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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 March 31, 2024

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                   to    
 
Commission File Number 001-35169

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.)
7373 Wisconsin Avenue, Suite 1500
  
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 ClassTrading SymbolName of Exchange on Which Registered
Common Shares of beneficial interest, par value $0.01 per shareRLJNew York Stock Exchange
$1.95 Series A Cumulative Convertible Preferred Shares, par value $0.01 per shareRLJ-ANew 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 April 25, 2024, 155,900,602 common shares of beneficial interest of the Registrant, $0.01 par value per share, were outstanding.



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TABLE OF CONTENTS
 
  Page
   
   
 
   
 Consolidated Financial Statements (unaudited) 
 
 
 
 
 
   
   
   
   
 
 

ii

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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)
March 31, 2024December 31, 2023
Assets  
Investment in hotel properties, net$4,249,341 $4,136,216 
Investment in unconsolidated joint ventures7,632 7,398 
Cash and cash equivalents350,237 516,675 
Restricted cash reserves40,721 38,652 
Hotel and other receivables, net of allowance of $270 and $265, respectively
26,754 26,163 
Lease right-of-use assets132,276 136,140 
Prepaid expense and other assets82,896 58,051 
Total assets$4,889,857 $4,919,295 
Liabilities and Equity  
Debt, net$2,221,833 $2,220,778 
Accounts payable and other liabilities138,634 147,819 
Advance deposits and deferred revenue36,140 32,281 
Lease liabilities120,290 122,588 
Accrued interest12,824 22,539 
Distributions payable22,570 22,500 
Total liabilities2,552,291 2,568,505 
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 March 31, 2024 and December 31, 2023
366,936 366,936 
Common shares of beneficial interest, $0.01 par value, 450,000,000 shares authorized; 155,819,434 and 155,297,829 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively
1,558 1,553 
Additional paid-in capital3,002,588 3,000,894 
Distributions in excess of net earnings(1,072,125)(1,055,183)
Accumulated other comprehensive income24,944 22,662 
Total shareholders’ equity2,323,901 2,336,862 
Noncontrolling interests:  
Noncontrolling interest in the Operating Partnership6,220 6,294 
Noncontrolling interest in consolidated joint ventures7,445 7,634 
Total noncontrolling interests13,665 13,928 
Total equity2,337,566 2,350,790 
Total liabilities and equity$4,889,857 $4,919,295 

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
(Amounts in thousands, except share and per share data)
(unaudited)
 For the three months ended March 31,
 20242023
Revenues
Operating revenues
Room revenue$266,630 $260,832 
Food and beverage revenue35,689 33,288 
Other revenue22,091 20,383 
Total revenues324,410 314,503 
Expenses
Operating expenses
Room expense69,386 66,051 
Food and beverage expense28,627 26,137 
Management and franchise fee expense25,655 26,182 
Other operating expenses89,809 82,624 
Total property operating expenses213,477 200,994 
Depreciation and amortization44,679 44,996 
Property tax, insurance and other27,834 24,648 
General and administrative15,105 13,656 
Transaction costs14 20 
Total operating expenses301,109 284,314 
Other income, net3,191 849 
Interest income4,787 3,664 
Interest expense(26,458)(24,130)
Income before equity in income from unconsolidated joint ventures4,821 10,572 
Equity in income from unconsolidated joint ventures234 281 
Income before income tax expense5,055 10,853 
Income tax expense(309)(339)
Net income 4,746 10,514 
Net loss (income) attributable to noncontrolling interests:
Noncontrolling interest in the Operating Partnership2 (17)
Noncontrolling interest in consolidated joint ventures189 148 
Net income attributable to RLJ4,937 10,645 
Preferred dividends(6,279)(6,279)
Net (loss) income attributable to common shareholders$(1,342)$4,366 
Basic per common share data:
Net (loss) income per share attributable to common shareholders$(0.01)$0.03 
Weighted-average number of common shares152,970,215 159,483,268 
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Diluted per common share data:
Net (loss) income per share attributable to common shareholders$(0.01)$0.03 
Weighted-average number of common shares152,970,215 160,143,748 
Comprehensive income:
Net income $4,746 $10,514 
Unrealized gain (loss) on interest rate derivatives2,282 (6,416)
Comprehensive income 7,028 4,098 
Comprehensive loss (income) attributable to noncontrolling interests:
Noncontrolling interest in the Operating Partnership2 (17)
Noncontrolling interest in consolidated joint ventures189 148 
Comprehensive income attributable to RLJ$7,219 $4,229 
 
