Pebblebrook Hotel Trust(PEB) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements. The unaudited consolidated financial statements detail the company's financial position, performance, and cash flows Consolidated Balance Sheets Total assets and equity slightly decreased while liabilities marginally increased from year-end 2024 to mid-2025 Consolidated Balance Sheets (Unaudited) | Metric | June 30, 2025 (Unaudited) (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :-------------------------- | :------------------ | | ASSETS | | | | Investment in hotel properties, net | $5,249,485 | $5,319,029 | | Cash and cash equivalents | $256,130 | $206,650 | | Hotel receivables (net) | $49,691 | $39,125 | | Total assets | $5,653,310 | $5,693,338 | | LIABILITIES AND EQUITY | | | | Debt | $2,248,135 | $2,246,732 | | Total liabilities | $2,922,209 | $2,905,464 | | Total equity | $2,731,101 | $2,787,874 | | Total liabilities and equity | $5,653,310 | $5,693,338 | Consolidated Statements of Operations and Comprehensive Income Revenues grew year-over-year, but higher expenses led to a significant decline in net income and a net loss for H1 2025 Consolidated Statements of Operations and Comprehensive Income (Unaudited) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $407,537 | $397,110 | $727,803 | $711,179 | | Total operating expenses | $355,149 | $336,139 | $682,652 | $651,587 | | Operating income (loss) | $52,388 | $60,971 | $45,151 | $59,592 | | Net income (loss) | $19,285 | $32,239 | $(12,895) | $4,719 | | Net income (loss) attributable to common shareholders | $7,424 | $20,304 | $(36,154) | $(18,677) | | Net income (loss) per share, basic | $0.06 | $0.17 | $(0.30) | $(0.16) | | Comprehensive income (loss) attributable to the Company | $14,034 | $29,150 | $(24,607) | $7,493 | Consolidated Statements of Equity Total equity declined from year-end 2024 due to distributions and share repurchases exceeding net income Consolidated Statements of Equity (Unaudited) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :------------ | :---------------- | | Total Shareholders' Equity | $2,638,604 | $2,697,424 | | Non-Controlling Interests | $92,497 | $90,450 | | Total Equity | $2,731,101 | $2,787,874 | Key Changes (Six Months Ended June 30, 2025) * Repurchase of common shares: $(15,612) thousand * Distributions on common shares/units: $(2,380) thousand * Distributions on preferred shares/units: $(21,263) thousand * Net income (loss): $(12,895) thousand Consolidated Statements of Cash Flows Operating cash flow increased while financing cash outflow decreased, resulting in a positive net change in cash Consolidated Statements of Cash Flows (Unaudited) | Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $140,883 | $129,671 | | Net cash provided by (used in) investing activities | $(47,504) | $(61,703) | | Net cash provided by (used in) financing activities | $(43,832) | $(150,431) | | Net change in cash and cash equivalents and restricted cash | $49,547 | $(82,463) | | Cash and cash equivalents and restricted cash, end of period | $267,138 | $111,178 | Notes to the Consolidated Financial Statements The notes detail accounting policies, property investments, debt, revenue, equity, and commitments Note 1. Organization Pebblebrook is a REIT owning 46 hotel properties in major U.S. markets, operating through an Operating Partnership - Pebblebrook Hotel Trust is a Maryland REIT that invests in hotel properties, primarily in major U.S. cities and resort markets[29] - As of June 30, 2025, the Company owned interests in 46 hotels with a total of 11,937 guest rooms across various U.S. locations[30] - The Company operates through Pebblebrook Hotel, L.P. (Operating Partnership), owning 99.0% of common units, and utilizes a taxable REIT subsidiary (PHL) to lease and manage hotels via third-party contractors to maintain REIT qualification[31] Note 2. Summary of Significant Accounting Policies This note outlines the basis of presentation, use of estimates, and the impact of new accounting pronouncements - The financial statements are prepared in accordance with U.S. GAAP and SEC rules for interim information, with certain disclosures omitted[32] - Management's estimates and assumptions are crucial, and actual results may differ[35] - New accounting pronouncements include ASU 2023-09 (Income Taxes), ASU 2024-01 (Stock Compensation), ASU 2024-03 (Expense Disaggregation Disclosures), and ASU 2024-04 (Induced Conversions of Convertible Debt Instruments)[37][38][39][40] - ASU 2023-09 (Income Taxes) is effective for fiscal years beginning after December 15, 2024, and is not expected to have a material impact[37] - ASU 2024-01 (Stock Compensation) was adopted on January 1, 2025, with no impact on financial