RLJ Lodging Trust(RLJ) - 2023 Q4 - Annual Report

Form 10-K General Information Provides general information on RLJ Lodging Trust's registration, market value, shares outstanding, and incorporated documents Registrant Information RLJ Lodging Trust is a Maryland REIT, a large accelerated filer, with common and preferred shares traded on the NYSE - RLJ Lodging Trust is a Maryland real estate investment trust (REIT) and a large accelerated filer[2][3][4] | Title of Class | Trading Symbol | Name of Exchange on Which Registered | | :--- | :--- | :--- | | Common Shares of beneficial interest, par value $0.01 per share | RLJ | New York Stock Exchange | | $1.95 Series A Cumulative Convertible Preferred Shares, par value $0.01 per share | RLJ-A | New York Stock Exchange | Market Value and Shares Outstanding Non-affiliate common shares had a market value of $1.57 billion as of June 30, 2023, with 155.78 million shares outstanding by February 20, 2024 - Aggregate market value of common shares held by non-affiliates was approximately $1.57 billion as of June 30, 2023[5] - As of February 20, 2024, 155,784,172 common shares of beneficial interest were outstanding[6] Documents Incorporated by Reference Portions of the 2024 Annual Meeting Proxy Statement are incorporated by reference into Part III of this report - Portions of the Definitive Proxy Statement for the 2024 Annual Meeting of Shareholders are incorporated by reference into Part III of this report[8] Special Note About Forward-Looking Statements Forward-looking statements in this Form 10-K involve estimates and projections, are not guarantees, and actual results may differ materially Nature of Forward-Looking Statements Statements in this report, other than historical information, are forward-looking and not predictions of future performance - Statements in this report, other than purely historical information, are 'forward-looking statements' and are not predictions or guarantees of future performance[13] Factors Affecting Actual Outcomes Actual outcomes may differ due to global economic uncertainty, competition, regulatory changes, lodging industry declines, and financing availability - Factors that might cause actual outcomes to differ materially include global economic uncertainty, increased competition, changes in government regulations, declines in the lodging industry, seasonality, natural disasters, and the ability to obtain financing[14] Key Definitions This section defines key terms used in the report, including 'our company,' 'hotel properties,' 'TRS,' 'ADR,' 'Occupancy,' and 'RevPAR' - Key terms defined include 'our company' (RLJ Lodging Trust and consolidated subsidiaries), 'our hotel properties' (97 hotels as of December 31, 2023), 'compact full-service hotel', 'focused-service hotel', 'TRS', 'ADR', 'Occupancy', and 'RevPAR'[15] Item 1. Business Details the company's REIT structure, hotel portfolio, investment strategies, industry context, and operational aspects Our Company RLJ Lodging Trust is a self-advised Maryland REIT owning 97 premium-branded, rooms-oriented hotels with 21,400 rooms as of December 31, 2023 - RLJ Lodging Trust is a self-advised and self-administered Maryland REIT, focusing on premium-branded, rooms-oriented, high-margin, focused-service and compact full-service hotels[17] - As of December 31, 2023, the company owned 97 hotel properties with approximately 21,400 rooms in 23 states and the District of Columbia[18] - The company elects to be taxed as a REIT and conducts operations through its Operating Partnership, owning 99.5% of OP units as of December 31, 2023[19] The Lodging Industry The U.S. lodging industry is diverse, with key participants being Owners, Franchisors, and Managers - The U.S. lodging industry is diversified, with key participants being Owners, Franchisors, and Managers[20][22] Our Investment and Business Strategies Aims for strong shareholder returns through proactive asset management, opportunistic capital recycling, and investing in premium-branded hotels - The company's objective is to generate strong returns for shareholders by acquiring and owning premium-branded, focused-service and compact full-service hotels, and selectively disposing of properties when returns are maximized[20] - Investment strategies include targeted ownership of premium-branded, rooms-oriented hotels in heart of demand locations, using premium brands (Marriott, Hilton, Hyatt), and focusing on high-growth markets[23][24] - Business strategies involve maximizing returns through proactive asset management, pursuing disciplined acquisitions (newly built or value-add), opportunistic capital recycling, and maintaining a flexible balance sheet with a focus on unsecured and fixed/hedged debt[26] Our Hotels Approximately 90% of the company's 97 hotels operate under premium brands like Marriott, Hilton, and Hyatt - Approximately 90.0% of the company's hotel properties operate under Marriott, Hilton, or Hyatt brands[27] Brand Affiliations of Hotel Properties (as of December 31, 2023) | Brand Affiliations | Number of hotels | Percentage of total hotels | Number of rooms | Percentage of total rooms | | :--- | :--- | :--- | :--- | :--- | | Marriott | 38 | 39.1 % | 7,722 | 36.1 % | | Hilton | 37 | 38.2 % | 9,008 | 42.1 % | | Hyatt | 12 | 12.4 % | 1,936 | 9.0 % | | Wyndham | 5 | 5.2 % | 1,893 | 8.8 % | | Other Brand Affiliation/Independent | 5 | 5.1 % | 858 | 4.0 % | | Total | 97 | 100.0 % | 21,417 | 