v3.22.4
Indebtedness, net
 9 Months Ended
Sep. 30, 2022
Debt Disclosure [Abstract]  
Indebtedness, net Indebtedness, net
Indebtedness, net consisted of the following (dollars in thousands):
IndebtednessCollateralCurrent Maturity
Final
Maturity (10)
Interest RateSeptember 30, 2022December 31, 2021
Mortgage loan (3)
Park Hyatt Beaver Creek Resort & SpaApril 2022April 2022
LIBOR (1) +3.00%
$— $67,500 
Mortgage loan (4)
The Ritz-Carlton SarasotaApril 2023April 2023
LIBOR (1) + 2.65%
98,750 99,500 
Mortgage loan (4)
Hotel YountvilleMay 2023May 2023
LIBOR (1) + 2.55%
51,000 51,000 
Mortgage loan (5)
The Notary HotelJune 2023June 2025
LIBOR (1) + 2.16%
435,000 435,000 
The Clancy
Sofitel Chicago Magnificent Mile
Marriott Seattle Waterfront
Mortgage loan (4)
Bardessono Hotel and SpaAugust 2023August 2023
LIBOR (1) + 2.55%
40,000 40,000 
Mortgage loan (6)
The Ritz-Carlton St. ThomasAugust 2023August 2024
LIBOR (1) + 3.95%
42,500 42,500 
Mortgage loan (4)
The Ritz-Carlton Lake TahoeJanuary 2024January 2024
LIBOR (1) + 2.10%
54,000 54,000 
Mortgage loan
Capital HiltonFebruary 2024February 2024
LIBOR (1) + 1.70%
195,000 195,000 
Hilton La Jolla Torrey Pines
Mortgage loan (3)
Park Hyatt Beaver Creek Resort & SpaFebruary 2024February 2027
SOFR (2) + 2.86%
70,500 — 
Mortgage loan (7)
The Ritz-Carlton Reserve Dorado BeachMarch 2024March 2026
LIBOR (1) + 6.00%
54,000 — 
Mortgage loan (8)
Mr. C Beverly Hills HotelAugust 2024August 2024
LIBOR (1) + 3.60%
30,000 30,000 
Mortgage loan (4) (9)
Pier House Resort & SpaSeptember 2024September 2024
LIBOR (1) + 1.85%
— 80,000 
Mortgage loan (9)
Pier House Resort & SpaSeptember 2024September 2024
SOFR (2) + 1.95%
80,000 — 
Convertible Senior NotesEquityJune 2026June 20264.50%86,250 86,250 
1,237,000 1,180,750 
Capitalized default interest and late charges, net2,400 3,904 
Deferred loan costs, net(3,455)(3,538)
Premiums/(Discounts), net919 (8,438)
Indebtedness, net$1,236,864 $1,172,678 
__________________
(1)LIBOR rates were 3.143% and 0.101% at September 30, 2022 and December 31, 2021, respectively.
(2)SOFR rate was 3.042% at September 30, 2022.
(3)On February 2, 2022, we refinanced this mortgage loan totaling $67.5 million with a new $70.5 million mortgage loan with a two-year initial term and three one-year extension options, subject to the satisfaction of certain conditions. The new mortgage loan is interest only and bears interest at a rate of SOFR + 2.86%.
(4)This mortgage loan has a LIBOR floor of 0.25%.
(5)This mortgage loan has five one-year extension options, subject to satisfaction of certain conditions, of which the third was exercised in June 2022.
(6)This mortgage loan has three one-year extension options, subject to satisfaction of certain conditions, of which the second was exercised in August 2022. This mortgage loan has a LIBOR floor of 1.00%.
(7)This mortgage loan has two one-year extension options, subject to satisfaction of certain conditions. This mortgage loan has a LIBOR floor of 0.75%.
(8)This mortgage loan has a LIBOR floor of 1.50%.
(9)On September 29, 2022, we amended this mortgage loan. Terms of the agreement replaced the variable interest rate of LIBOR + 1.85% with SOFR + 1.95%.
(10)The final maturity date assumes all available extensions options will be exercised.
