1、2014 Annual ReportRLJ Lodging Trust(“RLJ”)is a self-advised,publicly traded real estate investment trust focused on acquiring premium-branded,focused-service and compact full-service hotels.Our hotels are geographic ally diverse and primarily concentrated in major urban markets that provide multiple
2、 demand generators from business,leisure and other travelers.Residence Inn Atlanta Midtown Georgia Tech,Atlanta,Georgia1RLJ Lodging Trust59%MarriottBrand28%Hilton10%Hyatt3%OtherHorizontal Scale:85%59%MarriottBrandService Level72%Focused-Service25%CompactFull-Service3%Full-ServiceLodging Segments(Per
3、cent of Hotel Rooms)*Urban Markets(Number of Hotels)*As of December 31,2014Operational ExcellenceFairfield Inn&Suites Key West,Key West,Florida3RLJ Lodging TrustTo Our Fellow ShareholdersWe are very pleased to report that in 2014 we executed several key strategic initiatives that led to another succ
4、essful year for RLJ Lodging Trust.We optimized our portfolio through aggressive asset recycling,val-ue-add renovations,and laser-focused asset management.We are proud that our portfolios enhancements,along with our proactive balance sheet management,fueled another year of robust growth.Operational E
5、xcellenceIn 2014,our portfolio generated Pro forma Revenue per Available Room(“RevPAR”)growth of 7.2%,which represents our fourth consecutive year of RevPAR growth of more than 7%.Additionally,our RevPAR index premium of 112%confirms that we were once again able to capture significant market share o
6、ver our competitive set.Over the last four years,our portfolios broad market diversification has been key to our strong growth.As we have added new assets to the portfolio,we have further diversified our portfolio outside of our top six markets and increased our exposure in other high-growth markets
7、.In 2014,RevPAR at our non-top six markets increased 9.6%,driven by several markets that generated double-digit RevPAR growth such as Southern and Northern California,South Florida,and New Orleans.Additionally,our five most recent brand conversions in our portfolio generated impressive results in 20
8、14 with RevPAR growth of 13%.We are excited about our two upcoming conversions,the SpringHill Suites in downtown Houston and the Courtyard in downtown San Francisco,both of which will further enhance our portfolios growth profile once they open in mid-2015.0511021532042553063574082014201320122011201
9、00204060801001202014201320122011201020142013201220112010$118$106$97$89$8220142013201220112010$405$339$294$253$22920142013201220112010$118$106$97$89$82*Pro forma results as reported.RevPAR Growth*(in dollars)Consolidated Hotel EBITDA*(in millions)Excellent top-line growth also translated into strong
10、hotel EBITDA margins for our portfolio.As a result,our Pro forma Hotel EBITDA margin grew by 114 basis points to 35.6%,allowing us to generate$405 million of Pro forma Consolidated Hotel EBITDA in 2014.Our relentless efforts to drive shareholder value are clearly evident through our solid operationa
11、l performance.Our RevPAR of$118 is now 44%higher than what we reported for 2010 and our Pro forma Consoli dated Hotel EBITDA has grown by 77%over the same period.Prudent Capital AllocationWe have demonstrated a strong track record of prudent capital allocation.Through a highly disciplined capital re
12、cycling process,we have meaningfully upgraded our portfolio and enhanced our growth profile.In 2014,we significantly accelerated our disposition program.In total for the year,we sold 18 hotels for more than$135 million.These assets had an absolute RevPAR that on average was approximately 40%less tha
13、n the portfolio and would have contributed less than 5%to our Pro forma Consolidated Hotel EBITDA.By recycling these assets,we were able to reinvest both the cash proceeds and the savings from their planned capital expenditures into higher-yielding investment opportunities.Specifically,during the ye
14、ar,we acquired 15 high-growth assets for more than$630 million.The average RevPAR of these hotels was$137,which is almost double the average RevPAR of the assets we have sold and a 16%premium to the existing portfolio.Our acquisitions this year further diversified our geographic footprint as we ente
15、red into new high-growth,urban markets.Most notably,we more than doubled our presence on the West Coast with the addition of nine hotels in 2014.4RLJ Lodging Trust2014 HighlightsRevPAR Growth7.2%Dividend Growth22%Acquisitions$630+MillionDispositions$135+MillionPrudent Capital AllocationCourtyard Por
16、tland City Center,Portland,OregonProactive Balance Sheet ManagementHyatt Atlanta Midtown,Atlanta,GeorgiaSince our IPO,we have added 27 accretive investments for$1.1 billion.We are confident that our deep network and our excellent reputation in the industry will enable us to continue to acquire attra
17、ctive assets that are accretive to shareholder value.Proactive Balance Sheet ManagementWe were very active in the capital markets in 2014.Early in the year we completed a follow-on equity offering which generated$233 million of net proceeds.Our offering was once again over-subscribed and was priced
18、at one of the tightest discounts for a REIT follow-on in the last two years.This offering represents only the second equity raise we have executed since our IPO.During the year,we also upsized our term loans by$175 million and utilized the proceeds towards acquisitions.Furthermore,we amended one of
19、our term loans,which extended the maturity date,expanded the accordion feature,and reduced our applicable margin spread.Additionally,we spent considerable time during the year addressing our near-term debt maturities.Given the demand in the market and our strong banking relationships,we successfully
20、 originated four new mortgage loans and retired five mortgage loans.We also put in place a new seven-year term loan that we plan to use to retire our 2015 debt maturities.As a result of our recapitalization efforts,our next tranche of debt will not come due until 2017.As of year-end,we had one of th
21、e strongest balance sheets in the lodging industry with a net debt to EBITDA ratio of 3.5x.With no upcoming maturities and significant available liquidity,our balance sheet is in a healthy position to support future growth.Shareholder CommitmentOur commitment to enhancing and growing our portfolio i
22、s evident through our capital renovation program and our accretive acquisitions.That growth has translated into shareholder value through both share price appreciation and dividend growth.In particular,our continuous growth and increasing profitability have 7RLJ Lodging TrustTotal Shareholder Return
23、*RLJS&P 500RMZ117%66%54%*From May 11,2014Dec.31,20148RLJ Lodging TrustShareholder CommitmentRobert L.JohnsonExecutive ChairmanThomas J.Baltimore,Jr.President and Chief Executive OfficerHyatt House Charlotte Center City,Charlotte,North Carolinaallowed us to increase our cash dividend in a meaningful
24、way.In 2014,we distributed an aggregate cash dividend of$1.04 per share,representing an increase of 22%from last year.In total,we have distributed$2.975 per share since our IPO,representing a cash distribution of almost$360 million and an average 20%increase per year.For our shareholders,we have gen
25、erated a total return of 117%since our IPO and 43%in 2014 alone.Our ability to support our acquisitions and capital investment program with minimal equity offerings is a testament to the significant free cash flow generated from our high-quality portfolio.Looking ForwardFor the lodging industry,2014
26、 was an excellent year and 2015 has started off on solid ground.We are encour-aged by both strong lodging fundamentals and positive momentum in the economy.Here at RLJ,we picked up where we left off;early in 2015 we sold 20 non-strategic assets for$230 million.In addition to receiving cash proceeds,
27、we have also yielded substantial savings from previously planned capital expenditures that can now be deployed toward higher-yielding investment opportunities.Since our IPO,we have driven strong operating performance,continued to allocate capital prudently and recycled capital out of non-strategic a
28、ssets,all while maintaining a conservative balance sheet.As we stand,we could not be prouder of what we have achieved so far.With an incredibly talented team of professionals and a geographically diversified portfolio,we are confident that we have built a solid foundation that will position us for l
29、ong-term sustainable growth.UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-K?ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THESECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31,2014OR?TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THESECURITIES EX
30、CHANGE 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 Other Jurisdiction of(I.R.S.EmployerIncorporation or Organization)Identification No.)3 Bethesda Metro Center,Suite 10