statements[38] - ASU 2024-03 (Expense Disaggregation Disclosures) is effective for annual periods beginning after December 15, 2026, and its impact is currently being assessed[39] - ASU 2024-04 (Induced Conversions of Convertible Debt Instruments) is effective for annual periods beginning after December 15, 2025, and its impact is currently being assessed[40] Note 3. Acquisition and Disposition of Hotel Properties No hotel properties were acquired or disposed of during the first six months of 2025 or 2024 - No hotel properties were acquired or disposed of during the six months ended June 30, 2025, or 2024[41][42] Note 4. Investment in Hotel Properties Net investment in hotel properties decreased due to depreciation, with hurricane impacts affecting one property Investment in Hotel Properties, Net (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Investment in hotel properties | $6,895,044 | $6,849,883 | | Less: Accumulated depreciation | $(1,645,559) | $(1,530,854) | | Investment in hotel properties, net | $5,249,485 | $5,319,029 | - LaPlaya Beach Resort & Club was impacted by Hurricanes Helene and Milton in late 2024, resulting in $7.5 million of business interruption insurance income for the six months ended June 30, 2025[44][45] - The Company received $18.2 million in preliminary insurance advances through June 30, 2025, related to hurricane damages[45] - No impairment losses were incurred on hotel properties during the six months ended June 30, 2025, or 2024[47] - As of June 30, 2025, operating lease liabilities were $320.7 million and financing lease liabilities were $44.3 million[49] Note 5. Debt Total debt remained stable at $2.26 billion, with recent refinancing activities and use of interest rate swaps Debt Principal (in thousands) | Debt Type | June 30, 2025 (Principal) | December 31, 2024 (Principal) | | :-------------------------- | :-------------------------- | :---------------------------- | | Unsecured term loans | $916,652 | $916,652 | | Convertible senior notes | $750,000 | $750,000 | | Unsecured senior notes | $402,400 | $402,400 | | Mortgage loans | $194,315 | $195,413 | | Total debt principal | $2,263,367 | $2,264,465 | | Debt, net | $2,248,135 | $2,246,732 | - The Company extended $356.7 million of Term Loan 2024 to January 2028 (Term Loan 2028) and repaid $110 million of other term loans in January 2024[51] - In October 2024, the Company issued $400 million of 6.375% Senior Notes due October 2029, using proceeds to repay $353.3 million of existing term loans[52] - In November 2024, $185.2 million of Term Loan 2025 was extended to January 2029 (Term Loan 2029), and $602.0 million of the senior unsecured revolving credit facility was extended to October 2028[53] - As of June 30, 2025, the Company had no outstanding borrowings on its $650.0 million senior unsecured revolving credit facility, with $642.1 million borrowing capacity remaining[55] - Interest expense for the three months ended June 30, 2025, was $27.3 million, down from $27.9 million in the prior year, primarily due to lower unsecured term loan interest[71] - Interest expense for the six months ended June 30, 2025, was $54.4 million, slightly up from $54.36 million in the prior year, with a significant increase in unsecured senior notes interest[71] - The Company uses interest rate swap agreements as cash flow hedges, with an aggregate notional value of $955.0 million as of June 30, 2025, up from $855.0 million at December 31, 2024[74] Note 6. Revenue Total revenues increased, with San Diego and Southern Florida/Georgia as top contributors showing growth Total Revenues by Geographic Location (in thousands) | Geographic Location | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | San Diego, CA | $86,700 | $84,983 | $161,911 | $156,478 | | Southern Florida/Georgia | $70,951 | $68,934 | $156,406 | $149,891 | | Boston, MA | $80,956 | $79,958 | $127,729 | $125,878 | | Los Angeles, CA | $44,630 | $48,599 | $78,927 | $92,808 | | San Francisco, CA | $37,309 | $32,874 | $71,050 | $63,419 | | Washington, D.C. | $20,425 | $22,102 | $35,425 | $36,904 | | Total Revenues | $407,537 | $397,110 | $727,803 | $711,179 | Note 7. Equity The company repurchased $14.3 million in common shares and maintained consistent preferred dividends - During the six months ended June 30, 2025, the Company repurchased 1,298,396 common shares for $14.3 million (average $11.04 per share)[79] - As of June 30, 2025, $116.6 million of common shares remained available for repurchase under the $150.0 million program[79] Common Dividends Declared | Dividend per Share/Unit | For the Quarter Ended | | :---------------------- | :-------------------- | | $0.01 | March 31, 2025 | | $0.01 | June 30, 2025 | Preferred Shares Outstanding | Security Type | June 30, 2025 (Shares Outstanding) | December 31, 2024 (Shares Outstanding) | | :-------------- | :--------------------------------- | :------------------------------------- | | 6.375% Series E | 4,400,000 | 4,400,000 | | 6.30% Series F | 6,000,000 | 6,000,000 | | 6.375% Series G | 9,200,000 | 9,200,000 | | 5.70% Series H | 8,000,000 | 8,000,000 | | Total | 27,600,000 | 27,600,000 | - No preferred shares were repurchased during the six months ended June 30, 2025, with $84.2 million remaining available under the $100.0 million program[85] - As of June 30, 2025, the Operating Partnership had 1,154,431 LTIP units outstanding, of which 710,156 were vested[91][104] - The Operating Partnership had 3,104,400 Series Z Preferred Units outstanding as of June 30, 2025, and December 31, 2024[94] Note 8. Share-Based Compensation Plan The equity incentive plan was amended to increase available shares, with compensation expense detailed for awards - Shareholders approved an amendment to the 2009 Equity Incentive Plan, increasing available equity-based awards by 3,000,000 shares and extending the grant period to June 30, 2036[96] - As of June 30, 2025, 3,838,871 common shares were available for issuance under the Plan[96] - For the six months ended June 30, 2025, the Company recognized $1.5 million in share-based compensation expense for service condition restricted shares (vs. $1.7 million in 2024)[97][98] - For the six months ended June 30, 2025, the Company recognized $2.8 million in share-based compensation expense for performance-based equity awards (vs. $2.9 million in 2024)[100][101] - For the six months ended June 30, 2025, the Company recognized $2.4 million in expense related to LTIP units (vs. $2.0 million in 2024)[105][106] Note 9. Income Taxes As a REIT, the company is generally exempt from federal corporate income tax on distributed income - As a REIT, the Company is generally not subject to federal corporate income taxes on distributed taxable income[107] - Taxable income of TRSs (e.g., PHL) is subject to federal, state, and local corporate income taxes[107] - Tax years 2020 through 2024 remain open to examination due to net operating loss carryforwards[108] Note 10. Earnings (Loss) Per Share Basic and diluted EPS declined year-over-year, reflecting a net loss attributable to common shareholders in H1 2025 Earnings (Loss) Per Share Calculation (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to common shareholders | $7,424 | $20,304 | $(36,154) | $(18,677) | | Net income (loss) available to common shareholders — basic | $7,371 | $20,147 | $(36,171) | $(18,696) | | Net income (loss) per share available to common shareholders — basic | $0.06 | $0.17 | $(0.30) | $(0.16) | | Net income (loss) per share available to common shareholders — diluted | $0.06 | $0.16 | $(0.30) | $(0.16) | - For the three and six months ended June 30, 2025, 29,441,175 common shares underlying Convertible Notes were excluded from diluted shares as their effect would have been anti-dilutive[110] Note 11. Commitments and Contingencies The company has long-term hotel management agreements and lease obligations but no material litigation - Hotel management agreements have remaining terms up to nine years (excluding renewals) and up to 27 years (including renewals), with most terminable by the Company under certain conditions[112] - Combined base and incentive management fees were $18.8 million for the six months ended June 30, 2025, slightly down from $19.2 million in 2024[114] - As of June 30, 2025, restricted cash totaled $11.0 million, held for cash management, furniture/fixture reserves, and real estate taxes/ground rent/property insurance[116] Ground Rent Expense (in thousands) | Ground Rent Type | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------- | :----------------------------- | :----------------------------- | | Fixed ground rent | $9,635 | $9,592 | | Variable ground rent | $9,314 | $9,063 | | Total ground rent | $18,949 | $18,655 | - The Company is not presently subject to any material litigation[121] Note 12. Supplemental Information to Statements of Cash Flows This note details supplemental cash flow data, including interest paid, taxes paid, and non-cash activities Supplemental Cash Flow Information (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Interest paid, net of capitalized interest | $51,068 | $53,709 | | Income taxes paid (refunded) | $779 | $370 | | Distributions payable on common shares/units | $1,255 | $1,256 | | Distributions payable on preferred shares/units | $10,601 | $10,601 | | Accrued additions and improvements to hotel properties | $455 | $6,126 | | Write-down of investment | $2,662 | $0 | Note 13. Operating Segment Information Hotel revenues