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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________________________________
FORM 10-Q
________________________________________________________________________

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2016
OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
to
.
Commission file number 001-34572
_______________________________________________________________________
CHESAPEAKE LODGING TRUST
(Exact name of registrant as specified in its charter)
_______________________________________________________________________
MARYLAND
27-0372343
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1997 Annapolis Exchange Parkway, Suite 410 Annapolis,
Maryland
21401
(Address of principal executive offices)
(Zip Code)
(410) 972-4140
(Registrant’s telephone number, including area code)
_______________________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes  No 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act.
Large accelerated filer

Accelerated filer

Non-accelerated filer
 (Do not check if a smaller reporting company)
Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes 
No 
As of July 22, 2016, there were 60,101,531 shares of the registrant’s common shares issued and outstanding.
Table of Contents
CHESAPEAKE LODGING TRUST
INDEX
Page
PART I
Item 1.
Item 2.
Item 3.
Item 4.
Financial Statements
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Controls and Procedures
PART II
3
18
27
27
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Legal Proceedings
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
Other Information
Exhibits
28
28
28
28
28
28
28
2
Table of Contents
PART I
Item 1.
Financial Statements
CHESAPEAKE LODGING TRUST
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30, 2016
December 31, 2015
(unaudited)
ASSETS
Property and equipment, net
$
1,897,638
$
1,926,944
Intangible assets, net
36,124
36,414
55,512
50,544
44,231
40,361
25,307
15,603
21,024
17,900
Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowance for doubtful accounts of $138 and $172,
respectively
Prepaid expenses and other assets
Total assets
$
2,079,836
$
2,087,766
$
766,667
$
769,748
LIABILITIES AND SHAREHOLDERS’ EQUITY
Long-term debt
Accounts payable and accrued expenses
67,896
62,683
45,566
45,778
880,129
878,209
Preferred shares, $.01 par value; 100,000,000 shares authorized; Series A Cumulative
Redeemable Preferred Shares; 5,000,000 shares issued and outstanding, respectively
($127,422 liquidation preference)
50
50
Common shares, $.01 par value; 400,000,000 shares authorized; 60,101,531 shares and
59,659,522 shares issued and outstanding, respectively
601
597
Other liabilities
Total liabilities
Commitments and contingencies (Note 12)
Additional paid-in capital
Cumulative dividends in excess of net income
Accumulated other comprehensive loss
Total shareholders’ equity
1,302,443
(102,981)
(406)
1,297,877
(88,675)
(292)
1,199,707
1,209,557
Total liabilities and shareholders’ equity
$
2,079,836
The accompanying notes are an integral part of these consolidated financial statements.
3
$
2,087,766
Table of Contents
CHESAPEAKE LODGING TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended June 30,
2016
Six Months Ended June 30,
2015
2016
2015
REVENUE
Rooms
$
126,967
$
122,966
$
230,739
$
204,560
Food and beverage
35,664
33,014
66,219
56,412
6,800
6,165
13,084
10,463
169,431
162,145
310,042
271,435
27,876
26,144
53,377
47,244
24,111
23,495
46,877
41,961
1,589
1,906
3,147
3,239
94,029
53,103
51,024
103,683
106,679
102,569
207,084
186,473
18,610
17,929
37,094
32,856
130
130
260
260
4,734
4,498
10,000
9,075
—
466
—
835
130,153
125,592
254,438
229,499
55,604
(15,770)
41,936
(15,347)
Other
Total revenue
EXPENSES
Hotel operating expenses:
Rooms
Food and beverage
Other direct
Indirect
Total hotel operating expenses
Depreciation and amortization
Air rights contract amortization
Corporate general and administrative
Hotel acquisition costs
Total operating expenses
Operating income
Interest expense
Gain on sale of hotel
39,278
(7,560)
36,553
(8,168)
—
598
—
598
Income before income taxes
Income tax expense
32,316
(3,774)
28,385
(4,340)
40,432
(1,820)
26,589
(992)
Net income
Preferred share dividends
28,542
(2,422)
24,045
(2,422)
38,612
(4,844)
25,597
(4,844)
Net income available to common shareholders
$
26,120
$
21,623
$
33,768
$
20,753
Basic
$
0.44
$
0.37
$
0.57
$
0.36
Diluted
$
0.44
$
0.36
$
0.57
$
0.36
Net income available per common share:
The accompanying notes are an integral part of these consolidated financial statements.
4
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CHESAPEAKE LODGING TRUST
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
Three Months Ended June 30,
2016
Six Months Ended June 30,
2015
2016
2015
Net income
$
Other comprehensive income (loss):
Unrealized losses on cash flow hedge instruments
Reclassification of unrealized losses on cash flow hedge
instruments to interest expense
Comprehensive income
$
28,542
$
24,045
$
$
25,597
(116)
(189)
(434)
(936)
157
240
320
301
28,583
$
24,096
$
The accompanying notes are an integral part of these consolidated financial statements.
5
38,612
38,498
$
24,962
Table of Contents
CHESAPEAKE LODGING TRUST
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)
Preferred Shares
Shares
Balances at December
31, 2015
Repurchase of
common shares
5,000,000
Amount
$
Cumulative
Dividends in
Excess of Net
Income
Common Shares
50
—
—
—
—
—
Shares
59,659,52
2
Amount
$
597
Additional
Paid-In Capital
$ 1,297,877
$
(88,675)
Accumulated
Other
Comprehensive
Loss
$
(292)
Total
$ 1,209,557
—
(194)
—
—
(194)
448,146
4
(4)
—
—
—
—
1,717
—
42
—
—
42
—
—
—
—
4,722
—
—
4,722
—
—
—
—
—
(48,074)
—
(48,074)
—
—
—
—
—
(4,844)
—
(4,844)
—
—
—
—
—
38,612
—
38,612
—
—
—
—
—
—
50
60,101,53
1
601
$ 1,302,443
(7,854)
Issuance of restricted
common shares
Issuance of unrestricted
common shares
Amortization of deferred
compensation
Declaration of dividends
on common shares
Declaration of dividends
on preferred shares
Net income
Other
comprehensive
loss
Balances at June 30,
2016
5,000,000
$
$
$
(102,981)
(114)
$
The accompanying notes are an integral part of these consolidated financial statements.
6
(406)
(114)
$ 1,199,707
Table of Contents
CHESAPEAKE LODGING TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended June 30,
2016
2015
Cash flows from operating activities:
Net income
$
38,612
$
25,597
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
37,094
32,856
260
260
936
939
(598)
—
Air rights contract amortization
Deferred financing costs amortization
Gain on sale of hotel
Share-based compensation
4,764
Other
3,743
(442)
(392)
Accounts receivable, net
(9,704)
(13,309)
Prepaid expenses and other assets
(3,126)
(6,584)
4,407
6,403
Changes in assets and liabilities:
Accounts payable and accrued expenses
Other liabilities
(22)
Net cash provided by operating activities
Cash flows from investing activities:
Acquisition of hotels, net of cash acquired
72,181
—
Disposition of hotel, net of cash sold
2,028
Improvements and additions to hotels
(9,217)
5,981
55,494
(255,249)
—
(24,361)
Change in restricted cash
(3,870)
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from sale of common shares, net of underwriting fees
Payment of offering costs related to sale of common shares
(11,059)
—
—
4,841
(274,769)
153,962
(254)
Borrowings under revolving credit facility
Repayments under revolving credit facility
130,000
310,000
(190,000)
(175,000)
Proceeds from issuance of mortgage debt
150,000
Principal prepayment on mortgage debt
(88,190)
Scheduled principal payments on mortgage debt
Payment of deferred financing costs
(4,877)
—
—
(5,103)
(844)
(2,302)
Payment of dividends to common shareholders
(47,205)
(36,906)
Payment of dividends to preferred shareholders
(4,844)
(4,844)
(194)
(1,690)
Repurchase of common shares
Net cash provided by (used in) financing activities
Net increase in cash
(56,154)
237,863
4,968
18,588
Cash and cash equivalents, beginning of period
50,544
Cash and cash equivalents, end of period
29,326
$
55,512
$
47,914
$
15,251
$
14,065
$
1,605
$
2,140
$
—
$
125,000
Supplemental disclosure of cash flow information:
Cash paid for interest
Cash paid for income taxes
Assumption of mortgage debt related to hotel acquisition
The accompanying notes are an integral part of these consolidated financial statements.
7
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CHESAPEAKE LODGING TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Organization and Description of Business
Chesapeake Lodging Trust (the “Trust”) is a self-advised real estate investment trust (“REIT”) that was organized in the state of
Maryland in June 2009. The Trust is focused on investments primarily in upper-upscale hotels in major business and convention
markets and, on a selective basis, premium select-service hotels in urban settings or unique locations in the United States of America
(“U.S.”). The Trust completed its initial public offering (“IPO”) in January 2010. The Trust owned no hotels nor had any operations
prior to its IPO. As of June 30, 2016, the Trust owned 22 hotels with an aggregate of 6,694 rooms in nine states and the District of
Columbia.
Substantially all of the Trust’s assets are held by, and all of its operations are conducted through, Chesapeake Lodging, L.P., a
Delaware limited partnership, which is wholly owned by the Trust (the “Operating Partnership”). For the Trust to qualify as a REIT, it
cannot operate hotels. Therefore, the Operating Partnership leases its hotels to taxable REIT subsidiaries (each, a “TRS”), which are
wholly owned subsidiaries of the Operating Partnership and are treated as TRSs for federal income tax purposes. The TRSs then
engage hotel management companies to operate the hotels pursuant to management agreements.
2. Summary of Significant Accounting Policies
Basis of Presentation—The interim consolidated financial statements presented herein include all of the accounts of
Chesapeake Lodging Trust and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation as a result of
adopting a new accounting pronouncement relating to debt issuance costs. See "Recent Accounting Pronouncements" for additional
information.
The information in these interim consolidated financial statements is unaudited but, in the opinion of management, reflects all
adjustments necessary for a fair presentation of the results for the periods covered. All such adjustments are of a normal, recurring
nature unless disclosed otherwise. These interim consolidated financial statements, including notes, have been prepared in accordance
with the applicable rules of the Securities and Exchange Commission (“SEC”) and do not include all of the information and
disclosures required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. These interim
consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying
notes included in the Trust's Form 10-K for the year ended December 31, 2015.
Cash and Cash Equivalents—The Trust considers all highly liquid investments with an original maturity of three months or less
to be cash equivalents.
Restricted Cash—Restricted cash includes reserves held in escrow for normal replacements of furniture, fixtures and equipment
(“FF&E”), property improvement plans (each, a "PIP"), real estate taxes, and insurance pursuant to certain requirements in the Trust’s
hotel management, franchise, and loan agreements.
Investments in Hotels—The Trust allocates the purchase prices of hotels acquired based on the fair value of the property, FF&E,
and identifiable intangible assets acquired and the fair value of the liabilities assumed. In making estimates of fair value for purposes
of allocating the purchase price, the Trust utilizes a number of sources of information that are obtained in connection with the
acquisition of a hotel, including valuations performed by independent third parties and cost segregation studies. The Trust also
considers information obtained about each hotel as a result of its pre-acquisition due diligence in estimating the fair value of the
tangible and intangible assets acquired and liabilities assumed. Hotel acquisition costs, such as transfer taxes, title insurance,
environmental and property condition reviews, and legal and accounting fees, are expensed in the period incurred.
Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets, generally 15
to 40 years for buildings and building improvements and three to ten years for FF&E. Leasehold improvements are amortized over the
shorter of the lease term or the useful lives of the related assets. Replacements and improvements at the hotels are capitalized, while
repairs and maintenance are expensed as incurred. Upon the sale or retirement of property and equipment, the cost and related
accumulated depreciation are removed from the Trust’s accounts and any resulting gain or loss is recognized in the consolidated
statements of operations.
Intangible assets and liabilities are recorded on non-market contracts, including air rights, lease, management, and franchise
agreements, assumed as part of the acquisition of certain hotels. Above-market and below-market contract values are based on the
present value of the difference between contractual amounts to be paid pursuant to the contracts assumed and the Trust’s estimate of
the fair market contract rates for corresponding contracts measured over a period equal to the remaining non-cancelable term of the
contracts assumed. No value is allocated to market contracts. Intangible assets and liabilities are amortized using the straight-line
method over the remaining non-cancelable term of the related contracts.
8
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The Trust reviews its hotels for impairment whenever events or changes in circumstances indicate that the carrying values of
the hotels may not be recoverable. Events or circumstances that may cause a review include, but are not limited to, adverse changes in
the demand for lodging at the hotels due to declining national or local economic conditions and/or new hotel construction in markets
where the hotels are located. When such conditions exist, management performs an analysis to determine if the estimated
undiscounted future cash flows from operations and the proceeds from the ultimate disposition of a hotel exceed its carrying value. If
the estimated undiscounted future cash flows are less than the carrying amount of the asset, an adjustment to reduce the carrying
amount to the related hotel’s estimated fair market value is recorded and an impairment loss is recognized. No impairment losses have
been recognized related to any hotels for the three and six months ended June 30, 2016 and 2015.
The Trust classifies a hotel as held for sale in the period in which it has made the decision to dispose of the hotel, a binding
agreement to purchase the hotel has been signed under which the buyer has committed a significant amount of nonrefundable cash,
and no significant financing contingencies exist which could cause the transaction not to be completed in a timely manner. If these
criteria are met, depreciation and amortization of the hotel will cease and an impairment loss will be recognized if the fair value of the
hotel, less the costs to sell, is lower than the carrying amount of the hotel. If the sale represents a strategic shift that has (or will have) a
major effect on the Trust's operations and financial results, the Trust will classify the loss, together with the related operating results,
as discontinued operations in the consolidated statements of operations and will classify the related assets and liabilities as held for
sale in the consolidated balance sheets. As of June 30, 2016, the Trust had no assets held for sale or liabilities related to assets held for
sale.
Revenue Recognition—Revenues from operations of the hotels are recognized when the services are provided. Revenues consist
of room sales, food and beverage sales, and other hotel department revenues, such as parking, marina, theater, telephone, and gift shop
sales.
Prepaid Expenses and Other Assets—Prepaid expenses and other assets consist of prepaid real estate taxes, prepaid insurance,
deposits on hotel acquisitions and loan applications, deferred franchise costs, inventories, deferred tax assets, and other assets.
Deferred Financing Costs—Deferred financing costs are recorded at cost and consist of loan fees and other costs incurred in
issuing debt. Amortization of deferred financing costs is computed using a method that approximates the effective interest method
over the term of the related debt and is included in interest expense in the consolidated statements of operations. Unamortized deferred
financing costs are included as a direct deduction from long-term debt in the consolidated balance sheets.
Derivative Instruments—From time to time, the Trust is a party to interest rate swaps, which are considered derivative
instruments, in order to manage its interest rate exposure. The Trust’s interest rate risk management objective is to limit the impact of
interest rate changes on earnings and cash flows. The Trust records derivative instruments at fair value as either assets or liabilities and
designates them as cash flow hedging instruments at inception. The Trust evaluates the hedge effectiveness of the designated cash
flow hedging instruments on a quarterly basis and records the effective portion of the change in the fair value of the cash flow hedging
instruments as other comprehensive income (loss). Amounts reported in accumulated other comprehensive income (loss) related to
cash flow hedging instruments are reclassified to interest expense as interest payments are made on the variable-rate debt being
hedged. The Trust does not enter into derivative instruments for trading or speculative purposes and monitors the financial stability
and credit standing of its counterparties.
Fair Value Measurements—The Trust accounts for certain assets and liabilities at fair value. In evaluating the fair value of both
financial and non-financial assets and liabilities, GAAP outlines a valuation framework and creates a fair value hierarchy that
distinguishes between market assumptions based on market data (observable inputs) and the reporting entity’s own assumptions about
market data (unobservable inputs). The three levels of the fair value hierarchy are as follows:
Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the
measurement date. An active market is defined as a market in which transactions occur with sufficient frequency and volume to
provide pricing on an ongoing basis.
Level 2 – Inputs include quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar
assets or liabilities in markets that are not active (markets with few transactions), inputs other than quoted prices that are observable
for the asset or liability (e.g., interest rates, yield curves), and inputs that are derived principally from or corroborated by observable
market data correlation or other means.
Level 3 – Unobservable inputs reflect the reporting entity’s own assumptions about the pricing of an asset or liability when
observable inputs are not available or when there is minimal, if any, market activity for an identical or similar asset or liability at the
measurement date.
Income Taxes—The Trust has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code. As a
REIT, the Trust generally will not be subject to federal income tax on that portion of its net income that does not relate to any of the
Trust's TRSs, and that is currently distributed to its shareholders. Our TRSs, which lease the Trust’s hotels from the subsidiaries of the
Operating Partnership owning them, are subject to federal and state income taxes.
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The Trust accounts for income taxes using the asset and liability method under which deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Valuation allowances are provided if based upon the weight of the available
evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
Share-Based Compensation—From time to time, the Trust grants restricted share awards to employees and trustees. To date,
the Trust has granted two types of restricted share awards: (1) awards that vest solely on continued employment or service (time-based
awards) and (2) awards that vest based on the Trust achieving specified levels of relative total shareholder return and continued
employment (performance-based awards). The Trust measures share-based compensation expense for the restricted share awards
based on the fair value of the awards on the date of grant. The fair value of time-based awards is determined based on the closing price
of the Trust’s common shares on the measurement date, which is generally the date of grant. The fair value of performance-based
awards is determined using a Monte Carlo simulation performed by an independent third party. For time-based awards, share-based
compensation expense is recognized on a straight-line basis over the life of the entire award. For performance-based awards,
share-based compensation expense is recognized over the requisite service period for each award. No share-based compensation
expense is recognized for awards for which employees or trustees do not render the requisite service.
Earnings Per Share—Basic earnings per share is computed by dividing net income available to common shareholders, adjusted
for dividends declared on and undistributed earnings allocated to unvested time-based awards, by the weighted-average number of
common shares outstanding during the period. Diluted earnings per share is computed by dividing net income available to common
shareholders, adjusted for dividends declared on and undistributed earnings allocated to unvested time-based awards, by the
weighted-average number of common shares outstanding, plus potentially dilutive securities, such as unvested performance-based
awards, during the period. The Trust’s unvested time-based awards are entitled to receive non-forfeitable dividends, if declared.
Therefore, unvested time-based awards qualify as participating securities, requiring the allocation of dividends and undistributed
earnings under the two-class method to calculate basic earnings per share. The percentage of undistributed earnings allocated to the
unvested time-based awards is based on the proportion of the weighted-average unvested time-based awards outstanding during the
period to the total of the weighted-average common shares and unvested time-based awards outstanding during the period. No
adjustment is made for shares that are anti-dilutive during the period.
Segment Information—The Trust has determined that its business is conducted in one reportable segment, hotel ownership.
Use of Estimates—The preparation of the interim consolidated financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the interim consolidated financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Recent Accounting Pronouncements—In April 2015, the Financial Accounting Standards Board ("FASB") issued updated
accounting guidance for the presentation of debt issuance costs in the consolidated balance sheets. Under the new accounting
guidance, debt issuance costs are shown as a direct deduction from the related debt liability rather than as an asset in the consolidated
balance sheet. The amortization of the costs will continue to be included in interest expense in the consolidated statement of
operations. The new accounting guidance is effective for interim and annual periods beginning on or after December 15, 2015 and is
to be applied on a retrospective basis. The Trust adopted the new accounting guidance on January 1, 2016. As a result, $6.5 million of
unamortized deferred financing costs, which was previously presented as an asset as of December 31, 2015, is now presented within
long-term debt. This reclassification had no effect on previously reported results of operations or retained earnings. The Trust does not
believe that the adoption of this guidance has a material impact on the consolidated financial statements.
3. Acquisitions
The Trust has acquired the following hotels since January 1, 2015 (in thousands, except rooms data):
Hotel
Royal Palm South Beach Miami, a Tribute Portfolio
Resort (1)
Location
Net Assets
Acquired
Rooms
Miami Beach, FL
393
Los Angeles, CA
182
$
Acquisition Date
153,662
March 9, 2015
101,687
April 30, 2015
Ace Hotel and Theater Downtown Los Angeles
575
$
255,349
(1) As part of the acquisition, the Trust assumed a $125.0 million term loan with a carrying value that approximated its fair value at the date of acquisition. See
Note 7, "Long-Term Debt," for additional information related to the term loan.
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The allocation of the purchase prices to the assets acquired and liabilities assumed based on their fair values was as follows (in
thousands):
2015 Acquisitions
Land and land improvements
$
64,462
Buildings
294,498
Furniture, fixtures and equipment
20,518
Cash
100
Accounts receivable, net
1,823
Prepaid expenses and other assets
Accounts payable and accrued expenses
Other liabilities
Mortgage loan
Net assets acquired
3,162
(4,089)
(125)
(125,000)
$
255,349
4. Disposition
On April 14, 2016, the Trust sold the separate, five-room villa building and related land parcel at the Hyatt Centric Santa
Barbara for $2.1 million, including sold working capital. Net proceeds from the sale were $2.0 million, which resulted in the
recognition of a gain on sale of $0.6 million. This sale did not represent a strategic shift that had (or will have) a major effect on the
Trust's operations and financial results, and therefore, did not qualify to be reported as discontinued operations.
5. Property and Equipment
Property and equipment as of June 30, 2016 and December 31, 2015 consisted of the following (in thousands):
June 30, 2016
December 31, 2015
Land and land improvements
$
319,020
$
319,702
Buildings and leasehold improvements
1,630,010
1,628,124
193,847
191,092
7,010
3,276
Furniture, fixtures and equipment
Construction-in-progress
2,149,887
(252,249)
Less: accumulated depreciation and amortization
Property and equipment, net
$
1,897,638
2,142,194
(215,250)
$
1,926,944
6. Intangible Assets and Liability
Intangible assets and liability as of June 30, 2016 and December 31, 2015 consisted of the following (in thousands):
June 30, 2016
December 31, 2015
Intangible assets:
Air rights contract(1)
$
36,105
$
36,105
Favorable ground leases(2)
Less: accumulated amortization
3,568
3,568
39,673
(3,549)
39,673
(3,259)
Intangible assets, net
$
36,124
$
36,414
$
14,236 $
(1,865)
14,236
(1,668)
$
12,371
12,568
Intangible liability:
Unfavorable contract liability(2)
Less: accumulated amortization
Intangible liability, net (included within other liabilities)
11
$
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(1) In conjunction with the acquisition of the Hyatt Regency Boston on March 18, 2010, the Trust acquired an air rights contract which expires in September 2079
and that requires no payments through maturity. The Trust recorded the fair value of the air rights contract of $36.1 million as an intangible asset and is
amortizing the value over the term of the contract.
(2) In conjunction with the acquisition of the Denver Marriott City Center on October 3, 2011, the Trust assumed three lease agreements for land parcels
underlying a portion of the hotel with initial terms ending July 2068, February 2072 and April 2072. The Trust concluded that the terms of two of the three
ground leases were below market terms and recorded an aggregate of $4.8 million of favorable ground lease assets at the time. On July 29, 2014, the Trust
terminated one of the two ground leases with below market terms in connection with acquiring the associated land parcel. The Trust is amortizing the
remaining favorable ground lease asset over the life of the respective lease and including within indirect hotel operating expenses in the interim consolidated
statements of operations. Also in conjunction with the acquisition of the Denver Marriott City Center, the Trust assumed a management contract with a
non-cancelable term ending December 2047. The Trust concluded that the management agreement terms were above market terms and recorded a $14.2
million unfavorable contract liability, which the Trust is amortizing over the remaining non-cancelable term and including within indirect hotel operating
expenses in the interim consolidated statements of operations.
7. Long-Term Debt
Long-term debt as of June 30, 2016 and December 31, 2015 consisted of the following (in thousands):
Revolving credit facility(1)
Term loan:
Origination
Original
Principal
Amount
July 2010
Royal Palm South Beach
Miami, a Tribute Portfolio
Resort (2)
March 2015
Other mortgage loans:
Maturity
Interest
Rate
Principal
Amortization
Period
n/a
March 2019
Floating
n/a
$125,000
March 2017
Floating
n/a
125,000
125,000
$
June 30,
December 31,
2016
2015
50,000
$
110,000
Hyatt Regency Boston(3)
June 2011
$95,000
July 2016
5.01%
30
—
88,601
Courtyard Washington
Capitol Hill/Navy Yard (4)
June 2011
$37,497
November
2016
5.90%
30
34,099
34,491
Boston Marriott Newton
May 2013
$60,000
June 2020
3.63%
25
55,425
56,221
Le Meridien San Francisco
July 2013
$92,500
August 2020
3.50%
25
85,738
86,979
$70,000
August 2022
4.90%
30
65,674
66,285
Hilton Checkers Los
Angeles
July 2012
February
2013
$32,000
March 2023
4.11%
30
30,185
30,480
W Chicago – City Center
July 2013
$93,000
August 2023
4.25%
25
86,877
88,008
Hyatt Herald Square New
York/Hyatt Place New
York Midtown South (6)
July 2014
$90,000
July 2024
4.30%
30
90,000
90,000
June 2016
$150,000
July 2026
4.25%
30
150,000
—
772,998
776,065
Denver Marriott City Center
(5)
Hyatt Regency Boston
Unamortized premium(4)
Unamortized deferred financing costs
Long-term debt
70
(6,401)
$
766,667
176
(6,493)
$
769,748
(1) The Trust may exercise an option to extend the maturity by one year, subject to certain customary conditions. As of June 30, 2016, the interest rate in effect
was 2.01%. See below for additional information related to the revolving credit facility.
(2) On March 9, 2015, in connection with the acquisition of the Royal Palm South Beach Miami, a Tribute Portfolio Resort, the Trust assumed an existing loan
agreement with an outstanding principal balance of $125.0 million. The term loan was amended and restated at the time of assumption and provides for a new
two-year term and, subject to certain customary conditions, an option to extend the maturity by one year. The term loan bears interest equal to one-month
LIBOR plus 2.40%. Contemporaneous with the assumption of the term loan, the Trust entered into an interest rate swap to effectively fix the interest rate on the
term loan for the new two-year term at 3.34% per annum. Under the terms of this interest rate swap, the Trust pays fixed interest of 0.94% per annum on a
notional amount of $125.0 million and receives floating rate interest equal to one-month LIBOR. The effective date of this interest rate swap is March 9, 2015
and it matures on March 9, 2017.
( On April 6, 2016, the Trust prepaid without penalty this
3 mortgage loan.
)
(4) On June 30, 2011, in connection with the acquisition of the Courtyard Washington Capitol Hill/Navy Yard, the Trust assumed an existing loan agreement with
an outstanding principal balance of $37.5 million. Based on interest rates on similar types of debt instruments at the time of assumption, the Trust recorded the
loan at its estimated fair value of $38.6 million, which included a premium on mortgage loan of $1.1 million. Amortization of premium on mortgage loan is
computed using a method that approximates the effective interest method over the term of the loan agreement and is included in interest expense in the interim
consolidated statements of operations.
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(5) The loan has a term of 30 years, but is callable by the lender after 10 years, and the Trust expects the lender to call the loan at that time. The indicated maturity
is based on the date the loan is callable by the lender.
(6) The loan requires interest-only payments for the first two years and principal and interest payments
thereafter.