31、00Bethesda,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 the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Shares,$0.01 par valueNew York Stock E
32、xchangeSecurities 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.Yes?No?Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)of
33、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 12 months(or for such shorter period that the registrant wasrequired to file such reports),and(2)has been subject
34、 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 Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(232.405of this chapter
35、)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 pursuant to Item 405 of Regulation S-K(229.405 of thischapter)is not contained herein,and will not be contained,t
36、o 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 check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-acceleratedfiler,or a sma
37、ller 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 filer?Non-accelerated filer?Smaller reporting company?(do not check if asmaller reporting company)Indicate by che
38、ck 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 128,337,438 common shares of beneficial interest held by non-affiliates of theRegistrant was approximately$3,707,668,584 based on the closing price of$28.89 as rep
39、orted on the New York StockExchange for such common shares of beneficial interest on June 30,2014.As of February 18,2015,131,930,364 common shares of beneficial interest of the Registrant,$0.01 par value pershare,were outstanding.Documents Incorporated by ReferencePortions of the Definitive Proxy St
40、atement for our 2015 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 31,2014.TABLE OF CONTENTSForm 10-KItem No.Report PagePART IItem 1.Business.4Item 1A.Risk Factors.12Item 1B.Unresolved Sta
41、ff Comments.42Item 2.Properties.42Item 3.Legal Proceedings.50Item 4.Mine Safety Disclosures.50PART IIItem 5.Market for Registrants Common Equity,Related Shareholder Matters andIssuer Purchases of Equity Securities.51Item 6.Selected Financial Data.54Item 7.Managements Discussion and Analysis of Finan
42、cial Condition and Results ofOperations.56Item 7A.Quantitative and Qualitative Disclosures About Market Risk.80Item 8.Financial Statements and Supplementary Data.81Item 9.Changes in and Disagreements with Accountants on Accounting and FinancialDisclosure.81Item 9A.Controls and Procedures.81Item 9B.O
43、ther Information.81PART IIIItem 10.Directors,Executive Officers and Corporate Governance.82Item 11.Executive Compensation.82Item 12.Security Ownership of Certain Beneficial Owners and Management andRelated Shareholder Matters.82Item 13.Certain Relationships and Related Transactions and Director Inde
44、pendence.82Item 14.Principal Accountant Fees and Services.82PART IVItem 15.Exhibits and Financial Statement Schedules.821SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTSCertain statements in this Annual Report on Form 10-K,other than purely historical information,including estimates,projections,stateme
45、nts 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 the Private Securities Litigation Reform Act of 1995,Section 27A ofthe Securities Act of 1933,as amended,and Secti
46、on 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,may,will,will continue,intend,should,may or similar expressions.Although we believe that the expectations reflecte
47、d 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 future performance and ouractual results could differ materially from those set forth in the forward-looking state
48、ments.Somefactors that might cause such a difference include the following:the current global economicuncertainty,increased direct competition,changes in government regulations or accounting rules,changes in local,national and global real estate conditions,declines in the lodging industry,seasonalit
49、yof 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,our ability to obtain lines ofcredit or permanent financing on satisfactory terms,changes in interest rates,access t
50、o 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 and integrate those businesses andinaccuracies of our accounting estimates.A discussion of these and other risks a
51、nd 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 Financial Condition andResults of Operations of this Annual Report on Form 10-K.Given these uncertainties,undue r
52、elianceshould 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 information,futureevents or otherwise.Except where the context suggests otherwise,we define certain terms in thisA
53、nnual 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 Lodging Trust,L.P.,aDelaware limited partnership,which we refer to as our operating partnership;our predecessor c
54、ollectively 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 parallel fund),(collectively,Fund II),and RLJ Real EstateFund III,L.P.(and its parallel fund),(collectively,Fund
55、III),all of which were entities underthe common control of Robert L.Johnson,our Executive Chairman;our hotels refers to the 144 hotels owned by us as of December 31,2014;our formation transactions refers to a series of transactions in which,among other things,(1)our company was formed,(2)our operati
56、ng partnership was formed,(3)each of Fund II andFund III were merged with and into our company,with investors in each of Fund II andFund III receiving common shares as consideration,and(4)RLJ Development contributedsubstantially all of its assets and liabilities to our operating partnership in excha
57、nge for units oflimited partnership interest in our operating partnership(OP units);a compact full-service 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,th
58、e operations focus primarily on the rental of guestrooms suchthat a significant majority of its total revenue is generated from room rentals rather than othersources,such as food and beverage;2 a focused-service hotel typically refers to any hotel where the operations focus primarily onthe rental of
59、 guestrooms and that offers services and amenities to a lesser extent than a typicalfull-service or compact 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
60、and may not offer room service.In addition,a focused-servicehotel differs from a compact full-service hotel in that it typically has less than 2,000 square feetof meeting space,if any at all;TRSs refers to our taxable REIT subsidiaries that are wholly-owned,directly or indirectly,byour operating par
61、tnership and any disregarded subsidiaries of our TRSs;Average Daily Rate(ADR)represents total 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 P
62、er Available Room(RevPAR)is the product of ADR and occupancy;and RevPAR penetration index of our 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 a
63、nd the third-party hotel managementcompany that manages the hotel believe are comparable for purposes of benchmarking theperformance of such hotel.For a more in depth discussion of Occupancy,ADR,RevPAR andRevPAR penetration index,please see Key Indicators of Operating Performance.3PART I.FINANCIAL I
64、NFORMATIONItem 1.BusinessOur CompanyWe are a self-advised and self-administered Maryland real estate investment 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 hote
65、ls and number of rooms.Our hotels are concentrated in markets that we believe exhibit multiple demand generators 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
66、attractive returns.As of December 31,2014,we,through wholly-owned subsidiaries,owned 146 properties,comprisedof 144 hotels with approximately 22,900 rooms and two planned hotel conversions,located in 21 statesand the District of Columbia and an interest in one mortgage loan secured by a hotel.We own
67、,through wholly-owned subsidiaries,100%of the interests in all properties,with the exception of oneproperty in which we own a 98.1%controlling interest in a joint venture.We elected to be taxed as a REIT,for U.S.federal income tax purposes,when we filed ourU.S.federal tax return for the taxable year
68、 ended December 31,2011.Substantially all of our assets areheld by,and all of our operations are conducted through,our operating partnership.We are the solegeneral partner of our operating partnership.As of December 31,2014,we owned,through acombination of direct and indirect interests,99.3%of the O
69、P units in our operating partnership.Our Investment and Growth StrategiesOur objective is to generate strong returns for our shareholders by continuing to acquire primarilypremium-branded,focused-service hotels and compact full-service hotels at prices where we believe wecan generate attractive retu
70、rns on investment and long-term value appreciation through proactive assetmanagement.We intend to pursue acquisitions of these hotels and selectively dispose of propertieswhen we believe returns have been maximized in order to redeploy capital into more accretiveacquisitions and other opportunities.
