited Partnership’s
6.000% Senior Notes due 2025, dated as of August 31, 2017, by and among FelCor Lodging
Limited Partnership, Rangers Sub I, LLC, the other guarantors party thereto and U.S. Bank
National Association (incorporated by reference to Exhibit 4.2 to the Registrant’s Current
Report on Form 8-K filed on September 1, 2017)

4.7* Description of Registered Securities

Exhibit
Number

Description of Exhibit

10.1 Amended and Restated Agreement of Limited Partnership, dated May 13, 2011

(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
filed on May 19, 2011)

10.2 Amendment No. 1 to Amended and Restated Agreement of Limited Partnership, dated

August 31, 2017 (incorporated by reference to Exhibit 10.3 to the Registrant’s Current
Report on Form 8-K filed on September 1, 2017)

10.3

10.4

10.5

10.6

10.7

10.8

Indemnification Agreement, dated May 16, 2011, between RLJ Lodging Trust and Evan
Bayh (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on
Form 8-K filed on May 19, 2011)

Indemnification Agreement, dated May 16, 2011, between RLJ Lodging Trust and Nathaniel
Davis (incorporated by reference to Exhibit 10.7 to the Registrant’s Current Report on
Form 8-K filed on May 19, 2011)

Indemnification Agreement, dated May 16, 2011, between RLJ Lodging Trust and Leslie D.
Hale (incorporated by reference to Exhibit 10.8 to the Registrant’s Current Report on
Form 8-K filed on May 19, 2011)

Indemnification Agreement, dated May 16, 2011, between RLJ Lodging Trust and Robert L.
Johnson (incorporated by reference to Exhibit 10.9 to the Registrant’s Current Report on
Form 8-K filed on May 19, 2011)

Indemnification Agreement, dated May 16, 2011, between RLJ Lodging Trust and Robert
M. La Forgia (incorporated by reference to Exhibit 10.10 to the Registrant’s Current
Report on Form 8-K filed on May 19, 2011)

Indemnification Agreement, dated May 16, 2011, between RLJ Lodging Trust and Glenda
McNeal (incorporated by reference to Exhibit 10.11 to the Registrant’s Current Report on
Form 8-K filed on May 19, 2011)

10.9 RLJ Lodging Trust 2015 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to
the Registrant’s Registration Statement on Form S-8 (File No. 333-203947) filed on May 7,
2015)

10.10 Form of Restricted Share Agreement (incorporated by reference to Exhibit 10.3 to the

Registrant’s Registration Statement on Form S-11/A (File. No. 333-172011) filed on May 5,
2011)

10.11 Form of Restricted Share Agreement for Trustees (incorporated by reference to Exhibit 10.4

to the Registrant’s Registration Statement on Form S-11/A (File. No. 333-172011) filed on
May 5, 2011)

10.12 Form of Non-Qualified Option Agreement (incorporated by reference to Exhibit 10.5 to the
Registrant’s Registration Statement on Form S-11/A (File. No. 333-172011) filed on
April 13, 2011)

10.13 Form of Share Units Agreement (incorporated by reference to Exhibit 10.6 to the

Registrant’s Registration Statement on Form S-11/A (File. No. 333-172011) filed on
April 13, 2011)

10.14 Employment Agreement, dated as of May 14, 2015, by and among RLJ Lodging Trust,

RLJ Lodging Trust, L.P. and Robert L. Johnson (incorporated by reference to Exhibit 10.3
to the Registrant’s Current Report on Form 8-K filed on May 20, 2015)

Exhibit
Number

Description of Exhibit

10.15 Employment Agreement, dated as of February 14, 2020 by and among RLJ Lodging Trust,

RLJ Lodging Trust, L.P. and Leslie D. Hale (incorporated by reference to Exhibit 10.1 to
the Registrant’s Current Report on Form 8-K filed on February 20, 2020)

10.16 Employment Agreement, dated as of July 16, 2018, by and among RLJ Lodging Trust,

RLJ Lodging Trust, L.P., and Sean Mahoney (incorporated by reference to Exhibit 10.1 to
the Registrant’s Current Report on Form 8-K filed on July 20, 2018).

10.17 Third Amended and Restated Credit Agreement, dated as of December 18, 2019, by and
among RLJ Lodging Trust, L.P., RLJ Lodging Trust, Wells Fargo Bank National
Association, as Administrative Agent and a lender, and the other agents and lenders party
thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on
Form 8-K filed on December 19, 2019)

10.18 Third Amendment and Restated Guaranty, dated as of December 18, 2019, by and among

RLJ Lodging Trust, certain subsidiaries of RLJ Lodging Trust party thereto and Wells Fargo
Bank National Association, as Administrative Agent (incorporated by reference to
Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on December 19, 2019)

10.19 First Amendment to Third Amended and Restated Credit Agreement, dated as of June 24,
2020, by and among RLJ Lodging Trust, L.P., RLJ Lodging Trust, Wells Fargo Bank,
National Association, as Administrative Agent and a lender, and the other lenders party
thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on
Form 8-K filed on June 29, 2020)

10.20

Second Amendment to Third Amended and Restated Credit Agreement, dated as of
December 10, 2020, by and among RLJ Lodging Trust, L.P., RLJ Lodging Trust, Wells
Fargo Bank, National Association, as Administrative Agent and a lender, and the other
lenders party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current
Report on Form 8-K filed on December 14, 2020)

10.21 Term Loan Agreement, dated as of November 20, 2012, by and among RLJ Lodging

Trust, L.P., RLJ Lodging Trust, Wells Fargo Bank, National Association, as Administrative
Agent, PNC Bank, National Association, as Syndication Agent, Capital One, N.A., as
Documentation Agent, Raymond James, as Managing Agent, Wells Fargo Securities LLC
and PNC Capital Markets LLC, as Joint Lead Arrangers and Joint Bookrunners and the
lenders party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current
Report on Form 8-K filed on September 3, 2013)

10.22 First Amendment to Term Loan Agreement, dated as of August 27, 2013, by and among
RLJ Lodging Trust, L.P., RLJ Lodging Trust, Wells Fargo Bank, National Association, as
Administrative Agent, PNC Bank, National Association, as Syndication Agent, and the
lenders party thereto (incorporated by reference to Exhibit 10.2 to the Registrant’s Current
Report on Form 8-K filed on September 3, 2013)

10.23

Second Amendment to Term Loan Agreement, dated as of June 1, 2015, by and between
RLJ Lodging Trust, L.P., RLJ Lodging Trust and Wells Fargo Bank, National Association, as
Administrative Agent, and the lenders party thereto (incorporated by reference to
Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K filed on February 25, 2016)

Exhibit
Number

Description of Exhibit

10.24 Third Amendment to Term Loan Agreement, dated as of November 12, 2015, by and
between RLJ Lodging Trust, L.P., RLJ Lodging Trust and Wells Fargo Bank, National
Association, as Administrative Agent, and the lenders party thereto (incorporated by
reference to Exhibit 10.29 to the Registrant’s Annual Report on Form 10-K filed on
February 25, 2016)

10.25 Fourth Amendment to Term Loan Agreement and First Amendment to Guaranty, dated as
of April 22, 2016, by and among RLJ Lodging Trust, L.P., RLJ Lodging Trust, certain
subsidiaries of RLJ Lodging Trust party thereto, Wells Fargo Bank, National Association, as
Administrative Agent and a lender, and the other lenders party thereto (incorporated by
reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on April 28,
2016)

10.26 Fifth Amendment to Term Loan Agreement, dated August 31, 2017, by and among

RLJ Lodging Trust, RLJ Lodging Trust, L.P., certain subsidiaries of RLJ Lodging Trust
party thereto, Wells Fargo Bank, National Association, as administrative agent and a lender,
and the other lenders party thereto (incorporated by reference to Exhibit 10.2 to the
Registrant’s Current Report on Form 8-K filed on September 1, 2017)

10.27

10.28

Sixth Amendment to Term Loan Agreement, dated January 25, 2018, by and among
RLJ Lodging Trust, RLJ Lodging Trust, L.P., certain subsidiaries of RLJ Lodging Trust
party thereto, Wells Fargo Bank, National Association, as administrative agent and a lender,
and the other lenders party thereto (incorporated by reference to Exhibit 10.2 to the
Registrant’s Current Report on Form 8-K filed on January 31, 2018)

Seventh Amendment to Term Loan Agreement, dated as of December 18, 2019, by and
among RLJ Lodging Trust, L.P., RLJ Lodging Trust, certain subsidiaries of RLJ Lodging
Trust party thereto, Wells Fargo Bank National Association, as Administrative Agent and a
lender, and the other lenders party thereto (incorporated by reference to Exhibit 10.3 to the
Registrant’s Current Report on Form 8-K filed on December 19, 2019)

10.29 Eighth Amendment to Term Loan Agreement, dated as of June 24, 2020, by and among

RLJ Lodging Trust, L.P., RLJ Lodging Trust, certain subsidiaries of RLJ Lodging Trust
party thereto, Wells Fargo Bank, National Association, as Administrative Agent and a
lender, and the other lenders party thereto (incorporated by reference to Exhibit 10.2 to the
Registrant’s Current Report on Form 8-K filed on June 29, 2020)

10.30 Ninth Amendment to Term Loan Agreement, dated as of December 10, 2020, by and

among RLJ Lodging Trust, L.P., RLJ Lodging Trust, certain subsidiaries of RLJ Lodging
Trust party thereto, Wells Fargo Bank, National Association, as Administrative Agent and a
lender, and the other lenders party thereto (incorporated by reference to Exhibit 10.2 to the
Registrant’s Current Report on Form 8-K filed on December 14, 2020)

10.31 Additional Lender Supplement, dated as of August 27, 2013, by and among RLJ Lodging
Trust, L.P., RLJ Lodging Trust, Wells Fargo Bank, National Association, as Administrative
Agent, and the lenders party thereto (incorporated by reference to Exhibit 10.3 to the
Registrant’s Current Report on Form 8-K filed on September 3, 2013)

10.32 Guaranty, dated as of November 20, 2012, by RLJ Lodging Trust and certain subsidiaries of
RLJ Lodging Trust party thereto (incorporated by reference to Exhibit 10.4 to the
Registrant’s Current Report on Form 8-K filed on September 3, 2013)

Exhibit
Number

Description of Exhibit

10.33 Term Loan Agreement, dated as of August 27, 2013, by and among RLJ Lodging

Trust, L.P., RLJ Lodging Trust, Wells Fargo Bank, National Association, as Administrative
Agent, PNC Bank, National Association, as Syndication Agent, Bank of America, N.A.,
Barclays Bank PLC, Compass Bank, an Alabama Banking Corporation, and U.S. Bank
National Association, as Documentation Agents, and Wells Fargo Securities LLC and
PNC Capital Markets LLC, as Joint Lead Arrangers and Joint Bookrunners and the lenders
party thereto (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report
on Form 8-K filed on September 3, 2013)

10.34 Guaranty, dated as of August 27, 2013, by RLJ Lodging Trust and certain subsidiaries of
RLJ Lodging Trust party thereto (incorporated by reference to Exhibit 10.6 to the
Registrant’s Current Report on Form 8-K filed on September 3, 2013)

10.35 First Amendment to Term Loan Agreement, dated as of June 1, 2015, by and between

RLJ Lodging Trust, L.P., RLJ Lodging Trust and Wells Fargo Bank, National Association, as
Administrative Agent, and the lenders party thereto (incorporated by reference to
Exhibit 10.34 to the Registrant’s Annual Report on Form 10-K filed on February 25, 2016)

10.36

Second Amendment to Term Loan Agreement, dated as of November 12, 2015, by and
between RLJ Lodging Trust, L.P., RLJ Lodging Trust and Wells Fargo Bank, National
Association, as Administrative Agent, and the lenders party thereto (incorporated by
reference to Exhibit 10.35 to the Registrant’s Annual Report on Form 10-K filed on
February 25, 2016)

10.37 Additional Term Loan Lender Supplement, dated as of March 20, 2014, by and among

RLJ Lodging Trust, L.P., RLJ Lodging Trust, Wells Fargo Bank, National Association, as
Administrative Agent, and the lenders party thereto (incorporated by reference to
Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on March 25, 2014)

10.38 Additional Lender Supplement, dated as of March 20, 2014, by and among RLJ Lodging
Trust, L.P., RLJ Lodging Trust, Wells Fargo Bank, National Association, as Administrative
Agent, and the lenders party thereto (incorporated by reference to Exhibit 10.3 to the
Registrant’s Current Report on Form 8-K filed on March 25, 2014)

21.1* List of subsidiaries of RLJ Lodging Trust

23.1* Consent of PricewaterhouseCoopers LLP

31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the

Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

31.2* Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the

Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

32.1* Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance Document

Submitted electronically with this report

101.SCH Inline XBRL Taxonomy Extension Schema

Submitted electronically with this report

Document

101.CAL Inline XBRL Taxonomy Calculation Linkbase

Submitted electronically with this report

Document

Exhibit
Number

Description of Exhibit

101.DEF Inline XBRL Taxonomy Extension Definition

Submitted electronically with this report

Linkbase Document

101.LAB Inline XBRL Taxonomy Label Linkbase

Submitted electronically with this report

Document

101.PRE Inline XBRL Taxonomy Presentation Linkbase

Submitted electronically with this report

Document

104 Cover Page Interactive Data File (formatted as
Inline XBRL and included in Exhibit 101)

Filed herewith

Item 16. Form 10-K Summary

Not applicable.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as

amended, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized on February 26, 2021.

SIGNATURES

RLJ LODGING TRUST

By:

/s/ LESLIE D. HALE

Leslie D. Hale
President and Chief Executive Officer and Trustee

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed

below by the following persons on behalf of the registrant and in the capacities and on the dates
indicated.

Signature

Title

Date

/s/ ROBERT L. JOHNSON

Robert L. Johnson

Executive Chairman and Trustee

February 26, 2021

/s/ LESLIE D. HALE

Leslie D. Hale

President and Chief Executive Officer
and Trustee (Principal Executive
Officer)

February 26, 2021

/s/ SEAN M. MAHONEY

Sean M. Mahoney

Executive Vice President and Chief
Financial Officer (Principal Financial
Officer)

February 26, 2021

/s/ CHRISTOPHER A. GORMSEN

Christopher A. Gormsen

Senior Vice President and Chief
Accounting Officer (Principal
Accounting Officer)

February 26, 2021

/s/ EVAN BAYH

Evan Bayh

/s/ ARTHUR R. COLLINS

Arthur R. Collins

Trustee

February 26, 2021

Signature

Title

Date

/s/ NATHANIEL A. DAVIS

Nathaniel A. Davis

/s/ PATRICIA L. GIBSON

Patricia L. Gibson

/s/ ROBERT M. LA FORGIA

Robert M. La Forgia

/s/ ROBERT J. MCCARTHY

Robert J. McCarthy

/s/ GLENDA G. MCNEAL

Glenda G. McNeal

Trustee

February 26, 2021

Item 8. Financial Statements

INDEX TO FINANCIAL STATEMENTS

RLJ Lodging Trust:
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Financial Statements

Balance Sheets as of December 31, 2020 and 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statements of Operations and Comprehensive (Loss) Income for the years ended

F-2

F-5

F-6
December 31, 2020, 2019, and 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statements of Changes in Equity for the years ended December 31, 2020, 2019, and 2018 . . . .
F-7
Statements of Cash Flows for the years ended December 31, 2020, 2019, and 2018 . . . . . . . . . F-10
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11
Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2020 . . . . . . . . . . F-49

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of
RLJ Lodging Trust

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of RLJ Lodging Trust and its

subsidiaries (the ‘‘Company’’) as of December 31, 2020 and 2019, and the related consolidated
statements of operations and comprehensive (loss) income, of changes in equity and of cash flows for
each of the three years in the period ended December 31, 2020, including the related notes and
financial statement schedule listed in the accompanying index (collectively referred to as the
‘‘consolidated financial statements’’). We also have audited the Company’s internal control over
financial reporting as of December 31, 2020, based on criteria established in Internal Control—
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of December 31, 2020 and 2019, and the
results of its operations and its cash flows for each of the three years in the period ended
December 31, 2020 in conformity with accounting principles generally accepted in the United States of
America. Also in our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2020, based on criteria established in Internal
Control—Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for

maintaining effective internal control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting, included in Management’s Annual Report on
Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express
opinions on the Company’s consolidated financial statements and on the Company’s internal control
over financial reporting 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 audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud, and whether
effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements 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.
Our audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the circumstances.
We believe that our audits provide a reasonable basis for our opinions.

F-2

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable

assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.

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 the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of

the consolidated financial statements that was communicated or required to be communicated to the
audit committee and that (i) relates to accounts or disclosures that are material to the consolidated
financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter
below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to
which it relates.

Impairment Assessment of Investments in Hotel Properties

As described in Notes 2 and 3 to the consolidated financial statements, management assesses the

carrying value of its investments in hotel properties whenever events or changes in circumstances
indicate that the carrying amounts may not be recoverable. As of December 31, 2020, investments in
hotel properties totaled $4.5 billion and for the year ended December 31, 2020 there were no
impairment losses. Hotel property recoverability is measured by comparing the carrying amount to
management’s projected undiscounted future cash flows expected to be generated from the operations
and the eventual disposition of the hotel properties over the estimated hold period, which takes into
account current market conditions and management’s intent with respect to holding or disposing of the
hotel properties. If management’s analysis indicates that the carrying value is not recoverable on a
projected undiscounted cash flow basis, the Company will recognize an impairment loss for the amount
by which the carrying value exceeds the fair value. The projected undiscounted future cash flows
include assumptions that are consistent with a market participant’s future expectations for the travel
industry and the economy in general, including sales proceeds in the reversion year, average daily rates,
occupancy rates, operating expenses and capital expenditures, and management’s intent with respect to
holding or disposing of the underlying hotel properties.

The principal considerations for our determination that performing procedures relating to the
impairment assessment of investments in hotel properties is a critical audit matter are (i) the significant
judgments used by management to identify events or changes in circumstances indicating that the
carrying amounts may not be recoverable and to develop the projected undiscounted future cash flows;
and (ii) a high degree of auditor judgment and subjectivity in performing procedures and evaluating

F-3

audit evidence related to management’s identification of events or changes in circumstances indicating
that the carrying amounts may not be recoverable and to the aforementioned significant assumptions.

