RLJ Lodging Trust

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 September 30, 2025, there were 151,820,572 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 September 30, 2025, the Company owned 95 hotel properties with approximately 21,200 rooms, located in 23 states and the District of Columbia. The Company, through wholly-owned subsidiaries, owned a 100% interest in 93 of its hotel properties, a 95% controlling interest inone hotel property, and a 50% non-controlling interest in an entity owningone hotel property. The Company consolidates its real estate interests in the 94 hotel properties in which it holds a controlling interest, and the Company records the real estate interest in theone hotel property in which it holds an indirect 50% non-controlling interest using the equity method of accounting. The Company leases 94 of the 95 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, 2024, filed with the Securities and Exchange Commission ("SEC") on February 26, 2025 (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, 2024.

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 (loss) 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, 2024, 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 inone 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.

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

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 fiscal years beginning after December 15, 2024, 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 the Company's Annual Report on Form 10-K for the year ended December 31, 2025.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures, which requires public entities to disclose, on an annual and interim basis, disaggregated information about certain income statement expense line items in the notes to the financial statements. Public entities are required to apply the guidance prospectively and may elect to apply it retrospectively. The new standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The Company is currently evaluating this ASU to determine its impact on the Company’s consolidated financial statements and related disclosures.

3. Investment in Hotel Properties

Investment in hotel properties consisted of the following (in thousands):

For the three and nine months ended September 30, 2025, the Company recognized depreciation expense related to its investment in hotel properties of approximately $46.8 million and $138.7 million, respectively. For the three and nine months ended September 30, 2024, the Company recognized depreciation expense related to its investment in hotel properties of approximately $44.9 million and $133.9 million, respectively.

4. Acquisitions

On January 29, 2024, the Company acquired the fee simple interest in the Wyndham Boston Beacon Hill 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 sheets.

Also during the nine months ended September 30, 2024, the Company acquired a 100% interest in the following property:

The acquisition of Hotel Teatro was accounted for as an asset acquisition, whereby approximately $0.6 million of transaction costs were capitalized as part of the cost of the acquisition. The allocation of the costs for the property acquired was as follows (in thousands):

The value of the asset acquired was primarily based on a sales comparison approach (for land) and a depreciated replacement cost approach (for building and improvements and furniture, fixtures and equipment). The sales comparison approach used inputs of recent land sales in the hotel market. The depreciated replacement cost approach used inputs of both direct and indirect replacement costs using a nationally recognized authority on replacement cost information as well as the age, square footage and number of rooms of the asset.

The Company did not acquire any properties during the nine months ended September 30, 2025.

5. Sales of Hotel Properties

In connection with the sales of hotel properties, the Company recorded a net loss of $0.1 million and a net gain of $0.8 million for the three and nine months ended September 30, 2025, respectively, and net gains of $4.8 million and $8.3 million for the three and nine months ended September 30, 2024, respectively.

On March 6, 2025, the Company sold the 181-room Courtyard Atlanta Buckhead hotel property in Atlanta, Georgia for a sales price of $24.3 million.

During the nine months ended September 30, 2024, the Company sold the following hotel properties in two separate transactions for a combined sales price of approximately $20.8 million.

6. Revenue

The Company recognized revenue from the following geographic markets (in thousands):

7. Debt

The Company's debt consisted of the following (in thousands):

Senior Notes

The Company's senior notes (collectively, the "Senior Notes") consisted of the following (dollars in thousands):

(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.

A summary of the various restrictive covenants for the Senior Notes are as follows:

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 aone-year extension option or up totwo six-month extension options if certain conditions are satisfied (the "Revolver");

•$500.0 million term loan with a scheduled maturity date of September 24, 2027 and up totwo one-year extension options if certain conditions are satisfied (the "$500 Million Term Loan Maturing 2027");

•$300.0 million term loan with a scheduled maturity date of April 3, 2028 and up totwo one-year extension options if certain conditions are satisfied (the "$300 Million Term Loan Maturing 2028"); and

•$225.0 million term loan with a scheduled maturity date of May 10, 2026 and up totwo one-year extension options if certain conditions are satisfied (the "$225 Million Term Loan Maturing 2026").

The $500 Million Term Loan Maturing 2027, the $300 Million Term Loan Maturing 2028, 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):

(1)Interest rate at September 30, 2025 gives effect to interest rate hedges.

(2)At September 30, 2025 and December 31, 2024, there was $600.0 million and $500.0 million, respectively, of remaining capacity on the Revolver. The Company has the ability to extend the maturity date for an additionalone-year period or up totwo six-month periods ending May 2028 if certain conditions are satisfied.

(3)This term loan includestwo one-year extension options at the Company's discretion, subject to certain conditions.

(4)In April 2025, the Company refinanced this term loan to increase the term loan to $300.0 million and extend the initial maturity to April 2028, withtwo additionalone-year extension options at the Company's discretion, subject to certain conditions.