71、We intend to pursue this objective through the followinginvestment and growth strategies:Investment Strategies Targeted ownership of premium-branded,focused-service and compact full-service hotels.We believethat premium-branded,focused-service hotels have the potential to generate attractive returns
72、relative 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 margins due to theirmore efficient operating model and less volatile cash flows.We also may acquire compactfull-service hotel
73、s 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 byleading international franchisors such as Marriott,Hilton and Hyatt.We target hotels affiliatedwith premium brands such as
74、Courtyard by Marriott,Residence Inn by Marriott,Hilton GardenInn and Hyatt House.We believe that utilizing premium brands provides significant advantagesbecause of their guest loyalty programs,worldwide reservation systems,effective productsegmentation,global distribution and strong customer awarene
75、ss.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 believe thatthese hotels generate higher returns on investment.4Growth Strategies Maximize returns from our hotels.We believe th
76、at our hotels have the potential to generatesignificant improvements in RevPAR and earnings before interest,taxes,depreciation andamortization(EBITDA)as a result of our proactive asset management and the anticipatedeconomic growth in the United States.We actively monitor and advise our third-party h
77、otelmanagement companies on most aspects of our hotels operations,including propertypositioning,physical design,capital planning and investment,guest experience and overallstrategic direction.We regularly review opportunities to invest in our hotels in an effort toenhance the quality and attractiven
78、ess of our hotels,increase their long-term value and generateattractive returns on investment.Pursue a disciplined hotel acquisition strategy.We seek to acquire additional hotels at pricesbelow replacement cost where we believe we can generate attractive returns on investment.Weintend to target acqu
79、isition opportunities where we can enhance value by pursuing proactiveinvestment strategies such as renovation,repositioning or rebranding.Pursue a disciplined capital recycling program.We intend to continue to pursue a disciplinedcapital allocation strategy designed to maximize the value of our inv
80、estments 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 hotels,we intend to redeploy the capital intoacquisition and investment opportunities that we believe will achieve higher returns.
81、Our HotelsOverviewAs of December 31,2014,we owned a high-quality portfolio of 144 hotels located in 21 states andthe District of Columbia comprised of approximately 22,900 rooms.No single hotel accounted for morethan 6.5%of our total revenue for the year ended December 31,2014.We believe that the qu
82、ality ofour portfolio is evidenced by the RevPAR penetration index of 111.7 for our hotels for the year endedDecember 31,2014.The following table sets forth certain unaudited pro forma operating information for our hotels asof and for the years ended December 31,2014,2013 and 2012.Operating informat
83、ion is included forperiods prior to our ownership,and is not necessarily indicative of what actual results of operations ofthe hotels would have been had we owned them for the entirety of all periods presented.Dispositionsand properties closed for renovation or conversion during the periods presente
84、d have been excluded.For the year ended December 31,201420132012Statistical Data:Number of hotels.140140140Number of rooms.22,24922,24922,249Occupancy(1).78.7%76.3%74.2%ADR(1).$150.22$144.57$137.82RevPAR(1).$118.29$110.38$102.31(1)For a more detailed explanation of the terms occupancy,ADR and RevPAR
85、 and adiscussion of how we use these metrics to evaluate the operating performance of ourbusiness,see Managements Discussion and Analysis of Financial Condition and Resultsof OperationsKey Indicators of Operating Performance.5Brand AffiliationsOur hotels operate under strong,premium brands,with near
86、ly 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 31,2014:NumberPercentageNumberPercentageBrand Affiliationsof hotelsof totalof roomsof totalMarriottResidence Inn.3423.6%3,85816.9%
87、Courtyard.2920.1%4,54919.9%Fairfield Inn&Suites.117.6%1,2215.3%SpringHill Suites.106.9%1,2505.5%Marriott.64.2%1,8348.0%Renaissance.32.1%7823.4%Subtotal.9364.5%13,49459.0%HiltonHilton Garden Inn.96.2%1,8438.0%Hampton Inn/Hampton Inn&Suites.85.6%1,0094.4%Embassy Suites.74.9%1,7127.5%DoubleTree.32.1%1,
88、1324.9%Hilton.21.4%5112.2%Homewood Suites.21.4%3011.3%Subtotal.3121.6%6,50828.3%HyattHyatt House.117.6%1,7617.7%Hyatt Place.21.4%3021.3%Hyatt.21.4%2641.2%Subtotal.1510.4%2,32710.2%Other Brand Affiliation.53.5%5672.5%Total.144100.0%22,896100.0%Asset ManagementWe have a dedicated team of asset managem
89、ent professionals that proactively work with our third-party hotel management companies to maximize profitability at each of our hotels.Our assetmanagement team monitors the performance of our hotels on a daily basis and holds frequentownership meetings with personnel at the hotels.Our asset managem
90、ent team works closely with ourthird-party hotel management companies on key aspects of each hotels operation,including,amongothers,revenue management,market positioning,cost structure,capital and operational budgeting aswell as the identification of return on investment initiatives and overall busi
91、ness strategy.In addition,we retain approval rights on key staffing positions at many of our hotels,such as the hotels generalmanager and director of sales.We believe that our strong asset management process helps to ensurethat each hotel is being operated to our and our franchisors standards,that o
92、ur hotels are beingadequately maintained in order to preserve the value of the asset and the safety of the hotel tocustomers,and that our hotel management companies are maximizing revenue and enhancing operatingmargins.6CompetitionThe U.S.lodging industry is highly competitive.Our hotels compete wit
93、h other hotels for guests ineach of their markets on the basis of several factors,including,among others,location,quality ofaccommodations,convenience,brand affiliation,room rates,service levels and amenities,and level ofcustomer service.Competition is often specific to the individual markets in whi
94、ch our hotels are locatedand includes competition from existing and new hotels operated under premium brands in the focused-service and compact 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,
95、will enjoy the competitiveadvantages associated with operating under such brands.Increased competition could harm ouroccupancy and revenues and may require us to provide additional amenities or make capitalimprovements that we otherwise would not have to make,which may materially and adversely affec
96、tour operating results and liquidity.We face competition for the acquisition of hotels from institutional 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
97、resources and access to capitalthan we have and may have greater knowledge of the markets in which 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 investm
98、ents,including thecost thereof.SeasonalityThe lodging industry is seasonal in nature,which can be expected to cause quarterly fluctuations inour revenues.Our quarterly earnings may be adversely affected by factors outside our control,includingweather conditions and poor economic factors in certain m
99、arkets in which we operate.For example,our hotels in the Chicago,Illinois metropolitan area experience lower revenues and profits during thewinter months of December through March while our hotels in Florida generally have higher revenuesin the months of January through April.This seasonality can be
100、 expected to cause periodic fluctuationsin 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-EBITDAto a ratio of 5.0 x or below.We define net debt as tot
101、al indebtedness minus cash and cash equivalents.Over time,we intend to finance our long-term growth with equity issuances and debt financing havingstaggered maturities.We will seek to primarily utilize unsecured debt(with the ultimate goal ofachieving an investment grade rating)and a greater percent
102、age of fixed rate and hedged floating ratedebt relative to unhedged floating rate debt.Our debt currently is 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 at fixed rates or e
103、ffectively bears interest at fixed rates due tointerest rate hedges on the debt.Our IndebtednessAs of December 31,2014,we had approximately$532.7 million of outstanding mortgage debt and$1.0 billion in outstanding unsecured term loans.In addition,we,through our operating partnership,have in place a$
104、300.0 million unsecured revolving credit facility to fund future acquisitions,as well asfor hotel redevelopments,capital expenditures and general corporate purposes.As of December 31,2014,zero was drawn on our unsecured revolving credit facility.For more information regarding ourindebtedness,see Man
105、agements Discussion and Analysis of Financial Condition and Results ofOperationsLiquidity and Capital Resources.7Organizational StructureWe were formed as a Maryland real estate investment trust in January 2011.We conduct ourbusiness through a traditional umbrella partnership real estate investment
106、trust(UPREIT)in whichour properties are indirectly owned by our operating partnership,RLJ Lodging Trust,L.P.,throughlimited partnerships,limited liability companies or other subsidiaries.We are the sole general partnerof our operating partnership,and as of December 31,2014,we owned 99.3%of the OP un
107、its in ouroperating partnership.In the future,we may issue OP units from time to time in connection withacquisitions of properties 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 t
108、ests required for REIT qualification,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,andour TRS lessees have engaged,or will
109、engage,third-party 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
110、 hotels are deemed 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.83MAR201520224136The following chart generally depicts our corporate structure as of December 31,2014:Operating P
111、artnershipPrincipals of RLJ Development0.7%(1)100%100%99.3%RLJ Lodging TrustTRS EntitiesHotel SpecialPurpose EntitiesLessee SPEs100%Leases(1)Reflects OP units issued to the principals of RLJ Development as consideration for substantiallyall of RLJ Developments assets and liabilities,which were contr
112、ibuted to us in connection withour formation transactions.RegulationGeneralOur 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 eachof our hotels has the necessary
113、 permits and approvals to operate its business.Americans with Disabilities ActOur hotels must comply with applicable provisions of the Americans with Disabilities Act of 1990and the Accessibility Guidelines promulgated thereunder(the ADA),to the extent that such hotelsare public accommodations as de
