Pebblebrook Hotel Trust

PEBBLEBROOK HOTEL TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization

Pebblebrook Hotel Trust (the "Company") is an internally managed hotel investment company, formed as a Maryland real estate investment trust in October 2009 to opportunistically acquire and invest in hotel properties located primarily in major U.S. cities and resort properties located near our primary target urban markets and select destination resort markets, with an emphasis on major gateway coastal markets.

As of December 31, 2025, the Company owned interests in 44 hotels with a total of 11,052 guest rooms. The hotel properties are located in: Boston, Massachusetts; Chicago, Illinois; Hollywood, Florida; Jekyll Island, Georgia; Key West, Florida; Los Angeles, California (Beverly Hills, Santa Monica and West Hollywood); Naples, Florida; Newport, Rhode Island; Portland, Oregon; San Diego, California; San Francisco, California; Santa Cruz, California; Stevenson, Washington; and Washington, D.C.

Substantially all of the Company's assets are held by, and all of the Company's operations are conducted through, Pebblebrook Hotel, L.P. (the "Operating Partnership"). The Company is the sole general partner of the Operating Partnership. As of December 31, 2025, the Company owned 99.0% of the common limited partnership units issued by the Operating Partnership ("common units"). The remaining 1.0% of the common units are owned by the other limited partners of the Operating Partnership. For the Company to maintain its qualification as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"), it cannot operate the hotels it owns. Therefore, the Operating Partnership and its subsidiaries lease the hotel properties to subsidiaries of Pebblebrook Hotel Lessee, Inc. (collectively with its subsidiaries, "PHL"), a taxable REIT subsidiary ("TRS"), which in turn engage third-party eligible independent contractors to manage the hotels. PHL is consolidated into the Company's financial statements.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The Company and its subsidiaries are separate legal entities and maintain records and books of account separate and apart from each other. The consolidated financial statements include all of the accounts of the Company and its subsidiaries and are presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). All significant intercompany balances and transactions have been eliminated in consolidation. Investments in entities that the Company does not control, but over which the Company has the ability to exercise significant influence regarding operating and financial policies, are accounted for under the equity method.

Certain reclassifications have been made to the prior period's financial statements to conform to the current year presentation.

Use of Estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses. These estimates are prepared using management's best judgment, after considering past, current and expected events and economic conditions. Actual results could differ from these estimates.

Risks and Uncertainties

The state of the overall economy can significantly impact hotel operational performance and thus the Company's financial position. Global events, as well as national and local events, may adversely impact travel trends and the operations of the Company's hotels. In addition, inflation and changing interest rates may impact the overall economy and the availability of debt, which may impact the Company's financial position. A decline in travel or a significant increase in costs may also adversely impact the Company's cash flow and ability to service debt or meet other financial obligations.

Fair Value Measurements

A fair value measurement is based on the assumptions that market participants would use in pricing an asset or liability in an orderly transaction. The hierarchy for inputs used in measuring fair value are as follows:

1. Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

2. Level 2 – Inputs include quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, and model-derived valuations whose inputs are observable.

3. Level 3 – Model-derived valuations with unobservable inputs.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

The Company's financial instruments include cash and cash equivalents, restricted cash, accounts payable and accrued expenses. Due to their short maturities, the carrying amounts of these assets and liabilities approximate fair value. See Note 5. Debt to the accompanying consolidated financial statements for disclosures on the fair value of debt and derivative instruments.

Investment in Hotel Properties

Upon acquiring a business or hotel property, the Company measures and recognizes the fair value of the acquired land, land improvements, building, furniture, fixtures and equipment, identifiable intangible assets or liabilities, other assets and assumed liabilities. Identifiable intangible assets or liabilities typically arise from contractual arrangements in connection with the transaction, including terms that are above or below market compared to an estimated market agreement at the acquisition date. Acquisition-date fair values of assets and assumed liabilities are determined using a combination of the market, cost and income approaches. These valuation methodologies are based on significant Level 2 and Level 3 inputs in the fair value hierarchy, such as estimates of future income growth, capitalization rates, discount rates, capital expenditures and cash flow projections, including hotel revenues and net operating income, at the respective hotel properties.

Transaction costs related to business combinations are expensed as incurred and included on the consolidated statements of operations and comprehensive income. Transaction costs related to asset acquisitions are capitalized and recorded to investment in hotel property.

Hotel renovations and replacements of assets that improve or extend the life of the asset are recorded at cost and depreciated over their estimated useful lives. Furniture, fixtures and equipment under finance leases are recorded at the present value of the minimum lease payments. Repair and maintenance costs are expensed as incurred.

Hotel properties are recorded at cost and depreciated using the straight-line method over an estimated useful life of 10 to 40 years for buildings, land improvements and building improvements and 1 to 10 years for furniture, fixtures and equipment. Leasehold improvements are amortized over the shorter of the lease term or the useful lives of the related assets. Intangible assets arising from contractual arrangements are typically amortized over the life of the contract. The Company is required to make subjective assessments as to the useful lives and classification of properties for purposes of determining the amount of depreciation expense to reflect each year with respect to the assets. These assessments may impact the Company's results of operations.

The Company reviews its investments in hotel properties for impairment whenever events or changes in circumstances indicate that the carrying value of the hotel properties may not be recoverable. Events or circumstances that may cause a review include, but are not limited to, when a hotel property experiences a current or projected loss from operations or when it becomes more likely than not that a hotel property will be sold before the end of its useful life. When such conditions exist, the Company performs an analysis to determine if the estimated undiscounted future cash flows from operations and the proceeds from the ultimate disposition of a hotel exceed its carrying value. If the estimated undiscounted future cash flows are less than the carrying value of the asset, an adjustment to reduce the carrying value to the related hotel's estimated fair market value is recorded and an impairment loss is recognized. In the evaluation of impairment of its hotel properties, the Company makes many assumptions and estimates including projected cash flows both from operations and eventual disposition, expected useful life and estimated holding period, future required capital expenditures and fair values, including consideration of expected terminal capitalization rates, discount rates and comparable selling prices. The Company will adjust its assumptions with respect to the remaining useful life of the hotel property when circumstances change or it is more likely than not that the hotel property will be sold prior to its previously expected useful life.

The Company will classify a hotel as held for sale and will cease recording depreciation expense when a binding agreement to sell the property has been signed under which the buyer has committed a significant amount of nonrefundable cash, approval of the Company's board of trustees (the "Board of Trustees") has been obtained, no significant financing contingencies exist and the sale is expected to close within one year. If the fair value less costs to sell is lower than the carrying value of the hotel, the Company will record an impairment loss. The Company will classify the loss, together with the related operating results, as continuing or discontinuing operations on the statements of operations and classify the assets and related liabilities as held for sale on the balance sheet.

Intangible Assets and Liabilities

Intangible assets or liabilities are recorded on non-market contracts assumed as part of the acquisition of certain hotels. The Company reviews the terms of agreements assumed in conjunction with the purchase of a hotel to determine if the terms are over or under market compared to an estimated market agreement at the acquisition date. Under market lease assets or over market contract liabilities are recorded at the acquisition date and amortized using the straight-line method over the term of the agreement. The Company does not amortize intangible assets with indefinite useful lives, but reviews these assets for impairment annually or at interim periods if events or circumstances indicate that the asset may be impaired.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand, demand deposits with financial institutions and short-term liquid investments with an original maturity of three months or less. The Company maintains cash and cash equivalents balances in excess of insured limits with various financial institutions. This may subject the Company to significant concentrations of credit risk. The Company performs periodic evaluations of the credit quality of these financial institutions.