Revolving credit facility
On March 4, 2015, the Trust entered into an amended credit agreement to (1) convert its revolving credit facility from a secured
to an unsecured revolving credit facility, (2) increase the maximum borrowing availability under the revolving credit facility from
$250.0 million to $300.0 million, (3) lower the interest rate to LIBOR plus 1.55% - 2.30% (the spread over LIBOR continues to be
based on the Trust's consolidated leverage ratio), and (4) extend the maturity date to March 2019. The amended credit agreement
provides for the possibility of further future increases, up to a maximum of $450.0 million, in accordance with the terms of the
amended credit agreement. The amended credit agreement also provides for an extension of the maturity date by one year, subject to
satisfaction of certain customary conditions.
The amount that the Trust can borrow under the revolving credit facility is based on the value of the Trust's hotels included in
the borrowing base, as defined in the amended credit agreement. As of June 30, 2016, the borrowing base included 11 of the Trust's
hotels providing borrowing availability of $300.0 million under the revolving credit facility, of which $250.0 million remained
available. The amended credit agreement contains more favorable financial covenants, including the leverage ratio and minimum
tangible net worth requirement, as compared to those in effect prior to the amendment, and has additional financial covenants typically
found in similar unsecured revolving credit facilities, including a consolidated secured debt ratio, an unsecured leverage ratio and an
unsecured debt service coverage ratio.
Other
Certain of the Trust's mortgage loan agreements contain standard financial covenants relating to coverage ratios and standard
provisions that require loan servicers to maintain escrow accounts for certain items, including real estate taxes, insurance premiums,
and normal replacements of FF&E.
As of June 30, 2016, the Trust was in compliance with all financial covenants under its borrowing arrangements. As of June 30,
2016, the Trust’s weighted-average interest rate on its long-term debt was 3.96%. Future scheduled principal payments of debt
obligations (assuming no exercise of extension options) as of June 30, 2016 are as follows (in thousands):
Year
Amounts
2016
$
39,883
2017
137,648
2018
13,178
2019
63,732
2020
135,316
Thereafter
383,241
$
13
772,998
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8. Earnings Per Share
The following is a reconciliation of the amounts used in calculating basic and diluted earnings per share (in thousands, except
share and per share data):
Three Months Ended June 30,
2016
Six Months Ended June 30,
2015
2016
2015
Numerator:
Net income available to common shareholders
$
Less: Dividends declared on unvested time-based awards
Less: Undistributed earnings allocated to unvested time- based
awards
Net income available to common shareholders, excluding amounts
attributable to unvested time-based awards
$
Denominator:
Weighted-average number of common shares
outstanding–basic
26,120 $
(146)
21,623 $
(136)
33,768 $
(289)
(15)
(7)
—
25,959
$
21,480
$
33,479
20,753
(273)
—
$
20,480
58,722,104
58,544,392
58,701,815
56,373,504
141,946
412,091
134,931
410,368
58,864,050
58,956,483
58,836,746
56,783,872
Effect of dilutive unvested performance-based awards
Weighted-average number of common shares
outstanding–diluted
Net income available per common share:
Basic
$
0.44
$
0.37
$
0.57
$
0.36
$
0.44
$
0.36
$
0.57
$
0.36
Diluted
For the three and six months ended June 30, 2016 and 2015, 829,025 unvested performance-based awards and 227,213
unvested performance-based awards, respectively, were excluded from diluted weighted-average common shares outstanding as the
awards either had not achieved the specific levels of relative total shareholder return required for vesting at each period end or their
effect would have been anti-dilutive.
9. Shareholders’ Equity
Common Shares—The Trust is authorized to issue up to 400,000,000 common shares, $.01 par value per share. Each
outstanding common share entitles the holder to one vote on all matters submitted to a vote of shareholders. Holders of the Trust’s
common shares are entitled to receive distributions when authorized by the Trust’s board of trustees out of assets legally available for
the payment of distributions.
On September 6, 2013, the Trust entered into sales agreements with two sales agents, pursuant to which the Trust may issue and
sell up to $100.0 million in the aggregate of its common shares through a continuous at-the-market offering or other methods (the
“ATM program”). The Trust did not sell any common shares under the ATM program during the six months ended June 30, 2016. As
of June 30, 2016, $76.0 million of common shares remained available for issuance under the ATM program.
On March 27, 2015, the Trust completed an underwritten public offering of 4,600,000 common shares at a price of $33.47 per
share, including 600,000 shares sold pursuant to the underwriter's exercise of its option to purchase additional shares. After deducting
underwriting fees and offering costs, the Trust generated net proceeds of $153.7 million.
On September 29, 2015, the Trust's board of trustees authorized a share repurchase program pursuant to which the Trust may
acquire up to $100.0 million of its common shares. The repurchase program authorizes the Trust to repurchase its common shares
from time to time through open market purchases, negotiated transactions or other means, in accordance with applicable securities
laws and other restrictions. The repurchase program expires in September 2018, but may be suspended or discontinued at any time,
and does not obligate the Trust to acquire any particular amount of its shares. As of June 30, 2016, $100.0 million remained available
for the repurchase of common shares.
For the six months ended June 30, 2016, the Trust issued 1,717 unrestricted common shares and 448,146 restricted common
shares to its trustees and employees. For the six months ended June 30, 2016, the Trust repurchased 7,854 common shares from
employees to satisfy the minimum statutory tax withholding requirements related to the vesting of their previously granted restricted
common shares. As of June 30, 2016, the Trust had 60,101,531 common shares outstanding.
For the six months ended June 30, 2016, the Trust paid or its board of trustees declared the following dividends per common
share:
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Record Date
Payment Date
Dividend Per Common Share
Fourth Quarter 2015
December 31, 2015
January 15, 2016 $
0.40
March 31, 2016
April 15, 2016 $
0.40
June 30, 2016
July 15, 2016 $
0.40
First Quarter 2016
Second Quarter 2016
Preferred Shares—The Trust is authorized to issue up to 100,000,000 preferred shares, $.01 par value per share. The Trust’s
board of trustees is required to set for each class or series of preferred shares the terms, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends or other distributions, qualifications, and terms or conditions of redemption. As of
June 30, 2016, the Trust had 5,000,000 shares of its 7.75% Series A Cumulative Redeemable Preferred Shares outstanding.
Holders of Series A Cumulative Redeemable Preferred Shares are entitled to receive, when and as authorized by the Trust's
board of trustees, out of funds legally available for the payment of dividends, cumulative cash dividends at the rate of 7.75% per
annum of the $25.00 per share liquidation preference, equivalent to $1.9375 per annum per share. Dividends on the Series A
Cumulative Redeemable Preferred Shares are cumulative from the date of original issuance and are payable quarterly in arrears on or
about the 15th day of each of January, April, July and October. The Series A Cumulative Redeemable Preferred Shares rank senior to
the Trust's common shares with respect to the payment of dividends; the Trust will not declare or pay any dividends, or set aside any
funds for the payment of dividends, on its common shares unless the Trust also has declared and either paid or set aside for payment
the full cumulative dividends on the Series A Cumulative Redeemable Preferred Shares.
For the six months ended June 30, 2016, the Trust paid or its board of trustees declared the following dividends per preferred
share:
Record Date
Payment Date
Dividend Per Series A
Cumulative Redeemable
Preferred Share
Fourth Quarter 2015
December 31, 2015
January 15, 2016 $
0.484375
March 31, 2016
April 15, 2016 $
0.484375
June 30, 2016
July 15, 2016 $
0.484375
First Quarter 2016
Second Quarter 2016
The Trust cannot redeem the Series A Cumulative Redeemable Preferred Shares prior to July 17, 2017, except as described
below and in certain limited circumstances related to the ownership limitation necessary to preserve the Trust's qualification as a
REIT. On and after July 17, 2017, the Trust, at its option, can redeem the Series A Cumulative Redeemable Preferred Shares, in whole
or from time to time in part, at a redemption price of $25.00 per share, plus any accrued and unpaid dividends. The holders of Series A
Cumulative Redeemable Preferred Shares have no voting rights, except in certain limited circumstances.
Upon the occurrence of a change of control, as defined in the articles supplementary designating the Series A Cumulative
Redeemable Preferred Shares, as a result of which the Trust's common shares and the common securities of the acquiring or surviving
entity are not listed or quoted on the New York Stock Exchange, the NYSE MKT or the NASDAQ Stock Market, or any successor
exchanges, the Trust may, at its option, redeem the Series A Cumulative Redeemable Preferred Shares in whole or in part
within 120 days following the change of control by paying $25.00 per share, plus any accrued and unpaid dividends through the date
of redemption. If the Trust does not exercise its right to redeem the Series A Cumulative Redeemable Preferred Shares upon a change
of control, the holders of the Series A Cumulative Redeemable Preferred Shares have the right to convert some or all of their shares
into a number of the Trust's common shares based on a defined formula subject to a share cap. The share cap on each Series A
Cumulative Redeemable Preferred Share is 2.9189 common shares.
10. Equity Plan
In January 2010, the Trust established the Chesapeake Lodging Trust Equity Plan (the “Plan”), which provides for the issuance
of equity-based awards, including restricted shares, unrestricted shares, share options, share appreciation rights, and other awards
based on the Trust’s common shares. Employees and trustees of the Trust and other persons that provide services to the Trust are
eligible to participate in the Plan. The compensation committee of the board of trustees administers the Plan and determines the
number of awards to be granted, the vesting period, and the exercise price, if any.
The Trust initially reserved 454,657 common shares for issuance under the Plan at its establishment. In May 2012, the Trust’s
common shareholders approved an amendment to the Plan such that the number of shares available for issuance under the Plan was
increased by 2,750,000. Shares that are issued under the Plan to any person pursuant to an award are counted against this limit as one
share for every one share granted. If any shares covered by an award are not purchased or are forfeited, if an award is settled in cash,
or if an award otherwise terminates without delivery of any shares, then the number of common
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shares counted against the aggregate number of shares available under the Plan with respect to the award will, to the extent of any
such forfeiture or termination, again be available for making awards under the Plan. As of June 30, 2016, subject to increases that may
result in the case of any future forfeiture or termination of currently outstanding awards, 819,098 common shares were reserved and
available for future issuances under the Plan.
The Trust will make appropriate adjustments to outstanding awards and the number of shares available for issuance under the
Plan, including the individual limitations on awards, to reflect share dividends, share splits, spin-offs and other similar events. While
the compensation committee can terminate or amend the Plan at any time, no amendment can adversely impair the rights of grantees
with respect to outstanding awards. In addition, an amendment will be contingent on approval of the Trust’s common shareholders to
the extent required by law or if the amendment would materially increase the benefits accruing to participants under the Plan,
materially increase the aggregate number of shares that can be issued under the Plan, or materially modify the requirements as to
eligibility for participation in the Plan. Unless terminated earlier, the Plan will terminate in January 2020, but will continue to govern
unexpired awards.
For the six months ended June 30, 2016, the Trust granted 448,146 restricted common shares to certain employees and trustees,
of which 162,229 shares were time-based awards and 285,917 shares were performance-based awards (the “2016 Performance-Based
Awards”). The time-based awards are generally eligible to vest at the annual rate of one-third of the number of restricted shares
granted commencing on the first anniversary of their issuance. The 2016 Performance-Based Awards are eligible to vest at December
31, 2018. Dividends on the 2016 Performance-Based Awards accrue, but are not paid unless the related shares vest. The fair value of
the 2016 Performance-Based Awards was $10.54 per share and was determined using a Monte Carlo simulation with the following
assumptions: volatility of 21.04%; an expected term equal to the requisite service period for the awards; and a risk-free interest rate of
1.38%.
The actual number of shares under the 2016 Performance-Based Awards that vest will be based on the Trust’s total shareholder
return (“TSR”), as defined in the restricted share agreements, measured over a three-year performance period ending December 31,
2018, relative to the total return generated by the SNL US Hotel REIT Index prepared by SNL Financial LC (the “Index”). The payout
schedule for the 2016 Performance-Based Awards is as follows, with linear interpolation for performance between 67% and 100%,
and between 100% and 133% of the Index:
Trust TSR as % of
Index Total Return
Payout
(% of Maximum)
<67%
67%
100%
≥133%
0%
25%
50%
100%
If the Trust’s TSR is negative for the performance period, no shares under the 2016 Performance-Based Awards will vest. If the
Trust’s TSR is positive for the performance period and the total return of the Index is negative, 100% of the shares subject to vesting
under the 2016 Performance-Based Awards will vest.
As of June 30, 2016, there was approximately $11.8 million of unrecognized share-based compensation expense related to
restricted common shares. The unrecognized share-based compensation expense is expected to be recognized over a weighted-average
period of 1.8 years.
The following is a summary of the Trust’s restricted common share activity for the six months ended June 30, 2016:
Weighted-Average
Grant-Date
Fair Value
Number of
Shares
Restricted common shares as of December 31, 2015
1,057,270
$
17.40
448,146
$
15.58
(133,213)
$
27.58
—
$
—
1,372,203
$
15.81
Granted
Vested
Forfeited
Restricted common shares as of June 30, 2016
16
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11. Fair Value Measurements and Derivative Instrument
The following table sets forth the Trust’s financial assets and liabilities measured at fair value by level within the fair value
hierarchy (in thousands). Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the
fair value measurement.
Fair Value at June 30, 2016
Total
Level 1
Liabilities:
Interest rate swap (included within other liabilities)
Level 2
Level 3
$
406
$
—
$
406
$
—
$
406
$
—
$
406
$
—
Derivative instruments are classified within Level 2 of the fair value hierarchy as they are valued using third-party pricing
models which contain inputs that are derived from observable market data. Where possible, the values produced by the pricing models
are verified to market prices. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves,
credit spreads, measures of volatility, and correlations of such inputs.
The Trust’s financial instruments in addition to those disclosed in the table above include cash and cash equivalents, restricted
cash, accounts receivable, accounts payable and accrued expenses, and long-term debt. The carrying values reported in the
consolidated balance sheets for cash and cash equivalents, restricted cash, accounts receivable, and accounts payable and accrued
expenses approximate fair value. The Trust estimates the fair value of its fixed rate debt by discounting the future cash flows of each
instrument using estimated market rates of debt instruments with similar maturities and credit profiles. These inputs are classified as
Level 3 within the fair value hierarchy. As of June 30, 2016, the carrying value reported in the consolidated balance sheet for the
Trust's long-term debt approximated its fair value.
12. Commitments and Contingencies
Management Agreements—The Trust’s hotels operate pursuant to management agreements with various third-party
management companies. Each management company receives a base management fee generally between 2% and 4% of hotel
revenues. The management companies are also eligible to receive an incentive management fee if hotel operating income, as defined
in the management agreements, exceeds certain performance thresholds. The incentive management fee is generally calculated as a
percentage of hotel operating income after the Trust has received a priority return on its investment in the hotel.
Franchise Agreements—As of June 30, 2016, 12 of the Trust’s hotels operated pursuant to franchise agreements with hotel
brand companies and 10 hotels operated pursuant to management agreements with hotel brand companies that allowed them to operate
under their respective brands. Under the 12 franchise agreements, the Trust generally pays a royalty fee ranging from 3% to 6% of
room revenues and up to 3% of food and beverage revenues, plus additional fees for marketing, central reservation systems, and other
franchisor costs that amount to between 1% and 5% of room revenues.
Ground Lease Agreements—The Trust leases the land underlying the Hyatt Regency Mission Bay Spa and Marina pursuant to a
lease agreement, which has an initial term ending January 2056. Rent due under the lease agreement is the greater of base rent or
percentage rent. Base rent is currently $2.3 million per year. Base rent resets every three years over the remaining term of the lease
equal to 75% of the average of the actual rent paid over the two years preceding the base rent reset year. The next base rent reset year
is 2019. Annual percentage rent is calculated based on various percentages of the hotel's various sources of revenue, including room,
food and beverage, and marina rentals, earned during the period.
The Trust also leases the land underlying the JW Marriott San Francisco Union Square pursuant to a lease agreement, which has
a term ending January 2083. Rent due under the lease agreement is the greater of base rent or percentage rent. Base rent is currently
$1.7 million per year. Base rent resets every five years over the remaining term of the lease based on the level of inflation, as defined
in the agreement, over the preceding five years, but in no event resulting in an increase of more than 125% of the base rent in effect
immediately prior to the reset year (nor subject to any decrease). The next base rent reset year is 2019. In January 2034, base rent will
reset to 10% of the fair market value of the underlying land as determined by a valuation performed by an independent third party, if
such reset results in an increase over the base rent in effect immediately prior to the reset year. Annual percentage rent is calculated
based on various percentages of the hotel's various sources of revenue, including room and food and beverage, earned during the
period.
FF&E Reserves—Pursuant to its management, franchise and loan agreements, the Trust is required to establish a FF&E
reserve for each hotel to cover the cost of replacing FF&E. Contributions to the FF&E reserve are based on a percentage of gross
revenues at each hotel. The Trust is generally required to contribute between 3% and 5% of gross revenues over the term of the
agreements.
Litigation—The Trust is not involved in any material litigation nor, to its knowledge, is any material litigation threatened
against the Trust.
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Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended, and as such may involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future
results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements, which
are based on certain assumptions and describe our future plans, strategies and expectations, are generally identified by our use of
words, such as “intend,” “plan,” “may,” “should,” “will,” “project,” “estimate,” “anticipate,” “believe,” “expect,” “continue,”
“potential,” “opportunity,” and similar expressions, whether in the negative or affirmative. We cannot guarantee that we actually will
achieve these plans, intentions or expectations. All statements regarding our expected financial position, business and financing plans
are forward-looking statements. Factors which could have a material adverse effect on our operations and future prospects include, but
are not limited to:
• U.S. economic conditions generally and the real estate market and the lodging industry specifically;
•
management and performance of our
hotels;
•
our plans for renovation of our
hotels;
•
our financing plans and the terms on which capital is available
to us;
•
supply and demand for hotel rooms in our current and proposed market
areas;
•
our ability to acquire additional hotels and the risk that potential acquisitions may not be completed or perform in accordance
with expectations;
•
legislative/regulatory changes, including changes to laws governing taxation of real estate investment trusts; and
•
our
competition.
These risks and uncertainties, together with the information contained in our Form 10-K for the year ended December 31, 2015
under the caption “Risk Factors,” should be considered in evaluating any forward-looking statement contained in this report or
incorporated by reference herein. All forward-looking statements speak only as of the date of this report. All subsequent written and
oral forward-looking statements attributable to us or any person acting on our behalf are qualified by the cautionary statements in this
section. We undertake no obligation to update or publicly release any revisions to forward-looking statements to reflect events,
circumstances or changes in expectations after the date of this report, except as required by law.
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Overview
The Trust was organized as a self-advised REIT in the state of Maryland in June 2009, with a focus on investments primarily in
upper-upscale hotels in major business and convention markets and, on a selective basis, premium select-service hotels in urban
settings or unique locations in the U.S. We completed our IPO in January 2010 and own the following 22 hotels as of the date of this
filing:
Hotel
Location
1
Hyatt Regency Boston
2
Hilton Checkers Los Angeles
3
Boston Marriott Newton
4
Le Meridien San Francisco
5
Homewood Suites Seattle Convention Center
6
Hotel Indigo San Diego Gaslamp Quarter
8
Courtyard Washington Capitol Hill/Navy Yard
9
Hotel Adagio San Francisco, Autograph Collection
Boston, MA
502
March 18, 2010
Los Angeles, CA
193
June 1, 2010
Newton, MA
430
July 30, 2010
San Francisco, CA
360
December 15, 2010
Seattle, WA
195
May 2, 2011
Chicago, IL
403
May 10, 2011
San Diego, CA
210
June 17, 2011
Washington, DC
204
June 30, 2011
San Francisco, CA
171
July 8, 2011
Denver, CO
613
October 3, 2011
New York, NY
122
December 22, 2011
Chicago, IL
520
August 21, 2012
San Diego, CA
429
September 7, 2012
Minneapolis, MN
222
October 30, 2012
New York, NY
185
March 14, 2013
New Orleans, LA
97
March 28, 2013
New Orleans, LA
410
April 25, 2013
San Francisco, CA
316
May 31, 2013
Santa Barbara, CA
200
June 27, 2013
San Francisco, CA
337
October 1, 2014
Miami Beach, FL
393
March 9, 2015
Los Angeles, CA
182
April 30, 2015
Denver Marriott City Center
11
Hyatt Herald Square New York
12
W Chicago – Lakeshore
13
Hyatt Regency Mission Bay Spa and Marina
14
The Hotel Minneapolis, Autograph Collection
15
Hyatt Place New York Midtown South
16
W New Orleans – French Quarter
17
Acquisition Date
W Chicago – City Center
7
10
Rooms
Le Meridien New Orleans
18
Hyatt Centric Fisherman's Wharf
19
Hyatt Centric Santa Barbara
20
JW Marriott San Francisco Union Square
21
Royal Palm South Beach Miami, a Tribute Portfolio Resort
22
Ace Hotel and Theater Downtown Los Angeles
6,694
Hotel Operating Metrics
We believe that the results of operations of our hotels are best explained by five key performance indicators: occupancy,
average daily rate ("ADR"), room revenue per available room ("RevPAR"), Adjusted Hotel EBITDA, and Adjusted Hotel EBITDA
Margin. See the “Non-GAAP Financial Measures” section for additional information on Adjusted Hotel EBITDA and Adjusted Hotel
EBITDA Margin.
Occupancy is a major driver of room revenue, as well as other revenue categories, such as food and beverage and parking.
Fluctuations in occupancy are accompanied by fluctuations in most categories of variable hotel operating expenses, such as utility
costs and certain labor costs, such as housekeeping. ADR helps to drive room revenue as well; however, it does not have a direct
effect on other revenue categories. Fluctuations in ADR are accompanied by fluctuations in limited categories of hotel operating
expenses, such as management fees and franchise fees, since variable hotel operating expenses generally do not increase or decrease
correspondingly. Thus, increases in RevPAR attributable to increases in occupancy typically result in varying levels of increases in
Adjusted Hotel EBITDA and Adjusted Hotel EBITDA Margin, while increases in RevPAR attributable to increases in ADR typically
result in greater levels of increases in Adjusted Hotel EBITDA and Adjusted Hotel EBITDA Margin.
Executive Summary
Our hotel portfolio generated RevPAR growth of 2.2% during the second quarter of 2016 as compared to the second quarter of
2015, driven by an increase in occupancy of 2.1 percentage points offset by a decrease in ADR of 0.2%. Our hotel portfolio
underperformed the U.S. industry average RevPAR growth of 3.5%, as reported by STR.
During the second quarter, we saw a slowdown in demand from corporate transient customers across our portfolio associated
with the generally softening macroeconomic conditions we are seeing in the U.S. and abroad. Our Chicago hotels
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were further negatively impacted as a result of an unfavorable convention calendar for the market as compared to the second quarter
of 2015. We did see positive growth trends continue from group customers throughout our portfolio, however, our portfolio’s
concentration in group business is significantly less than in transient business.
Despite modest revenue growth, our hotel portfolio was able to (1) increase market share (RevPAR Index increased by 0.8
percentage points during the second quarter of 2016) and (2) generate an increase in Adjusted Hotel EBITDA of 4.5% and increase
Adjusted Hotel EBITDA Margin by 50 basis points during the second quarter of 2016 as compared to the second quarter of 2015. We
continue to aggressively asset manage our hotels and work closely with our hotel operators to mitigate the current environment. We
expect the headwinds we saw during the second quarter to persist through the remainder of 2016.
Results of Operations
Comparison of three months ended June 30, 2016 and 2015
Results of operations for the three months ended June 30, 2016 include the operating activity of 22 hotels for the full period,
whereas the results of operations for the three months ended June 30, 2015 include the operating activity of 21 hotels for the full
period and one hotel for part of the period. We use the term “comparable hotel portfolio” to refer to those hotels owned for the entirety
of the two periods being compared and the term “non-comparable hotel portfolio” to refer to those hotels acquired or sold in either of
the two periods being compared. The comparable hotel portfolio for the three months ended June 30, 2016 and 2015 includes 21 of the
22 hotels owned as of June 30, 2016.
Revenues—Total revenue for the three months ended June 30, 2016 was $169.4 million, of which $161.3 million was
contributed by the comparable hotel portfolio and $8.1 million was contributed by the non-comparable hotel portfolio. Total revenue
for the three months ended June 30, 2015 was $162.1 million, of which $156.8 million was contributed by the comparable hotel
portfolio and $5.3 million was contributed by the non-comparable hotel portfolio. The increase in total revenue for the comparable
hotel portfolio was $4.5 million. We experienced increases in total revenue from our hotels located in Los Angeles, San Francisco,
Denver, Boston, Minneapolis, New Orleans and Miami, which were offset partially by decreases in total revenue from our hotels
located in Chicago, Seattle, Washington DC, and New York. The Hyatt Centric Fisherman's Wharf experienced a significant increase
in total revenue also due to the fact that the hotel was undergoing a comprehensive renovation during a portion of the three months
ended June 30, 2015. We experienced favorable convention calendars during the three months ended June 30, 2016 as compared to the
three months ended June 30, 2015 in San Francisco and Denver, which led to increased demand from group customers and contributed
to the increases in total revenue at the hotels located in those markets, and we experienced an unfavorable convention calendar in
Chicago, which led to decreased demand from group customers and primarily drove the decrease in total revenue at the hotels located
in that market.
Hotel operating expenses—Hotel operating expenses, excluding depreciation and amortization, for the three months ended
June 30, 2016 was $106.7 million, of which $101.3 million was contributed by the comparable hotel portfolio and $5.4 million was
contributed by the non-comparable hotel portfolio. Hotel operating expenses, excluding depreciation and amortization, for the three
months ended June 30, 2015 was $102.6 million, of which $98.9 million was contributed by the comparable hotel portfolio and $3.7
million was contributed by the non-comparable hotel portfolio. The increase in total hotel operating expenses for the comparable hotel
portfolio of $2.4 million was primarily a result of the increase in corresponding total revenue for the comparable hotel portfolio.
Specifically driving the increase in total hotel operating expenses were rooms expense and the following indirect hotel operating
expenses: general and administrative, sales and marketing, franchise fees, and management fees. Credit card commissions (included
within general and administrative), brand marketing fees (included within sales and marketing), franchise fees and management fees
are all variable hotel operating expenses calculated as a percentage of revenue and therefore, increased commensurate with the
increase in total revenues.
Depreciation and amortization—Depreciation and amortization expense for the three months ended June 30, 2016 and 2015
was $18.6 million and $17.9 million, respectively. The increase in depreciation and amortization expense was primarily attributable to
the acquisition of the Ace Hotel and Theater Downtown Los Angeles in April 2015.
Air rights contract amortization—Air rights contract amortization expense associated with the Hyatt Regency Boston for each
of the three months ended June 30, 2016 and 2015 was $0.1 million.
Corporate general and administrative—Corporate general and administrative expense for the three months ended June 30,
2016 and 2015 was $4.7 million and $4.5 million, respectively. Included in corporate general and administrative expense for the three
months ended June 30, 2016 and 2015 was $2.4 million and $2.0 million, respectively, of non-cash share-based compensation
expense. The increase in corporate general and administrative expense is primarily related to an increase in non-cash share-based
compensation expense related to restricted common shares granted to employees.
Hotel acquisition costs—Hotel acquisition costs for the three months ended June 30, 2015 was $0.5 million. There were no
hotel acquisitions occurring or hotel acquisition costs incurred during the three months ended June 30, 2016.
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Interest expense—Interest expense for the three months ended June 30, 2016 and 2015 was $7.6 million and $8.2 million,
respectively. The decrease is primarily related to (1) the decrease in long-term debt outstanding as compared to the three months
ended June 30, 2015 and (2) interest rate savings related to the prepayment of the Hyatt Regency Boston mortgage loan in April 2016.