114、fined by the ADA.The ADA may require removal of structuralbarriers to access by persons with disabilities in certain public areas of our hotels where such removal isreadily achievable.We believe that our hotels are in substantial compliance with the ADA and that we9will not be required to make subst
115、antial capital expenditures to address the requirements of the ADA.However,non-compliance with the ADA could result in imposition of fines or an award of damages toprivate litigants.The obligation to make readily achievable accommodations is an ongoing one,and wewill continue to assess our hotels an
116、d to make alterations as appropriate in this respect.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 resultingfrom the presence or discha
117、rge 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 whether theowner or operator knew of,or
118、 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 injury,natural resource damages and
119、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 facility,such as alandfill or an incinera
120、tor,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,airemissions from emergency generators,s
121、torm 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 and safety laws could increase as n
122、ew 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 immediate remediation or current plans to re
123、move 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 precautions,including removal or oth
124、er 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 owners or operators for personal injury
125、 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 ofsignificant mold or other airborne contam
126、inants 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 contaminants could expose us to liabi
127、lity from guests or employees at our hotels and others ifproperty damage or health concerns arise.InsuranceWe carry comprehensive general liability,fire,extended coverage,business interruption,rental losscoverage and umbrella liability coverage on all of our hotels and earthquake,wind,flood and hurr
128、icanecoverage 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 replacement basis,for costs incurred to
129、 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 not carry insurance for generally un
130、insuredlosses,including,but not limited to losses caused by riots,war or acts of God.In the opinion of ourmanagement,our hotels are adequately insured.10EmployeesAs of December 31,2014,we had 56 employees.Corporate InformationOur principal executive offices are located at 3 Bethesda Metro Center,Sui
131、te 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 document that we file with or furn
132、ish 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,QuarterlyReports on Form 10-Q,Current Reports
133、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 Ethics for our trustees,officers a
134、nd 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,Washington,D.C.20549.Information on
135、 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 website address is www.sec.gov.11Item 1A.
136、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 financial condition,results of oper
137、ations,cash flow,themarket 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 statements in this report including s
138、tatements 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 continue to be significantly influence
139、d 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,Chicago,Illinois,Austin,Texas,Denver-Boulder,Colorado,Houston,Texas,and the Baltimore,Mary
140、land-Washington,D.C.metropolitan areasaccounted for approximately 13.7%,10.0%,8.3%,7.3%,5.7%,and 5.2%,respectively,of our totalrevenue for the fiscal year ended December 31,2014.As a result,we are particularly susceptible toadverse market conditions in these areas,including industry downturns,reloca
141、tion of businesses andany oversupply of hotel rooms or a reduction in lodging demand.Adverse economic developments inthe markets in which we have a concentration of hotels,or in any of the other markets in which weoperate,or any increase in hotel supply or decrease in lodging demand resulting from t
142、he local,regional or national business climate,could materially and adversely affect 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
143、manage 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 h
144、otels pursuant to managementagreements.We have entered into individual hotel management agreements for 144 of our hotels,93 ofwhich are with White Lodging Services(WLS).We could be materially and adversely affected if anyof our third-party managers fail to provide quality services and amenities,fail
145、 to comply with brandquality standards or otherwise fail to manage our hotels in our best interest,and we can be financiallyresponsible for the actions and inactions of our third-party managers pursuant to our hotelmanagement agreements.In addition,from time to time,disputes may arise between us and
146、 our third-party managers regarding their performance or compliance with the terms of the hotel managementagreements,which in turn could adversely affect our results of operations.We generally will attempt toresolve any such disputes through discussions and negotiations;however,if we are unable to r
147、eachsatisfactory results through discussions and negotiations,we may choose to terminate our managementagreement,litigate the dispute or submit the matter to third-party dispute resolution,the outcome ofwhich may be unfavorable to us.Under the terms of the hotel management agreements,the hotel manag
148、ers are responsible for allaspects of the operations of our hotels,including 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,incl
149、uding approval of theannual operating budget.While our TRS lessees closely 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
150、management12agreement or our obligations under our hotel franchise agreements.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.W
151、e do not havethe authority to require any hotel to be operated in a particular 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 limite
152、d to terminationupon sixty days notice if we believe our third-party managers are not performing adequately or if webelieve our third-party managers are not operating our hotels in our best interests.For example,wehave a right to terminate a management agreement with WLS,our largest provider of mana
153、gementservices,if WLS fails to achieve certain hotel performance criteria measured over any two consecutivefiscal years,as outlined in each WLS management agreement.However,even if WLS fails to performunder the terms of a management agreement,it has the option(exercisable a maximum of three timesper
154、 hotel)to avoid a performance termination by paying a performance deficit fee as specified in themanagement agreement.In the event that we terminate any of our management agreements,we can provide no assurancesthat we could find a replacement manager or that our franchisors will consent to a replace
155、mentmanager in a timely manner,or at all,or that any replacement manager will be successful in operatingour hotels.Furthermore,if WLS,as our largest provider of management services,is financially unableor unwilling to perform its obligations pursuant to our management agreements,our ability to find
156、areplacement manager or managers for our WLS-managed hotels could be challenging and timeconsuming,depending on the number of WLS-managed hotels affected,and could cause us to incursignificant costs to obtain new management agreements for the affected hotels.Accordingly,if we losea significant numbe
157、r of our WLS management agreements,we could be materially and adverselyaffected.In addition,many of our existing franchise agreements provide the franchisor with a right offirst offer in the event of certain sales or transfers of a hotel and provide that the franchisor has theright to approve any ch
158、ange in the hotel management company engaged to manage the hotel.If any ofthe foregoing were to occur,it could have a material adverse effect on us.Restrictive covenants in certain of our hotel management and franchise agreements contain provisions limitingor restricting the sale or financing of our
159、 hotels,which could have a material adverse effect on us.Hotel management and franchise agreements typically contain restrictive covenants 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
160、provide the franchisor with a right of first offer in theevent of certain sales or transfers of a hotel and provide that the franchisor 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 particu
161、lar hotels unless the transferee is not a competitor ofthe hotel management company or franchisor and the transferee assumes the related hotel managementand franchise agreements.For example,substantially all of our management agreements with WLSprovide that any sale of a hotel to a purchaser who doe
162、s not meet all of the requirements under theapplicable franchise agreement associated with such hotel must be first approved by WLS.If the hotelmanagement company or franchisor does not consent to the sale or financing of our hotels,we may beprohibited from taking actions that would otherwise be in
163、our and our shareholders best interests.Substantially all of our hotels operate under either Marriott,Hilton or Hyatt brands;therefore,we are subjectto risks associated with concentrating our portfolio in just three brand families.139 of the 144 hotels that we owned as of December 31,2014 utilize br
164、ands owned by Marriott,Hilton or Hyatt.As a result,our success is dependent in part on the 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 th
165、e positive13perception of Marriott and/or Hilton and/or Hyatt is reduced or compromised,the 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 a
166、s aresult of disputes regarding the management of our hotels or for other reasons,Marriott and/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 the
167、foregoing were to occur,it could have a material adverse effect on us.Our long-term growth depends 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 w
168、ill be successful in identifying attractive hotels or that,once identified,we will be successful 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 acc
169、ess to debt and equity capital to acquire hotels than we do.Thiscompetition increases as investments 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 pr
170、ice may be significantly elevated or other terms may besubstantially more onerous.In addition,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
171、not be available on advantageous terms,or at all.Any delay or failure on our part to identify,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
172、in the lodgingindustry,including Robert L.Johnson,Thomas J.Baltimore,Jr.and Ross H.Bierkan,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.