Restricted Cash

Restricted cash primarily consists of reserves for replacement of furniture and fixtures, cash held in escrow pursuant to certain lender or hotel management agreement requirements to pay for real estate taxes, ground rent or property insurance and cash held in cash management and lockbox accounts pursuant to certain mortgage loan requirements.

Prepaid Expenses and Other Assets

The Company's prepaid expenses and other assets consist of prepaid real estate taxes, prepaid insurance, inventories, over or under market leases and corporate office equipment and furniture.

Derivative Instruments

In the normal course of business, the Company is exposed to the effects of interest rate changes. The Company may enter into derivative instruments including interest rate swaps, caps and collars to manage or hedge interest rate risk. Derivative instruments are recorded at fair value on the balance sheet date. Unrealized gains and losses of hedging instruments are reported in other comprehensive income (loss) and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

Revenue Recognition

Revenue consists of amounts derived from hotel operations, including the sales of rooms, food and beverage, and other ancillary services. Room revenue is recognized over the length of a customer's hotel stay. Revenue from food and beverage and other ancillary services is generated when a customer chooses to purchase goods or services separately from a hotel room and revenue is recognized on these distinct goods and services at the point in time or over the time period that goods or services are provided to the customer. Certain ancillary services are provided by third parties and the Company assesses whether it is the principal or agent in these arrangements. If the Company is the agent, revenue is recognized based upon the commission earned from the third party. If the Company is the principal, the Company recognizes revenue based upon the gross sales price. Some contracts for rooms or food and beverage services require an upfront deposit which is recorded as deferred revenues (or contract liabilities) and recognized once the performance obligations are satisfied.

The Company recognizes revenue related to nonrefundable membership initiation fees and refundable membership initiation deposits over the expected life of an active membership. For refundable membership initiation deposits, the difference between the amount paid by the member and the present value of the refund obligation is deferred and recognized as other operating revenues on the consolidated statements of operations and comprehensive income over the expected life of an active membership. The present value of the refund obligation is recorded as a membership initiation deposit liability in the consolidated balance sheets and accretes over the nonrefundable term using the effective interest method using the Company's incremental borrowing rate. The accretion is included in interest expense.

Certain of the Company's hotels have retail spaces, restaurants or other spaces which the Company leases to third parties. Lease revenue is recognized on a straight-line basis over the life of the lease and included in other operating revenues in the Company's consolidated statements of operations and comprehensive income.

The Company collects sales, use, occupancy and similar taxes at its hotels which are presented on a net basis on the consolidated statements of operations and comprehensive income. Accounts receivable primarily represents receivables from hotel guests who occupy hotel rooms and utilize hotel services. The Company maintains an allowance for doubtful accounts sufficient to cover estimated potential credit losses.

Income Taxes

To qualify as a REIT for federal income tax purposes, the Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90 percent of its REIT taxable income (determined without regard to the deduction for dividends paid and excluding net capital gains) to its shareholders. As a REIT, the Company generally is not subject to federal corporate income tax on that portion of its taxable income that is currently distributed to shareholders. The Company is subject to certain state and local taxes on its income and property, and to federal income and excise taxes on its undistributed taxable income. In addition, the Company's TRS lessees are subject to federal and state income taxes. The Company accounts for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. 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.

Share-based Compensation

The Company has adopted an equity incentive plan that provides for the grant of common share options, share awards, share appreciation rights, performance units and other equity-based awards. Share-based compensation is measured at the fair value of the award on the date of grant and recognized as an expense on a straight-line basis over the vesting period. Share-based compensation awards that contain a performance condition are reviewed at least quarterly to assess the achievement of the performance condition. Compensation expense will be adjusted when a change in the assessment of achievement of the specific performance condition level is determined to be probable. The determination of fair value of these awards is subjective and involves significant estimates and assumptions including expected volatility of the Company's shares, expected dividend yield, expected term and assumptions of whether these awards will achieve parity with other operating partnership units or achieve performance thresholds.

Earnings Per Share

Basic earnings per share ("EPS") is computed by dividing the net income (loss) available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is computed by dividing net income (loss) available to common shareholders, as adjusted for dilutive securities, by the weighted-average number of common shares outstanding plus dilutive securities. Any anti-dilutive securities are excluded from the diluted per-share calculation.

Comprehensive Income (Loss)

The purpose of reporting comprehensive income (loss) is to report a measure of all changes in equity of an entity that result from recognized transactions and other economic events of the period other than transactions with owners in their capacity as owners. Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss).

Segment Information

The Company separately evaluates the performance of each of its hotel properties and considers each to be an operating segment. However, because all of the hotels have similar economic characteristics, facilities and services, the hotel properties have been aggregated into a single operating segment for reporting purposes.

Investments in Unconsolidated Entities

The Company owns a non-controlling equity interest in Fifth Wall Late-Stage Climate Technology Fund, L.P. As of December 31, 2025, the Company is committed to fund an additional $0.9 million.

New Accounting Pronouncements

Income Taxes

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should be applied on a prospective basis, with the option to apply retrospectively. The Company's adoption of ASU 2023-09 for the year ended December 31, 2025 did not have a material impact on its consolidated financial statements and disclosures. See Note 9. Income Taxes for the information provided pursuant to this standard.

Stock Compensation

In March 2024, the FASB issued ASU 2024-01, Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards ("ASU 2024-01"), to clarify the scope application of profits interest and similar awards by adding illustrative guidance in ASC 718, Compensation—Stock Compensation("ASC 718"). ASU 2024-01 clarifies how to determine whether profits interest and similar awards should be accounted for as a share-based payment arrangement (ASC 718) or as a cash bonus or profit-sharing arrangement(ASC 710, Compensation—General, or other guidance) and applies to all reporting entities that account for profits interest awards as compensation to employees or non-employees. In addition to adding the illustrative guidance, ASU 2024-01 modified the language in paragraph 718-10-15-3 to improve its clarity and operability without changing the guidance. ASU 2024-01 is effective for fiscal years beginning after December 15, 2024, including interim periods within those annual periods. Early adoption is permitted. The amendments should be applied either retrospectively to all prior periods presented in the financial statements or prospectively to profits interest and similar awards granted or modified on or after the adoption date. The Company's adoption of ASU 2024-01 on January 1, 2025 had no impact on its consolidated financial statements and disclosures.

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ("ASU 2024-03"). ASU 2024-03 requires public entities to disclose specified information about certain costs and expenses. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The amendments should be applied either retrospectively to all prior periods presented in the financial statements or prospectively after the adoption date. The Company is currently assessing the impact of adopting ASU 2024-03 on its consolidated financial statements and disclosures.

Induced Conversions of Convertible Debt Instruments

In November 2024, the FASB issued ASU 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments ("ASU 2024-04"). ASU 2024-04 clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as induced conversions rather than as debt extinguishments. ASU 2024-04 is effective for annual reporting periods beginning after December 15, 2025, and interim periods within those annual reporting periods, with early adoption permitted. The amendments should be applied either prospectively or retrospectively. The Company adopted ASU 2024-04 on January 1, 2026 on a prospective basis to any future settlements of convertible debt instruments.

Derivatives and Hedging

In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements ("ASU 2025-09"). ASU 2025-09 amends existing hedge accounting guidance to improve the alignment of financial reporting with the economics of an entity's risk management activities. ASU 2025-09 is effective for annual reporting periods beginning after December 15, 2026, including interim periods within those annual reporting periods. Early adoption is permitted. The amendments in this update apply to any entity that elects to apply hedge accounting in accordance with Topic 815 and generally are to be adopted on a prospective basis, with an election available to apply the guidance to existing hedging relationships as of the adoption date. The Company adopted ASU 2025-09 on January 1, 2026 on a prospective basis. The adoption did not have a material impact on the Company's consolidated financial statements.

