1、2015 ANNUAL REPORTCOVER:HYATT HOUSE CHARLOTTE/CENTER CITY,CHARLOTTE,NORTH CAROLINAPHOTO BELOW:HYATT PLACE DC/DOWNTOWN/K STREET,WASHINGTON,DCURBAN MARKETS(NUMBER OF HOTELS)LODGING SEGMENTS (PERCENT OF HOTEL ROOMS)RLJ Lodging Trust(“RLJ”)is a self-advised,publicly traded real estate investment trust f
2、ocused on acquiring premium-branded,focused service and compact full-service hotels.Our hotels are geographically diverse and primarily concentrated in major urban markets that provide multiple demand generators from business,leisure and other travelers.73%FOCUSED-SERVICE24%COMPACT FULL-SERVICE3%FUL
3、L-SERVICE SERVICE LEVEL56%MARRIOTT30%HILTON12%HYATT2%OTHERBRANDTO OUR SHAREHOLDERS,We are pleased to have completed our fifth year as a public company and to report another year of solid operating results.The cumulative results we have achieved since our IPO in 2011 demonstrate our fundamental commi
4、tment to our guiding principles of achieving operational excellence,being prudent capital allocators,and proactively managing our balance sheet.Over the past five years we have focused on enhancing our portfolio,having completed more than$1.3 billion in acquisitions and approximately$400 million in
5、dispositions.Through these accretive transactions,we have built a highly diversified,institutional quality portfolio that is well positioned to continue to drive strong growth through varying economic cycles.The composition of our portfolio,along with our unwavering focus on operational excellence,h
6、as allowed us to increase our RevPAR by 58%,expand our EBITDA margins by over 400 basis points,and more than double our EBITDA since our IPO.During this time,we also have distributed approximately$530 million in dividends.Including dividends and share repurchases,we have returned over$750 million in
7、 capital to our shareholders,which represents approximately 70%of all the equity capital we raised as a public company.These accomplishments,coupled with a relentless commitment to creating shareholder value,give us confidence that we will continue to generate solid returns for our investors for yea
8、rs to come.ADJUSTED EBITDA (2.3X SINCE 2010)(IN MILLIONS)201020112012201320142015$380$367$311$268$234$164RevPAR GROWTH (9.6%CAGR)201020112012201320142015$130$118$106$97$89$82SPRINGHILL SUITES HOUSTON DOWNTOWN/CONVENTION CENTER,HOUSTON,TEXASOPERATIONAL EXCELLENCEIn 2015,we once again generated solid
9、operating results with our RevPAR increasing by 3.9%,which represents our sixth consecutive year of positive RevPAR growth.The broad diversification of our portfolio was a key driver of our strong performance and yielded an impressive 8.0%RevPAR increase in our non-top 6 markets,significantly outper
10、forming the industry by 170 basis points.The robust growth in our non-top 6 markets was led by double-digit RevPAR growth in Dallas,Northern California,Portland,Tampa,and Atlanta.We are excited that Northern California is expected to be our top market in 2016,projected to account for 11%of our EBITD
11、A.Including our hotels in Southern California,the overall California market is expected to represent approximately 16%of our EBITDA in 2016.The overall RevPAR growth in our portfolio translated into$405 million of consolidated hotel EBITDA in 2015,which resulted in a 6.1%increase over the prior year
12、.Our 2015 results illustrate the strength and resiliency of our portfolio and validate our ongoing diversification strategy.%OF EBITDAMARKET 2015 2016*Northern California 6%11%Austin 9%9%South Florida 6%9%Denver 8%8%NYC 12%7%Chicago 9%7%Washington,DC 6%7%Louisville 6%6%Houston 7%5%Southern Californi
13、a 4%5%*Consolidated EBITDA based on 2016 projections.RESIDENCE INN DETROIT NOVI,NOVI,MICHIGANOPERATIONAL EXCELLENCEPRUDENT CAPITAL ALLOCATIONCOURTYARD SAN FRANCISCO UNION SQUARE,SAN FRANCISCO,CALIFORNIA*Since IPODIVIDENDS*$530M+$225MSHARE REPURCHASESTOTAL CAPITAL RETURN*$750M+PRUDENT CAPITAL ALLOCAT
14、IONWe have a proven track record of prudent capital allocation.In 2015,we continued to build upon this success by adding three exceptionally well-located urban hotels in off-market transactions for$176 million.With the addition of these hotels,we entered the high-growth market of Seattle and expande
15、d our presence in the key markets of Silicon Valley and Washington,DC.Additionally,we bolstered the quality of our portfolio by opening the SpringHill Suites Houston Downtown/Convention Center and the Courtyard San Francisco Union Square following transformative conversions.Our cost bases in these t
16、wo hotels are well below replacement cost,which demonstrates our teams ability to select high-yielding capital projects and execute complex renovations that create long-term shareholder value.We expect a sizable contribution to total EBITDA in 2016 from these two hotels.During the year,we further en
17、hanced our portfolio and improved our operating metrics by selling 23 non-core hotels for approximately$253 million.The aggregate RevPAR for these assets was nearly 42%lower than our overall RevPAR and their EBITDA margins were 450 basis points lower.Through these capital recycling activities,we hav
18、e significantly transformed our portfolio and vastly improved our operating metrics.This is evident in the RevPAR across our top-60 hotels,which represented more than 70%of our EBITDA in 2015 and is now at par with many of our peers that own full-service hotels.In addition,our margins are among the
19、highest when compared with this peer group.PROACTIVE BALANCE SHEET MANAGEMENTHYATT ATLANTA MIDTOWN,ATLANTA,GEORGIAPROACTIVE BALANCE SHEET MANAGEMENTOur fortress balance sheet provides us tremendous flexibility and ample liquidity.In 2015,we further strengthened our balance sheet by executing a multi
20、-step strategy to refinance$165 million of maturing debt.With this transaction,we reduced our interest rate on this debt and extended the maturity to 2022.Additionally,we increased the number of unencumbered assets to 112,which accounted for approximately 82%of our EBITDA in 2015.We once again ended
21、 the year in a position of tremendous strength,with one of the strongest balance sheets among publicly-traded lodging REITs today.At year-end,our net debt to EBITDA ratio stood at 3.8x,nearly six turns of improvement from when we went public in 2011.In 2016,we intend to proactively address our 2017
22、and 2018 debt maturities with a focus on extending the duration,enhancing the covenants,and improving the interest rates of this debt.As we execute our strategic initiatives,we will remain committed to maintaining a low levered,conservative capital structure.RETURN TO SHAREHOLDERSLast year,we accele
23、rated the return of capital to our shareholders.The liquidity generated by our strong performance in 2015 gave us ample capacity to raise our annual dividend by 27%to$1.32 per share.In addition,our capital recycling activities allowed us to take advantage of the dislocation in our stock price and re
24、purchase 8 million shares for approxi-mately$225 million,at a significant discount to our net asset value.In total,we returned approximately$400 million to our shareholders in the form of dividends and share repur-chases,which highlights our commitment to increasing total returns for our shareholder
25、s.$398CAPITAL RETURNED(IN MILLIONS)$136$106$75$4120112012201320142015LOOKING FORWARDBy expanding our footprint in higher growth markets,we have laid the groundwork for solid performance in 2016 and beyond.We have some unique tailwinds this year,as the strong markets of Northern California,Austin,and
26、 South Florida,which are estimated to account for approximately 30%of our EBITDA,will be our top three markets.Our Northern California hotels are already off to a great start,benefitting from Super Bowl 50 held in Santa Clara in February.Additionally,our portfolios performance will benefit from our
27、two newly-converted hotels and other hotel renovations completed in 2015.Looking ahead,our strong and flexible balance sheet has positioned us to capitalize on opportunities in all parts of the lodging cycle.We will continue to pursue ways to enhance shareholder value,including selling non-core hote
28、ls and recycling capital into higher yielding investments,buying back additional shares and reducing debt.Our team remains laser-focused on maximizing returns for our shareholders.We thank you for your support and look forward to continuing to work on your behalf to deliver sustainable,long-term gro
29、wth.Thomas J.Baltimore,Jr.Robert L.Johnson President and Executive Chairman Chief Executive OfficerCOURTYARD,RESIDENCE INN AND SPRINGHILL SUITES HOUSTON DOWNTOWN/CONVENTION CENTER,HOUSTON,TEXASLOOKING FORWARDRobert L.Johnson Executive ChairmanThomas J.Baltimore,Jr.President and Chief Executive Offic
30、erRoss H.Bierkan Chief Investment Officer and Executive Vice PresidentLeslie D.Hale Chief Financial Officer and Executive Vice PresidentEXECUTIVE OFFICERSBOARD OF TRUSTEESRobert L.Johnson Executive Chairman of the Board RLJ Lodging TrustThomas J.Baltimore,Jr.President and Chief Executive Officer RLJ
31、 Lodging TrustSenator Evan Bayh Former U.S.Senator and Governor,State of Indiana Partner McGuireWoods,LLCNathaniel A.Davis Executive Chairman K12,Inc.Robert M.La Forgia Principal Apertor Hospitality,LLCGlenda G.McNeal Executive Vice President and General Manager of the Global Client Group in Global
32、Merchant Services American Express CompanyJoseph Ryan Chairman and Chief Executive Officer Ryan Investments,LLC and Joseph Ryan and AssociatesUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-K?ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THESECURITIES EXCHANGE ACT OF 193
33、4For the fiscal year ended December 31,2015OR?TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THESECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission File Number 001-35169RLJ LODGING TRUST(Exact Name of Registrant as Specified in Its Charter)Maryland27-4706509(State or Oth
34、er Jurisdiction of(I.R.S.EmployerIncorporation or Organization)Identification No.)3 Bethesda Metro Center,Suite 1000Bethesda,Maryland20814(Address of Principal Executive Offices)(Zip Code)(301)280-7777(Registrants Telephone Number,Including Area Code)Securities registered pursuant to Section 12(b)of
35、 the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Shares,$0.01 par valueNew York Stock ExchangeSecurities registered pursuant to Section 12(g)of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the SecuritiesAct.