During the second and third quarters of 2020, we reached forbearance and other agreements with our lenders relating to loans secured by the Pier House Resort & Spa, The Ritz-Carlton Sarasota, The Ritz-Carlton Lake Tahoe, Hotel Yountville, Bardessono Hotel and Spa, Sofitel Chicago Magnificent Mile, The Notary Hotel, The Clancy, Marriott Seattle Waterfront, Capital Hilton and Hilton La Jolla Torrey Pines. The Company determined that all of the forbearance and other agreements
evaluated were considered troubled debt restructurings due to terms that allowed for deferred interest and the forgiveness of default interest and late charges.
As a result of the troubled debt restructurings, all accrued default interest and late charges were capitalized into the applicable loan balances and are being amortized over the remaining term of the loans using the effective interest method. The amount of principal amortization for the three and nine months ended September 30, 2022 was $481,000 and $1.5 million, respectively. For the three and nine months ended September 30, 2021, the amount of principal amortization was approximately $519,000 and $2.9 million, respectively.
On March 11, 2022, in connection with the acquisition of The Ritz-Carlton Reserve Dorado Beach, the Company assumed a $54 million mortgage loan. See note 4.
Convertible Senior Notes
In May 2021, the Company issued $86.25 million aggregate principal amount of 4.50% Convertible Senior Notes due June 2026 (the “Convertible Senior Notes”). The net proceeds from this offering of the Convertible Senior Notes were approximately $82.8 million after deducting the underwriting fees and other expenses paid by the Company.
The Convertible Senior Notes are governed by an indenture between the Company and U.S. Bank National Association, as trustee. The Convertible Senior Notes bear interest at a rate of 4.50% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2021. The Convertible Senior Notes will mature on June 1, 2026. The Company recorded coupon interest expense of $970,000 and $2.9 million for the three and nine months ended September 30, 2022, respectively. The Company also recorded coupon interest expense of $970,000 and $1.4 million for the three and nine months ended September 30, 2021, respectively.
Upon issuance of the Convertible Senior Notes, the Company separated the Convertible Senior Notes into liability and equity components. The initial carrying amount of the liability component was calculated using a discount rate of 7.1%. The discount rate was based on the terms of debt instruments that were similar to the Convertible Senior Notes. The $6.3 million carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the net proceeds of the Convertible Senior Notes. The amount recorded in equity was not subject to remeasurement or amortization. The initial discount of $9.3 million was accreted to interest expense using the effective interest rate method over the contractual term of the Convertible Senior Notes. The Company recorded discount amortization of $140,000 and $411,000 related to the initial purchase discount for the three and nine months ended September 30, 2022, with the remaining discount balance to be amortized through June 2026. For the three and nine months ended September 30, 2021, the discount amortization was $391,000 and $576,000, respectively.
As a result of the Company's adoption of ASU 2020-06 on January 1, 2022, the Convertible Senior Notes are now recorded as a single liability with no portion recorded in equity. The Company also ceased recording non-cash interest expense associated with the amortization of the portion of the debt discount originally reflected in equity, while the initial purchase discount remains and will continue to be amortized through June 2026.
The Convertible Senior Notes are convertible at any time prior to the close of business on the business day immediately preceding the maturity date for cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the election of the Company, based on an initial conversion rate of 157.7909 shares of the Company’s common stock per $1,000 principal amount of notes (equivalent to a conversion price of approximately $6.34 per share of common stock), subject to adjustment of the conversion rate under certain circumstances. In addition, following the occurrence of certain corporate events, if the Company provides notice of redemption or if it exercises its option to convert the Convertible Senior Notes, the Company will, in certain circumstances, increase the conversion rate for a holder that converts its Convertible Senior Notes in connection with such corporate event, such notice of redemption, or such issuer conversion option, as the case may be.
The Company may redeem the Convertible Senior Notes at the Company’s option, in whole or in part, on any business day on or after the date of issuance if the last reported sale price per share of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides a notice of redemption at a redemption price equal to 100% of the principal amount of the Convertible Senior Notes to be redeemed subject to certain adjustments, plus accrued and unpaid interest to, but excluding, the redemption date.
If we violate covenants in any debt agreement, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms, if at all. The assets of certain of our subsidiaries are pledged under non-recourse indebtedness and are not available to satisfy the debts and other obligations of the consolidated group. As of September 30, 2022, we were in compliance with all covenants.