Note 3. Acquisition and Disposition of Hotel Properties

Acquisitions

The Company didnot acquire any hotel properties during the years ended December 31, 2025 and 2024.

Dispositions

The Company didnot dispose of any hotel properties during the year ended December 31, 2024.

The following table summarizes disposition transactions during the year ended December 31, 2025 (in thousands):

For the years ended December 31, 2025, 2024 and 2023, the accompanying consolidated statements of operations and comprehensive income included operating income of $4.2 million, $0.3 million and $1.5 million, respectively, excluding impairment loss and gain on sale of hotel properties related to the hotel properties sold.

The sales of the hotel properties described above did not represent a strategic shift that had a major effect on the Company's operations and financial results, and therefore, did not qualify as discontinued operations.

Note 4. Investment in Hotel Properties

Investment in hotel properties as of December 31, 2025 and 2024 consisted of the following (in thousands):

Hurricane Ian

On September 27, 2022, LaPlaya Beach Resort & Club ("LaPlaya") in Naples, Florida was impacted by the effects of Hurricane Ian. LaPlaya closed in anticipation of the storm and required remediation and repairs from the damage. LaPlaya began reopening in stages during 2023, and was substantially complete in the first quarter of 2024.

The Company's insurance policies provided coverage for property damage, business interruption and other costs that were incurred relating to damages sustained, in excess of the applicable deductibles. In December 2024, the Company finalized a settlement agreement for the Hurricane Ian claim with the insurance carriers totaling $146.5 million, and for the years ended December 31, 2024 and 2023, recognized $48.6 million and $33.0 million, respectively, of business interruption insurance income and gain on insurance settlement. For the years ended December 31, 2024 and 2023, the Company incurred $0.2 million and $6.6 million, respectively, of non-reimbursable insurance costs related to payroll, repair and claims administration which is included in other operating expenses in the Company's accompanying consolidated statements of operations and comprehensive income.

Hurricane Helene and Hurricane Milton

On September 26, 2024, LaPlaya was impacted by Hurricane Helene and, on October 9, 2024, was again impacted by Hurricane Milton. The damage primarily impacted the ground floor of the Beach House, the pool complex and landscaping. LaPlaya closed following Hurricane Milton to undertake clean-up, repairs and a full assessment of damages. Full restoration of the resort was completed in the second quarter of 2025.

The Company's insurance policies provide coverage for property damage, business interruption and other costs that were incurred relating to damage sustained in excess of the applicable deductibles. For the year ended December 31, 2024, the Company recognized a loss of $10.0 million for damage to LaPlaya, which is included in impairment in the Company's accompanying consolidated statement of operations and comprehensive income. In 2025, the Company finalized a settlement agreement for its Hurricanes Helene and Milton claims with its insurance providers totalling $29.3 million. For the year ended December 31, 2025, the Company recognized $17.4 million of business interruption insurance income and gain on insurance settlement for damage due to Hurricanes Helene and Milton.

Impairment

The Company reviews its investment in hotel properties for impairment whenever events or circumstances indicate potential impairment. The Company periodically adjusts its estimate of future operating cash flows and estimated hold periods for certain properties. As a result of this review, the Company may identify an impairment trigger has occurred and assess its investment in hotel properties for recoverability.

For the year ended December 31, 2025, the Company recognized an impairment loss of $48.9 million related tothree hotel properties. For the year ended December 31, 2024, the Company recognized an impairment loss of $38.1 million related toone hotel property. For the year ended December 31, 2023, the Company recognized an impairment loss of $81.8 million related tothree hotels andone retail component of a hotel property. The impairment losses were a result of their fair values being lower than their carrying values. The impairment losses were determined using Level 2 inputs under authoritative guidance for fair value measurements using purchase and sale agreements and information from marketing efforts for these properties.

Right-of-use Assets and Lease Liabilities

The Company recognized right-of-use assets and related liabilities related to its ground leases, all of which are operating leases. When the rate implicit in the lease could not be determined, the Company used incremental borrowing rates, which ranged from 4.7% to 7.6%. In addition, the term used includes any options to exercise extensions when it is reasonably certain the Company will exercise such option. See Note 11. Commitments and Contingencies for additional information about the ground leases.

The right-of-use assets and liabilities are amortized to ground rent expense over the term of the underlying lease agreements. As of December 31, 2025, the Company's lease liabilities consisted of operating lease liabilities of $333.1 million and finance lease liabilities of $44.6 million. As of December 31, 2024, the Company's lease liabilities consisted of operating lease liabilities of $320.7 million and finance lease liabilities of $44.0 million. The finance lease liabilities are included inaccounts payable, accrued expenses and other liabilities on the Company's accompanying consolidated balance sheets.

Note 5. Debt

The Company's debt consisted of the following as of December 31, 2025 and 2024 (dollars in thousands):

(1)Borrowings bear interest at floating rates. Interest rate at December 31, 2025 gives effect to interest rate hedges.

(2)$48.0 million of the $650.0 million senior unsecured revolving credit facility matures in October 2026, with no option to extend the maturity date, and the remaining $602.0 million matures in October 2028, with the option to extend the maturity date for up totwo six-month periods, subject to certain terms and conditions and payment of an extension fee.

(3)This loan bears interest at a floating rate equal to daily SOFR plus a spread of 3.75%. The interest rate at December 31, 2025 gives effect to an interest rate swap. In the fourth quarter of 2025, the Company paid down $100.0 million of the loan. In February 2026, the Company paid down the remaining $40.0 million of the loan.

(4)In October 2025, the Company repaid its borrowings under Term Loan 2025 with available cash.

(5)In December 2025, the Company paid off the Series B Notes with available cash.

Unsecured Credit Agreement

On October 13, 2022, the Company entered into the Fifth Amended and Restated Credit Agreement with Bank of America, N.A., as administrative agent and certain other agents and lenders ("Credit Agreement"). The Credit Agreement provides for a $650.0 million senior unsecured revolving credit facility andthree unsecured term loan facilities. The Company may request additional lender commitments to increase the aggregate borrowing capacity under the Credit Agreement up to an additional $970.0 million.

Unsecured Revolving Credit Facilities

The $650.0 million senior unsecured revolving credit facility provided for in the Credit Agreement matures as follows: $48.0 million in October 2026, with no option to extend the maturity date, and $602.0 million in October 2028, with the option to extend the maturity date for up totwo six-month periods, subject to certain terms and conditions and payment of an extension fee. All borrowings under this senior unsecured revolving credit facility bear interest at a rate per annum equal to, at the option of the Company, (i) the Secured Overnight Financing Rate ("SOFR") plus 0.10% (the "SOFR Adjustment") plus a margin that is based upon the Company's leverage ratio or (ii) the Base Rate (as defined by the Credit Agreement) plus a margin that is based on the Company's leverage ratio. The margins for revolving credit facility loans range in amount from 1.45% to 2.50% for SOFR-based loans and 0.45% to 1.50% for Base Rate-based loans, depending on the Company's leverage ratio. As of December 31, 2025, the Company hadno outstanding borrowings, $7.9 million of outstanding letters of credit and a borrowing capacity of $642.1 million remaining on the senior unsecured revolving credit facility. The Company is required to pay an unused commitment fee at an annual rate of 0.20% or 0.30% of the unused portion of the senior unsecured revolving credit facility, depending on the amount of borrowings outstanding. The credit agreement contains certain financial covenants, including a maximum leverage ratio, a minimum fixed charge coverage ratio and a maximum percentage of secured debt to total asset value.