Addressing the matter involved performing procedures and evaluating audit evidence in connection

with forming our overall opinion on the consolidated financial statements. These procedures included
testing the effectiveness of controls relating to management’s impairment assessment of investments in
hotel properties, including controls over the identification of events or changes in circumstances
indicating that the carrying amounts may not be recoverable and the development of projected
undiscounted future cash flows. These procedures also included, among others, testing management’s
process for identifying investments in hotel properties to be evaluated for impairment and developing
the projected undiscounted future cash flows. Testing management’s process included (i) evaluating the
appropriateness of the projected undiscounted future cash flow model; (ii) testing the completeness and
accuracy of underlying data used in the model; and (iii) evaluating the reasonableness of the significant
assumptions related to sales proceeds in the reversion year, average daily rates, occupancy rates,
operating expenses and capital expenditures, and management’s intent with respect to holding or
disposing of the hotel properties. Evaluating the reasonableness of the significant assumptions involved
considering (i) the current and past performance of the hotel properties; (ii) the consistency with
external market and industry data; and (iii) whether these assumptions were consistent with evidence
obtained in other areas of the audit.

/s/ PricewaterhouseCoopers LLP

McLean, Virginia
February 26, 2021

We have served as the Company’s auditor since 2001.

F-4

RLJ Lodging Trust

Consolidated Balance Sheets

(Amounts in thousands, except share and per share data)

December 31,

2020

2019

Assets
Investment in hotel properties, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in unconsolidated joint ventures . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hotel and other receivables, net of allowance of $292 and $251, respectively .
Lease right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax asset, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expense and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,486,416
6,798
899,813
34,977
13,346
142,989
—
32,833

$4,614,966
15,171
882,474
44,686
39,762
144,358
51,447
58,536

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,617,172

$5,851,400

Liabilities and Equity
Debt, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advance deposits and deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,587,731
172,325
32,177
122,593
6,206
8,752

$2,195,707
183,408
57,459
121,154
3,024
64,165

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,929,784

2,624,917

Commitments and Contingencies (Note 10)
Equity
Shareholders’ equity:

Preferred shares of beneficial interest, $0.01 par value, 50,000,000 shares

authorized
Series A Cumulative Convertible Preferred Shares, $0.01 par value,

12,950,000 shares authorized; 12,879,475 shares issued and outstanding,
liquidation value of $328,266, at December 31, 2020 and 2019 . . . . . . .

Common shares of beneficial interest, $0.01 par value, 450,000,000 shares

authorized; 165,002,752 and 169,852,246 shares issued and outstanding at
December 31, 2020 and 2019, respectively . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions in excess of net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . .

366,936

1,650
3,077,142
(69,050)
(710,161)

1,699
3,127,982
(19,514)
(274,769)

Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,666,517

3,202,334

Noncontrolling interest:

Noncontrolling interest in consolidated joint ventures . . . . . . . . . . . . . . . .
Noncontrolling interest in the Operating Partnership . . . . . . . . . . . . . . . . .

Total noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13,002
7,869

20,871

14,065
10,084

24,149

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,687,388

3,226,483

Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,617,172

$5,851,400

The accompanying notes are an integral part of these consolidated financial statements.

F-5

RLJ Lodging Trust

Consolidated Statements of Operations and Comprehensive (Loss) Income

(Amounts in thousands, except share and per share data)

Revenues

Operating revenues
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Room revenue .
Food and beverage revenue .
.
Other revenue .

Total revenues

Expenses

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Operating expenses
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Room expense .
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Food and beverage expense .
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Management and franchise fee expense .
.
Other operating expense .

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Total property operating expenses .
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Depreciation and amortization .
Impairment loss .
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Property tax, insurance and other .
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General and administrative .
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Transaction costs .

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Total operating expenses .

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Other income .
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Interest income .
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Interest expense .
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Gain (loss) on sale of hotel properties, net
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(Loss) gain on extinguishment of indebtedness, net .

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(Loss) income before equity in (loss) income from unconsolidated joint ventures .
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Equity in (loss) income from unconsolidated joint ventures

(Loss) income before income tax (expense) benefit .
.
Income tax (expense) benefit

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Net (loss) income .
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Net loss (income) attributable to noncontrolling interests:
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Noncontrolling interest in consolidated joint ventures
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Noncontrolling interest in the Operating Partnership .
Preferred distributions—consolidated joint venture .
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Redemption of preferred equity—consolidated joint venture .

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Net (loss) income attributable to RLJ
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Preferred dividends .

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Net (loss) income attributable to common shareholders

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Basic per common share data:
Net (loss) income per share attributable to common shareholders .

Weighted-average number of common shares

Diluted per common share data:
Net (loss) income per share attributable to common shareholders .

Weighted-average number of common shares

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Comprehensive (loss) income:
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Net (loss) income .
Unrealized (loss) gain on interest rate derivatives .
.
Reclassification of unrealized gain on discontinued interest rate derivatives to interest expense .

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Comprehensive (loss) income .
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Comprehensive loss (income) attributable to noncontrolling interests:
.
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Noncontrolling interest in consolidated joint ventures
Noncontrolling interest in the Operating Partnership .
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Preferred distributions—consolidated joint venture .

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Comprehensive (loss) income attributable to RLJ .

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For the year ended December 31,

2020

2019

2018

397,754
40,384
34,949

473,087

1,317,085
177,499
71,608

1,566,192

1,473,047
205,518
82,659

1,761,224

124,063
35,220
21,057
211,216

391,556
194,168
—
103,470
41,141
(158)

730,177

1,941
4,237
(100,169)
2,703
—

(348,378)
(8,454)

(356,832)
(51,970)

(408,802)

2,327
2,034
—
—

(404,441)
(25,115)

(429,556)

(2.61)

329,077
134,206
120,797
373,130

957,210
211,584
13,500
119,287
45,252
1,211

1,348,044

1,242
8,720
(91,295)
(9,300)
(214)

127,301
(1,673)

125,628
3,751

129,379

289
(487)
(186)
(1,153)

127,842
(25,115)

102,727

0.59

364,820
157,156
138,143
417,110

1,077,229
241,641
—
135,059
49,195
2,057

1,505,181

2,791
4,891
(101,643)
30,941
5,996

199,019
636

199,655
(8,793)

190,862

(17)
(719)
(1,483)
—

188,643
(25,115)

163,528

0.93

164,503,661

171,287,086

174,225,130

(2.61)

0.59

0.93

164,503,661

171,388,476

174,316,405

(408,802)
(49,536)
—

(458,338)

129,379
(33,459)
(2,250)

93,670

2,327
2,034
—

289
(487)
(186)

190,862
7,349
—

198,211

(17)
(719)
(1,483)

(453,977)

93,286

195,992

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The accompanying notes are an integral part of these consolidated financial statements.

F-6

RLJ Lodging Trust

Consolidated Statements of Changes in Equity

(Amounts in thousands, except share data)

Shareholders’ Equity

Common Stock

Preferred Stock

Amount

Par
Value

Additional
Paid-in
Capital

Distributions
in Excess
of Net
Earnings

Accumulated
Other
Comprehensive
Income

Balance at December 31, 2017 . . . . . . . . 12,879,475 $366,936 174,869,046 $1,749 $3,208,002

$ (82,566)
— 188,643

F
-
7

Net income . . . . . . . . . . . . . . . . . . .
Unrealized gain on interest rate

derivatives . . . . . . . . . . . . . . . . . .

Redemption of Operating Partnership

units . . . . . . . . . . . . . . . . . . . . . .
Issuance of restricted stock . . . . . . . . .
Amortization of share-based

compensation . . . . . . . . . . . . . . . .

Shares acquired to satisfy minimum
required federal and state tax
withholding on vesting restricted stock

Shares acquired as part of a share

repurchase program . . . . . . . . . . . .
Forfeiture of restricted stock . . . . . . . .
Contributions from consolidated joint

venture partners . . . . . . . . . . . . . .
Distributions on preferred shares . . . . .
Distributions on common shares and

units . . . . . . . . . . . . . . . . . . . . . .

Preferred distributions—consolidated

joint venture . . . . . . . . . . . . . . . .

—

—
—

—

—
—

—

—
—

—

—
592,673

—

—
6

—

—
(6)

12,769

—

(166,221)

(2)

(3,583)

— (1,162,557)
(113,325)
—

(12)
(1)

(21,802)
1

—

—
—

—

—
—

—

—
—

—

—
—

—

—
—

—
(25,115)

— (231,438)

—

$ 8,846
—

7,349

—
—

—

—
—

—

Noncontrolling Interest

Preferred
Equity in a
Consolidated Consolidated

Operating
Partnership

$11,181
719

Joint
Ventures

$11,700
17

Joint
Venture

Total
Equity

$44,430
1,483

$3,570,278
190,862

—

(14)
—

—

—
—

(1,059)

—

—
—

—

—
—

191
—

—

—
—

—

—
—

—

7,349

(14)
—

12,769

(3,585)

(21,814)
—

191
(25,115)

(232,497)

(1,483)

Balance at December 31, 2018 . . . . . . . . 12,879,475 $366,936 174,019,616 $1,740 $3,195,381

$(150,476)

$16,195

$10,827

$11,908

$44,430

$3,496,941

The accompanying notes are an integral part of these consolidated financial statements.

RLJ Lodging Trust

Consolidated Statements of Changes in Equity

(Amounts in thousands, except share data)

Shareholders’ Equity

Common Stock

Preferred Stock

Amount

Par
Value

Additional
Paid-in
Capital

Distributions
in Excess
of Net
Earnings

Accumulated
Other
Comprehensive
Income
(Loss)

Noncontrolling Interest

Preferred
Equity in a
Consolidated Consolidated

Operating
Partnership

Joint
Ventures

Joint
Venture

Total
Equity

$(150,476)
— 127,842

$ 16,195
—

$10,827
487

$11,908
(289)

$ 44,430
1,339

$3,496,941
129,379

—

(33,459)

—

(33,459)

Balance at December 31, 2018 . . . . . . . . 12,879,475 $366,936 174,019,616 $1,740 $3,195,381

F
-
8

Net income (loss) . . . . . . . . . . . . . . .
Unrealized loss on interest rate

derivatives . . . . . . . . . . . . . . . . . .

Reclassification of unrealized gain on
discontinued cash flow hedges to
interest expense . . . . . . . . . . . . . .

Redemption of Operating Partnership

units . . . . . . . . . . . . . . . . . . . . . .
Issuance of restricted stock . . . . . . . . .
Amortization of share-based

compensation . . . . . . . . . . . . . . . .

Shares acquired to satisfy minimum
required federal and state tax
withholding on vesting restricted stock

Shares acquired as part of a share

repurchase program . . . . . . . . . . . .
Forfeiture of restricted stock . . . . . . . .
Contributions from consolidated joint

venture partners . . . . . . . . . . . . . .
Distributions on preferred shares . . . . .
Distributions on common shares and

units . . . . . . . . . . . . . . . . . . . . . .

Preferred distributions—consolidated

joint venture . . . . . . . . . . . . . . . .

Redemption of preferred equity—

consolidated joint venture . . . . . . . .

—

—
—

—

—
—

—

—
—

—

—
530,436

—

—
5

—

—
(5)

12,196

—

(103,741)

(1)

(1,801)

— (4,575,170)
(18,895)
—

(45)
—

(77,789)
—

—
—

—

—
—

—

—
—

—

—
—

—
(25,115)

— (227,020)

—

—
—

—

—
—

(2,250)

—
—

—

—
—

—

(9)
—

—

—
—

(1,221)

—

(2,250)

(9)
—

12,196

(1,802)

(77,834)
—

2,446
(25,115)

(228,241)

—
—

—

—
—

—

(186)

(45,583)

—
—

—

—
—

2,446
—

—

Balance at December 31, 2019 . . . . . . . . 12,879,475 $366,936 169,852,246 $1,699 $3,127,982

$(274,769)

$(19,514)

$10,084

$14,065

— $3,226,483

The accompanying notes are an integral part of these consolidated financial statements.

RLJ Lodging Trust

Consolidated Statements of Changes in Equity

(Amounts in thousands, except share data)

Shareholders’ Equity

Common Stock

Preferred Stock

Amount

Par
Value

Additional
Paid-in
Capital

Distributions
in Excess
of Net
Earnings

Accumulated
Other
Comprehensive
Loss

Noncontrolling Interest

Operating
Partnership

Consolidated
Joint
Ventures

Total
Equity

Balance at December 31, 2019 . . . . . . . . . . . . . . . . 12,879,475 $366,936 169,852,246 $1,699 $3,127,982

F
-
9

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized loss on interest rate derivatives . . . . . . .
Redemption of Operating Partnership units . . . . . .
Issuance of restricted stock . . . . . . . . . . . . . . . . .
Amortization of share-based compensation . . . . . . .
Shares acquired to satisfy minimum required federal
and state tax withholding on vesting restricted
stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares acquired as part of a share repurchase

program . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeiture of restricted stock . . . . . . . . . . . . . . . .
Contributions from consolidated joint venture

partners . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions on preferred shares . . . . . . . . . . . . .
Distributions on common shares and units . . . . . . .

—
—
—
—
—

—

—
—

—
—
—

—
—
—
—
—

—
—
—
801,463
—

—
—
—
8
—

$(274,769)
— (404,441)
—
—
—
—
—
(8)
—
13,356

$(19,514)
—
(49,536)
—
—
—

$10,084
(2,034)
—
(8)
—
—

$14,065
(2,327)
—
—
—
—

$3,226,483
(408,802)
(49,536)
(8)
—
13,356

—

(152,629)

(2)

(1,639)

— (5,489,335)
(8,993)
—

(55)
—

(62,549)
—

—

—
—

—
—
—

—
(25,115)
(5,836)

—

—
—

—
—
—

—

—
—

—
—
(173)

—

—
—

1,264
—
—

(1,641)

(62,604)
—

1,264
(25,115)
(6,009)

Balance at December 31, 2020 . . . . . . . . . . . . . . . . 12,879,475 $366,936 165,002,752 $1,650 $3,077,142

$(710,161)

$(69,050)

$ 7,869

$13,002

$2,687,388

The accompanying notes are an integral part of these consolidated financial statements.

RLJ Lodging Trust

Consolidated Statements of Cash Flows

(Amounts in thousands)

Cash flows from operating activities
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net (loss) income to cash flow (used in) provided by operating

activities:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on sale of hotel properties, net
Loss (gain) on extinguishment of indebtedness, net
. . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized (gain) loss on discontinued cash flow hedges . . . . . . . . . . . . . . . . . . . . .
Equity in loss (income) from unconsolidated joint ventures . . . . . . . . . . . . . . . . . . .
Distributions of income from unconsolidated joint ventures . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment loss
Amortization of share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in assets and liabilities:

Hotel and other receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expense and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and other liabilities
Advance deposits and deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the year ended December 31,

2020

2019

2018

$(408,802)

$ 129,379

$ 190,862

(2,703)
—
194,168
4,416
(2,404)
(376)
8,454
—
—
12,396
51,447

26,409
19,178
(48,791)
(25,282)
3,182

9,300
214
211,584
4,100
(2,055)
376
1,673
1,964
13,500
11,459
(6,818)

8,813
(6,335)
(10,706)
35,766
(4,889)

(30,941)
(5,996)
241,641
3,504
(3,081)
—
(636)
2,591
—
12,251
8,384

5,580
351
(20,590)
82
(9,168)

Net cash flow (used in) provided by operating activities . . . . . . . . . . . . . . . . . . . . .

(168,708)

397,325

394,834

Cash flows from investing activities

Proceeds from the sale of hotel properties, net . . . . . . . . . . . . . . . . . . . . . . . . . . .
Improvements and additions to hotel properties
. . . . . . . . . . . . . . . . . . . . . . . . . .
Contributions to unconsolidated joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .
Distributions from unconsolidated joint ventures in excess of earnings

5,169
(73,337)
(100)
1,576

685,870
(157,354)
(603)
2,499

475,063
(197,599)
(350)
—

Net cash flow (used in) provided by investing activities . . . . . . . . . . . . . . . . . . . . . .

(66,692)

530,412

277,114

Cash flows from financing activities

Borrowings under Revolver
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments under Revolver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redemption of senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from mortgage loans
Scheduled mortgage loan principal payments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common shares under a share repurchase program . . . . . . . . . . . . . . .
Repurchase of common shares to satisfy employee tax withholding requirements . . . . . .
Distributions on preferred shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions on common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions on Operating Partnership units
Payments of deferred financing costs
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred distributions—consolidated joint venture . . . . . . . . . . . . . . . . . . . . . . . . .
Redemption of preferred equity—consolidated joint venture . . . . . . . . . . . . . . . . . . . .
Contributions from consolidated joint venture partners . . . . . . . . . . . . . . . . . . . . . .

400,000
—
—
—
(3,376)
—
(62,604)
(1,641)
(25,116)
(61,000)
(428)
(4,069)
—
—
1,264

140,000
(140,000)
(112)
381,000
(3,979)
(374,500)
(77,834)
(1,802)
(25,115)
(228,287)
(1,230)
(10,111)
(312)
(45,583)
2,446

300,000
(300,000)
(539,026)
—
(6,335)
(113,137)
(21,814)
(3,585)
(25,115)
(231,188)
(1,050)
(3,640)
(1,483)
—
191

Net cash flow provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . .

243,030

(385,419)

(946,182)

Net change in cash, cash equivalents, and restricted cash reserves . . . . . . . . . . . . . . . . .
Cash, cash equivalents, and restricted cash reserves, beginning of year . . . . . . . . . . . . .

7,630
927,160

542,318
384,842

(274,234)
659,076

Cash, cash equivalents, and restricted cash reserves, end of year . . . . . . . . . . . . . . . . .

$ 934,790

$ 927,160

$ 384,842

The accompanying notes are an integral part of these consolidated financial statements.

F-10

RLJ Lodging Trust

Notes to the Consolidated Financial Statements

1. General

Organization

RLJ Lodging Trust (the ‘‘Company’’) was formed as a Maryland real estate investment trust
(‘‘REIT’’) on January 31, 2011. The Company is a self-advised and self-administered REIT that
acquires primarily premium-branded, high-margin, focused-service and compact full-service hotels. The
Company elected to be taxed as a REIT, for U.S. federal income tax purposes, commencing with its
taxable year ended December 31, 2011.

Substantially all of the Company’s assets and liabilities are held by, and all of its operations are
conducted through, RLJ Lodging Trust, L.P. (the ‘‘Operating Partnership’’). The Company is the sole
general partner of the Operating Partnership. As of December 31, 2020, there were 165,775,045 units
of limited partnership interest in the Operating Partnership (‘‘OP units’’) outstanding and the Company
owned, through a combination of direct and indirect interests, 99.5% of the outstanding OP units.

As of December 31, 2020, the Company owned 103 hotel properties with approximately 22,700

rooms, located in 23 states and the District of Columbia. The Company, through wholly-owned
subsidiaries, owned a 100% interest in 99 of its hotel properties, a 98.3% controlling interest in the
DoubleTree Metropolitan Hotel New York City, a 95.0% controlling interest in The Knickerbocker, and
50% interests in entities owning two hotel properties. The Company consolidates its real estate
interests in the 101 hotel properties in which it holds a controlling financial interest, and the Company
records the real estate interests in the two hotels in which it holds an indirect 50% interest using the
equity method of accounting. The Company leases 102 of the 103 hotel properties to its taxable REIT
subsidiaries (‘‘TRS’’), of which the Company owns a controlling financial interest.