100.0 % | Asset Management A dedicated asset management team proactively collaborates with third-party managers to maximize hotel profitability and strategic direction - A dedicated asset management team proactively works with third-party management companies to maximize profitability at each hotel[28] - The team monitors performance daily, advises on revenue management, market positioning, cost structure, capital planning, and retains approval rights on key staffing positions[28] Competition The lodging industry is highly competitive for both guests and acquisitions, facing traditional and non-traditional accommodation providers - The U.S. lodging industry is highly competitive, with hotels competing for guests based on factors like location, quality, brand, and rates, including competition from non-traditional accommodations[30] - The company faces significant competition for hotel property acquisitions from institutional investors, which may reduce suitable opportunities or increase acquisition costs[31] Seasonality The lodging industry experiences seasonality, causing quarterly fluctuations in revenues and profits, with regional variations - The lodging industry is seasonal, causing quarterly fluctuations in revenues and profits[32] - Northeastern hotels experience lower revenues in winter, while Florida hotels have higher revenues in early spring[32] Our Financing Strategy Finances long-term growth through equity and debt, prioritizing unsecured and fixed/hedged debt with staggered maturities - The company intends to finance long-term growth with equity issuances and debt financing with staggered maturities[33] - The debt strategy focuses on unsecured debt and a greater percentage of fixed-rate or hedged floating-rate debt[33] Organizational Structure Operates as an UPREIT, leasing hotels to TRSs that engage third-party managers to maintain REIT qualification - The company conducts business through a traditional UPREIT structure, with hotel properties indirectly owned by the Operating Partnership[34] - To qualify as a REIT, hotels are leased to Taxable REIT Subsidiaries (TRSs) which engage third-party management companies, ensuring income constitutes 'rents from real property'[35][36] Regulation Hotel properties are subject to federal, state, and local regulations, including ADA and environmental laws, with compliance costs and potential liabilities - Hotel properties are subject to various federal, state, and local laws, including ADA and environmental regulations[37][38][39] - The company believes its properties are in substantial compliance with ADA and environmental regulations, but acknowledges potential costs for compliance and liabilities for contamination[38][39][42] Insurance Maintains comprehensive insurance for hotels but does not cover uninsurable risks like communicable diseases, war, or cyber incidents - The company carries comprehensive general liability, property, business interruption, and umbrella liability coverage for its hotels, with specific coverages for natural disasters in vulnerable areas[43] - The company does not carry insurance for uninsurable risks such as communicable diseases, war, governmental actions, or cyber insurance[44] Human Capital As of December 31, 2023, the company had 79 employees, focusing on diverse talent, competitive compensation, and fostering inclusion - As of December 31, 2023, the company had 79 employees and is committed to a discrimination-free workplace with annual trainings[45] - Human capital objectives include attracting, developing, and promoting diverse talent, providing competitive compensation and benefits, fostering diversity and inclusion, and investing in technology[46] Environmental, Social, and Governance (ESG) Committed to ESG, with environmental efforts including carbon reduction targets, social initiatives, and diverse board governance - The company is committed to ESG initiatives, releasing its inaugural Corporate Sustainability Report in January 2023[47][48] - Environmental efforts include reducing energy usage per square foot by 11% and greenhouse gas emissions per square foot by 22% since 2019, with a target to reduce carbon emissions by 35% by 2030[49] - Social commitments include supporting Habitat for Humanity and initiating a $5.0 million deposit with a minority banking partner, alongside promoting health and safety through AHLA Safe Stay® and 5-Star Promise initiatives[50][51] - Governance is characterized by a diverse board (three women, five ethnically diverse, seven independent) with nearly 80% having risk management expertise, overseen by the NCG Committee[52][53] Corporate Information Principal executive offices are in Bethesda, Maryland, with SEC filings and governance documents available on its website - The company's principal executive offices are in Bethesda, Maryland, and its website provides SEC filings and corporate governance documents[55][56] Item 1A. Risk Factors Details risks related to the company's business, hotel properties, the lodging and real estate industries, and its REIT status Risks Related to Our Business and Hotel Properties Risks include economic volatility, high inflation, debt service, geographic concentration, dependence on third-party managers, labor issues, and acquisition challenges - Economic volatility and high inflation could significantly impact business, financial performance, and cash flows, increasing interest rates and operating expenses[60][63] - The