Under the terms of the Credit Agreement, one or more standby letters of credit, up to a maximum aggregate outstanding balance of $30.0 million, may be issued on behalf of the Company by the lenders under the senior unsecured revolving facility. The Company pays a fee for outstanding standby letters of credit at a rate per annum equal to the applicable margin based upon the Company's leverage ratio. Any outstanding standby letters of credit reduce the available borrowings on the senior unsecured revolving credit facility by a corresponding amount. Standby letters of credit of $7.9 million and $7.4 million were outstanding as of December 31, 2025 and 2024, respectively.

As of December 31, 2025, the Company also has a $20.0 million unsecured revolving credit facility (the "PHL Credit Facility") to be used for PHL's working capital and general corporate purposes. On November 27, 2024, PHL amended the agreement governing the PHL Credit Facility to extend the maturity to October 2028. The PHL Credit Facility has substantially similar terms as the Company's senior unsecured revolving credit facility. Borrowings on the PHL Credit Facility bear interest at a rate per annum equal to, at the option of the Company, (i) SOFR plus the SOFR Adjustment plus a margin that is based upon the Company's leverage ratio or (ii) the Base Rate (as defined by the Credit Agreement) plus a margin that is based on the Company's leverage ratio. The PHL Credit Facility is subject to debt covenants substantially similar to the covenants under the Credit Agreement, which governs the Company's senior unsecured revolving credit facility. As of December 31, 2025, the Company hadno borrowings under the PHL Credit Facility and had $20.0 million borrowing capacity remaining available under the PHL Credit Facility.

As of December 31, 2025, the Company was in compliance with all debt covenants of the credit agreements that govern the unsecured revolving credit facilities.

Unsecured Term Loan Facilities

The term loan facilities provided for in the Credit Agreement bear interest at a rate per annum equal to, at the option of the Company, (i) SOFR plus the SOFR Adjustment plus a margin that is based upon the Company's leverage ratio or (ii) the Base Rate (as defined by the Credit Agreement) plus a margin that is based on the Company's leverage ratio. The margins for term loans range in amount from 1.40% to 2.45% for SOFR-based loans and 0.40% to 1.45% for Base Rate-based loans, depending on the Company's leverage ratio. The term loans are subject to the debt covenants in the Credit Agreement. As of December 31, 2025, the Company was in compliance with all debt covenants of its term loans.

The Company entered into interest rate swap agreements to fix the SOFR rate on a portion of these unsecured term loan facilities. See Derivative and Hedging Activities for further discussion on the interest rate swaps.

Convertible Senior Notes due 2026

The Company used net proceeds from the issuance of the Convertible Senior Notes 2030 and cash on hand, totaling $392.0 million, to repurchase $400.0 million aggregate principal amount of the Company's 1.75% Convertible Senior Notes due December 2026 (the "Convertible Notes 2026") at a discount in private transactions with certain note holders. The repurchase of the Convertible Notes 2026 resulted in a gain on debt extinguishment of $7.4 million, net of a write-off of debt issuance costs, which is included in interest expense on the Company's accompanying consolidated statements of operations and comprehensive income. Following the repurchase, the Company has $350.0 million aggregate principal amount of the Convertible Notes 2026 outstanding. The Convertible Notes 2026 are governed by an indenture between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee, and bear interest at a rate of 1.75% per annum, payable semi-annually in arrears on June 15th and December 15th of each year. As of December 31, 2025 and 2024, the Convertible Notes 2026 had $0.4 million and $1.8 million, respectively, of unamortized issuance costs outstanding.

Prior to June 15, 2026, the Convertible Notes 2026 will be convertible upon certain circumstances. On and after June 15, 2026, holders may convert any of their Convertible Notes 2026 into the Company's common shares of beneficial interest ("common shares") at the applicable conversion rate at any time at their election untiltwo days prior to the maturity date. The initial conversion rate is 39.2549 common shares per $1,000 principal amount of Convertible Notes 2026, which represents an initial conversion price of approximately $25.47 per share. The conversion rate is subject to adjustment in certain circumstances. Upon conversion of the Convertible Notes 2026, the Company may choose to pay or deliver cash, common shares or a combination of cash and shares. As of December 31, 2025 and 2024, the if-converted value of the Convertible Notes 2026 did not exceed the principal amount.

The Company may redeem for cash all or a portion of the Convertible Notes 2026, at its option, upon certain circumstances. The redemption price will be equal to 100% of the principal amount of the convertible notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If certain make-whole fundamental changes occur, the conversion rate for the Convertible Notes 2026 may be increased.

Convertible Senior Notes due 2030

On September 18, 2025, the Company issued $400.0 million aggregate principal amount of its 1.625% Convertible Senior Notes 2030 due January 2030 (the "Convertible Notes 2030") in a private placement to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The Convertible Notes 2030 are governed by an indenture between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee, and bear interest at a rate of 1.625% per annum, payable semi-annually in arrears on January 15th and July 15th of each year. The net proceeds from the issuance were approximately $390.2 million after deducting the underwriting fees. As of December 31, 2025 and 2024, the Convertible Notes 2030 had $9.8 million andzero, respectively, of unamortized issuance costs outstanding.

Prior to July 15, 2029, the Convertible Notes 2030 are convertible upon certain circumstances. On and after July 15, 2029, holders may convert any of their Convertible Notes 2030 into common shares at the applicable conversion rate at any time at their election untiltwo days prior to the maturity date. The initial conversion rate is 62.9129 common shares per $1,000 principal amount of Convertible Notes 2030, which represents an initial conversion price of approximately $15.89 per share. The conversion rate is subject to adjustment in certain circumstances. Upon conversion of the Convertible Notes 2030, the Company will settle the conversion by paying cash up to the aggregate principal amount of the Convertible Notes 2030 to be converted and cash, common shares or a combination of cash and common shares, at the Company's election, with respect to the remainder, if any, of the conversion obligation in excess of the aggregate principal amount. As of December 31, 2025, the if-converted value of the Convertible Notes 2030 did not exceed the principal amount.

Prior to July 20, 2028, the Company may not redeem the Convertible Notes 2030. On or after July 20, 2028, the Company may redeem for cash all or a portion of the Convertible Notes 2030, at its option, upon certain circumstances. The redemption price will be equal to 100% of the principal amount of the convertible notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If certain make-whole fundamental changes occur, the conversion rate for the Convertible Notes 2030 may be increased.

Capped Call Transactions in Connection with the Convertible Senior Notes

In connection with the issuances of the Convertible Notes 2026 and the Convertible Notes 2030, the Company entered into privately negotiated capped call transactions. The capped call transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the convertible notes, the number of common shares underlying the applicable convertible note instrument. The capped call transactions are expected generally to reduce the potential dilution to holders of common shares upon conversion of the applicable convertible notes and/or offset the potential cash payments that the Company could be required to make in excess of the principal amount of any converted applicable convertible notes upon conversion thereof, with such reduction and/or offset subject to a cap. The upper strike price of the capped call transactions is $33.0225 per share for the Convertible Notes 2026 and $20.23 per share for the Convertible Notes 2030. Premiums paid for the capped call transactions were included as a net reduction to additional paid-in capital in the Company's accompanying consolidated balance sheets. The Company is exposed to credit risk in the event of non-performance by the counterparties to the capped call agreements. The Company believes it minimizes the credit risk by transacting with major creditworthy financial institutions. In October 2025, the Company entered into unwind agreements with counterparties on $550.0 million aggregate principal amount of the capped calls entered into in connection with the Convertible Notes 2026.