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’ EquityNoncontrolling Interest 
 Preferred StockCommon Stock   
 SharesAmountSharesPar 
Value
Additional
Paid-in Capital
Distributions in excess of net earningsAccumulated Other Comprehensive
Income
Operating
Partnership
Consolidated
Joint 
Ventures
Total 
Equity
Balance at December 31, 202312,879,475 $366,936 155,297,829 $1,553 $3,000,894 $(1,055,183)$22,662 $6,294 $7,634 $2,350,790 
Net income (loss)— — — — — 4,937 — (2)(189)4,746 
Unrealized gain on interest rate derivatives— — — — — — 2,282 — — 2,282 
Issuance of restricted stock— — 973,365 9 (9)— — — —  
Amortization of share-based compensation— — — — 6,981 — — — — 6,981 
Shares acquired to satisfy minimum required federal and state tax withholding on vesting restricted stock— — (345,870)(3)(4,028)— — — — (4,031)
Shares acquired as part of a share repurchase program— — (105,511)(1)(1,250)— — — — (1,251)
Forfeiture of restricted stock— — (379)— — — — — —  
Distributions on preferred shares— — — — — (6,279)— — — (6,279)
Distributions on common shares and units— — — — — (15,600)— (72)— (15,672)
Balance at March 31, 202412,879,475 $366,936 155,819,434 $1,558 $3,002,588 $(1,072,125)$24,944 $6,220 $7,445 $2,337,566 
 
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’ EquityNoncontrolling Interest 
 Preferred StockCommon Stock   
 SharesAmountSharesPar 
Value
Additional 
Paid-in
Capital
Distributions in excess of net earningsAccumulated Other Comprehensive IncomeOperating
Partnership
Consolidated
Joint
Ventures
Total
Equity
Balance at December 31, 202212,879,475 $366,936 162,003,533 $1,620 $3,054,958 $(1,049,441)$40,591 $6,313 $7,669 $2,428,646 
Net income (loss)— — — — — 10,645 — 17 (148)10,514 
Unrealized loss on interest rate derivatives— — — — — — (6,416)— — (6,416)
Issuance of restricted stock— — 640,407 6 (6)— — — —  
Amortization of share-based compensation— — — — 6,131 — — — — 6,131 
Shares acquired to satisfy minimum required federal and state tax withholding on vesting restricted stock— — (162,749)(1)(1,888)— — — — (1,889)
Shares acquired as part of a share repurchase program— — (2,401,853)(24)(24,513)— — — — (24,537)
Forfeiture of restricted stock— — (1,554)— — — — — —  
Distributions on preferred shares— — — — — (6,279)— — — (6,279)
Distributions on common shares and units— — — — — (12,864)— (66)— (12,930)
Balance at March 31, 202312,879,475 $366,936 160,077,784 $1,601 $3,034,682 $(1,057,939)$34,175 $6,264 $7,521 $2,393,240 

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

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RLJ Lodging Trust
Consolidated Statements of Cash Flows
(Amounts in thousands)
(unaudited)
 For the three months ended March 31,
 20242023
Cash flows from operating activities  
Net income$4,746 $10,514 
Adjustments to reconcile net income to cash flow provided by operating activities:  
Depreciation and amortization44,679 44,996 
Amortization of deferred financing costs1,572 1,474 
Other amortization1,466 1,086 
Equity in income from unconsolidated joint ventures(234)(281)
Amortization of share-based compensation6,434 5,692 
Changes in assets and liabilities: 
Hotel and other receivables, net(591)(2,650)
Prepaid expense and other assets(24,434)(4,782)
Accounts payable and other liabilities(7,015)(8,603)
Advance deposits and deferred revenue3,859 4,135 
Accrued interest(9,715)(9,563)
Net cash flow provided by operating activities20,767 42,018 
Cash flows from investing activities  
Acquisition, net(122,679) 
Improvements and additions to hotel properties and other assets(33,794)(32,634)
Purchase deposit(1,500) 
Net cash flow used in investing activities(157,973)(32,634)
Cash flows from financing activities  
Borrowing on Term Loan 95,000 
Repayments of Term Loans  (94,006)
Repurchase of common shares under share repurchase programs(1,251)(24,537)
Repurchase of common shares to satisfy employee tax withholding requirements(4,031)(1,889)
Distributions on preferred shares(6,279)(6,279)
Distributions on common shares(15,530)(8,100)
Distributions on Operating Partnership units(72)(40)
Payments of deferred financing costs (343)
Net cash flow used in financing activities(27,163)(40,194)
Net change in cash, cash equivalents, and restricted cash reserves(164,369)(30,810)
Cash, cash equivalents, and restricted cash reserves, beginning of year555,327 536,386 
Cash, cash equivalents, and restricted cash reserves, end of period$390,958 $505,576 