36、Yes?No?Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)of the Act.Yes?No?Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)ofthe Securities Exchange Act of 1934 during the preceding
37、 12 months(or for such shorter period that the registrant wasrequired to file such reports),and(2)has been subject to such filing requirements for the past 90 days.?Yes?NoIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,ifany,every Inter
38、active Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(232.405of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submitand post such files).?Yes?NoIndicate by check mark if disclosure of delinquent filers
39、 pursuant to Item 405 of Regulation S-K(229.405 of thischapter)is not contained herein,and will not be contained,to the best of registrants knowledge,in definitive proxy orinformation statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.?Indicate by c
40、heck mark whether the registrant is a large accelerated filer,an accelerated filer,a non-acceleratedfiler,or a smaller reporting company.See the definitions of large accelerated filer,accelerated filer and smallerreporting company in Rule 12b-2 of the Exchange Act.Large accelerated filer?Accelerated
41、 filer?Non-accelerated filer?Smaller reporting company?(do not check if asmaller reporting company)Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).?Yes?NoThe aggregate market value of the 126,754,540 common shares of beneficial interest
42、held by non-affiliates of theRegistrant was approximately$3,774,750,201 based on the closing price of$29.78 as reported on the New York StockExchange for such common shares of beneficial interest on June 30,2015.As of February 17,2016,124,627,008 common shares of beneficial interest of the Registran
43、t,$0.01 par value pershare,were outstanding.Documents Incorporated by ReferencePortions of the Definitive Proxy Statement for our 2016 Annual Meeting of Shareholders are incorporated byreference into Part III of this report.We expect to file our proxy statement within 120 days after December 31,2015
44、.TABLE OF CONTENTSForm 10-KItem No.Report PagePART IItem 1.Business.4Item 1A.Risk Factors.11Item 1B.Unresolved Staff Comments.36Item 2.Properties.36Item 3.Legal Proceedings.42Item 4.Mine Safety Disclosures.42PART IIItem 5.Market for Registrants Common Equity,Related Shareholder Matters andIssuer Pur
45、chases of Equity Securities.43Item 6.Selected Financial Data.46Item 7.Managements Discussion and Analysis of Financial Condition and Results ofOperations.48Item 7A.Quantitative and Qualitative Disclosures About Market Risk.68Item 8.Financial Statements and Supplementary Data.69Item 9.Changes in and
46、Disagreements with Accountants on Accounting and FinancialDisclosure.69Item 9A.Controls and Procedures.69Item 9B.Other Information.70PART IIIItem 10.Directors,Executive Officers and Corporate Governance.70Item 11.Executive Compensation.70Item 12.Security Ownership of Certain Beneficial Owners and Ma
47、nagement andRelated Shareholder Matters.70Item 13.Certain Relationships and Related Transactions and Director Independence.70Item 14.Principal Accountant Fees and Services.70PART IVItem 15.Exhibits and Financial Statement Schedules.701SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTSCertain statements i
48、n this Annual Report on Form 10-K,other than purely historical information,including estimates,projections,statements relating to our business plans,objectives and expectedoperating results,and the assumptions upon which those statements are based,are forward-lookingstatements within the meaning of
49、the Private Securities Litigation Reform Act of 1995,Section 27A ofthe Securities Act of 1933,as amended,and Section 21E of the Securities Exchange Act of 1934,asamended.These forward-looking statements generally are identified by the use of the words believe,project,expect,anticipate,estimate,plan,
50、may,will,will continue,intend,should,may or similar expressions.Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions,beliefs and expectations,such forward-looking statements are not predictions of future events or guarantees of
51、future performance and ouractual results could differ materially from those set forth in the forward-looking statements.Somefactors that might cause such a difference include the following:the current global economicuncertainty,increased direct competition,changes in government regulations or accoun
52、ting rules,changes in local,national and global real estate conditions,declines in the lodging industry,seasonalityof the lodging industry,risks related to natural disasters,such as earthquakes and hurricanes,hostilities,including future terrorist attacks or fear of hostilities that affect travel,ou
53、r ability to obtain lines ofcredit or permanent financing on satisfactory terms,changes in interest rates,access to capital throughofferings of our common and preferred shares of beneficial interest,or debt,our ability to identifysuitable acquisitions,our ability to close on identified acquisitions
54、and integrate those businesses andinaccuracies of our accounting estimates.A discussion of these and other risks and uncertainties thatcould cause actual results and events to differ materially from such forward-looking statements isincluded in Risk Factors and Managements Discussion and Analysis of
55、 Financial Condition andResults of Operations of this Annual Report on Form 10-K.Given these uncertainties,undue relianceshould not be placed on such statements.Except as required by law,we undertake no obligation toupdate or revise publicly any forward-looking statements,whether as a result of new
56、information,futureevents or otherwise.Except where the context suggests otherwise,we define certain terms in thisAnnual Report on Form 10-K as follows:our company,we,us and our refer to RLJ Lodging Trust,a Maryland real estateinvestment trust,together with its consolidated subsidiaries,including RLJ
57、 Lodging Trust,L.P.,aDelaware limited partnership,which we refer to as our operating partnership;our predecessor collectively refers to RLJ Development,LLC(RLJ Development),and twolodging-focused private equity funds that were sponsored and managed by RLJ Development,RLJ Lodging Fund II,L.P.(and its
58、 parallel fund),(collectively,Fund II),and RLJ Real EstateFund III,L.P.(and its parallel fund),(collectively,Fund III),all of which were entities underthe common control of Robert L.Johnson,our Executive Chairman;our hotels refers to the 126 hotels owned by us as of December 31,2015;a compact full-s
59、ervice hotel typically refers to any hotel with(1)less than 300 guestrooms andless than 12,000 square feet of meeting space or(2)more than 300 guestrooms where,unliketraditional full-service hotels,the operations focus primarily on the rental of guestrooms suchthat a significant majority of its tota
60、l revenue is generated from room rentals rather than othersources,such as food and beverage;a focused-service hotel typically refers to any hotel where the operations focus primarily onthe rental of guestrooms and that offers services and amenities to a lesser extent than a typicalfull-service or co
61、mpact full-service hotel.For example,a focused-service hotel may have arestaurant,but,unlike a restaurant in a typical full-service or compact full-service hotel,it maynot offer three meals per day and may not offer room service.In addition,a focused-service2hotel differs from a compact full-service
62、 hotel in that it typically has less than 2,000 square feetof meeting space,if any at all;TRS refers to each of our taxable REIT subsidiaries that are wholly-owned,directly orindirectly,by our operating partnership and any disregarded subsidiaries of our TRSs;Average Daily Rate(ADR)represents total
63、hotel room revenues divided by total number ofrooms sold in a given period;Occupancy represents the total number of hotel rooms sold in a given period divided by thetotal number of rooms available;Revenue Per Available Room(RevPAR)is the product of ADR and Occupancy;and RevPAR penetration index of o
64、ur hotels is the measure of each hotels RevPAR in relation tothe average RevPAR of that hotels competitive set.Each hotels competitive set consists of asmall group of hotels in the relevant market that we and the third-party hotel managementcompany that manages the hotel believe are comparable for p
65、urposes of benchmarking theperformance of such hotel.For a more in depth discussion of Occupancy,ADR,RevPAR,and the RevPAR penetration index,please see Key Indicators of Operating Performance.3PART IItem 1.BusinessOur CompanyWe are a self-advised and self-administered Maryland real estate investment
66、 trust(REIT)thatacquires primarily premium-branded,focused-service and compact full-service hotels.We are one of thelargest U.S.publicly-traded lodging REITs in terms of both number of hotels and number of rooms.Our hotels are concentrated in markets that we believe exhibit multiple demand generator
67、s and highbarriers to entry.We believe premium-branded,focused-service and compact full-service hotels withthese characteristics generate high levels of RevPAR,strong operating margins and attractive returns.As of December 31,2015,we,through wholly-owned subsidiaries,owned 126 hotels withapproximate
68、ly 20,900 rooms,located in 21 states and the District of Columbia and an interest in onemortgage loan secured by a hotel.We own,through wholly-owned subsidiaries,100%of the interests inall properties,with the exception of one property in which we own a 98.3%controlling interest in ajoint venture.For
69、 U.S.federal income tax purposes,we elected to be taxed as a REIT commencing with ourtaxable year ended December 31,2011.Substantially all of our assets are held by,and all of ouroperations are conducted through,our operating partnership.We are the sole general partner of ouroperating partnership.As
70、 of December 31,2015,we owned,through a combination of direct andindirect interests,99.3%of the OP units in our operating partnership.The Lodging IndustryThe lodging industry in the United States consists of private and public entities that operate in anextremely diversified market under a variety o
71、f brand names.The lodging industry has several keyparticipants as follows:Ownersown the hotel and typically enter into a management agreement for an independentthird party to manage the hotel.The hotel properties may be branded and operated under themanagers brand or branded under a separate franchi
72、se agreement.Franchisorsown a brand or brands and provide their hotels with brand recognition,marketingsupport and worldwide reservation systems for the franchised hotels.Managersresponsible for the day-to-day operation of the hotel,including the employment ofthe hotel staff,the determination of roo
73、m rates,the development of sales and marketing plans,the preparation of operating and capital expenditures budgets and the preparation of financialreports for the owner.Our Investment and Growth StrategiesOur objective is to generate strong returns for our shareholders by acquiring primarily premium
74、-branded,focused-service hotels and compact full-service hotels at prices where we believe we cangenerate attractive returns on investment and long-term value appreciation through proactive assetmanagement.We intend to pursue acquisitions of these hotels and selectively dispose of propertieswhen we
75、believe returns have been maximized in order to redeploy capital into more accretive4acquisitions and other opportunities.We intend to pursue this objective through the followinginvestment and growth strategies:Investment Strategies Targeted ownership of premium-branded,focused-service and compact f
76、ull-service hotels.We believethat premium-branded,focused-service hotels have the potential to generate attractive returnsrelative to other types of hotels due to their ability to achieve RevPAR levels at or close to thosegenerated by traditional full-service hotels,while achieving higher profit mar
77、gins due to theirmore efficient operating model and less volatile cash flows.We also may acquire compactfull-service hotels which have operating characteristics that resemble those of focused-servicehotels.Use of premium hotel brands.We believe in affiliating our hotels with premium brands owned byl
78、eading international franchisors such as Marriott,Hilton and Hyatt.We target hotels affiliatedwith premium brands such as Courtyard by Marriott,Residence Inn by Marriott,Hilton GardenInn and Hyatt House.We believe that utilizing premium brands provides significant advantagesbecause of their guest lo
79、yalty programs,worldwide reservation systems,effective productsegmentation,global distribution and strong customer awareness.Focus on high-growth markets.We focus on owning and acquiring hotels in markets that webelieve have multiple demand generators and high barriers to entry.As a result,we believ