173、,ourPresident and Chief Executive Officer and a member of our board of trustees,and Ross H.Bierkan,our Chief Investment Officer,to manage our day-to-day operations and strategic business direction.Messrs.Johnson,Baltimore and Bierkan have 21,26 and 29 years of experience in the lodging industry,resp
174、ectively,during which time they have established an extensive network of lodging industry contactsand relationships,including relationships with global and national hotel brands,hotel owners,financiers,operators,commercial real estate brokers,developers and management companies.We canprovide no assu
175、rances that any of our key personnel will continue their employment with us,eventhough all of the members of our senior management team have entered into employment agreementswith us.The loss of services of Messrs.Johnson,Baltimore or Bierkan,or of the services of othermembers of our senior manageme
176、nt team,or any difficulty attracting and retaining other talented andexperienced personnel,could adversely affect our ability to source potential investment opportunities,our relationship with global and national hotel brands and other industry participants and the executionof our business strategy.
177、Further,such a loss could be negatively perceived in the capital markets,whichcould reduce the market value of our common shares.Our business strategy depends on achieving revenue and net income growth from anticipated increases indemand for hotel rooms.Accordingly,any delay or a weaker than anticip
178、ated economic growth couldmaterially and adversely affect us and our growth prospects.Our hotels experienced declining operating performance across various U.S.markets during themost recent economic recession.Our business strategy depends on achieving revenue and net incomegrowth from anticipated im
179、provement in demand for hotel rooms as part of the continued economic14recovery.Accordingly,any delay or weaker than anticipated economic growth could materially andadversely affect us and our growth prospects.Furthermore,even if the economy continues to grow,wecannot provide any assurances that dem
180、and for hotel rooms will increase from current levels.Ifdemand does not increase in the near future,or if demand weakens,our future results of operationsand our growth prospects could be materially and adversely affected.The ongoing need for capital expenditures at our hotels could have a material a
181、dverse effect on us.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 franchiselice
182、nses.In addition,our lenders will likely require that we set aside annual amounts for capitalimprovements to our hotels.The costs of these capital improvements could materially and adverselyaffect us.Any difficulties in obtaining capital necessary to make required periodic capital expenditures and r
183、enovationof our hotels could materially and adversely affect our financial condition and results of operations.Our hotels require periodic capital expenditures and renovation to remain competitive.In addition,acquisitions or redevelopment of additional hotels will require significant capital expendi
184、tures.We maynot be able to fund capital improvements on our hotels or acquisitions of new hotels solely from cashprovided from our operating activities because we must distribute annually at least 90%of our REITtaxable income,determined without regard to the deduction for dividends paid and excludin
185、g netcapital gain,to maintain our qualification as a REIT,and we are subject to tax on any retained incomeand gain.As a result,our ability to fund capital expenditures,acquisitions or hotel redevelopmentthrough retained earnings is very limited.Consequently,we expect to rely upon the availability of
186、 debtor equity capital to fund capital improvements and acquisitions.If we are unable to obtain the capitalnecessary to make required periodic capital expenditures and renovate our hotels on favorable terms,or at all,our financial condition,liquidity and results of operations could be materially and
187、 adverselyaffected.Adverse global market and economic conditions and dislocations 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 circumstan
188、ces that could indicate that the carryingvalue of the real estate and related 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 recoverabi
189、lity of these assets by determining whether thecarrying value will be recovered 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
190、 the real estate and related intangible assets tothe fair value and recognize 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 t
191、o companies that have carrying values well belowcurrent market values,which could materially and adversely affect our business,financial condition andresults of operations.Projections of expected future cash flows require management to make assumptions to estimatefuture occupancy,hotel operating exp
192、enses,and the number of years the hotel is held for investment,among other factors.The subjectivity of assumptions used in the future cash flow analysis,includingdiscount rates,could result in an incorrect assessment of the hotels fair value and,therefore,couldresult in the misstatement of the carry
193、ing value of our real estate and related intangible assets on our15balance sheet and our results of operations.Ongoing adverse market and economic conditions andmarket volatility will likely continue to make it difficult to value the hotels owned by us,as well as thevalue of our intangible assets.As
194、 a result of adverse market and economic conditions,there may besignificant uncertainty in the valuation,or in the stability of,the cash flows,discount rates and otherfactors related to such assets that could result in a substantial decrease in their value.Competition from other hotels in the market
195、s in which we operate could adversely affect occupancy levelsand/or ADRs,which could have a material adverse effect on us.We face significant competition from owners and operators of other hotels.These competitors mayhave an operating model that enables them to offer rooms at lower rates than we can
196、,which couldresult in those competitors increasing their occupancy at our expense and adversely affecting ourADRs.Given the importance of occupancy and ADR at focused-service and compact full-servicehotels,this competition could adversely affect our ability to attract prospective guests,which couldm
197、aterially and adversely affect our results of operations.The RevPAR penetration index may not accurately reflect our hotels respective market shares.We use the RevPAR penetration index,which measures a hotels RevPAR in relation to theaverage RevPAR of that hotels competitive set,as an indicator of a
198、 hotels market share in relation toits competitive set.However,as a particular hotels competitive set is selected by us and the hotelmanagement company that manages such hotel,no assurance can be given that a competitive setconsisting of different hotels would not lead to a more accurate measure of
199、such hotels market share.As such,the RevPAR penetration index may not accurately reflect our hotels respective market shares.At December 31,2014,we had approximately$1.6 billion of debt outstanding,which may materially andadversely affect our operating performance and put us at a competitive disadva
200、ntage.Required repayments of debt and related interest may materially and adversely affect ouroperating performance.At December 31,2014,we had approximately$1.6 billion of outstanding debt,approximately$1.4 billion of which bears interest at variable rates.After taking into consideration theeffect o
201、f interest rate swaps,$249.0 million of our 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.Because we
202、anticipate that our internally generated cash will be adequate to repay only a portionof our debt at maturity,we expect that we will be required to repay debt through debt refinancingsand/or offerings of our securities.The amount of our outstanding debt may adversely affect our abilityto refinance o
203、ur debt.If we are unable to refinance our debt on acceptable 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 mayadversely affect cash available for distributions to our shareholders.In addition,if then-prevailingin
204、terest rates or other factors at the time of refinancing 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 may harm our business,financial condition,liquidity,EB
205、ITDA,Funds from Operations(FFO)and results of operations,including:requiring us to use a substantial portion of our cash flows to pay principal and interest,whichwould reduce the cash available for distributions to our shareholders;placing us at a competitive disadvantage compared to our competitors
206、 that have less debt;16 making us vulnerable to economic volatility,particularly if growth were to slow or stall andreduce our flexibility to respond to difficult economic conditions;and limiting our ability to borrow more money for operations,capital improvements or to financefuture acquisitions.Th
207、e use of debt to finance future acquisitions could restrict operations,inhibit our ability to grow our businessand revenues,and negatively affect our business and financial results.We may incur additional debt in connection with future hotel acquisitions.We may,in someinstances,borrow under our unse
208、cured revolving credit facility or borrow new funds to acquire hotels.In addition,we may incur mortgage debt by obtaining loans secured by a portfolio of some or all of thehotels that we own or acquire.If necessary or advisable,we also may borrow funds to makedistributions to our shareholders in ord
209、er to maintain our qualification as a REIT for U.S.federalincome tax purposes.To the extent that we incur debt in the future and do not have sufficient funds torepay such debt at maturity,it may be necessary to refinance the debt through debt or equityfinancings,which may not be available on accepta