Gain on sale of hotel—Gain on sale of hotel for the three months ended June 30, 2016 was $0.6 million and related to the sale
of the separate, five-room villa building and related land parcel at the Hyatt Centric Santa Barbara on April 14, 2016.
Income tax expense—Income tax expense for the three months ended June 30, 2016 and 2015 was $3.8 million and $4.3
million, respectively. Income tax expense is directly related to taxable income generated by our TRSs during the period.
Comparison of six months ended June 30, 2016 and 2015
Results of operations for the six months ended June 30, 2016 include the operating activity of 22 hotels for the full period,
whereas the results of operations for the six months ended June 30, 2015 include the operating activity of 20 hotels for the full period
and two hotels for part of the period. The comparable hotel portfolio for the six months ended June 30, 2016 and 2015 includes 20 of
our 22 hotels owned as of June 30, 2016.
Revenues—Total revenue for the six months ended June 30, 2016 was $310.0 million, of which $269.2 million was contributed
by the comparable hotel portfolio and $40.8 million was contributed by the non-comparable hotel portfolio. Total revenue for the six
months ended June 30, 2015 was $271.4 million, of which $252.5 million was contributed by the comparable hotel portfolio and $18.9
million was contributed by the non-comparable hotel portfolio. The increase in total revenue for the comparable hotel portfolio was
$16.7 million. We experienced increases in total revenue from our hotels located in Los Angeles, San Francisco, Denver, Boston, and
New Orleans, which were offset partially by decreases in total revenue from our hotels located in Chicago and Washington DC. The
Hyatt Regency Boston, the Le Meridien San Francisco and the Hyatt Centric Fisherman's Wharf experienced significant increases in
total revenue due to the fact that the hotels were undergoing comprehensive renovations during a portion of the six months ended June
30, 2015. We experienced a favorable convention calendar during the six months ended June 30, 2016 as compared to the six months
ended June 30, 2015 in San Francisco, which led to increased demand from group customers and contributed to the increase in total
revenue at the hotels located in that market, and we experienced an unfavorable convention calendar in Chicago, which led to
decreased demand from group customers and primarily drove the decrease in total revenue at the hotels located in that market.
Hotel operating expenses—Hotel operating expenses, excluding depreciation and amortization, for the six months ended
June 30, 2016 was $207.1 million, of which $183.4 million was contributed by the comparable hotel portfolio and $23.7 million was
contributed by the non-comparable hotel portfolio. Hotel operating expenses, excluding depreciation and amortization, for the six
months ended June 30, 2015 was $186.5 million, of which $175.1 million was contributed by the comparable hotel portfolio and $11.4
million was contributed by the non-comparable hotel portfolio. The increase in total hotel operating expenses for the comparable hotel
portfolio of $8.3 million was primarily a result of the increase in corresponding total revenue for the comparable hotel portfolio.
Specifically driving the increase in total hotel operating expenses were rooms expense, food and beverage expense and the following
indirect hotel operating expenses: general and administrative, sales and marketing, repairs and maintenance, franchise fees, and
management fees. Credit card commissions (included within general and administrative), brand marketing fees (included within sales
and marketing), franchise fees and management fees are all variable hotel operating expenses calculated as a percentage of revenue
and therefore, increased commensurate with the increase in total revenues.
Depreciation and amortization—Depreciation and amortization expense for the six months ended June 30, 2016 and 2015 was
$37.1 million and $32.9 million, respectively. The increase in depreciation and amortization expense was primarily attributable to the
acquisitions of the Royal Palm South Beach Miami, a Tribute Portfolio Resort in March 2015 and the Ace Hotel and Theater
Downtown Los Angeles in April 2015.
Air rights contract amortization—Air rights contract amortization expense associated with the Hyatt Regency Boston for each
of the six months ended June 30, 2016 and 2015 was $0.3 million.
Corporate general and administrative—Corporate general and administrative expense for the six months ended June 30, 2016
and 2015 was $10.0 million and $9.1 million, respectively. Included in corporate general and administrative expense for the six
months ended June 30, 2016 and 2015 was $4.8 million and $3.7 million, respectively, of non-cash share-based compensation
expense. The increase in corporate general and administrative expense is primarily related to an increase in non-cash share-based
compensation expense related to restricted common shares granted to employees.
Hotel acquisition costs—Hotel acquisition costs for the six months ended June 30, 2015 was $0.8 million. There were no hotel
acquisitions occurring or hotel acquisition costs incurred during the six months ended June 30, 2016.
Interest expense—Interest expense for the six months ended June 30, 2016 and 2015 was $15.8 million and $15.3 million,
respectively. The increase is primarily related to the use of debt to partially fund the acquisitions of the Royal Palm South
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Beach Miami, a Tribute Portfolio Resort in March 2015 and the Ace Hotel and Theater Downtown Los Angeles in April 2015, offset
by interest rate savings related to the prepayment of the Hyatt Regency Boston mortgage loan in April 2016.
Gain on sale of hotel—Gain on sale of hotel for the six months ended June 30, 2016 was $0.6 million and related to the sale of
the separate, five-room villa building and related land parcel at the Hyatt Centric Santa Barbara on April 14, 2016.
Income tax expense—Income tax expense for the six months ended June 30, 2016 and 2015 was $1.8 million and $1.0 million,
respectively. Income tax expense is directly related to taxable income generated by our TRSs during the period.
Hotel operating results
We assess the operating performance of our hotels irrespective of the hotel owner during the periods compared. We use the
term "pro forma" to refer to metrics that include, or comparisons of metrics that are based on, the operating results of hotels under
previous ownership for either a portion of or the entire period. Since two of our hotels owned as of June 30, 2016 were acquired
during 2015, the key operating metrics below reflect the pro forma operating results for those hotels for all, or a certain period, of the
three and six months ended June 30, 2015. Included in the following table are comparisons of occupancy, ADR, RevPAR, Adjusted
Hotel EBITDA, and Adjusted Hotel EBITDA Margin for the hotel portfolio for the three and six months ended June 30, 2016 and
2015 (in thousands, except for ADR and RevPAR):
Three Months Ended June 30,
2016
2015(1)
Change
Six Months Ended June 30,
2016
2015(1)
79.1% 430 bps
$227.03
0.0%
$179.52
5.5%
Change
Occupancy
ADR
RevPAR
88.1%
$236.69
$208.43
86.0%
$237.11
$203.99
210 bps
(0.2)%
2.2%
83.4%
$227.05
$189.39
Adjusted Hotel EBITDA
Adjusted Hotel EBITDA
Margin
$62,597
$59,875
4.5%
$102,648
$91,543
12.1%
36.9%
36.4%
50 bps
33.1%
31.4%
170 bps
( Includes results of operations for certain hotels prior to our
1 acquisition.
)
Non-GAAP Financial Measures
Non-GAAP financial measures are measures of our historical financial performance that are different from measures calculated
and presented in accordance with U.S. generally accepted accounting principles. We report the following eight non-GAAP financial
measures that we believe are useful to investors as key measures of our operating performance: (1) Hotel EBITDA, (2) Adjusted Hotel
EBITDA, (3) Adjusted Hotel EBITDA Margin, (4) Corporate EBITDA, (5) Adjusted Corporate EBITDA, (6) Funds from operations
(FFO), (7) FFO available to common shareholders, and (8) Adjusted FFO (AFFO) available to common shareholders.
Hotel EBITDA—Hotel EBITDA is defined as net income before interest, income taxes, depreciation and amortization, air rights
amortization, corporate general and administrative, and hotel acquisition costs. The Trust believes that Hotel EBITDA provides
investors a useful financial measure to evaluate the Trust’s hotel operating performance, excluding the impact of the Trust’s capital
structure (primarily interest), the Trust’s asset base (primarily depreciation and amortization), and the Trust’s corporate-level expenses
(corporate general and administrative and hotel acquisition costs).
Adjusted Hotel EBITDA—We further adjust Hotel EBITDA for certain additional recurring and non-recurring items.
Specifically, we adjust for non-cash amortization of intangible assets and liabilities, including ground lease assets and unfavorable
contract liabilities, deferred franchise costs, and deferred key money, all of which are recurring items, and gains (losses) from sales of
real estate, which is a non-recurring item. We believe that Adjusted Hotel EBITDA provides investors with another useful financial
measure to evaluate our hotel operating performance, excluding the effect of these non-cash items.
Adjusted Hotel EBITDA Margin—Adjusted Hotel EBITDA Margin is defined as Adjusted Hotel EBITDA as a percentage of
total revenues. We believe that Adjusted Hotel EBITDA Margin provides investors another useful measure to evaluate our hotel
operating performance.
The following table reconciles net income to Hotel EBITDA, Adjusted Hotel EBITDA, pro forma Adjusted Hotel EBITDA,
and pro forma Adjusted Hotel EBITDA Margin for the three and six months ended June 30, 2016 and 2015 (in thousands):
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Three Months Ended June 30,
2016
Six Months Ended June 30,
2015
2016
2015
Net income
$
28,542
$
24,045
$
38,612
$
25,597
Add: Interest expense
Income tax expense
Depreciation and amortization
7,560
8,168
15,770
15,347
3,774
4,340
1,820
992
18,610
17,929
37,094
32,856
130
130
260
260
4,734
4,498
10,000
9,075
—
466
—
835
Air rights contract amortization
Corporate general and administrative
Hotel acquisition costs
Hotel EBITDA
63,350
(155)
Less: Non-cash amortization(1)
Gain of sale of hotel
59,576
(180)
—
(598)
Adjusted Hotel EBITDA
84,962
(261)
—
(598)
62,597
59,396
102,648
84,701
—
479
—
6,842
Add: Prior owner Hotel EBITDA(2)
Pro forma Adjusted Hotel EBITDA
103,556
(310)
$
62,597
$
59,875
$
102,648
$
91,543
$
169,431
$
162,145
$
310,042
$
271,435
Total revenue
—
Add: Prior owner total revenue(2)
Pro forma total revenue
$
169,431
Pro forma Adjusted Hotel EBITDA Margin
—
2,242
$
164,387
36.9%
$
310,042
36.4%
33.1%
20,286
$
291,721
31.4%
(1) Reflects non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, and unfavorable contract liability.
( Reflects results of operations for certain hotels prior to our
2 acquisition.
)
Corporate EBITDA—Corporate EBITDA is defined as net income before interest, income taxes, and depreciation and
amortization. We believe that Corporate EBITDA provides investors a useful financial measure to evaluate our operating
performance, excluding the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and
amortization).
Adjusted Corporate EBITDA—We further adjust Corporate EBITDA for certain additional recurring and non-recurring items.
Specifically, we adjust for hotel acquisition costs and non-cash amortization of intangible assets and liabilities, including air rights
contracts, ground lease assets and unfavorable contract liabilities, deferred franchise costs, and deferred key money, all of which are
recurring items, and gains (losses) from sales of real estate, which is a non-recurring item. We believe that Adjusted Corporate
EBITDA provides investors with another financial measure of our operating performance that provides for greater comparability of
our core operating results between periods.
The following table reconciles net income to Corporate EBITDA and Adjusted Corporate EBITDA for the three and six months
ended June 30, 2016 and 2015 (in thousands):
Three Months Ended June 30,
2016
Net income
$
28,542
Six Months Ended June 30,
2015
$
24,045
2016
$
38,612
2015
$
25,597
Add: Interest expense
7,560
8,168
15,770
15,347
3,774
4,340
1,820
992
18,610
17,929
37,094
32,856
58,486
54,482
93,296
74,792
Income tax expense
Depreciation and amortization
Corporate EBITDA
Add: Hotel acquisition costs
Less: Non-cash amortization(1)
Gain on sale of hotel
—
(25)
466
(50)
—
(50)
835
(1)
(598)
—
(598)
—
Adjusted Corporate EBITDA
$
57,863
$
54,898
$
92,648
$
75,626
(1) Reflects non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, unfavorable contract liability, and air rights contract.
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FFO—We calculate FFO in accordance with standards established by the National Association of Real Estate Investment
Trusts ("NAREIT"), which defines FFO as net income (calculated in accordance with GAAP), excluding depreciation and
amortization, impairment charges of depreciable real estate, gains (losses) from sales of real estate, the cumulative effect of changes in
accounting principles, and adjustments for unconsolidated partnerships and joint ventures. Historical cost accounting for real estate
assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have
historically risen or fallen with market conditions, most industry investors consider presentations of operating results for real estate
companies that use historical cost accounting to be insufficient by themselves. By excluding the effect of depreciation and
amortization and gains (losses) from sales of real estate, both of which are based on historical cost accounting and which may be of
lesser significance in evaluating current performance, we believe that FFO provides investors a useful financial measure to evaluate
our operating performance.
FFO available to common shareholders—We reduce FFO for preferred share dividends and dividends declared on and earnings
allocated to unvested time-based awards (consistent with adjustments required by GAAP in reporting net income available to common
shareholders and related per share amounts). FFO available to common shareholders provides investors another financial measure to
evaluate our operating performance after taking into account the interests of holders of our preferred shares and unvested time-based
awards.
AFFO available to common shareholders—We further adjust FFO available to common shareholders for certain additional
recurring and non-recurring items that are not in NAREIT’s definition of FFO. Specifically, we adjust for hotel acquisition costs and
non-cash amortization of intangible assets and liabilities, including air rights contracts, ground lease assets and unfavorable contract
liabilities, deferred franchise costs, and deferred key money, all of which are recurring items. We believe that AFFO available to
common shareholders provides investors with another financial measure of our operating performance that provides for greater
comparability of our core operating results between periods.
The following table reconciles net income to FFO, FFO available to common shareholders, and AFFO available to common
shareholders for the three and six months ended June 30, 2016 and 2015 (in thousands, except per share amounts):
Three Months Ended
June 30,
2016
Net income
$
2015
Six Months Ended
June 30,
2016
2015
28,54
24,04 38,61
25,59
2 $
5 $
2 $
7
Add: Depreciation and amortization
18,610
Less: Gain on sale of hotel
(598)
17,929 37,094
—
(598)
32,856
—
FFO
Less: Preferred share dividends
Dividends declared on unvested time-based awards
Undistributed earnings allocated to unvested time-based awards
46,554 41,974 75,108 58,453
(2,422) (2,422) (4,844) (4,844)
(146)
(136)
(289)
(273)
(15)
—
—
39,409 69,975
53,336
(7)
FFO available to common shareholders
43,971
Add: Hotel acquisition costs
Less: Non-cash amortization(1)
AFFO available to common shareholders
—
466
—
835
(25)
(50)
(50)
(1)
43,94
39,82 69,92
54,17
6 $
5 $
5 $
0
$
FFO available per common share:
Basic
$ 0.75 $ 0.67 $ 1.19 $ 0.95
Diluted
$ 0.75 $ 0.67 $ 1.19 $ 0.94
AFFO available per common share:
Basic
$ 0.75 $ 0.68 $ 1.19 $ 0.96
Diluted
$ 0.75 $ 0.68 $ 1.19 $ 0.95
(1) Reflects non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, unfavorable contract liability, and air rights contract.
None of Hotel EBITDA, Adjusted Hotel EBITDA, Corporate EBITDA, Adjusted Corporate EBITDA, FFO, FFO available to
common shareholders, or AFFO available to common shareholders represent cash generated from operating activities as determined
by GAAP, nor shall any of these measures be considered as an alternative to GAAP net income (loss),
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as an indication of our financial performance, or to GAAP cash flow from operating activities, as a measure of liquidity. In addition,
Hotel EBITDA, Adjusted Hotel EBITDA, Corporate EBITDA, Adjusted Corporate EBITDA, FFO, FFO available to common
shareholders, and AFFO available to common shareholders are not indicative of funds available to fund cash needs, including the
ability to make cash distributions.
Sources and Uses of Cash
For the six months ended June 30, 2016, net cash flows from operating activities were $72.2 million; net cash flows used in
investing activities were $11.1 million, including $9.2 million for improvements and additions to our hotels, offset by proceeds of $2.0
million from the sale of the separate, five-room villa building and related land parcel at the Hyatt Centric Santa Barbara; and net cash
flows used in financing activities were $56.2 million, including the prepayment of $88.2 million of mortgage debt, net repayment of
$60.0 million under our revolving credit facility, $4.9 million in scheduled principal payments on mortgage debt and $52.0 million in
dividend payments to common and preferred shareholders, offset by proceeds of $150.0 million from the issuance of mortgage debt.
As of June 30, 2016, we had cash and cash equivalents of $55.5 million.
Liquidity and Capital Resources
We expect our primary source of cash to meet operating requirements, including payment of dividends in accordance with the
REIT requirements of the U.S. federal income tax laws, payment of interest on any borrowings and funding of any capital
expenditures, will be from our hotels’ results of operations and existing cash and cash equivalent balances. We currently expect that
our operating cash flows will be sufficient to fund our continuing operations. We also expect to use existing restricted cash balances to
partially fund any capital expenditures. We intend to incur indebtedness to supplement our investment capital and to maintain
flexibility to respond to industry conditions and opportunities. We are targeting an overall debt level not to exceed 40% of the
aggregate value of all of our hotels as calculated in accordance with our revolving credit facility; as of June 30, 2016, our overall debt
level was 32.3% under this calculation.
We expect to meet long-term liquidity requirements, such as new hotel acquisitions and scheduled debt maturities, through
additional secured and unsecured borrowings and the issuance of equity securities. Our ability to raise funds through the issuance of
equity securities depends on, among other things, general market conditions for hotel companies and REITs and market perceptions
about us. We will continue to analyze alternate sources of capital in an effort to minimize our capital costs and maximize our financial
flexibility.
We expect to continue declaring distributions to shareholders, as required to maintain our REIT status, although no assurances
can be made that we will continue to generate sufficient income to distribute similar aggregate amounts in the future. The per share
amounts of future distributions will depend on the number of our common and preferred shares outstanding from time to time and will
be determined by our board of trustees following its periodic review of our financial performance and capital requirements, and the
terms of our existing borrowing arrangements.
On April 6, 2016, we prepaid without penalty our mortgage loan secured by the Hyatt Regency Boston, which had an
outstanding principal balance at the time of $88.2 million, with a borrowing under our revolving credit facility. On June 23, 2016, we
obtained a new $150.0 million mortgage loan secured by the Hyatt Regency Boston. We used the proceeds from the new loan to repay
outstanding borrowings under our revolving credit facility.
Our mortgage loan secured by the Courtyard Washington Capitol Hill/Navy Yard matures in November 2016, but is prepayable
without penalty on August 1, 2016. We expect to prepay the outstanding principal balance of $34.0 million on August 1, 2016 with
proceeds from a borrowing under our revolving credit facility made on July 29, 2016.
As of the date of this filing, we have approximately $90.0 million of cash and cash equivalents, including the amount borrowed
under our revolving credit facility that we will use to prepay the Courtyard Washington Capitol Hill/Navy Yard mortgage loan on
August 1, 2016, as described above, approximately $44.2 million of restricted cash, and total borrowing availability of $300.0 million
under our revolving credit facility, of which $205.0 million remained available. See Note 7, "Long-Term Debt," to our interim
consolidated financial statements for additional information relating to our revolving credit facility and other long-term debt.
Capital Expenditures
We maintain each hotel in good repair and condition and in conformity with applicable laws and regulations and in accordance
with the franchisor’s standards and the agreed-upon requirements in our management and loan agreements. The cost of all such
routine improvements and alterations will be paid out of property improvement reserves, which will be funded by a portion of each
hotel’s gross revenues. Routine capital expenditures will be administered by the management companies. However, we will have
approval rights over the capital expenditures as part of the annual budget process.
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From time to time, certain of our hotels may be undergoing renovations as a result of our decision to upgrade portions of the
hotels, such as guestrooms, meeting space, and/or restaurants, in order to better compete with other hotels in our markets. As of
June 30, 2016, none of our hotels were undergoing comprehensive renovations. In addition, often after we acquire a hotel, we are
required to complete a PIP in order to bring the hotel up to the respective franchisor’s standards. If permitted by the terms of the
management agreement, funding for a renovation will first come from the FF&E reserve. To the extent that the FF&E reserve is not
adequate to cover the cost of the renovation, we will fund the remaining portion of the renovation with cash and cash equivalents or
available borrowings under our revolving credit facility.
Contractual Obligations
The following table sets forth our contractual obligations as of June 30, 2016, and the effect such obligations are expected to
have on our liquidity and cash flow in future periods (in thousands). There were no other material off-balance sheet arrangements at
June 30, 2016.
Payments Due by Period
Contractual Obligations
Revolving credit facility, including
interest (1)
Term loan, including interest(1)
Less Than
One Year
Total
$
Other mortgage loans, including
interest
52,812
$
1,019
One to
Three Years
$
51,793
Three to
Five Years
$
—
More Than
Five Years
—
$
128,270
128,270
—
—
—
756,165
69,862
71,544
186,215
428,544
297
237
60
—
—
211,639
4,101
8,201
8,201
191,136
Corporate office lease
Ground leases(2)
$
1,149,183
$
203,489
$
131,598
$
194,416
$
619,680
(1) Assumes no additional borrowings and interest payments are based on the interest rate in effect at June 30, 2016. Also assumes that no extension options are
exercised. See the notes to our interim consolidated financial statements for additional information relating to our revolving credit facility and term loan.
(2) The ground leases for the Hyatt Regency Mission Bay Spa and Marina and the JW Marriott San Francisco Union Square provide for the greater of base or
percentage rent, subject to potential increases over the term of the leases. Amounts assume only base rent for all periods presented and do not assume any
adjustments for potential increases.
Inflation
Operators of hotels, in general, possess the ability to adjust room rates daily to reflect the effects of inflation. However,
competitive pressures may limit the ability of our management companies to raise room rates.
Seasonality
Demand in the lodging industry is affected by recurring seasonal patterns. For non-resort properties, demand is generally lower
in the winter months due to decreased travel and higher in the spring and summer months during the peak travel season. For resort
properties, demand is generally higher in the winter months. We expect that our operations will generally reflect non-resort seasonality
patterns. Accordingly, we expect that we will have lower revenue, operating income and cash flow in the first and fourth quarters and
higher revenue, operating income and cash flow in the second and third quarters. These general trends are, however, expected to be
greatly influenced by overall economic cycles.
Critical Accounting Policies
Our interim consolidated financial statements have been prepared in conformity with GAAP, which requires management to
make estimates and assumptions that affect the reported amount of assets and liabilities at the date of our interim consolidated
financial statements and the reported amounts of revenues and expenses during the reporting period. While we do not believe the
reported amounts would be materially different, application of these policies involves the exercise of judgment and the use of
assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. We evaluate our estimates and
judgments on an ongoing basis. We base our estimates on experience and on various other assumptions that are believed to be
reasonable under the circumstances. All of our critical accounting policies are disclosed in our Form 10-K for the year ended
December 31, 2015.
26
Table of Contents
Recent Accounting Pronouncements
See Note 2, “Summary of Significant Accounting Policies,” to our interim consolidated financial statements for additional
information relating to recent accounting pronouncements.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
We earn interest income primarily from cash and cash equivalent balances. Based on our cash and cash equivalents as of
June 30, 2016, if interest rates increase or decrease by 1.00%, our interest income will increase or decrease by approximately
$0.6 million annually.
Amounts borrowed under our revolving credit facility currently bear interest at variable rates based on LIBOR plus 1.55% 2.30% (the spread over LIBOR based on our consolidated leverage ratio). If prevailing LIBOR on any outstanding borrowings under
our revolving credit facility were to increase or decrease by 1.00%, the increase or decrease in interest expense on our debt would
increase or decrease future earnings and cash flows by approximately $0.5 million annually, assuming that the amount outstanding
under our revolving credit facility was to remain at $50.0 million, the balance at June 30, 2016.
Item 4.
Controls and Procedures
The Chief Executive Officer and Chief Financial Officer of the Trust have evaluated the effectiveness of the disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)), as required by paragraph (b) of Rules 13a-15 and 15d-15 under the Exchange Act, and have concluded that as of the end of the
period covered by this report, the Trust's disclosure controls and procedures were effective at a reasonable assurance level.
There was no change in the Trust's internal control over financial reporting identified in connection with the evaluation required
by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act during the Trust's most recent fiscal quarter that materially
affected, or is reasonably likely to materially affect, the Trust's internal control over financial reporting.
27
Table of Contents
PART II
Item 1.
Legal Proceedings
We are not involved in any material litigation nor, to our knowledge, is any material litigation threatened against us.
Item 1A.
Risk Factors
There have been no material changes from the risk factors disclosed under the caption “Risk Factors” in the Trust's Form 10-K
for the year ended December 31, 2015.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
Item 3.
Defaults Upon Senior Securities
Not applicable.
Item 4.
Mine Safety Disclosures
Not applicable.
Item 5.
Other Information
None.
Item 6.
Exhibits
The following exhibits are filed as part of this Form 10-Q:
Exhibit
Number
Description of Exhibit
10.1
Loan Agreement, dated June 23, 2016, by and between CHSP Boston II LLC, as borrower, and Metropolitan
Life Insurance Company, as lender
31.1
Rule 13a-14(a)/15d-14(a) Certification of President and Chief Executive Officer
31.2
Rule 13a-14(a)/15d-14(a) Certification of Executive Vice President and Chief Financial Officer
32.1
Section 1350 Certification of President and Chief Executive Officer
32.2
Section 1350 Certification of Executive Vice President and Chief Financial Officer
101.INS XBRL
Instance Document
101.SCH XBRL
Taxonomy Extension Schema Document
101.CAL XBRL
Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL
Taxonomy Extension Definition Linkbase Document
101.LAB XBRL
Taxonomy Extension Label Linkbase Document
101.PRE XBRL
Taxonomy Extension Presentation Linkbase Document
28
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CHESAPEAKE LODGING TRUST
Date: July 29, 2016
By:
/S/
DOUGLAS W. VICARI
Douglas W. Vicari
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
/S/
GRAHAM J. WOOTTEN
Graham J. Wootten
Senior Vice President and Chief Accounting Officer (Principal
Accounting Officer)
29
Exhibit 10.1
_________________________________________________________________________
LOAN AGREEMENT
Dated as of June 23, 2016
By and Between
CHSP BOSTON II LLC,
as Borrower,
and
METROPOLITAN LIFE INSURANCE COMPANY,
as Lender
Property:
Hyatt Regency Boston
One Avenue de Lafayette
Boston, Massachusetts 02111
Loan Amount: $150,000,000.00
_________________________________________________________________________
TABLE OF CONTENTS
I.
II.
III.
IV.
V.
DEFINITIONS; PRINCIPLES OF CONSTRUCTION
Section 1.1
Definitions
Section 1.2
Principles of Construction
THE LOAN
1
1
15
16
Section 2.1
The Loan
16
Section 2.2
Interest Rate
16
Section 2.3
Loan Payments
17
Section 2.4
Prepayments
18
RESERVE FUNDS
19
Section 3.1
Tax Funds
19
Section 3.2
Insurance Funds
20
Section 3.3
FF&E Funds
21
Section 3.4
Reserve Funds Generally
22
REPRESENTATIONS AND WARRANTIES
22
Section 4.1
Borrower Representations
22
Section 4.2
Survival of Representations
31
BORROWER COVENANTS
31
VI.
VII.
VIII.
IX.