The accompanying notes are an integral part of these consolidated financial statements.
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RLJ Lodging Trust
Notes to the Consolidated Financial Statements
(unaudited)

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 owns primarily premium-branded, rooms-oriented, high-margin, focused-service and compact full-service hotels located within heart of demand locations. 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 March 31, 2024, there were 156,591,265 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 March 31, 2024, the Company owned 97 hotel properties with approximately 21,400 rooms, located in 23 states and the District of Columbia.  The Company, through wholly-owned subsidiaries, owned a 100% interest in 95 of its hotel properties, a 95% controlling interest in one hotel property, and a 50% non-controlling interest in an entity owning one hotel property. The Company consolidates its real estate interests in the 96 hotel properties in which it holds a controlling interest, and the Company records the real estate interest in the one hotel property in which it holds an indirect 50% non-controlling interest using the equity method of accounting. The Company leases 96 of the 97 hotel properties to its taxable REIT subsidiaries ("TRSs"), of which the Company owns a controlling financial interest.
 
2.              Summary of Significant Accounting Policies
 
The Company's Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission ("SEC") on February 27, 2024 (the "Annual Report"), contains a discussion of the Company's significant accounting policies. Other than noted below, there have been no significant changes to the Company's significant accounting policies since December 31, 2023.

Basis of Presentation and Principles of Consolidation
 
The unaudited 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") and in conformity with the rules and regulations of the SEC applicable to financial information. The unaudited financial statements include all adjustments of a normal recurring nature that are necessary, in the opinion of management, to fairly state the consolidated balance sheets, statements of operations and comprehensive income, statements of changes in equity and statements of cash flows.

The unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto as of and for the year ended December 31, 2023, included in the Annual Report.

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 interest in one hotel property in which it holds a 50% non-controlling interest using the equity method of accounting. All intercompany balances and transactions have been eliminated in consolidation.

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.




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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.

Recently Issued Accounting Pronouncements and Disclosure Rules
 
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosures. The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. It also requires disclosure of the amount and description of the composition of other segment items, as well as interim disclosures of a reportable segment’s profit or loss and assets. The ASU also applies to entities with a single reportable segment. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for the Company beginning January 1, 2025, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company is currently evaluating this ASU to determine its impact on the Company’s consolidated financial statements and related disclosures.

In March 2024, the SEC adopted the final rule under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors. In April 2024, the SEC stayed the final climate rules pending the completion of judicial review of an Eighth Circuit challenge seeking to vacate the rules. This rule would require registrants to disclose certain climate-related information in registration statements and annual reports. The disclosure requirements would apply to the Company's fiscal year beginning January 1, 2025. The Company is currently evaluating the final rule to determine its impact on the Company's disclosures.
3.              Investment in Hotel Properties
 
Investment in hotel properties consisted of the following (in thousands):
March 31, 2024December 31, 2023
Land and improvements$1,125,650 $998,417 
Buildings and improvements4,133,900 4,117,210 
Furniture, fixtures and equipment812,236 798,410 
6,071,786 5,914,037 
Accumulated depreciation(1,822,445)(1,777,821)
Investment in hotel properties, net$4,249,341 $4,136,216 
 
For the three months ended March 31, 2024 and 2023, the Company recognized depreciation expense related to its investment in hotel properties of approximately $44.6 million and $45.0 million, respectively.

4.              Acquisition
 
On January 29, 2024, the Company acquired the fee simple interest in its Wyndham Boston Beacon Hill hotel property in Boston, Massachusetts, which was previously owned via a leasehold interest that was subject to a ground lease, for a purchase price of approximately $125.0 million. The acquisition was accounted for as an asset acquisition, whereby approximately $0.2 million of transaction costs were capitalized as part of the cost of the acquisition. The existing right-of-use asset of $1.3 million, lease liability of $0.1 million and $125.2 million cost of the acquisition were recorded as land in the accompanying consolidated balance sheet.