80、e thatthese hotels generate higher returns on investment.Growth Strategies Maximize returns from our hotels.We believe that our hotels have the potential to generatesignificant improvements in RevPAR and earnings before interest,taxes,depreciation andamortization(EBITDA)as a result of our proactive
81、asset management and the anticipatedeconomic growth in the United States.We actively monitor and advise our third-party hotelmanagement companies on most aspects of our hotels operations,including propertypositioning,physical design,capital planning and investment,guest experience and overallstrateg
82、ic direction.We regularly review opportunities to further invest in our hotels in an effortto enhance the quality and attractiveness of our hotels,increase their long-term value andgenerate attractive returns on investment.Pursue a disciplined hotel acquisition strategy.We seek to acquire additional
83、 hotels at pricesbelow replacement cost where we believe we can generate attractive returns on investment.Weintend to target acquisition opportunities where we can enhance value by pursuing proactiveinvestment strategies such as renovation,repositioning or rebranding.Pursue a disciplined capital rec
84、ycling program.We intend to continue to pursue a disciplinedcapital allocation strategy designed to maximize the value of our investments by selectivelyselling hotels that are no longer consistent with our investment strategy or whose returns appearto have been maximized.To the extent that we sell h
85、otels,we intend to redeploy the capital intohigher yielding investments including acquisition and investment opportunities that we believewill achieve higher returns as well as repurchasing our shares on an opportunistic basis.Our HotelsOverviewAs of December 31,2015,we owned a high-quality portfoli
86、o of 126 hotels located in 21 states andthe District of Columbia comprised of approximately 20,900 rooms.No single hotel accounted for morethan 6.2%of our total revenue for the year ended December 31,2015.We believe that the quality of5our portfolio is evidenced by the RevPAR penetration index of 11
87、0.7 for our hotels for the year endedDecember 31,2015.Brand AffiliationsOur hotels operate under strong,premium brands,with nearly 97%of our hotels operating underexisting relationships with Marriott,Hilton or Hyatt.The following table sets forth the brandaffiliations of our hotels as of December 31
88、,2015:NumberPercentageNumberPercentageBrand Affiliationsof hotelsof totalof roomsof totalMarriottResidence Inn.2923.0%3,37616.2%Courtyard.2419.0%4,03819.3%SpringHill Suites.97.1%1,1595.5%Fairfield Inn&Suites.75.6%8193.9%Marriott.54.0%1,5447.4%Renaissance.32.4%7823.7%Subtotal.7761.1%11,71856.0%Hilton
89、Hilton Garden Inn.97.1%1,8438.8%Hampton Inn/Hampton Inn&Suites.75.6%9454.5%Embassy Suites.64.8%1,4927.1%DoubleTree.32.4%1,1325.4%Hilton.21.6%5112.4%Homewood Suites.21.6%3451.7%Subtotal.2923.1%6,26829.9%HyattHyatt House.118.7%1,7628.4%Hyatt Place.32.4%4662.2%Hyatt.21.6%2641.3%Subtotal.1612.7%2,49211.
90、9%Other Brand Affiliation.43.1%4192.2%Total.126100.0%20,897100.0%Asset ManagementWe have a dedicated team of asset management professionals that proactively work with our third-party hotel management companies to maximize profitability at each of our hotels.Our assetmanagement team monitors the perf
91、ormance of our hotels on a daily basis and holds frequentownership meetings with corporate operations executives and key personnel at the hotels.Our assetmanagement team works closely with our third-party hotel management companies on key aspects ofeach hotels operation,including,among others,revenu
92、e management,market positioning,coststructure,capital and operational budgeting as well as the identification of return on investmentinitiatives and overall business strategy.In addition,we retain approval rights on key staffing positionsat many of our hotels,such as the hotels general manager and d
93、irector of sales.We believe that ourstrong asset management process helps to ensure that each hotel is being operated to our and ourfranchisors standards,that our hotels are being adequately maintained in order to preserve the valueof the asset and the safety of the hotel to customers,and that our h
94、otel management companies aremaximizing revenue and enhancing operating margins.6CompetitionThe U.S.lodging industry is highly competitive.Our hotels compete with other participants in thelodging industry for guests in each of their markets on the basis of several factors,including,amongothers,locat
95、ion,quality of accommodations,convenience,brand affiliation,room rates,service levelsand amenities,and level of customer service.Competition is often specific to the individual markets inwhich our hotels are located and includes competition from existing and new hotels in the focused-service and com
96、pact full-service segments.We believe that hotels,such as our hotels,that are affiliatedwith leading national brands,such as the Marriott,Hilton or Hyatt brands,will enjoy competitiveadvantages associated with operating under such brands.We face competition for the acquisition of hotels from institu
97、tional pension funds,private equityfunds,REITs,hotel companies and others who are engaged in the acquisition of hotels.Some of thesecompetitors may have substantially greater financial and operational resources and access to capitalthan we have and may have greater knowledge of the markets in which
98、we seek to invest.Thiscompetition may reduce the number of suitable investment opportunities offered to us and decreasethe attractiveness of the terms on which we may acquire our targeted hotel investments,including thecost thereof.SeasonalityThe lodging industry is seasonal in nature,which can be e
99、xpected to cause quarterly fluctuations inour revenues.For example,our hotels in the Chicago,Illinois metropolitan area experience lowerrevenues and profits during the winter months of December through March while our hotels in Floridagenerally have higher revenues in the months of January through A
100、pril.This seasonality can beexpected to cause periodic fluctuations in a hotels room revenues,occupancy levels,room rates,operating expenses and cash flows.Our Financing StrategyWe expect to continue to maintain a prudent capital structure by limiting our net debt-to-EBITDAratio to 5.0 x or below.We
101、 define net debt as total indebtedness minus cash and cash equivalents.Overtime,we intend to finance our long-term growth with equity issuances and debt financing withstaggered maturities.We will seek to primarily utilize unsecured debt(with the ultimate goal ofachieving an investment grade rating)a
102、nd a greater percentage of fixed rate and hedged floating ratedebt relative to unhedged floating rate debt.Our debt is currently comprised of both unsecured debtand mortgage debt secured by our hotels.We have a mix of fixed and floating rate debt;however,themajority of our debt either bears interest
103、 at fixed rates or effectively bears interest at fixed rates due tointerest rate hedges on the debt.Organizational StructureWe were formed as a Maryland REIT in January 2011.We conduct our business through atraditional umbrella partnership real estate investment trust(UPREIT)in which our properties
104、areindirectly owned by our operating partnership,RLJ Lodging Trust,L.P.,through limited partnerships,limited liability companies or other subsidiaries.We are the sole general partner of our operatingpartnership,and as of December 31,2015,we owned 99.3%of the OP units in our operatingpartnership.In t
105、he future,we may issue OP units from time to time in connection with acquisitions ofproperties or for financing,compensation or other reasons.In order for the income from our hotel operations to constitute rents from real property forpurposes of the gross income tests required for REIT qualification
106、,we cannot directly or indirectlyoperate any of our hotels.Accordingly,we lease each of our hotels,and intend to lease any hotels weacquire in the future,to subsidiaries of our TRSs(TRS lessees),which are wholly-owned by us,and71MAR201617554651our TRS lessees have engaged,or will engage,third-party
107、hotel management companies to manage ourhotels,and any hotels we acquire in the future,on market terms.Our TRS lessees pay rent to us thatwe intend to treat as rents from real property,provided that the third-party hotel managementcompanies engaged by our TRS lessees to manage our hotels are deemed
108、to be eligible independentcontractors and certain other requirements are met.Our TRSs are subject to U.S.federal,state andlocal income taxes applicable to corporations.The following chart generally depicts our corporate structure as of December 31,2015:Operating PartnershipNoncontrollingInterest0.7%
109、100%100%99.3%RLJ Lodging TrustTRS EntitiesHotel SpecialPurpose EntitiesLessee SPEs100%LeasesRegulationGeneralOur hotels are subject to various U.S.federal,state and local laws,ordinances and regulations,including regulations relating to common areas and fire and safety requirements.We believe that e
110、achof our hotels has the necessary permits and approvals to operate its business.Americans with Disabilities ActOur hotels must comply with the applicable provisions of the Americans with Disabilities Act of1990 and the Accessibility Guidelines promulgated thereunder(the ADA),to the extent that such
111、8hotels are public accommodations as defined by the ADA.The ADA may require removal ofstructural barriers to access by persons with disabilities in certain public areas of our hotels where suchremoval is readily achievable.We believe that our hotels are in substantial compliance with the ADAand that
112、 we will not be required to make substantial capital expenditures to address the requirementsof the ADA.However,non-compliance with the ADA could result in imposition of fines or an awardof damages to private litigants.The obligation to make readily achievable accommodations is anongoing one,and we
113、will continue to assess our hotels and to make alterations as appropriate in thisrespect.Environmental MattersUnder various laws relating to the protection of the environment,a current or previous owner oroperator(including tenants)of real estate may be subject to liability related to contamination
114、resultingfrom the presence or discharge of hazardous or toxic substances at that property and may be requiredto investigate and clean up such contamination at that property or emanating from that property.Thesecosts could be substantial and liability under these laws may attach without regard to whe
115、ther theowner or operator knew of,or was responsible for,the presence of the contaminants,and the liabilitymay be joint and several.The presence of contamination or the failure to remediate contamination atour hotels may expose us to third-party liability for cleanup costs,property damage or bodily
116、injury,natural resource damages and costs or expenses related to liens or property use restrictions andmaterially and adversely affect our ability to sell,lease or develop the real estate or to incur debt usingthe real estate as collateral.Furthermore,persons who sent waste to a waste disposal facil
117、ity,such as alandfill or an incinerator,may be liable for costs associated with cleanup of that facility.Our hotels are subject to various federal,state,and local environmental,health and safety lawsand regulations that address a wide variety of issues,including,but not limited to,storage tanks,aire
118、missions from emergency generators,storm water and wastewater discharges,lead-based paint,moldand mildew and waste management.Our hotels incur costs to comply with these laws and regulationsand could be subject to fines and penalties for non-compliance.The costs of complying withenvironmental,health
119、 and safety laws could increase as new laws are enacted and existing laws aremodified.Some of our hotels contain asbestos-containing building materials.We believe that the asbestos isappropriately contained in accordance with current environmental regulations and that we have noneed for any immediat
120、e remediation or current plans to remove the asbestos.Environmental lawsrequire that owners or operators of buildings with asbestos-containing building materials properlymanage and maintain these materials,adequately inform or train those who may come into contactwith asbestos and undertake special
121、precautions,including removal or other abatement,in the eventthat asbestos is disturbed during building renovation or demolition.These laws may impose fines andpenalties on building owners or operators for failure to comply with these requirements.In addition,third parties may seek recovery from own