company is highly dependent on third-party management companies and adherence to franchisor operating standards; failure to comply could lead to termination payments or loss of brand affiliation[66][69][70] - Labor shortages, unionized labor, and restrictive covenants in management/franchise agreements pose risks to operations and asset disposition[71][73][75] - Concentration in three major brands (Marriott, Hilton, Hyatt) and ownership of properties with ground leases expose the company to specific brand and lease renewal risks[76][77] - Difficulties in making and integrating acquisitions, obtaining capital for renovations, and intense competition could impede growth and adversely affect financial results[78][81][82] - Approximately $2.2 billion of outstanding debt as of December 31, 2023, subjects the company to risks including insufficient cash flow for payments, competitive disadvantage, and vulnerability to economic volatility[83][86] Risks Related to the Lodging Industry The lodging industry's cyclical nature, technology failures, terrorist attacks, and natural disasters pose significant operational and financial risks - The cyclical nature of the lodging industry, driven by general economic conditions and new hotel room supply, can cause significant fluctuations in operating performance[101] - Technology failures, future terrorist attacks, and natural disasters or climate change effects pose risks to operations, travel demand, and property integrity, potentially leading to significant uninsured losses or increased costs[102][104][105][106] Risks Related to Our Organization and Structure REIT share ownership limits, restrictive bylaws, and executive severance provisions may inhibit changes in control and shareholder recourse - REIT share ownership limits (not more than 9.8% for common shares) may restrict share transfers and business combination opportunities[108] - Advance notice provisions in bylaws and difficult trustee removal processes (requiring two-thirds vote for cause) could inhibit changes in control[110][112] - Executive employment agreements with severance compensation upon termination (including change in control) could make changes costly[111] - Limited liability for trustees and officers under Maryland law and company's declaration of trust may limit shareholder recourse[113] Risks Related to the Real Estate Industry Real estate illiquidity, uninsured losses from catastrophic events, and environmental liabilities pose significant risks - The illiquid nature of real estate investments could impede the company's ability to respond to changing economic conditions or dispose of properties quickly[116] - Uninsured and underinsured losses from catastrophic events (e.g., windstorms, earthquakes) could result in significant financial losses not fully covered by insurance[118][119] - Significant costs related to government environmental regulation and litigation could arise from contamination liabilities, potentially reducing profitability[120][121] Risks Related to Our Status as a REIT Failure to maintain REIT status would incur federal income tax, and distribution requirements may force borrowing or asset sales - Failure to qualify or remain qualified as a REIT would result in U.S. federal income tax, substantially reducing earnings and distributions[124][125] - REIT distribution requirements (90% of taxable income) may necessitate borrowing, asset sales, or taxable share distributions, potentially hindering growth[126] - Leases with TRSs must be respected as true leases, and management companies must qualify as 'eligible independent contractors' for REIT income tests; failure could lead to loss of REIT status[127][130][131] - Compliance with REIT asset and income tests may force the company to forgo or liquidate attractive investment opportunities[132] Item 1B. Unresolved Staff Comments Confirms the company has no unresolved staff comments from the SEC Unresolved Staff Comments The company has no unresolved staff comments - There are no unresolved staff comments[141] Item 1C. Cybersecurity Details the company's cybersecurity risk management program, strategy, and governance, including board oversight Risk Management and Strategy The company employs a comprehensive cybersecurity risk management program, overseen by an IT Committee, with no material threats identified - The company has a comprehensive cybersecurity risk management program, managed by a dedicated IT Committee and a 24/7 security operations center[142] - Mitigation strategies include continuous monitoring, vulnerability management, and annual employee training, with policies modeled after NIST Cybersecurity Standards[142][144] - The company monitors third-party management companies and cloud suppliers for compliance with its cybersecurity policies[145] - Management has not identified any cybersecurity threats or incidents that have materially affected or are reasonably likely to materially affect the company[147] Governance The board of trustees oversees cybersecurity risks, with the Audit Committee having primary responsibility and an incident response plan - The board of trustees oversees enterprise-level cybersecurity risks, with two members having information security expertise[148] - The Audit Committee has primary responsibility for cybersecurity oversight, receiving annual reports from management[149] - A cybersecurity incident response plan, including an escalation