Unsecured Senior Notes

On October 3, 2024, the Company issued $400.0 million aggregate principal amount of its 6.375% senior notes due October 15, 2029 (the "Senior Notes 2029"). The net proceeds from the issuance were approximately $390.0 million after deducting discounts and offering expenses paid by the Company, of which $353.3 million was used to repay borrowings under the Term Loan facilities. The indenture governing the Senior Notes 2029 contains covenants that are customary for similar securities and require the Company to maintain total unencumbered assets as of the end of each fiscal quarter of not less than 150% of total unsecured indebtedness calculated on a consolidated basis. As of December 31, 2025, the Company was in compliance with all such covenants.

Mortgage Loans

On December 1, 2021, the Company assumed a $61.7 million loan secured by a first-lien mortgage on the leasehold interest of Estancia La Jolla Hotel & Spa ("Estancia"). The loan requires both principal and interest monthly payments based on a fixed interest rate of 5.07%. The loan matures on September 1, 2028.

On September 7, 2023, the Company entered into a $140.0 million loan secured by a first-lien mortgage on the leasehold interest of Margaritaville Hollywood Beach Resort ("Margaritaville"). The loan requires interest-only payments based on a floating rate equal to daily SOFR plus a spread of 3.75%. The loan matures on September 7, 2026 and may be extended for up totwo one-year periods, subject to certain terms and conditions and payment of an extension fee. The Company entered into an interest rate swap agreement to fix the SOFR rate on the loan. See Derivative and Hedging Activities for further discussion on the interest rate swaps. In the fourth quarter of 2025, the Company paid down $100.0 million of the loan. In February 2026, the Company paid down the remaining $40.0 million of the loan.

The Company's mortgage loan associated with Estancia are non-recourse to the Company except for customary carve-outs to the general non-recourse liability. The loan contains customary provisions regarding events of default, as well as customary cash management, cash trap and lockbox provisions. Cash trap provisions are triggered if the hotel's performance is below a certain threshold. Once triggered, all of the cash flow generated by the hotel is deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of the lender. The property is not in a cash trap and no event of default has occurred under the loan documents.

Interest Expense

The components of the Company's interest expense consisted of the following for the years ended December 31, 2025, 2024 and 2023 (in thousands):

Fair Value

The Company estimates the fair value of its fixed rate mortgage loans and unsecured senior notes by discounting the future cash flows of each instrument at estimated market rates, taking into consideration general market conditions and maturity of the debt with similar credit terms and is classified within Level 2 of the fair value hierarchy. The Company estimates the fair value of its fixed rate convertible senior notes using public market prices and is classified within Level 1 of the fair value hierarchy. The estimated fair value of the Company's fixed rate debt (unsecured senior notes, convertible senior notes and the Estancia mortgage loan) as of December 31, 2025 and 2024 was $1.2 billion and $1.1 billion, respectively. The fair value of the Company's variable rate debt approximates its carrying value.

Future Minimum Principal Payments

As of December 31, 2025, the future minimum principal payments for the Company's debt are as follows (in thousands):

Derivative and Hedging Activities

The Company enters into interest rate swap agreements to hedge against interest rate fluctuations. All of the Company's interest rate swaps are designated as cash flow hedges. All unrealized gains and losses on these hedging instruments are reported in accumulated other comprehensive income (loss) and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

The Company's interest rate swaps at December 31, 2025 and 2024 consisted of the following, by maturity date (dollars in thousands):

(1) In December 2025, the Company received a cash settlement for the early termination of these interest rate swap agreements.

The Company records all derivative instruments at fair value in the accompanying consolidated balance sheets. Fair values of interest rate swaps are determined using the standard market methodology of netting the discounted future fixed cash receipts/payments and the discounted expected variable cash payments/receipts. Variable interest rates used in the calculation of projected receipts and payments on the swaps are based on an expectation of future interest rates derived from observable market interest rate curves (Overnight Index Swap curves) and volatilities (Level 2 inputs). Derivatives expose the Company to credit risk in the event of non-performance by the counterparties under the terms of the interest rate hedge agreements. The Company incorporates these counterparty credit risks in its fair value measurements. The Company believes it minimizes the credit risk by transacting with major creditworthy financial institutions.

As of December 31, 2025 and 2024, the Company's interest rate swap assets had an aggregate fair value of $0.7 million and $16.6 million, respectively. As of December 31, 2025 and 2024, the Company's interest rate swap liabilities had an aggregate fair value of $0.9 million andzero, respectively. Interest rate swap assets are included in prepaid expenses and other assets and interest rate swap liabilities are included in accounts payable, accrued expenses and other liabilities in the accompanying consolidated balance sheets. The Company expects approximately $2.5 million will be reclassified from accumulated other comprehensive income (loss) to interest expense within the next 12 months.

Note 6. Revenue

The Company presents revenue on a disaggregated basis in the accompanying consolidated statements of operations and comprehensive income. The following table presents revenues by geographic location for the years ended December 31, 2025, 2024 and 2023 (in thousands):

(1) Other includes: Seattle, WA, Newport, RI and Santa Cruz, CA.

Payments from customers are primarily made when services are provided. Due to the short-term nature of the Company's contracts and the almost simultaneous receipt of payment, almost all of the contract liability balance at the beginning of the period is expected to be recognized as revenue over the following 12 months.

Note 7. Equity

Common Shares

The Company is authorized to issue up to 500,000,000 common shares. Each outstanding common share entitles the holder toone vote on each matter submitted to a vote of shareholders. Holders of common shares are entitled to receive dividends when authorized by the Board of Trustees.

Common Share Repurchase Programs

On February 17, 2023, the Company's Board of Trustees authorized a share repurchase program of up to $150.0 million of common shares (the "February 2023 Common Share Repurchase Program"). Under this program, the Company could repurchase common shares from time to time in transactions on the open market or by private agreement. The Company could have suspended or discontinued this program at any time.

On October 21, 2025, the Company's Board of Trustees terminated the February 2023 Common Share Repurchase Program and authorized a new common share repurchase program of up to $150.0 million of common shares (the "October 2025 Common Share Repurchase Program"). Under this program, the Company may repurchase common shares from time to time in transactions on the open market or by private agreement. The Company may suspend or discontinue this program at any time. Common shares repurchased by the Company cease to be outstanding and become authorized but unissued common shares.

During the year ended December 31, 2025, the Company repurchased 6,277,068 common shares for an aggregate purchase price of $71.4 million, or an average of approximately $11.37 per share, under the February 2023 Common Share Repurchase Program. As of December 31, 2025, no common shares were available for repurchase under the February 2023 Common Share Repurchase Program. As of December 31, 2025, $150.0 million of common shares remained available for repurchase under the October 2025 Common Share Repurchase Program.

Common Dividends

The Company declared the following dividends on common shares/units for the year ended December 31, 2025:

Preferred Shares

The Company is authorized to issue up to 100,000,000 preferred shares of beneficial interest, $0.01 par value per share ("preferred shares").

The following preferred shares were outstanding as of December 31, 2025 and 2024:

The Series E, Series F, Series G and Series H Cumulative Redeemable Preferred Shares (collectively, the "Preferred Shares") rank senior to the common shares and on parity with each other with respect to payment of distributions. The Preferred Shares do not have any maturity date and are not subject to mandatory redemption. The Company may redeem the Series E and Series F Preferred Shares at any time. The Series G and Series H Preferred Shares may not be redeemed prior to May 13, 2026 and July 27, 2026, respectively, except in limited circumstances relating to the Company's continuing qualification as a REIT or as discussed below. On or after such dates, the Company may, at its option, redeem the Preferred Shares, in each case in whole or from time to time in part, by payment of $25.00 per share, plus any accumulated, accrued and unpaid distributions through the date of redemption. Upon the occurrence of a change of control, as defined in the Company's declaration of trust, the result of which the common shares and the common securities of the acquiring or surviving entity are not listed on the New York Stock Exchange, the NYSE American or Nasdaq, or any successor exchanges, the Company may, at its option, redeem the Preferred Shares in whole or in part within 120 days following the change of control by paying $25.00 per share, plus any accrued and unpaid distributions through the date of redemption. If the Company does not exercise its right to redeem the Preferred Shares upon a change of control, the holders of the Preferred Shares have the right to convert some or all of their shares into a number of common shares based on defined formulas subject to share caps. The share cap on each Series E Preferred Share is 1.9372 common shares, on each Series F Preferred Share is 2.0649 common shares, on each Series G Preferred Share is 2.1231 common shares, and on each Series H Preferred Share is 2.2311 common shares.