122、ers or operators for personal injury associated with exposureto asbestos-containing building materials.Some of our hotels may contain or develop harmful mold or suffer from other adverse conditions,which could lead to liability for adverse health effects and costs of remediation.The presence ofsigni
123、ficant mold or other airborne contaminants at any of our hotels could require us to undertake acostly remediation program to contain or remove the mold or other airborne contaminants from theaffected hotel or increase indoor ventilation.In addition,the presence of significant mold or otherairborne c
124、ontaminants could expose us to liability from guests or employees at our hotels and others ifproperty damage or health concerns arise.9InsuranceWe carry comprehensive general liability,fire,extended coverage,business interruption,rental losscoverage and umbrella liability coverage on all of our hote
125、ls and earthquake,wind,flood and hurricanecoverage on hotels in areas where we believe such coverage is warranted,in each case with limits ofliability that we deem adequate.Similarly,we are insured against the risk of direct physical damage inamounts we believe to be adequate to reimburse us,on a re
126、placement basis,for costs incurred to repairor rebuild each hotel,including loss of revenue during the reconstruction period.We have selectedpolicy specifications and insured limits which we believe to be appropriate given the relative risk ofloss,the cost of the coverage and industry practice.We do
127、 not carry insurance for generally uninsuredlosses,including,but not limited to losses caused by riots,war or acts of God.In the opinion of ourmanagement,our hotels are adequately insured.EmployeesAs of December 31,2015,we had 56 employees.Corporate InformationOur principal executive offices are loc
128、ated at 3 Bethesda Metro Center,Suite 1000,Bethesda,Maryland 20814.Our telephone number is(301)280-7777.Our website is located .The information that is found on or accessible through our website is notincorporated into,and does not form a part of,this Annual Report on Form 10-K or any other reportor
129、 document that we file with or furnish to the SEC.We have included our website address in thisAnnual Report on Form 10-K as an inactive textual reference and do not intend it to be an active linkto our website.We make available on our website,free of charge,our Annual Report on Form 10-K,QuarterlyRe
130、ports on Form 10-Q,Current Reports on Form 8-K and amendments to those reports filed orfurnished pursuant to Section 13(a)or 15(d)of the Exchange Act as soon as reasonably practicableafter we electronically file such material with,or furnish it to,the SEC.We also make our Code ofBusiness Conduct and
131、 Ethics for our trustees,officers and employees available on our website on theCorporate Governance page under the Investor Relations section of our website.This Annual Report on Form 10-K and other reports filed with the SEC can be read or copied atthe SECs Public Reference Room at 100 F Street NE,
132、Washington,D.C.20549.Information on theoperation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.TheSEC maintains a website that contains reports,proxy and information statements,and otherinformation regarding issuers that file electronically with the SEC;the websit
133、e address is www.sec.gov.10Item 1A.Risk FactorsSet forth below are the risks that we believe are material to our shareholders.You should carefullyconsider the following risks in evaluating our Company and our business.The occurrence of any of thefollowing risks could materially adversely impact our
134、financial condition,results of operations,cash flows,the market price of our common shares and our ability to,among other things,satisfy our debt serviceobligations and to make distributions to our shareholders,which in turn could cause our shareholders tolose all or a part of their investment.Some
135、statements in this report including statements in the followingrisk factors constitute forward-looking statements.Please refer to the section entitled Special Note AboutForward-Looking Statements at the beginning of our Annual Report on Form 10-K.Risks Related to Our Business and PropertiesWe will c
136、ontinue to be significantly influenced by the economies and other conditions in the specific marketsin which we operate,particularly in the metropolitan areas where we have high concentrations of hotels.Our hotels located in the New York,New York,South Florida,Chicago,Illinois,Austin,Texas,andDenver
137、-Boulder,Colorado metropolitan areas accounted for approximately 13.1%,8.5%,8.4%,8.3%,and 7.4%,respectively,of our total revenue for the fiscal year ended December 31,2015.As a result,we are particularly susceptible to adverse market conditions in these areas,including industrydownturns,relocation o
138、f businesses and any oversupply of hotel rooms or a reduction in lodgingdemand.Adverse economic developments in the markets in which we have a concentration of hotels,orin any of the other markets in which we operate,or any increase in hotel supply or decrease in lodgingdemand resulting from the loc
139、al,regional or national business climate,could materially and adverselyaffect us.We are dependent on the performance of the third-party hotel management companies that manage theoperations of each of our hotels and could be materially and adversely affected if such third-party managersdo not manage
140、our hotels in our best interests.Because federal income tax laws restrict REITs and their subsidiaries from operating or managinghotels,we do not operate or manage our hotels.Instead,we lease all of our hotels to our TRS lessees,and our TRS lessees retain third-party managers to operate our hotels p
141、ursuant to managementagreements.We have entered into individual hotel management agreements for 126 of our hotels,72 ofwhich are with White Lodging Services(WLS).Under the terms of the hotel management agreements,the hotel managers are responsible for allaspects of the operations of our hotels,inclu
142、ding ensuring those operations are conducted inaccordance with applicable law and regulations and in our best interests,and our ability to participatein operating decisions regarding our hotels is limited to certain matters,including approval of theannual operating budget.While our TRS lessees close
143、ly monitor the performance and operations ofour third-party managers,we cannot assure you that the hotel managers will manage our hotels in amanner that is consistent with their respective obligations under the applicable hotel managementagreement or our obligations under our hotel franchise agreeme
144、nts.We also cannot assure you that ourhotel managers will not be negligent in their performance,will not engage in criminal or fraudulentactivity,or will not otherwise default on their respective management obligations to us.We do not havethe authority to require any hotel to be operated in a partic
145、ular manner(for instance,with respect tosetting room rates),even if we believe that our hotels are not being operated efficiently or in our bestinterests,and our general recourse under the hotel management agreements is limited to terminationupon sixty days notice if we believe our third-party manag
146、ers are not performing adequately or if webelieve our third-party managers are not operating our hotels in our best interests.From time to time,disputes may arise between us and our third-party managers regarding their performance or compliancewith the terms of the hotel management agreements,which
147、in turn could adversely affect our results ofoperations.We generally will attempt to resolve any such disputes through discussions and negotiations;11however,if we are unable to reach satisfactory results through discussions and negotiations,we maychoose to terminate our management agreement,litigat
148、e the dispute or submit the matter to third-party dispute resolution,the outcome of which may be unfavorable to us.In the event that any of our management agreements are terminated,we can provide noassurances that we could find a replacement manager or that our franchisors will consent to areplaceme
149、nt manager in a timely manner,or at all,or that any replacement manager will be successfulin operating our hotels.Furthermore,if WLS,as our largest provider of management services,isfinancially unable or unwilling to perform its obligations pursuant to our management agreements,ourability to find a
150、replacement manager or managers for our WLS-managed hotels could be challengingand time consuming,depending on the number of WLS-managed hotels affected,and could cause us toincur significant costs to obtain new management agreements for the affected hotels,which in turncould materially and adversel
151、y affect us.Restrictive covenants in certain of our hotel management and franchise agreements contain provisions limitingor restricting the sale or financing of our hotels,which could have a material adverse effect on us.Hotel management and franchise agreements typically contain restrictive covenan
152、ts that limit orrestrict our ability to sell or refinance a hotel without the consent of the hotel management company orfranchisor.Many of our franchise agreements provide the franchisor with a right of first offer in theevent of certain sales or transfers of a hotel and provide that the franchisor
153、has the right to approveany change in the hotel management company engaged to manage the hotel.Generally,we may notagree to sell,lease or otherwise transfer particular hotels unless the transferee is not a competitor ofthe hotel management company or franchisor and the transferee assumes the related
154、 hotel managementand franchise agreements.If the hotel management company or franchisor does not consent to the saleor financing of our hotels,we may be prohibited from taking actions that would otherwise be in ourand our shareholders best interests.Substantially all of our hotels operate under eith
155、er Marriott,Hilton or Hyatt brands;therefore,we are subjectto risks associated with concentrating our portfolio in just three brand families.122 of the 126 hotels that we owned as of December 31,2015 utilize brands owned by Marriott,Hilton or Hyatt.As a result,our success is dependent in part on the
156、 continued success of Marriott,Hilton and Hyatt and their respective brands.We believe that building brand value is critical toincrease demand and build customer loyalty.Consequently,if market recognition or the positiveperception of Marriott and/or Hilton and/or Hyatt is reduced or compromised,the
157、goodwill associatedwith the Marriott-,Hilton-or Hyatt-branded hotels in our portfolio may be adversely affected.Furthermore,if our relationship with Marriott,Hilton or Hyatt were to deteriorate or terminate as aresult of disputes regarding the management of our hotels or for other reasons,Marriott a
158、nd/or Hiltonand/or Hyatt could,under certain circumstances,terminate our current franchise licenses with them ordecline to provide franchise licenses for hotels that we may acquire in the future.If any of theforegoing were to occur,it could have a material adverse effect on us.Our long-term growth d
159、epends in part on successfully identifying and consummating acquisitions of additionalhotels and the failure to make such acquisitions could materially impede our growth.We can provide no assurances that we will be successful in identifying attractive hotels or that,once identified,we will be succes
160、sful in consummating an acquisition.We face significant competitionfor attractive investment opportunities from other well-capitalized investors,some of which have greaterfinancial resources and a greater access to debt and equity capital to acquire hotels than we do.Thiscompetition increases as inv
161、estments in real estate become increasingly attractive relative to otherforms of investment.As a result of such competition,we may be unable to acquire certain hotels thatwe deem attractive or the purchase price may be significantly elevated or other terms may be12substantially more onerous.In addit
162、ion,we expect to finance future acquisitions through a combinationof borrowings under our unsecured revolving credit facility,the use of retained cash flows,andofferings of equity and debt securities,which may not be available on advantageous terms,or at all.Any delay or failure on our part to ident
163、ify,negotiate,finance on favorable terms,consummate andintegrate such acquisitions could materially impede our growth.The departure of any of our key personnel who have significant experience and relationships in the lodgingindustry,including Robert L.Johnson,Thomas J.Baltimore,Jr.and Ross H.Bierkan
164、,could materially andadversely affect us.We depend on the experience and relationships of our senior management team,especiallyRobert L.Johnson,Executive Chairman of our board of trustees,Thomas J.Baltimore,Jr.,ourPresident and Chief Executive Officer and a member of our board of trustees,and Ross H