Section 5.1
Borrower Affirmative Covenants
31
Section 5.2
Borrower Negative Covenants
37
INSURANCE, CASUALTY AND CONDEMNATION
Section 6.1
Insurance
40
40
Section 6.2
44
Casualty and Condemnation
PROPERTY MANAGEMENT
Section 7.1
The Management Agreement
Section 7.2
Prohibition Against Termination or Modification
Section 7.3
Replacement of Manager
PERMITTED TRANSFERS
47
47
48
49
49
Section 8.1
Permitted Transfers of Interest in Borrower
49
Section 8.2
One-Time Transfer
51
Section 8.3
Prohibition on Additional Financing
52
Section 8.4
Restrictions on Additional Obligations
52
Section 8.5
Statements Regarding Ownership
52
Section 8.6
Compliance with Management Agreement Requirements
53
ENVIRONMENTAL HAZARDS
53
Section 9.1
Representations and Warranties
53
Section 9.2
Remedial Work
53
Section 9.3
Environmental Site Assessment
54
Section 9.4
X.
Unsecured Obligations
PARTICIPATION AND SALE OF LOAN
Section 10.1
Sale of Loan/Participation
54
54
54
Section 10.2
XI.
XII.
Cooperation
55
55
DEFAULTS
Section 11.1
Event of Default
55
Section 11.2
Remedies
57
Section 11.3
Right to Cure Defaults
58
Section 11.4
Remedies Cumulative
59
Section 11.5
Duration of Events of Default
59
MISCELLANEOUS
59
Section 12.1
Successors and Assigns; Terminology
59
Section 12.2
Lender’s Discretion
59
Section 12.3
Governing Law
60
Section 12.4
Modification. Waiver in Writing
61
Section 12.5
Delay Not a Waiver
61
Section 12.6
Notices
61
Section 12.7
Trial by Jury
62
Section 12.8
Headings
63
Section 12.9
Severability
63
Section 12.10
Preferences
63
63
Section 12.11
Waiver of Notice
Section 12.12
Remedies of Borrower
Section 12.13
Section 12.14
Expenses; Indemnity
Waiver of Consequential Damages
Section 12.15
Schedules and Exhibits Incorporated
65
Section 12.16
Offsets, Counterclaims and Defenses
65
Section 12.17
No Joint Venture or Partnership; No Third Party Beneficiaries
65
Section 12.18
Publicity
Section 12.19
Waiver of Marshalling of Assets
Section 12.20
Waiver of Offsets/Defenses/Counterclaims
66
Section 12.21
Conflict; Construction of Documents; Reliance
66
Section 12.22
Brokers and Financial Advisors
67
Section 12.23
Exculpation
67
Section 12.24
Prior Agreements
68
Section 12.25
Servicer
68
Section 12.26
Replacement of Note
68
Section 12.27
Joint and Several Liability
68
Section 12.28
Counterparts
69
Section 12.29
Creation of Security Interest
69
Section 12.30
Time Of The Essence
63
63
65
66
66
69
SCHEDULES AND EXHIBITS
Schedule 4.1.22 – Organizational Chart
Schedule 4.1.23 – Material Agreements
Exhibit A
– Legal Description of Property
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of June 23, 2016 (as amended, restated, replaced,
supplemented or otherwise modified from time to time, this “ Agreement ”), by and between
METROPOLITAN LIFE INSURANCE COMPANY , a New York corporation, having an address at 10
Park Avenue, Morristown, PO Box 1902, New Jersey 07960 (together with its affiliates and/or their respective
successors and assigns, “ Lender ”), and CHSP BOSTON II LLC , a Delaware limited liability company,
having an address at 1997 Annapolis Exchange Parkway, Suite 410, Annapolis, Maryland 21401 (“ Borrower
”).
All capitalized terms used herein shall have the respective meanings set forth in Article I hereof.
W I T N E S S E T H:
WHEREAS, Borrower desires to obtain the Loan from Lender; and
WHEREAS, Lender is willing to make the Loan to Borrower, subject to and in accordance with the
conditions and terms of this Agreement and the other Loan Documents.
NOW, THEREFORE, in consideration of the covenants set forth in this Agreement, and other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree, represent and warrant as follows:
I.
DEFINITIONS; PRINCIPLES OF CONSTRUCTION
Section 1.1 Definitions.
For all purposes of this Agreement, except as otherwise expressly provided:
“Actions” shall have the meaning set forth in Section 5.1.18(a).
“Affiliate” shall mean, as to any Person, any other Person that, directly or indirectly, (i) owns more
than ten percent (10%) of such Person, or (ii) is in Control of, is Controlled by or is under common ownership
or Control with such Person.
“Agreement” shall have the meaning set forth in the introductory paragraph hereto.
“ALTA” shall mean American Land Title Association or any successor thereto.
“Appraisal” shall mean an appraisal with respect to the Property conducted in accordance with the
standards of the Appraisal Institute by an Appraiser and certified by such Appraiser as having been prepared in
accordance with the requirements of the Standards of Professional Practice of the Appraisal Institute and the
Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation, as well as FIRREA.
“Appraiser” shall mean an independent appraiser, selected by Lender or any applicable Servicer, that
is a member in good standing of the Appraisal Institute and that is certified or licensed in the State in which the
Property is located, and who has a minimum of five (5) years’ experience in the appraisal of comparable
properties in the geographic area in which the Property is located.
“Approved FF&E Expense” for any period shall mean the amount expended for FF&E Work in, at, or
to, the Property.
“Approved Management Agreement” shall have the meaning set forth in Section 8.1(b)(ii)(5) .
“Approved Plans and Specifications” shall have the meaning set forth in Section 6.2.3(a) .
“Architect” shall have the meaning set forth in Section 6.2.3(a).
“Assignment of Leases” shall mean that certain first priority Assignment of Leases and Rents, dated as
of the date hereof, from Borrower and TRS Entity, as assignor, to Lender, as assignee, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to time.
“Assignment of Management Agreement” shall mean that certain Subordination Non-disturbance and
Attornment Agreement with respect to the Management Agreement, dated as of the date hereof among TRS
Entity, Manager and Lender, as the same may be amended, restated, replaced, supplemented or otherwise
modified from time to time.
“Award” shall mean any and all compensation, awards, damages, proceeds and payments or relief for
the Condemnation paid in connection with a Condemnation in respect of all or any part of the Property.
“Bankruptcy Code” shall mean Title 11 of the United States Code entitled “Bankruptcy”, as amended
from time to time, and any successor statute or statutes and all rules and regulations from time to time
promulgated thereunder, and any comparable foreign laws relating to bankruptcy, insolvency or creditors’
rights.
“Basic Carrying Costs” shall mean the sum of the following costs associated with the Property for the
relevant Fiscal Year or payment period: (i) Taxes and (ii) Insurance Premiums.
“Borrower” shall have the meaning set forth in the introductory paragraph hereto.
“Borrower’s Constituents” shall have the meaning set forth in Section 4.1.30.
“Broker” shall have the meaning set forth in Section 12.22.
“Business Day” shall mean any day other than a Saturday, a Sunday or a legal holiday on which
national banks or Lender are not open for general business in (i) the State of New York, or (ii) the state where
the servicing offices of the Servicer are located.
“Capital Expenditures” shall mean for any period amounts expended for replacements and alterations
to the Property and required to be capitalized according to GAAP.
“Casualty” shall mean the occurrence of any casualty, damage or injury, by fire or otherwise, to the
Property or any part thereof.
“Claims” shall have the meaning set forth in Section 5.2.2.
“Closing Date” shall mean the date of funding the Loan.
“CLT” shall have the meaning set forth in Section 8.1(b)(i).
“Code” shall mean the Internal Revenue Code of 1986, as amended, and as it may be further amended
from time to time, any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued
pursuant thereto in temporary or final form.
“Condemnation” shall mean a temporary or permanent taking by any Governmental Authority as the
result or in lieu or in anticipation of the exercise of the right of condemnation or eminent domain, of all or any
part of the Property, or any interest therein or right accruing thereto, including any right of access thereto or any
change of grade affecting the Property or any part thereof. Condemnation shall include any grant or conveyance
in lieu of condemnation or eminent domain.
“Contractor” shall have the meaning set forth in Section 6.2.3(a).
“Control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction
of the management, policies or activities of a Person, whether through ownership of voting securities, by
contract or otherwise. The definition is to be construed to apply equally to variations of the word “Control”
including “Controlled,” “Controlling” or “Controlled by.”
“Debt” shall mean the outstanding principal amount of the Loan together with all interest accrued and
unpaid thereon and all other sums (including the Prepayment Fee, if applicable) due to Lender in respect of the
Loan under the Note, this Agreement, the Security Instrument, the Environmental Indemnity or any other Loan
Document.
“Debt Service” shall mean, with respect to any particular period of time, scheduled principal (if any)
and interest payments under the Note.
“Debt Yield” shall mean the amount (expressed as a percentage) determined by dividing the Net
Operating Income by the then outstanding principal balance of the Loan.
“Default” shall mean the occurrence of any event hereunder or under any other Loan Document which,
but for the giving of notice or passage of time, or both, would be an Event of Default.
“Default Rate” shall mean, with respect to the Loan, a rate per annum equal to the lesser of (i) the
maximum rate permitted by applicable law, or (ii) four percent (4%) above the Interest Rate.
“Deposit Account Control Agreement” shall mean that certain Deposit Account Control Agreement,
dated as of the date hereof by and between Lender, Wells Fargo Bank, National Association, Borrower [and
Hyatt Corporation] with respect to the FF&E reserve fund maintained pursuant to the Management Agreement
and referred to therein as the “Capital Fund”.
“Eligibility Requirements” means, with respect to any Person, that such Person (x) has total assets of
$650,000,000.00 or more (calculated exclusive of the Property), including hotel properties, or is managed by a
Person that controls at least $650,000,000.00 in real estate equity investments (calculated exclusive of the
Property) including hotel properties, (y) is not the subject of a bankruptcy, insolvency or reorganization
proceeding, (z) is not and has not at any time filed or been a party to a material claim, petition or cause of action
in any municipal, state or federal court or other administrative agency or regulatory agency that names Lender
and/or its affiliates or subsidiaries as defendant or is the subject of such a claim.
“Environmental Indemnity” shall mean that certain Unsecured Indemnity Agreement, dated as of the
date hereof, executed by Borrower and Guarantor in favor of Lender, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.
“EPI” shall have the meaning set forth in Section 6.1.1(a)(iii).
“Equipment” shall have the meaning set forth in the granting clause of the Security Instrument.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.
“Event of Default” shall have the meaning set forth in Section 11.1.
“Existing Lease” shall have the meaning set forth in Section 4.1.18(a).
“FF&E Reserve Fund” shall have the meaning set forth in Section 3.3.1.
“FF&E Work” shall mean replacements to fixtures, furniture, and equipment located at the Property,
and any replacement therefor or additions thereto, but not including operating equipment.
“Fiscal Year” shall mean each twelve month period commencing on January 1 and ending on and
including December 31 during each year of the term of the Loan.
“Foreign Taxes” shall have the meaning set forth in Section 2.2.2(e).
“Full Replacement Cost” shall have the meaning set forth in Section 6.1.1(a)(i).
“GAAP” shall mean generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants
and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar
functions of comparable stature and authority within the accounting profession), or in such other statements by
such entity as may be in general use by significant segments of the U.S. accounting profession.
“Governmental Authority” shall mean any court, board, agency, commission, office or authority of
any nature whatsoever or any governmental unit (federal, state, county, district, municipal, city, foreign or
otherwise) whether now or hereafter in existence.
“Gross Revenue” means, for any period of time, without duplication, all income and proceeds of sales
of every kind (whether in cash or on credit and computed on an accrual basis) received by Borrower, TRS
Entity or Manager for the use, occupancy or enjoyment of the Property or the sale of any goods, services or
other items sold on or provided from the Property in the ordinary course of operation of the Property, including,
without limitation, all income received from tenants, transient guests, lessees (other than communications
equipment lessees or service providers), licensees and concessionaires and other services to guests at the
Property, all Rents and the proceeds from business interruption insurance, but excluding the following: (i) any
excise, sales or use taxes or similar government charges collected directly from patrons or guests, or as a part of
the sales price of any goods, services or displays, such as gross receipts, admission, cabaret or similar or
equivalent taxes; (ii) receipts from condemnation awards or sales in lieu of or under threat of condemnation;
(iii) proceeds of insurance (other than business interruption insurance); (iv) other allowances and deductions as
provided by the Uniform System of Accounts in determining the sum contemplated by this definition, by
whatever name, it may be called; (v) proceeds of sales, whether dispositions of capital assets, furniture, fixtures
or equipment; (vi) gross receipts received by tenants (other than TRS Entity), lessees, licensees or
concessionaires of the Property; (vii) consideration received at the Property for hotel accommodations, goods
and services to be provided at other hotels although arranged by, for or on behalf of, and paid over to, the
applicable Manager; (viii) tips, service charges and gratuities collected for the benefit of employees; (ix)
proceeds of any financing; (x) working capital provided by Borrower or TRS Entity; (xii) amounts collected
from guests or patrons of the Property on behalf of Property tenants and other third parties; (xii) the value of
any goods or services in excess of actual amounts paid (in cash or services) provided by the applicable Manager
on a complimentary or discounted basis; and (xiii) other income
or proceeds resulting other than from the use or occupancy of the Property, or any part thereof, or other than
from the sale of goods, services or other items sold on or provided from the Property in the ordinary course of
business. Gross Revenue shall be reduced by credits or refunds to guests at the applicable Property.
“Guarantor” shall mean Chesapeake Lodging, L.P., a Delaware limited partnership.
“Guaranty” shall mean that certain Guaranty of Recourse Obligations, dated as of the date hereof,
executed by Guarantor in favor of Lender, as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.
“Hazardous Materials” shall include without limitation:
(i) Those substances included within the definitions of “hazardous substances,” “hazardous
materials,” “toxic substances,” or “solid waste” in the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980 as amended, 42 U.S.C. Sections 9601 et seq ., the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. Sections 6901 et seq ., and the Hazardous Materials Transportation Act, 49
U.S.C. Sections 1801 et seq ., and in the regulations promulgated pursuant to said laws;
(ii) Those substances defined as “hazardous wastes” in M.G.L. c. 21E as amended, and the
regulations adopted pursuant thereto, including the Massachusetts Contingency Plan, as the same may be
amended from time to time;
(iii) Those chemicals known to cause cancer or reproductive toxicity, as published pursuant to
applicable federal, state or local law;
(iv) Those substances listed in the United States Department of Transportation Table (49 CFR
172.101 and amendments thereto) or by the Environmental Protection Agency (or any successor agency) as
hazardous substances (40 CFR Part 302 and amendments thereto);
(v) Any material, waste or substance which is (A) petroleum, (B) asbestos, (C) polychlorinated
biphenyls, (D) designated as a “hazardous substance” pursuant to Section 311 of the Clean Water Act, 33
U.S.C. Section 1251 et seq ., (33 U.S.C. Section 1321) or listed pursuant to Section 307 of the Clean Water
Act (33 U.S.C. Section 1317); (E) a chemical substance or mixture regulated under the Toxic Substances
Control Act of 1976, 15 U.S.C. Sections 2601 et seq .; (F) flammable explosives; or (G) radioactive materials;
and
(vi) Such other substances, materials and wastes which are or become regulated as hazardous or toxic
under applicable local, state or federal law, or the United States government, or which are classified as
hazardous or toxic under federal, state, or local laws or regulations.
“Impairment of the Security” shall mean any or all of the following: (i) the casualty or damage occurs
during the last year of the term of the Loan; (ii) restoration of the Property is estimated to require more than one
year to complete from the date of the occurrence; or (iii) insufficient business interruption insurance is available
to cover the Indebtedness and Operating Expenses during such restoration, including, without limitation, the
Debt.
“Improvements” shall have the meaning set forth in the granting clause of the Security Instrument.
“Indebtedness” shall mean, for any Person, without duplication: (i) all indebtedness of such Person for
borrowed money, for amounts drawn under a letter of credit, or for the deferred purchase price of property for
which such Person or its assets is liable, (ii) all unfunded amounts under a loan agreement, letter of credit, or
other credit facility for which such Person would be liable if such amounts were advanced thereunder, (iii) all
amounts required to be paid by such Person as a guaranteed payment to partners or a preferred or special
dividend, including any mandatory redemption of shares or interests, (iv) all indebtedness guaranteed by such
Person, directly or indirectly, (v) all obligations under leases that constitute capital leases for which such Person
is liable and (vi) all obligations of such Person under interest rate swaps, caps, floors, collars and other interest
hedge agreements, in each case whether such Person is liable contingently or otherwise, as obligor, guarantor or
otherwise, or in respect of which obligations such Person otherwise assures a creditor against loss.
“Indemnified Liabilities” shall have the meaning set forth in Section 12.13(b).
“Insolvent Entity” shall have the meaning set forth in Section 11.1(c).
“Insurance Funds” shall have the meaning set forth in Section 3.2.1.
“Insurance Premiums” shall mean certificates of insurance evidencing the Policies which shall be
accompanied by evidence satisfactory to Lender of payment of the premiums then due thereunder.
“Insurance Proceeds” shall mean all insurance proceeds payable as a result of a Casualty to the
Property.
“Interest Rate” shall mean a per annum rate equal to 4.25%.
“Investor” shall have the meaning set forth in Section 10.1.
“Late Payment Charge” shall have the meaning set forth in Section 2.3.3.
“Lease” shall mean any lease, sublease or sub-sublease, letting, license, concession or other agreement
(whether written or oral and whether now or hereafter in effect) pursuant to which any Person is granted a
possessory interest in, or right to use or occupy all or any portion of any space in the Property, and (i) every
modification, amendment or other agreement relating to such lease, sublease, sub-sublease, or other agreement
entered into in connection with such lease, sublease, sub-sublease, or other agreement and (ii) every guarantee
of the performance and observance of the covenants, conditions and agreements to be performed and observed
by the other party thereto.
“Legal Requirements” shall mean all federal, state, county, municipal and other governmental statutes,
laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities
affecting Borrower or the Property or any part thereof or the construction, use, alteration or operation thereof, or
any part thereof, whether now or hereafter enacted and in force, including, without limitation, the Americans
with Disabilities Act of 1990, and all permits, licenses and authorizations and regulations relating thereto, and
all covenants, agreements, restrictions and encumbrances contained in any instruments, either of record or
known to Borrower, at any time in force affecting the Property or any part thereof, including, without limitation,
any which may (i) require repairs, modifications or alterations in or to the Property or any part thereof, or (ii) in
any way limit the use and enjoyment thereof.
“Lender” shall have the meaning set forth in the introductory paragraph hereto.
“Lender Indemnitees” shall have the meaning set forth in Section 12.13(b).
“Lender’s Address for Insurance Notification” shall mean: Metropolitan Life Insurance Company,
its affiliates and/or successors and assigns, 10 Park Avenue, PO Box 1902, Morristown, New Jersey 07690,
Attention: Real Estate Investments Insurance Manager.
“Lien” shall mean any mortgage, deed of trust, lien, pledge, hypothecation, assignment, security
interest, or any other encumbrance, charge or transfer of, on or affecting the Property or any portion thereof or
Borrower, or any interest therein, including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as any of the foregoing, the filing
of any financing statement, and mechanic’s, materialmen’s and other similar liens and encumbrances.
“Loan” shall mean the loan in the original principal amount of ONE HUNDRED FIFTY MILLION
and 00/100 Dollars ($150,000,000.00) made by Lender to Borrower pursuant to this Agreement.
“Loan Documents” shall mean, collectively, this Agreement, the Note, the Security Instrument, the
Assignment of Leases, the Assignment of Management Agreement and any and all other documents now or
hereafter executed and/or delivered in connection with the Loan (except the Environmental Indemnity), as the
same may be amended, restated, replaced, supplemented or otherwise modified from time to time. The
Environmental Indemnity and the Guaranty are not Loan Documents and shall survive repayment of the Loan or
other termination of the Loan Documents to the extent set forth therein.
“Loan to Value Ratio” shall mean, with respect to any date of calculation, the ratio, as reasonably
determined by Lender and expressed as a percentage, (a) the numerator of which is equal to the then
outstanding principal balance of the Loan and (b) the denominator of which is equal to the then current fair
market value of the Property as determined by an Appraisal delivered to Lender not later than thirty (30) days
prior to the proposed effective date of the proposed transfer.
“Management Agreement” shall mean the Hotel Management Agreement, dated as of March 18,
2010, together with all amendments thereto prior to the date hereof, entered into by and between TRS Entity
and Manager, and all amendments thereto entered into in accordance with the terms and conditions set forth in
this Agreement, pursuant to which the Manager is to provide management and other services with respect to the
Property.
“Manager” shall mean Hyatt Corporation or any other manager approved in accordance with the terms
and conditions of the Loan Documents.
“Material Adverse Change” shall mean a material adverse change in (i) the condition (financial,
physical or otherwise) of the Property, (ii) the financial condition of Borrower that would reasonably be
expected to impair its ability to perform its obligations under the Loan Documents to which it is a party, and/or
(iii) the financial condition of Guarantor that would reasonably be expected to impair its ability to perform its
obligations under the Guaranty.
“Material Agreements” shall mean each contract and agreement relating to the ownership,
management, development, use, operation, leasing, maintenance, repair or improvement of the Property (other
than the TRS Lease, the Management Agreement and the Leases), (i) under which there is an obligation of
Borrower or TRS Entity to pay more than $500,000.00 per annum, (ii) the termination of which would
materially adversely affect the Property or the operation thereof, and (iii) which is not terminable by the owner
or operator of the Property upon thirty (30) days’ or less notice without payment of a termination fee.
“Maturity Date” shall mean the Monthly Payment Date occurring in July, 2026, or such other date on
which the final payment of the principal amount of the Loan becomes due and payable as herein provided,
whether at such stated maturity date, by declaration of acceleration, or otherwise.
“Maximum Legal Rate” shall mean the maximum nonusurious interest rate, if any, that at any time or
from time to time may be contracted for, taken, reserved, charged or received on the indebtedness evidenced by
the Note and as provided for herein or the other Loan Documents, under the laws of such state or states whose
laws are held by any court of competent jurisdiction to govern the interest rate provisions of the Loan.
“MetLife” shall have the meaning set forth in Section 4.1.30.
“Monthly Debt Service Payment Amount” shall mean equal monthly installments of principal and
interest at the Interest Rate each in the amount of $737,909.84.
“Monthly FF&E Deposit” shall have the meaning set forth in Section 3.3.1.
“Monthly Payment Date” shall mean the first (1st) day of every calendar month occurring during the
term of the Loan.
“Net Operating Income” shall mean, for the 12-month period immediately preceding the date of
calculation, the excess of Gross Revenue for such period over Operating Expenses for such period.
“Net Proceeds” shall mean (i) the net amount of all Insurance Proceeds, after deduction of costs and
expenses (including, but not limited to, reasonable attorneys’ fees and adjusters’ fees), if any, in collecting such
Insurance Proceeds, or (ii) the net amount of the Award, after deduction of reasonable costs and expenses
(including, but not limited to, reasonable attorneys’ fees and adjusters’ fees), if any, in collecting such Award.
“Note” shall mean that certain Promissory Note, dated the date hereof, in the original principal amount
of ONE HUNDRED FIFTY MILLION Dollars and 00/100 ($150,000,000.00), made by Borrower in favor of
Lender, as the same may be hereinafter amended, consolidated, split, severed, restated, replaced (whether by
one or more replacement notes), supplemented, renewed, extended or otherwise modified from time to time.
“Notice” shall have the meaning set forth in Section 12.6.
“Open Prepayment Date” shall mean the Monthly Payment Date occurring in March, 2026.
“Operating Expenses” shall mean all costs and expenses relating to the operation, maintenance and
management of the Property, including, without limitation, utilities, repairs and maintenance, insurance,
property taxes and assessments, advertising expenses, payroll and related taxes, equipment lease payments,
FF&E reserve expense and a management fee equal to the greater of 3.0% or the actual management fee, all
parking charges, credit card fees, travel agent and third party reservation fees and any other cost or charge
classified as an Operating Expense under the Uniform System of Accounts, but excluding Debt Service, actual
Capital Expenditures, depreciation, amortization and deposits required to be made to the Tax Funds and
Insurance Funds.
“Other Charges” shall mean all ground rents, maintenance charges, impositions other than Taxes, and
any other charges, including, without limitation, vault charges and license fees for the use
of vaults, chutes and similar areas adjoining the Property, now or hereafter levied or assessed or imposed
against the Property or any part thereof.
“Parking Agreement” shall mean those certain rights and easements described in the Deed and
Agreement between the City of Boston and Lafayette Place Associates dated September 11, 1979 and recorded
with said Deeds in Book 9388, Page 90, as the same has been amended to date.
“Permitted Encumbrances” shall mean, collectively, (i) the Liens and security interests created by the
Loan Documents, (ii) all Liens, encumbrances and other matters disclosed in the Title Insurance Policy, (iii)
Liens, if any, for Taxes imposed by any Governmental Authority not yet due or delinquent, (iv) Liens in
connection with Permitted FF&E Financing; and (v) such other title and survey exceptions as Lender has
approved or may approve in writing in Lender’s sole discretion. Notwithstanding the foregoing, Permitted
Encumbrances shall not include any tax liens or assessment liens to secure repayment of any loan or other
financing including, without limitation, any Property-Assessed Clean Energy Loan.
“Permitted FF&E Financing” means a Permitted FF&E Lease financed under the following terms and
conditions: (i) the lease or other instrument evidencing the Permitted FF&E Financing shall allow for a
collateral assignment to Lender which provides that, upon foreclosure by Lender, at Lender’s option, such lease
or other instrument will remain in full force and effect so long as the Lender complies with the terms thereof,
without payment of any assignment, transfer or similar fee; (ii) the Permitted FF&E Financing shall not be
evidenced by a note and shall be secured by a lien on the financed FF&E only (and not a lien on any direct or
indirect interest in Borrower, TRS Entity or the Property or any portion thereof); and (iii) unless otherwise
agreed by Lender, at any given time the aggregate amount of Permitted FF&E Financing does not exceed 5% of
the outstanding principal balance of the Loan, as reasonably determined by Lender; Borrower hereby agrees,
upon request from Lender from time to time, to provide Lender with such information and documentation as
Lender may reasonably require to make such determination.
“Permitted FF&E Lease” means any equipment for the Property that is leased or subject to a purchase
money indebtedness, conditional sales contract or other similar instrument, and where Lender consents to such
leasing or financing and receives an assignment of the tenant’s interest in any leased equipment. Lender shall
also receive from the lessor or financer of such equipment an agreement providing (or the applicable
agreements shall directly provide) that if Lender shall ever become the owner of the Property, such lessor’s
lease or contract, at Lender’s option, may be assumed by Lender at the same rental or payment charges, and
under the same terms and conditions as are presently contained in such lease or contract, and Lender shall have
the ability to obtain, at Lender’s request, an estoppel certificate reflecting the lease agreement and the defaults,
if any, of Borrower or TRS Entity under the lease agreement. Notwithstanding anything to the contrary
contained herein, Borrower or TRS Entity may enter into any such equipment lease or financing agreement for
less than $500,000.00 annually without Lender’s consent.
“Permitted Indebtedness” shall mean the Loan, trade payables payable within sixty (60) days and not
evidenced by a promissory note, and indebtedness secured by Permitted Encumbrances.
“Permitted Prepayment Date” shall mean the Monthly Payment Date occurring in June, 2018.
“Person” shall mean any individual, corporation, partnership, limited liability company, joint venture,
estate, trust, unincorporated association, any other entity, any federal, state, county or municipal
government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of
any of the foregoing.
“Personal Property” shall have the meaning set forth in the Security Instrument.
“PIP” shall mean any property improvement plan or similar requirement imposed during the term of
the Loan pursuant to the Management Agreement.