Preferred Share Repurchase Program

On February 17, 2023, the Company's Board of Trustees authorized a share repurchase program of up to $100.0 million of the Preferred Shares. Under the terms of the program, the Company may repurchase up to an aggregate of $100.0 million of its 6.375% Series E Cumulative Redeemable Preferred Shares,6.30% Series F Cumulative Redeemable Preferred Shares,6.375% Series G Cumulative Redeemable Preferred Shares and 5.70% Series H Cumulative Redeemable Preferred Shares from time to time in transactions on the open market or by private agreement.

During the year ended December 31, 2025, the Company repurchased 531,038 Preferred Shares for an aggregate purchase price of $10.1 million, or an average of approximately $18.95 per share. As of December 31, 2025, $74.1 million of Preferred Shares remained available for repurchase under this program.

The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will depend on a variety of factors, including legal requirements, price, liquidity and economic considerations, and market conditions. The program does not require the Company to repurchase any specific number of Preferred Shares. The program does not have an expiration date and may be suspended, modified or discontinued at any time.

In connection with the sale of Montrose at Beverly Hills on November 19, 2025, $4.0 million of the purchase price was paid with 208,447 Preferred Shares, which were retired at closing.

Preferred Dividends

The Company declared the following dividends on preferred shares for the year ended December 31, 2025:

Non-controlling Interest of Common Units in Operating Partnership

Holders of Operating Partnership units ("OP units") have certain redemption rights that enable OP unit holders to cause the Operating Partnership to redeem their units in exchange for, at the Company's option, cash per unit equal to the market price of common shares at the time of redemption or common shares on aone-for-one basis. The number of shares issuable upon exercise of the redemption rights will be adjusted upon the occurrence of share splits, mergers, consolidations or similar pro-rata share transactions, which otherwise would have the effect of diluting the ownership interests of the Operating Partnership's limited partners or the Company's shareholders.

On May 11, 2022, in connection with the acquisition of Inn on Fifth in Naples, Florida, the Company issued 16,291 OP units.

As of December 31, 2025 and 2024, the Operating Partnership had 16,291 OP units held by third parties, excluding LTIP units.

As of December 31, 2025, the Operating Partnership hadtwo classes of long-term incentive partnership units ("LTIP units"), LTIP Class A units and LTIP Class B units. All of the outstanding LTIP units are held by officers of the Company.

On February 15, 2024, the Board of Trustees granted 136,353 LTIP Class B units to executive officers.

On February 7, 2025, the Board of Trustees granted 159,594 LTIP Class B units to executive officers.

As of December 31, 2025, the Operating Partnership had 1,154,431 LTIP units outstanding, of which 710,156 LTIP units have vested. As of December 31, 2024, the Operating Partnership had 994,837 LTIP units outstanding, of which 470,920 LTIP units have vested. Only vested LTIP units may be converted to OP units, which in turn can be tendered for redemption as described above.

Non-controlling Interest of Preferred Units in Operating Partnership

On May 11, 2022, in connection with the acquisition of Inn on Fifth, the Company issued 3,104,400 preferred units in the Operating Partnership, designated as 6.0% Series Z Cumulative Perpetual Preferred Units ("Series Z Preferred Units"). The Series Z Preferred Units rank senior to OP units and on parity with the Operating Partnership's Series E, Series F, Series G and Series H Preferred Units. Holders of Series Z Preferred Units are entitled to receive quarterly distributions at an annual rate of 6.0% of the liquidation preference value of $25.00 per share.

At any time, holders of Series Z Preferred Units may elect to convert some or all of their units into any other series of the Operating Partnership's preferred units outstanding at that time. After the second anniversary of the issuance of the Series Z Preferred Units, holders may elect to redeem some or all of their units for, at the Company's election, cash, common shares having an equivalent value or preferred shares on aone-for-one basis. After May 11, 2027, the Company may redeem the Series Z Preferred Units for cash, common shares having an equivalent value or preferred shares on aone-for-one basis. At any time following a change of control of the Company, holders of Series Z Preferred Units may elect to redeem some or all of their units for, at the Company's election, cash or common shares having an equivalent value.

As of December 31, 2025 and 2024, the Operating Partnership had 3,104,400 Series Z Preferred Units outstanding.

Note 8. Share-Based Compensation Plan

Available Shares

The Company maintains the 2009 Equity Incentive Plan (as amended and restated effective May 23, 2025, the "Plan") to attract and retain independent trustees, executive officers and other key employees and service providers. The Plan provides for the grant of options to purchase common shares, share awards, share appreciation rights, performance units and other equity-based awards. Share awards under the Plan vest over a period determined by the Board of Trustees, generally over three tofive years. The Company pays or accrues for dividends on share-based awards. All outstanding share awards are subject to full or partial accelerated vesting upon a change in control and upon death or disability or certain other employment termination events as set forth in the award agreements.

On May 23, 2025, shareholders of the Company approved an amendment to the Plan which increased the aggregate number of equity-based awards that may be issued under the Plan by 3,000,000 shares and extended the time period during which awards may be granted until June 30, 2036.

As of December 31, 2025, there were 3,846,257 common shares available for issuance under the Plan.

Service Condition Share Awards

From time to time, the Company awards restricted common shares under the Plan to members of the Board of Trustees, officers and employees. These shares generally vest over three tofive years based on continued service or employment. The following table provides a summary of service condition restricted share activity for the years ended December 31, 2025, 2024 and 2023:

The fair value of each of these service condition restricted share awards is determined based on the closing price of the Company's common shares on the grant date and compensation expense is recognized on a straight-line basis over the vesting period.

For the years ended December 31, 2025, 2024 and 2023, the Company recognized approximately $3.1 million, $3.4 million and $3.5 million, respectively, of share-based compensation expense related to these awards as presented in the accompanying consolidated statements of operations and comprehensive income. As of December 31, 2025, there was $2.2 million of total unrecognized share-based compensation expense related to unvested restricted shares. The unrecognized share-based compensation expense is expected to be recognized over the weighted-average remaining vesting period of 1.7 years.

Performance-Based Equity Awards

On February 12, 2020, the Board of Trustees approved a target award of 161,777 performance-based equity awards to officers and employees of the Company. In January 2023, following the completion of the performance period from January 1, 2020 through December 31, 2022, the Company issued 51,686 common shares in settlement of the awards, based on the performance criteria set forth in the award agreements.

On February 18, 2021, the Board of Trustees approved a target award of 189,348 performance-based equity awards to officers and employees of the Company. In January 2024, following the completion of the performance period from January 1, 2021 through December 31, 2023, the Company issued 71,677 common shares in settlement of the awards, based on the performance criteria set forth in the award agreements.

On May 16, 2022, the Board of Trustees approved a target award of 175,898 performance-based equity awards to officers and employees of the Company. In January 2025, following the completion of the performance period from January 1, 2022 through December 31, 2024, the Company issued 29,928 common shares in settlement of the awards, based on the performance criteria set forth in the award agreements.