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5.          Revenue

For the three months ended March 31, 2024For the three months ended March 31, 2023
Room RevenueFood and Beverage RevenueOther RevenueTotal RevenueRoom RevenueFood and Beverage RevenueOther RevenueTotal Revenue
South Florida$40,349 $5,859 $3,124 $49,332 $38,540 $5,424 $2,322 $46,286 
Northern California34,737 4,309 1,907 40,953 34,812 3,463 1,988 40,263 
Southern California30,542 4,226 3,139 37,907 28,931 3,872 2,916 35,719 
Houston12,371 912 1,109 14,392 11,599 889 1,163 13,651 
New York City11,676 1,363 686 13,725 11,006 1,204 662 12,872 
Louisville8,270 4,117 817 13,204 8,154 3,393 768 12,315 
Washington DC12,391 138 550 13,079 12,507 187 555 13,249 
Austin10,438 1,192 843 12,473 11,620 1,613 928 14,161 
Charleston8,864 2,608 874 12,346 7,769 2,022 788 10,579 
Chicago9,361 2,117 677 12,155 9,442 2,208 670 12,320 
Other87,631 8,848 8,365 104,844 86,452 9,013 7,623 103,088 
Total$266,630 $35,689 $22,091 $324,410 $260,832 $33,288 $20,383 $314,503 

6.              Debt
 
The Company's debt consisted of the following (in thousands):
March 31, 2024December 31, 2023
Senior Notes, net$992,263 $991,672 
Revolver  
Term Loans, net821,914 821,443 
Mortgage loans, net407,656 407,663 
Debt, net$2,221,833 $2,220,778 

Senior Notes

The Company's senior notes (collectively, the "Senior Notes") consisted of the following (dollars in thousands):
Carrying Value at
Interest RateMaturity DateMarch 31, 2024December 31, 2023
2029 Senior Notes (1)4.00%September 2029$500,000 $500,000 
2026 Senior Notes (1)3.75%July 2026500,000 500,000 
1,000,000 1,000,000 
Deferred financing costs, net(7,737)(8,328)
Total senior notes, net$992,263 $991,672 
(1)Requires payment of interest only through maturity.

The indentures governing the Senior Notes contain customary covenants that limit the Operating Partnership’s ability and,
in certain instances, the ability of its subsidiaries, to incur additional debt, create liens on assets, make distributions and pay
dividends, make certain types of investments, issue guarantees of indebtedness, and make certain restricted payments. These
limitations are subject to a number of exceptions and qualifications set forth in the indentures.



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A summary of the various restrictive covenants for the Senior Notes are as follows:
CovenantCompliance
Maintenance Covenant
Unencumbered Asset to Unencumbered Debt Ratio
> 150.0%
Yes
Incurrence Covenants
Consolidated Indebtedness less than Adjusted Total Assets
< .65x
Yes
Consolidated Secured Indebtedness less than Adjusted Total Assets
< .45x
Yes
Interest Coverage Ratio
> 1.5x
Yes

Revolver and Term Loans
 
The Company has the following unsecured credit agreements in place:

$600.0 million revolving credit facility with a scheduled maturity date of May 10, 2027 and either a one-year extension option or up to two six-month extension options if certain conditions are satisfied (the "Revolver");
$400.0 million term loan with a scheduled maturity date of May 18, 2025 (the "$400 Million Term Loan Maturing 2025");
$200.0 million term loan with a scheduled maturity date of January 31, 2026 and two one-year extension options if certain conditions are satisfied (the "$200 Million Term Loan Maturing 2026"); and
$225.0 million term loan with a scheduled maturity date of May 10, 2026 and two one-year extension options if certain conditions are satisfied (the "$225 Million Term Loan Maturing 2026").
The $400 Million Term Loan Maturing 2025, the $200 Million Term Loan Maturing 2026, and the $225 Million Term Loan Maturing 2026 are collectively referred to as the "Term Loans."