framework, is established to address threats effectively[150] Item 2. Properties Details the company's hotel properties, management and franchise agreements, TRS leases, and ground leases Our Hotel Properties As of December 31, 2023, the company owned 97 hotel properties across various states and D.C., with concentrations in key states - As of December 31, 2023, the company owned 97 hotel properties, with a comprehensive list provided by state and room count[151] Management Agreements 96 hotels are managed by 16 independent companies, with base fees from 1.5% to 7.0% of revenues, and the company retains termination rights - 96 consolidated hotel properties are managed by 16 independent companies, with Aimbridge Hospitality (31 hotels) and Hilton (21 hotels) being the largest managers[154][155] - Management companies receive base fees (1.5% to 7.0% of hotel revenues) and potential incentive fees based on financial performance[156][157] - The company has termination rights for non-performance or property sale, but certain agreements may require new owners to assume management contracts[158][159] Franchise Agreements 59 hotels operate under franchise agreements with major brands, requiring compliance with standards and payment of royalty and marketing fees - 59 hotels operate under franchise agreements with major brands, providing benefits like centralized reservation systems and marketing support[160][161] - Franchise fees include royalty fees (2.0% to 6.0% of room revenue) and additional fees for marketing and central reservation systems (1.0% to 4.3% of room revenue)[161] - The company guarantees franchise obligations, and agreements may grant franchisors rights of first offer or approval over management changes[162] TRS Leases 96 hotels are leased to TRS lessees to maintain REIT qualification, with lessees paying rent, operating costs, and funding FF&E reserves - 96 hotels are leased to TRS lessees to maintain REIT qualification, with initial terms generally three years and renewal options[163][164] - TRS lessees pay fixed annual base rent, percentage rent (based on room, food & beverage, and other revenues), and cover all operating costs[165][166] - Lessees are required to maintain hotels and establish FF&E reserves (up to 5% of gross revenue), while the company maintains underground utilities and structural elements[167] - Leases include default clauses and termination rights for the company upon hotel sale or change of control, with applicable termination fees[168][169] Ground Leases As of December 31, 2023, 13 consolidated and one unconsolidated hotel properties were subject to ground lease agreements - As of December 31, 2023, 13 consolidated and one unconsolidated hotel properties were subject to ground lease agreements[170] Item 3. Legal Proceedings Confirms the company is not subject to any material legal or regulatory proceedings Legal Proceedings The company is not presently subject to any material litigation or regulatory proceedings - The company is not presently subject to any material litigation or regulatory proceedings[171] Item 4. Mine Safety Disclosures This item is not applicable to the company Mine Safety Disclosures Mine Safety Disclosures are not applicable - Mine Safety Disclosures are not applicable[172] Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Covers market information, dividends, share return performance, shareholder details, and issuer share repurchases Market Information and Dividends Common shares trade on the NYSE, with cash dividends increasing to $0.10 per share in Q3/Q4 2023 - Common shares are traded on the NYSE under the symbol 'RLJ'[175] - Cash dividends per common share increased from $0.01 in Q1/Q2 2022 to $0.08 in Q1/Q2 2023, and to $0.10 in Q3/Q4 2023[175] - The closing price of common shares was $11.72 on December 31, 2023, and February 20, 2024[176] Share Return Performance A $100 investment in RLJ common shares grew to $81.13 over five years, underperforming the S&P 500 - An initial $100 investment in RLJ Lodging Trust common shares on December 31, 2018, was valued at $81.13 by December 31, 2023[178] - The company's share performance lagged the S&P 500 Index ($207.21) but was comparable to the Dow Jones US REIT Hotels Index ($104.09) over the five-year period[178] Cumulative Total Returns (December 31, 2018 = $100) | Name | December 31, 2018 | December 31, 2019 | December 31, 2020 | December 31, 2021 | December 31, 2022 | December 31, 2023 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | RLJ Lodging Trust | $100.00 | $116.41 | $93.34 | $92.14 | $70.85 | $81.13 | | S&P 500 Index | $100.00 | $131.49 | $155.68 | $200.37 | $164.08 | $207.21 | | Dow Jones US REIT Hotels Index | $100.00 | $115.93 | $85.89 | $98.83 | $83.64 | $104.09 | Shareholder Information As of February 20, 2024, there were 170 common share holders and 12 OP unit holders, with a 9.8% ownership limit for REIT compliance - As of February 20, 2024, there were 170 holders of record for common shares and 12 holders of OP units[179] - To comply with REIT requirements, the declaration of trust limits individual ownership to 9.8% of outstanding common or preferred shares[180] Distribution Information Intends quarterly distributions of at least 90% of REIT taxable income, subject to credit agreement and preferred stock limitations - The company intends to make quarterly distributions, aiming for at least 90% of REIT taxable income to maintain REIT