165、.Bierkan,our Executive Vice President and Chief Investment Officer,to manage our day-to-day operations andstrategic business direction.Although the members of our senior management team have entered intoemployment agreements with us,we can provide no assurances that any of our key personnel willcont
166、inue their employment with us.The loss of services of Messrs.Johnson,Baltimore or Bierkan,orof the services of other members of our senior management team,or any difficulty attracting andretaining other talented and experienced personnel,could adversely affect our ability to sourcepotential investme
167、nt opportunities,our relationships with global and national hotel brands and otherindustry participants and the execution of our business strategy.Further,such a loss could be negativelyperceived in the capital markets,which could reduce the market value of our common shares.Our business strategy de
168、pends on achieving revenue and net income growth from anticipated increases indemand for hotel rooms.Accordingly,any delay or a weaker than anticipated economic growth couldmaterially and adversely affect us and our growth prospects.Our hotels experienced declining operating performance across vario
169、us U.S.markets during themost recent economic recession.Our business strategy depends on achieving revenue and net incomegrowth from anticipated improvement in demand for hotel rooms as part of the growth of the U.S.aswell as the global economy.Accordingly,any delay or weaker than anticipated econom
170、ic growth couldmaterially and adversely affect us and our growth prospects.Furthermore,even if the U.S.and theglobal economy continues to grow,we cannot provide any assurances that demand for hotel rooms willincrease from current levels.If demand does not increase in the near future,or if demand wea
171、kens,our future results of operations and our growth prospects could be materially and adversely affected.Any difficulties in obtaining capital necessary to make required periodic capital expenditures and renovationof our hotels could materially and adversely affect our financial condition and resul
172、ts of operations.Our hotels have an ongoing need for renovations and other capital improvements,includingreplacements,from time to time,of furniture,fixtures and equipment(FF&E).The franchisors ofour hotels also require periodic capital improvements as a condition of maintaining the franchiselicense
173、s.Our lenders will also likely require that we set aside annual amounts for capital improvementsto our hotels.The costs of these capital improvements could materially and adversely affect us.Inaddition,acquisitions or redevelopment of additional hotels will require significant capital expenditures.W
174、e may not be able to fund capital improvements on our hotels or acquisitions solely from thecash provided from our operating activities because we must distribute annually at least 90%of ourREIT taxable income,determined without regard to the deduction for dividends paid and excluding netcapital gai
175、n,to maintain our qualification as a REIT.As a result,our ability to fund capitalexpenditures,acquisitions or hotel redevelopment through retained earnings is very limited.Consequently,we expect to rely upon the availability of debt or equity capital to fund capitalimprovements and acquisitions.If w
176、e are unable to obtain the capital necessary to make required13periodic capital expenditures and renovate our hotels on favorable terms,or at all,our financialcondition,liquidity and results of operations could be materially and adversely affected.Adverse global market and economic conditions and di
177、slocations in the markets could cause us to recognizeimpairment charges,which could materially and adversely affect our business,financial condition and resultsof operations.We continually monitor events and changes in circumstances that could indicate that the carryingvalue of the real estate and r
178、elated intangible assets in which we have an ownership interest may not berecoverable.When circumstances indicate that the carrying value of real estate and related intangibleassets may not be recoverable,we assess the recoverability of these assets by determining whether thecarrying value will be r
179、ecovered through the undiscounted future operating cash flows expected fromthe use of the asset and its eventual disposition.In the event that such expected undiscounted futurecash flows do not exceed the carrying value,we adjust the real estate and related intangible assets tothe fair value and rec
180、ognize an impairment loss.Because our predecessor acquired many of our hotelswhen prices for hotels in many markets were at or near their peaks,we may be particularly susceptibleto future non-cash impairment charges as compared to companies that have carrying values well belowcurrent market values,w
181、hich could materially and adversely affect our business,financial condition andresults of operations.Competition from other lodging industry participants in the markets in which we operate could adverselyaffect occupancy levels and/or ADRs,which could have a material adverse effect on us.We face sig
182、nificant competition from owners and operators of other hotels and other lodgingindustry participants.In addition,we face competition from non-traditional accomodations for travelers,such as online room sharing services.These competitors may have an operating model that enablesthem to offer rooms at
183、 lower rates than we can,which could result in those competitors increasingtheir occupancy at our expense and adversely affecting our ADRs.Given the importance of occupancyand ADR at focused-service and compact full-service hotels,this competition could adversely affect ourability to attract prospec
184、tive guests,which could materially and adversely affect our results ofoperations.At December 31,2015,we had approximately$1.6 billion of debt outstanding,which may materially andadversely affect our operating performance and put us at a competitive disadvantage.Required repayments of debt and relate
185、d interest may materially and adversely affect ouroperating performance.At December 31,2015,we had approximately$1.6 billion of outstanding debt,approximately$1.5 billion of which bears interest at variable rates.After taking into consideration theeffect of interest rate swaps,$131.0 million of our
186、borrowings are subject to variable rates.Increases ininterest rates on our existing or future variable rate debt would increase our interest expense,whichcould adversely affect our cash flows and our ability to pay distributions to shareholders.Our organizational documents contain no limitations on
187、the amount of debt that we may incur,and our board of trustees may change our financing policy at any time without shareholder notice orapproval.As a result,we may be able to incur substantial additional debt,including secured debt,inthe future.Because we anticipate that our operating cash will be a
188、dequate to repay only a portion of our debtat maturity,we expect that we will be required to repay debt through debt refinancings and/or offeringsof our securities.The amount of our outstanding debt may adversely affect our ability to refinance ourdebt.If we are unable to refinance our debt on accep
189、table terms,or at all,we may be forced to disposeof one or more of our hotels on disadvantageous terms,which may result in losses to us and may14adversely affect cash available for distributions to our shareholders.In addition,if then-prevailinginterest rates or other factors at the time of refinanc
190、ing result in higher interest rates upon refinancing,our interest expense would increase,which would adversely affect our future operating results andliquidity.Our substantial outstanding debt,and any additional debt borrowed in the future,may subject usto many risks,including the risks that:our cas
191、h flows from operations may be insufficient to make required payments of principal andinterest;we may be required to use a substantial portion of our cash flows to pay principal and interest,which would reduce the cash available for distributions to our shareholders;we may be at a competitive disadv
192、antage compared to our competitors that have less debt;we may be vulnerable to economic volatility,particularly if growth were to slow or stall andreduce our flexibility to respond to difficult economic conditions;the terms of any refinancing may not be in the same amount or on terms as favorable as
193、 theterms of the debt being refinanced;and the use of leverage could adversely affect our ability to borrow more money for operations,capital improvements,to finance future acquisitions or to make distributions to our shareholdersand could adversely affect the market price of our common shares.Disru
194、ptions in the financial markets could adversely affect our ability to obtain sufficient third-party financingfor our capital needs on favorable terms or at all,which could materially and adversely affect us.In recent years,the U.S.financial markets experienced significant price volatility,dislocatio
195、ns andliquidity disruptions,which caused market prices of many stocks to fluctuate substantially and thespreads on prospective debt financings to widen considerably.Renewed volatility and uncertainty in thefinancial markets may negatively impact our ability to access additional financing for our cap
196、ital needs,including expansion,acquisition activities and other purposes,on favorable terms or at all,which maynegatively affect our business.Additionally,due to this potential uncertainty,we may in the future beunable to refinance or extend our debt,or the terms of any refinancing may not be as fav
197、orable as theterms of our existing debt.If we are not successful in refinancing our debt when it becomes due,wemay be forced to dispose of hotels on disadvantageous terms,which might adversely affect our abilityto service other debt and to meet our other obligations.A prolonged downturn in the finan
198、cial marketsmay cause us to seek alternative sources of potentially less attractive financing and may require us tofurther adjust our business plan accordingly.These events also may make it more difficult or costly forus to raise capital through the issuance of new equity capital or the incurrence o
199、f additional secured orunsecured debt,which could materially and adversely affect us.Hedging against interest rate exposure may adversely affect us.Subject to maintaining our qualification as a REIT,we may manage our exposure to interest ratevolatility by using interest rate hedging arrangements,suc
200、h as cap agreements and swap agreements.These agreements involve the risks that these arrangements may fail to protect or adversely affect usbecause,among other things:interest rate hedging can be expensive,particularly during periods of rising and volatile interestrates;available interest rate hedg
201、es may not correspond directly with the interest rate risk for whichprotection is sought;the duration of the hedge may not match the duration of the related liability;15 the credit quality of the hedging counterparty owing money on the hedge may be downgraded tosuch an extent that it impairs our abi
202、lity to sell or assign our side of the hedging transaction;and the hedging counterparty owing money in the hedging transaction may default on its obligationto pay.As a result of any of the foregoing,our hedging transactions,which are intended to limit losses,could have a material adverse effect on u
203、s.Our failure to comply with all covenants in our existing or future debt agreements could materially andadversely affect us.Our existing indebtedness,whether secured by our hotels or unsecured,contains,and indebtednessthat we may enter into in the future likely will contain,customary covenants such
204、 as those that limitour ability to enter into future indebtedness,whether secured by our hotels or unsecured,or todiscontinue insurance coverage,as well as financial covenants.In addition,our continued ability toborrow under our unsecured revolving credit facility is subject to compliance with our f
205、inancial andother covenants,including covenants relating to debt service coverage ratios and leverage ratios,andour ability to meet these covenants may be adversely affected if U.S.lodging fundamentals do notcontinue to improve to the extent that we expect.Our failure to comply with covenants in our
206、 existingor future indebtedness,as well as our inability to make required payments,could cause a default underthe applicable debt agreement,which could result in the acceleration of the debt and require us torepay such debt with capital obtained from other sources,which may not be available to us or