The Company's unsecured credit agreements consisted of the following (dollars in thousands):
Carrying Value at
Interest Rate at March 31, 2024 (1)Maturity DateMarch 31, 2024December 31, 2023
Revolver (2)%May 2027$ $ 
$400 Million Term Loan Maturing 2025
4.48%May 2025400,000 400,000 
$200 Million Term Loan Maturing 2026
4.82%January 2026 (3)200,000 200,000 
$225 Million Term Loan Maturing 2026
2.97%May 2026 (3)225,000 225,000 
825,000 825,000 
Deferred financing costs, net (4)(3,086)(3,557)
Total Revolver and Term Loans, net$821,914 $821,443 
 
(1)Interest rate at March 31, 2024 gives effect to interest rate hedges.
(2)There was $600.0 million of capacity on the Revolver at both March 31, 2024 and December 31, 2023. The Company has the ability to extend the maturity date for an additional one-year period or up to two six-month periods ending May 2028 if certain conditions are satisfied. In April 2024, the Company borrowed $200.0 million under the Revolver and utilized the proceeds to repay a $200.0 million maturing mortgage loan, reducing the remaining capacity on the Revolver to $400.0 million.
(3)This Term Loan includes two one-year extension options at the Company's discretion, subject to certain conditions.
(4)Excludes $5.2 million and $5.6 million as of March 31, 2024 and December 31, 2023, respectively, related to deferred financing costs on the Revolver, which are included in prepaid expense and other assets in the accompanying consolidated balance sheets.








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The Revolver and Term Loans are subject to various financial covenants. A summary of the most restrictive covenants is as follows:
CovenantCompliance
Leverage ratio (1)
<= 7.25x
Yes
Fixed charge coverage ratio (2)
>= 1.50x
Yes
Secured indebtedness ratio
<= 45.0%
Yes
Unencumbered indebtedness ratio
<= 60.0%
Yes
Unencumbered debt service coverage ratio
>= 2.00x
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") 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.


Mortgage Loans 

The Company's mortgage loans consisted of the following (dollars in thousands):
Carrying Value at
Number of Assets EncumberedInterest Rate at March 31, 2024 Maturity DateMarch 31, 2024December 31, 2023
Mortgage loan (1)75.94%(3)April 2024(4)$200,000 $200,000 
Mortgage loan (1)35.03%(3)April 2024(5)96,000 96,000 
Mortgage loan (1)45.61%(3)April 2024(5)85,000 85,000 
Mortgage loan (2)15.06%January 202926,742 26,833 
15407,742 407,833 
Deferred financing costs, net(86)(170)
Total mortgage loans, net$407,656 $407,663 

(1)The hotels encumbered by the mortgage loan are cross-collateralized. Requires payments of interest only through maturity.
(2)Includes $1.7 million and $1.8 million at March 31, 2024 and December 31, 2023, respectively, related to a fair value adjustment on this mortgage loan from purchase price allocation at hotel property acquisition. This mortgage loan requires payments of interest only through maturity.
(3)Interest rate at March 31, 2024 gives effect to interest rate hedges.
(4)In April 2024, the Company fully repaid this mortgage loan using a $200.0 million draw under its Revolver.
(5)This mortgage loan provides two one-year extension options, subject to certain conditions. In April 2024, the Company satisfied the conditions required to exercise the first one-year extension option on this mortgage loan to extend the maturity to April 2025, with a second one-year extension option still remaining.
 
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. At March 31, 2024, all mortgage loans exceeded the minimum debt yield or DSCR thresholds.












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Interest Expense

The components of the Company's interest expense consisted of the following (in thousands):
For the three months ended March 31,
20242023
Senior Notes$9,688 $9,688 
Revolver and Term Loans9,060 8,543 
Mortgage loans5,656 3,943 
Amortization of deferred financing costs1,572 1,474 
Non-cash interest expense related to interest rate hedges482 482 
Total interest expense$26,458 $24,130 
 
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7.              Derivatives and Hedging Activities
 