210、ble terms or at all and which could be dilutive to ourshareholders.If we are unable to refinance our debt on acceptable terms or at all,we may be forced todispose of hotels at inopportune times or on disadvantageous terms,which could result in losses.To theextent we cannot meet our future debt servi
211、ce obligations,we will risk losing to foreclosure some or allof our hotels that may be pledged to secure our obligations.For tax purposes,a foreclosure of any of our hotels would be treated as a sale of the hotel for apurchase price equal to the outstanding balance of the debt secured by the mortgag
212、e.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 ability to meet the REIT distribution requirements imposed by the Internal Revenue Codeo
213、f 1986,as amended(the Code).In addition,we may give full or partial guarantees to lenders ofmortgage debt on behalf of the entities that own our hotels.When we give a guarantee on behalf of anentity that owns one of our hotels,we will be responsible to the lender for satisfaction of the debt if itis
214、 not paid by such entity.If any of our hotels are foreclosed on due to a default,our ability to paycash distributions to our shareholders will be limited.Our organizational documents have no limitation on the amount of indebtedness we may incur.As a result,we may become highly leveraged in the futur
215、e,which could materially and adversely affect us.Our business strategy contemplates the use of both non-recourse secured and unsecured debt tofinance long-term growth.In addition,our organizational documents contain no limitations on theamount of debt that we may incur,and our board of trustees may
216、change our financing policy at anytime without shareholder notice or approval.As a result,we may be able to incur substantial additionaldebt,including secured debt,in the future.Incurring debt could subject us to many risks,including therisks that:our cash flows from operations may be insufficient t
217、o make required payments of principal andinterest;our debt may increase our vulnerability to adverse economic and industry conditions;we may be required to dedicate a substantial portion of our cash flows from operations topayments on our debt,thereby reducing cash available for distribution to our
218、shareholders,fundsavailable for operations and capital expenditures,future business opportunities or otherpurposes;the terms of any refinancing may not be in the same amount or on terms as favorable as theterms of the existing debt being refinanced;and17 the use of leverage could adversely affect ou
219、r ability to raise capital from other sources or tomake distributions to our shareholders and could adversely affect the market price of ourcommon shares.If we violate covenants in future agreements relating to indebtedness that we may incur,we couldbe required to repay all or a portion of our indeb
220、tedness before maturity at a time when we might beunable to arrange financing for such repayment on attractive terms,if at all.In addition,futureindebtedness agreements may require that we meet certain covenant tests in order to makedistributions to our shareholders.Disruptions in the financial mark
221、ets could adversely affect our ability to obtain sufficient third-party financingfor our capital needs,including expansion,acquisition and other activities,on favorable terms or at all,whichcould materially and adversely affect us.In recent years,the U.S.stock and credit markets experienced signific
222、ant price volatility,dislocations and liquidity disruptions,which caused market prices of many stocks to fluctuatesubstantially and the spreads on prospective debt financings to widen considerably.Renewed volatilityand uncertainty in the stock and credit markets may negatively impact our ability to
223、access additionalfinancing for our capital needs,including expansion,acquisition activities and other purposes,onfavorable terms or at all,which may negatively affect our business.Additionally,due to this potentialuncertainty,we may in the future be unable to refinance or extend our debt,or the term
224、s of anyrefinancing may not be as favorable as the terms of our existing debt.If we are not successful inrefinancing our debt when it becomes due,we may be forced to dispose of hotels on disadvantageousterms,which might adversely affect our ability to service other debt and to meet our other obligat
225、ions.A prolonged downturn in the financial markets may cause us to seek alternative sources of potentiallyless attractive financing and may require us to further adjust our business plan accordingly.Theseevents also may make it more difficult or costly for us to raise capital through the issuance of
226、 newequity capital or the incurrence of additional secured or unsecured debt,which could materially andadversely 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
227、interest rate hedging arrangements,such 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 inte
228、restrates;available interest rate hedges 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;the credit quality of the hedging counterparty owing money on the hedge may be downgraded tosuc
229、h an extent that it impairs our ability 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
230、have a material adverse effect on us.18Our 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,and indebtedness that wemay enter into in the future likely will cont
231、ain customary covenants such as those that limit our abilityto enter into future indebtedness,whether secured by our hotels or unsecured,or to discontinueinsurance coverage.In addition,our continued ability to borrow under our unsecured revolving creditfacility is subject to compliance with our fina
232、ncial and other covenants,including covenants relating todebt service coverage ratios and leverage ratios,and our ability to meet these covenants may beadversely affected if U.S.lodging fundamentals do not continue to improve to the extent that weexpect.In addition,any indebtedness that we enter int
233、o in the future likely will contain customaryfinancial covenants,restrictions,requirements and other limitations with which we must comply.Ourfailure to comply with covenants in our existing or future indebtedness,as well as our inability to makerequired payments,could cause a default under the appl
234、icable debt agreement,which could result inthe acceleration of the debt and require us to repay such debt with capital obtained from other sources,which may not be available to us or may be available only on unattractive terms.Furthermore,if wedefault on secured debt,lenders can take possession of t
235、he hotel or hotels securing such debt.Inaddition,debt agreements may contain specific cross-default provisions with respect to specified otherindebtedness,giving the lenders the right to declare a default on its debt and to enforce remedies,including acceleration of the maturity of such debt upon th
236、e occurrence of a default under such otherindebtedness.If we default on several of our debt agreements or any significant debt agreement,wecould be materially and adversely affected.Covenants applicable to future debt could restrict our ability to make distributions to our shareholders and,asa resul
237、t,we may be unable to make distributions necessary to maintain our qualification as a REIT,whichcould materially and adversely affect us and the market price of our common shares.We intend to continue to operate in a manner so as to maintain our qualification as a REIT forU.S.federal income tax purp
238、oses.In order to qualify as a REIT,we generally are required to distributeat least 90%of our REIT taxable income,determined without regard to the dividends paid deductionand excluding net capital gain,each year to our shareholders.To the extent that we satisfy thisdistribution requirement,but distri
239、bute less than 100%of our REIT taxable income,we will be subjectto U.S.federal corporate income tax on our undistributed taxable income.In addition,we will besubject to a 4%nondeductible excise tax if the actual amount that we distribute to our shareholders ina calendar year is less than a minimum a
240、mount specified under the Code.In order to meet the REITrequirements,we may be required to issue common shares of beneficial interest in lieu of cashdistributions.If,as a result of covenants applicable to our future debt,we are restricted from makingdistributions to our shareholders,we may be unable
241、 to make distributions necessary for us to avoidU.S.federal corporate income and excise taxes and maintain our qualification as a REIT,which couldmaterially and adversely affect us and the market price of our shares.We may change the distribution policy for our common shares of beneficial interest i
242、n the future.Our management and board of trustees will continue to evaluate our distribution policy on aquarterly basis as they monitor the capital markets,the impact of the economy on our operations andother factors.Future distributions will be declared and paid at the discretion of our board of tr
243、usteesand will depend upon a number of factors,including our actual and projected financial condition,liquidity,EBITDA,FFO and results of operations,the revenue we actually receive from our properties,our operating expenses,our debt service requirements,our capital expenditures,prohibitions and othe
244、rlimitations under our financing arrangements,our REIT taxable income,the annual REIT distributionrequirements,applicable law and such other factors as our board of trustees deems relevant.Any19change in our distribution policy could have a material adverse effect on the market price of ourcommon sh
245、ares.Costs associated with,or failure to maintain,franchisor 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 periodica
246、lly inspect ourhotels to ensure that we and the hotel management 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