COVID-19

The global outbreak of a novel strain of coronavirus (COVID-19) and the public health measures

that have been undertaken in response have had, and will likely continue to have, a material adverse
impact on the Company’s financial results and liquidity, and such adverse impact may continue well
beyond the containment of such outbreak and vaccination distribution. Since the extent to which the
COVID-19 pandemic will continue to impact our operations will depend on future developments that
are highly uncertain, the Company cannot estimate the impact on its business, financial condition or
near- or longer-term financial or operational results with reasonable certainty.

Given the impact on lodging demand, the Company has taken various actions to help mitigate the

effects of the COVID-19 pandemic on its operating results and to preserve liquidity. Operational
measures the Company has taken include:

(cid:127) Suspension of Hotel Operations: The Company had previously announced the suspension of

operations at 57 of its hotel properties. As government mandated stay-in-place restrictions were
lifted, the Company developed a framework to open the suspended hotels. The Company has
reopened 50 of its hotel properties as of December 31, 2020, and subsequent to the end of the
year has reopened 2 hotel properties. The Company continues to evaluate reopening the
remaining 5 suspended hotel properties based on market conditions. The remaining suspended
hotel properties are generally located within the central business districts of New York City and
San Francisco, or are part of a cluster where the Company owns multiple hotels in the same
immediate area. In the markets where stay-in-place restrictions are reinstated, the Company
would consider temporarily re-suspending hotel operations where demand is inadequate.

F-11

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

1. General (Continued)

(cid:127) Cost Containment Initiatives: The Company continues to operate with reduced operating

expenses by implementing stringent operational cost containment measures. These measures
include significantly reduced staffing, reduced energy costs, elimination of non-essential
amenities and services and the closure of several floors and most food and beverage outlets at
properties that remain open.

(cid:127) Capital Investment Reduction: The Company reduced its 2020 capital expenditure program by

deferring all capital investments, other than completing projects that were substantially underway
and nearing completion.

(cid:127) Return on Investment (‘‘ROI’’) Project Suspensions: The Company suspended most of the 2020

ROI projects.

In addition, the Company has taken aggressive actions to increase liquidity and preserve cash at

the corporate level including:

(cid:127) Common Stock Dividend: The Company’s board of trustees authorized the first, second, third

and fourth quarter common cash dividends of $0.01 per common share, which reflects a
significant reduction compared to the Company’s dividend payout prior to the COVID-19
pandemic.

(cid:127) Share Repurchase: The Company suspended all repurchases of its common shares and Series A

Preferred Shares (defined below), as applicable.

(cid:127) Increased Liquidity: The Company enhanced its liquidity position by drawing $400.0 million on

its $600.0 million revolving credit facility. As of December 31, 2020, the Company had
approximately $934.8 million of cash and cash equivalents and restricted cash reserves.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The consolidated financial statements and related notes have been prepared on the accrual basis of
accounting in accordance with accounting principles generally accepted in the United States of America
(‘‘GAAP’’).

The consolidated financial statements include the accounts of the Company, the Operating

Partnership and its wholly-owned subsidiaries, and joint ventures in which the Company has a majority
voting interest and control. For the controlled subsidiaries that are not wholly-owned, the third-party
ownership interest represents a noncontrolling interest, which is presented separately in the
consolidated financial statements. The Company also records the real estate interests in two joint
ventures in which it holds an indirect 50% interest using the equity method of accounting. All
intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the Company’s financial statements in conformity with GAAP requires

management to make estimates and assumptions that affect the reported amounts of certain assets and
liabilities and the amounts of contingent assets and liabilities at the balance sheet date and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates.

F-12

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

Reclassifications

Certain prior year amounts in these financial statements have been reclassified to conform to the

current year presentation with no impact to net income and comprehensive income, shareholders’
equity or cash flows.

Revenue

Substantially all of the Company’s revenues are derived from the operation of hotel properties.
The Company generates room revenue by renting hotel rooms to customers at its hotel properties. The
Company generates food and beverage revenue from the sale of food and beverage to customers at its
hotel properties. The Company generates other revenue from parking fees, resort fees, gift shop sales
and other guest service fees at its hotel properties.

A performance obligation is a promise in a contract to transfer a distinct good or service to the

customer. A contract’s transaction price is allocated to each distinct performance obligation and
recognized as revenue when the performance obligation is satisfied. The Company’s contracts generally
have a single performance obligation, such as renting a hotel room to a customer, or providing food
and beverage to a customer, or providing a hotel property-related good or service to a customer. The
Company’s performance obligations are generally satisfied at a point in time.

The Company allocates revenue to the performance obligation based on its relative standalone
selling price. The Company determines the standalone selling price based on the price it charges each
customer for the use or consumption of the promised good or service.

The Company’s revenue is recognized when control of the promised good or service is transferred

to the customer, in an amount that reflects the consideration the Company expects to receive in
exchange for the promised good or service. The revenue is recorded net of any sales and occupancy
taxes collected from the customer. All rebates or discounts are recorded as a reduction to revenue, and
there are no material contingent obligations with respect to rebates and discounts offered by the hotel
properties.

The timing of revenue recognition, billings, and cash collections results in the Company

recognizing hotel and other receivables and advance deposits and deferred revenue on the consolidated
balance sheet. Hotel and other receivables are recognized on the consolidated balance sheets when the
Company has provided a good or service to the customer and is waiting for the customer to submit
consideration to the Company. Advance deposits and deferred revenue are recognized on the
consolidated balance sheets when cash payments are received in advance of the Company satisfying its
performance obligation. Advance deposits and deferred revenue consist of amounts that are refundable
and non-refundable to the customer. The advance deposits and deferred revenue are recognized as
revenue in the consolidated statements of operations and comprehensive income when the Company
satisfies its performance obligation to the customer.

For the majority of its goods or services and customers, the Company requires payment at the time

the respective good or service is provided to the customer. The Company’s payment terms vary by the
type of customer and the goods or services offered to the customer. The Company applied a practical
expedient to not disclose the value of unsatisfied performance obligations for contracts that have an
original expected length of one year or less. Any contracts that have an original expected length of
greater than one year are insignificant.

F-13

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

The Company records an allowance for doubtful accounts based on its best estimate of the amount

of probable credit losses in the existing accounts receivable portfolio. The Company recognizes
increases to the allowance for doubtful accounts as bad debt expense. The allowance for doubtful
accounts is calculated as a percentage of the aged accounts receivable based on the Company’s
historical collection activity and its understanding of the circumstances related to a specific receivable.

Investment in Hotel Properties

The Company’s acquisitions generally consist of land, land improvements, buildings, building

improvements, furniture, fixtures and equipment (‘‘FF&E’’), and inventory. The Company may also
acquire intangible assets or liabilities related to in-place leases, management agreements, franchise
agreements, and advanced bookings. The Company allocates the purchase price among the assets
acquired and the liabilities assumed based on their respective fair values at the date of acquisition. The
Company estimates the fair values of the assets acquired and the liabilities assumed by using a
combination of the market, cost and income approaches. The Company determines the fair value by
using market data and independent appraisals available to us and making numerous estimates and
assumptions, such as estimates of future income growth, capitalization rates, discount rates, capital
expenditures and cash flow projections at the respective hotel properties. Transaction costs are
expensed for acquisitions that are considered business combinations and capitalized for asset
acquisitions.

The Company’s investments in hotel properties are carried at cost and are depreciated using the

straight-line method over the estimated useful lives of 15 years for land improvements, 15 years for
building improvements, 40 years for buildings, and three to five years for FF&E. Maintenance and
repairs are expensed and major renewals or improvements to the hotel properties are capitalized.
Indirect project costs, including interest, salaries and benefits, travel and other related costs that are
directly attributable to the development, are also capitalized. Upon the sale or disposition of a hotel
property, the asset and related accumulated depreciation accounts are removed and the related gain or
loss is included in the gain or loss on sale of hotel properties in the consolidated statements of
operations and comprehensive income. A sale or disposition of a hotel property that represents a
strategic shift that has or will have a major effect on the Company’s operations and financial results is
presented as discontinued operations in the consolidated statements of operations and comprehensive
income.

In accordance with the guidance on impairment or disposal of long-lived assets, the Company does

not consider the ‘‘held for sale’’ classification on the consolidated balance sheet until it is expected to
qualify for recognition as a completed sale within one year and the other requisite criteria for such
classification have been met. The Company does not depreciate assets so long as they are classified as
held for sale. Upon designation as held for sale and quarterly thereafter, the Company reviews the
realizability of the carrying value, less costs to sell, in accordance with the guidance. Any such
adjustment to the carrying value is recorded as an impairment loss.

The Company assesses the carrying value of its investments in hotel properties whenever events or
changes in circumstances indicate that the carrying amounts may not be recoverable. The recoverability
is measured by comparing the carrying amount to the projected undiscounted future cash flows
expected to be generated from the operations and the eventual disposition of the hotel properties over
the estimated hold period, which take into account current market conditions and the Company’s intent
with respect to holding or disposing of the hotel properties. If the Company’s analysis indicates that the

F-14

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

carrying value is not recoverable on a projected undiscounted cash flow basis, the Company will
recognize an impairment loss for the amount by which the carrying value exceeds the fair value. The
fair value is determined through various valuation techniques, including internally developed discounted
cash flow models, comparable market transactions, third-party appraisals, the net sales proceeds from
pending offers, or the net sales proceeds from transactions that closed subsequent to the end of the
reporting period. The use of projected future cash flows is based on assumptions that are consistent
with a market participant’s future expectations for the travel industry and the economy in general,
including discount rates, sales proceeds in the reversion year, average daily rates, occupancy rates,
operating expenses and capital expenditures, and the Company’s intent with respect to holding or
disposing of the underlying hotel properties. Fair value may also be based on assumptions including,
but not limited to, room revenue multiples and comparable sales adjusted for capital expenditures, if
necessary.

Investment in Unconsolidated Joint Ventures

If the Company determines that it does not have a controlling financial interest in a joint venture,

either through a controlling financial interest in a variable interest entity or through the Company’s
voting interest in a voting interest entity, but the Company exercises significant influence over the
operating and financial policies of the joint venture, the Company accounts for the joint venture using
the equity method of accounting. Under the equity method of accounting, the Company’s investment is
adjusted each reporting period to recognize the Company’s share of the net earnings or losses of the
joint venture, plus any contributions to the joint venture, less any distributions received from the joint
venture and any adjustment for impairment. In addition, the Company’s share of the net earnings or
losses of the joint venture is adjusted for the straight-line depreciation of the difference between the
Company’s basis in the investment in the unconsolidated joint venture as compared to the historical
basis of the underlying net assets in the joint venture at the date of acquisition.

The Company assesses the carrying value of its investment in unconsolidated joint ventures
whenever events or changes in circumstances may indicate that the carrying value of the investment
exceeds its fair value on an other-than-temporary basis. When an impairment indicator is present, the
Company will estimate the fair value of the investment, which will be determined by using internally
developed discounted cash flow models, comparable market transactions, third-party appraisals, the net
sales proceeds from pending offers, or the net sales proceeds from transactions that closed subsequent
to the end of the reporting period. If the estimated fair value is less than the carrying value, and
management determines that the decline in value is considered to be other-than-temporary, the
Company will recognize an impairment loss on its investment in the joint venture.

The Company evaluates the nature of the distributions from each of its unconsolidated joint
ventures in order to classify the distributions as either operating activities or investing activities in the
consolidated statements of cash flows. Any cash distribution that is considered to be a distribution of
the earnings of the unconsolidated joint venture is presented as an operating activity in the
consolidated statements of cash flows. Any cash distribution that is considered to be a return of capital
from the unconsolidated joint venture is presented as an investing activity in the consolidated
statements of cash flows.

F-15

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

Intangible Assets

In a business combination, the Company may acquire intangible assets related to in-place leases,
management agreements, franchise agreements, advanced bookings, and other intangible assets. The
Company recognizes each of the intangible assets at fair value. The Company estimated the fair value
of the intangible assets by using market data and independent appraisals, and by making numerous
estimates and assumptions. The below market lease intangible assets are amortized over the remaining
terms of the respective leases as adjustments to rental expense in property tax, insurance and other in
the consolidated statements of operations and comprehensive income. The advanced bookings
intangible assets are amortized over the duration of the hotel room and guest event reservations period
at the respective hotel property to depreciation and amortization in the consolidated statements of
operations and comprehensive income. The other intangible assets are amortized over the remaining
non-cancelable term of the related agreement, or the useful life of the respective intangible asset, to
depreciation and amortization in the consolidated statements of operations and comprehensive income.

The Company assesses the carrying value of the intangible assets whenever events or changes in

circumstances indicate that the carrying amounts may not be recoverable. The recoverability is
measured by comparing the carrying amount to the estimated undiscounted future cash flows, which
take into account current market conditions and the Company’s intent with respect to holding or
disposing of the hotel properties. If the Company’s analysis indicates that the carrying value is not
recoverable on an undiscounted cash flow basis, the Company will recognize an impairment loss for the
amount by which the carrying value exceeds the fair value. The fair value is determined through various
valuation techniques, including internally developed discounted cash flow models or third-party
appraisals. The use of projected future cash flows is based on assumptions that are consistent with a
market participant’s future expectations for the travel industry and the economy in general, including
discount rates, market rent, and the Company’s intent with respect to holding or disposing of the
underlying hotel properties.

Cash and Cash Equivalents

Cash and cash equivalents include all cash and highly liquid investments that mature three months

or less when they are purchased. The Company maintains its cash at domestic banks, which, at times,
may exceed the limits of the amounts insured by the Federal Deposit Insurance Corporation.

Restricted Cash Reserves

Restricted cash reserves consist of all cash that is required to be maintained in a reserve escrow

account by a management agreement, franchise agreement, and/or a mortgage loan agreement for the
replacement of FF&E and the funding of real estate taxes and insurance.

Hotel Receivables

Hotel receivables consist mainly of receivables due from hotel guests and meeting and banquet

room rentals. The Company typically does not require collateral as ongoing credit evaluations are
performed. An allowance for doubtful accounts is established against any receivable that is estimated to
be uncollectible.

F-16

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

Deferred Financing Costs

Deferred financing costs are the costs incurred to obtain long-term financing. The deferred

financing costs are recorded at cost and are amortized using the straight-line method, which
approximates the effective interest method, over the respective term of the financing agreement and
are included as a component of interest expense in the consolidated statements of operations and
comprehensive income. The Company expenses unamortized deferred financing costs when the
associated financing agreement is refinanced or repaid before the maturity date, unless certain criteria
are met that would allow for the carryover of such costs to the refinanced agreement. The Company
presents the deferred financing costs for its Term Loans (as defined in Note 7) and mortgage loans on
the balance sheet as a direct deduction from the carrying amount of the respective debt liability, which
is included in debt, net, in the accompanying consolidated balance sheets. The Company presents the
deferred financing costs for its unsecured revolving credit facility (the ‘‘Revolver’’) on the balance sheet
as an asset, which is included in prepaid expense and other assets in the accompanying consolidated
balance sheets.

For the years ended December 31, 2020, 2019 and 2018, approximately $4.4 million, $4.1 million
and $3.5 million, respectively, of amortization expense was recorded as a component of interest expense
in the consolidated statements of operations and comprehensive income.

Transaction Costs

The Company incurs costs during the review of potential hotel property acquisitions and
dispositions, including legal fees and other professional service fees. In addition, if the Company
completes a hotel property acquisition, the Company may incur transfer taxes and integration costs,
including professional fees and employee-related costs. If the Company completes a hotel property
acquisition that is considered to be an asset acquisition, the transaction costs are capitalized on the
consolidated balance sheets. If the Company completes a hotel property acquisition that is considered
to be a business combination, the transaction costs are expensed as incurred in the consolidated
statements of operations and comprehensive income.

Derivative Financial Instruments

In the normal course of business, the Company is exposed to the effects of interest rate changes.

The Company utilizes a variety of borrowing vehicles, including the Revolver and medium and
long-term financings. The Company reduces its risk to interest rate changes by following its established
risk management policies and procedures, including the use of derivative financial instruments to
manage, or hedge, interest rate risk. To mitigate the Company’s exposure to interest rate changes, the
Company uses interest rate derivative instruments, typically interest rate swaps, to convert a portion of
its variable rate debt to fixed rate debt. The Company attempts to require the hedging derivative
instruments to be effective in reducing the interest rate risk exposure that they are designated to hedge.
This effectiveness is essential in order to qualify for hedge accounting. Derivative instruments that meet
the hedging criteria are formally designated as cash flow hedges at the inception of the derivative
contract. The Company does not use derivative instruments for trading or speculative purposes.

Interest rate swap agreements contain a credit risk that the counterparties may be unable to fulfill

the terms of the agreement. The Company has minimized the credit risk by evaluating the

F-17

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

creditworthiness of its counterparties, who are limited to major banks and financial institutions, and it
does not anticipate nonperformance by these counterparties.

The estimated fair values of the derivatives are determined by using available market information
and appropriate valuation methods. Considerable judgment is required in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could realize in a current market exchange.

The Company recognizes all derivatives as assets or liabilities on its consolidated balance sheet at
fair value. The gains and losses on the derivatives that have been determined to be effective cash flow
hedges are reported in other comprehensive income (loss) and are reclassified to interest expense in
the period in which the interest expense is recognized on the underlying hedged item. The ineffective
portion of the change in fair value of the derivatives is recognized in earnings immediately.

When the terms of an underlying transaction are modified, or when the underlying hedged item

ceases to exist, and the interest rate derivative no longer qualifies for hedge accounting, all changes in
the fair value of the derivative instrument are marked-to-market with the changes in fair value
recognized in earnings each period until the derivative instrument matures.

Leases

On January 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842) using the modified

retrospective transition approach. This ASU provides the principles for the recognition, measurement,
presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The
comparative historical periods will be presented in accordance with ASC 840, Leases.

As a lessee in a lease contract, the Company recognizes a lease right-of-use asset and a lease
liability on the consolidated balance sheet. The Company is a lessee in a variety of lease contracts, such
as ground leases, parking leases, office leases and equipment leases. The Company classifies its leases
as either an operating lease or a finance lease based on the principle of whether or not the lease is
effectively a financed purchase of the leased asset. For operating leases, the Company recognizes lease
expense on a straight-line basis over the term of the lease. For finance leases, the Company recognizes
lease expense on the effective interest method, which results in the interest component of each lease
payment being recognized as interest expense and the lease right-of-use asset being amortized into
amortization expense using the straight-line method over the term of the lease. For leases with an
initial term of 12 months or less, the Company will not recognize a lease right-of-use asset and a lease
liability on the consolidated balance sheet and lease expense will be recognized on a straight-line basis
over the lease term.