On February 17, 2023, the Board of Trustees approved a target award of 314,235 performance-based equity awards to officers and employees of the Company. In January 2026, following the completion of the performance period from January 1, 2023 through December 31, 2025, none of these awards vested and the Company issued zero common shares to officers or employees.

On February 15, 2024, the Board of Trustees approved a target award of 322,950 performance-based equity awards to officers and employees of the Company. These awards will vest, if at all, in 2027. The actual number of common shares that ultimately vest will be from 0% to 200% of the target award and will be determined in 2027 based on the performance criteria set forth in the award agreements for the period of performance from January 1, 2024 through December 31, 2026.

On February 7, 2025, the Board of Trustees approved a target award of 348,332 performance-based equity awards to officers and employees of the Company. These awards will vest, if at all, in 2028. The actual number of common shares that ultimately vest will be from 0% to 200% of the target award and will be determined in 2028 based on the performance criteria set forth in the award agreements for the period of performance from January 1, 2025 through December 31, 2027.

The grant date fair value of the performance awards, with market conditions, were determined using a Monte Carlo simulation method with the following assumptions (dollars in millions):

In the table above, the Relative Total Shareholder Return and Absolute Total Shareholder Return components are market conditions as defined by ASC 718.

Dividends on unvested performance-based equity awards accrue over the vesting period and will be paid on the actual number of shares that vest at the end of the applicable period. The Company recognizes compensation expense on a straight-line basis through the vesting date.

For the years ended December 31, 2025, 2024 and 2023, the Company recognized approximately $5.7 million, $6.0 million and $5.6 million, respectively, of share-based compensation expense related to performance-based equity awards as presented in the accompanying consolidated statements of operations and comprehensive income. As of December 31, 2025, there was approximately $5.4 million of unrecognized compensation expense related to these performance-based equity awards which will be recognized over the weighted-average remaining vesting period of 1.6 years.

Long-Term Incentive Partnership Units

LTIP units, which are also referred to as profits interest units, may be issued to eligible participants for the performance of services to or for the benefit of the Operating Partnership. LTIP units are a class of partnership unit in the Operating Partnership and receive, whether vested or not, the same per-unit profit distributions as the other outstanding units in the Operating Partnership, which equal per-share distributions on common shares. LTIP units are allocated their pro-rata share of the Company's net income (loss). Vested LTIP units may be converted by the holder, at any time, into an equal number of common Operating Partnership units and thereafter will possess all of the rights and interests of a common Operating Partnership unit, including the right to redeem the common Operating Partnership unit for a common share in the Company or cash, at the option of the Operating Partnership.

As of December 31, 2025, the Operating Partnership hadtwo classes of LTIP units, LTIP Class A units and LTIP Class B units. All of the outstanding LTIP units are held by officers of the Company.

On February 18, 2021, the Board of Trustees granted 600,097 LTIP Class B units to executive officers. These LTIP units will vest ratably on January 1, 2023, 2024, 2025 and 2026, contingent upon continued employment with the Company. The fair value of each award was determined based on the closing price of the Company's common shares on the grant date of $22.69 per unit with an aggregate grant date fair value of $13.6 million.

On February 17, 2023, the Board of Trustees granted 131,276 LTIP Class B units to executive officers. These LTIP units will vest ratably on January 1, 2024, 2025 and 2026, contingent upon continued employment with the Company. The fair value of each award was determined based on the closing price of the Company's common shares on the grant date of $15.04 per unit with an aggregate grant date fair value of $2.0 million.

On February 15, 2024, the Board of Trustees granted 136,353 LTIP Class B units to executive officers. These LTIP units will vest ratably on January 1, 2025, 2026 and 2027, contingent upon continued employment with the Company. The fair value of each award was determined based on the closing price of the Company's common shares on the grant date of $16.13 per unit with an aggregate grant date fair value of $2.2 million.

On February 7, 2025, the Board of Trustees granted 159,594 LTIP Class B units to executive officers. These LTIP units will vest ratably on January 1, 2026, 2027 and 2028, contingent upon continued employment with the Company. The fair value of each award was determined based on the closing price of the Company's common shares on the grant date of $12.81 per unit with an aggregate grant date fair value of $2.0 million.

As of December 31, 2025, the Operating Partnership had 1,154,431 LTIP units outstanding, of which 710,156 LTIP units have vested. As of December 31, 2024, the Operating Partnership had 994,837 LTIP units outstanding, of which 470,920 LTIP units have vested. Only vested LTIP units may be converted to OP units, which in turn can be tendered for redemption as described in Note 7. Equity.

For the years ended December 31, 2025, 2024 and 2023, the Company recognized approximately $4.9 million, $4.2 million and $3.4 million, respectively, in expense related to these LTIP units. As of December 31, 2025, there was $2.2 million of unrecognized share-based compensation expense related to LTIP units. The aggregate expense related to the LTIP unit grants is presented as non-controlling interest in the Company's accompanying consolidated balance sheets.

Note 9. Income Taxes

The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Code. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90 percent of its REIT taxable income (determined without regard to the deduction for dividends paid and excluding net capital gains) to its shareholders. It is the Company's current intention to adhere to these requirements and maintain the Company's qualification for taxation as a REIT. As a REIT, the Company generally is not subject to federal corporate income tax on that portion of its taxable income that is currently distributed to shareholders. However, as a REIT, the Company is still subject to certain state and local taxes on its income and property, and to federal income and excise taxes on its undistributed taxable income. In addition, taxable income of TRSs, including our TRS lessees, are subject to federal, state and local income taxes.

For federal income tax purposes, the cash distributions paid to the Company's common shareholders and preferred shareholders may be characterized as ordinary income, return of capital (generally non-taxable) or capital gains. Tax law permits certain characterization of distributions which could result in differences between cash basis and tax basis distribution amounts.

The following characterizes distributions paid per common share and preferred share on a tax basis for the years ended December 31, 2025, 2024 and 2023:

The common and preferred distributions declared on December 15, 2022 and paid on January 17, 2023 were treated as 2022 distributions for tax purposes.

The common and preferred distributions declared on December 15, 2023 and paid on January 16, 2024 were treated as 2023 distributions for tax purposes.

The common and preferred distributions declared on December 15, 2024 and paid on January 15, 2025 were treated as 2025 distributions for tax purposes.

The common and preferred distributions declared on December 15, 2025 and paid on January 15, 2026 will be treated as 2026 distributions for tax purposes.

The Company's provision (benefit) for income taxes consists of the following (in thousands):

A reconciliation of the U.S. federal statutory rate and the Company's effective tax rate is as follows (in thousands):

(1)The following states made up the majority of the tax effect: California and Massachusetts in 2025, 2024 and 2023.

The Company paid income taxes or received income tax refunds of the following (in thousands):

*The amount of income taxes paid during the year did not meet the 5% disaggregation threshold.

The significant components of the Company's deferred tax assets as of December 31, 2025 and 2024 consisted of the following (in thousands):

The Company evaluates its deferred tax assets each reporting period to determine if it is more likely than not that those assets will be realized or if a valuation allowance is needed. In 2024, due to the TRS no longer having a three-year cumulative loss and continued improvement in the Company's financial results coming out of the COVID-19 pandemic and the projected future taxable income of its TRS, the Company released a portion of its federal and state valuation allowance. The change in the valuation allowance was a $0.8 million increase in 2025 and a $31.7 million decrease in 2024. The Company has provided a valuation allowance against a portion of its state deferred tax assets at December 31, 2025 due to the uncertainty of realizing the loss in future years. The Company's federal net operating loss can be carried forward indefinitely.

