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10-K
RLJ LODGING TRUST filed this Form 10-K on 03/01/2019
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Cash flows from Financing Activities
 
The net cash flow used in financing activities totaled $946.2 million for the year ended December 31, 2018 primarily due to a payment of $539.0 million to redeem the senior secured notes, $257.3 million in distributions to shareholders and unitholders, $113.1 million in repayments of mortgage loans, $21.8 million paid to repurchase common shares under a share repurchase program, $6.3 million in scheduled mortgage loans principal payments, $3.6 million in deferred financing cost payments, and $3.6 million paid to repurchase common shares to satisfy employee tax withholding requirements.

The net cash flow used in financing activities totaled $190.4 million for the year ended December 31, 2017 primarily due to $177.0 million in distributions to shareholders and unitholders, $4.8 million in scheduled mortgage loans principal payments, $3.1 million paid to repurchase common shares to satisfy employee tax withholding requirements, $2.6 million paid to repurchase common shares under a share repurchase program, and $1.6 million in deferred financing cost payments.

The net cash flow used in financing activities totaled $182.3 million for the year ended December 31, 2016 primarily due to $165.2 million in distributions to shareholders and unitholders, $13.3 million paid to repurchase common shares under a share repurchase program, $5.5 million paid to repurchase common shares to satisfy employee tax withholding requirements, $5.4 million in deferred financing cost payments, and $3.7 million in scheduled mortgage loans principal payments. The net cash flow used in financing activities was partially offset by $11.0 million in additional mortgage loan debt.

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, 2018, approximately $62.0 million was held in FF&E reserve accounts for future capital expenditures.
 
Off-Balance Sheet Arrangements
 
As of December 31, 2018, we owned 50% interests in joint ventures that owned two hotel properties. We own more than 50% of the operating lessee for one of these hotels and the other hotel is operated without a lease. The Company also owned 50% interests in joint ventures that owned real estate and a condominium management business that are associated with two of our resort hotel properties. None of our trustees, officers or employees holds an ownership interest in any of these joint ventures or entities.

One of the 50% unconsolidated joint ventures that owns a hotel property has $21.0 million of non-recourse mortgage debt, of which our pro rata portion was $10.5 million, none of which is reflected as a liability on our consolidated balance sheet. Our liabilities with regard to the non-recourse debt and the liabilities of our subsidiaries that are members or partners in joint ventures are generally limited to guaranties of the borrowing entity's obligations to pay for the lender's losses caused by misconduct, fraud or misappropriation of funds by the venture and other typical exceptions from the non-recourse provisions in the mortgages, such as for environmental liabilities. In addition, this joint venture is subject to two ground leases with terms expiring in 2044 and 2094.


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