At the lease commencement date, the Company determines the lease term by incorporating the
fixed, non-cancelable lease term plus any lease extension option terms that are reasonably certain of
being exercised. The ability to extend the lease term is at the Company’s sole discretion. The Company
calculates the present value of the future lease payments over the lease term in order to determine the
lease liability and the related lease right-of-use asset that is recognized on the consolidated balance
sheet.

Certain lease contracts may include an option to purchase the leased property, which is at the
Company’s sole discretion. The Company’s lease contracts do not contain any material residual value
guarantees or material restrictive covenants.

F-18

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

The Company’s leases include a base lease payment, which is recognized as lease expense on a
straight-line basis over the lease term. In addition, certain of the Company’s leases may include an
additional lease payment that is based on either (i) a percentage of the respective hotel property’s
financial results, or (ii) the frequency to which the leased asset is used; all of which are recognized as
variable lease expense, when incurred, in the consolidated statements of operations and comprehensive
income. The variable lease expense incurred by the Company was not based on an index or rate.

The Company will use the implicit rate in a lease contract in order to determine the present value

of the future lease payments over the lease term. If the implicit rate in the lease contract is not
available, then the Company will use its incremental borrowing rate at the lease commencement date.
The Company determined its incremental borrowing rate for each lease contract by using the U.S.
Treasury interest rates yield curve, and then making adjustments for the lease term, the Company’s
credit spread, the Company’s ability to borrow on a secured basis, the quality and condition of the
leased asset and the current economic environment.

As a lessor in a lease contract, the Company classifies its leases as either an operating lease, direct
financing lease, or a sales-type lease. The Company leases space at its hotel properties to third parties,
who use the space for their restaurants or retail locations. The Company classifies these lease contracts
as operating leases, so the Company will continue to recognize the underlying leased asset as an
investment in hotel properties on the consolidated balance sheets. Lease revenue is recognized on a
straight-line basis over the lease term. Variable lease revenue is recognized over the lease term when it
is earned and becomes receivable from the lessee, according to the provisions of the respective lease
contract. The Company only capitalizes the incremental direct costs of leasing, so any indirect costs of
leasing will be expensed as incurred.

Noncontrolling Interests

The consolidated financial statements include all subsidiaries controlled by the Company. For the

controlled subsidiaries that are not wholly-owned, the third-party ownership interest represents a
noncontrolling interest, which is presented separately in the consolidated financial statements.

As of December 31, 2020 and 2019, the Company consolidated the Operating Partnership, which

has a 0.5% third-party ownership interest. The third-party ownership interest is included in the
noncontrolling interest in the Operating Partnership in the equity section of the consolidated balance
sheets. The portion of the income and losses associated with the third-party ownership interest are
included in the noncontrolling interest in the Operating Partnership in the consolidated statements of
operations and comprehensive income.

As of December 31, 2020 and 2019, the Company consolidated the joint venture that owns the
DoubleTree Metropolitan Hotel New York City hotel property; this joint venture has a 1.7% third-party
ownership interest in the joint venture. The Company also consolidated the joint venture that owns The
Knickerbocker hotel property; this joint venture has a 5% third-party ownership interest in the joint
venture. In addition, the Company consolidated the operating lessee of the Embassy Suites Secaucus—
Meadowlands hotel property through its 51% controlling financial interest in the operating lessee of the
joint venture; this joint venture has a 49% third-party ownership interest in the joint venture. The
third-party ownership interest is included in the noncontrolling interest in consolidated joint ventures in
the equity section of the consolidated balance sheets. The income and losses associated with the third-

F-19

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

party ownership interest are included in the noncontrolling interest in consolidated joint ventures in the
consolidated statements of operations and comprehensive income.

Income Taxes

The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Internal

Revenue Code of 1986, as amended. To qualify as a REIT, the Company must meet a number of
organizational and operational requirements, including a requirement that it distribute at least 90% of
its REIT taxable income, subject to certain adjustments and excluding any net capital gain, to
shareholders. The Company’s intention is to adhere to the REIT qualification requirements and to
maintain its qualification for taxation as a REIT.

As a REIT, the Company is generally not subject to U.S. federal corporate income tax on the

portion of taxable income that is distributed to shareholders. If the Company fails to qualify for
taxation as a REIT in any taxable year, the Company will be subject to U.S. federal income taxes at
regular corporate rates (including any applicable alternative minimum tax) and it may not be able to
qualify as a REIT for four subsequent taxable years. As a REIT, the Company may be subject to
certain state and local taxes on its income and property, and to U.S. federal income and excise taxes on
undistributed taxable income. Taxable income from non-REIT activities managed through the
Company’s TRSs is subject to U.S. federal, state, and local income taxes at the applicable rates.

The Company accounts for income taxes using the asset and liability method. Under this method,
deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable
to the differences between the financial statement carrying amounts of existing assets and liabilities and
their respective income tax bases, and for net operating loss, capital loss and tax credit carryforwards.
The deferred tax assets and liabilities are measured using the enacted income tax rates in effect for the
year in which those temporary differences are expected to be realized or settled. The effect on the
deferred tax assets and liabilities from a change in tax rates is recognized in earnings in the period
when the new rate is enacted. 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 all available evidence,
including the future reversals of existing taxable temporary differences, future projected taxable income
and tax planning strategies. Valuation allowances are provided if, based upon the weight of the
available evidence, it is more likely than not that some or all of the deferred tax assets will not be
realized.

The Company performs an annual review for any uncertain tax positions and, if necessary, will
record the expected future tax consequences of uncertain tax positions in the consolidated financial
statements.

Earnings Per Common Share

Basic earnings per common share is calculated by dividing net income attributable to common

shareholders by the weighted-average number of common shares outstanding during the period
excluding the weighted-average number of unvested restricted shares and performance units
outstanding during the period. Diluted earnings per common share is calculated by dividing net income
attributable to common shareholders by the weighted-average number of common shares outstanding
during the period, plus any shares that could potentially be outstanding during the period. The
potential shares consist of unvested restricted share grants and unvested performance units, calculated

F-20

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

using the treasury stock method. Any anti-dilutive shares have been excluded from the diluted earnings
per common share calculation.

Share-based Compensation

The Company may issue share-based awards as compensation to officers, employees, non-employee
trustees and other eligible persons under the RLJ Lodging Trust 2015 Equity Incentive Plan (the ‘‘2015
Plan’’). The vesting of the awards issued to the officers and employees is based on either the continued
employment (time-based) or the relative total shareholder returns of the Company and continued
employment (performance-based), as determined by the board of trustees at the date of grant. For
time-based awards, the Company recognizes compensation expense for the unvested restricted shares
on a straight-line basis over the vesting period based upon the fair market value of the shares on the
date of grant, adjusted for forfeitures. For performance-based awards, the Company recognizes
compensation expense over the requisite service period for each award, based on the fair market value
of the shares on the date of grant, as determined using a Monte Carlo simulation, adjusted for
forfeitures.

Non-employee trustees may elect to receive unrestricted shares under the 2015 Plan as
compensation that would otherwise be paid in cash for their services. The shares issued to the
non-employee trustees in lieu of cash compensation are unrestricted and include no vesting conditions.
The Company recognizes compensation expense for the unrestricted shares issued in lieu of cash
compensation based upon the fair market value of the shares on the date of issuance.

Recently Issued Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards
Update (‘‘ASU’’) No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments, which modifies the measurement approach for credit losses on
financial assets measured on an amortized cost basis from an ‘‘incurred loss’’ method to an ‘‘expected
loss’’ method. In November 2019, the FASB issued ASU 2019-11, Codification Improvements to
Topic 326, Financial Instruments—Credit Losses. The Company adopted this new standard on January 1,
2020. The adoption of this standard did not have a material impact on the Company’s consolidated
financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure
Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The guidance modifies
the disclosure requirements for fair value measurements by removing or modifying some of the
disclosures, while also adding new disclosures. The Company adopted this new standard on January 1,
2020. The adoption of this standard did not have a material impact on the Company’s consolidated
financial statements.

In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the

Effects of Reference Rate Reform on Financial Reporting. The guidance provides optional expedients for
applying GAAP to contracts, hedging relationships, and other transactions that reference the London
Interbank Offered Rate (‘‘LIBOR’’) or another reference rate expected to be discontinued at the end
of 2021 because of reference rate reform. The guidance is effective immediately and expires on
December 31, 2022. Based on the Company’s assessment, the adoption of this standard is not expected
to have a material impact on the Company’s consolidated financial statements.

F-21

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

3. Investment in Hotel Properties

Investment in hotel properties consisted of the following (in thousands):

December 31,
2020

December 31,
2019

Land and improvements . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . .
Furniture, fixtures and equipment . . . . . . . . . . . . . . . . . .

$ 1,089,597
4,084,712
697,404

$ 1,088,436
4,039,012
685,699

Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . .

5,871,713
(1,385,297)

5,813,147
(1,198,181)

Investment in hotel properties, net . . . . . . . . . . . . . . . . .

$ 4,486,416

$ 4,614,966

For the years ended December 31, 2020, 2019 and 2018, the Company recognized depreciation
expense related to its investment in hotel properties of approximately $193.3 million, $209.6 million and
$233.8 million, respectively.

Impairment

During year ended December 31, 2019, the Company recorded an impairment loss of $13.5 million

related to two hotel properties. The Company evaluated the recoverability of the carrying value of the
hotels due to adverse changes in the operating performance of the hotels. Based on an analysis of the
estimated undiscounted net cash flows, the Company concluded that the carrying value of the hotels
was not recoverable. The Company estimated the fair value of the hotels using a weighted valuation
approach considering room revenue multiples and comparable sales adjusted for capital expenditures.
The valuation approach included significant unobservable inputs, including revenue growth projections
and prevailing market multiples, from third party sources. There were no impairment losses recorded
during the years ended December 31, 2020 and December 31, 2018.

4. Investment in Unconsolidated Joint Ventures

As of December 31, 2020 and 2019, the Company owned 50% interests in joint ventures that
owned two hotel properties. During the year ended December 31, 2020, one of the unconsolidated joint
ventures did not exercise its right to extend the term of the ground lease. Accordingly the ground lease
will terminate on October 31, 2021 and the property will revert to the ground lessor at that time. As a
result, the Company recorded an impairment loss of $6.5 million to write down the Company’s
investment in this joint venture, which is included in equity in (loss) income of unconsolidated entities
in the accompanying consolidated statements of operations.

During the year ended December 31, 2019, the Company sold two hotels located in Myrtle Beach,

South Carolina. In addition, the joint ventures that were associated with these two hotels sold their
assets. The Company had owned 50% interests in these joint ventures. The Company recorded a loss of
$2.1 million as a result of the joint ventures’ sale of their assets, which is included in equity in (loss)
income of unconsolidated entities in the accompanying consolidated statements of operations. Refer to
Note 5, Sale of Hotel Properties, for more information regarding the sale of the hotels.

The Company accounts for the investments in these unconsolidated joint ventures under the equity

method of accounting. The Company makes adjustments to the equity in (loss) income from
unconsolidated joint ventures related to the difference between the Company’s basis in the investment

F-22

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

4. Investment in Unconsolidated Joint Ventures (Continued)

in the unconsolidated joint ventures as compared to the historical basis of the assets and liabilities of
the joint ventures. As of December 31, 2020 and 2019, the unconsolidated joint ventures’ debt consisted
entirely of non-recourse mortgage debt.

The following table summarizes the components of the Company’s investments in unconsolidated

joint ventures (in thousands):

Equity basis of the joint venture investments . . . . . . . . . .
Cost of the joint venture investments in excess of the joint
venture book value . . . . . . . . . . . . . . . . . . . . . . . . . . .

Investment in unconsolidated joint ventures . . . . . . . . . . .

$ 6,798

December 31,
2020

December 31,
2019

$ (6,687)

$ (4,236)

13,485

19,407

$15,171

The following table summarizes the components of the Company’s equity in income from

unconsolidated joint ventures (in thousands):

For the year ended December 31,

2020

2019

2018

Operating (loss) income . . . . . . . . . . . . . . . . . . . . . . .
Depreciation of cost in excess of book value . . . . . . . . .
Impairment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (913) $ 1,667
(1,265)
—
— (2,075)

(995)
(6,546)

$ 2,105
(1,469)
—
—

Equity in (loss) income from unconsolidated joint

ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(8,454) $(1,673) $

636

5. Sale of Hotel Properties

In connection with the sale of hotel properties for the years ended December 31, 2020, 2019, and
2018, the Company recorded a gain of $2.7 million, a loss of $9.3 million, and a gain of $30.9 million,
respectively.

During the year ended December 31, 2020, the Company sold one hotel property for a sales price

of approximately $4.9 million.

The following table discloses the hotel property that was sold during the year ended December 31,

2020:

Hotel Property Name

Location

Sale Date

Rooms

Residence Inn Houston Sugarland . . . . .

Stafford, TX December 1, 2020

Total . . . . . . . . . . . . . . . . . . . . . . . . .

During the year ended December 31, 2019, the Company sold 47 hotel properties in five separate

transactions for a total sales price of approximately $721.0 million.

F-23

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

5. Sale of Hotel Properties (Continued)

The following table discloses the hotel properties that were sold during the year ended

December 31, 2019:

Hotel Property Name

Location

Sale Date

Rooms

Courtyard Boulder Longmont . . . . . . . . . . . . . . Longmont, CO
Courtyard Salt Lake City Airport
Courtyard Fort Lauderdale SW Miramar . . . . . . Miramar, FL
Courtyard Austin Airport . . . . . . . . . . . . . . . . . Austin, TX
Fairfield Inn & Suites San Antonio Downtown

. . . . . . . . . . .

Salt Lake City, UT

Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

San Antonio, TX

Hampton Inn & Suites Clearwater St. Petersburg Clearwater, FL
Hampton Inn Fort Walton Beach . . . . . . . . . . . . Fort Walton, FL
Hampton Inn & Suites Denver Tech Center . . . . Denver, CO
Hampton Inn West Palm Beach Airport Central . West Palm Beach, FL
Hilton Garden Inn Bloomington . . . . . . . . . . . . Bloomington, IN
Hilton Garden Inn West Palm Beach Airport . . . West Palm Beach, FL
Hilton Garden Inn Durham Raleigh Research

Triangle Park . . . . . . . . . . . . . . . . . . . . . . . . Durham, NC
Residence Inn Longmont Boulder . . . . . . . . . . . Longmont, CO
Residence Inn Detroit Novi . . . . . . . . . . . . . . . . Novi, MI
Residence Inn Chicago Oak Brook . . . . . . . . . . Oak Brook, IL
Residence Inn Fort Lauderdale Plantation . . . . . Plantation, FL
Residence Inn Salt Lake City Airport
Residence Inn San Antonio Downtown Market

. . . . . . . .

Salt Lake City, UT

Square . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

San Antonio, TX

Silver Spring, MD

Residence Inn Fort Lauderdale SW Miramar . . . Miramar, FL
Residence Inn Silver Spring . . . . . . . . . . . . . . . .
SpringHill Suites Boulder Longmont . . . . . . . . . Longmont, CO
Embassy Suites Myrtle Beach Oceanfront Resort Myrtle Beach, SC
Hilton Myrtle Beach Resort
. . . . . . . . . . . . . . . Myrtle Beach, SC
Courtyard Austin Northwest Arboretum . . . . . . . Austin, TX
Courtyard Denver West Golden . . . . . . . . . . . . . Golden, CO
Courtyard Boulder Louisville . . . . . . . . . . . . . . . Louisville, CO
Courtyard Louisville Northeast . . . . . . . . . . . . . Louisville, KY
Courtyard South Bend Mishawaka . . . . . . . . . . . Mishawaka, IN
Hampton Inn Houston Galleria . . . . . . . . . . . . . Houston, TX
Hyatt House Houston Galleria . . . . . . . . . . . . . Houston, TX
Hyatt House Austin Arboretum . . . . . . . . . . . . . Austin, TX
Hyatt House Dallas Lincoln Park . . . . . . . . . . . . Dallas, TX
Hyatt House Dallas Uptown . . . . . . . . . . . . . . . Dallas, TX
Residence Inn Austin Northwest Arboretum . . . . Austin, TX
Residence Inn Austin North Parmer Lane . . . . . Austin, TX
Residence Inn Denver West Golden . . . . . . . . . Golden, CO
Residence Inn Boulder Louisville . . . . . . . . . . . Louisville, CO
Residence Inn Louisville Northeast . . . . . . . . . . Louisville, KY

F-24

June 25, 2019
June 25, 2019
June 25, 2019
June 25, 2019

June 25, 2019
June 25, 2019
June 25, 2019
June 25, 2019
June 25, 2019
June 25, 2019
June 25, 2019

June 25, 2019
June 25, 2019
June 25, 2019
June 25, 2019
June 25, 2019
June 25, 2019

June 25, 2019
June 25, 2019
June 25, 2019
June 25, 2019
June 27, 2019
June 27, 2019
August 14, 2019
August 14, 2019
August 14, 2019
August 14, 2019
August 14, 2019
August 14, 2019
August 14, 2019
August 14, 2019
August 14, 2019
August 14, 2019
August 14, 2019
August 14, 2019
August 14, 2019
August 14, 2019
August 14, 2019

78
154
128
150

110
128
100
123
105
168
100

177
84
107
156
138
104

95
130
130
90
255
385
102
110
154
114
78
176
147
131
155
141
84
88
88
88
102

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

5. Sale of Hotel Properties (Continued)

Hotel Property Name

Location

Sale Date

Rooms

SpringHill Suites Austin North Parmer Lane . . . Austin, TX
SpringHill Suites Louisville Hurstbourne North . Louisville, KY
SpringHill Suites South Bend Mishawaka . . . . . . Mishawaka, IN
Residence Inn Columbia . . . . . . . . . . . . . . . . . . Columbia, MD
Courtyard Austin South . . . . . . . . . . . . . . . . . . Austin, TX
Fairfield Inn & Suites Austin South Airport . . . . Austin, TX
Marriott Austin South . . . . . . . . . . . . . . . . . . . . Austin, TX
Residence Inn Austin South . . . . . . . . . . . . . . . Austin, TX
SpringHill Suites Austin South . . . . . . . . . . . . . Austin, TX

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

August 14, 2019
August 14, 2019
August 14, 2019
September 12, 2019
November 22, 2019
November 22, 2019
November 22, 2019
November 22, 2019
November 22, 2019

132
142
87
108
110
63
211
66
152

6,024

During the year ended December 31, 2018, the Company sold seven hotel properties and a parcel

of land for a total sales price of approximately $530.9 million.