207、 may beavailable only on unattractive terms.Furthermore,if we default on secured debt,lenders can takepossession of the hotel or hotels securing such debt.In addition,debt agreements may contain specificcross-default provisions with respect to specified other indebtedness,giving the lenders the righ
208、t todeclare a default on its debt and to enforce remedies,including acceleration of the maturity of suchdebt upon the occurrence of a default under such other indebtedness.If we default on several of ourdebt agreements or any significant debt agreement,we could be materially and adversely affected.F
209、or tax purposes,a foreclosure of any of our hotels would be treated as a sale of the hotel.If theoutstanding balance of the debt secured by the mortgage exceeds our tax basis in the hotel,we wouldrecognize taxable income on foreclosure,but we would not receive any cash proceeds,which couldhinder our
210、 ability to meet the REIT distribution requirements imposed by the Internal Revenue Codeof 1986,as amended(the Code).If any of our hotels are foreclosed on due to a default,our abilityto pay cash distributions to our shareholders will be limited.Costs associated with,or failure to maintain,franchiso
211、r operating standards may materially and adverselyaffect us.Under the terms of our franchise license agreements,we are required to meet specified operatingstandards and other terms and conditions.We expect that our franchisors will periodically inspect ourhotels to ensure that we and the hotel manag
212、ement companies follow brand standards.Failure by us,orany hotel management company that we engage,to maintain these standards or other terms andconditions could result in a franchise license being canceled or the franchisor requiring us to undertakea costly property improvement program.If a franchi
213、se license is terminated due to our failure to makerequired improvements or to otherwise comply with its terms,we also may be liable to the franchisorfor a termination payment,which will vary by franchisor and by hotel.If the funds required to maintainfranchisor operating standards are significant,w
214、e could be materially and adversely affected.In addition,if we were to lose a franchise license,we would be required to re-brand the affectedhotel(s).As a result,the underlying value of a particular hotel could decline significantly from the lossof associated name recognition,marketing support,parti
215、cipation in guest loyalty programs and the16centralized system provided by the franchisor,which could require us to recognize an impairmentcharge on the hotel.Furthermore,the loss of a franchise license at a particular hotel could harm ourrelationship with the franchisor,which could impede our abili
216、ty to operate other hotels under the samebrand,limit our ability to obtain new franchise licenses from the franchisor in the future on favorableterms,or at all,and cause us to incur significant costs to obtain a new franchise license for theparticular hotel.Applicable REIT laws may restrict certain
217、business activities.As a REIT,we are subject to various restrictions on our income,assets and activities.Businessactivities that could be impacted by applicable REIT laws include,but are not limited to,activities suchas developing alternative uses of real estate,including the development and/or sale
218、 of timeshare orcondominium units.Due to these restrictions,we anticipate that we will continue to conduct certainbusiness activities in one or more of our TRSs.Our TRSs are taxable as regular C corporations andare subject to federal,state,local,and,if applicable,foreign taxation on their taxable in
219、come.Inaddition,neither we,nor our TRSs can directly manage or operate hotels,making us entirelydependent on unrelated third-party operators/managers.Federal income tax provisions applicable to REITs may restrict our business decisions regarding the potentialsale of a hotel.The federal income tax pr
220、ovisions applicable to REITs provide that any gain realized by a REITon the sale of property held as inventory or other property held primarily for sale to customers in theordinary course of business is treated as income from a prohibited transaction that is subject to a100%excise tax.Under existing
221、 law,whether property,including hotels,is held as inventory orprimarily for sale to customers in the ordinary course of business is a question of fact that dependsupon all of the facts and circumstances with respect to the particular transaction.We intend to holdour hotels for investment with a view
222、 to long-term appreciation,to engage in the business of acquiringand owning hotels and to make occasional sales of hotels consistent with our investment objectives.There can be no assurance,however,that the Internal Revenue Service(the IRS)might not contendthat one or more of these sales are subject
223、 to the 100%excise tax.Moreover,the potential applicationof this penalty tax could deter us from selling one or more hotels even though it otherwise would be inthe best interests of us and our shareholders for us to do so.There is a statutory safe harbor availablefor a limited number of sales in a s
224、ingle taxable year of properties that have been owned by a REITfor at least two years,but that safe harbor likely would not apply to all sales transactions that we mightotherwise consider.As a result,we may not be able to vary our portfolio promptly in response toeconomic or other conditions or on f
225、avorable terms,which may adversely affect us.Joint venture investments that we make could be adversely affected by our lack of sole decision-makingauthority,our reliance on joint venture partners financial condition and liquidity and disputes between usand our joint venture partners.We own the Doubl
226、eTree Metropolitan Hotel New York City through a joint venture with anaffiliate of the hotels property manager.In addition,we may enter into joint ventures in the future toacquire,develop,improve or partially dispose of hotels,thereby reducing the amount of capitalrequired by us to make investments
227、and diversifying our capital sources for growth.Such joint ventureinvestments involve risks not otherwise present in a wholly-owned hotel or a redevelopment project,including the following:we may not have exclusive control over the development,financing,leasing,management andother aspects of the hot
228、el or joint venture,which may prevent us from taking actions that are inour best interest but opposed by our partners;17 joint venture agreements often restrict the transfer of a partners interest or may otherwiserestrict our ability to sell the interest when we desire or on advantageous terms;joint
229、 venture agreements may contain buy-sell provisions pursuant to which one partner mayinitiate procedures requiring the other partner to choose between buying the other partnersinterest or selling its interest to that partner;a partner may,at any time,have economic or business interests or goals that
230、 are,or that maybecome,inconsistent with our business interests or goals;a partner may fail to fund its share of required capital contributions or may become bankrupt,which would mean that we and any other remaining partners generally would remain liable forthe joint ventures liabilities;or we may,i
231、n certain circumstances,be liable for the actions of a partner,and the activities of apartner could adversely affect our ability to qualify as a REIT,even though we do not controlthe joint venture.Any of the above might subject a hotel to liabilities in excess of those contemplated and adverselyaffe
232、ct the value of our current and future joint venture investments.Risks Related to the Lodging IndustryOur ability to make distributions to our shareholders may be adversely affected by various operating riskscommon to the lodging industry,including competition,over-building and dependence on busines
233、s travel andtourism.The hotels that we own have different economic characteristics than many other real estate assets.Unlike other real estate assets,hotels generate revenue from guests that typically stay at the hotel foronly a few nights,which causes the room rate and occupancy levels at each of o
234、ur hotels to changeevery day,and results in earnings that can be highly volatile.In addition,our hotels are subject to various operating risks common to the lodging industry,manyof which are beyond our control,including,among others,the following:competition from other lodging industry participants
235、in the markets in which we operate;over-building of hotels in the markets in which we operate,which results in increased supply andwill adversely affect occupancy and revenues at our hotels;dependence on business and leisure travelers;labor strikes,disruptions or lockouts that may impact operating p
236、erformance;increases in energy costs and other expenses affecting travel,which may affect travel patternsand reduce the number of business and leisure travelers;requirements for periodic capital reinvestment to repair and upgrade hotels;increases in operating costs due to inflation and other factors
237、 that may not be offset byincreased room rates;changes in interest rates;changes in the availability,cost and terms of financing;changes in governmental laws and regulations,fiscal policies and zoning ordinances and therelated costs of compliance with laws and regulations,fiscal policies and ordinan
238、ces;adverse effects of international,national,regional and local economic and market conditions;18 unforeseen events beyond our control,such as terrorist attacks,travel-related health concerns,including pandemics and epidemics,imposition of taxes or surcharges by regulatory authorities,travel-relate
239、d accidents and unusual weather patterns,including natural disasters such ashurricanes,tsunamis or earthquakes;adverse effects of worsening conditions in the lodging industry;and risks generally associated with the ownership of hotels and real estate,as we discuss in detailbelow.The occurrence of an
240、y of the foregoing could materially and adversely affect us.The seasonality of the lodging industry could have a material adverse effect on us.The lodging industry is seasonal in nature,which can be expected to cause quarterly fluctuations inour revenues.Our quarterly earnings may be adversely affec
241、ted by factors outside our control,includingweather conditions and poor economic factors in certain markets in which we operate.The seasonalitycan be expected to cause periodic fluctuations in room revenues,occupancy levels,room rates andoperating expenses in particular hotels.We can provide no assu
242、rances that our cash flows will besufficient to offset any shortfalls that occur as a result of these fluctuations.As a result,we may have toenter into short-term borrowings in certain quarters in order to make distributions to our shareholders,and we can provide no assurances that such borrowings w
243、ill be available on favorable terms,if at all.Consequently,volatility in our financial performance resulting from the seasonality of the lodgingindustry could have a material adverse effect on us.The cyclical nature of the lodging industry may cause fluctuations in our operating performance,which co
244、uldhave a material adverse effect on us.The lodging industry historically has been highly cyclical in nature.Fluctuations in lodging demandand,therefore,operating performance,are caused largely by general economic and local marketconditions,which subsequently affect levels of business and leisure tr
245、avel.In addition to generaleconomic conditions,new hotel room supply is an important factor that can affect the lodgingindustrys performance,and overbuilding has the potential to further exacerbate the negative impact ofan economic recession.Room rates and occupancy,and thus RevPAR,tend to increase
246、when demandgrowth exceeds supply growth.We can provide no assurances regarding whether,or the extent to which,lodging demand will rebound or whether any such rebound will be sustained.An adverse change inlodging fundamentals could result in returns that are substantially below our expectations or re
247、sult inlosses,which could have a material adverse effect on us.Our acquisition,redevelopment,repositioning,renovation and re-branding activities are subject to variousrisks,any of which could,among other things,result in disruptions to our hotel operations,strainmanagement resources and materially a
248、nd adversely affect our business.We intend to continue to acquire,redevelop,reposition,renovate and re-brand hotels,subject tothe availability of attractive hotels or projects and our ability to undertake such activities on satisfactoryterms.In deciding whether to undertake such activities,we will m
249、ake certain assumptions regarding theexpected future performance of the hotel or project.However,newly acquired,redeveloped,renovated,repositioned or re-branded hotels may fail to perform as expected and the costs necessary to bring suchhotels up to franchise standards may exceed our expectations,wh