The following interest rate swaps have been designated as cash flow hedges (in thousands):
Notional value atFair value at
Hedge typeSwap
rate
Effective DateMaturity DateMarch 31, 2024December 31, 2023March 31, 2024December 31, 2023
Swap-cash flow-Daily SOFR 2.44%January 2021December 2023$ $75,000 $ $ 
Swap-cash flow-Daily SOFR2.31%January 2021December 2023 75,000   
Swap-cash flow-Daily SOFR1.08%April 2021April 202450,000 50,000 305 827 
Swap-cash flow-Daily SOFR1.13%April 2021April 202450,000 50,000 302 819 
Swap-cash flow-Daily SOFR1.08%April 2021April 202450,000 50,000 306 829 
Swap-cash flow-Daily SOFR0.97%April 2021April 202450,000 50,000 313 849 
Swap-cash flow-Daily SOFR0.85%April 2021April 202425,000 25,000 161 436 
Swap-cash flow-Daily SOFR0.88%April 2021April 202425,000 25,000 160 434 
Swap-cash flow-Daily SOFR 0.86%April 2021April 202425,000 25,000 161 436 
Swap-cash flow-Daily SOFR0.83%April 2021April 202425,000 25,000 162 439 
Swap-cash flow-Term SOFR4.37%April 2023April 2024200,000 200,000 207 673 
Swap-cash flow-Daily SOFR0.77%June 2020December 202450,000 50,000 1,640 2,011 
Swap-cash flow-Daily SOFR0.63%June 2020December 202450,000 50,000 1,693 2,081 
Swap-cash flow-Daily SOFR1.16%September 2021September 2025150,000 150,000 7,941 7,969 
Swap-cash flow-Daily SOFR0.56%July 2021January 202650,000 50,000 3,601 3,556 
Swap-cash flow-Daily SOFR2.95%April 2024April 2027125,000 125,000 4,160 1,769 
Swap-cash flow-Daily SOFR2.85%April 2024April 202765,000 65,000 2,347 1,103 
Swap-cash flow-Daily SOFR2.75%April 2024April 202760,000 60,000 2,336 1,188 
Swap-cash flow-Daily SOFR3.70%July 2024July 202725,000 25,000 222 (254)
Swap-cash flow-Daily SOFR3.45%July 2024July 202725,000 25,000 399 (77)
Swap-cash flow-Daily SOFR3.71%July 2024July 202725,000 25,000 217 (259)
$1,125,000 $1,275,000 $26,633 $24,829 
 
As of March 31, 2024 and December 31, 2023, the aggregate fair value of the interest rate swap assets of $26.6 million and $25.4 million, respectively, was included in prepaid expense and other assets in the accompanying consolidated balance sheets. As of December 31, 2023, the aggregate fair value of the interest rate swap liabilities of $0.6 million was included in accounts payable and other liabilities in the accompanying consolidated balance sheets.

As of March 31, 2024 and December 31, 2023, there was approximately $24.9 million and $22.7 million, respectively, of unrealized gains included in accumulated other comprehensive income related to interest rate swaps. There was no ineffectiveness recorded during the three month periods ended March 31, 2024 or 2023. For the three months ended March 31, 2024 and 2023, gains of approximately $6.6 million and $6.0 million, respectively, included in accumulated other comprehensive income were reclassified into interest expense for the interest rate swaps. Approximately $15.5 million of the unrealized gains included in accumulated other comprehensive income at March 31, 2024 is expected to be reclassified into earnings within the next 12 months.
 
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8.             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:
 
Level 1 — Inputs include quoted market prices in an active market for identical assets or liabilities.
 
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 market prices in an inactive market, and other observable information that can be corroborated by market data.

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:
 
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. 

Debt — The Company estimated the fair value of the Senior Notes by using publicly available trading prices, which are Level 1 inputs 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 2 and Level 3 inputs in the fair value hierarchy. The Company estimated the fair value of the mortgage loans by 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):
March 31, 2024December 31, 2023
Carrying ValueFair ValueCarrying ValueFair Value
Senior Notes, net$992,263 $920,425 $991,672 $928,750 
Revolver and Term Loans, net821,914 822,158 821,443 817,960 
Mortgage loans, net407,656 397,217 407,663 394,458 
Debt, net$2,221,833 $2,139,800 $2,220,778 $2,141,168 

Recurring Fair Value Measurements
 
The following table presents the Company’s fair value hierarchy for those financial assets measured at fair value on a recurring basis as of March 31, 2024 (in thousands):
Fair Value at March 31, 2024
Level 1Level 2Level 3Total
Interest rate swap asset$ $26,633 $ $26,633 
Total$ $26,633 $ $26,633 
 
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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, 2023 (in thousands):
Fair Value at December 31, 2023
Level 1Level 2Level 3Total
Interest rate swap asset$ $25,419 $ $25,419 
Interest rate swap liability (590) (590)
Total$ $24,829 $ $24,829 

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 March 31, 2024, 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.