status[181] - Credit agreements and preferred stock terms impose limitations on dividend payments; for instance, no cash dividends if a payment default or bankruptcy event of default exists, and preferred dividends must be paid first[182][183] Unregistered Sales of Equity Securities No unregistered securities were sold during the fiscal year ended December 31, 2023 - No unregistered securities were sold during the fiscal year ended December 31, 2023[185] Issuer Purchases of Equity Securities The company repurchased 874,910 common shares for $10.48 average price in Q4 2023 under a $250.0 million program Share Repurchases (Q4 2023) | Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs | | :--- | :--- | :--- | :--- | | October 1, 2023 through October 31, 2023 | 328,381 | $9.75 | 328,381 | | November 1, 2023 through November 30, 2023 | 194,430 | $10.47 | 194,430 | | December 1, 2023 through December 31, 2023 | 352,099 | $11.23 | 352,099 | | Total | 874,910 | | 874,910 | - A $250.0 million share repurchase program was approved in April 2023, expiring May 8, 2024. As of February 27, 2024, the program had a remaining capacity of $212.7 million[187][438] Item 6. Reserved This item is reserved and contains no information Reserved This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes the company's financial condition, operating results, key performance indicators, significant activities, and critical accounting estimates Overview A self-advised Maryland REIT focusing on high-margin, rooms-oriented hotels, generating stable cash flows with limited F&B - The company is a self-advised and self-administered Maryland REIT, focusing on premium-branded, rooms-oriented, high-margin, focused-service and compact full-service hotels in high-demand locations[189] - These hotel types generate most revenue from room rentals, have limited food and beverage/meeting space, and require fewer employees, contributing to higher profit margins and less volatile cash flows[189] Our Customers Majority of customers are transient business or leisure travelers, with a small component of group business and extended-stay guests - The majority of customers are transient business or leisure travelers, with business travelers forming the largest segment[190] - Group business is a small component, and some hotels cater to extended-stay customers (five nights or longer)[191][192] Key Indicators of Operating Performance Key operating indicators include ADR, Occupancy, and RevPAR, with ADR changes having a greater impact on margins; non-GAAP measures are also used - Key operating performance indicators include Average Daily Rate (ADR), Occupancy, and Revenue Per Available Room (RevPAR)[194] - Changes in ADR typically have a greater impact on operating margins and profitability than changes in Occupancy, as ADR primarily affects revenue while Occupancy also increases variable operating costs[195] - Non-GAAP measures such as FFO, Adjusted FFO, EBITDA, EBITDAre, and Adjusted EBITDA are also used to evaluate operating performance[197] Principal Factors Affecting Our Results of Operations Operating results are affected by lodging demand/supply, management's expense control, macroeconomic factors, and new construction - Principal factors affecting operating results are lodging demand vs. supply and third-party management's ability to increase revenues while controlling expenses[198] - ADR, Occupancy, and RevPAR are impacted by macroeconomic factors (e.g., employment growth, government spending, corporate earnings) and new hotel construction[199] - Room revenue is the majority of total revenues (82.6% in 2023). Variable operating expenses fluctuate with Occupancy, but changes in ADR have a more significant impact on operating margins[196][201] Inflation Relies on daily rate adjustments to counter inflation, but competitive pressures and rising operating expenses can impact profitability - The company relies on increasing revenues to keep pace with inflation, with hotel management companies able to adjust room rates daily, though competitive pressures may limit increases[202] - High inflation can adversely affect operating expenses (labor, supplies, repairs, maintenance) and consumer spending, impacting occupancy levels[202] 2023 Significant Activities Significant 2023 activities included a hotel conversion, debt refinancing, new interest rate swaps, and repurchasing 7.5 million common shares - Successfully launched hotel conversion of The Pierside Hotel in Santa Monica, California[203] - Refinanced approximately $224.7 million in Term Loans and recast the $600.0 million Revolver, extending maturity dates to May 2026 and May 2027, respectively[206] - Entered into $525.0 million in new interest rate swap agreements as $425.0 million in swaps expired[206] - Repurchased and retired approximately 7.5 million common shares for approximately $76.0 million under the 2023 Share Repurchase Program[206] Results of Operations (2023 vs 2022) In 2023, total revenues increased by $131.9 million to $1.3 billion, net income rose to $51.29 million, and operating expenses increased by $90.3 million Consolidated Statements of Operations (Amounts in thousands) | Item | 2023 | 2022 | $ Change | | :--- | :--- | :--- | :--- | | Total revenues | $1,325,577 | $1,193,662 | $131,915 | | Total operating expenses | $1,173,220 | $1,072,264 | $100,956 | | Net income attributable to common shareholders | $51,290 | $16,810 | $34,480 | | Basic