250、ich may result in the hotels failure toachieve projected returns.19In particular,to the extent that we engage in the activities described above,they could pose thefollowing risks to our ongoing operations:we may abandon such activities and may be unable to recover expenses already incurred inconnect
251、ion with exploring such opportunities;acquired,redeveloped,renovated or re-branded hotels may not initially be accretive to ourresults of operations,and we and the hotel management companies may not successfully managenewly acquired,renovated,redeveloped,repositioned or re-branded hotels to meet our
252、expectations;we may be unable to quickly,effectively and efficiently integrate new acquisitions,particularlyacquisitions of portfolios of hotels,into our existing operations;our redevelopment,repositioning,renovation or re-branding activities may not be completed onschedule,which could result in inc
253、reased debt service and other costs and lower revenues;and management attention may be diverted by our acquisition,redevelopment,repositioning orrebranding activities,which in some cases may turn out to be less compatible with our growthstrategy than originally anticipated.The occurrence of any of t
254、he foregoing events,among others,could materially and adversely affect ourbusiness.Our ownership of hotels through ground leases exposes us to the risks that we may be forced to sell suchhotels for a lower price,we may be unable to renew a ground lease or we may lose such hotels upon breach ofa grou
255、nd lease.As of December 31,2015,nine of our hotels were on land subject to ground leases.Accordingly,we only own a long-term leasehold or similar interest in those nine hotels.Our ground leaseagreements require the consent of the lessor or sub-lessor prior to transferring our interest in theground l
256、ease.These provisions may impact our ability to sell our hotels which,in turn,could adverselyimpact the price realized from any such sale.In addition,at any given time,investors may bedisinterested in buying properties subject to a ground lease and may pay a lower price for suchproperties than for a
257、 comparable property in fee simple or they may not purchase such properties atany price.If we are found to be in breach of a ground lease,we could lose the right to use the hotel.In addition,unless we can purchase a fee interest in the underlying land and improvements or extendthe terms of these lea
258、ses before their expiration,as to which no assurance can be given,we will loseour right to operate these properties and our interest in the improvements upon expiration of theleases.If we were to lose the right to use a hotel due to a breach or non-renewal of the ground lease,we would be unable to d
259、erive income from such hotel and would be required to purchase an interest inanother hotel to attempt to replace that income,which could materially and adversely affect us.The increasing use of Internet travel intermediaries by consumers may materially and adversely affect ourprofitability.Although
260、a majority of rooms sold on the Internet are sold through websites maintained by thehotel franchisors and managers,including Marriott,Hilton and Hyatt,some of our hotel rooms will bebooked through Internet travel intermediaries.Typically,these Internet travel intermediaries haveaccess to the room in
261、ventory from participating hotels.These intermediaries charge highercommissions,which reduces the hotels profitability.Moreover,some of these Internet travelintermediaries are attempting to offer hotel rooms as a commodity,by increasing the importance ofprice and general indicators of quality,such a
262、s three-star downtown hotel,at the expense of brandidentification or quality of product or service normally associated with these brands.If consumersdevelop brand loyalties to Internet reservations systems rather than to the brands under which our20hotels are franchised,the value of our hotels could
263、 deteriorate and our business could be materiallyand adversely affected.Although most of the business for our hotels is expected to be derived fromtraditional channels,if the amount of sales made through Internet intermediaries increases significantly,commissions paid to these intermediaries may inc
264、rease and our profitability may be materially andadversely affected.Technology is used in our operations,and any material failure,inadequacy,interruption or security failure ofthat technology could harm the business.We and our hotel managers and franchisors rely on information technology networks an
265、d systems,including the Internet,to process,transmit and store electronic information,and to manage or supporta variety of business processes,including financial transactions and records,personal identifyinginformation,reservations,billing and operating data.Although we believe we and our hotel mana
266、gersand franchisors have taken commercially reasonable steps to protect the security of our systems,therecan be no assurance that such security measures will prevent failures,inadequacies or interruptions insystem services,or that system security will not be breached.Any failure to maintain proper f
267、unction,security and availability of information systems could interrupt operations,damage reputation,subjectus to liability claims or regulatory penalties and could have a material adverse effect on our business,financial condition and results of operations.Future terrorist attacks or changes in te
268、rror alert levels could materially and adversely affect us.Previous terrorist attacks and subsequent terrorist alerts have adversely affected the U.S.travel andhospitality industries over the past several years,often disproportionately to the effect on the overalleconomy.The extent of the impact tha
269、t actual or threatened terrorist attacks in the U.S.or elsewherecould have on domestic and international travel and our business in particular cannot be determined,but any such attacks or the threat of such attacks could have a material adverse effect on travel andhotel demand and our ability to ins
270、ure our hotels,which could materially and adversely affect us.The outbreak of influenza or other widespread contagious disease could reduce travel and adversely affecthotel demand,which would have a material adverse effect on us.A widespread outbreak of an infectious or contagious disease in the U.S
271、.could reduce travel andadversely affect demand within the lodging industry.If demand at our hotels decreases significantly orfor a prolonged period of time as a result of an outbreak of an infectious or contagious disease,ourrevenue would be adversely affected,which could have a material adverse ef
272、fect on us.Risks Related to Our Organization and StructureThe share ownership limits imposed by the Code for REITs and our declaration of trust may restrict sharetransfers and/or business combination opportunities,particularly if our management and board of trustees donot favor a combination proposa
273、l.In order for us to maintain our qualification as a REIT under the Code,not more than 50%invalue of our outstanding shares may be owned,directly or indirectly,by five or fewer individuals(asdefined in the Code to include certain entities)at any time during the last half of each taxable yearfollowin
274、g our first year.Our declaration of trust,with certain exceptions,authorizes our board oftrustees to take the actions that are necessary and desirable to preserve our qualification as a REIT.Unless exempted by our board of trustees,no person or entity(other than a person or entity who hasbeen grante
275、d an exception)may directly or indirectly,beneficially or constructively,own more than9.8%of the aggregate of our outstanding common shares,by value or by number of shares,whicheveris more restrictive,or 9.8%of the aggregate of the outstanding preferred shares of any class or series,by value or by n
276、umber of shares,whichever is more restrictive.21Our board may,in its sole discretion,grant an exemption to the share ownership limits,subject tocertain conditions and the receipt by our board of certain representations and undertakings.Our boardof trustees has granted exemptions from our ownership l
277、imits to certain shareholders.During the timethat such waiver is effective,the excepted holders will be subject to an increased ownership limit.As acondition to granting such excepted holder limit,the excepted holders were required to makerepresentations and warranties to us,which are intended to en
278、sure that we will continue to meet theREIT ownership requirements.The excepted holders must inform us if any of these representationsbecomes untrue or is violated,in which case such excepted holder will lose its exemption from theownership limit.In addition,our board of trustees may change the share
279、 ownership limits.Our declaration of trustalso prohibits any person from(1)beneficially or constructively owning,as determined by applyingcertain attribution rules of the Code,our shares if that would result in us being closely held underSection 856(h)of the Code or otherwise cause us to fail to qua
280、lify as a REIT,including,but not limitedto,as a result of any eligible independent contractor that operates a qualified lodging facility(eachas defined in the Code)on behalf of a TRS failing to qualify as such,or us having significantnon-qualifying income from related parties,or(2)transferring share
281、s if such transfer would result inour shares being owned by fewer than 100 persons.The share ownership limits contained in ourdeclaration of trust key off the ownership at any time by any person,which term includes entities,and take into account direct and indirect ownership as determined under vari
282、ous ownership attributionrules in the Code.The share ownership limits also might delay or prevent a transaction or a change inour control that might involve a premium price for our common shares or otherwise be in the bestinterests of our shareholders.Our authorized but unissued common shares and pr
283、eferred shares may prevent a change in our control thatmight involve a premium price for our common shares or otherwise be in the best interests of ourshareholders.Our declaration of trust authorizes us to issue additional authorized but unissued common orpreferred shares.In addition,our board of tr
284、ustees may,without shareholder approval,amend ourdeclaration of trust to increase the aggregate number of our common shares or the number of sharesof any class or series of preferred shares that we have authority to issue and classify or reclassify anyunissued common shares or preferred shares and s
285、et the preferences,rights and other terms of theclassified or reclassified shares.As a result,our board of trustees may establish a series of commonshares or preferred shares that could delay or prevent a transaction or a change in our control thatmight involve a premium price for our common shares
286、or otherwise be in the best interests of ourshareholders.Certain provisions of Maryland law could inhibit changes in control.Certain provisions of the Maryland General Corporation Law(MGCL)that are applicable toMaryland real estate investment trusts may have the effect of deterring a third party fro
287、m making aproposal to acquire us or of impeding a change in our control under circumstances that otherwise couldprovide the holders of our common shares with the opportunity to realize a premium over thethen-prevailing market price of our common shares,including:business combination provisions that,
288、subject to limitations,prohibit certain businesscombinations between us and an interested shareholder(defined generally as any person whobeneficially owns,directly or indirectly,10%or more of the voting power of our voting shares oran affiliate or associate of ours who was the beneficial owner,direc
289、tly or indirectly,of 10%ormore of the voting power of our then outstanding voting shares at any time within the two-yearperiod immediately prior to the date in question)for five years after the most recent date on22which the shareholder becomes an interested shareholder,and thereafter impose fair pr
290、iceand/or supermajority and shareholder voting requirements on these combinations;and control share provisions that provide that control shares of our company(defined as votingshares that,when aggregated with other shares controlled by the shareholder,entitle theshareholder to exercise one of three
291、increasing ranges of voting power in electing trustees)acquired in a control share acquisition(defined as the direct or indirect acquisition ofownership or control of issued and outstanding control shares)have no voting rights except tothe extent approved by our shareholders by the affirmative vote