(5)Excludes $2.6 million and $3.9 million as of September 30, 2025 and December 31, 2024, respectively, related to deferred financing costs on the Revolver, which are included in prepaid expense and other assets in the accompanying consolidated balance sheets.

In April 2025, the Company refinanced a $200.0 million term loan with a scheduled maturity date of January 31, 2026 (the "$200 Million Term Loan Maturing 2026") to upsize the term loan to $300.0 million and extend the initial maturity to April 2028, withtwo additionalone-year extension options at the Company's discretion, subject to certain conditions. Borrowings under the term loan bear interest at a variable rate under the same pricing grid as the $200 Million Term Loan Maturing 2026. The Company paid approximately $1.9 million in lender fees and legal costs related to the financing. In April 2025, the Company utilized the incremental $100.0 million in proceeds to pay off the full outstanding balance on the Revolver.

The Revolver and Term Loans are subject to various financial covenants. A summary of the most restrictive covenants is as follows:

(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):

(1)The hotels encumbered by the mortgage loan are cross-collateralized. Requires payments of interest only through maturity.

(2)Includes $1.2 million and $1.5 million at September 30, 2025 and December 31, 2024, 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 September 30, 2025 gives effect to interest rate hedges.

(4)In April 2025, the Company exercised the final option to extend the maturity to April 2026.

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 September 30, 2025, all mortgage loans exceeded the minimum debt yield or DSCR thresholds.

The components of the Company's interest expense consisted of the following (in thousands):

8. Derivatives and Hedging Activities

The following interest rate swaps have been designated as cash flow hedges (in thousands):

As of September 30, 2025 and December 31, 2024, the aggregate fair value of the interest rate swap assets of $3.5 million and $14.4 million, respectively, was included in prepaid expense and other assets in the accompanying consolidated balance sheets. As of September 30, 2025, the aggregate fair value of the interest rate swap liabilities of $0.4 million was included in accounts payable and other liabilities in the accompanying consolidated balance sheet.

As of September 30, 2025 and December 31, 2024, there was approximately $2.9 million and $13.8 million, respectively, of unrealized gains included in accumulated other comprehensive income related to interest rate swaps. There wasno ineffectiveness recorded during the three or nine month periods ended September 30, 2025 or 2024. For the three and nine months ended September 30, 2025, gains of approximately $2.5 million and $8.1 million, respectively, included in accumulated other comprehensive income were reclassified into interest expense for the interest rate swaps. For the three and nine months ended September 30, 2024, gains of approximately $4.9 million and $16.3 million, respectively, included in accumulated other comprehensive income were reclassified into interest expense for the interest rate swaps. Approximately $2.7 million of the unrealized gains included in accumulated other comprehensive income at September 30, 2025 is expected to be reclassified into earnings within the next 12 months.

9. Fair Value

Fair Value Measurement

Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. The fair value hierarchy has three levels of inputs, both observable and unobservable:

•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 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):

Recurring Fair Value Measurements

The following table presents the Company’s fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2025 (in thousands):

The following table presents the Company’s fair value hierarchy for those financial assets measured at fair value on a recurring basis as of December 31, 2024 (in thousands):

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 September 30, 2025, 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.

10. 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.

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (the "OBBBA"). Among other changes, the OBBBA permanently extended the 20% deduction for “qualified REIT dividends” for individuals and other non-corporate taxpayers under Section 199A of the Internal Revenue Code (the “Code”). The OBBBA also increased the percentage limit under the REIT asset test applicable to TRSs (the permissible value of TRS securities that a REIT may hold) from 20% to 25% of the value of the REIT’s total assets for taxable years beginning after December 31, 2025, and increased the base on which the 30% interest deduction limit under Section 163(j) of the Code applies by excluding depreciation, amortization and depletion from the definition of “adjusted taxable income” (i.e. based on EBITDA rather than EBIT) for taxable years beginning after December 31, 2024. The Company has evaluated this legislation and determined its impact is not material to the Company’s consolidated financial statements and related disclosures.

The Company hadno accruals for tax uncertainties as of September 30, 2025 and December 31, 2024.

11. Commitments and Contingencies

Restricted Cash Reserves

The Company may be obligated to maintain cash reserve funds for future capital expenditures, real estate taxes, insurance, and other items. 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 September 30, 2025 and December 31, 2024, approximately $29.2 million and $23.5 million, respectively, was available in the restricted cash reserves for future capital expenditures.

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.

Management Agreements

As of September 30, 2025,94 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 (loss) income. For the three and nine months ended September 30, 2025, the Company incurred management fee expense of approximately $9.6 million and $30.0 million, respectively. For the three and nine months ended September 30, 2024, the Company incurred management fee expense of approximately $10.2 million and $31.4 million, respectively.

Franchise Agreements

As of September 30, 2025,56 of the Company’s consolidated hotel properties were operated under franchise agreements with initial terms ranging fromone 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, three 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 (loss) income. For the three and nine months ended September 30, 2025, the Company incurred franchise fee expense of approximately $15.7 million and $48.9 million, respectively. For the three and nine months ended September 30, 2024, the Company incurred franchise fee expense of approximately $17.1 million and $51.4 million, respectively.