EPS | $0.32 | $0.10 | $0.22 | | Diluted EPS | $0.32 | $0.10 | $0.22 | - Total revenues increased by $131.9 million to $1.3 billion, primarily due to a $92.6 million increase in room revenue from comparable properties, driven by higher RevPAR from business and group travel recovery[210][211] Key Hotel Operating Statistics (Comparable Properties) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Occupancy | 71.8 % | 68.9 % | | ADR | $196.43 | $187.84 | | RevPAR | $141.09 | $129.46 | - Food and beverage revenue increased by $24.6 million, and other revenue increased by $14.7 million, mainly due to increased group business and demand[213][214] - Property operating expenses increased by $90.3 million, primarily due to higher wages and benefits, sales and marketing expenses, and revenue-based fees[215][216] - Interest income increased by $15.2 million due to higher interest rates on corporate and hotel-level cash[221] - Interest expense increased by $5.7 million due to higher interest rates on unhedged variable rate debt and an increase in unhedged debt, partially offset by lower average debt balances[222] Non-GAAP Financial Measures Uses non-GAAP measures like FFO, Adjusted FFO, and Adjusted EBITDA to evaluate performance, all showing increases in 2023 - The company uses FFO, Adjusted FFO, EBITDA, EBITDAre, and Adjusted EBITDA as key supplemental measures of performance[224] FFO and Adjusted FFO (Amounts in thousands) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net income | $76,617 | $42,215 | | FFO | $231,440 | $201,631 | | Adjusted FFO | $260,388 | $221,111 | EBITDA, EBITDAre, and Adjusted EBITDA (Amounts in thousands) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net income | $76,617 | $42,215 | | EBITDA | $337,414 | $318,723 | | EBITDAre | $337,448 | $317,706 | | Adjusted EBITDA | $364,472 | $336,523 | Liquidity and Capital Resources As of December 31, 2023, the company had $555.3 million in cash and $600.0 million available on its Revolver, with operating cash flow of $315.1 million - As of December 31, 2023, the company had $555.3 million in cash, cash equivalents, and restricted cash, and $600.0 million available on its Revolver[236] - Principal uses of capital in 2023 included $132.3 million for capital improvements, $76.0 million for common share repurchases, and $74.5 million for distributions[237][244][246] - Net cash flow provided by operating activities totaled $315.1 million in 2023, an increase from $256.5 million in 2022[243] - As of December 31, 2023, approximately $2.2 billion in debt was outstanding, with $381.0 million due in the next 12 months. Total future minimum lease payments were $592.7 million, with $10.4 million due in the next 12 months[240] Capital Expenditures and Reserve Funds Routine capital expenditures are funded by FF&E reserves (typically 3.0% to 5.0% of gross revenues), with $32.0 million held as of December 31, 2023 - Routine capital expenditures are funded from FF&E reserves, typically 3.0% to 5.0% of gross revenues[248][250] - Major renovations are funded by FF&E reserves, cash, the Revolver, or other liquidity sources[249] - As of December 31, 2023, approximately $32.0 million was held in FF&E reserve accounts[250] Critical Accounting Estimates Critical accounting estimates include impairment assessments of hotel properties and purchase price allocation for acquisitions, both involving significant subjective judgments - Critical accounting estimates are impairment of hotel properties and purchase price allocation for acquisitions[251] - Impairment is assessed by comparing carrying value to projected undiscounted future cash flows; if not recoverable, an impairment loss is recognized based on fair value, which is subjective and relies on various valuation techniques and assumptions[252] - Purchase price allocation involves distributing acquisition costs based on fair values of acquired assets and assumed liabilities, using market, cost, and income approaches, requiring numerous estimates and assumptions[253][254] Item 7A. Quantitative and Qualitative Disclosures About Market Risk Discusses the company's market risk exposure, primarily interest rate fluctuations on variable debt, and mitigation strategies Market Risk Exposure and Management Primary market risk is interest rate fluctuations on variable debt, with 88.5% of total indebtedness fixed or hedged by swaps - Primary market risk exposure is to changes in interest rates on variable rate debt[255] - As of December 31, 2023, $1.2 billion (54.1%) of total indebtedness was variable rate, with a weighted-average interest rate of 4.30%[255] - Interest rate swaps are used to mitigate risk, resulting in 88.5% of total indebtedness being fixed or effectively fixed[256] - A 1.00% increase in market interest rates on unhedged variable rate debt would decrease future earnings and cash flows by approximately $2.6 million annually[256] Debt Obligations by Maturity and Interest Rate (as of December 31, 2023, in thousands) | | 2024 | 2025 | 2026 | 2027 | 2028 | Thereafter | Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Fixed rate debt | $— | $— | $500,000 | $— | $— | $525,000 | $1,025,000 | | Weighted-average interest rate | —% | —% | 3.75% | —% | —% | 4.05% | 3.90% | | Variable rate debt | $381,000 | $400,000 | $425,000 | $— | $— | $— | $1,206,000 | | Weighted-average interest rate | 5.67% | 3.44% | 3.90% | —% | —% | —% | 4.30% | | Total | $381,000 | $400,000 | $925,000 | $— | $— | $525,000 | $2,231,000 | Item 8. Financial Statements and Supplementary Data Presents the independent auditor's report, consolidated financial statements, and detailed notes Report of Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP issued unqualified opinions on financial statements and internal controls, identifying hotel property impairment as a critical audit matter - PricewaterhouseCoopers LLP issued an unqualified opinion on the consolidated financial statements for RLJ Lodging Trust for the periods ended December 31, 2023 and 2022, and on the effectiveness of internal control over financial reporting as of December 31, 2023[290][291] - The impairment assessment of investment in hotel properties was identified as a critical audit matter due to significant management judgment in identifying recoverability events and high auditor judgment/effort[298][299] Consolidated Balance Sheets As of December 31, 2023, total assets were $4.92 billion, total liabilities $2.57 billion, and total equity $2.35 billion Consolidated Balance Sheet Highlights (Amounts in thousands) | Item | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total assets | $4,919,295 | $4,978,225 | | Investment in hotel properties, net | $4,136,216 | $4,180,328 | | Cash and cash equivalents | $516,675 | $481,316 | | Total liabilities | $2,568,505 | $2,549,579 | | Debt, net | $2,220,778 | $2,217,555 | | Total equity | $2,350,790 | $2,428,646 | Consolidated Statements of Operations and Comprehensive Income (Loss) In 2023, total revenues increased to $1.33 billion, net income was $76.6 million, and net income attributable to common shareholders was $51.3 million Consolidated Statements of Operations Highlights (Amounts in thousands) | Item | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Total revenues | $1,325,577 | $1,193,662 | $785,664 | | Net income (loss) | $76,617 | $42,215 | $(311,088) | | Net income (loss) attributable to common shareholders | $51,290 | $16,810 | $(330,283) | | Diluted EPS | $0.32 | $0.10 | $(2.01) | | Comprehensive income (loss) | $58,688 | $99,919 | $(259,151) | - Net income attributable to common shareholders increased significantly from $16.8 million in 2022 to $51.3 million in 2023[307] - Comprehensive income decreased in 2023 compared to 2022, mainly due to unrealized losses on interest rate derivatives[308] Consolidated Statements of Changes in Equity Total equity decreased from $2.43 billion to $2.35 billion, influenced by net income, derivative losses, share repurchases, and distributions - Total equity decreased from $2,428,646 thousand at December 31, 2022, to $2,350,790 thousand at December 31, 2023[317] - Key factors affecting equity in 2023 included net income attributable to RLJ ($76.4 million), unrealized loss on interest rate derivatives ($17.9 million), share repurchases ($76.0 million), and distributions on preferred ($25.1 million) and common shares/units ($57.3 million)[317] Consolidated Statements of Cash Flows Net cash from operating activities increased to $315.1 million in 2023, while investing and financing activities used $134.7 million and $161.5 million, respectively Consolidated Statements of Cash Flows Highlights (Amounts in thousands) | Cash Flow Activity | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net cash flow provided by operating activities | $315,142 | $256,519 | $42,961 | | Net cash flow used in investing activities | $(134,749) | $(135,515) | $(24,627) | | Net cash flow used in financing activities | $(161,452) | $(298,487) | $(239,255) | | Net change in cash, cash equivalents, and restricted cash reserves | $18,941 | $(177,483) | $(220,921) | | Cash, cash equivalents, and restricted cash reserves, end of year | $555,327 | $536,386 | $713,869 | - Net cash flow provided by operating activities increased by $58.6 million in 2023[320] - Net cash flow used in investing activities was primarily for capital improvements and additions to hotel properties ($132.3 million) in 2023[320] - Net cash flow used in financing activities decreased, with $76.0 million for share repurchases and $74.5 million for distributions in 2023[320] Notes to the Consolidated Financial Statements Details accounting policies, debt obligations, equity changes, share-based compensation, and commitments, including updates on new accounting standards - The company applied optional expedients for reference rate reform (ASU 2022-06) with no material impact, and is evaluating new ASUs for segment reporting (ASU 2023-07) and income tax disclosures (ASU 2023-09)[372][373][374][375] - Investment in hotel properties, net, decreased to $4.14 billion in 2023 from $4.18 billion in 2022, with no impairment losses recorded in 2023 or 2022[377][380] - Total debt, net, was $2.22 billion as of December 31, 2023, comprising Senior Notes ($991.7 million), Term Loans ($821.4 million), and Mortgage Loans ($407.7 million)[392] - The company had $1.28 billion in interest rate swaps as of December 31, 2023, with a fair value asset of $24.8 million, and $22.7 million in unrealized gains in accumulated other comprehensive income[417][419][420] - Total ground lease expense was $16.7 million in 2023, up from $15.9 million in 2022, with future lease payments totaling $592.7 million[424][428] - The 2023 Share Repurchase Program authorized up to $250.0 million, with $76.0 million used to repurchase 7.5 million common shares in 2023[438] - Share-based compensation