9.              Income Taxes
 
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 ("NOL"), 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 is still continuing to provide a full valuation allowance against the deferred tax assets related to the NOL carryforwards of RLJ Lodging Trust Master TRS, Inc., the Company's primary TRS.

The Company had no accruals for tax uncertainties as of March 31, 2024 and December 31, 2023.

10.       Commitments and Contingencies
 
Restricted Cash Reserves
 
The Company is obligated to maintain cash reserve funds for future capital expenditures, real estate taxes, insurance, and debt obligations where lenders hold restricted cash due to cash trap events. 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 for future capital expenditures (including the periodic replacement or refurbishment of FF&E). Any unexpended amounts will remain the property of the Company upon termination of the management agreements, franchise agreements or mortgage loan documents. As of March 31, 2024 and December 31, 2023, approximately $40.7 million and $38.7 million, respectively, was available in the restricted cash reserves for future capital expenditures, real estate taxes, and insurance.

Litigation
 
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.

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Management Agreements

As of March 31, 2024, 96 of the Company's consolidated hotel properties were operated pursuant to management agreements with initial terms ranging from three to 25 years. This number includes 35 consolidated hotel properties that receive the benefits of a franchise agreement pursuant to management agreements with Hilton, Hyatt, or Marriott. Each management company receives a base management fee between 1.5% and 3.5% of hotel revenues. Management agreements that include the benefits of a franchise agreement incur a base management fee between 1.0% 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 three months ended March 31, 2024 and 2023, the Company incurred management fee expense of approximately $9.9 million and $10.8 million, respectively.

Franchise Agreements
 
As of March 31, 2024, 59 of the Company’s consolidated hotel properties were operated under franchise agreements with initial terms ranging from one to 30 years. This number excludes 35 consolidated hotel properties that receive the benefits of a franchise agreement pursuant to management agreements with Hilton, Hyatt, or Marriott. In addition, two hotels are not operated with a hotel brand so they do not have franchise agreements. Franchise agreements allow the hotel properties to operate under the respective brands. Pursuant to the franchise agreements, the Company pays a royalty fee between 2.0% 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 between 1.5% and 3.0% of food and beverage revenues. 

Franchise fees are included in management and franchise fee expense in the accompanying consolidated statements of operations and comprehensive income. For the three months ended March 31, 2024 and 2023, the Company incurred franchise fee expense of approximately $15.8 million and $15.4 million, respectively.

11.       Equity

Common Shares of Beneficial Interest

During the three months ended March 31, 2024 and 2023, the Company declared a cash dividend of $0.10 and $0.08 per common share, respectively.

During the three months ended March 31, 2024, the Company repurchased and retired approximately 0.1 million common shares for approximately $1.3 million. As of March 31, 2024, the Company's share repurchase program approved in 2023 had a remaining capacity of $212.7 million.

On April 26, 2024, the Company's board of trustees approved a new share repurchase program to acquire up to an
aggregate of $250.0 million of common and preferred shares from May 9, 2024 to May 8, 2025 (the "2024 Share Repurchase
Program").

During the three months ended March 31, 2023, the Company repurchased and retired approximately 2.4 million common shares for approximately $24.5 million.

Series A Preferred Shares

During the three months ended March 31, 2024 and 2023, the Company declared a cash dividend of $0.4875 on each Series A Preferred Share.

The Series A Preferred Shares are convertible, in whole or in part, at any time, at the option of the holders into common shares at a conversion rate of 0.2806 common shares for each Series A Preferred Share.




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Noncontrolling Interest in Consolidated Joint Ventures

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 interest is 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. 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. As of March 31, 2024, 771,831 outstanding OP units were held by the limited partners. The noncontrolling interest is included in the noncontrolling interest in the Operating Partnership on the consolidated balance sheets.

12.       Equity Incentive Plan
 
The Company may issue share-based awards to officers, employees, non-employee trustees and other eligible persons under the RLJ Lodging Trust 2021 Equity Incentive Plan (the "2021 Plan"). The 2021 Plan provides for a maximum of 6,828,527 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 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 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 as of March 31, 2024 is as follows:
 2024
 Number of
Shares
Weighted-Average
Grant Date
Fair Value
Unvested at January 1, 20242,305,303 $13.52 
Granted 720,317 11.70 
Vested(523,076)12.82 
Forfeited(379)9.88 
Unvested at March 31, 20242,502,165 $13.14 

For the three months ended March 31, 2024 and 2023, the Company recognized approximately $4.2 million and $3.6 million, respectively, of share-based compensation expense related to restricted share awards. As of March 31, 2024, there was $17.2 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 2.1 years. The total fair value of the shares vested (calculated as the number of shares multiplied by the vesting date share price) during the three months ended March 31, 2024 and 2023 was approximately $6.1 million and $4.4 million, respectively.