“PIP Work” shall mean any work required under a PIP.
“Plan” shall have the meaning set forth in Section 4.1.8.
“Policies” and “Policy” shall mean all insurance provided for in Section 6.1.1(a) and obtained under
valid and enforceable policies.
“Prepayment Date” shall have the meaning set forth in Section 2.4.1(b)(ii).
“Prepayment Fee” shall mean with respect to the principal amount of the Loan being prepaid:
(i) if such prepayment occurs on or after the Permitted Prepayment Date and prior to the Open
Prepayment Date, an amount equal to the greater of (A) the Prepayment Ratio (as hereinafter defined)
multiplied by (x – y), where (x) is the present value of all remaining payments of principal and interest
including the outstanding principal due on the Maturity Date, discounted at the rate which, when compounded
monthly, is equivalent to the Treasury Rate compounded semi-annually, and (y) is the amount of the principal
then outstanding, or (B) one percent (1%) of the amount of the principal being prepaid; and
(ii) if such prepayment occurs on or after the Open Prepayment Date, there shall be no Prepayment Fee.
“Prepayment Notice” shall have the meaning set forth in Section 2.4.1(b)(ii).
“Prepayment Ratio” shall mean, a fraction, the numerator of which shall be the amount of principal
being prepaid, and the denominator of which shall be the principal then outstanding.
“Prescribed Laws” shall mean, collectively, (i) the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107 56) (The USA
PATRIOT Act), (ii) Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, and
relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or
Support Terrorism, (iii) the International Emergency Economic Power Act, 50 U.S.C. §1701 et seq. and (iv) all
other Legal Requirements relating to money laundering or terrorism.
“Property” shall mean the fee estate of Borrower, the Improvements thereon and all personal property
owned by Borrower or TRS Entity and encumbered by the Security Instrument, together with all rights
pertaining to such property and Improvements, all as more particularly described in the granting clauses of the
Security Instrument.
“Property-Assessed Clean Energy Loan” shall mean any property-assessed clean energy loans or
similar indebtedness (without regard to the name given to such indebtedness) made for the purpose of energy
efficiency or conservation, which loans or indebtedness are made or otherwise provided by
any Governmental Authority and/or secured or repaid (directly or indirectly) by any taxes or similar
assessments against the Property.
“Qualified Equityholder” means one or more of the following:
(i) a real estate investment trust, bank, saving and loan association, investment bank, insurance
company, trust company, commercial credit corporation, pension plan, pension fund or pension advisory firm,
mutual fund, government entity or plan or hotel company, provided that any such entity referred to in this
clause (i) satisfies the Eligibility Requirements; or
(ii) an institution substantially similar to any of the foregoing entities described in clause (i) above
that satisfies the Eligibility Requirements.
“Qualified Hotel Manager” shall have the meaning set forth in Section 8.1(b)(ii)(5).
“Regulated Party” shall have the meaning set forth in Section 4.1.31.
“Remedial Work” shall mean any investigation or monitoring of site conditions or any clean up,
containment, restoration, removal or other remedial work.
“Rents” shall mean all rents, moneys payable as damages or in lieu of rent, revenues, deposits
(including, without limitation, security, utility and other deposits), accounts, cash, issues, profits, charges for
services rendered, and other consideration of whatever form or nature received by or paid to or for the account
of or benefit of Borrower or its agents or employees from any and all sources arising from or attributable to the
Property, including, without limitation, all revenues and credit card receipts collected from guest rooms,
restaurants, bars, meeting rooms, banquet rooms and recreational facilities.
“Request for Payment” shall have the meaning set forth in Section 6.2.3(b)(ii).
“Required Insurance” shall have the meaning set forth in Section 6.1.1(d).
“Requirements of Environmental Laws” means all requirements of environmental, ecological, health,
or industrial hygiene laws or regulations or rules of common law related to the Property, including, without
limitation, all requirements imposed by any environmental permit, law, rule, order, or regulation of any federal,
state, or local executive, legislative, judicial, regulatory, or administrative agency, which relate to (i) exposure
to Hazardous Materials; (ii) pollution or protection of the air, surface water, ground water, land; (iii) solid,
gaseous, or liquid waste generation, treatment, storage, disposal, or transportation; or (iv) regulation of the
manufacture, processing, distribution and commerce, use, or storage of Hazardous Materials.
“Requirements for Restoration” shall have the meaning set forth in Section 6.2.3.
“Replacement Management Agreement” shall have the meaning set forth in Section 8.1(b)(ii)(5) .
“Reserve Funds” shall mean, collectively, the Insurance Funds, the Tax Funds and FF&E Reserve
Funds.
“Restoration” shall have the meaning set forth in Section 6.2.1(b).
“Restoration Funds” shall have the meaning set forth in Section 6.2.3(a).
“Restricted Party” shall mean (x) with respect to Borrower (a) if Borrower is a limited partnership, the
general partner of Borrower; and (b) if Borrower is a limited liability company, the managing member of
Borrower and (y) with respect to TRS Entity (a) if TRS Entity is a limited partnership, the general partner of
TRS Entity; and (b) if TRS Entity is a limited liability company, the managing member of TRS Entity.
“S&P” shall mean Standard & Poor’s Ratings Services, a division of The McGraw Hill Companies,
Inc.
“Secondary Financing” shall have the meaning set forth in Section 8.2.
“Security Instrument” shall mean that certain first priority Mortgage, Assignment of Leases and
Rents, Security Agreement and Fixture Filing, dated as of the date hereof, executed and delivered by Borrower
and TRS Entity as security for the Loan and encumbering the Property, as the same may be amended,
consolidated, split, spread, severed, restated, replaced, supplemented, renewed, extended or otherwise modified
from time to time.
“Servicer” shall have the meaning set forth in Section 12.25(a).
“Servicing Agreement” shall have the meaning set forth in Section 12.25(a).
“Share Transfer Conditions” shall have the meaning set forth in Section 8.1(b)(i).
“Special Purpose Entity” means a Person, other than a natural person, which, since the date of its
formation and at all times prior to, on and after the date thereof, has not and shall not:
(i) engage in business other than owning and operating the Property;
(ii) acquire or own a material asset other than the Property and incidental personal property;
(iii) maintain assets in a way difficult to segregate and identify, or commingle its assets with the
assets of any other person or entity;
(iv) fail to hold itself out to the public as a legal entity separate from any other;
(v) fail to conduct business solely in its name or fail to maintain capital sufficient therefor;
(vi) fail to maintain records, accounts or bank accounts separate from any other person or entity;
(vii) file or consent to a petition pursuant to applicable bankruptcy, insolvency, liquidation or
reorganization statutes, or make an assignment for the benefit of creditors without the unanimous consent of its
partners or members, as applicable;
(viii) incur additional indebtedness except for trade payables in the ordinary course of business of
owning and operating the Property, provided that such indebtedness is paid within sixty (60) days of when
incurred;
(ix) dissolve, liquidate, consolidate, merge or sell all or substantially all of its assets; or
(x) modify, amend or revise its organizational documents, except for non-material changes, without
Lender’s prior written consent.
“State” shall mean the Commonwealth of Massachusetts.
“Subordination Agreement” shall mean that certain Subordination of Operating Lease, dated as of the
date hereof, executed by TRS Entity, Lender and Borrower, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
“Tax Funds” shall have the meaning set forth in Section 3.1.1.
“Taxes” shall mean all real estate and personal property taxes, assessments, water rates or sewer rents,
now or hereafter levied or assessed or imposed (including, without limitation, any payments in lieu thereof)
against the Property or part thereof, together with all interest and penalties thereon.
“Tenant” shall mean any Person obligated by contract or otherwise to pay monies (including a
percentage of gross income, revenue or profits) under any Lease now or hereafter affecting all or any part of the
Property.
“Title Insurance Policy” shall mean an ALTA mortgagee title insurance policy or policies in the form
acceptable to Lender issued with respect to the Property and insuring the lien of the Security Instrument,
together with such endorsements and affirmative coverage as Lender may require.
“Transfer” shall have the meaning set forth in Section 8.1.
“Treasury Rate” shall mean the annualized yield on securities issued by the United States Treasury
having a maturity equal to the remaining stated term of the Loan, as quoted in the Federal Reserve Statistical
Release [H. 15 (519) ] under the heading “U.S. Government Securities - Treasury Constant Maturities” for the
date which is five (5) Business Days prior to the date on which prepayment is being made. If this rate is not
available as of the date of prepayment, the Treasury Rate shall be determined by interpolating between the yield
on securities of the next longer and next shorter maturity. If the Treasury Rate is no longer published, Lender
shall select a comparable rate.
“TRS Entity” shall mean CHSP TRS Boston II LLC, a Delaware limited liability company.
“TRS Entity’s Constituents” shall have the meaning set forth in Section 4.1.30 .
“TRS Lease” shall mean that certain Lease Agreement, dated as of March 18, 2010, together with all
amendments thereto and assignments thereof prior to the date hereof, entered into by and between Borrower, as
lessor, and TRS Entity, as lessee, and all amendments thereto and restatements or replacements thereof, notice
of which is recorded in Book 46727, Page 179, with the Suffolk County Registry of Deeds.
“UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect in the
State.
“Uniform System of Accounts” shall mean the Uniform System of Accounts for the Lodging Industry,
as the same may be modified, amended, supplemented or superseded by any subsequent editions or revisions
thereto.
“Unsecured Obligations” means any obligations evidenced by or arising under the Environmental
Indemnity.
“Upper Tier Transfer Conditions” shall have the meaning set forth in Section 8.1(b)(ii) .
“U.S. Obligations” shall mean (i) direct obligations of the United States of America for the payment of
which its full faith and credit is pledged and which are not subject to prepayment, call or early redemption, and
(ii) other non-callable “government securities” as defined in Treasury Regulations Section 1.860G-2(a)(8)(i), as
amended, which are acceptable to Lender in its sole and absolute discretion.
“Use” shall have the meaning set forth in Section 5.1.15.
“Work” shall have the meaning set forth in Section 6.2.3(a).
Section 1.2 Principles of Construction. All references to sections and schedules are to sections and
schedules in or to this Agreement unless otherwise specified. Any reference in this Agreement or in any other
Loan Document or in the Guaranty or the Environmental Indemnity to any Loan Document shall be deemed to
mean such Loan Document, Guaranty or Environmental Indemnity (as applicable) as the same may hereafter be
amended, modified, supplemented, extended, replaced and/or restated from time to time (and, in the case of any
note or other instrument, to any instrument issued in substitution therefor). Unless otherwise specified, the
words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise specified,
all meanings attributed to defined terms herein shall be equally applicable to both the singular and plural forms
of the terms so defined.
II. THE LOAN
Section 2.1
The Loan.
2.1.1 Agreement to Lend and Borrow. Subject to and upon the terms and conditions set forth
herein, Lender shall make the Loan to Borrower and Borrower shall accept the Loan from Lender on the
Closing Date.
2.1.2 Single Disbursement to Borrower. Borrower shall receive only one disbursement hereunder in
respect of the Loan and any amount borrowed and repaid hereunder in respect of the Loan may not be
reborrowed.
2.1.3 The Note. The Loan shall be evidenced by the Note and shall be repaid in accordance with the
terms of this Agreement and the Note.
Section 2.2
Interest Rate.
2.2.1 Interest Rate. Subject to Section 2.2.3, interest on the outstanding principal balance of the Loan
shall accrue at the Interest Rate from the Closing Date through the date on which the Loan is repaid in full.
2.2.2 [Intentionally Omitted].
2.2.3 Default Rate. In the event that, and for so long as, any Event of Default shall have occurred and
be continuing, the outstanding principal balance of the Loan and, to the extent permitted by law, overdue
interest in respect of the Loan, shall accrue interest at the Default Rate, calculated from the date such payment
was due without regard to any grace or cure periods contained herein.
2.2.4 Interest Calculation. Interest on the outstanding principal balance of the Loan shall be
calculated for the period for which the calculation is being made on the basis of a thirty (30) day
month and a three hundred sixty (360) day year; provided, however, that interest on the outstanding principal
balance of the Loan for any partial month shall be calculated on the basis of the actual number of days elapsed
in the period for which the calculation is being made and a three hundred sixty (360) day year.
2.2.5 Usury Savings. This Agreement and the other Loan Documents are subject to the express
condition that at no time shall Borrower be required to pay interest on the principal balance of the Loan at a rate
which could subject Lender to either civil or criminal liability as a result of being in excess of the Maximum
Legal Rate. If by the terms of this Agreement or the other Loan Documents, Borrower is at any time required or
obligated to pay interest on the principal balance due hereunder at a rate in excess of the Maximum Legal Rate,
the Interest Rate or the Default Rate, as the case may be, shall be deemed to be immediately reduced to the
Maximum Legal Rate and all previous payments in excess of the Maximum Legal Rate shall be deemed to have
been payments in reduction of principal and not on account of the interest due hereunder. All sums paid or
agreed to be paid to Lender for the use, forbearance, or detention of the sums due under the Loan, shall, to the
extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term
of the Loan until payment in full so that the rate or amount of interest on account of the Loan does not exceed
the Maximum Legal Rate from time to time in effect and applicable to the Loan for so long as the Loan is
outstanding.
Section 2.3
Loan Payments.
2.3.1 Monthly Debt Service Payments. Borrower shall make a payment to Lender of interest only on
the Closing Date for the period from the Closing Date through the last day of the month in which the Closing
Date occurs (unless the Closing Date is the first (1st) day of a calendar month, in which case no such separate
payment of interest shall be due). Borrower shall make a payment to Lender of the Monthly Debt Service
Payment Amount on the Monthly Payment Date occurring in the second (2nd) calendar month following the
Closing Date and on each Monthly Payment Date thereafter to (but excluding) the Maturity Date. Each payment
shall be applied first to accrued and unpaid interest and the balance, if any, to principal.
2.3.2 Payment on Maturity Date. Borrower shall pay to Lender on the Maturity Date the
outstanding principal balance of the Loan, all accrued and unpaid interest (through and including the Maturity
Date) and all other amounts due hereunder and under the Note, the Security Instrument and the other Loan
Documents.
2.3.3 Late Payment Charge. If any principal, interest or any other sum due under the Loan
Documents, other than the payment of principal due on the Maturity Date, is not paid by Borrower within seven
(7) days of the date on which it is due, Borrower shall pay to Lender on demand an amount equal to the lesser of
(i) four percent (4%) of such unpaid sum or (ii) the maximum amount permitted by applicable law (the “ Late
Payment Charge ”) in order to defray the expense incurred by Lender in handling and processing such
delinquent payment and to compensate Lender for the loss of the use of such delinquent payment. Any such
amount shall be secured by the Security Instrument and the other Loan Documents.
2.3.4 Method and Place of Payment.
(a) Except as otherwise specifically provided herein, all payments and prepayments under this
Agreement and the Note shall be made to Lender not later than 1:00 P.M., New York City time, on the date
when due and shall be made in lawful money of the United States of
America in immediately available funds at Lender’s office, and any funds received by Lender after such time
shall, for all purposes hereof, be deemed to have been paid on the next succeeding Business Day.
(b) Whenever any payment to be made hereunder or under any other Loan Document shall be
stated to be due on a day which is not a Business Day, the due date thereof shall be the preceding Business Day.
(c) All payments required to be made by Borrower hereunder or under the Note or the other
Loan Documents shall be made irrespective of, and without deduction for, any setoff, claim or counterclaim and
shall be made irrespective of any defense thereto.
Section 2.4
Prepayments.
2.4.1 Voluntary Prepayments.
(a) Except as otherwise provided herein (including as provided in Section 2.4.2 below),
Borrower shall not have the right to prepay the Loan in whole or in part prior to the Maturity Date.
(b) Commencing on the Permitted Prepayment Date, Borrower may prepay the Loan in
whole, but not in part, at any time so long as the following conditions are satisfied:
(i) [Intentionally Deleted];
(ii) Borrower gives Lender not less ten (10) days’ prior written notice (such written
notice, a “ Prepayment Notice ”) specifying the date on which prepayment in whole is to be made (such date, a
“ Prepayment Date ”); and
(iii) Borrower pays Lender, in addition to the outstanding principal balance of the
Loan, (A) all interest which would have accrued on the amount of the Loan to be repaid through and including
the date on which such prepayment is made; (B) all other sums then due and payable under this Agreement, the
Note, and the other Loan Documents with respect to the amount being repaid, including, but not limited to all of
Lender’s costs and expenses (including reasonable attorney’s fees and expenses) incurred by Lender in
connection with such prepayment; and (C) the Prepayment Fee to the extent the same is then due and payable.
(iv) Lender shall notify Borrower of the amount and the basis of determination of the
required prepayment consideration. If a Prepayment Notice is given by Borrower to Lender pursuant to this
Section 2.4.1(b) , the amount designated for prepayment and all other sums required under this Section
2.4.1(b) shall be due and payable on the proposed Prepayment Date; provided , however , that on not less
than five (5) Business Days’ prior notice to Lender, Borrower shall have the one-time option to extend the
proposed Prepayment Date to a date which is not later than thirty (30) days after the originally proposed
Prepayment Date so long as Borrower indemnifies and holds Lender harmless from and against any actual loss
or out-of-pocket expense which Lender sustains or incurs as a consequence of any such extension of the original
Prepayment Date, which amounts shall be payable within ten (10) Business Days of Lender’s written demand
therefor.
2.4.2 Mandatory Prepayments. On each date on which Lender actually receives a distribution of
Net Proceeds and, if in accordance with Section 6.2 hereof, Lender is not required to
make such Net Proceeds available to Borrower for a Restoration, Borrower shall, at Lender’s option, prepay the
outstanding principal balance of the Note in the amount of such Net Proceeds, together with the Prepayment
Fee, accrued and unpaid interest thereon and all other sums due hereunder and under the other Loan
Documents; provided, however, that so long as Borrower makes a good faith effort to recover any Prepayment
Fee which would be due as a result of a casualty or condemnation from the insurer in the case of a casualty or
from the condemning authority in the case of a condemnation, then the Prepayment Fee due as a result of such
casualty or condemnation shall be waived except to the extent such Prepayment Fee is recovered by Borrower.
2.4.3 Prepayments After Default. If after the occurrence and during the continuance of an Event of
Default, payment of all or any part of the principal of the Loan is tendered by Borrower, a purchaser at
foreclosure or any other Person, such tender shall be deemed an attempt to circumvent the prohibition against
prepayment set forth in Section 2.4. 1 and Borrower, such purchaser at foreclosure or other Person shall be
required to pay the Prepayment Fee, in addition to the entire outstanding principal balance, all accrued and
unpaid interest and other amounts payable under the Loan Documents.
III.
Section 3.1
RESERVE FUNDS
Tax Funds.
3.1.1 Deposits of Tax Funds. Subject to the provisions of Section 3.1.3, Borrower shall deposit with
Lender such amount as Lender may reasonably require to establish the escrow for Taxes required under this
Section 3.1.1 . In addition, on each Monthly Payment Date Borrower shall deposit with Lender an amount equal
to one twelfth of the Taxes that Lender estimates will be payable during the next ensuing twelve (12) months in
order to accumulate sufficient funds to pay all such Taxes at least thirty (30) days prior to their respective due
dates. Amounts deposited pursuant to this Section 3.1.1 are referred to herein as the “ Tax Funds ”. If at any
time Lender reasonably determines that the Tax Funds will not be sufficient to pay the Taxes, Lender shall
notify Borrower of such determination and the monthly deposits for Taxes shall be increased by the amount that
Lender estimates is sufficient to make up the deficiency at least ten (10) days prior to the respective due dates
for the Taxes; provided that if Borrower receives notice of any deficiency after the date that is ten (10) days
prior to the date that Taxes are due, Borrower will deposit such amount within one (1) Business Day after its
receipt of such notice.
3.1.2 Release of Tax Funds. If Borrower has not provided Lender with evidence of payment of
Taxes at least ten (10) days prior to the due date of such Taxes, Lender shall have the right to apply the Tax
Funds to payments of Taxes. In making any payment relating to Taxes, Lender may do so according to any bill,
statement or estimate procured from the appropriate public office (with respect to Taxes) without inquiry into
the accuracy of such bill, statement or estimate or into the validity of any tax, assessment, sale, forfeiture, tax
lien or title or claim thereof. If the amount of the Tax Funds shall exceed the amounts due for Taxes, Lender
shall, in its sole discretion, return any excess to Borrower or credit such excess against future payments to be
made to the Tax Funds. Upon submission to Lender of reasonable evidence of payment of such Taxes directly
by Borrower, Lender shall reimburse Borrower for the amount of such Taxes so paid by Borrower to the extent
of the amount of the Tax Funds. Any Tax Funds remaining after the Debt has been paid in full shall upon
repayment of the Debt be returned to Borrower.
3.1.3 Waiver of Tax Escrow. Borrower shall be relieved of its obligation to make deposits to the Tax
Fund under this Section 3.1 , provided, that (a) no Event of Default has occurred and is
continuing; (b) (x) the Borrower named herein continues to own the Property or (y) if the Borrower named
herein does not own the Property, the Manager is escrowing a sufficient amount for Taxes pursuant to the terms
and conditions of the Management Agreement; and (c) (x) no Transfer has occurred in violation of Article VIII
of this Agreement or Article VI of the Security Instrument or (y) if a Transfer has occurred Manager is
escrowing a sufficient amount for Taxes pursuant to the terms and conditions of the Management Agreement.
Section 3.2
Insurance Funds.
3.2.1 Deposits of Insurance Funds. Subject to the provisions of Section 3.2.3, Borrower shall
deposit with Lender such amount as Lender may reasonably require to establish the escrow for Insurance
Premiums required under this Section 3.2.1 . In addition, on each Monthly Payment Date Borrower shall
deposit with Lender an amount equal to one twelfth of the Insurance Premiums that Lender estimates will be
payable for the renewal of the coverage afforded by the Policies upon the expiration thereof in order to
accumulate sufficient funds to pay all such Insurance Premiums at least thirty (30) days prior to the expiration
of the Policies. Amounts deposited pursuant to this Section 3.2.1 are referred to herein as the “ Insurance
Funds ”. If at any time Lender reasonably determines that the Insurance Funds will not be sufficient to pay the
Insurance Premiums, Lender shall notify Borrower of such determination and the monthly deposits for
Insurance Premiums shall be increased by the amount that Lender estimates is sufficient to make up the
deficiency at least thirty (30) days prior to expiration of the Policies.
3.2.2 Release of Insurance Funds. If Borrower has not provided Lender with evidence of payment of
such Insurance Premiums at least ten (10) days prior to the due date of the Insurance Premiums, Lender shall
have the right to apply the Insurance Funds to payment of Insurance Premiums. In making any payment relating
to Insurance Premiums, Lender may do so according to any bill, statement or estimate procured from the insurer
or its agent, without inquiry into the accuracy of such bill, statement or estimate. If the amount of the Insurance
Funds shall exceed the amounts due for Insurance Premiums, Lender shall, in its sole discretion, return any
excess to Borrower or credit such excess against future payments to be made to the Insurance Funds. Upon
submission to Lender of reasonable evidence of payment of such Insurance Premiums directly by Borrower,
Lender shall reimburse Borrower for the amount of such Insurance Premiums so paid by Borrower to the extent
of the amount of the Insurance Funds. Any Insurance Funds remaining after the Debt has been paid in full shall
upon repayment of the Debt be returned to Borrower.
3.2.3 Waiver of Insurance Escrow. Borrower shall be relieved of its obligation to make deposits to
the Insurance Funds under this Section 3.2 , provided, that (a) no Event of Default has occurred and is
continuing; (b) (x) the Borrower named herein continues to own the Property, or (y) if the Borrower named
herein does not own the Property, the Manager is escrowing a sufficient amount for Insurance Premiums
pursuant to the terms and conditions of the Management Agreement; (c) (x) no Transfer has occurred in
violation of Article VIII of this Agreement or Article VI of the Security Instrument or (y) if a Transfer has
occurred, the Manager is escrowing a sufficient amount for Insurance Premiums pursuant to the terms and
conditions of the Management Agreement; and (d) Lender receives evidence acceptable to it of the payment of
all such Insurance Premiums at least thirty (30) days prior to the date the same are due and the other terms and
conditions of this Agreement with respect to the Policies are satisfied.
Section 3.3
FF&E Funds.
3.3.1 Deposits of FF&E Reserve Funds. Borrower shall deposit with or on behalf of Lender five
(5%) percent of the previous month’s Gross Revenue (the “ Monthly FF&E Deposit ”) and such payments
shall be held in escrow (the “ FF&E Reserve Fund ”) and disbursed in accordance with the provisions set forth
in this Section 3.3 . Notwithstanding anything to the contrary contained in this paragraph, the Borrower shall
only be required to escrow with Lender the amount by which the required Monthly FF&E Deposit amount
exceeds the amount that the Manager is escrowing into a FF&E reserve fund pursuant to the terms and
conditions of the Management Agreement, and provided that the Manager, the bank at which the account is
maintained and Lender enter into a control agreement satisfactory to Lender.
3.3.2 Release of FF&E Reserve Funds.
(a) During any period of time in which Borrower is required to deposit the Monthly FF&E
Deposit with or on behalf of Lender, Lender shall make disbursements to Borrower from the FF&E Reserve
Account for FF&E Work upon satisfaction by Borrower of each of the following conditions with respect to each
such disbursement: (i) such disbursement is for an Approved FF&E Expense; (ii) Borrower shall submit a
request for payment to Lender at least ten (10) days prior to the date on which Borrower requests such payment
be made, which request shall specify the Approved FF&E Expenses to be paid; (iii) on the date such request is
received by Lender and on the date such payment is to be made, no Event of Default shall exist and remain
uncured, and (iv) Lender shall have received (1) an Officer’s Certificate from Borrower (A) stating that the
items to be funded by the requested disbursement are Approved FF&E Expenses, and a description thereof, (B)
stating that all Approved FF&E Expenses to be funded by the requested disbursement have been completed in a
good and workmanlike manner and in accordance with all Applicable Law, (C) identifying each Person that
supplied materials or labor in connection with the Approved FF&E Expenses to be funded by the requested
disbursement, (D) stating that each such Person has been paid in full or will be paid in full upon such
disbursement, (E) stating that the Approved FF&E Expenses to be funded have not been the subject of a
previous disbursement, and (F) stating that all previous disbursements of FF&E Reserve Funds have been used
to pay the previously identified Approved FF&E Expenses, (2) a copy of any license, permit or other approval
to the extent required by any Governmental Authority in connection with the Approved FF&E Expenses and not
previously delivered to Lender, (3) upon Lender’s request for any Approved FF&E Expense item in excess of
$25,000.00, lien waivers (which may be conditioned on payment of the requested amount) or other evidence of
payment satisfactory to Lender to the extent such request is for reimbursement, (4) at Lender’s option, a title
search for the Property indicating that the Property is free from all Liens, claims and other encumbrances not
previously approved by Lender, provided that Lender shall not request such a title search more than two (2)
times in any calendar year, and (5) such other evidence as Lender shall reasonably request to demonstrate that
the Approved FF&E Expenses to be funded by the requested disbursement have been completed and are paid
for or will be paid upon such disbursement to Borrower. Lender shall not be required to disburse FF&E Reserve
Funds more frequently than once each calendar month.
(b) Nothing in this Section 3.3.2 shall (i) make Lender responsible for performing or
completing any FF&E Work; (ii) require Lender to expend funds in addition to the FF&E Reserve Funds to
complete any FF&E Work; (iii) obligate Lender to proceed with any FF&E Work; or (iv) obligate Lender to
demand from Borrower additional sums to complete any FF&E Work.