increased, but higher operating expenses led to a decrease in Hotel EBITDA year-over-year Reconciliation of Net Income (Loss) to Hotel EBITDA (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Hotel revenues | $407,328 | $395,746 | $727,216 | $708,097 | | Hotel operating expenses (total) | $253,786 | $247,657 | $481,000 | $463,713 | | Hotel real estate taxes, personal property taxes, property insurance and ground rent | $34,063 | $24,319 | $67,110 | $56,385 | | Hotel EBITDA | $120,979 | $125,467 | $181,806 | $191,571 | | Net income (loss) | $19,285 | $32,239 | $(12,895) | $4,719 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Management discusses financial results, highlighting strong performance in certain markets and analyzing key metrics FORWARD-LOOKING STATEMENTS This section outlines future plans and expectations while cautioning about inherent risks and uncertainties - Forward-looking statements cover business strategy, industry trends, estimated revenues/expenses, renovation costs, debt refinancings, insurance recoveries, deferred tax assets, and liquidity[126] - Key risks include hotel industry competition, changes in travel policies, increased operating costs, decreased demand from external events (e.g., terrorism, natural disasters, pandemics), global economic conditions, financing availability, dependence on third-party managers, and potential failure to qualify as a REIT[128] Overview Second-quarter results surpassed expectations, driven by a rebound in San Francisco and redeveloped properties - Second-quarter operating results exceeded outlook, primarily due to a strong rebound in San Francisco and momentum from redeveloped properties[129] - Newport Harbor Island Resort delivered results well above expectations in its first full year post-redevelopment[129] - Los Angeles properties faced challenges from early 2025 wildfires and the ramp-up of Hyatt Centric Delfina Santa Monica after renovation[129] - During the six months ended June 30, 2025, the Company repurchased 1,298,396 common shares for $14.3 million, at an average of $11.04 per share[130] Key Indicators of Financial Condition and Operating Performance The company uses metrics like RevPAR, FFO, and EBITDA to measure performance, with occupancy up and ADR down in Q2 - Key performance indicators include RevPAR, Total RevPAR, ADR, Occupancy, FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel EBITDA[131] Same-Property Key Performance Indicators | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Same-Property Occupancy | 78.2 % | 76.3 % | 70.1 % | 68.7 % | | Same-Property ADR | $302.50 | $308.09 | $302.05 | $306.92 | | Same-Property RevPAR | $236.56 | $235.09 | $211.71 | $210.84 | | Same-Property Total RevPAR | $370.93 | $366.10 | $336.27 | $330.58 | Non-GAAP Financial Measures The company uses non-GAAP measures like FFO and EBITDA to provide insight into operating performance - Non-GAAP measures like FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel EBITDA are used to evaluate operating performance[133] - FFO is calculated in accordance with Nareit standards, excluding real estate related depreciation, gains/losses from sales, and impairments[134] - Adjusted FFO includes adjustments for transaction costs, non-cash ground rent, share-based compensation, and other items[135] Reconciliation of Net Income (Loss) to Non-GAAP Measures (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $19,285 | $32,239 | $(12,895) | $4,719 | | FFO | $76,869 | $89,454 | $102,176 | $119,060 | | FFO available to common share and unit holders | $65,073 | $77,658 | $78,585 | $95,469 | | Adjusted FFO available to common share and unit holders | $77,442 | $83,760 | $96,183 | $108,762 | | EBITDA and EBITDAre | $112,024 | $118,484 | $161,358 | $174,640 | | Adjusted EBITDAre | $116,959 | $123,471 | $173,548 | $184,276 | | Hotel EBITDA | $120,979 | $125,467 | $181,806 | $191,571 | Results of Operations Total revenues increased, but higher operating and tax expenses led to a decrease in net income Comparison of the three months ended June 30, 2025 to the three months ended June 30, 2024 Total revenues increased by $10.4 million, but net income fell due to higher operating and tax expenses - Total revenues increased by $10.4 million, driven by Newport Harbor Island Resort and demand in San Francisco, offset by Hyatt Centric Delfina Santa Monica[139] - Total hotel operating expenses increased by $6.1 million due to increased operations and higher wage rates/benefits[140] - Real estate taxes, personal property taxes, property insurance, and ground rent increased by $9.0 million due to higher tax assessments[141] - Income tax (expense) benefit increased by $6.8 million due to taxable income of Pebblebrook Hotel