Performance Units
 
The Company aligns its executive officers with its long-term investors by awarding a significant percentage of their equity compensation in the form of multi-year performance unit awards that use both absolute and relative total shareholder return as
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the primary metrics. The performance units vest at the end of a three year period (the “performance units measurement period”).
The performance units granted in 2024 may convert into restricted shares at a range of 0% to 200% of the number of performance units granted contingent upon the Company achieving a relative shareholder return over the measurement period at specified percentiles of the peer group, as defined by the awards. These performance units are subject to modification based on the Company's absolute total shareholder return performance as follows: (1) if at the end of the measurement period the relative total shareholder return performance exceeds target and absolute total shareholder return is less than zero, payouts will be reduced by 25%, but not below target and (2) if the absolute total shareholder return is down more than 15% during the entire measurement period, the maximum payout will be capped at 115% of target. The performance units granted prior to 2024 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 (25% of award) and a relative shareholder return (75% of award) over the measurement period at specified percentiles of the peer group, as defined by the awards.
At the end of the performance units measurement period, if the target criterion is met, 100% of the performance units that are earned will vest immediately. The fair value of the performance units was determined using a Monte Carlo simulation. The Company estimates the compensation expense for the performance units on a straight-line basis using a calculation that recognizes 100% of the grant date fair value over three years.
A summary of the performance unit awards granted prior to 2024 is as follows:
Date of AwardNumber of
Units Granted

Grant Date Fair
Value
Conversion RangeRisk Free Interest RateVolatility
February 2021 (1)431,151$20.90
0% to 200%
0.23%69.47%
February 2022407,024$21.96
0% to 200%
1.70%70.15%
February 2023574,846$16.90
0% to 200%
4.33%66.70%
February 2024703,325$15.13
0% to 200%
4.43%35.6%
(1) In February 2024, following the end of the measurement period, the Company met certain threshold criterion and the performance units converted into approximately 253,000 restricted shares, all of which vested immediately. The total fair value of the vested shares related to the conversion of the performance units (calculated as the number of vested shares multiplied by the vesting date share price) during the three months ended March 31, 2024 was approximately $3.0 million.

For the three months ended March 31, 2024 and 2023, the Company recognized approximately $2.3 million and $2.1 million, respectively, of share-based compensation expense related to the performance unit awards. As of March 31, 2024, there was $18.9 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 March 31, 2024, there were 1,765,411 common shares available for future grant under the 2021 Plan, which includes potential common shares that may convert from performance units if certain target criterion is met.

13.       Earnings per Common Share
 
Basic earnings per common share is calculated by dividing net (loss) 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 unvested performance units outstanding during the period. Diluted earnings per common share is calculated by dividing net (loss) 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, and convertible Series A Preferred Shares, calculated using the if-converted 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 (loss) 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 three months ended
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March 31, 2024 and 2023, since the limited partners’ share of income would also be added back to net (loss) 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):
 For the three months ended March 31,
 20242023
Numerator:
Net income attributable to RLJ$4,937 $10,645 
Less: Preferred dividends(6,279)(6,279)
Less: Dividends paid on unvested restricted shares(250)(202)
Net (loss) income attributable to common shareholders excluding amounts attributable to unvested restricted shares$(1,592)$4,164 
Denominator:
Weighted-average number of common shares - basic152,970,215 159,483,268 
Unvested restricted shares 568,125 
Unvested performance units 92,355 
Weighted-average number of common shares - diluted152,970,215 160,143,748 
Net (loss) income per share attributable to common shareholders - basic$(0.01)$0.03 
Net (loss) income per share attributable to common shareholders - diluted$(0.01)$0.03 
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14.       Supplemental Information to Statements of Cash Flows (in thousands)
For the three months ended March 31,
20242023
Reconciliation of cash, cash equivalents, and restricted cash reserves
Cash and cash equivalents$350,237 $