(c) Borrower shall permit Lender and Lender’s agents and representatives (including
Lender’s engineer, architect or inspector) or third parties to enter onto the Property during normal business
hours to inspect the progress of any FF&E Work.
Section 3.4 Reserve Funds Generally. (a) Borrower and TRS Entity each grant to Lender a
first-priority perfected security interest in each of the Reserve Funds and the related accounts and any and all
monies now or hereafter deposited in each Reserve Fund and related accounts as additional security for payment
of the Debt. In the event Manager is escrowing funds for Taxes, Insurance Premiums or FF&E pursuant to the
terms and conditions of the Management Agreement, Borrower and TRS Entity shall cause such escrow or
reserve accounts to be pledged to Lender as additional security for payment of the Debt as recognized in
Assignment of Management Agreement. Until expended or applied in accordance herewith, the Reserve Funds
and the related accounts shall constitute additional security for the Obligations.
(b) The Reserve Funds shall be held in non-interest bearing accounts, and Lender may
commingle the Reserve Funds with other funds of Lender.
(c) Borrower shall not, without obtaining the prior written consent of Lender, further pledge,
assign or grant any security interest in any Reserve Fund or related account or the monies deposited therein or
permit any lien or encumbrance to attach thereto, or any levy to be made thereon, or any UCC-1 Financing
Statements, except those naming Lender as the secured party, to be filed with respect thereto.
(d) Borrower shall indemnify Lender and hold Lender harmless from and against any and all
actions, suits, claims, demands, liabilities, losses, damages, obligations and costs and expenses (including
litigation costs and reasonable attorneys’ fees and expenses) arising from or in any way connected with the
Reserve Funds or the related accounts or the performance of the obligations for which the Reserve Funds or the
related accounts were established, except to the extent arising from the gross negligence or willful misconduct
of Lender, its agents or employees. Borrower shall assign to Lender all rights and claims Borrower may have
against all Persons supplying labor, materials or other services which are to be paid from or secured by the
Reserve Funds or the related Accounts; provided, however, that Lender may not pursue any such right or claim
unless an Event of Default has occurred and remains uncured.
IV. REPRESENTATIONS AND WARRANTIES
Section 4.1 Borrower Representations. Borrower and TRS Entity each represents and warrants as of
the date hereof that:
4.1.1 Organization.
(a) Borrower, TRS Entity and each Restricted Party is duly organized, validly existing and in
good standing with full power and authority to own its assets and conduct its business, and is duly qualified in
all jurisdictions in which the ownership or lease of its property or the conduct of its business requires such
qualification, and Borrower has taken all necessary action to authorize the execution, delivery and performance
of this Agreement, the other Loan Documents and the Environmental Indemnity by it, and has the power and
authority to execute, deliver and perform under this Agreement, the other Loan Documents and the
Environmental Indemnity and all the transactions contemplated hereby and thereby.
(b) Borrower’s exact legal name is correctly set forth in the first paragraph of this Agreement.
Borrower is an organization of the type specified in the first paragraph of this Agreement. Borrower is
incorporated or organized under the laws of the state specified in the first
paragraph of this Agreement. Borrower’s principal place of business and chief executive office, and the place
where Borrower keeps its books and records, including recorded data of any kind or nature, regardless of the
medium of recording, including software, writings, plans, specifications and schematics, has been for the
preceding four (4) months (or, if less than four (4) months, the entire period of the existence of Borrower) the
address of Borrower set forth in the first paragraph of this Agreement. Borrower’s organizational identification
number, assigned by the state of its incorporation or organization is 4988211. Borrower’s federal tax
identification number is 45-2458065. Borrower is not subject to back up withholding taxes. Borrower has
delivered to Lender true and correct copies of all of Borrower’s organizational documents and except as
expressly approved by Lender in writing, there have been no changes in Borrower’s Constituents since the date
the loan application for the Loan was executed by Borrower.
(c) TRS Entity’s exact legal name is correctly set forth on the signature page of this
Agreement. TRS Entity is a limited liability company duly organized under the laws of the State of Delaware.
TRS Entity’s principal place of business and chief executive office and the place where TRS Entity keeps its
books and records, including recorded dates of any kind or nature, regardless of the medium of recording,
including, software, writings, plans, specifications and schematics, has been for the preceding four (4) months
(or, if less than four (4) months, the entire period of existence for the TRS Entity) the same address of
Borrower. TRS Entity’s organizational identification number, assigned by the state of its incorporation or
organization is 4988212. TRS Entity’s federal tax identification number is 45-2458072. TRS Entity is not
subject to back up withholding taxes. Borrower has delivered to Lender true and correct copies of all of TRS
Entity’s organizational documents and except as expressly approved by Lender in writing, there have been no
changes in TRS Entity’s Constituents since the date the loan application for the Loan was executed by
Borrower.
4.1.2 Proceedings. This Agreement, the Environmental Indemnity and the other Loan Documents to
which Borrower is a party or which the TRS Entity has joined in, have been duly authorized, executed and
delivered by Borrower and constitute a legal, valid and binding obligation of Borrower, or where applicable,
TRS Entity, enforceable against Borrower, or where applicable, TRS Entity, in accordance with their respective
terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors’ rights generally, and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in equity or at law).
4.1.3 No Conflicts. The execution, delivery and performance by Borrower, and TRS Entity where
applicable, of this Agreement, the Environmental Indemnity and the other Loan Documents to which Borrower
is a party or which the TRS Entity has joined in, and the performance of its obligations hereunder and
thereunder do not conflict with any provision of any law or regulation to which Borrower or where applicable,
TRS Entity, is subject or conflict with, result in a breach of, or constitute a default under, any of the terms,
conditions or provisions of any of Borrower’s or where applicable, TRS Entity, organizational documents or
any agreement or instrument to which Borrower is a party or by which it is bound, or any order or decree
applicable to Borrower or where applicable, TRS Entity, or result in the creation or imposition of any lien on
any of Borrower’s or where applicable, TRS Entity, assets or property (other than pursuant to the Loan
Documents).
4.1.4 Litigation. There is no action, suit, proceeding, or investigation pending or, to Borrower’s
knowledge, threatened against or affecting Borrower, TRS Entity, any of Borrower’s Constituents, any of TRS
Entity’s Constituents, or the Property in any court or by or before any other Governmental Authority which if
determined adversely would materially adversely affect the
Property or the ability of Borrower, TRS Entity or Guarantor to carry out the transactions contemplated by this
Agreement, the other Loan Documents, the Guaranty or the Environmental Indemnity.
4.1.5 Agreements. Borrower or where applicable, TRS Entity, is not in default with respect to any
order or decree of any court or any order, regulation or demand of any Governmental Authority, which default
would be reasonably likely to materially and adversely affect the condition (financial or other) or operations of
the Property or Borrower or TRS Entity or Borrower’s or TRS Entity’s ability to perform its obligations
hereunder or under the Loan Documents or the Environmental Indemnity. Borrower or where applicable, TRS
Entity, is not in default in any material respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument to which it is a party or by which
Borrower or where applicable, TRS Entity, or the Property are bound.
4.1.6 Consents. No consent, approval, authorization or order of any court or Governmental Authority
is required for the execution, delivery and performance by Borrower or where applicable, TRS Entity, of, or
compliance by Borrower or where applicable, TRS Entity, with, this Agreement or any of the other Loan
Documents or the Environmental Indemnity or the consummation of the transactions contemplated hereby or
thereby, other than those which have been obtained by Borrower.
4.1.7 Title. Borrower has good, marketable, indefeasible and insurable fee simple title to the real
property rights comprising part of the Property and good title to the balance of the Property owned by it, free
and clear of all Liens whatsoever except the Permitted Encumbrances. TRS Entity has good, marketable and
indefeasible leasehold title to the Property pursuant to the TRS Lease, free and clear of all Liens whatsoever,
except the Permitted Encumbrances. Borrower or where applicable, TRS Entity, has the right and is lawfully
authorized to sell, convey or encumber the Property subject only to the Permitted Encumbrances. The Security
Instrument, when properly recorded in the appropriate records, together with any Uniform Commercial Code
financing statements required to be filed in connection therewith, will create (i) a valid, first priority, perfected
lien on Borrower’s and TRS Entity’s right, title and interest to the Property, subject only to Permitted
Encumbrances and (ii) perfected security interests in and to, and perfected collateral assignments of, all
personalty (including the Leases), all in accordance with the terms thereof, in each case subject only to any
Permitted Encumbrances. There are no mechanics’, materialman’s or other similar liens or claims which have
been filed for work, labor or materials affecting the Property which are or may be liens prior to, or equal or
coordinate with, the lien of the Security Instrument. The Property is free from all due and unpaid Taxes and
Other Charges. None of the Permitted Encumbrances, individually or in the aggregate, materially interfere with
the benefits of the security intended to be provided by the Security Instrument and this Agreement, materially
and adversely affect the value of the Property, impair the use or operations of the Property or impair Borrower’s
ability to pay its obligations in a timely manner.
4.1.8 No Plan Assets. Borrower and TRS Entity each hereby represents, warrants and agrees that: (i)
it is acting on its own behalf and that it is not an employee benefit plan as defined in Section 3(3) of ERISA,
which is subject to Title 1 of ERISA, nor a plan as defined in Section 4975(e)(1) of the Internal Revenue Code
of 1986, as amended (each of the foregoing hereinafter referred to collectively as a “ Plan ”); and (ii)
Borrower’s and TRS Entity’s assets do not constitute “plan assets” of one or more such Plans within the
meaning of Department of Labor Regulation Section 2510.3-101.
4.1.9 Compliance. Borrower, TRS Entity and the Property and the use thereof comply in all material
respects with all applicable Legal Requirements, including, without limitation, building and zoning ordinances
and codes and Prescribed Laws. Neither Borrower nor TRS Entity is in default or violation of any order, writ,
injunction, decree or demand of any Governmental Authority, the violation of which might materially adversely
affect the condition (financial or otherwise) or business of Borrower or TRS Entity. Neither Borrower nor TRS
Entity has committed any act which may give any Governmental Authority the right to cause Borrower or TRS
Entity to forfeit the Property or any part thereof or any monies paid in performance of Borrower’s obligations
under any of the Loan Documents.
4.1.10 Financial Information. All financial statements, including, without limitation, the statement
of income and operating expense, that have been delivered to Lender in respect of the Property and/or in
connection with the Loan (i) are true, complete and correct in all material respects as of the date of such reports,
(ii) accurately represent the financial condition of the Property as of the date of such reports, and (iii) have been
prepared in accordance with the Uniform System of Accounts throughout the periods covered. Borrower does
not have any contingent liabilities, liabilities for taxes, unusual forward or long term commitments or unrealized
or anticipated losses from any unfavorable commitments that are known to Borrower and which are,
individually or in the aggregate, reasonably likely to have a materially adverse effect on the Property or the
operation thereof, except as referred to or reflected in the most recent financial statements of Borrower
delivered to Lender. Since the date of such financial statements, there has been no material adverse change in
the financial condition, operations or business of Borrower or the Property from that set forth in the financial
statements.
4.1.11 Casualty and Condemnation. Except as expressly approved by Lender in writing, no casualty
or damage to any part of the Property which would cost more than $50,000.00 to restore or replace has occurred
which has not been fully restored or replaced. No part of the Property has been taken in Condemnation or other
similar proceeding or transferred in lieu of Condemnation, nor has Borrower or TRS Entity received notice of
any proposed condemnation or other similar proceeding affecting the Property. No Condemnation or other
proceeding has been commenced or, to Borrower’s or TRS Entity’s best knowledge, is contemplated with
respect to all or any portion of the Property or for the relocation of roadways providing access to the Property.
4.1.12 Enforceability. The Loan Documents and the Environmental Indemnity are not subject to any
right of rescission, set off, counterclaim or defense by Borrower or TRS Entity, including the defense of usury,
nor would the operation of any of the terms of the Loan Documents or the Environmental Indemnity, or the
exercise of any right thereunder, render the Loan Documents or the Environmental Indemnity unenforceable,
and neither Borrower nor TRS Entity has asserted any right of rescission, set off, counterclaim or defense with
respect thereto.
4.1.13 Assignment of Leases. The Assignment of Leases creates a valid assignment of, or a valid
security interest in, certain rights under the Leases, subject only to a license granted to Borrower and TRS
Entity to exercise certain rights and to perform certain obligations of the lessor under the Leases, including the
right to operate the Property. No Person other than Lender has any interest in or assignment of Borrower or TRS
Entity’s interest in the Leases or any portion of the Rents due and payable or to become due and payable
thereunder.
4.1.14 Insurance. Borrower has obtained and has delivered to Lender original or certified copies of
all of the Policies, with all premiums prepaid thereunder, reflecting the insurance coverages,
amounts and other requirements set forth in this Agreement. No claims have been made under any of the
Policies, and none of Borrower, TRS Entity, nor to Borrower’s knowledge, any other Person, has done, by act
or omission, anything which would impair the coverage of any of the Policies.
4.1.15 Licenses. All authorizations, permits, licenses and approvals, including, without limitation,
operating permits, certificates of occupancy and liquor licenses, required by any Governmental Authority for
the use, occupancy, operation construction, maintenance and management of the Property in the manner in
which the Property is currently being used, occupied and operated have been obtained and are in full force and
effect and, to the knowledge of Borrower and TRS Entity, all Tenants have such permits and approvals as are
required by any Governmental Authority for the use, occupancy and operation of the premises demised under
their respective Leases.
4.1.16 Flood Zone. None of the Improvements on the Property is located in an area identified by the
Federal Emergency Management Agency as a special flood hazard area.
4.1.17 Physical Condition. The Property, including, without limitation, all buildings, improvements,
parking facilities, sidewalks, storm drainage systems, roofs, plumbing systems, HVAC systems, fire protection
systems, electrical systems, equipment, elevators, exterior sidings and doors, landscaping, irrigation systems
and all structural components, are in good condition, order and repair in all material respects; there exists no
structural or other material defects or damages in the Property, whether latent or otherwise, and neither
Borrower nor TRS Entity has received notice from any insurance company or bonding company of any defects
or inadequacies in the Property, or any part thereof, which would adversely affect the insurability of the same or
cause the imposition of extraordinary premiums or charges thereon or of any termination or threatened
termination of any policy of insurance or bond.
4.1.18 Leases.
(a) There are no Leases affecting the Property except (i) that certain Lease Agreement, dated
as of September 14, 2012, entered into by and between Hyatt Corporation as agent of CHSP TRS Boston LLC
d/b/a Hyatt Regency Boston and Niva Downtown Boston Gift Shop Inc., and all amendments thereto and (ii)
that certain Concession Agreement dated October 3, 2012 entered into by and between Hyatt Corporation as
agent of CHSP TRS Boston II LLC d/b/a Hyatt Regency Boston and Visual Aids Electronics Corp. Borrower
has delivered to Lender true, correct and complete copies of all existing Leases, including all existing
modifications and amendments, and associated guaranties (collectively, “ Existing Leases ”). All agreements
between the landlord and Tenant or between the landlord and any guarantor pertaining to any of such Leases are
set forth in writing and are included in such copies that have been so delivered.
(b) There are no defaults by Borrower under the Existing Leases. To the best knowledge of
Borrower, there are no defaults by any Tenants under the Existing Leases. The Existing Leases are in full force
and effect.
(c) To the best knowledge of Borrower, none of the Tenants now occupying 10% or more of
the rentable space at the Property or having a current Lease affecting 10% or more of such rentable space is the
subject of any bankruptcy, reorganization or insolvency proceeding or any other debtor-creditor proceeding.
4.1.19 Filing and Recording Taxes. All transfer taxes, deed stamps, intangible taxes or other
amounts in the nature of transfer taxes required to be paid by Borrower under applicable Legal Requirements in
connection with the transfer of the Property to Borrower have been paid or are being paid simultaneously
herewith. All mortgage, mortgage recording, stamp, intangible or other similar tax required to be paid under
applicable Legal Requirements in connection with the execution, delivery, recordation, filing, registration,
perfection or enforcement of any of the Loan Documents, including, without limitation, the Security Instrument,
have been paid or are being paid simultaneously herewith. All taxes and governmental assessments due and
owing in respect of the Property have been paid, or an escrow of funds in an amount sufficient to cover such
payments has been established hereunder or are insured against by the Title Insurance Policy.
4.1.20 Special Purpose Entity/Separateness.
(a)
Borrower is a Special Purpose Entity.
(b) The Property has “single asset real estate” status as defined by Section 101(51)(B) of the
Bankruptcy Code.
(c) The organizational documents of Borrower and its controlling constituent entities, as in
effect on the date hereof, have been approved by Lender.
(d) TRS Entity is a Special Purpose Entity.
(e) The organizational documents of TRS Entity and its controlling constituent entities, as in
effect on the date hereof, have been approved by Lender.
(f) The representations and warranties set forth in this Section 4.1.20 shall survive for so long
as any amount remains payable to Lender under this Agreement or any other Loan Document.
4.1.21 Solvency. Borrower (a) has not entered into the transaction contemplated by this Agreement or
any Loan Document or the Environmental Indemnity with the actual intent to hinder, delay, or defraud any
creditor and (b) has received reasonably equivalent value in exchange for its obligations under the Loan
Documents and the Environmental Indemnity. Giving effect to the Loan, the fair saleable value of Borrower’s
assets exceeds and will, immediately following the making of the Loan, exceed Borrower’s total liabilities,
including, without limitation, subordinated, unliquidated, disputed and contingent liabilities. The fair saleable
value of Borrower’s assets is and will, immediately following the making of the Loan, be greater than
Borrower’s probable liabilities, including the maximum amount of its contingent liabilities on its debts as such
debts become absolute and matured. Borrower’s assets do not and, immediately following the making of the
Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be
conducted. Borrower does not intend to, and does not believe that it will, incur Indebtedness and liabilities
(including contingent liabilities and other commitments) beyond its ability to pay such Indebtedness and
liabilities as they mature (taking into account the timing and amounts of cash to be received by Borrower and
the amounts to be payable on or in respect of obligations of Borrower). None of Borrower, any of Borrower’s
Constituents, TRS Entity or any of TRS Entity’s Constituents, is involved in any bankruptcy, reorganization,
insolvency, dissolution or liquidation proceeding, and to the best knowledge of Borrower, no such proceeding is
contemplated or threatened.
4.1.22 Organizational Chart. The organizational chart attached as Schedule 4.1.22 hereto, relating to
Borrower, TRS Entity and certain Affiliates and other parties, is true, complete and correct on and as of the date
hereof and shows all Persons holding direct or indirect ownership interests in Borrower and TRS Entity, except
as otherwise indicated thereon above the level of Chesapeake Lodging Trust.
4.1.23 Material Agreements. Attached hereto as Schedule 4.1.23 is a list of all Material Agreements,
true and complete copies of each of which have been delivered to Lender.
4.1.24 No Other Debt. Neither Borrower nor TRS Entity has borrowed or received debt financing
(other than permitted pursuant to this Agreement) that has not been heretofore repaid in full.
4.1.25 No Bankruptcy Filing. Neither Borrower nor TRS Entity is contemplating either the filing of
a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of its assets or
property, and neither Borrower nor TRS Entity has any knowledge of any Person contemplating the filing of
any such petition against it.
4.1.26 Full and Accurate Disclosure. No information contained in this Agreement, the other Loan
Documents or the Environmental Indemnity, or any written statement furnished by or on behalf of Borrower or
TRS Entity pursuant to the terms of this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein or therein not misleading in any material
respect in light of the circumstances under which they were made. There is no fact or circumstance presently
known to Borrower or TRS Entity which has not been disclosed to Lender and which materially adversely
affects, or is reasonably likely to materially adversely affect, the Property, Borrower, TRS Entity or their
respective business, operations or condition (financial or otherwise).
4.1.27 Foreign Person. None of Borrower’s Constituents or TRS Entity’s Constituents is a “foreign
person” within the meaning of Sections 1445 and 7701 of the Code.
4.1.28 No Change in Facts or Circumstances; Disclosure. There has been no material adverse
change in any condition, fact, circumstance or event that would make the financial statements, rent rolls,
reports, certificates or other documents submitted in connection with the Loan inaccurate, incomplete or
otherwise misleading in any material respect or that otherwise materially and adversely affects the business
operations or the financial condition of Borrower, TRS Entity or the Property.
4.1.29 Management Agreement. Borrower has provided to Lender a true, correct and complete copy
of the Management Agreement. The Management Agreement is in full force and effect and no event of default
has occurred by Borrower or, to Borrower’s knowledge, by Manager thereunder nor has any event under the
Management Agreement occurred by Borrower or, to Borrower’s knowledge, by Manager which, but for the
giving of notice, or passage of time, or both would be an event of default thereunder. All fees due and payable
to Manager have been paid in full.
4.1.30 Non-Relationship. None of (i) Borrower, CHSP Boston LLC, Guarantor or CLT (collectively,
“ Borrower’s Constituents ”), (ii) TRS Entity, CHSP TRS Boston LLC or CHSP TRS LLC (collectively, “
TRS Entity’s Constituents ”), or (iii) to Borrower’s knowledge any officer or director of Borrower’s
Constituents or TRS Entity’s Constituents is (a) a director or officer of
Metropolitan Life Insurance Company (“MetLife”), (b) a parent, son or daughter of a director or officer of
MetLife, or a descendent of any of them, (c) a stepparent, adopted child, step-son or step-daughter of a director
or officer of MetLife, or (d) a spouse of a director or officer of MetLife.
4.1.31 US Patriot Act. Borrower, TRS Entity and any person or entity (other than the holders of a
non-controlling publicly traded interest of a Regulated Party) that directly or indirectly (a) Controls Borrower or
TRS Entity or (b) has an ownership interest in Borrower or TRS Entity of twenty-five percent (25%) or more be
regulated by the SEC, FINRA or the Federal Reserve (a “ Regulated Party ”), or for such persons or entities in
subsections (a) and (b) which are not Regulated Parties, such persons or entities do not appear on a US Treasury
Office of Foreign Assets Control (“ OFAC ”) list or any other law or any similar list maintained by any other
governmental authority, with respect to which entering into transactions with such person or entity would
violate the USA Patriot Act or regulations or any Presidential Executive Order or any other similar applicable
law, ordinance, order, rule or regulation.
4.1.32 Criminal Acts. None of Borrower’s Constituents or TRS Entity’s Constituents has been
convicted of, or been indicted for, a felony criminal offense.
4.1.33 No Defaults. None of Borrower’s Constituents or TRS Entity’s Constituents is currently in
default under any mortgage, deed of trust, note, loan or credit agreement.
4.1.34 [Intentionally Omitted]
4.1.35 [Intentionally Omitted]
4.1.36 [Intentionally Omitted]
4.1.37 [Intentionally Omitted]
4.1.38 Personal Property. Either or both of Borrower and TRS Entity own the Personal Property free
from any lien, security interest, encumbrance or adverse claim, except as otherwise expressly approved by
Lender in writing . The Personal Property has not been used or bought for personal, family, or household
purposes, but has been bought and used solely for the purpose of carrying on Borrower's business.
4.1.39 TRS Lease. Borrower and TRS Entity each hereby represents and warrants to Lender the
following with respect to the TRS Lease:
(a) Recording; Modification. A memorandum of the TRS Lease has been duly recorded. The
TRS Lease permits the interest of Borrower to be encumbered by a mortgage or the TRS Entity has approved
and consented to the encumbrance of the Property by the Security Instrument. There have not been amendments
or modifications to the terms of the TRS Lease since recordation of the TRS Lease (or a memorandum thereof),
with the exception of written instruments, copies of which have been delivered to Lender.
(b) No Liens. Neither Borrower’s nor TRS Entity’s interest in the TRS Lease is subject to any
Liens or encumbrances.
(c) TRS Lease Assignable. Borrower’s interest in the TRS Lease is assignable without the
consent of the TRS Entity to Lender subject to execution of the Subordination Agreement. TRS Entity’s interest
in the TRS Lease is assignable without the consent of Borrower to Lender or Borrower has consented to the
assignment of the TRS Entity’s interest in the TRS Lease to Lender pursuant to the Subordination Agreement.
(d) Termination. The TRS Lease shall unconditionally terminate concurrently with the
foreclosure of the Lien of the Security Instrument or Lender’s acceptance of any deed-in-lieu of foreclosure
from Borrower, as more particularly set forth in the Subordination Agreement. Borrower and TRS Entity
acknowledge that the security interest granted by the Security Instrument shall permit Lender to exercise all
rights and remedies under all agreements, contracts, management agreements, guaranties, warranties,
certificates, instruments, franchises, permits, licenses and other documents relating in any way to the Property
in the event of such a termination of the TRS Lease.
(e) Default. As of the date hereof, the TRS Lease is in full force and effect and no default has
occurred under the TRS Lease and there is no existing condition which, but for the passage of time or the giving
of notice, could result in a default under the terms of the TRS Lease. All rents, additional rents and other sums
due and payable as of the date hereof under the TRS Lease have been paid in full. Neither Borrower nor TRS
Entity under the TRS Lease has commenced any action or given or received any notice for the purpose of
terminating the TRS Lease.
4.1.40 Hotel Management Agreement. The Management Agreement, pursuant to which TRS Entity
has designated the Manager the right to operate the hotel located on the Property under a name and/or hotel
system controlled by such Manager, is in full force and effect, all management fees, reservation fees, royalties
and other sums due thereunder have been paid in full to date, and there is no default, breach or violation existing
thereunder by Borrower or TRS Entity, or, to Borrower’s or TRS Entity’s knowledge, Manager, and no event
has occurred (other than payments due but not yet delinquent) that, with the passage of time or the giving of
notice, or both, would constitute a default, breach or violation by any party thereunder. Neither the execution
and delivery of the Loan Documents nor Borrower's performance thereunder will adversely affect TRS Entity’s
rights under the Management Agreement.
Section 4.2 Survival of Representations. The representations and warranties set forth in Section 4.1
shall survive for so long as any amount remains payable to Lender under this Agreement or any of the other
Loan Documents.
V.
BORROWER COVENANTS
Section 5.1 Borrower Affirmative Covenants. From the date hereof until payment of the Debt in
full, Borrower and TRS Entity, where applicable, hereby covenants and agrees with Lender that:
5.1.1 Existence; Compliance with Legal Requirements. Borrower and TRS Entity shall do or cause
to be done all things necessary to preserve, renew and keep in full force and effect its existence, rights, licenses,
permits and franchises and comply in all material respects with all Legal Requirements applicable to it and the
Property, including, without limitation, Prescribed Laws. Neither Borrower nor TRS Entity shall use or permit
the use of the Property, or any part thereof, for any illegal purpose. Borrower shall furnish to Lender, on
request, proof of compliance with the Legal Requirements.