247、undertakea costly property improvement program.If a franchise 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.Furthermore,under cert
248、aincircumstances,a franchisor may require us to make capital expenditures,even if we do not believe thecapital improvements are necessary or desirable or will result in an acceptable return on ourinvestment.If the funds required to maintain franchisor operating standards are significant,or if afranc
249、hise license is terminated,we could be materially and adversely affected.If we were to lose a franchise license at one or more of our hotels,the value of the affected hotels coulddecline significantly and we could incur significant costs to obtain new franchise licenses,which could have amaterial ad
250、verse effect on us.If we were to lose a franchise license,we would be required to re-brand the affected hotel(s).As aresult,the underlying value of a particular hotel could decline significantly from the loss of associatedname recognition,marketing support,participation in guest loyalty programs and
251、 the centralized systemprovided by the franchisor,which could require us to recognize an impairment on the hotel.Furthermore,the loss of a franchise license at a particular hotel could harm our relationship with thefranchisor,which could impede our ability to operate other hotels under the same bran
252、d,limit ourability to obtain new franchise licenses from the franchisor in the future on favorable terms,or at all,and cause us to incur significant costs to obtain a new franchise license for the particular hotel.Accordingly,if we lose one or more franchise licenses,we could be materially and adver
253、sely affected.Applicable REIT laws may restrict certain 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 u
254、ses of real estate,including the development and/or sale 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,loca
255、l,and,if applicable,foreign taxation on their taxable income.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 regardin
256、g the potentialsale of a hotel.The federal income tax provisions 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 trans
257、action that is subject to a100%excise tax.Under existing 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 transactio
258、n.We intend to hold20our hotels for investment with a view 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)mi
259、ght not contendthat one or more of these sales are subject 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
260、 safe harbor availablefor a limited number of sales in a single 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 p
261、romptly in response toeconomic or other conditions or on favorable 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
262、 between usand our joint venture partners.We own the DoubleTree 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 reducin
263、g the amount of capitalrequired by us to make investments 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 developmen
264、t,financing,leasing,management andother aspects of the hotel or joint venture,which may prevent us from taking actions that are inour best interest but opposed by our partners;joint venture agreements often restrict the transfer of a partners interest or may otherwiserestrict our ability to sell the
265、 interest when we desire or on advantageous terms;joint 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
266、 time,have economic or business interests or goals that 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 rema
267、in liable forthe joint ventures liabilities;or we may,in 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 liabil
268、ities in excess of those contemplated and adverselyaffect 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,includ
269、ing competition,over-building and dependence on business travel andtourism.The hotels that we own have different economic characteristics than many other real estate assets.A typical office property,for example,has long-term leases with third-party tenants,which provides arelatively stable long-term
270、 stream of revenue.Hotels,on the other hand,generate revenue from gueststhat typically stay at the hotel for only a few nights,which causes the room rate and occupancy levels ateach of our hotels to change every day,and results in earnings that can be highly volatile.21In addition,our hotels are sub
271、ject to various operating risks common to the lodging industry,manyof which are beyond our control,including,among others,the following:competition from other hotels in the markets in which we operate;over-building of hotels in the markets in which we operate,which results in increased supply andwil
272、l adversely affect occupancy and revenues at our hotels;dependence on business and commercial travelers and tourism;labor strikes,disruptions or lockouts that may impact operating performance;increases in energy costs and other expenses affecting travel,which may affect travel patternsand reduce the
273、 number of business and commercial travelers and tourists;requirements for periodic capital reinvestment to repair and upgrade hotels;increases in operating costs due to inflation and other factors that may not be offset byincreased room rates;changes in interest rates;changes in the availability,co
274、st 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 ordinances;adverse effects of international,national,regional and local economic and market conditions;unfores
275、een 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-related accidents and unusual weather patterns,including natural disasters such ashurricanes,tsunamis or earthqu
276、akes;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 any of the foregoing could materially and adversely affect us.The seasonality of the lodging industry could
277、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 affected by factors outside our control,includingweather conditions and poor economic factors in certain market
278、s in which we operate.For example,our hotels in the Chicago,Illinois metropolitan area experience lower revenues and profits during thewinter months of December through March while our hotels in Florida generally have higher revenuesin the months of January through April.This seasonality can be expe
279、cted to cause periodic fluctuationsin room revenues,occupancy levels,room rates and operating expenses in particular hotels.We canprovide no assurances that our cash flows will be sufficient to offset any shortfalls that occur as a resultof these fluctuations.As a result,we may have to enter into sh
280、ort-term borrowings in certain quartersin order to make distributions to our shareholders,and we can provide no assurances that suchborrowings will be available on favorable terms,if at all.Consequently,volatility in our financialperformance resulting from the seasonality of the lodging industry cou
281、ld have a material adverse effecton us.22The cyclical nature of the lodging industry may cause fluctuations in our operating performance,which couldhave a material adverse effect on us.The lodging industry historically has been highly cyclical in nature.Fluctuations in lodging demandand,therefore,op
282、erating performance,are caused largely by general economic and local marketconditions,which subsequently affect levels of business and leisure travel.In addition to generaleconomic conditions,new hotel room supply is an important factor that can affect the lodgingindustrys performance,and overbuildi
283、ng has the potential to further exacerbate the negative impact ofan economic recession.Room rates and occupancy,and thus RevPAR,tend to increase when demandgrowth exceeds supply growth.We can provide no assurances regarding whether,or the extent to which,lodging demand will rebound or whether any su
284、ch rebound will be sustained.An adverse change inlodging fundamentals could result in returns that are substantially below our expectations or result inlosses,which could have a material adverse effect on us.Our acquisition,redevelopment,repositioning,renovation and re-branding activities are subjec
285、t to variousrisks,any of which could,among other things,result in disruptions to our hotel operations,strainmanagement resources and materially and adversely affect our business.We intend to continue to acquire,redevelop,reposition,renovate and re-brand hotels,subject tothe availability of attractiv
286、e hotels or projects and our ability to undertake such activities on satisfactoryterms.In deciding whether to undertake such activities,we will make certain assumptions regarding theexpected future performance of the hotel or project.However,newly acquired,redeveloped,renovated,repositioned or re-br
287、anded hotels may fail to perform as expected and the costs necessary to bring suchhotels up to franchise standards may exceed our expectations,which may result in the hotels failure toachieve projected returns.In particular,to the extent that we engage in the activities described above,they could po
288、se thefollowing risks to our ongoing operations:we may abandon such activities and may be unable to recover expenses already incurred inconnection with exploring such opportunities;acquired,redeveloped,renovated or re-branded hotels may not initially be accretive to ourresults of operations,and we a
289、nd the hotel management companies may not successfully managenewly acquired,renovated,redeveloped,repositioned or re-branded hotels to meet ourexpectations;we may be unable to quickly,effectively and efficiently integrate new acquisitions,particularlyacquisitions of portfolios of hotels,into our exi
290、sting operations;our redevelopment,repositioning,renovation or re-branding activities may not be completed onschedule,which could result in increased debt service and other costs and lower revenues;and management attention may be diverted by our acquisition,redevelopment,repositioning orrebranding a