Lessee, Inc[143] Comparison of the six months ended June 30, 2025 to the six months ended June 30, 2024 Revenues rose by $16.6 million, but higher operating, tax, and G&A expenses drove a net loss - Total revenues increased by $16.6 million, driven by Newport Harbor Island Resort, LaPlaya Beach Resort & Club, Estancia La Jolla Hotel & Spa, 1 Hotel San Francisco, and The Westin Copley Place, Boston[145] - Total hotel operating expenses increased by $17.3 million due to increased operations and higher wage rates/benefits[146] - Real estate taxes, personal property taxes, property insurance, and ground rent increased by $9.8 million due to higher tax assessments[147] - General and administrative expenses increased by $1.6 million, primarily due to legal costs[148] - Income tax (expense) benefit increased by $3.6 million due to increased taxable income of Pebblebrook Hotel Lessee, Inc[149] Critical Accounting Policies Financial statements are prepared under U.S. GAAP, requiring management estimates that may differ from actual results - Financial statements rely on management estimates and assumptions, which may differ from actual results[151] - Significant accounting policies are disclosed in the Annual Report on Form 10-K for December 31, 2024[151] New Accounting Pronouncements Details on new accounting pronouncements are available in Note 2 of the financial statements - Details on new accounting pronouncements are provided in Note 2. Summary of Significant Accounting Policies[152] Liquidity and Capital Resources The company maintains sufficient liquidity to cover short-term needs, with total debt at $2.26 billion - Primary liquidity sources: cash from operations, credit facilities, equity/debt offerings, and property sales[153] - Short-term cash requirements: property lease obligations, debt interest/principal, capital improvements, common/preferred dividends, and working capital[153] - As of June 30, 2025, total liquidity (cash, restricted cash, and credit facility capacity) was $909.2 million, sufficient for short-term needs[153] - To maintain REIT qualification, the Company must distribute at least 90% of taxable income, necessitating external capital for long-term funding[154] Total Debt (in thousands) | Debt Type | June 30, 2025 (Face Value) | | :-------------------------- | :------------------------- | | Unsecured revolving credit facilities | $0 | | Unsecured term loans | $916,652 | | Convertible senior notes | $750,000 | | Unsecured senior notes | $402,400 | | Mortgage loans | $194,315 | | Total debt at face value | $2,263,367 | - Expected future principal and interest payments on debt total $2.6 billion through maturity, with $19.2 million principal and $99.3 million interest due by June 30, 2026[157] - The Company is in compliance with all debt covenants[158] - None of the mortgage loans were in a cash trap as of June 30, 2025[159] - Future fixed minimum payments for long-term operating and finance leases total $1.8 billion, with $23.5 million payable by June 30, 2026[161] - Outstanding purchase commitments for capital and renovation projects totaled $1.3 million as of June 30, 2025, all due by June 30, 2026[162] - Expected annual dividends and distributions on preferred shares and Series Z preferred units are approximately $47.2 million[163] - Net cash provided by operating activities was $140.9 million for the six months ended June 30, 2025 (vs. $129.7 million in 2024)[165] - Net cash used in investing activities was $47.5 million for the six months ended June 30, 2025 (vs. $61.7 million in 2024)[166] - Net cash used in financing activities was $43.8 million for the six months ended June 30, 2025 (vs. $150.4 million in 2024)[167] Capital Investments The company invested $49.5 million in capital improvements in H1 2025 and plans to invest $65-75 million for the full year - For the six months ended June 30, 2025, $49.5 million was invested in capital improvements, including renovations at several properties[170] - Excluding the repair and remediation of LaPlaya Beach Resort & Club, capital investments for the six months ended June 30, 2025, were $41.1 million[170] - The Company expects to invest $65.0 million to $75.0 million in capital investments in 2025, excluding LaPlaya's repair and remediation[171] Common Share Repurchase Programs and Preferred Share Repurchase Program The company repurchased $14.3 million of common shares in H1 2025, with significant capacity remaining in both common and preferred programs - During the six months ended June 30, 2025, 1,298,396 common shares were repurchased for $14.3 million (average $11.04 per share)[173] - As of June 30, 2025, $116.6 million remained available under the $150.0 million common share repurchase program[173] - No