292、of at least two-thirds of all thevotes entitled to be cast on the matter,excluding all interested shares.As permitted by Maryland law,we have elected,by resolution of our board of trustees,to opt outof the business combination provisions of the MGCL and that resolution may not be repealed absentthe
293、approval by our shareholders,however,there can be no assurance that the resolution adopted bythe board will not be amended or eliminated at some time in the future.Pursuant to a provision in ourbylaws,we have elected to exempt any acquisition of our shares from the control share provisions ofthe MGC
294、L and our bylaws prohibit the repeal,amendment or alteration of this provision without theapproval by our shareholders;however,there can be no assurance that this provision will not beamended or eliminated at some time in the future.Certain provisions of the MGCL applicable to Maryland real estate i
295、nvestment trusts permit ourboard of trustees,without shareholder approval and regardless of what is currently provided in ourdeclaration of trust or bylaws,to adopt certain mechanisms,some of which(for example,a classifiedboard)we do not have.These provisions may have the effect of limiting or precl
296、uding a third partyfrom making an acquisition proposal for us or of delaying,deferring or preventing a change in ourcontrol under circumstances that otherwise could provide the holders of our common shares with theopportunity to realize a premium over the then current market price.Our board of trust
297、ees hasresolved to opt out of these unsolicited takeover provisions of Maryland law,and that resolution maynot be repealed absent the approval by our shareholders;however,there can be no assurance that theresolution adopted by our board of trustees will not be amended or eliminated at some point in
298、thefuture.Certain advance notice provisions of our bylaws inhibit changes in control.Our bylaws provide that(a)with respect to an annual meeting of shareholders,nominations ofindividuals for election to our board of trustees and the proposal of other business to be considered byshareholders may be m
299、ade only(i)pursuant to our notice of the meeting,(ii)by the board of trusteesor(iii)by a shareholder who was a shareholder of record at the time of the notice of the meeting andat the time of the annual meeting,who is entitled to vote at the meeting and has complied with theadvance notice procedures
300、 set forth in the bylaws and(b)with respect to special meetings ofshareholders,only the business specified in our notice of meeting may be brought before the meetingof shareholders and nominations of individuals for election to the board of trustees may be made only(A)pursuant to our notice of the m
301、eeting,(B)by the board of trustees or(C)provided that the boardof trustees has determined that directors shall be elected at such meeting,by a shareholder who was ashareholder of record at the time of the notice of the meeting and at the time of the special meeting,who is entitled to vote at the mee
302、ting and has complied with the advance notice provisions set forth inthe bylaws.These advance notice provisions may have the effect of delaying,deferring or preventing atransaction or a change in control of our company that might involve a premium to the market price ofour common stock or otherwise
303、be in our shareholders best interests.23Termination of the employment agreements with our executive officers could be costly and prevent a change inour control.The employment agreements that we entered into with each of our executive officers provide that,if their employment with us terminates under
304、 certain circumstances(including upon a change in ourcontrol),we are required to pay them significant amounts of severance compensation,includingaccelerated vesting of equity awards,thereby making it costly to terminate their employment.Furthermore,these provisions could delay or prevent a transacti
305、on or a change in our control thatmight involve a premium paid for our common shares or otherwise be in the best interests of ourshareholders.Our declaration of trust contains provisions that make removal of our trustees difficult,which could make itdifficult for our shareholders to effect changes t
306、o our management.Our declaration of trust provides that,subject to the rights of holders of one or more classes orseries of preferred shares to elect or remove one or more trustees,a trustee may be removed only forcause and only by the affirmative vote of holders of at least two-thirds of the votes
307、entitled to be castin the election of trustees and that our board of trustees has the exclusive power to fill vacanttrusteeships,even if the remaining trustees do not constitute a quorum.These provisions make it moredifficult to change our management by removing and replacing trustees and may delay
308、or prevent achange in our control that is in the best interests of our shareholders.We may change our operational policies,investment guidelines and our investment and growth strategieswithout shareholder consent,which may subject us to different and more significant risks in the future,whichcould m
309、aterially and adversely affect us.Our board of trustees determines our operational policies,investment guidelines and ourinvestment and growth strategies.Our board of trustees may make changes to,or approve transactionsthat deviate from,those policies,guidelines and strategies without a vote of,or n
310、otice to,ourshareholders.This could result in us conducting operational matters,making investments or pursuingdifferent investment or growth strategies than those contemplated in this Annual Report on Form 10-K.Under any of these circumstances,we may expose ourselves to different and more significan
311、t risks inthe future,which could materially and adversely affect us.Our rights and the rights of our shareholders to take action against our trustees and officers are limited,which could limit our shareholders recourse in the event of actions not in our shareholders best interests.Under Maryland law
312、 generally,a trustee is required to perform his or her duties in good faith,in amanner he or she reasonably believes to be in our best interest and with the care that an ordinarilyprudent person in a like position would use under similar circumstances.Under Maryland law,trusteesare presumed to have
313、acted with this standard of care.In addition,our declaration of trust limits theliability of our trustees and officers to us and our shareholders for money damages,except for liabilityresulting from:actual receipt of an improper benefit or profit in money,property or services;or active and deliberat
314、e dishonesty by the trustee or officer that was established by a final judgmentas being material to the cause of action adjudicated.Our declaration of trust and bylaws obligate us,to the fullest extent permitted by Maryland law ineffect from time to time,to indemnify and to pay or reimburse reasonab
315、le expenses in advance of finaldisposition of a proceeding to any present or former trustee or officer who is made or threatened to bemade a party to the proceeding by reason of his or her service to us in that capacity.In addition,wemay be obligated to advance the defense costs incurred by our trus
316、tees and officers.As a result,we and24our shareholders may have more limited rights against our trustees and officers than might otherwiseexist absent the current provisions in our declaration of trust and bylaws or that might exist with othercompanies.If we fail to maintain an effective system of i
317、ntegrated internal controls,we may not be able to accuratelyreport our financial results.In connection with operating as a public company,we are required to provide reliable financialstatements and reports to our shareholders.To monitor the accuracy and reliability of our financialreporting,we have
318、established an internal audit function that oversees our internal controls.Inaddition,we have developed policies and procedures with respect to company-wide business processesand cycles in order to implement effective internal control over financial reporting.We haveestablished,or caused our third-p
319、arty hotel management companies to establish,controls andprocedures designed to ensure that hotel revenues and expenses are properly recorded at our hotels.While we have undertaken substantial work to comply with Section 404 of the Sarbanes-Oxley Act of2002,we cannot be certain that we will be succe
320、ssful in maintaining effective internal control over ourfinancial reporting and may determine in the future that our existing internal controls needimprovement.If we fail to comply with proper overall controls,we could be materially harmed or wecould fail to meet our reporting obligations.In additio
321、n,the existence of a material weakness orsignificant deficiency in our internal controls could result in errors in our financial statements thatcould require a restatement,cause us to fail to meet our reporting obligations,result in increased coststo remediate any deficiencies,attract regulatory scr
322、utiny or lawsuits and cause investors to loseconfidence in our reported financial information,leading to a substantial decline in the market price ofour common shares.Risks Related to the Real Estate IndustryThe illiquidity of real estate investments could significantly impede our ability to respond
323、 to changingeconomic,financial,and investment conditions or changes in the operating performance of our properties,which could adversely affect our cash flows and results of operations.Real estate investments,including the focused-service and compact full-service hotels in ourportfolio,are relativel
324、y illiquid.As a result,we may not be able to sell a hotel or hotels quickly or onfavorable terms in response to changing economic,financial and investment conditions or changes inthe hotels operating performance when it otherwise may be prudent to do so.We cannot predictwhether we will be able to se
325、ll any hotel we desire to sell for the price or on the terms set by us orwhether any price or other terms offered by a prospective purchaser would be acceptable to us.Wealso cannot predict the length of time needed to find a willing purchaser and to close the sale of ahotel.We may be required to exp
326、end funds to correct defects or to make improvements before a hotelcan be sold,and we cannot provide any assurances that we will have funds available to correct suchdefects or to make such improvements.Our inability to dispose of assets at opportune times or onfavorable terms could adversely affect
327、our cash flows and results of operations.Moreover,the Code imposes restrictions on a REITs ability to dispose of properties that are notapplicable to other types of real estate companies.In particular,the tax laws applicable to REITsrequire that we hold our hotels for investment,rather than primaril
328、y for sale in the ordinary course ofbusiness,which may cause us to forego or defer sales of hotels that otherwise would be in our bestinterests.Therefore,we may not be able to vary our portfolio promptly in response to economic orother conditions or on favorable terms,which may adversely affect our
329、cash flows,our ability to makedistributions to shareholders and the market price of our common shares.In addition,our ability to dispose of some of our hotels could be constrained by their taxattributes.Hotels that we own for a significant period of time or that we may acquire in the future25through
330、 tax deferred contribution transactions in exchange for OP units in our operating partnershipmay have low tax bases.If we dispose of these hotels outright in taxable transactions,we may berequired to distribute the taxable gain to our shareholders under the requirements of the Codeapplicable to REIT
331、s or to pay tax on that gain,either of which,in turn,would impact our cash flowand increase our leverage.In some cases,we may be restricted from disposing of properties contributedto us in the future in exchange for our OP units under tax protection agreements with contributorsunless we incur additi
332、onal costs related to indemnifying those contributors.To dispose of low basis ortax-protected hotels efficiently,we may from time to time use like-kind exchanges,which qualify fornon-recognition of taxable gain,but can be difficult to consummate and result in the hotel for whichthe disposed assets a
333、re exchanged inheriting their low tax bases and other tax attributes.Uninsured and underinsured losses at our hotels could materially and adversely affect us.We maintain comprehensive insurance on each of our hotels and intend to maintaincomprehensive insurance on any hotels that we acquire,including liability,fire and extended coverage,of the type and amount we believe are customarily obtained fo
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