expense for restricted share awards was $15.4 million in 2023, and for performance unit awards was $8.9 million in 2023[448][454] - In January 2024, the company acquired a fee simple interest in its Wyndham Boston Beacon Hill hotel property for approximately $125.0 million[471] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Confirms no changes in or disagreements with the company's accountants Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There have been no changes in or disagreements with accountants on accounting and financial disclosure - There have been no changes in or disagreements with accountants on accounting and financial disclosure[261] Item 9A. Controls and Procedures Details the effectiveness of the company's disclosure controls and internal control over financial reporting Evaluation of Disclosure Controls and Procedures As of December 31, 2023, management concluded that the company's disclosure controls and procedures were effective - As of December 31, 2023, the company's disclosure controls and procedures were effective[262] Management's Annual Report on Internal Control over Financial Reporting Management concluded internal control over financial reporting was effective as of December 31, 2023, a conclusion attested by PricewaterhouseCoopers LLP - Management concluded that internal control over financial reporting was effective as of December 31, 2023, based on COSO criteria[265] - PricewaterhouseCoopers LLP audited and attested to the effectiveness of the company's internal control over financial reporting[266] Changes in Internal Control over Financial Reporting No material changes in internal control over financial reporting occurred during the period ended December 31, 2023 - No material changes in internal control over financial reporting occurred during the period ended December 31, 2023[267] Item 9B. Other Information Confirms no Rule 10b5-1 trading plans were adopted or terminated by trustees or officers in Q4 2023 Rule 10b5-1 Trading Plans No Rule 10b5-1 trading plans were adopted or terminated by trustees or officers during Q4 2023 - No Rule 10b5-1 trading plans were adopted or terminated by trustees or officers during Q4 2023[268] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This disclosure item is not applicable - This disclosure item is not applicable[268] Item 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Proxy Statement Directors, Executive Officers and Corporate Governance Information for this item is incorporated by reference from the 2024 Annual Meeting of Shareholders Proxy Statement - Information for this item is incorporated by reference from the definitive Proxy Statement for the 2024 Annual Meeting of Shareholders[270] Item 11. Executive Compensation Information on executive compensation is incorporated by reference from the 2024 Proxy Statement Executive Compensation Information for this item is incorporated by reference from the 2024 Annual Meeting of Shareholders Proxy Statement - Information for this item is incorporated by reference from the definitive Proxy Statement for the 2024 Annual Meeting of Shareholders[271] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters Information on security ownership and related shareholder matters is incorporated by reference from the 2024 Proxy Statement or Item 5 Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters Information for this item is incorporated by reference from the 2024 Annual Meeting of Shareholders Proxy Statement or Item 5 - Information for this item is incorporated by reference from the definitive Proxy Statement for the 2024 Annual Meeting of Shareholders or Item 5 of this Annual Report on Form 10-K[272] Item 13. Certain Relationships and Related Transactions and Director Independence Information on related transactions and director independence is incorporated by reference from the 2024 Proxy Statement Certain Relationships and Related Transactions and Director Independence Information for this item is incorporated by reference from the 2024 Annual Meeting of Shareholders Proxy Statement - Information for this item is incorporated by reference from the definitive Proxy Statement for the 2024 Annual Meeting of Shareholders[273] Item 14. Principal Accountant Fees and Services Information on principal accountant fees and services is incorporated by reference from the 2024 Proxy Statement Principal Accountant Fees and Services Information for this item is incorporated by reference from the 2024 Annual Meeting of Shareholders Proxy Statement - Information for this item is incorporated by reference from the definitive Proxy Statement for the 2024 Annual Meeting of Shareholders[274] Item 15. Exhibits and Financial Statement Schedules Lists all documents filed as part of the report, including financial statements, Schedule III, and various exhibits Exhibits and Financial Statement Schedules The report includes financial statements, Schedule III, and exhibits as required by Item 601 of Regulation S-K - The report includes financial statements, Schedule III (Real Estate and Accumulated Depreciation), and exhibits as required by Item 601 of Regulation S-K[277] - Exhibits cover organizational documents, registration rights agreements, indentures, and employment agreements, among others[279][280] Item 16. Form 10-K Summary This item is not applicable to the company Form 10-K Summary This item is not applicable - This item is not applicable[281]