SEC Filing – RLJ Lodging Trust

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rlj-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended September 30, 2022


☐			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						27-4706509
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)


3 Bethesda Metro Center, Suite 1000
Bethesda,	Maryland	20814
(Address of Principal Executive Offices)		(Zip Code)

(301) 280-7777

(Registrant’s Telephone Number, Including Area Code)

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

Title of Each Class

Trading Symbol

Name of Exchange on Which Registered

Common Shares of beneficial interest, par value $0.01 per share

RLJ

New York Stock Exchange

$1.95 Series A Cumulative Convertible Preferred Shares, par value $0.01 per share

RLJ-A

New York Stock Exchange

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.

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Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of October 27, 2022, 162,053,953 common shares of beneficial interest of the Registrant, $0.01 par value per share, were outstanding.

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		Page

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Financial Statements (unaudited)
	Balance Sheets as of September 30, 2022 and December 31, 2021	1
	Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2022 and 2021	2
	Statements of Changes in Equity for the three and nine months ended September 30, 2022 and 2021	4
	Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	8
	Notes to the Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	40

Signatures		41

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

RLJ Lodging Trust

Consolidated Balance Sheets

(Amounts in thousands, except share and per share data)

(unaudited)


	September 30, 2022		December 31, 2021
Assets
Investment in hotel properties, net	$	4,171,428	$	4,219,116
Investment in unconsolidated joint ventures	6,777		6,522
Cash and cash equivalents	488,146		665,341
Restricted cash reserves	51,504		48,528
Hotel and other receivables, net of allowance of $302 and $274, respectively	42,393		31,091
Lease right-of-use assets	138,335		144,988


Prepaid expense and other assets	68,190		33,390

Total assets	$	4,966,773	$	5,148,976
Liabilities and Equity
Debt, net	$	2,212,752	$	2,409,438
Accounts payable and other liabilities	150,946		155,136

Advance deposits and deferred revenue	21,987		20,047
Lease liabilities	117,810		123,031
Accrued interest	9,492		19,110
Distributions payable	14,596		8,347
Total liabilities	2,527,583		2,735,109
Commitments and Contingencies (Note 11)
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 September 30, 2022 and December 31, 2021	366,936		366,936
Common shares of beneficial interest, $0.01 par value, 450,000,000 shares authorized; 162,726,642 and 166,503,062 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	1,627		1,665
Additional paid-in capital	3,056,603		3,092,883
Distributions in excess of net earnings	(1,041,610)		(1,046,739)
Accumulated other comprehensive income (loss)	41,805		(17,113)
Total shareholders’ equity	2,425,361		2,397,632
Noncontrolling interests:
Noncontrolling interest in the Operating Partnership	6,341		6,316
Noncontrolling interest in consolidated joint ventures	7,488		9,919
Total noncontrolling interests	13,829		16,235

Total equity	2,439,190		2,413,867
Total liabilities and equity	$	4,966,773	$	5,148,976

The accompanying notes are an integral part of these consolidated financial statements.

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RLJ Lodging Trust

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Amounts in thousands, except share and per share data)

(unaudited)


	For the three months ended September 30,				For the nine months ended September 30,
	2022		2021		2022		2021
Revenues
Operating revenues
Room revenue	$	267,363	$	200,051	$	753,818	$	469,377
Food and beverage revenue	30,600		17,013		82,655		36,238
Other revenue	20,108		16,705		54,998		41,960
Total revenues	318,071		233,769		891,471		547,575
Expenses
Operating expenses
Room expense	68,394		51,951		188,015		124,276
Food and beverage expense	23,375		12,576		61,314		25,841
Management and franchise fee expense	25,390		16,225		71,846		34,216
Other operating expenses	82,021		67,599		227,563		173,602
Total property operating expenses	199,180		148,351		548,738		357,935
Depreciation and amortization	46,559		47,065		140,346		140,923
Impairment losses	—		138,899		—		144,845
Property tax, insurance and other	20,744		21,290		66,206		65,419
General and administrative	13,446		12,630		40,928		35,564
Transaction costs	(773)		(154)		(575)		101
Total operating expenses	279,156		368,081		795,643		744,787
Other income (expense), net	710		676		8,716		(8,579)
Interest income	1,281		222		1,800		826
Interest expense	(22,625)		(26,933)		(71,041)		(81,194)
(Loss) gain on sale of hotel properties, net	(57)		1,947		996		3,133
Gain on extinguishment of indebtedness, net	—		7,100		—		893
Income (loss) before equity in (loss) income from unconsolidated joint ventures	18,224		(151,300)		36,299		(282,133)
Equity in (loss) income from unconsolidated joint ventures	(150)		(232)		255		(470)
Income (loss) before income tax expense	18,074		(151,532)		36,554		(282,603)
Income tax expense	(391)		(286)		(1,139)		(554)
Net income (loss)	17,683		(151,818)		35,415		(283,157)
Net (income) loss attributable to noncontrolling interests:
Noncontrolling interest in the Operating Partnership	(53)		727		(74)		1,391
Noncontrolling interest in consolidated joint ventures	(36)		3,084		(29)		4,326