The following table discloses the hotel properties that were sold during the year ended

December 31, 2018:

Hotel Property Name

Location

Sale Date

Rooms

Marlborough,

Embassy Suites Boston Marlborough . . . . . . . . . . . . MA
Sheraton Philadelphia Society Hill Hotel . . . . . . . . . Philadelphia, PA
Embassy Suites Napa Valley . . . . . . . . . . . . . . . . . . Napa, CA
DoubleTree Hotel Columbia . . . . . . . . . . . . . . . . . . Columbia, MD
The Vinoy Renaissance St. Petersburg Resort &

Golf Club . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

St. Petersburg, FL

DoubleTree by Hilton Burlington Vermont . . . . . . . Burlington, VT
San Francisco,

February 21, 2018
March 27, 2018
July 13, 2018
August 7, 2018

August 28, 2018
September 27, 2018

229
364
205
152

362
309

Holiday Inn San Francisco—Fisherman’s Wharf . . . . CA

October 15, 2018

585

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,206

F-25

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

6. Revenue

The Company recognized revenue from the following geographic markets (in thousands):

For the year ended December 31, 2020

Room
Revenue

Food and Beverage
Revenue

Other
Revenue

Total
Revenue

South Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Southern California . . . . . . . . . . . . . . . . . . . . . . . .
Northern California . . . . . . . . . . . . . . . . . . . . . . . .
Chicago . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New York City . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Washington, DC . . . . . . . . . . . . . . . . . . . . . . . . . . .
Denver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charleston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pittsburgh . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 52,213
53,814
51,107
24,267
25,292
19,401
17,843
12,285
12,661
13,815
115,056

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$397,754

$ 7,058
4,013
4,160
4,187
2,189
827
416
2,948
2,145
1,481
10,960

$40,384

$ 4,359
5,590
3,204
1,193
1,231
1,931
1,220
864
1,188
631
13,538

$ 63,630
63,417
58,471
29,647
28,712
22,159
19,479
16,097
15,994
15,927
139,554

$34,949

$473,087

For the year ended December 31, 2019

Room
Revenue

Food and Beverage
Revenue

Other
Revenue

Total
Revenue

Northern California . . . . . . . . . . . . . . . . . . . . . .
Southern California . . . . . . . . . . . . . . . . . . . . . .
New York City . . . . . . . . . . . . . . . . . . . . . . . . .
South Florida . . . . . . . . . . . . . . . . . . . . . . . . . .
Austin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chicago . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Denver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Washington, DC . . . . . . . . . . . . . . . . . . . . . . . .
Louisville . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 201,667
126,959
130,702
117,252
76,438
70,469
55,063
55,955
59,257
40,627
382,696

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,317,085

$ 19,752
15,306
16,410
19,720
9,453
13,102
12,224
3,763
1,703
18,246
47,820

$177,499

$ 5,875
10,030
4,759
8,112
3,772
2,139
1,351
4,355
2,343
2,373
26,499

$ 227,294
152,295
151,871
145,084
89,663
85,710
68,638
64,073
63,303
61,246
457,015

$71,608

$1,566,192

F-26

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

6. Revenue (Continued)

For the year ended December 31, 2018

Room
Revenue

Food and Beverage
Revenue

Other
Revenue

Total
Revenue

Northern California . . . . . . . . . . . . . . . . . . . . . .
South Florida . . . . . . . . . . . . . . . . . . . . . . . . . .
Southern California . . . . . . . . . . . . . . . . . . . . . .
New York City . . . . . . . . . . . . . . . . . . . . . . . . .
Austin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chicago . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Denver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Washington, DC . . . . . . . . . . . . . . . . . . . . . . . .
Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tampa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 233,394
133,527
129,634
133,728
84,183
73,497
69,603
66,130
61,811
38,169
449,371

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,473,047

$ 20,872
20,547
16,662
16,633
9,382
13,106
12,596
2,460
3,789
17,296
72,175

$205,518

$ 7,572
7,272
8,846
4,197
3,662
2,029
1,291
2,370
4,337
9,108
31,975

$ 261,838
161,346
155,142
154,558
97,227
88,632
83,490
70,960
69,937
64,573
553,521

$82,659

$1,761,224

7. Debt

The Company’s debt consisted of the following (in thousands):

December 31,
2020

December 31,
2019

Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revolver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term Loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 495,759
400,000
1,168,304
523,668

$ 500,484
—
1,168,793
526,430

Debt, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,587,731

$2,195,707

Senior Notes

The Company’s senior unsecured notes are referred to as the ‘‘Senior Notes’’. The Company’s

Senior Notes consisted of the following (in thousands):

Interest Rate Maturity Date

Outstanding Borrowings at

December 31,
2020

December 31,
2019

Senior unsecured notes(1)(2)(3) . . . . . . . . . . . . .

6.00%

June 2025

$495,759

$500,484

(1) Requires payments of interest only through maturity.

(2) The senior unsecured notes include $20.9 million and $25.6 million at December 31, 2020 and
2019, respectively, related to acquisition related fair value adjustments on the Senior Notes.

(3) The Company has the option to redeem the senior unsecured notes at a price of 103.0% of face

value.

F-27

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

7. Debt (Continued)

If an event of default under the indenture governing the Senior Notes exists, the Company is not

permitted to (i) incur additional indebtedness, except to refinance maturing debt with replacement
debt, as defined under our indentures; (ii) pay dividends in excess of the minimum distributions
required to qualify as a REIT; (iii) repurchase capital stock; or (iv) merge. The Senior Notes are
subject to a maximum unsecured leverage maintenance covenant, which is based on asset value that is
calculated at historical cost.

In addition, the Senior Notes are subject to various incurrence covenants that limit the ability of

the Company’s subsidiary, FelCor Lodging Limited Partnership (‘‘Felcor LP’’), to incur additional debt
if these covenants are violated. Failure to meet these incurrence covenants thresholds does not, in and
of itself, constitute an event of default under the Senior Notes indenture. As of December 31, 2020, the
Company was in compliance with all covenants except the interest coverage ratio, which, as a result,
currently prohibits FelCor LP from incurring additional debt.

As of December 31, 2019, the Company was in compliance with all financial covenants.

Revolver and Term Loans

The Company has the following unsecured credit agreements in place:

(cid:127) $600.0 million revolving credit facility with a scheduled maturity date of May 18, 2024 and a one

year extension option if certain conditions are satisfied (the ‘‘Revolver’’);

(cid:127) $150.0 million term loan with a scheduled maturity date of January 22, 2022 (the ‘‘$150 Million

Term Loan Maturing 2022’’);

(cid:127) $400.0 million term loan with a scheduled maturity date of January 25, 2023 (the ‘‘$400 Million

Term Loan Maturing 2023’’);

(cid:127) $225.0 million term loan with a scheduled maturity date of January 25, 2023 (the ‘‘$225 Million

Term Loan Maturing 2023’’); and

(cid:127) $400.0 million term loan with a scheduled maturity date of May 18, 2025 (the ‘‘$400 Million

Term Loan Maturing 2025’’).

The $150 Million Term Loan Maturing 2022, the $400 Million Term Loan Maturing 2023, the

$225 Million Term Loan Maturing 2023, and the $400 Million Term Loan Maturing 2025 are
collectively the ‘‘Term Loans’’. The credit agreements contain certain financial covenants relating to the
Company’s maximum leverage ratio, minimum fixed charge coverage ratio, maximum secured
indebtedness, maximum unencumbered leverage ratio and minimum unsecured interest coverage ratio.
If an event of default exists, the Company is not permitted to make distributions to shareholders, other
than those required to qualify for and maintain REIT status. As of December 31, 2019, the Company
was in compliance with all financial covenants. As of December 31, 2020, the Company was not
required to comply with certain financial covenants, as described below.

The borrowings under the Revolver and Term Loans bear interest at variable rates equal to the
London InterBank Offered Rate (‘‘LIBOR’’) plus an applicable margin. The margin ranges from 1.35%
to 2.50%, depending on the Company’s leverage ratio, as calculated under the terms of each facility.
The Company incurs an unused facility fee on the Revolver of between 0.20% and 0.25%, based on the

F-28

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

7. Debt (Continued)

amount by which the maximum borrowing amount exceeds the total principal balance of the
outstanding borrowings.

The Company’s unsecured credit agreements consisted of the following (in thousands):

Interest Rate at
December 31,
2020(1)

Revolver(2) . . . . . . . . . . . . . . . . . . . . . . . . .
$150 Million Term Loan Maturing 2022 . . . .
$400 Million Term Loan Maturing 2023 . . . .
$225 Million Term Loan Maturing 2023 . . . .
$400 Million Term Loan Maturing 2025 . . . .

3.77%
4.03%
4.73%
4.73%
3.92%

Deferred financing costs, net (3) . . . . . . . . . .

Total Revolver and Term Loans, net . . . . . . .

Maturity Date

May 2024
January 2022
January 2023
January 2023
May 2025

Outstanding Borrowings at

December 31,
2020

December 31,
2019

$ 400,000
150,000
400,000
225,000
400,000

—
150,000
400,000
225,000
400,000

1,575,000
(6,696)

1,175,000
(6,207)

$1,568,304

$1,168,793

(1) Interest rate at December 31, 2020 gives effect to interest rate hedges.

(2) At December 31, 2020 and 2019, there was $200.0 million and $600.0 million of remaining capacity
on the Revolver, respectively. The Company has the ability to further increase the total capacity on
the Revolver to $750.0 million, subject to certain lender requirements. The Company also has the
ability to extend the maturity date for an additional one year period ending May 2025 if certain
conditions are satisfied.

(3) Excludes $4.1 million and $3.4 million as of December 31, 2020 and 2019, respectively, related to
deferred financing costs on the Revolver, which are included in prepaid expense and other assets
in the accompanying consolidated balance sheets.

The Revolver and Term Loans are subject to various financial covenants. A summary of the most

restrictive covenants is as follows:

Leverage ratio(1) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed charge coverage ratio(2) . . . . . . . . . . . . . . . . .
Secured indebtedness ratio . . . . . . . . . . . . . . . . . . . .
Unencumbered indebtedness ratio . . . . . . . . . . . . . . .
Unencumbered debt service coverage ratio . . . . . . . .
Maintain minimum liquidity level

. . . . . . . . . . . . . . . (cid:2) $125.0 million

Covenant
(cid:1) 7.00x
(cid:2) 1.50x
(cid:1) 45.0%
(cid:1) 60.0%
(cid:2) 2.00x

Compliance

N/A(3)
N/A(3)
N/A(3)
N/A(3)
N/A(3)
Yes

(1) Leverage ratio is net indebtedness, as defined in the Revolver and Term Loan

agreements, to corporate earnings before interest, taxes, depreciation, and amortization
(‘‘EBITDA’’), as defined in the Revolver and Term Loan agreements.

(2) Fixed charge coverage ratio is Adjusted EBITDA, generally defined in the Revolver and
Term Loan agreements as EBITDA less furniture, fixtures and equipment (‘‘FF&E’’)

F-29

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

7. Debt (Continued)

reserves, to fixed charges, which is generally defined in the Revolver and Term Loan
agreements as interest expense, all regularly scheduled principal payments, preferred
dividends paid, and cash taxes paid.

(3) The Company is not currently required to comply with these covenants, as described

below.

During the year ended December 31, 2020, the Company entered into two amendments to its
Revolver and Term Loans. The amendments suspend the testing of all existing financial maintenance
covenants under the Revolver and the Term Loan agreements for all periods through and including the
fiscal quarter ending December 31, 2021 (the ‘‘Covenant Relief Period’’). In addition, for periods
following the Covenant Relief Period, the amendments modify the covenant thresholds for the leverage
ratio and unencumbered debt service coverage ratio as follows:

(cid:127) Increasing the maximum leverage ratio to 8.50x for the first two quarters following the Covenant
Relief Period, 8.00x for the third and fourth quarters following the Covenant Relief Period, 7.50x
for the fifth quarter following the Covenant Relief Period (such period, the ‘‘Leverage Relief
Period’’), and returning to 7.00x for the quarter ending June 30, 2023.

(cid:127) Reducing the minimum unencumbered debt service coverage ratio to 1.65x for the first three

quarters following the Covenant Relief Period.

(cid:127) The Company is required to maintain a minimum liquidity level of $125.0 million.

Pursuant to the amendments and through the date that the financial statements are delivered for
the quarter ending March 31, 2022 (the ‘‘Restriction Period’’), the Company is subject to the following
restrictions:

(cid:127) The net cash proceeds from asset sales, equity issuances and incurrences of indebtedness will,
subject to various exceptions, be required to be applied as a mandatory prepayment of certain
amounts outstanding under the Revolver and the Term Loans.

(cid:127) Additional negative covenants that limit the ability of the Company and its subsidiaries to incur

additional indebtedness, make prepayments of other indebtedness, make dividends and
distributions (with certain exceptions, including for the payment of a quarterly cash dividend of
$0.01 per common share, the payment of a quarterly cash dividend on the Company’s Series A
Cumulative Convertible Preferred Shares and other payments for purposes of maintaining REIT
status) and stock repurchases. In addition, there are limitations on capital expenditures
exceeding $175.0 million, and investments, including acquisitions or mergers, exceeding
$200.0 million. All of these limitations are subject to various exceptions.

(cid:127) Requirement to pledge the equity interests in certain subsidiaries that own unencumbered
properties to secure the Revolver and Term Loans. The equity pledge requirement is also
required to be satisfied following the Restriction Period until such time as the leverage ratio is
no greater than 6.50x for two consecutive fiscal quarters (the ‘‘Covenant Relief Pledged
Collateral Period’’).

(cid:127) Extension of (1) the mandatory prepayment requirement applicable to dispositions of

unencumbered properties through the end of the Covenant Relief Pledged Collateral Period and

F-30

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

7. Debt (Continued)

(2) the requirement to maintain a minimum liquidity level of $125.0 million through the end of
the Leverage Relief Period.

The amendments further provide that, until the earlier of (1) April 1, 2023 or the day after the
end of the fifth quarter immediately following the end of the Covenant Relief Period and (2) such time
as the leverage ratio is less than or equal to 7.00x, borrowings under the Revolver and the Term Loan
agreements will bear interest, at the Company’s election, at a per annum rate of (i) in the case of the
Revolver, (a) LIBOR plus a margin of 250 basis points or (b) a Base Rate, as defined in the credit
agreement, plus a margin of 150 basis points, and (ii) in the case of each of the Term Loans,
(a) LIBOR plus a margin of 240 basis points or (b) a Base Rate, as defined in the credit agreement,
plus a margin of 140 basis points. The amendments also add a floor of 0.25% to the LIBOR interest
rate determination, subject to certain exceptions, under both the Revolver and the Term Loan
agreements.

At the Company’s election, the Restriction Period and the Covenant Relief Period may be

terminated early if the Company is at such time able to comply with the applicable financial covenants.
If the Company assesses that it is unlikely to meet the financial covenant thresholds for periods
following the Covenant Relief Period, then the Company will seek an extension of the Covenant Relief
Period.

Mortgage Loans

The Company’s mortgage loans consisted of the following (in thousands):

Number of
Assets
Encumbered

Interest Rate at
December 31, 2020

1.66%
5.25%
4.95%
4.94%
1.74%
1.74%

7
1
3
1
4
3

Mortgage loan(1) . . . . .
Mortgage loan(2) . . . . .
Mortgage loan(3) . . . . .
Mortgage loan(4) . . . . .
Mortgage loan(1) . . . . .
Mortgage loan(1) . . . . .

Deferred financing

costs, net

. . . . . . . . .

Total mortgage loans,

net . . . . . . . . . . . . . .

Maturity Date

April 2022
June 2022
October 2022
October 2022
April 2024
April 2024

Principal balance at

December 31,
2020

December 31,
2019

(5)

(5)
(5)

$200,000
30,332
86,775
27,972
85,000
96,000

$200,000
31,215
89,299
28,785
85,000
96,000

526,079

530,299

(2,411)

(3,869)

$523,668

$526,430

(1) The hotels encumbered by the mortgage loan are cross-collateralized. Requires payments of

interest only through maturity.

(2) Includes $0.3 million and $0.5 million at December 31, 2020 and 2019, respectively, related to a

fair value adjustment on a mortgage loan.

F-31

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

7. Debt (Continued)

(3) Includes $0.9 million and $1.4 million at December 31, 2020 and 2019, respectively, related to fair

value adjustments on the mortgage loans.

(4) Includes $0.3 million and $0.4 million at December 31, 2020 and 2019, respectively, related to a

fair value adjustment on the mortgage loan.

(5) The mortgage loan provides two one year extension options.

Certain mortgage agreements are subject to various maintenance covenants requiring the Company

to maintain a minimum debt yield or debt service coverage ratio (‘‘DSCR’’). Failure to meet the debt
yield or DSCR thresholds is not an event of default, but instead triggers a cash trap event. During the
cash trap event, the lender or servicer of the mortgage loan controls cash outflows until the loan is
covenant compliant. In addition, certain mortgage loans have other requirements including continued
operation and maintenance of the hotel property. At December 31, 2020, five mortgage loans failed to
meet the DSCR threshold and were in a cash trap event. The Company was in compliance with all
other maintenance covenants associated with the other mortgage loan at December 31, 2020 and 2019.

Interest Expense

The components of the Company’s interest expense consisted of the following (in thousands):

For the year ended December 31,

2020

2019

2018

Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revolver and Term Loans . . . . . . . . . . . . . . . . . . . .
Mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred financing costs . . . . . . . . .
Undesignated interest rate swaps . . . . . . . . . . . . . . .

$ 23,767
55,413
16,949
4,416
(376)

$23,793
42,272
20,754
4,100
376

$ 28,428
43,458
26,253
3,504
—

Total interest expense . . . . . . . . . . . . . . . . . . . . . . .

$100,169

$91,295

$101,643

Future Minimum Principal Payments

As of December 31, 2020, the future minimum principal payments were as follows (in thousands):

2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,279
490,386
625,000
581,000
874,888

Total(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,574,553

(1) Excludes a total of $22.3 million related to fair value adjustments on debt.

F-32

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

8. Derivatives and Hedging

The Company’s interest rate swaps consisted of the following (in thousands):

Hedge type

Swap-cash flow . . . . .
Swap-cash flow . . . . .
Swap-cash flow . . . . .
Swap-cash flow . . . . .
Swap-cash flow . . . . .
Swap-cash flow . . . . .
Swap-cash flow . . . . .
Swap-cash flow . . . . .
Swap-cash flow . . . . .
Swap-cash flow . . . . .
Swap-cash flow . . . . .
Swap-cash flow . . . . .
Swap-cash flow(1) . . .
Swap-cash flow(1) . . .
Swap-cash flow . . . . .
Swap-cash flow . . . . .
Swap-cash flow(2) . . .
Swap-cash flow(3) . . .
Swap-cash flow(3) . . .
Swap-cash flow(3) . . .
Swap-cash flow(3) . . .
Swap-cash flow(3) . . .
Swap-cash flow(3) . . .
Swap-cash flow(3) . . .
Swap-cash flow(3) . . .
Swap-cash flow . . . . .
Swap-cash flow . . . . .
Swap-cash flow(4) . . .