preferred shares were repurchased during the six months ended June 30, 2025[177] - As of June 30, 2025, $84.2 million remained available under the $100.0 million preferred share repurchase program[177] Inflation The company's hotel operators can adjust room rates to mitigate inflation, though competitive pressures may limit increases - Hotel operators can adjust room rates daily to keep pace with inflation, but competitive pressures may limit rate increases[179] Seasonality The lodging industry is seasonal, with company performance typically lowest in Q1 and highest in Q3 - Hotel operations are seasonal, with lower performance in Q1 and higher in Q3, influenced by economic cycles, geography, weather, and customer mix[180] Derivative Instruments The company uses interest rate swaps with a notional value of $955.0 million to hedge against interest rate risk - The Company uses interest rate swap agreements to hedge interest rate risk on variable rate debt[181] - As of June 30, 2025, interest rate swap agreements had an aggregate notional amount of $955.0 million[182] - Derivative instruments are subject to fair value reporting and expose the Company to counterparty credit risk, which is mitigated by transacting with major creditworthy financial institutions[181] Item 3. Quantitative and Qualitative Disclosures About Market Risk. The company is exposed to interest rate risk, with 4.5% of its debt subject to unhedged variable rates - The Company is exposed to market risk from interest rate changes and uses derivative instruments to manage this risk[183] - As of June 30, 2025, $101.7 million (4.5%) of aggregate indebtedness was subject to variable interest rates, excluding effectively swapped amounts[183] - A 0.1% change in interest rates on unhedged variable rate debt would impact annual interest expense by approximately $0.1 million[183] Item 4. Controls and Procedures. Disclosure controls and procedures were deemed effective, with no material changes to internal controls - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025[184] - No material changes to internal control over financial reporting occurred during the most recent fiscal quarter[185] PART II. OTHER INFORMATION Item 1. Legal Proceedings. The company is not currently subject to any material litigation - The Company is not currently subject to any material litigation, nor is any material litigation threatened[187] - Routine claims and administrative proceedings are expected to be covered by liability insurance and are not anticipated to have a material adverse effect[187] Item 1A. Risk Factors. There have been no material changes to the risk factors disclosed in the 2024 Annual Report - No material changes to risk factors from the Annual Report on Form 10-K for December 31, 2024[188] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. The company repurchased common shares in April 2025, with significant capacity remaining in its repurchase programs Common Share Repurchases | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Shares that May Yet Be Purchased (in millions) | | :----------------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------- | | April 1, 2025 - April 30, 2025 | 111,599 | $8.96 | $116.6 | | May 1, 2025 - May 31, 2025 | — | $— | $116.6 | | June 1, 2025 - June 30, 2025 | — | $— | $116.6 | | Total (Common Shares) | 111,599 | $8.96 | $116.6 | Preferred Share Repurchases | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Shares that May Yet Be Purchased (in millions) | | :----------------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------- | | April 1, 2025 - April 30, 2025 | — | $— | $84.2 | | May 1, 2025 - May 31, 2025 | — | $— | $84.2 | | June 1, 2025 - June 30, 2025 | — | $— | $84.2 | | Total (Preferred Shares) | — | $— | $84.2 | Item 3. Defaults Upon Senior Securities. No defaults upon senior securities occurred during the period - No defaults upon senior securities occurred[191] Item 4. Mine Safety Disclosures. This item is not applicable to the company - Mine Safety Disclosures are not applicable to the Company[192] Item 5. Other Information. No officers or trustees adopted or terminated Rule 10b5-1 trading arrangements during the quarter - No officers or trustees adopted or terminated any Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[194] Item 6. Exhibits. This section lists all exhibits filed with the Form 10-Q, including organizational documents and certifications - Exhibits include organizational documents (Declaration of Trust, Bylaws, Partnership Agreements), debt indentures (Indenture, Supplemental Indenture), equity incentive plan amendments, and certifications (CEO, CFO)[195] - Financial statements and cover page are submitted electronically in XBRL format[195]