Net income (loss) attributable to RLJ	17,594		(148,007)		35,312		(277,440)
Preferred dividends	(6,279)		(6,279)		(18,836)		(18,836)
Net income (loss) attributable to common shareholders	$	11,315	$	(154,286)	$	16,476	$	(296,276)

Basic per common share data:
Net income (loss) per share attributable to common shareholders	$	0.07	$	(0.94)	$	0.10	$	(1.81)
Weighted-average number of common shares	160,368,297		164,068,011		162,681,840		163,964,227

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Diluted per common share data:
Net income (loss) per share attributable to common shareholders	$	0.07	$	(0.94)	$	0.10	$	(1.81)
Weighted-average number of common shares	160,784,709		164,068,011		163,064,462		163,964,227



Comprehensive income (loss):
Net income (loss)	$	17,683	$	(151,818)	$	35,415	$	(283,157)
Unrealized gain on interest rate derivatives	17,211		4,595		64,784		26,690
Reclassification of unrealized (gains) losses on discontinued cash flow hedges to other income (expense), net	—		—		(5,866)		10,658
Comprehensive income (loss)	34,894		(147,223)		94,333		(245,809)
Comprehensive (income) loss attributable to noncontrolling interests:
Noncontrolling interest in the Operating Partnership	(53)		727		(74)		1,391
Noncontrolling interest in consolidated joint ventures	(36)		3,084		(29)		4,326


Comprehensive income (loss) attributable to RLJ	$	34,805	$	(143,412)	$	94,230	$	(240,092)

The accompanying notes are an integral part of these consolidated financial statements.

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RLJ Lodging Trust

Consolidated Statements of Changes in Equity

(Amounts in thousands, except share data)

(unaudited)


	Shareholders’ Equity												Noncontrolling Interest
	Preferred Stock			Common Stock
	Shares	Amount		Shares	Par Value		Additional Paid-in Capital		Distributions in excess of net earnings		Accumulated Other Comprehensive (Loss) Income		Operating Partnership		Consolidated Joint Ventures		Total Equity
Balance at December 31, 2021	12,879,475	$	366,936	166,503,062	$	1,665	$	3,092,883	$	(1,046,739)	$	(17,113)	$	6,316	$	9,919	$	2,413,867
Net income	—	—		—	—		—		35,312		—		74		29		35,415
Unrealized gain on interest rate derivatives	—	—		—	—		—		—		64,784		—		—		64,784
Reclassification of unrealized gains on discontinued cash flow hedges to other income (expense), net	—	—		—	—		—		—		(5,866)		—		—		(5,866)

Contributions from consolidated joint venture partners	—	—		—	—		—		—		—		—		154		154
Distribution to consolidated joint venture partners	—	—		—	—		—		—		—		—		(2,614)		(2,614)





Issuance of restricted stock	—	—		702,993	7		(7)		—		—		—		—		—
Amortization of share-based compensation	—	—		—	—		17,280		—		—		—		—		17,280

Shares acquired to satisfy minimum required federal and state tax withholding on vesting restricted stock	—	—		(260,841)	(3)		(3,595)		—		—		—		—		(3,598)
Shares acquired as part of a share repurchase program	—	—		(4,190,359)	(42)		(49,958)		—		—		—		—		(50,000)
Forfeiture of restricted stock	—	—		(28,213)	—		—		—		—		—		—		—
Distributions on preferred shares	—	—		—	—		—		(18,836)		—		—		—		(18,836)
Distributions on common shares and units	—	—		—	—		—		(11,347)		—		(49)		—		(11,396)


Balance at September 30, 2022	12,879,475	$	366,936	162,726,642	$	1,627	$	3,056,603	$	(1,041,610)	$	41,805	$	6,341	$	7,488	$	2,439,190

The accompanying notes are an integral part of these consolidated financial statements.