As of December 31, 2025 and 2024, the Company had no material unrecognized tax benefits. As a policy, the Company recognizes penalties and interest accrued related to unrecognized tax benefits as a component of income tax expense, however, there are currently no such accruals. The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal, state and local jurisdictions, where applicable. Due to the net operating loss carryforward, tax years 2020 through 2025 remain open to examination by the major taxing jurisdictions to which the Company is subject.

Note 10. Earnings Per Share

The following is a reconciliation of basic and diluted earnings per common share (in thousands, except share and per-share data):

For the years ended December 31, 2025, 2024 and 2023,1,383,592,1,215,533 and 1,108,816, respectively, of unvested service condition restricted shares and performance-based equity awards were excluded from diluted weighted-average number of common shares, as their effect would have been anti-dilutive. For the years ended December 31, 2025, 2024 and 2023,13,739,215,29,441,175 and 29,441,175, respectively, of common shares underlying the Convertible Notes 2026 have been excluded from diluted shares as their effect would have been anti-dilutive.

The LTIP and OP units held by the non-controlling interest holders have been excluded from the denominator of the diluted earnings per share as there would be no effect on the amounts since the limited partners' share of income (loss) would also be added or subtracted to derive net income (loss) available to common shareholders.

Note 11. Commitments and Contingencies

Hotel Management Agreements

The Company's hotel properties are operated pursuant to management agreements with various management companies. The remaining terms of these management agreements are up toeight years, not including renewals, and up to 27 years, including renewals. The majority of the Company's management agreements are terminable at will by the Company upon paying a termination fee and some are terminable by the Company upon sale of the property, with, in some cases, the payment of termination fees. Most of the agreements also provide the Company the ability to terminate based on failure to achieve defined operating performance thresholds. Termination fees range from zero to up tothree times the annual base management and incentive management fees, depending on the agreement and the reason for termination. Certain of the Company's management agreements are non-terminable except upon the manager's breach of a material representation or the manager's failure to meet performance thresholds as defined in the management agreement.

The management agreements require the payment of a base management fee generally between 1% and 4% of hotel revenues. Under certain management agreements, the management companies are also eligible to receive an incentive management fee if hotel operating income, cash flows or other performance measures, as defined in the agreements, exceed certain performance 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.

For the years ended December 31, 2025, 2024 and 2023, combined base and incentive management fees were $39.8 million, $40.8 million and $39.3 million, respectively. Base and incentive management fees are included in other direct and indirect expenses in the Company's accompanying consolidated statements of operations and comprehensive income.

Reserve Funds

Certain of the Company's agreements with its hotel managers, franchisors, ground lessors and lenders have provisions for the Company to provide funds, typically 4.0% of hotel revenues, sufficient to cover the cost of (a) certain non-routine repairs and maintenance to the hotels and (b) replacements and renewals to the hotels' furniture, fixtures and equipment.

Restricted Cash

At December 31, 2025 and 2024, the Company had $12.0 million and $10.9 million, respectively, in restricted cash, which consisted of funds held in cash management accounts held by a lender, reserves for replacement of furniture and fixtures, and reserves to pay for real estate taxes, ground rent or property insurance under certain hotel management agreements or loan agreements.

Long-Term Property Operating and Finance Leases

At December 31, 2025, the following hotels were subject to leases as follows:

(1) The expiration date assumes the exercise of a 14-year extension option.

(2) No payments are required through maturity.

(3) The expiration date assumes the exercise of all 19 five-year extension options.

(4) This property consists of a 116-guest room building which is owned fee simple and an adjoining building with 80 guest-rooms which is subject to a lease agreement. The expiration date assumes the exercise of a 30-year extension option.

The Company's leases may require minimum fixed rent payments, percentage rent payments based on a percentage of revenues in excess of certain thresholds or rent payments equal to the greater of a minimum fixed rent or percentage rent. Minimum fixed rent may be adjusted annually by increases in the consumer price index and may be subject to minimum and maximum increases. Some leases also contain certain restrictions on modifications that can be made to the hotel structures due to their status as national historic landmarks.

The Company records expense on a straight-line basis for leases that provide for minimum rental payments that increase in pre-established amounts over the remaining terms of the leases. Ground rent expense is included in real estate taxes, personal property taxes, property insurance and ground rent in the Company's accompanying consolidated statements of operations and comprehensive income.

The components of ground rent expense for the years ended December 31, 2025, 2024 and 2023 are as follows (in thousands):

Future maturities of lease liabilities for the Company's operating and finance leases at December 31, 2025 were as follows (in thousands):

As of December 31, 2025 and 2024, the weighted-average remaining operating lease term was 55.4 years and 57.1 years, respectively, and the weighted-average discount rate used to determine the operating lease liabilities was 6.4% for both periods. As of December 31, 2025 and 2024, the weighted-average remaining finance lease term was 28.9 years and 29.9 years, respectively, and the weighted-average discount rate used to determine the finance lease liabilities was 7.0% for both periods.

Litigation

The nature of the operations of hotels exposes the Company's hotels, the Company and the Operating Partnership to the risk of claims and litigation in the normal course of their business. The Company has insurance to cover certain potential material losses. The Company is not presently subject to any material litigation nor, to the Company's knowledge, is any material litigation threatened against the Company.

Note 12. Supplemental Information to Statements of Cash Flows

Note 13. Operating Segment Information

The Company invests in luxury and upper-upscale hotels located in major U.S. cities and resort properties located near our primary target urban markets and select destination resort markets, with an emphasis on major gateway coastal markets. In this note, the Company refers to hotels and resorts as "hotels". These hotels provide lodging, food and beverage services, and a range of amenities, including banquet and meeting space, fitness centers, swimming pools, spas, golf courses and other lifestyle amenities. The Company's Chief Executive Officer, who serves as the Chief Operating Decision Maker ("CODM"), evaluates the performance, allocates capital resources and manages the overall operating and investing strategy of each hotel individually. The Company's hotels are not managed on a consolidated basis. Given these factors, the Company considers each hotel to be an operating segment. Because all of the Company's hotels offer similar full-service products, services and facilities, serve a similar mix of business and leisure customers, have similar economic characteristics and risks, and utilize similar methods to distribute their products and services via third-party management companies, all hotels have been aggregated into a single segment for reporting purposes.

All operating segments adhere to the same accounting policies as those described in Note. 2 Summary of Significant Accounting Policies. The CODM evaluates the performance of each operating segment using hotel earnings before interest taxes depreciation and amortization ("Hotel EBITDA"), comparing it to prior reporting periods, forecasts and industry/peer benchmarks on a monthly basis to make decisions and allocate resources. Additionally, the CODM considers other performance indicators such as Total Revenue, Revenue per Available Room (RevPAR), Average Daily Rate (ADR) and Occupancy to assess performance. The CODM does not rely on segment assets or aggregated data by brand, property type, or geographic region to make strategic, operational, investment or resource allocation decisions.

The following table presents the Company's segment hotel revenues, Hotel EBITDA, including significant hotel expenses and its reconciliation to Net income (loss) for the years ended December 31, 2025, 2024 and 2023 (in thousands):

(1)Other segment items include expenses incurred for parking, spa, franchise fees and other hotel operating expenses.

(2)Corporate and other include corporate general and administrative and other operating income and expenses.

Note 14. Subsequent Events

On February 11, 2026, the Company amended its Credit Facility to provide for a $450.0 million delayed draw term loan facility which will mature in February 2031. The Company immediately borrowed $360.0 million under the delayed draw term loan to extend the Term Loan 2027. The Company has the option to borrow the remaining $90.0 million by December 15, 2026. The Credit Facility was also amended to remove the SOFR adjustment from its senior unsecured revolving credit facility and all unsecured term loan facilities. Concurrently, the maturity date of the $48.0 million unextended portion of the senior unsecured revolving credit facility was extended to October 13, 2028.