Interest
rate

Maturity

December 31,
2020

December 31,
2019

December 31,
2020

December 31,
2019

Notional value at

Fair value at

April 2021
April 2021
April 2021
April 2021
June 2021
June 2021
June 2021

1.15%
1.20%
2.15%
1.91%
1.61%
1.56%
1.71%
2.29% December 2022
2.29% December 2022
2.38% December 2022
2.38% December 2022
2.75% November 2023
2.51% December 2023
2.39% December 2023
1.35% September 2021
1.28% September 2022
1.24% September 2025
1.16%
1.20%
1.15%
1.10%
0.98%
0.95%
0.93%
0.90%
0.85% December 2024
0.75% December 2024
0.65% January 2026

April 2024
April 2024
April 2024
April 2024
April 2024
April 2024
April 2024
April 2024

$ 100,000
100,000
75,000
75,000
50,000
50,000
50,000
200,000
125,000
200,000
100,000
100,000
75,000
75,000
49,000
100,000
150,000
50,000
50,000
50,000
50,000
25,000
25,000
25,000
25,000
50,000
50,000
50,000

$ 100,000
100,000
75,000
75,000
50,000
50,000
50,000
200,000
125,000
200,000
100,000
100,000
75,000
75,000
49,000
100,000
150,000
—
—
—
—
—
—
—
—
—
—
—

(398)
(418)
(594)
(523)
(433)
(416)
(462)
(9,044)
(5,648)
(9,436)
(4,716)
(7,635)
(5,284)
(5,012)
(454)
(2,035)
(5,508)
(1,464)
(1,526)
(1,450)
(1,374)
(596)
(573)
(558)
(535)
(1,249)
(1,047)
(662)

607
538
(590)
(337)
(32)
13
(109)
(4,587)
(2,859)
(5,155)
(2,574)
(3,590)
(2,120)
(1,858)
181
690
2,268
—
—
—
—
—
—
—
—
—
—
—

$2,124,000

$1,674,000

$(69,050)

$(19,514)

(1) Effective in January 2021.

(2) Effective in September 2021.

(3) Effective in April 2021.

(4) Effective in July 2021.

F-33

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

8. Derivatives and Hedging (Continued)

The following interest rate swaps have not been designated as hedging instruments (in thousands):

Derivative type

Interest
rate

Maturity

December 31,
2020

December 31,
2019

December 31,
2020

December 31,
2019

Notional value at

Fair value at

Interest rate swap(1) .
Interest rate swap(1) .
Interest rate swap(1) .
Interest rate swap(1) .

1.80% September 2020
1.80% September 2020
1.80% September 2020
1.81% October 2020

$—
—
—
—

$—

$ 30,195
75,030
32,025
142,500

$279,750

$—
—
—
—

$—

$ (34)
(86)
(37)
(219)

$(376)

(1) During the year ended December 31, 2019, the Company discontinued accounting for these

interest rate swaps as cash flow hedges. The Company recognized all changes in the fair value of
these interest rate swaps in interest expense in the consolidated statements of operations and
comprehensive income.

As of December 31, 2020 and 2019, the aggregate fair value of the interest rate swap liabilities of

$69.1 million and $24.2 million, respectively, was included in accounts payable and other liabilities in
the accompanying consolidated balance sheets. As of December 31, 2019, the aggregate fair value of
the interest rate swap assets of $4.3 million was included in prepaid expense and other assets in the
accompanying consolidated balance sheet.

As of December 31, 2020 and 2019, there was approximately $69.1 million and $19.5 million,
respectively, of unrealized losses included in accumulated other comprehensive loss related to interest
rate hedges that are effective in offsetting the variable cash flows. There was no ineffectiveness
recorded on the designated hedges during the years ended December 31, 2020 and 2019. For the year
ended December 31, 2020, approximately $19.7 million of the amounts included in accumulated other
comprehensive loss were reclassified into interest expense. For the year ended December 31, 2019,
approximately $5.4 million of the amounts included in accumulated other comprehensive income were
reclassified into interest expense. Approximately $27.7 million of the unrealized losses included in
accumulated other comprehensive loss at December 31, 2020 is expected to be reclassified into interest
expense within the next 12 months.

9. Fair Value

Fair Value Measurement

Fair value is defined as the price that would be received upon the sale of an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date in
the principal or most advantageous market. The fair value hierarchy has three levels of inputs, both
observable and unobservable:

(cid:127) Level 1—Inputs include quoted market prices in an active market for identical assets or

liabilities.

(cid:127) Level 2—Inputs are market data, other than Level 1, that are observable either directly or

indirectly. Level 2 inputs include quoted market prices for similar assets or liabilities, quoted

F-34

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

9. Fair Value (Continued)

market prices in an inactive market, and other observable information that can be corroborated
by market data.

(cid:127) Level 3—Inputs are unobservable and corroborated by little or no market data.

Fair Value of Financial Instruments

The Company used the following market assumptions and/or estimation methods:

(cid:127) Cash and cash equivalents, restricted cash reserves, hotel and other receivables, accounts payable
and other liabilities—The carrying amounts reported in the consolidated balance sheets for these
financial instruments approximate fair value because of their short term maturities.

(cid:127) Debt—The Company estimated the fair value of the Senior Notes by using publicly available

trading prices for the Senior Notes, which are Level 2 in the fair value hierarchy. The Company
estimated the fair value of the Revolver and Term Loans by using a discounted cash flow model
and incorporating various inputs and assumptions for the effective borrowing rates for debt with
similar terms, which are Level 3 inputs in the fair value hierarchy. The Company estimated the
fair value of the mortgage loans using a discounted cash flow model and incorporating various
inputs and assumptions for the effective borrowing rates for debt with similar terms and the loan
to estimated fair value of the collateral, which are Level 3 inputs in the fair value hierarchy.

The fair value of the Company’s debt was as follows (in thousands):

December 31, 2020

December 31, 2019

Carrying
Value

Senior Notes . . . . . . . . . . . . . . .
Revolver and Term Loans, net
. .
Mortgage loans, net . . . . . . . . . .

$ 495,759
1,568,304
523,668

Fair Value

$ 484,229
1,543,636
512,118

Carrying
Value

$ 500,484
1,168,793
526,430

Fair Value

$ 497,835
1,176,068
532,249

Debt, net . . . . . . . . . . . . . . . . . .

$2,587,731

$2,539,983

$2,195,707

$2,206,152

Recurring Fair Value Measurements

The following table presents the Company’s fair value hierarchy for those financial assets and

liabilities measured at fair value on a recurring basis as of December 31, 2020 (in thousands):

Interest rate swap liability . . . . . . . . . . . . . . .

$— $(69,050)

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$— $(69,050)

Fair Value at December 31, 2020

Level 1

Level 2

Level 3

Total

F-35

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

9. Fair Value (Continued)

The following table presents the Company’s fair value hierarchy for those financial assets and

liabilities measured at fair value on a recurring basis as of December 31, 2019 (in thousands):

Fair Value at December 31, 2019

Level 1

Level 2

Level 3

Total

Interest rate swap asset . . . . . . . . . . . . . . . . .
Interest rate swap liability . . . . . . . . . . . . . . .

$— $ 4,297

—

(24,187) —

$— $ 4,297
(24,187)

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$— $(19,890)

The fair values of the derivative financial instruments are determined using widely accepted

valuation techniques including a discounted cash flow analysis on the expected cash flows for each
derivative. The Company determined that the significant inputs, such as interest yield curves and
discount rates, used to value its derivatives fall within Level 2 of the fair value hierarchy and that the
credit valuation adjustments associated with the Company’s counterparties and its own credit risk utilize
Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself
and its counterparties. As of December 31, 2020, the Company assessed the significance of the impact
of the credit valuation adjustments on the overall valuation of its derivative positions and determined
that the credit valuation adjustments were not significant to the overall valuation of its derivatives. As a
result, the Company determined that its derivative valuations in their entirety are classified in Level 2
of the fair value hierarchy.

Non-recurring Fair Value Measurements

The following table presents the Company’s fair value hierarchy for those financial assets and
liabilities measured at fair value on a non-recurring basis as of December 31, 2019 (in thousands):

Fair Value at December 31, 2019

Level 1

Level 2

Level 3

Total

Impaired hotel properties . . . . . . . . . . . . . . . . . .

$—

$— $6,019

$6,019

During the year ended December 31, 2019, the Company recorded an impairment loss of

$13.5 million related to two hotel properties. The Company estimated the fair value of the hotels using
a weighted valuation approach considering room revenue multiples and comparable sales. The valuation
approach included significant unobservable inputs, including revenue growth projections and prevailing
market multiples, from third party sources.

10. Commitments and Contingencies

Operating Leases

As of December 31, 2020, 12 of Company’s hotel properties were subject to ground lease
agreements that cover the land underlying the respective hotels. The ground leases are classified as
operating leases. The total ground lease expense was $12.4 million for the year ended December 31,
2020, which consisted of $11.6 million of fixed lease expense and $0.8 million of variable lease expense.
The total ground lease expense was $15.7 million for the year ended December 31, 2019, which
consisted of $11.6 million of fixed lease expense and $4.1 million of variable lease expense. The total

F-36

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

10. Commitments and Contingencies (Continued)

ground lease expense was $22.2 million for the year ended December 31, 2018. The total ground lease
expense is included in property tax, insurance and other in the accompanying consolidated statements
of operations and comprehensive income.

The Company’s ground leases consisted of the following (in millions):

Hotel Property Name

Wyndham Boston Beacon Hill . . . . . . . . . . . . . . . . . . .
Wyndham San Diego Bayside . . . . . . . . . . . . . . . . . . .
DoubleTree Suites by Hilton Orlando Lake Buena

Vista . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residence Inn Palo Alto Los Altos . . . . . . . . . . . . . . .
Wyndham Pittsburgh University Center . . . . . . . . . . . .
Marriott Louisville Downtown . . . . . . . . . . . . . . . . . . .
Embassy Suites San Francisco Airport Waterfront . . . . .
Wyndham New Orleans French Quarter . . . . . . . . . . . .
Courtyard Charleston Historic District . . . . . . . . . . . . .
Courtyard Austin Downtown Convention Center and

Residence Inn Downtown Convention Center . . . . . .
Courtyard Waikiki Beach . . . . . . . . . . . . . . . . . . . . . .

Initial Term
Expiration

Extension
Term(s)
Expiration

Ground Lease Expense

For the year ended
December 31,

2020

2019

2018(1)

2028
2029

2032
2033
2038
2053
2059
2065
2096

2100
2112

— $ 0.4
4.1
—

$ 0.9
4.8

0.3
2057
0.1
—
0.7
2083
2153(2) —
1.2
0.5
1.0

—
—
—

—
—

0.4
3.7

0.9
0.1
0.7
—
2.4
0.5
1.0

0.8
3.6

0.8
0.1
0.8
—
2.3
0.5
1.0

0.9
3.5

$12.4

$15.7

$15.6

(1) Excludes $6.6 million of ground lease expense related to hotel properties sold during the year

ended December 31, 2018.

(2) The lease may be extended up to four twenty-five year terms at the Company’s option.

The future lease payments for the Company’s operating leases are as follows (in thousands):

December 31, 2020

2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 11,201
11,309
11,405
11,465
11,516
534,621

Total future lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Imputed interest

591,517
(468,924)

Lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 122,593

F-37

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

10. Commitments and Contingencies (Continued)

The following table presents certain information related to the Company’s operating leases as of

December 31, 2020:

Weighted average remaining lease term . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

62 years

7.03%

Restricted Cash Reserves

The Company is obligated to maintain cash reserve funds for future capital expenditures at the

hotels (including the periodic replacement or refurbishment of FF&E) as determined pursuant to the
management agreements, franchise agreements and/or mortgage loan documents. The management
agreements, franchise agreements and/or mortgage loan documents require the Company to reserve
cash ranging typically from 3.0% to 5.0% of the individual hotel’s revenues. Any unexpended amounts
will remain the property of the Company upon termination of the management agreements, franchise
agreements or mortgage loan documents. As of December 31, 2020 and 2019, approximately
$35.0 million and $44.7 million, respectively, was available in the restricted cash reserves for future
capital expenditures, real estate taxes and insurance. In addition, due to the effects of the COVID-19
pandemic on its operations, the Company has worked with the hotel brands, third-party managers and
lenders to allow the use of available restricted cash reserves to cover operating shortfalls at certain
hotels.

Litigation

Other than the legal proceeding mentioned below, neither the Company nor any of its subsidiaries

is currently involved in any regulatory or legal proceedings that management believes will have a
material and adverse effect on the Company’s financial position, results of operations or cash flows.

Prior to the Company’s merger with FelCor Lodging Trust, Inc. (‘‘FelCor’’), an affiliate of
InterContinental Hotels Group PLC (‘‘IHG’’), which was previously the management company for
three of FelCor’s hotels (two of which were sold in 2006, and one of which was converted by FelCor
into a Wyndham brand and operation in 2013), notified FelCor that the National Retirement Fund
(‘‘NRF’’) in which the employees at those hotels had participated had assessed a withdrawal liability of
$8.3 million, with required quarterly payments including interest, in connection with the termination of
IHG’s operation of those hotels. During the year ended December, 31 2020, the Company settled the
dispute with IHG and NRF.

Management Agreements

As of December 31, 2020, 102 of the Company’s consolidated hotel properties were operated
pursuant to long-term management agreements with initial terms ranging from one to 25 years, with 13
different management companies as noted in the table below. This number includes 29 consolidated

F-38

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

10. Commitments and Contingencies (Continued)

hotel properties that receive the benefits of a franchise agreement pursuant to management agreements
with Hilton, Hyatt, or Marriott.

Management Company

Aimbridge Hospitality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Crestline Hotels and Resorts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Davidson Hotels and Resorts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hilton Management and affiliates . . . . . . . . . . . . . . . . . . . . . . . . . .
HEI Hotels and Resorts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Highgate Hotels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hyatt Corporation and affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . .
InnVentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marriott International, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sage Hospitality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Urgo Hotels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
White Lodging Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wyndham . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number of
Hotel Properties

35
1
1
19
1
5
11
3
3
4
3
8
8

102

Each management company receives a base management fee between 1.75% and 3.5% of hotel

revenues. Management agreements that include the benefits of a franchise agreement incur a base
management fee between 3.0% and 7.0% of hotel revenues. The management companies are also
eligible to receive an incentive management fee if hotel operating income, as defined in the
management agreements, exceeds certain thresholds. The incentive management fee is generally
calculated as a percentage of hotel operating income after the Company has received a priority return
on its investment in the hotel.

Management fees are included in management and franchise fee expense in the accompanying
consolidated statements of operations and comprehensive income. For the years ended December 31,
2020, 2019 and 2018, the Company incurred management fee expense of approximately $13.2 million,
$45.5 million and $57.3 million, respectively.

Franchise Agreements

As of December 31, 2020, 72 of the Company’s consolidated hotel properties were operated under

franchise agreements with initial terms ranging from one to 30 years. This number excludes 29
consolidated hotel properties that receive the benefits of a franchise agreement pursuant to
management agreements with Hilton, Hyatt, or Marriott. In addition, The Knickerbocker is not
operated with a hotel brand so the hotel does not have a franchise agreement. Franchise agreements
allow the hotel properties to operate under the respective brands. Pursuant to the franchise
agreements, the Company pays a royalty fee between 3.0% and 6.0% of room revenue, plus additional
fees for marketing, central reservation systems and other franchisor costs between 1.0% and 4.3% of
room revenue. Certain hotels are also charged a royalty fee of 3.0% of food and beverage revenues.

F-39

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

10. Commitments and Contingencies (Continued)

Franchise fees are included in management and franchise fee expense in the accompanying
consolidated statements of operations and comprehensive income. For the years ended December 31,
2020, 2019 and 2018, the Company incurred franchise fee expense of approximately $25.6 million,
$75.3 million and $80.8 million, respectively.

Wyndham Agreements

Prior to January 1, 2020, the Wyndham management agreements guaranteed minimum levels of

annual net operating income at each of the Wyndham-managed hotels. In 2019, the Company entered
into an agreement with Wyndham to terminate the net operating income guarantee effective
December 31, 2019 and received termination payments totaling $36.0 million from Wyndham, of which
$35.0 million was received in 2019 and $1.0 million was received in 2020. These amounts are included
in advance deposits and deferred revenue in the accompanying consolidated balance sheets. In addition,
in conjunction with the termination of the net operating income guarantee, the Company entered into
transitional franchise and management agreements effective January 1, 2020 through December 31,
2020. During the year ended December 31, 2020, the Company exercised its option to extend the
agreements through December 31, 2021. The transitional franchise and management fees are 3% and
2%, respectively, of hotel revenues. Effective January 1, 2020, the Company began recognizing the
termination payments over the estimated term of the transitional agreements as a reduction to
management and franchise fee expense in the consolidated statements of operations and comprehensive
income. For the year ended December 31, 2020, the Company recognized approximately $17.8 million
as a reduction to management and franchise fee expense related to the amortization of the termination
payments.

Other

During the year ended December 31, 2020, the Company incurred approximately $8.7 million in

corporate and property-level severance costs as a result of the COVID-19 pandemic. This amount
includes $6.7 million for the year ended December 31, 2020 related to severance for associates at the
Company’s New York City hotels operating under collective bargaining agreements. The severance costs
are included in other operating expense in the accompanying consolidated statement of operations and
comprehensive income.

11. Equity

Common Shares of Beneficial Interest

Under the declaration of trust for the Company, there are 450,000,000 Common Shares authorized

for issuance.

During the year ended December 31, 2020, the Company repurchased and retired 5,489,335
common shares for approximately $62.6 million, of which $26.0 million was repurchased under a share
repurchase program that expired February 29, 2020 and $36.6 million was repurchased under a share
repurchase program that was approved by the Company’s board of trustees on February 14, 2020 to
acquire up $250.0 million of Common Shares from March 1, 2020 to February 28, 2021 (‘‘2020 Share
Repurchase Program’’). As of December 31, 2020, the 2020 Share Repurchase Program had a
remaining capacity of $213.4 million. In April 2020, the Company suspended further repurchases of its
common shares pursuant to the 2020 Share Repurchase Program due to the effects of the COVID-19

F-40

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

11. Equity (Continued)

pandemic. In addition, the Company is not permitted to repurchase common shares as part of the
Revolver and Term Loans amendments discussed in Note 7 above. The 2020 Share Repurchase Program
expires pursuant to its terms on February 28, 2021.

During the year ended December 31, 2019, the Company repurchased and retired 4,575,170
common shares for approximately $77.8 million, of which $10.3 million was repurchased under a share
repurchase program that expired February 28, 2019, and $67.5 million was repurchased under a share
repurchase program that expired February 29, 2020.