5.1.2 Taxes and Other Charges.
(a) Borrower shall pay all Taxes and Other Charges now or hereafter levied or assessed or
imposed against the Property or any part thereof as the same become due and payable; provided, however,
Borrower’s obligation to directly pay Taxes shall be suspended for so long as Borrower complies with the terms
and provisions of Section 3.1 hereof subject to Borrower’s right in Section 3.1 to pay such Taxes and Other
Charges and provide Lender with evidence thereof. Borrower shall furnish to Lender receipts for the payment of
the Taxes and the Other Charges not later than ten (10) days prior to the date the same would otherwise become
delinquent; provided, however, that if Borrower has not furnished such receipts for payment of Taxes prior to
such date and Borrower is in compliance with Section 3.1 such Taxes shall be paid by Lender in accordance
with Section 3.1 hereof. Borrower shall not permit or suffer and shall promptly discharge any lien or charge
against the Property, except Permitted Encumbrances. After prior written notice to Lender, Borrower, at its own
expense, may contest by appropriate legal proceeding, conducted in good faith and with due diligence, the
amount or validity of any Taxes or Other Charges, provided that (i) no Event of Default has occurred and
remains uncured; (ii) such proceeding shall be permitted under and be conducted in accordance with all
applicable statutes, laws and ordinances; (iii) neither the Property nor any part thereof or interest therein will be
in danger of being sold, forfeited, terminated, canceled or lost; (iv) Borrower shall promptly upon final
determination thereof pay the amount of any such Taxes or Other Charges, together with all costs, interest and
penalties which may be payable in connection therewith; and (v) (A) Borrower shall first pay such contested
amount to the applicable taxing body or other governmental authority or (B) such proceeding shall suspend the
collection of Taxes or Other Charges from the Property, and Borrower shall deposit with Lender cash, or other
security as may be reasonably approved by Lender, in an amount equal to 125% of the contested amount, to
insure the payment of any such Taxes or Other Charges, together with all interest and penalties thereon. Lender
may pay over any such cash or other security held by Lender to the claimant entitled thereto at any time when,
in the reasonable judgment of Lender, the Property or any part thereof or interest therein will be in danger of
being sold, forfeited, terminated, canceled or lost as a result of any non-payment.
(b) In the event of the passage, after the date hereof, of any law which changes in any way the
existing laws regarding the taxation of mortgages, deeds of trust and/or security agreements or debts secured by
these instruments, or changes the manner for the collection of any such taxes, and the law has the effect of
imposing payment of any Taxes upon Lender, at Lender’s option, the Debt shall immediately become due and
payable unless (i) Borrower is permitted by law (including, without limitation, applicable interest rate laws) to,
and actually does, pay the Taxes or the increased portion of the Taxes and (ii) Borrower agrees in writing to pay
or reimburse Lender in accordance with Section 12.13 for the payment of any such Taxes which becomes
payable at any time when the Loan is outstanding.
5.1.3 Litigation. Borrower shall give prompt notice to Lender of any litigation or governmental
proceedings pending or threatened in writing against Borrower, TRS Entity, the Guarantor or the Property
which could, if determined adversely to Borrower, TRS Entity, the Guarantor or the Property, be reasonably
expected to materially adversely affect the Property, the Guarantor, TRS Entity or Borrower’s ability to perform
its obligations hereunder or under the other Loan Documents or the Guaranty or the Environmental Indemnity.
5.1.4 Access to Property. Lender shall have the right, at any time and from time to time during
normal business hours, to enter the Property in order to ascertain Borrower’s compliance with the Loan
Documents, to examine the condition of the Property, to perform an appraisal, to undertake surveying or
engineering work, and to inspect premises occupied by Tenants. Borrower shall cooperate with Lender in
performing these inspections.
5.1.5 Further Assurances; Supplemental Security Instrument Affidavits. Borrower and TRS
Entity shall, without expense to Lender, execute, acknowledge and deliver all further acts, deeds, conveyances,
mortgages, deeds of trust, assignments, security agreements, and financing statements as Lender shall from time
to time reasonably require, to assure, convey, assign, transfer and confirm unto Lender the Property and rights
conveyed or assigned by this Agreement and the other Loan Documents and the Environmental Indemnity or
which Borrower may become bound to convey or assign to Lender, or for carrying out the intention or
facilitating the performance of the terms of this Agreement or any of the other Loan Documents or the
Environmental Indemnity, or for filing, refiling, registering, reregistering, recording or rerecording the Security
Instrument.
5.1.6 Books and Records; Financial Reporting. Borrower and TRS Entity shall keep adequate
books and records of account in accordance with GAAP and the Uniform System of Accounts, or in accordance
with other methods acceptable to Lender in its sole discretion, consistently applied and Borrower shall furnish
to Lender:
(a) monthly, a report showing actual income and expenses for the Property and a “STR”
report for the Property, within thirty (30) days after the close of each calendar month;
(b) an annual balance sheet and profit and loss statement of Borrower in the form required by
Lender, prepared and certified by Borrower, as the case may be, and a “STR” report for the Property all within
ninety (90) days after the close of each fiscal year of Borrower and the Guarantor, as the case may be; and
(c) an annual operating budget presented on a monthly basis consistent with the annual
operating statement described above for the Property including cash flow projections for the upcoming one (1)
year period and all proposed capital replacements and improvements no later than January 31 st of each
calendar year.
5.1.7 [Intentionally Omitted]
5.1.8 Additional Financial or Management Information; Right to Audit.
(a) Borrower shall furnish Lender with such other additional financial or management
information as may, from time to time, be reasonably required by Lender in form and substance satisfactory to
Lender.
(b) Lender and its representatives shall have the right upon prior reasonable prior written
notice to examine and audit the records, books, management and other papers of Borrower and its affiliates or
of any guarantor or indemnitor which reflect upon their financial condition and/or the income, expenses and
operations of the Property, at the Property or at any office regularly maintained by Borrower, its affiliates or any
guarantor or indemnitor where the books and records are located. Lender shall have the right upon notice to
make copies and extracts from the foregoing records and other papers.
(c) Borrower shall furnish Lender and its agents convenient facilities for the examination and
audit of any such books and records.
5.1.9 Title to the Property. Borrower and TRS Entity, as applicable, will warrant and defend the
validity and priority of the Liens of the Security Instrument and the Assignment of Leases on the Property
against the claims of all Persons whomsoever, subject only to Permitted Encumbrances.
5.1.10 Estoppel Statements. Within ten (10) days after a request by Lender, Borrower and TRS
Entity shall furnish an acknowledged written statement in form satisfactory to Lender (i) setting forth the
amount of the Loan and the interest rate, (ii) stating either that no offsets or defenses exist against the Loan, or
if any offsets or defenses are alleged to exist, their nature and extent, (iii) whether any default then exists under
the Loan Documents or the Environmental Indemnity or any event has occurred and is continuing, which, with
the lapse of time, the giving of notice, or both, would constitute such a default, and (iv) any other matters as
Lender may reasonably request.
5.1.11 Leases.
(a) Borrower and TRS Entity, as applicable, shall perform all obligations of landlord under
any and all Leases. Borrower agrees to furnish Lender true, correct and complete executed copies of all future
Leases.
(b) Borrower and TRS Entity shall not, without the express written consent of Lender (which
consent shall not be unreasonably withheld so long as no Event of Default exists), enter into or extend or
materially amend or modify any Lease with an annual rent in excess of $250,000.00. If any of the acts described
in this Section 5.1.11 which require the written consent of Lender are done without such written consent, at
the option of Lender they shall be of no force or effect with respect to the Lender and shall, following written
notice to Borrower and Borrower’s or TRS Entity’s failure to cure such breach within ten (10) Business Days,
constitute an Event of Default.
(c) Each Lease affecting the Property shall be absolutely subordinate to the lien of the
Security Instrument and shall also contain a provision, reasonably satisfactory to Lender, to the effect that in the
event of the judicial or non-judicial foreclosure of the Property, at the election of the acquiring foreclosure
purchaser, the particular Lease shall not be terminated and the Tenant shall attorn to the purchaser. If requested
to do so, the Tenant shall agree to enter into a new Lease for the balance of the term upon the same terms and
conditions. If requested by a Tenant, at Lender’s election and at Borrower’s cost and expense, Lender shall to
enter into a subordination and attornment agreement or a non-disturbance agreement with such Tenant on
Lender’s standard form.
5.1.12 Material Agreements. Borrower and TRS Entity, as applicable, shall (a) promptly perform
and/or observe all of the material covenants and agreements required to be performed and observed by it under
each Material Agreement to which it is a party, and do all things necessary to preserve and to keep unimpaired
its rights thereunder, (b) promptly notify Lender in writing of the giving of any notice of any default by any
party under any Material Agreement of which it is aware and (c) promptly enforce the performance and
observance of all of the material covenants and agreements required to be performed and/or observed by the
other party under each Material Agreement to which it is a party in a commercially reasonable manner.
5.1.13 Performance by Borrower. Borrower and TRS Entity, as applicable, shall in a timely manner
observe, perform and fulfill each and every covenant, term and provision of each Loan Document and the
Environmental Indemnity executed and delivered by Borrower.
5.1.14 Costs of Enforcement/Remedying Defaults. In the event (a) that the Security Instrument is
foreclosed in whole or in part or the Note or any other Loan Document or the Environmental Indemnity is put
into the hands of an attorney for collection, suit, action or foreclosure, (b) of the foreclosure of any Lien or
mortgage or other security instrument prior to or subsequent to the Security Instrument in which proceeding
Lender is made a party, (c) of the bankruptcy, insolvency, rehabilitation or other similar proceeding in respect
of Borrower, TRS Entity or Guarantor or an assignment by Borrower, TRS Entity or Guarantor for the benefit
of its creditors, or (d) Lender shall remedy or attempt to remedy any Event of Default hereunder, Borrower shall
be chargeable with and agrees to pay all costs incurred by Lender as a result thereof, including costs of
collection and defense (including reasonable attorneys’, experts’, consultants’ and witnesses’ fees and
disbursements) in connection therewith and in connection with any appellate proceeding or post judgment
action involved therein, which shall be due and payable on demand, together with interest thereon at the Default
Rate from the date incurred by Lender to the date of payment to Lender, and together with all required service
or use taxes.
5.1.15 Business and Operations. Borrower and TRS Entity, as applicable, will continue to engage in
the businesses currently conducted by it as and to the extent the same are necessary for the ownership, operation
and leasing of the Property. Borrower and TRS Entity, as applicable, will qualify to do business and will remain
in good standing under the laws of each jurisdiction as and to the extent the same are required for the
ownership, operation and leasing of the Property. Borrower shall at all times cause the Property to be
maintained as a Hyatt full service hotel (the “ Use ”). Borrower and TRS Entity, as applicable, at its sole cost
and expense, shall keep the Property in good order, condition and repair, and make all necessary structural and
non-structural, ordinary and extraordinary repairs to the Property and the Improvements.
5.1.16 Use. Borrower and TRS Entity shall use, or cause to be used, the Property continuously for the
current Use. Borrower and TRS Entity shall not use, or permit the use of, the Property for any other use without
the prior written consent of Lender. Borrower shall not file or record a declaration of condominium, master
mortgage or deed of trust or any other similar document evidencing the imposition of a so called “condominium
regime” whether superior or subordinate to the Security Instrument and Borrower shall not permit any part of
the Property to be converted to, or operated as, a “cooperative apartment house” whereby the tenants or
occupants participate in the ownership, management or control of any part of the Property.
5.1.17 Collateral Security Instruments. Borrower and TRS Entity each covenants and agrees that if
Lender at any time holds additional security for any obligations secured by the Security Instrument, it may
enforce its rights and remedies with respect to the security, at its option, either before, concurrently or after a
sale of the Property is made pursuant to the terms of the Security Instrument. Lender may apply the proceeds of
the additional security to the Loan without affecting or waiving any right to any other security, including the
security under the Security Instrument, and without waiving any breach or default of Borrower or TRS Entity
under the Security Instrument or any other Loan Document or the Environmental Indemnity.
5.1.18 Suits and Other Acts to Protect the Property.
(a) Borrower shall immediately notify Lender of the commencement, or receipt of notice by
Borrower or TRS Entity, of any and all actions or proceedings or other material matter or claim (i) affecting the
Property, and/or (ii) arising under any of the Leases or that is connected with the obligations, duties or liabilities
of the landlord, Tenant or any guarantor under any Lease, and/or (iii) affecting the interest of Lender under the
Loan Documents or the Environmental Indemnity or the Guaranty (collectively, “ Actions ”). Borrower or TRS
Entity, as applicable, shall appear in and defend any Actions.
(b) Lender shall have the right, at the cost and expense of Borrower, to institute, maintain and
participate in Actions and take such other action, as it may deem appropriate in the good faith exercise of its
discretion to preserve or protect the Property and/or the interest of Lender under the Loan Documents or the
Environmental Indemnity or the Guaranty. Any money paid by Lender under this Section 5.1.18 shall be
reimbursed to Lender in accordance with Section 12.13 hereof.
5.1.19 US Patriot Act. Borrower, TRS Entity and any person or entity (other than the holders of a
non-controlling publicly traded interest of a Regulated Party) that directly or indirectly (a) Controls Borrower or
TRS Entity or (b) has an ownership interest in Borrower or TRS Entity of twenty-five percent (25%) or more
shall not be a Regulated Party and shall not appear on a OFAC list or any other law or any similar list
maintained by any other governmental authority, with respect to which entering into transactions with such
person or entity would violate the USA Patriot Act or regulations or any Presidential Executive Order or any
other similar applicable law, ordinance, order, rule or regulation and Borrower shall provide evidence as
reasonably requested by Lender from time to time, to confirm compliance.
5.1.20 Special Purpose Entity/Separateness.
(a) Borrower shall be and shall continue to be a Special Purpose Entity.
(b) The Property will continue to have, “single asset real estate” status as defined by Section
101(51)(B) of the Bankruptcy Code.
(c) The organizational documents of Borrower shall not be modified, amended or revised,
except for non-material changes, without the prior written consent of Lender.
(d) TRS Entity shall be and shall continue to be a Special Purpose Entity.
(e) The organizational documents of TRS Entity shall not be modified, amended or revised,
except for non-material changes, without the prior written consent of Lender.
(f) The covenants set forth in this Section 5.1.20 shall survive for so long as any amount
remains payable to Lender under this Agreement or any other Loan Document.
5.1.21 Personal Property. Borrower will notify Lender of, and will protect, defend and indemnify
Lender against, all claims and demands of all persons at any time claiming any rights or interest in the Personal
Property. The Personal Property shall not be used or bought for personal, family, or household purposes, but
shall be bought and used solely for the purpose of carrying on Borrower's business. Neither Borrower nor TRS
Entity will remove the Personal Property without the prior written reasonable consent of Lender, except the
items of Personal Property which are
consumed or worn out in ordinary usage shall be promptly replaced by Borrower or TRS Entity with other
Personal Property of value equal to or greater than the value of the replaced Personal Property .
5.1.22 [Intentionally Omitted].
5.1.23 Parking Agreement. Borrower and TRS Entity shall (a) promptly perform and/or observe or
cause to be performed and/or observed all of the covenants and agreements required to be performed and
observed by it under the Parking Agreement, and do all things necessary to preserve and to keep unimpaired its
rights thereunder, (b) promptly notify Lender in writing of the giving of any notice of any default by any party
under any the Parking Agreement of which it is aware and (c) promptly enforce or cause the enforcement of the
performance and observance of all of the material covenants and agreements required to be performed and/or
observed by the other party under the Parking Agreement.
Section 5.2 Borrower Negative Covenants. From the date hereof until the Debt is paid in full,
Borrower and TRS Entity each hereby covenants and agrees with Lender that:
5.2.1 Due on Sale and Encumbrance; Transfers of Interests. Subject to the provisions of Article
VIII hereof, without the prior written consent of Lender, neither Borrower nor TRS Entity nor any other
Person having a direct or indirect ownership or beneficial interest in Borrower or TRS Entity shall sell, convey,
mortgage, grant, bargain, encumber, pledge, assign or otherwise Transfer any interest, direct or indirect, in the
Borrower, TRS Entity, the Property or any part thereof, whether voluntarily or involuntarily, except as
expressly permitted in the Security Instrument and this Agreement.
5.2.2 Liens. Neither Borrower nor TRS Entity and shall create, incur, assume or suffer to exist any
Lien on any portion of the Property (including any tax liens or assessment liens to secure repayment of any loan
or other financing including, without limitation, any Property-Assessed Clean Energy Loan) except for
Permitted Encumbrances. Subject to the immediately following sentence, if any Lien is recorded against the
Property or any part of the Property, Borrower or TRS Entity, as applicable, shall obtain a stay, discharge and
release, or have otherwise bonded over, such Lien within thirty (30) days after receipt of notice of its existence.
After prior notice to Lender, Borrower or TRS Entity, as applicable, at its own expense, may contest by
appropriate legal proceeding, conducted in good faith and with due diligence, the amount or validity of any
claims (including claims for labor, services, materials and supplies) for sums that have become due and payable
and that by law have or may become a Lien upon the Property (collectively, “ Claims ”); provided that (i) no
Event of Default has occurred and remains uncured; (ii) such proceeding shall be permitted under and be
conducted in accordance with all applicable statutes, laws and ordinances; (iii) neither the Property nor any part
thereof or interest therein will be in danger of being sold, forfeited, terminated, canceled or lost; (iv) Borrower
shall promptly upon final determination thereof pay the amount of any such Claims, together with all costs,
interest and penalties which may be payable in connection therewith; and (v) (A) Borrower shall first pay such
contested amount to the applicable claimant or (B) such proceeding shall suspend the collection of such Claims
from the Property, and Borrower shall deposit with Lender or the court cash, or other security as may be
reasonably approved by Lender, in an amount equal to 125% of the contested amount (or such higher amount as
may be required by applicable law), to insure the payment of any such Claims, together with all interest and
penalties thereon. Lender may pay over any such cash or other security held by Lender to the claimant entitled
thereto at any time when, in the reasonable judgment of Lender, the Property or any part thereof or interest
therein will be in danger of being sold, forfeited, terminated, canceled or lost as a result of any non-payment.
5.2.3 Dissolution. Neither Borrower nor TRS Entity shall (i) engage in any dissolution, liquidation or
consolidation or merger with or into any other business entity, (ii) engage in any business activity not related to
the ownership and operation of the Property, (iii) transfer, lease or sell, in one transaction or any combination of
transactions, all or substantially all of the property or assets of Borrower or TRS Entity, as applicable, except to
the extent expressly permitted by the Loan Documents, or (iv) cause, permit or suffer any Restricted Party to
(A) dissolve, wind up or liquidate or take any action, or omit to take an action, as a result of which such
Restricted Party would be dissolved, wound up or liquidated in whole or in part, or (B) amend, modify, waive
or terminate the certificate of formation or operating agreement, (or certificate of incorporation or by-laws, as
applicable) of such Restricted Party, in each case without obtaining
the prior consent of Lender.
5.2.4 Change in Business. Borrower and TRS Entity shall not enter into any line of business other
than the ownership and operation of the Property.
5.2.5 Debt Cancellation. Neither Borrower nor TRS Entity shall cancel or otherwise forgive or
release any claim or debt (other than with respect to terminations of Leases in accordance herewith) owed to
Borrower or TRS Entity by any Person, except for adequate consideration and in the ordinary course of
Borrower’s or TRS Entity’s business.
5.2.6 Affiliate Transactions. Neither Borrower nor TRS Entity shall enter into, or be a party to, any
transaction with an Affiliate of Borrower or TRS Entity or any of the partners of Borrower or TRS Entity except
in the ordinary course of business and on terms which are fully disclosed to Lender in advance and are no less
favorable to Borrower or TRS Entity, as applicable, or such Affiliate than would be obtained in a comparable
arm’s length transaction with an unrelated third party.
5.2.7 Zoning. Borrower shall not initiate or consent to any zoning reclassification of any portion of
the Property or seek any variance under any existing zoning ordinance or use or permit the use of any portion of
the Property in any manner that could result in the Use becoming a non-conforming use under any zoning
ordinance or any other applicable land use law, rule or regulation, without the prior written consent of Lender
which shall not be unreasonably withheld. The zoning approval for the Property is not dependent upon the
ownership or use of any property which is not encumbered by the Security Instrument.
5.2.8 Assets. Borrower shall not purchase or own any property other than the Property and any
property necessary or incidental to the ownership and operation of the Property. TRS Entity shall not purchase
or own any property other than its interest in the TRS Lease any property necessary or incidental to the
operation of the Property.
5.2.9 No Joint Assessment. Neither Borrower nor TRS Entity shall suffer, permit or initiate the joint
assessment of the Property (i) with any other real property constituting a tax lot separate from the Property, and
(ii) with any portion of the Property which may be deemed to constitute personal property, or any other
procedure whereby the lien of any taxes which may be levied against such personal property shall be assessed
or levied or charged to the Property.
5.2.10 Principal Place of Business; Chief Executive Office; Books and Records. Neither Borrower
nor TRS Entity shall (i) change its principal place of business or name from the address and name set forth in
the introductory paragraph hereof without, in each instance, (A) giving Lender at least thirty (30) days’ prior
written notice thereof and (B) taking all action, if any, required by Lender for the purpose of perfecting and/or
protecting the Lien and security interest of Lender created pursuant to this Agreement and the other Loan
Documents or (ii) change its corporate form or state of formation without (A) obtaining the prior written
consent of Lender and (B) taking all action reasonably required by Lender for the purpose of perfecting or
protecting the Lien and security interest of Lender created pursuant to this Agreement and the other Loan
Documents. At the request of Lender, Borrower and TRS Entity shall execute a certificate in form reasonably
satisfactory to Lender listing the trade names under which Borrower or TRS Entity, as applicable, intends to
operate the Property, and representing and warranting that Borrower or TRS Entity, as applicable does business
under no other trade name with respect to the Property. Notwithstanding anything to the contrary contained
herein, with respect any notice required to be delivered pursuant to clause (i) above, Borrower may cure any
failure to deliver such notice at any time (without regard to the cure periods set forth in Section 11.1) by
delivering such notice to Lender, and Lender shall accept such cure.
5.2.11 ERISA. Neither Borrower nor TRS Entity will be reconstituted as a Plan or as an entity whose
assets constitute “plan assets”.
5.2.12 Material Agreements. Neither Borrower nor TRS Entity shall, without Lender’s prior written
consent, such consent not to be unreasonably withheld: (a) enter into any Material Agreement, (b) surrender or
terminate any Material Agreement to which it is a party (unless the other party thereto is in material default and
the termination of such Material Agreement would be commercially reasonable and then only if Borrower shall
have provided to Lender not less than five (5) Business Days’ notice of such termination and such termination
would not be reasonably expected to result in a Material Adverse Change), (c) increase or consent to the
increase of the amount of any fees or charges payable by Borrower or TRS Entity, as applicable, under any
Material Agreement, except for such increases as are expressly provided for therein, or (d) modify, change,
supplement, alter or amend, or waive or release any of its rights and remedies under any Material Agreement.
5.2.13 Improvements. Borrower and TRS Entity shall abstain from, and not permit the commission
of waste to the Property, and shall not remove or alter in any substantial manner, the structure or character of
any Improvements without the prior written consent of Lender, which consent shall not be unreasonably
withheld unless such alterations are reasonably expected to (a) have a material adverse impact on the value of
the Property or the operation thereof, (b) have a cost to complete in excess of the $7,500,000.00 in the
aggregate, or (c) result in the closure of more than ten percent (10%) of the guest rooms at the Property for more
than thirty consecutive days.
5.2.14 TRS Lease. Neither Borrower nor TRS Entity shall (i) terminate or surrender the TRS Lease,
(ii) enter into a replacement to the TRS Lease on materially different terms than the TRS Lease, (iii) assign or
otherwise transfer its rights or interest in the TRS Lease; or (iv) amend or modify, in any material respect, the
TRS Lease, without the prior written consent of Lender in each instance; provided that no amendment or
modification to the TRS Lease shall result in an impairment of Lender’s collateral for the Loan.
Notwithstanding the foregoing, the TRS Lease may be amended without the prior written consent of Lender
with respect to rent payable thereunder as necessary to comply with Section 856 of the Internal Revenue Code
of 1986, as amended from time to time or any successor statute, so long as such amendment or modification
does not have a material adverse effect
on (x) the Property, (y) the enforceability, validity, perfection or priority of the lien of the Security Instrument
or the Loan Documents or (z) the ability of Borrower or TRS Entity to perform its monetary and any other
material obligations under the Loan Documents.
VI. INSURANCE, CASUALTY AND CONDEMNATION
Section 6.1
Insurance.
6.1.1 Insurance Policies.
(a) During the term of the Loan, Borrower at its sole cost and expense must provide, or cause
to be provided, insurance policies and certificates of insurance for types of insurance described below all of
which must be satisfactory to Lender as to form of policy, amounts, deductibles, sublimits, types of coverage,
exclusions and the companies underwriting these coverages. In no event shall such policies be terminated or
otherwise allowed to lapse. Borrower shall be responsible for its own deductibles. Borrower shall also pay for
or cause to be paid for any insurance, or any increase of policy limits, not described in this Agreement which
Borrower requires for its own protection or for compliance with government statutes. The insurance required
hereunder shall be primary and without contribution from any insurance procured by Lender including, without
limitation, any insurance obtained by Lender pursuant to Section 6.1.1(d) hereof.
Policies of insurance shall be delivered to Lender in accordance with the following requirements:
(i) Property insurance on the Improvements and the Personal Property insuring
against any peril now or hereafter included within the classification “All Risk” or “Special Perils,” in each case
(1) in an amount equal to 100% of the Full Replacement Cost of the Improvements and Personal Property with
a waiver of depreciation and with a Replacement Cost Endorsement; (2) containing an agreed amount
endorsement with respect to the Improvements and Personal Property waiving all co-insurance provisions; (3)
providing for no deductible in excess of $250,000.00; and (4) containing no margin clause unless approved by
Lender and (5) containing Ordinance or Law Coverage, Operation of Building Laws, Demolition Costs and
Increased Cost of Construction in an amount reasonably required by Lender or if any of the Improvements or
the use of the Property constitute non-conforming structures then in the amount of 100% of the Full
Replacement Cost. The Full Replacement Cost shall be determined from time to time by an appraiser or
contractor designated and paid by Borrower and approved by Lender or by an engineer or appraiser in the
regular employ of the insurer. The “ Full Replacement Cost ” for purposes of this Article VI shall mean the
estimated total cost of construction required to replace the Improvements with a substitute of like utility, and
using modern materials and current standards, design and layout. For purposes of calculating Full Replacement
Cost direct (hard) costs shall include, without limitation, labor, materials, supervision and contractor’s profit
and overhead and indirect (soft) costs shall include, without limitation, fees for architect’s plans and
specifications, construction financing costs, permits, sales taxes, insurance and other costs included in the
Marshall Valuation Service published by Marshall & Swifts.
(ii) Commercial General Liability insurance against claims for personal injury, bodily
injury, death or property damage occurring upon, in or about the Property, such insurance (1) to be on the
so-called “occurrence” form with a combined single limit of not less than Fifty Million Dollars
($50,000,000.00); (2) to continue at not less than this limit until required to be
changed by Lender in writing by reason of changed economic conditions making such protection inadequate;
and (iii) to cover at least the following hazards: (a) premises and operations; (b) products and completed
operations on an “if any” basis; (c) independent contractors; (d) blanket contractual liability for all written and
oral contracts; (e) innkeeper’s liability; (f) liquor liability; and (g) contractual liability covering the indemnities
contained in this Agreement and the other Loan Documents to the extent available. The required limit may be
satisfied through a combination of Primary and Excess Liability policies.
(iii) Business income insurance in an amount sufficient to prevent Borrower from
becoming a co-insurer within the terms of the applicable policies, and sufficient to recover “true actual loss
sustained”. The amount of such insurance shall be increased from time to time during the term of the Loan as
and when new leases and renewal leases are entered into and rents payable increase or the annual estimate of
gross income from occupancy of the Property increases to reflect such rental increases.