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RLJ Lodging Trust

Consolidated Statements of Changes in Equity

(Amounts in thousands, except share data)

(unaudited)


	Shareholders’ Equity												Noncontrolling Interest
	Preferred Stock			Common Stock
	Shares	Amount		Shares	Par Value		Additional Paid-in Capital		Distributions in excess of net earnings		Accumulated Other Comprehensive Income		Operating Partnership		Consolidated Joint Ventures		Total Equity
Balance at June 30, 2022	12,879,475	$	366,936	162,981,820	$	1,630	$	3,053,345	$	(1,044,726)	$	24,594	$	6,325	$	7,468	$	2,415,572
Net income	—	—		—	—		—		17,594		—		53		36		17,683
Unrealized gain on interest rate derivatives	—	—		—	—		—		—		17,211		—		—		17,211

Contributions from consolidated joint venture partners	—	—		—	—		—		—		—		—		(2)		(2)
Distribution to consolidated joint venture partners	—	—		—	—		—		—		—		—		(14)		(14)





Amortization of share-based compensation	—	—		—	—		5,818		—		—		—		—		5,818

Shares acquired to satisfy minimum required federal and state tax withholding on vesting restricted stock	—	—		(654)	—		(9)		—		—		—		—		(9)
Shares acquired as part of a share repurchase program	—	—		(232,376)	(3)		(2,551)		—		—		—		—		(2,554)
Forfeiture of restricted stock	—	—		(22,148)	—		—		—		—		—		—		—


Distributions on preferred shares	—	—		—	—		—		(6,279)		—		—		—		(6,279)
Distributions on common shares and units	—	—		—	—		—		(8,199)		—		(37)		—		(8,236)


Balance at September 30, 2022	12,879,475	$	366,936	162,726,642	$	1,627	$	3,056,603	$	(1,041,610)	$	41,805	$	6,341	$	7,488	$	2,439,190

The accompanying notes are an integral part of these consolidated financial statements.

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RLJ Lodging Trust

Consolidated Statements of Changes in Equity

(Amounts in thousands, except share data)

(unaudited)


	Shareholders’ Equity												Noncontrolling Interest
	Preferred Stock			Common Stock
	Shares	Amount		Shares	Par Value		Additional Paid-in Capital		Distributions in excess of net earnings		Accumulated Other Comprehensive Loss		Operating Partnership		Consolidated Joint Ventures		Total Equity
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
Net loss	—	—		—	—		—		(277,440)		—		(1,391)		(4,326)		(283,157)
Unrealized gain on interest rate derivatives	—	—		—	—		—		—		26,690		—		—		26,690
Reclassification of unrealized losses on discontinued cash flow hedges to other income (expense), net	—	—		—	—		—		—		10,658		—		—		10,658
Redemption of Operating Partnership units	—	—		—	—		—		—		—		(7)		—		(7)








Contributions from consolidated joint venture partners	—	—		—	—		—		—		—		—		891		891
Issuance of restricted stock	—	—		1,759,193	17		(17)		—		—		—		—		—
Amortization of share-based compensation	—	—		—	—		13,648		—		—		—		—		13,648

Shares acquired to satisfy minimum required federal and state tax withholding on vesting restricted stock	—	—		(160,310)	(1)		(2,450)		—		—		—		—		(2,451)

Forfeiture of restricted stock	—	—		(21,853)	—		—		—		—		—		—		—
Distributions on preferred shares	—	—		—	—		—		(18,836)		—		—		—		(18,836)
Distributions on common shares and units	—	—		—	—		—		(4,644)		—		(16)		—		(4,660)


Balance at September 30, 2021	12,879,475	$	366,936	166,579,782	$	1,666	$	3,088,323	$	(1,011,081)	$	(31,702)	$	6,455	$	9,567	$	2,430,164

The accompanying notes are an integral part of these consolidated financial statements.

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RLJ Lodging Trust

Consolidated Statements of Changes in Equity

(Amounts in thousands, except share data)

(unaudited)


	Shareholders’ Equity												Noncontrolling Interest
	Preferred Stock			Common Stock
	Shares	Amount		Shares	Par Value		Additional Paid-in Capital		Distributions in excess of net earnings		Accumulated Other Comprehensive Loss		Operating Partnership		Consolidated Joint Ventures		Total Equity
Balance at June 30, 2021	12,879,475	$	366,936	166,626,796	$	1,666	$	3,083,175	$	(855,106)	$	(36,297)	$	7,195	$	12,349	$	2,579,918
Net loss	—	—		—	—		—		(148,007)		—		(727)		(