During the year ended December 31, 2018, the Company repurchased and retired 1,162,557
Common Shares for approximately $21.8 million under a share repurchase program that expired
February 28, 2019.

During the year ended December 31, 2020, the Company declared a cash dividend of $0.04 per
Common Share. During each of the years ended December 31, 2019 and 2018, the Company declared a
cash dividend of $1.32 per Common Share.

Series A Preferred Share

Under the declaration of trust for the Company, there are 50,000,000 preferred shares authorized

for issuance.

During each of the years ended December 31, 2020, 2019 and 2018, the Company declared a cash

dividend of $1.95 per Series A Preferred Share.

Noncontrolling Interest in Consolidated Joint Ventures

The Company consolidates the joint venture that owns the DoubleTree Metropolitan Hotel New
York City hotel property, which has a third-party partner that owns a noncontrolling 1.7% ownership
interest in the joint venture. In addition, the Company consolidates the joint venture that owns The
Knickerbocker hotel property, which has a third-party partner that owns a noncontrolling 5% ownership
interest in the joint venture. The third-party ownership interests are included in the noncontrolling
interest in consolidated joint ventures on the consolidated balance sheets.

Noncontrolling Interest in the Operating Partnership

The Company consolidates the Operating Partnership, which is a majority-owned limited

partnership that has a noncontrolling interest. As of December 31, 2020, the Operating Partnership had
165,775,045 OP units outstanding, of which 99.5% of the outstanding OP units were owned by the
Company and its subsidiaries, and the noncontrolling 0.5% ownership interest was owned by other
limited partners.

As of December 31, 2020, the limited partners owned 772,293 OP units. The outstanding OP units

held by the limited partners are redeemable for cash, or at the option of the Company, for a like
number of Common Shares. The noncontrolling interest is included in the noncontrolling interest in
the Operating Partnership on the consolidated balance sheets.

F-41

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

11. Equity (Continued)

Consolidated Joint Venture Preferred Equity

The Company’s joint venture that redeveloped The Knickerbocker raised $45.0 million

($44.4 million net of issuance costs) through the sale of redeemable preferred equity under the EB-5
Immigrant Investor Program. The purchasers received a 3.25% annual return, plus a 0.25%
non-compounding annual return that was paid upon redemption. On February 15, 2019, the Company
redeemed the preferred equity in full.

12. Equity Incentive Plan

Pursuant to the terms of the RLJ Lodging Trust 2015 Equity Incentive Plan (the ‘‘2015 Plan’’), the

Company may issue share-based awards to officers, employees, non-employee trustees and other
eligible persons under the 2015 Plan. The 2015 Plan provides for a maximum of 7,500,000 Common
Shares to be issued in the form of share options, share appreciation rights, restricted share awards,
unrestricted share awards, share units, dividend equivalent rights, long-term incentive units, other
equity-based awards and cash bonus awards.

Share Awards

From time to time, the Company may award unvested restricted shares under the 2015 Plan as

compensation to officers, employees and non-employee trustees. The issued shares vest over a period
of time as determined by the board of trustees at the date of grant. The Company recognizes
compensation expense for time-based unvested restricted shares on a straight-line basis over the vesting
period based upon the fair market value of the shares on the date of issuance, adjusted for forfeitures.

Non-employee trustees may also elect to receive unrestricted shares under the 2015 Plan as

compensation that would otherwise be paid in cash for their services. The shares issued to
non-employee trustees in lieu of cash compensation are unrestricted and include no vesting conditions.
The Company recognizes compensation expense for the unrestricted shares issued in lieu of cash
compensation on the date of issuance based upon the fair market value of the shares on that date.

A summary of the unvested restricted shares is as follows:

2020

2019

2018

Unvested at January 1, . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . .

Number of
Shares

940,202
801,463
(480,444)
(8,993)

Unvested at December 31,

. . . . .

1,252,228

Weighted-
Average
Grant Date
Fair Value

$20.21
11.95
19.59
18.80

$15.17

Weighted-
Average

Number of Grant Date
Fair Value

740,792
530,436
(312,131)
(18,895)

940,202

$21.89
18.69
21.63
20.03

$20.21

700,325
592,673
(438,881)
(113,325)

740,792

$22.88
21.42
22.92
21.58

$21.89

For the years ended December 31, 2020, 2019 and 2018, the Company recognized approximately
$8.7 million, $8.6 million and $10.2 million, respectively, of share-based compensation expense related
to restricted share awards.

F-42

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

12. Equity Incentive Plan (Continued)

As of December 31, 2020, there was $13.7 million of total unrecognized compensation costs related

to unvested restricted share awards and these costs are expected to be recognized over a weighted-
average period of 2.4 years. The total fair value of the shares vested (calculated as the number of
shares multiplied by the vesting date share price) during the years ended December 31, 2020, 2019 and
2018 was approximately $5.2 million, $5.5 million and $9.5 million, respectively.

Performance Units

From time to time, the Company may award performance units under the 2015 Plan as

compensation to officers and employees. The performance units vest over a four years period, including
three years of performance-based vesting (the ‘‘performance units measurement period’’) plus an
additional one year of time-based vesting. These performance units may convert into restricted shares
at a range of 0% to 200% of the number of performance units granted contingent upon the Company
achieving an absolute total shareholder return and a relative total shareholder return over the
measurement period at specified percentiles of the peer group, as defined by the awards. If at the end
of the performance units measurement period the target criterion is met, then 50% of the restricted
shares will vest immediately. The remaining 50% will vest one year later. The award recipients will not
be entitled to receive any dividends prior to the date of conversion. For any restricted shares issued
upon conversion, the award recipient will be entitled to receive payment of an amount equal to all
dividends that would have been paid if such restricted shares had been issued at the beginning of the
performance units measurement period. The fair value of the performance units is determined using a
Monte Carlo simulation, and an expected term equal to the requisite service period for the awards of
four years. The Company estimates the compensation expense for the performance units on a
straight-line basis using a calculation that recognizes 50% of the grant date fair value over three years
and 50% of the grant date fair value over four years.

A summary of the performance unit awards is as follows:

Date of Award

February 2018 . . . . . . . . . . . . . . . . . . . . .
February 2019 . . . . . . . . . . . . . . . . . . . . .
February 2020 . . . . . . . . . . . . . . . . . . . . .

Number of
Units
Granted

264,000
260,000
489,000

Grant Date
Fair Value

Conversion
Range

Risk Free
Interest Rate

$13.99
$19.16
$12.06

0% to 150%
0% to 200%
0% to 200%

2.42%
2.52%
1.08%

Volatility

27.44%
27.19%
23.46%

For the years ended December 31, 2020, 2019 and 2018, the Company recognized approximately
$3.5 million, $2.9 million and $2.1 million, respectively, of share-based compensation expense related to
the performance unit awards.

As of December 31, 2020, there was $7.1 million of total unrecognized compensation costs related
to the performance unit awards and these costs are expected to be recognized over a weighted-average
period of 2.3 years.

As of December 31, 2020, there were 762,744 Common Shares available for future grant under the
2015 Plan, which includes potential Common Shares that may convert from performance units if certain
target criterion is met.

F-43

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

13. Earnings per Common Share

Basic earnings per Common Share is calculated by dividing net income attributable to common

shareholders by the weighted-average number of Common Shares outstanding during the period
excluding the weighted-average number of unvested restricted shares outstanding during the period.
Diluted earnings per Common Share is calculated by dividing net income attributable to common
shareholders by the weighted-average number of Common Shares outstanding during the period, plus
any shares that could potentially be outstanding during the period. The potential shares consist of the
unvested restricted share grants and unvested performance units, calculated using the treasury stock
method. Any anti-dilutive shares have been excluded from the diluted earnings per share calculation.

Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend
equivalents (whether paid or unpaid) are participating shares and are considered in the computation of
earnings per share pursuant to the two-class method. If there were any undistributed earnings allocable
to the participating shares, they would be deducted from net income attributable to common
shareholders used in the basic and diluted earnings per share calculations.

The limited partners’ outstanding OP Units (which may be redeemed for Common Shares under

certain circumstances) have been excluded from the diluted earnings per share calculation as there was
no effect on the amounts for the years ended December 31, 2020, 2019 and 2018, since the limited
partners’ share of income would also be added back to net income attributable to common
shareholders.

The computation of basic and diluted earnings per Common Share is as follows (in thousands,

except share and per share data):

Numerator:
Net (loss) income attributable to RLJ . . . . . . . . . . . . . . .
Less: Preferred dividends . . . . . . . . . . . . . . . . . . . . . . . .
Less: Dividends paid on unvested restricted shares . . . . .
Less: Undistributed earnings attributable to unvested

For the year ended December 31,

2020

2019

2018

(404,441) $
(25,115)
(55)

127,842
(25,115)
(1,342)

188,643
(25,115)
(1,181)

restricted shares . . . . . . . . . . . . . . . . . . . . . . . . . . . ..

—

Net (loss) income attributable to common shareholders
excluding amounts attributable to unvested restricted
shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Denominator:
Weighted-average number of Common Shares—basic . . . .
Unvested restricted shares . . . . . . . . . . . . . . . . . . . . . . .

(429,611) $

101,385

162,347

164,503,661
—

171,287,086
101,390

174,225,130
91,275

Weighted-average number of Common Shares—diluted . .

164,503,661

171,388,476

174,316,405

Net (loss) income per share attributable to common

shareholders—basic . . . . . . . . . . . . . . . . . . . . . . . . . .

Net (loss) income per share attributable to common

shareholders—diluted . . . . . . . . . . . . . . . . . . . . . . . . .

(2.61) $

0.59

(2.61) $

0.59

0.93

F-44

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

14. Income Taxes

Current income tax expense represents the amounts expected to be reported on the Company’s

income tax returns, and deferred tax expense or benefit represents the change in the net deferred tax
assets and liabilities. The deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities as measured by the enacted tax
rates that will be in effect when these differences reverse.

The Company accounts for income taxes using the asset and liability method. Under this method,
deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable
to the differences between the financial statement carrying amounts of existing assets and liabilities and
their respective income tax bases, and for net operating loss, capital loss and tax credit carryforwards.
The deferred tax assets and liabilities are measured using the enacted income tax rates in effect for the
year in which those temporary differences are expected to be realized or settled. The effect on the
deferred tax assets and liabilities from a change in tax rates is recognized in earnings in the period
when the net rate is enacted. 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 all available evidence,
including the future reversals of existing taxable temporary differences, future projected taxable income
and tax planning strategies.

The components of the income tax provision are as follows (in thousands):

For the Years Ended December 31,

2020

2019

2018

Current:

Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

— $ — $ —
(2,209)

(3,067)

(484)

Deferred:
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(45,438)
(6,048)

3,987
2,831

(4,867)
(1,717)

Income tax (expense) benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(51,970) $ 3,751

$(8,793)

F-45

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

14. Income Taxes (Continued)

The provision for income taxes is different from the amount of income tax (expense) benefit that
is determined by applying the applicable U.S. statutory federal income tax rate to pretax income as a
result of the following differences (in thousands):

For the Years Ended December 31,

2020

2019

2018

Expected U.S. federal tax benefit (expense) at statutory rate . . . . . . . .
Tax impact of REIT election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 90,143
(85,140)

$(26,382) $(41,864)
35,058

24,129

Expected tax benefit (expense) at TRS . . . . . . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State income tax benefit (expense), net of federal benefit . . . . . . . . . .
Reassessment of acquired NOLs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact of rate changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other permanent items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact of provision to return/deferred adjustments . . . . . . . . . . . . . . .

5,003
(59,321)
1,174
—
349
(22)
847

(2,253)
(297)
(2,367)
9,973
332
(117)
(1,520)

(6,806)
542
(1,463)
—
(51)
(566)
(449)

Income tax (expense) benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(51,970) $ 3,751

$ (8,793)

Deferred income taxes represent the tax effect from continuing operations of the differences
between the book and tax basis of the assets and liabilities. The deferred tax assets (liabilities) include
the following (in thousands):

December 31, 2020

December 31, 2019

Deferred tax liabilities:

Partnership basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred tax assets:

Property and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Incentive and vacation accrual . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue—key money . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . .
Federal historic tax credit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wyndham guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (2,453)
(1,157)

$ (3,610)

$ 2,619
2,339
966
76
202
71,831
824
5,384
(80,670)

Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,571

(977)
(1,496)

$ (2,473)

$ 1,786
3,878
994
65
421
57,109
824
10,192
(21,349)

$ 53,920

Deferred tax assets are recognized only to the extent that it is more likely than not that they will

be realized based on the consideration of all available evidence, including the future reversals of
existing taxable temporary differences, future projected taxable income, and tax planning strategies.
Valuation allowances are provided if, based upon the weight of the available evidence, it is more likely
than not that some or all of the deferred tax assets will not be realized. The Company would record a

F-46

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

14. Income Taxes (Continued)

valuation allowance to reduce its deferred tax assets to the amount that is most likely to be utilized in
future periods to offset taxable income. Based upon the available objective evidence at December 31,
2020, the Company determined it was more likely than not that the deferred tax assets related to the
net operating loss (‘‘NOL’’) carryforwards of its primary TRS would not be utilized in future periods.
The Company considered all available evidence, both positive and negative, including cumulative losses
in recent years and its current forecast of future income in its analysis. As a result, the Company
recorded a $59.3 million valuation allowance to fully reserve these deferred tax assets and recorded
income tax expense totaling $52.0 million during the year ended December 31, 2020. As of
December 31, 2020 and 2019, the Company had a valuation allowance of approximately $80.7 million
and $21.3 million, respectively, related to NOL carryforwards, historic tax credits, and other deferred
tax assets of its TRSs.

As discussed in Note 10, Commitments and Contingencies, the Company terminated its agreements

with Wyndham effective December 31, 2019. The termination triggered the reassessment of the
utilization of NOLs acquired in the merger with FelCor. As a result, the Company recorded a deferred
tax benefit during the year ended December 31, 2019 to recognize additional deferred tax assets related
to NOLs that would have otherwise expired absent the termination.

The Company’s NOLs will begin to expire in 2024 for federal tax purposes and 2020 to 2040 for
state tax purposes. The Company’s historic tax credits begin to expire in 2035. The annual utilization of
these NOLs and tax credits is limited pursuant to federal and state tax laws.

The Company is subject to examination by U.S. federal and various state and local jurisdictions.

The tax years subject to examination vary by jurisdiction. With few exceptions, as of December 31,
2020, the Company is no longer subject to U.S. federal or state and local tax examinations by tax
authorities for the tax years of 2015 and before.

The Company had no accruals for tax uncertainties as of December 31, 2020 and 2019.

15. Segment Information

The Company separately evaluates the performance of each of its hotel properties. However,

because each of the hotels has similar economic characteristics, facilities, and services, the hotel
properties have been aggregated into a single operating segment.

F-47

RLJ Lodging Trust

Notes to the Consolidated Financial Statements (Continued)

16. Supplemental Information to Statements of Cash Flows (in thousands)

For the year ended December 31,

2020

2019

2018

Reconciliation of cash, cash equivalents, and restricted cash reserves
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$899,813
34,977

$882,474
44,686

$320,147
64,695

Cash, cash equivalents, and restricted cash reserves . . . . . . . . . . . . . .

$934,790

$927,160

$384,842

Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 98,511

$ 97,259

$114,280

Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,501

4,090

1,836

Operating cash flow lease payments for operating leases . . . . . . . . . .

$ 11,813

$ 15,270

Right-of-use asset obtained in exchange for lease obligation due to

remeasurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 4,100

—

Supplemental investing and financing transactions
In conjunction with the sale of hotel properties, the Company

recorded the following:
Sale of hotel properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Escrow related to certain post-closing obligations . . . . . . . . . . . . . .
Purchase option for land subject to a ground lease . . . . . . . . . . . .
Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating prorations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receipt of forfeited deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,883
—
—
(133)
(98)
517

$530,850
$705,681
—
1,000
— (44,831)
(10,668)
(1,288)
—

(10,482)
(9,329)
—

Proceeds from the sale of hotel properties, net . . . . . . . . . . . . . .

5,169

$685,870

$475,063

$ (49,536) $ (33,459) $
$
$

$ 14,234
$ 64,165

7,313
8,752

7,349
$ 15,709
$ 65,557

Supplemental non-cash transactions

Change in fair market value of designated interest rate swaps . . . . .
Accrued capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-48

RLJ Lodging Trust
Schedule III—Real Estate and Accumulated Depreciation
December 31, 2020
(amounts in thousands)

Costs
Capitalized
Subsequent to
Acquisition

Description

Debt

Initial Costs

Land,
Buildings &
Building &
Improvements Improvements Improvements Improvements Improvements

Building &

Land &

Gross Amount at December 31, 2020

Accumulated
Total(1) Depreciation Acquired

Date

Depreciation
Life

Marriott Denver South @ Park

Meadows . . . . . . . . . . . . . . $

Marriott Louisville Downtown . .
Marriott Chicago Midway . . . . .
Renaissance Boulder Flatiron

Hotel . . . . . . . . . . . . . . . . .

Renaissance Fort Lauderdale

Plantation Hotel . . . . . . . . . .

Courtyard Chicago Downtown

— $
—
—

—

Magnificent Mile . . . . . . . . .

31,000

F
-
4
9

Courtyard Chicago Southeast

Hammond . . . . . . . . . . . . .

Courtyard Indianapolis @ The

Capitol . . . . . . . . . . . . . . . .
Courtyard Midway Airport . . . . .
Courtyard Houston Sugarland . . .
Courtyard Austin Downtown

Convention Center . . . . . . . .

Residence Inn Indianapolis

Fishers . . . . . . . . . . . . . . . .
Residence Inn Chicago Southeast
Hammond . . . . . . . . . . . . .

Residence Inn Houston By The

Galleria . . . . . . . . . . . . . . .

Residence Inn Indianapolis

Downtown On The Canal . . . .
Residence Inn Merrillville . . . . .
Residence Inn Chicago Naperville
Residence Inn Louisville

Downtown . . . . . . . . . . . . .