12. Equity

Common Shares of Beneficial Interest

During the nine months ended September 30, 2025, the Company declared a cash dividend of $0.15 per common share in each of the first, second and third quarters of 2025. During the nine months ended September 30, 2024, the Company declared a cash dividend of $0.10 per common share in each of the first and second quarters of 2024 and a cash dividend of $0.15 per common share in the third quarter of 2024.

On April 25, 2025, 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, 2025 to May 8, 2026 (the "2025 Share Repurchase

Program"). During the nine months ended September 30, 2025, the Company repurchased and retired approximately 3.3 million common shares for approximately $28.6 million, of which $24.3 million was repurchased under a share repurchase program authorized by the Company’s board of trustees in 2024, which expired May 8, 2025, and $4.3 million was repurchased under the 2025 Share Repurchase Program. As of November 6, 2025, the 2025 Share Repurchase Program had a remaining capacity of $245.7 million.

During the nine months ended September 30, 2024, the Company repurchased and retired approximately 2.0 million common shares for approximately $19.0 million.

Series A Preferred Shares

During the nine months ended September 30, 2025 and 2024, the Company declared a cash dividend of $0.4875 on each Series A Preferred Share in each of the first, second and third quarters of 2025 and 2024.

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.

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 September 30, 2025,771,831 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.

13. 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 September 30, 2025 is as follows:

For the three and nine months ended September 30, 2025, the Company recognized approximately $2.0 million and $6.5 million, respectively, of share-based compensation expense related to restricted share awards. For the three and nine months ended September 30, 2024, the Company recognized approximately $2.3 million and $9.4 million, respectively, of share-based compensation expense related to restricted share awards. As of September 30, 2025, there was $13.5 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 2.0 years. The total fair value of the shares vested (calculated as the number of shares multiplied by the vesting date share price) during the nine months ended September 30, 2025 and 2024 was approximately $7.6 million and $17.6 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 the primary metrics. The performance units vest at the end of athree year period (the “performance units measurement period”).

The performance units granted in 2024 and 2025 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 is as follows:

(1) In February 2025, following the end of the measurement period, the Company met certain threshold criterion and the performance units converted into approximately 240,000 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 nine months ended September 30, 2025 was approximately $2.1 million.

For the three and nine months ended September 30, 2025, the Company recognized approximately $2.0 million and $4.8 million, respectively, of share-based compensation expense related to the performance unit awards. This included a benefit of $1.6 million as a result of the forfeitures of approximately 217,000 performance units related to the departure of Company executives during the three months ended June 30, 2025. For the three and nine months ended September 30, 2024, the Company recognized approximately $2.3 million and $6.9 million, respectively, of share-based compensation expense related to the performance unit awards. As of September 30, 2025, there was $12.6 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 1.9 years.

As of September 30, 2025, there were 779,968 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.

14. 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 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 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 and nine months ended September 30, 2025 and 2024, since the limited partners’ share of income would also be added back to net income attributable to common shareholders.

The computation of basic and diluted earnings per common share is as follows (in thousands, except share and per share data):

For the three months ended September 30, 2025, an aggregate of 216,114 unvested restricted shares and performance units were excluded from diluted weighted-average number of common shares, as their effect would have been anti-dilutive.

15. Segment Information

The Company’s chief operating decision maker (“CODM”) is the President and Chief Executive Officer.

The CODM separately evaluates the performance of each of the Company’s hotel properties and each hotel property is an operating segment. However, because each of the hotels has similar economic characteristics, facilities, and services, the hotel properties have been aggregated into a single reportable segment.

The hotel segment revenues are derived from the operation of hotel properties. The hotel segment generates room revenue by renting hotel rooms to customers at the Company’s hotel properties. The hotel segment generates food and beverage revenue from the sale of food and beverage to customers at the Company’s hotel properties. The hotel segment generates other revenue from parking fees, resort fees, gift shop sales and other guest service fees at the Company’s hotel properties.

The CODM assesses performance for the hotel segment and decides how to allocate resources based on Hotel EBITDA, which is a non-GAAP financial measure. Hotel EBITDA is defined as net income or loss excluding: (1) interest expense; (2) income tax expense; and (3) depreciation and amortization expense, adjusted for corporate-level expenses, certain non-cash items, and certain other items that the Company considers outside the normal course of operations.

The following table presents information about profit or loss for the hotel segment:

(1) Includes miscellaneous hotel segment income, as well as adjustments for corporate-level expenses, certain non-cash items, and certain other items that the Company considers outside the normal course of operations.

The following table provides a reconciliation of the hotel segment profit and loss to the Company’s consolidated totals:

A measure of segment assets is not currently provided to the CODM and has therefore not been included herein.

16. Supplemental Information to Statements of Cash Flows (in thousands)