291、ctivities,which in some cases may turn out to be less compatible with our growthstrategy than originally anticipated.The occurrence of any of the foregoing events,among others,could materially and adversely affect ourbusiness.Certain of our hotels are subject to ground leases that contain provisions
292、 that may impact our ability to sellsuch hotels.Our ground lease agreements with respect to certain of our hotels require the consent of the lessoror sub-lessor prior to transferring our interest in the ground lease.These provisions may impact ourability to sell our hotels which,in turn,could advers
293、ely impact the price realized from any such sale.In23addition,at any given time,investors may be disinterested in buying properties subject to a groundlease and may pay a lower price for such properties than for a comparable property in fee simple orthey may not purchase such properties at any price
294、.Accordingly,we may find it difficult to sell aproperty subject to a ground lease or may receive lower proceeds from any such sale.If we are found to be in breach of a ground lease or are unable to renew a ground lease,we could bematerially and adversely affected.As of December 31,2014,eight of our
295、hotels were on land subject to ground leases.Accordingly,we only own a long-term leasehold or similar interest in those eight hotels.If we are found to be inbreach of a ground lease,we could lose the right to use the hotel.In addition,unless we can purchasea fee interest in the underlying land and i
296、mprovements or extend the terms of these leases before theirexpiration,as to which no assurance can be given,we will lose our right to operate these properties andour interest in the improvements upon expiration of the leases.Our ability to exercise any extensionoptions relating to our ground leases
297、 is subject to the condition that we are not in default under theterms of the ground lease at the time that we exercise such options,and we can provide no assurancesthat we will be able to exercise any available options at such time.Furthermore,we can provide noassurances that we will be able to ren
298、ew any ground lease upon its expiration.If we were to lose theright to use a hotel due to a breach or non-renewal of the ground lease,we would be unable to deriveincome from such hotel and would be required to purchase an interest in another hotel to attempt toreplace that income,which could materia
299、lly and adversely affect us.We will not recognize any increase in the value of the land or improvements subject to our ground leases andmay only receive a portion of compensation paid in any eminent domain proceeding with respect to the hotel.Unless we purchase a fee interest in the land and improve
300、ments subject to our ground leases,wewill not have any economic interest in the land or improvements at the expiration of our ground leasesand therefore we will not share in any increase in value of the land or improvements beyond the termof a ground lease,notwithstanding our capital outlay to purch
301、ase our interest in the hotel or fundimprovements thereon,and will lose our right to use the hotel.Furthermore,if the state or federalgovernment seizes a hotel subject to a ground lease under its eminent domain power,we may only beentitled to a portion of any compensation awarded for the seizure.The
302、 increasing use of Internet travel intermediaries by consumers may materially and adversely affect ourprofitability.Although 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
303、will bebooked through Internet travel intermediaries.Typically,these Internet travel intermediaries purchaserooms at a negotiated discount from participating hotels,which could result in lower room rates thanthe franchisor or manager otherwise could have obtained.As these Internet bookings increase,
304、theseintermediaries may be able to obtain higher commissions,reduced room rates or other significantcontract concessions from us and any hotel management companies that we engage.Moreover,some ofthese Internet travel intermediaries are attempting to offer hotel rooms as a commodity,by increasingthe
305、importance of price and general indicators of quality,such as three-star downtown hotel,at theexpense of brand identification or quality of product or service.If consumers develop brand loyalties toInternet reservations systems rather than to the brands under which our hotels are franchised,the valu
306、eof our hotels could deteriorate and our business could be materially and adversely affected.Althoughmost of the business for our hotels is expected to be derived from traditional channels,if the amountof sales made through Internet intermediaries increases significantly,room revenues may flatten or
307、decrease and our profitability may be materially and adversely affected.24Technology 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 netwo
308、rks and 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 hote
309、l managersand 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 pr
310、oper function,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.The need for business-related trave
311、l and,thus,demand for rooms in our hotels may be materially andadversely affected by the increased use of business-related technology.The increased use of teleconference and video-conference technology by businesses could result indecreased business travel as companies increase the use of technologi
312、es that allow multiple parties fromdifferent locations to participate at meetings without traveling to a centralized meeting location,such asour hotels.To the extent that such technologies play an increased role in day-to-day business and thenecessity for business-related travel decreases,demand for
313、 our hotel rooms may decrease and we couldbe materially and adversely affected.Future terrorist attacks or changes in terror alert levels could materially and adversely affect us.Previous terrorist attacks and subsequent terrorist alerts have adversely affected the U.S.travel andhospitality industri
314、es over the past several years,often disproportionately to the effect on the overalleconomy.The extent of the impact that 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 att
315、acks or the threat of such attacks could have a material adverse effect on travel andhotel demand and our ability to insure 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,
316、which would have a material adverse effect on us.A widespread outbreak of an infectious or contagious disease in the U.S.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 outbr
317、eak of an infectious or contagious disease,ourrevenue would be adversely affected,which could have a material adverse effect 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 b
318、usiness combination opportunities,particularly if our management and board of trustees donot favor a combination proposal.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 ind
319、ividuals(asdefined in the Code to include certain entities)at any time during the last half of each taxable yearfollowing 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
320、 as a REIT.Unless exempted by our board of trustees,no person or entity(other than a person or entity who hasbeen granted 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,whicheve
321、ris more restrictive,or 9.8%of the aggregate of the outstanding preferred shares of any class or series,by value or by number of shares,whichever is more restrictive.25Our board may,in its sole discretion,grant an exemption to the share ownership limits,subject tocertain conditions and the receipt b
322、y our board of certain representations and undertakings.Our boardof trustees has granted exemptions from our ownership limits 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 excep
323、ted holder limit,the excepted holders were required to makerepresentations and warranties to us,which are intended to ensure 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 suc
324、h excepted holder will lose its exemption from theownership limit.In addition,our board of trustees may change the share 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
325、shares if that would result in us being closely held underSection 856(h)of the Code or otherwise cause us to fail to qualify 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 T
326、RS failing to qualify as such,or us having significantnon-qualifying income from related parties,or(2)transferring shares 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
327、 by any person,which term includes entities,and take into account direct and indirect ownership as determined under various 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
328、 common shares or otherwise be in the bestinterests of our shareholders.Our authorized but unissued common shares and preferred 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
329、of trust authorizes us to issue additional authorized but unissued common orpreferred shares.In addition,our board of trustees 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 preferr
330、ed shares that we have authority to issue and classify or reclassify anyunissued common shares or preferred shares and set 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
331、could delay or prevent a transaction or a change in our control thatmight involve a premium price for our common shares 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
332、Law(MGCL)that are applicable toMaryland real estate investment trusts may have the effect of deterring a third party from 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 rea
333、lize a premium over thethen-prevailing market price of our common shares,including:business combination provisions that,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 be
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