—

—
—
—

—

—
—
—

—

5,385
—
4,464

4,440

4,842

8,140

1,038

2,482
2,172
617

6,049

998

980

2,665

2,670
595
1,923

1,815

39,488
89,541
32,736

32,557

35,517

59,696

7,616

18,207
15,927
2,331

44,361

7,322

7,190

19,549

19,588
4,372
14,101

13,308

3,946
25,110
2,771

3,245

8,194

9,430

2,236

4,101
2,674
3,447

5,163

1,092

1,322

3,065

4,612
1,321
1,103

3,015

5,353
92
4,496

4,719

4,876

8,142

1,080

2,635
2,197
731

6,049

1,048

1,043

2,665

2,670
595
1,923

1,815

43,466
114,559
35,475

48,819
114,651
39,971

$ 15,836
36,502
12,867

2006
2006
2006

15 - 40 years
15 - 40 years
15 - 40 years

35,523

40,242

12,742

2006

15 - 40 years

43,677

48,553

13,898

2006

15 - 40 years

69,124

77,266

24,031

2006

15 - 40 years

9,810

10,890

3,477

2006

15 - 40 years

22,155
18,576
5,664

24,790
20,773
6,395

7,236
7,394
3,623

2006
2006
2006

15 - 40 years
15 - 40 years
15 - 40 years

49,524

55,573

15,491

2007

15 - 40 years

8,364

8,449

9,412

2,952

2006

15 - 40 years

9,492

2,905

2006

15 - 40 years

22,614

25,279

8,347

2006

15 - 40 years

24,200
5,693
15,204

26,870
6,288
17,127

7,862
2,143
5,566

2006
2006
2006

15 - 40 years
15 - 40 years
15 - 40 years

16,323

18,138

4,963

2007

15 - 40 years

Description

Debt

Residence Inn Austin Downtown

Convention Center . . . . . . . .

SpringHill Suites Denver North

Westminster

. . . . . . . . . . . .

Fairfield Inn & Suites Denver

Cherry Creek . . . . . . . . . . . .
Fairfield Inn & Suites Chicago SE
Hammond . . . . . . . . . . . . .
.

Fairfield Inn & Suites Key West
Fairfield Inn & Suites Chicago

Midway Airport . . . . . . . . . .

Hampton Inn Chicago Midway

Airport

. . . . . . . . . . . . . . .

Hilton Garden Inn Chicago

Midway Airport . . . . . . . . . .
Sleep Inn Midway Airport . . . . .
Holiday Inn Express & Suites

Midway Airport . . . . . . . . . .
TGI Friday’s Chicago Midway . . .
Hampton Inn Garden City . . . . .
Courtyard Houston By The

—

—
—

—

—
—

—
—
—

Galleria . . . . . . . . . . . . . . .

19,000

F
-
5
0

Embassy Suites Los Angeles

Downey . . . . . . . . . . . . . . .
Embassy Suites Tampa Downtown
Convention Center . . . . . . . .
Fairfield Inn & Suites Washington
DC Downtown . . . . . . . . . . .

Embassy Suites Fort Myers

Estero . . . . . . . . . . . . . . . .

Homewood Suites Washington

DC Downtown . . . . . . . . . . .

Hotel Indigo New Orleans

Garden District

. . . . . . . . . .

Residence Inn National Harbor

Washington DC . . . . . . . . . .

31,000

—

Costs
Capitalized
Subsequent to
Acquisition

Initial Costs

Land,
Buildings &
Building &
Improvements Improvements Improvements Improvements Improvements

Building &

Land &

Gross Amount at December 31, 2020

Accumulated
Total(1) Depreciation Acquired

Date

Depreciation
Life

3,767

2,409

1,203

722
1,803

1,425

2,747

2,978
1,189

1,874
829
5,691

3,069

4,857

2,161

27,626

17,670

8,823

5,301
19,325

10,449

20,143

21,842
8,718

13,742
6,139
22,764

22,508

4,312

1,720

1,350

1,548
3,518

2,012

3,067

1,585
1,863

3,154
703
2,792

2,073

29,943

11,520

71,017

14,448

3,804

2,409

1,203

790
1,853

1,447

2,793

3,000
1,211

1,902
851
5,737

3,069

4,970

2,425

31,901

35,705

9,555

2007

15 - 40 years

19,390

21,799

7,001

2006

15 - 40 years

10,173

11,376

3,810

2006

15 - 40 years

6,781
22,793

7,571
24,646

2,505
8,258

2006
2006

15 - 40 years
15 - 40 years

12,439

13,886

4,489

2006

15 - 40 years

23,164

25,957

8,439

2006

15 - 40 years

23,405
10,559

16,868
6,820
25,510

26,405
11,770

18,770
7,671
31,247

8,517
4,100

5,692
2,444
8,292

2006
2006

2006
2006
2007

15 - 40 years
15 - 40 years

15 - 40 years
15 - 40 years
15 - 40 years

24,581

27,650

8,059

2007

15 - 40 years

41,350

46,320

12,346

2008

15 - 40 years

85,201

87,626

21,524

2010

15 - 40 years

34,000

16,214

22,265

2,816

7,862

23,139

34,188

7,706

1,860

5,104

16,447

29,738

46,185

8,984

2010

15 - 40 years

2,926

9,612

12,538

3,102

2010

15 - 40 years

23,150

39,281

62,431

10,484

2010

15 - 40 years

1,901

7,457

3,865

11,992

37,046

2,119

2,082

7,480

15,676

17,758

7,127

2010

15 - 40 years

39,142

46,622

10,166

2010

15 - 40 years

F
-
5
1

Description

Hilton Garden Inn New Orleans

Convention Center . . . . . . . .

Hilton Garden Inn Los Angeles

Hollywood . . . . . . . . . . . . .

DoubleTree Metropolitan Hotel

New York City . . . . . . . . . . .
Renaissance Pittsburgh Hotel . . .
Courtyard Atlanta Buckhead . . .
Marriott Denver Airport @

Gateway Park . . . . . . . . . . .
Embassy Suites West Palm Beach
. . . . . . . . . . . . . . .

Central

Hilton Garden Inn Pittsburgh

University Place . . . . . . . . . .

Courtyard Charleston Historic

District

. . . . . . . . . . . . . . .

Residence Inn Bethesda

Downtown . . . . . . . . . . . . .

Courtyard New York Manhattan

Upper East Side . . . . . . . . . .
Hilton Garden Inn San Francisco
Oakland Bay Bridge . . . . . . .
Embassy Suites Boston Waltham .
Courtyard Houston Downtown

Convention Center . . . . . . . .

Residence Inn Houston

Downtown Convention Center .

SpringHill Suites Houston

Downtown Convention Center .
Courtyard Waikiki Beach . . . . . .
Courtyard San Francisco . . . . . .
Residence Inn Atlanta Midtown

Historic . . . . . . . . . . . . . . .

SpringHill Suites Portland

Hillsboro . . . . . . . . . . . . . .
Hilton Cabana Miami Beach . . .

Debt

—

—
34,000
—

—

—
—

—

—
—
—

—

—
—

Costs
Capitalized
Subsequent to
Acquisition

Initial Costs

Land,
Buildings &
Building &
Improvements Improvements Improvements Improvements Improvements

Building &

Land &

Gross Amount at December 31, 2020

Accumulated
Total(1) Depreciation Acquired

Date

Depreciation
Life

3,405

5,303

140,332
3,274
2,860

3,083

3,656

1,975

2,714

8,154

20,655

11,903
6,268

5,799

4,674

2,382
557
11,277

2,812

3,488
25,083

20,750

9,191

19,136

10,704

188,014
39,934
21,668

38,356

9,614

18,490

35,828

52,749

60,222

22,757
56,024

28,953

24,913

12,756
79,033
18,198

6,044

18,283
40,707

24,524
11,147
3,840

4,854

7,884

9,024

4,499

6,895

7,860

14,212
4,842

4,558

4,991

15,951
13,102
28,732

7,602

1,481
6,905

3,479

5,667

140,513
3,396
2,875

3,179

3,877

2,382

3,510

8,287

21,265

12,187
6,386

6,050

4,875

2,566
801
11,291

29,867

33,346

8,237

2010

15 - 40 years

29,476

35,143

8,635

2010

15 - 40 years

212,357
50,959
25,493

352,870
54,355
28,368

57,057
12,700
6,863

2010
2011
2011

15 - 40 years
15 - 40 years
15 - 40 years

43,114

46,293

11,722

2011

15 - 40 years

17,277

21,154

6,040

2011

15 - 40 years

27,107

29,489

8,937

2011

15 - 40 years

39,531

43,041

9,234

2011

15 - 40 years

59,511

67,798

13,551

2012

15 - 40 years

67,472

88,737

15,483

2012

15 - 40 years

36,685
60,748

48,872
67,134

6,472
13,503

2012
2012

15 - 40 years
15 - 40 years

33,260

39,310

7,051

2013

15 - 40 years

29,703

34,578

6,164

2013

15 - 40 years

28,523
91,891
46,916

31,089
92,692
58,207

6,970
18,602
10,985

2013
2013
2013

15 - 40 years
15 - 40 years
15 - 40 years

2,969

13,489

16,458

3,080

2013

15 - 40 years

3,515
25,212

19,737
47,483

23,252
72,695

3,784
7,963

2013
2014

15 - 40 years
15 - 40 years

Costs
Capitalized
Subsequent to
Acquisition

Initial Costs

Land,
Buildings &
Building &
Improvements Improvements Improvements Improvements Improvements

Building &

Land &

Gross Amount at December 31, 2020

Accumulated
Total(1) Depreciation Acquired

Date

Depreciation
Life

Description

Hyatt House Charlotte Center

City . . . . . . . . . . . . . . . . . .
Hyatt House Cypress Anaheim . .
Hyatt House Emeryville San

Francisco Bay Area . . . . . . . .
Hyatt House San Diego Sorrento
Mesa . . . . . . . . . . . . . . . . .

Hyatt House San Jose Silicon

Valley . . . . . . . . . . . . . . . .
Hyatt House San Ramon . . . . . .
Hyatt House Santa Clara . . . . . .
Hyatt Centric The Woodlands . . .
Hyatt Place Fremont Silicon

Valley . . . . . . . . . . . . . . . .
Hyatt Place Madison Downtown .
Embassy Suites Irvine Orange

County . . . . . . . . . . . . . . . .
Courtyard Portland City Center . .
Hyatt Atlanta Midtown . . . . . . .
DoubleTree Grand Key Resort . .
Hyatt Place Washington DC

Downtown K Street . . . . . . . .

Homewood Suites Seattle

F
-
5
2

Debt

18,000
16,000

36,000

3,029
3,995

7,425

—

10,420

—
—
34,000
—

—
13,000

—
—
—
—

—

6,820
5,712
8,044
5,950

6,209
6,701

15,062
8,019
3,737
48,192

10,763

Lynnwood . . . . . . . . . . . . . .

19,000

3,933

Residence Inn Palo Alto Los

Altos . . . . . . . . . . . . . . . . .

30,332

16,996

DoubleTree Suites by Hilton

Austin . . . . . . . . . . . . . . . .

DoubleTree Suites by Hilton

Orlando—Lake Buena Vista . .

Embassy Suites Atlanta—

—

Buckhead . . . . . . . . . . . . . .
Embassy Suites Birmingham . . . .

—
21,130

7,072

896

31,279
10,495

26,193
9,164

29,137

21,288

31,682
11,852
27,703
16,882

13,730
25,478

33,048
53,024
41,731
27,770

55,225

30,949

45,786

50,827

44,508

46,015
33,568

2,013
3,964

6,689

1,423

2,433
2,834
3,157
1,679

1,475
1,399

8,900
1,511
1,164
8,253

1,987

204

801

1,049

981

8,006
641

3,029
4,354

7,517

28,206
12,769

31,235
17,123

4,840
3,161

2014
2014

15 - 40 years
15 - 40 years

35,734

43,251

7,303

2014

15 - 40 years

10,625

22,506

33,131

4,366

2014

15 - 40 years

6,894
5,717
8,046
5,957

6,271
6,701

15,187
8,022
3,740
48,266

10,763

34,041
14,681
30,858
18,554

15,143
26,877

41,823
54,532
42,892
35,949

40,935
20,398
38,904
24,511

21,414
33,578

57,010
62,554
46,632
84,215

5,644
3,067
5,700
3,159

3,017
4,438

8,130
9,236
7,098
6,758

2014
2014
2014
2014

2014
2014

2014
2014
2014
2014

15 - 40 years
15 - 40 years
15 - 40 years
15 - 40 years

15 - 40 years
15 - 40 years

15 - 40 years
15 - 40 years
15 - 40 years
15 - 40 years

57,212

67,975

7,960

2015

15 - 40 years

4,001

31,085

35,086

4,440

2015

15 - 40 years

17,099

46,484

63,583

6,680

2015

15 - 40 years

7,225

989

31,479
10,512

51,723

58,948

4,380

2017

15 - 40 years

45,396

46,385

4,006

2017

15 - 40 years

53,821
34,192

85,300
44,704

4,485
3,020

2017
2017

15 - 40 years
15 - 40 years

Description

Debt

Embassy Suites Dallas—Love

Field . . . . . . . . . . . . . . . . .

25,000

Embassy Suites Deerfield

Beach—Resort & Spa . . . . . .

27,972

Embassy Suites Fort Lauderdale

6,408

7,527

17th Street

. . . . . . . . . . . . .

31,673

30,933

Embassy Suites Los Angeles—

International Airport South . . .

50,000

13,110

F
-
5
3

Embassy Suites Mandalay

Beach—Hotel & Resort . . . . .

Embassy Suites Miami—

International Airport . . . . . . .

Embassy Suites Milpitas Silicon

Valley . . . . . . . . . . . . . . . .

Embassy Suites Minneapolis—

—

35,769

14,765

43,157

Costs
Capitalized
Subsequent to
Acquisition

Initial Costs

Land,
Buildings &
Building &
Improvements Improvements Improvements Improvements Improvements

Building &

Land &

Gross Amount at December 31, 2020

Accumulated
Total(1) Depreciation Acquired

Date

Depreciation
Life

34,694

56,128

54,592

94,733

53,280

18,099

1,645

3,772

3,190

1,841

5,143

3,336

26,399

12,887

6,413

7,815

31,277

13,168

35,865

15,057

43,369

36,334

42,747

3,092

2017

15 - 40 years

59,612

67,427

5,133

2017

15 - 40 years

57,438

88,715

5,195

2017

15 - 40 years

96,516

109,684

8,183

2017

15 - 40 years

58,327

94,192

5,030

2017

15 - 40 years

21,143

36,200

2,158

2017

15 - 40 years

39,074

82,443

3,716

2017

15 - 40 years

Airport

. . . . . . . . . . . . . . .

33,972

7,248

41,202

17,148

9,673

55,925

65,598

5,887

2017

15 - 40 years

Embassy Suites Orlando—

International Drive South/
Convention Center . . . . . . . .

Embassy Suites Phoenix—

—

4,743

Biltmore . . . . . . . . . . . . . . .

21,000

24,680

37,687

24,487

1,402

2,833

39,616

55,163

14,167

4,923

38,909

43,832

3,420

2017

15 - 40 years

24,783

39,683

27,217

52,000

2,500

2017

15 - 40 years

69,263

108,946

5,888

2017

15 - 40 years

Embassy Suites San Francisco

Airport—South San Francisco .

Embassy Suites San Francisco

Airport—Waterfront

. . . . . . .

San Francisco Marriott Union

Square . . . . . . . . . . . . . . . .
The Knickerbocker New York . . .
The Mills House Wyndham

Grand Hotel

Wyndham Boston Beacon Hill

. . . . . . . . . . . .
. .

—

—
—

3,698

85,270

4,076

4,054

88,990

93,044

8,293

2017

15 - 40 years

46,773
113,613

9,599
174

107,841
119,453

68,932
51,934

13,148
1,626

989
1,552

46,883
113,622

9,601
178

120,879
121,070

69,919
53,482

167,762
234,692

79,520
53,660

10,849
10,113

5,878
15,955

2017
2017

15 - 40 years
15 - 40 years

15 - 40 years
9 years

Costs
Capitalized
Subsequent to
Acquisition

Description

Debt

Initial Costs

Land,
Buildings &
Building &
Improvements Improvements Improvements Improvements Improvements

Building &

Land &

Gross Amount at December 31, 2020

Accumulated
Total(1) Depreciation Acquired

Date

Depreciation
Life

F
-
5
4

Wyndham Houston—Medical

Center Hotel & Suites . . . . . .

Wyndham New Orleans—French

Quarter . . . . . . . . . . . . . . .

Wyndham Philadelphia Historic

District

. . . . . . . . . . . . . . .

Wyndham Pittsburgh University

Center . . . . . . . . . . . . . . . .
Wyndham San Diego Bayside . . .
Wyndham Santa Monica At The

Pier . . . . . . . . . . . . . . . . . .

—

—
—

—

7,776

300

8,367

154
989

27,054

43,475

72,711

51,914

31,625
29,440

45,866

278

736

713

365
5,154

715

7,806

300

8,405

158
1,129

43,723

51,529

3,723

2017

15 - 40 years

73,447

73,747

6,225

2017

15 - 40 years

52,589

60,994

4,452

2017

15 - 40 years

31,986
34,454

32,144
35,583

2,696
8,807

2017
2017

15 - 40 years
10 years

27,081

46,554

73,635

3,965

2017

15 - 40 years

$526,079

$1,076,382

$3,567,557

$530,370

$1,089,597

$4,084,712

$5,174,309

$827,808

(1) The aggregate cost of real estate for federal income tax purposes was approximately $5.0 billion at December 31, 2020.

The change in the total cost of the hotel properties is as follows:

2020

2019

2018

Reconciliation of Land and Buildings and Improvements
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . .
Add: Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
Add: Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Sale of hotel properties . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Impairment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,127,448
—
52,936
(6,075)
—

$5,903,906
—
91,129
(854,087)
(13,500)

$6,165,296
—
109,403
(370,793)
—

Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,174,309

$5,127,448

$5,903,906

The change in the accumulated depreciation of the real estate assets is as follows:

Reconciliation of Accumulated Depreciation
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: Depreciation for the period . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Sale of hotel properties . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(706,040) $(759,643) $(628,518)
(143,215)
(131,442)
12,090
185,045

(125,494)
3,726

Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(827,808) $(706,040) $(759,643)

2020

2019

2018

F-55

EXECUTIVE OFFICERS

ROBERT L. JOHNSON
Executive Chairman

LESLIE D. HALE
President and
Chief Executive Officer

SEAN M. MAHONEY
Executive Vice President and
Chief Financial Officer

BOARD OF TRUSTEES

ROBERT L. JOHNSON
Executive Chairman of the Board
RLJ Lodging Trust

ARTHUR R. COLLINS
Managing Partner
theGROUP

LESLIE D. HALE
President and
Chief Executive Officer
RLJ Lodging Trust

SENATOR EVAN BAYH
Senior Advisor
Apollo Global Management
Former U.S. Senator and Governor
State of Indiana

NATHANIEL A. DAVIS
Executive Chairman
Stride, Inc.

PATRICIA L. GIBSON
Chief Executive Officer
Banner Oak Capital Partners, LP

ROBERT M. LA FORGIA
Principal and
Chief Executive Officer
Apertor Hospitality, LLC

ROBERT J. MCCARTHY
Chairman
Hotel Development Partners
Chairman
McCarthy Investments, LLC

GLENDA G. MCNEAL
President, Enterprise Strategic
Partnerships
American Express Company