(iv) If Lender determines at any time that any part of the Property is located in an area
identified on a Flood Hazard Boundary Map or Flood Insurance Rate Map issued by the Federal Emergency
Management Agency as having special flood hazards and flood insurance has been made available, Borrower
will maintain a flood insurance policy meeting the requirements of the current guidelines of the Federal
Insurance Administration with a generally acceptable insurance carrier, in an amount not less than the
maximum amount of insurance which is available under the National Flood Insurance Act of 1968, the Flood
Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of 1994, as amended. In addition
Difference in Conditions (DIC) insurance and/or excess insurance from and against all losses, damages, costs,
expenses, claims and liabilities related to or arising from acts of flood, of such types, in such amounts, with
such deductibles, issued by such companies, and on such forms of insurance policies as required by Lender, if
Lender determines at any time that any part of the Property is located in Flood Zone A or V.
(v) During the period of any construction or renovation or alteration of the
Improvements, and only if the Property insurance (as described in Section 6.1.1(a)(i) above) form does not
otherwise provide coverage, a so-called “Builder’s All Risk” insurance policy in non-reporting form for any
Improvements under construction, renovation or alteration including, without limitation, for demolition and
increased cost of construction or renovation, in an amount approved by Lender including an Occupancy
endorsement and Worker’s Compensation Insurance covering all persons engaged in the construction,
renovation or alteration in an amount at least equal to the minimum required by statutory limits of the State.
(vi) Workers’ Compensation insurance, subject to the statutory limits of the State, and
employer’s liability insurance with a limit of at least $1,000,000.00 per accident and per disease per employee,
and $1,000,000.00 for disease in the aggregate in respect of any work or operations on or about the Property, or
in connection with the Property or its operations (if applicable).
(vii) Boiler & Machinery, or Equipment Breakdown Coverage, insurance covering
the major components of the central heating, air conditioning and ventilating systems, boilers, other pressure
vessels, high pressure piping and machinery, elevators and escalators, if any, and other similar equipment
installed in the Improvements, in an amount equal to one hundred percent (100%) of the full replacement cost
of all equipment installed in, on or at the Improvements.
These policies shall insure against physical damage to and loss of occupancy and use of the Improvements
arising out of an accident or breakdown.
(viii) Insurance from and against all losses, damages, costs, expenses, claims and
liabilities related to or arising from acts of terrorism, of such types, in such amounts, with such deductibles,
issued by such companies, and on such forms of insurance policies as required by Lender.
(ix) Business Automobile Insurance with a combined single limit of not less
than$1,000,000.00 per occurrence for bodily injury and property damage arising out of the use of owned,
non-owned, hired and/or leased automotive equipment when such equipment is operated by Borrower,
Borrower’s employees or Borrower’s agents in connection with the Property.
(x) Windstorm coverage, including coverage for Named Storms, in an amount equal
to the Full Replacement Cost, plus an amount equal to the business income insurance and EPI contemplated in
Subsection (a)(iii) of this Section 6.1.1 and on terms consistent with the commercial property insurance
policy required under Subsection (a)(i) of this Section 6.1.1 , provided, however, that the deductible for
windstorm coverage shall not exceed the greater of (i) $250,000.00 or (ii) five percent (5%) of the Full
Replacement Cost.
(xi) Insurance from or against all losses, damages, costs, expenses, claims and
liabilities related to or arising from earthquake on such form of insurance policy and in such amount as required
by Lender, and provided that the deductible for earthquake coverage shall not exceed the greater of (i)
$250,000.00 or (ii) five percent (5%) of the Full Replacement Cost.
(xii) Crime insurance and guest property/safe deposit box coverage of such types, in
such amounts, with such deductibles, issued by such companies, and on such forms of insurance policies as
required by Lender.
(xiii) Such other insurance (i) as may from time to time be required by Lender to
replace coverage against any hazard, which as of the date hereof is insured against under any of the insurance
policies described in Subsections (a)(i) through (a)(xi) of this Section 6.1.1 , and (ii) as may from time to
time be reasonably required by Lender against other insurable hazards, including, but not limited to, vandalism,
earthquake, environmental, sinkhole and mine subsidence.
(b) Lender’s interest must be clearly stated by endorsement in the insurance policies described
in this Section 6.1.1 as follows:
(i) The policies of insurance referenced in Subsections (a)(i), (a)(iii), (a)(iv), (a)(v),
(a)(vii) , (a)(x) and (a)(xi) of this Section 6.1.1 shall identify Lender under the New York Standard
Mortgagee Clause (non-contributory) endorsement.
(ii) The insurance policies referenced in Sections 6.1.1(a)(ii) and 6.1.1(a)(ix) shall
name Lender as an additional insured.
(iii) The policies of insurance referenced in Section 6.1.1(a)(viii) shall name Lender
in such form and manner as Lender shall require.
(iv) All of the policies referred to in Section 6.1.1 shall provide for at least thirty (30)
days’ written notice to Lender in the event of policy cancellation and/or material change.
(c) All the insurance companies must be authorized to do business in New York State and the
State and be approved by Lender. The insurance companies must have a general policy rating of A.M. Best
“Excellent” or better and a financial class of X or better by A.M. Best. So called “Cut-through” endorsements
shall not be permitted. Borrower shall deliver evidence satisfactory to Lender of payment of premiums due
under the insurance policies.
(d) Certified copies of the policies, and any endorsements, shall be made available for
inspection by Lender upon request. If Borrower fails to obtain or maintain insurance policies and coverages as
required by this Section 6.1.1 (“ Required Insurance ”) then Lender shall have the right but shall not have
the obligation immediately to procure any Required Insurance at Borrower’s cost.
(e) Borrower shall be required during the term of the Loan to continue to provide Lender with
original renewal policies or replacements of the insurance policies referenced in Section 6.1.1(a) . Lender may
accept Certificates of Insurance, if satisfactory to Lender, evidencing insurance policies referenced in this
Section 6.1.1 instead of requiring the actual policies. Lender shall be provided with renewal Certificates of
Insurance, or Binders, prior to each expiration. The failure of Borrower to maintain the insurance required under
this Article VI shall not constitute a waiver of Borrower’s obligation to fulfill these requirements.
(f) All binders, policies, endorsements, certificates, and cancellation notices are to be sent to
the Lender’s Address for Insurance Notification until changed by notice from Lender.
(g) If any policy referred to in Section 6.1.1 is written on a blanket basis, a list of locations
and their insurable values shall be provided, as required by Lender.
6.1.2 Adjustment of Claims. Lender may (x) provided no Event of Default then exists, jointly with
Borrower settle and adjust any claims, (y) during the continuance of an Event of Default, settle and adjust any
claims for damage to, or loss or destruction of, all or a portion of the Property, without the consent or
cooperation of Borrower, or (z) allow Borrower to settle and adjust any such claims; except that if no Event of
Default is continuing, Borrower may settle and adjust claims aggregating not in excess of $3,000,000.00 if such
settlement or adjustment is carried out in a competent and timely manner, but Lender shall be entitled to collect
and receive (as set forth below) any and all Insurance Proceeds.
6.1.3 Assignment to Lender. To the extent the insurance requirements in Section 6.1 are satisfied
using a stand-alone policy(ies) covering only the Property, then in the event of the foreclosure of the Security
Instrument or other transfer of the title to the Property in extinguishment of the Debt, all right, title and interest
of Borrower in and to such insurance policy(ies), or premiums or payments in satisfaction of claims or any other
rights under these insurance policy(ies) shall pass to the transferee of the Property. Notwithstanding the
foregoing, to the extent the insurance requirements in Section 6.1 are satisfied using a blanket policy, then in
the event of the foreclosure of the Security Instrument or other transfer of the title to the Property in
extinguishment of the Debt, all right, title and interest of Borrower in and to any unamortized premiums paid for
such insurance policy(ies) which are returned to Borrower or payments due in satisfaction of claims made
relating to the period prior to the event foreclosure or any other rights under such insurance policy(ies) relating
to the Property with respect to the period prior to the event of foreclosure shall pass to the transferee of the
Property.
Section 6.2
Casualty and Condemnation.
6.2.1 Casualty.
(a) Borrower shall give prompt written notice of any Casualty to Lender whether or not
required to be insured against. The notice shall describe the nature and cause of the Casualty and the extent of
the damage to the Property. Borrower covenants and agrees to commence and diligently pursue to completion
the Restoration.
(b) Borrower and TRS Entity, as applicable, each assigns to Lender all Insurance Proceeds
which it is entitled to receive in connection with a Casualty whether or not such insurance is required under this
Agreement. In the event of any Casualty, and provided (1) an Event of Default does not currently exist, and (2)
Lender has determined that (i) there has not been an Impairment of the Security, and (ii) the repair, restoration
and rebuilding of any portion of the Property that has been partially damaged or destroyed (the “ Restoration ”)
can be accomplished in full compliance with all Legal Requirements to the same condition, character and
general utility as nearly as possible to that existing prior to the Casualty and at least equal in value as that
existing prior to the Casualty, the Net Proceeds shall be applied to the cost of completion of the Restoration in
accordance with the terms of this Article VI . In the event that the Net Proceeds exceed $3,000,000.00, Lender
shall hold and disburse the Net Proceeds to the Restoration in accordance with this Section 6.2. In the event that
the Net Proceeds do not exceed $3,000,000.00, upon receipt, the Net Proceeds shall be disbursed to and held by
Borrower for the Restoration, provided that no Event of Default then exists and Borrower delivers to Lender a
written undertaking to expeditiously commence and to satisfactorily complete with due diligence the
Restoration in accordance with the terms of this Agreement.
(c) If the Net Proceeds are to be used for the Restoration in accordance with this Article VI,
Borrower shall comply with Lender’s Requirements For Restoration as set forth in Section 6.2.3 below. Upon
Borrower’s satisfaction and completion of the Requirements For Restoration and upon confirmation that there is
no Event of Default then existing, Lender shall pay any remaining Restoration Funds (as defined in Section
6.2.3(a) below) then held by Lender to Borrower.
(d) In the event that the conditions for Restoration set forth in this Section have not been met,
Lender may, at its option, apply the Net Proceeds to the reduction of the Debt in such order as Lender may
determine and Lender may declare the entire Debt immediately due and payable. After payment in full of the
Debt, any remaining Restoration Funds shall be paid to Borrower.
6.2.2 Condemnation.
(a) If the Property or any part of the Property is taken by reason of any Condemnation, Lender
shall be entitled to any Award. At its option, Lender shall be entitled to commence, appear in and prosecute in
its own name any action or proceeding or to make any compromise or settlement in connection with such
Condemnation.
(b) Borrower and TRS Entity each assigns to Lender any and all Awards which it is entitled to
receive. In the event of any Condemnation, and provided (1) an Event of Default does not currently exist, and
(2) Lender has determined that (i) there has not been an Impairment of the Security, and (ii) the Restoration of
any portion of the Property that has not been taken can be accomplished in full compliance with all Legal
Requirements to the same condition, character and general utility as nearly as possible to that existing prior to
the taking and at least equal in value as that existing prior to the taking, then Borrower shall commence and
diligently pursue to completion the Restoration. In the event that the Net Proceeds exceed $1,000,000.00,
Lender shall hold and disburse the related Net Proceeds to the Restoration in accordance with this Section 6.2.
In the event
that the Net Proceeds do not exceed $1,000,000.00, the Net Proceeds shall be disbursed to and held by
Borrower for the Restoration, provided that no Event of Default then exists and Borrower delivers to Lender a
written undertaking to expeditiously commence and to satisfactorily complete with due diligence the
Restoration in accordance with the terms of this Agreement.
(c) In the event the Net Proceeds are to be used for the Restoration, Borrower shall comply
with Lender’s Requirements For Restoration as set forth in Section 6.2.3 below. Upon Borrower’s
satisfaction and completion of the Requirements For Restoration and upon confirmation that there is no Event
of Default then existing, Lender shall pay any remaining Restoration Funds (as defined in Section 6.2.3(a)
below) then held by Lender to Borrower.
(d) In the event that the conditions for Restoration set forth in this Section have not been met,
Lender may, at its option, apply the Net Proceeds to the reduction of the Debt in such order as Lender may
determine and Lender may declare the entire Debt immediately due and payable. After payment in full of the
Debt, any remaining Restoration Funds shall be paid to Borrower.
6.2.3 Requirements For Restoration. Unless otherwise expressly agreed in a writing signed by
Lender, the following are the “ Requirements for Restoration ”:
(a) If the Net Proceeds are to be used for the Restoration and the estimated cost to complete
such Restoration exceeds $3,000,000.00 with respect to a casualty or exceeds $1,000,000.00 with respect to a
Condemnation, prior to the commencement of any Restoration work (the “ Work ”), Borrower shall provide
Lender for its review and written approval which shall not be unreasonably withheld (i) complete plans and
specifications for the Work which (A) have been approved by all required governmental authorities, (B) have
been approved by an architect satisfactory to Lender (the “ Architect ”), and (C) are accompanied by
Architect’s signed statement of the total estimated cost of the Work (the “ Approved Plans and Specifications
”); (ii) the amount of money which Lender reasonably determines will be sufficient when added to the Net
Proceeds to pay the entire cost of the Restoration (collectively referred to as the “ Restoration Funds ”); (iii)
evidence that the Approved Plans and Specifications and the Work are in compliance with all Legal
Requirements; (iv) an executed contract for construction with a contractor reasonably satisfactory to Lender (the
“ Contractor ”) in a form approved by Lender in writing, which approval shall not be unreasonably withheld;
and (v) a surety bond and/or guarantee of payment with respect to the completion of the Work. The bond or
guarantee shall be satisfactory to Lender in form and amount and shall be signed by a surety or other entities
who are acceptable to Lender.
(b) Borrower shall not commence the Work, other than temporary work to protect the
Property or prevent interference with business, until Borrower shall have complied with the requirements of
Subsection (a) of this Section 6.2.3 . So long as there does not currently exist an Event of Default and the
following conditions have been complied with or, in Lender’s discretion, waived, Lender shall disburse any
Restoration Funds held by Lender in increments to Borrower, from time to time as the Work progresses:
(i) Contractor shall be in charge of the Work.
(ii) Lender shall disburse the Restoration Funds directly or through escrow with a title
company selected by Borrower and approved by Lender, upon not less than ten (10) days’ prior written notice
from Borrower to Lender and Borrower’s delivery to Lender of (A) Borrower’s written request for payment (a “
Request for Payment ”) accompanied by a certificate by Architect in a form satisfactory to Lender which
states that (1) all of the Work completed to that date has been
completed in compliance with the Approved Plans and Specifications and in accordance with all Legal
Requirements, and (2) the amount requested has been paid or is then due and payable and is properly a part of
the cost of the Work; and (B) evidence satisfactory to Lender that the balance of the Restoration Funds
remaining after making the payments shall be sufficient to pay the balance of the cost of the Work. Each
Request for Payment shall be accompanied by (x) waivers of liens covering that part of the Work previously
paid for, if any, (y) a title search or by other evidence satisfactory to Lender that no mechanic’s or
materialmen’s liens or other similar liens for labor or materials supplied in connection with the Work have been
filed against the Property and not discharged of record, and (z) an endorsement to the Title Insurance Policy
insuring that no encumbrance exists on or affects the Property other than the Permitted Encumbrances, other
than any matter which is being contested and has been stayed, discharged, released or bonded over in
accordance with Section 5.2.2.
(iii) The final Request for Payment shall be accompanied by (i) a temporary
certificate of occupancy or other evidence of approval of appropriate governmental authorities for the use and
occupancy of the Improvements, (ii) evidence that the Restoration has been completed in accordance with the
Approved Plans and Specifications and all Legal Requirements, (iii) evidence that the costs of the Restoration
have been paid in full or will be paid from funds pursuant to such final Request for Payment, and (iv) evidence
that no mechanic’s or similar liens for labor or material supplied in connection with the Restoration are
outstanding against the Property, including final waivers of liens covering all of the Work and an endorsement
to the Title Insurance Policy insuring that no encumbrance exists on or affects the Property other than the
Permitted Encumbrances.
(c) If (i) within one hundred and eighty (180) days after the occurrence of any damage,
destruction or condemnation requiring Restoration, Borrower fails to submit to Lender and receive Lender’s
approval of plans and specifications (which shall not be unreasonably withheld) or fails to deposit with Lender
the additional amount necessary to accomplish the Restoration as provided in subparagraph (a) above, or (ii)
after such plans and specifications are approved by all such governmental authorities and Lender, Borrower
fails to commence promptly or diligently continue to completion the Restoration, or (iii) Borrower becomes
delinquent in payment to mechanics, materialmen or others for the costs incurred in connection with the
Restoration, other than any matter which is being contested and has been stayed, discharged, released or bonded
over in accordance with Section 5.2.2, or (iv) there exists an Event of Default, then, in addition to all of the
rights herein set forth and after ten (10) days’ written notice of the non-fulfillment of one or more of these
conditions, Lender may apply the Restoration Funds held by Lender to reduce the Debt in such order as Lender
may determine, and at Lender’s option and in its sole discretion, Lender may declare the Debt immediately due
and payable together with the Prepayment Fee.
VII.
PROPERTY MANAGEMENT
Section 7.1 The Management Agreement.
(a) Borrower and TRS Entity shall cause Manager to manage and operate the Property in
accordance with the Management Agreement. Borrower and TRS Entity shall comply with the terms of any
PIP. Borrower and TRS Entity shall (i) diligently perform, enforce and observe all of the terms, covenants and
conditions of the Management Agreement on the part of Borrower or TRS Entity, as applicable, to be
performed, enforced and observed to the end that all things shall be done which are reasonably necessary to
keep unimpaired the rights of Borrower or TRS Entity under the Management Agreement, (ii) promptly notify
Lender of any written notice to Borrower or TRS Entity of any default by Borrower or TRS Entity in the
performance or observance of any of the
terms, covenants or conditions of the Management Agreement on the part of Borrower or TRS Entity to be
performed and observed and deliver to Lender a true copy of each such notice, (iii) promptly deliver to Lender a
copy of each financial statement, business plan, capital expenditures plan, report and estimate received by it
under the Management Agreement and (iv) pay or cause to be paid all sums required to be paid by Borrower or
the TRS Entity under the Management Agreement.
(b) If Borrower or TRS Entity shall default in the performance or observance of any material
term, covenant or condition of the Management Agreement on the part of Borrower or TRS Entity to be
performed or observed, then, without limiting Lender’s other rights or remedies under this Agreement or the
other Loan Documents or the Environmental Indemnity or the Guaranty, and without waiving or releasing
Borrower or TRS Entity from any of its obligations hereunder or under the Management Agreement, Lender
shall have the right if such default is not cured within ten (10) days prior to the expiration of any cure period,
but shall be under no obligation, to pay any sums and to perform any act as may be appropriate to cause all the
material terms, covenants and conditions of the Management Agreement on the part of Borrower or TRS Entity
to be performed or observed. Lender and any Person designated by Lender shall have, and are hereby granted,
the right to enter upon the Property from time to time at reasonable times and upon reasonable prior notice to
Borrower, TRS Entity and Manager for the purpose of taking any such action. If Manager shall deliver to
Lender a copy of any notice sent to Borrower or TRS Entity of default under the Management Agreement, such
notice shall constitute full protection to Lender for any action taken or omitted to be taken by Lender in good
faith, in reliance thereon. Upon the occurrence and during the continuance of an Event of Default, any
out-of-pocket costs expended by Lender pursuant to this Section 7.1(b) shall be deemed to constitute a portion
of the Debt, shall be secured by the lien of the Security Instrument and the other Loan Documents and shall be
immediately due and payable upon demand by Lender therefor.
(c) Borrower and TRS Entity shall, from time to time, use commercially reasonable efforts to
obtain from Manager such certificates of estoppel with respect to compliance by Borrower or TRS Entity with
the terms of the Management Agreement as may be reasonably requested by Lender; provided, however, so
long as no Event of Default has occurred and is continuing, Borrower shall not be required to pay or reimburse
Lender for Lender’s costs of obtaining such certificates.
Section 7.2 Prohibition Against Termination or Modification. Neither Borrower nor TRS Entity
shall surrender, terminate, cancel, modify, amend or supplement in any material respect, renew or extend the
Management Agreement, or enter into any other agreement relating to the management or operation of the
Property with Manager or any other Person, or consent to the assignment by the Manager of its interest under
the Management Agreement, in each case without the express consent of Lender (such consent not to be
unreasonably withheld). Borrower and TRS Entity hereby assign to Lender as further security for the payment
of the Debt and for the performance and observance of the terms, covenants and conditions of this Agreement,
all the rights, privileges and prerogatives of Borrower and TRS Entity to surrender the Management Agreement
or to terminate, cancel, modify, change, supplement, alter or amend the Management Agreement in any respect,
and any such surrender of the Management Agreement or termination, cancellation, modification, change,
supplement, alteration or amendment of the Management Agreement without the prior consent of Lender shall
be void and of no force and effect. If at any time Lender consents to the appointment of a new manager, such
manager and Borrower or TRS Entity, as applicable, shall, as a condition of Lender’s consent, execute an
assignment and subordination of management agreement in the form then used by Lender.
Section 7.3 Replacement of Manager. Lender shall have the right, in its sole discretion, to require
Borrower and TRS Entity to replace the Manager upon prior notice with a Person reasonably approved by
Lender if Manager shall be in default of any material provision under the Management Agreement beyond any
applicable notice and cure period or if at any time the Manager has engaged in gross negligence, fraud or willful
misconduct which in either case permits Borrower or TRS Entity to terminate the Management Agreement in
accordance with the terms thereof without the payment of a termination fee or penalty.
VIII.
PERMITTED TRANSFERS
Section 8.1 Permitted Transfers of Interest in Borrower.
(a) Borrower shall not cause or permit: (i) the Property or any part thereof, or any direct or
indirect interest in the Property, to be conveyed, transferred, assigned, encumbered, sold or otherwise disposed
of; or (ii) any transfer, assignment, conveyance or change of any direct or indirect interest in Borrower or its
partners, stockholders, members, beneficiaries, or any of Borrower’s direct or indirect constituents or (iii) any
merger, reorganization, dissolution or other change in the ownership structure of Borrower or any of the direct
or indirect general partners or members of Borrower, including, without limitation, any conversion of Borrower
or any direct or indirect general partner or member of Borrower to a limited partnership, a limited liability
partnership or a limited liability company (collectively, a “ Transfer ” or “ Transfers ”). The prohibitions on
transfer shall not be applicable to (i) Transfers as a result of the death of a natural person who is Borrower; or
(ii) Transfers in connection with estate planning by a natural person to a spouse, son or daughter or descendant
of either, a stepson or stepdaughter or descendant of either. Borrower shall pay all costs and expenses, including
reasonable attorneys’ fees and disbursements incurred by Lender in connection with any Transfer.
(b) Notwithstanding the provisions of Section 8.1(a) above, the following Transfers shall be
permitted without the consent of Lender, subject to the satisfaction of the conditions set forth below:
(i) the issuance of (x) additional shares or other interests in or the transfer of existing
shares or other interest in Chesapeake Lodging Trust, a Maryland real estate investment trust (“ CLT ”), so long
as any class of shares or interests of CLT are publicly traded over a U.S. public stock exchange, or (y)
additional limited partnership interests or the transfer of existing limited partnership interests in Guarantor,
provided no Event of Default exists under the Loan Documents, the Environmental Indemnity or the Guaranty
at the time of such transfer under this clause (y); and in the case of either clause (x) or (y), provided, however,
that as of the date that such transaction is consummated all of the following conditions shall have been satisfied
(the “ Share Transfer Conditions ”):
1)
CHSP Boston II LLC continues to be the Borrower, and Guarantor continues to own,
directly or indirectly, 100% of the ownership interests in Borrower;
2)
CLT continues to own, directly or indirectly, 100% of the sole general partner of
Guarantor and continues to own (as general partner and limited partner) no less than 51%
of the ownership interests in Guarantor;
3)
No such transaction or series of transactions leads to a change in the (x) management
composition in any material way of, or (y) Control of, Borrower, CLT, Guarantor or any
other guarantor or any indemnitor of environmental liabilities; and
4)
No such transaction or series of transactions shall result in the proposed transferee having
been granted consent, veto or Control rights over any material or major decisions relating
to the Borrower, the Property or the Loan.
(ii) the merger of CLT and/or Guarantor with or into a Qualified Equityholder, or the
sale of all or substantially all of the shares and interests in CLT and/or Guarantor to a Qualified Equityholder,
provided no Event of Default exists under the Loan Documents, the Environmental Indemnity or the Guaranty
at the time of such transfer and the following conditions are satisfied (“ Upper Tier Transfer Conditions ”):
Guarantor
1
remains a direct or indirect owner of the
Borrower;
)
2)
Borrower shall continue to be able to make the ERISA representations set forth in Section
4.1.8 hereof and the USA Patriot Act representations set forth in Section 4.1.31 hereof;
3)
Borrower pays a fee equal to one percent (1%) of the outstanding principal balance of the
Note at the time of the transfer together with a non-refundable processing fee in the
amount of $25,000.00;
4) Guarantor shall reaffirm its obligations under the Guaranty and the
Environmental Indemnity;
5)
the Property continues to be managed by (x) Hyatt pursuant to the Management
Agreement or (y) another national hotel manager acceptable to MetLife in its reasonable
discretion (“ Qualified Hotel Manager ”) pursuant to a hotel management agreement
acceptable to Lender in its reasonable discretion (“ Replacement Management
Agreement ”; together with the Management Agreement being referred to as an “
Approved Management Agreement ”); and
6)
Borrower pays all actual, out-of-pocket costs and expenses incurred by Lender in
connection with the transfer, including title insurance premiums, documentation costs and
reasonable attorneys’ fees.
(iii) for so long as any class of shares or interests of CLT are publicly traded over a
U.S. public stock exchange, provided no Event of Default exists under the Loan Documents, the Environmental
Indemnity or the Guaranty, CLT may pledge or grant a security interest in its interests in Guarantor to a lender
that is providing financing or has provided financing to CLT; provided, however, that unless all of the Share
Transfer Conditions have been satisfied at the time that such lender or any other party acquires such interests,
whether at a foreclosure sale, by reason of an assignment in lieu of foreclosure, or otherwise, and continue to
remain satisfied immediately after such acquisition, such lender or other acquiring party must be a Qualified
Equityholder at the time of such acquisition and the Upper Tier Transfer Conditions must be satisfied.
Section 8.2 One-Time Transfer. Borrower shall have a one-time right to Transfer the Property,
subject to the following conditions:
(a) there being no event of default under the Loan Documents, the Environmental Indemnity
or the Guaranty at the time of the Transfer;
(b) Lender’s approval of the transferee, which approval shall not be unreasonably withheld;
(c) the transferee shall be able to make the ERISA representations set forth in Section 4.1.8
hereof and the USA Patriot Act representations set forth in Section 4.1.31 hereof;
(d) the Debt Yield must be not less than twelve (12%) percent;
(e) the Loan to Value Ratio of the Property at the time of the Transfer shall not be greater than
fifty (50%) percent based on an Appraisal;
(f) Borrower or the transferee shall pay a fee equal to one percent (1%) of the outstanding
principal balance of the Note at the time of the assumption, together with a non-refundable processing fee in the
amount of $25,000.00;
(g) the transferee shall expressly assume the Loan Documents and the Environmental
Indemnity in a manner satisfactory to Lender as to periods from and after the date of Transfer and an additional
guarantor acceptable to Lender shall execute the Guaranty and the Environmental Indemnity with respect to
events arising or occurring from and after the date of the Transfer, which additional guarantor must have (in the
aggregate if more than one) a net worth of not less than $650,000,000.00;
(h) the transferee must have a net worth not less than $250,000,000.00;
(i) the transferee must be experienced in the ownership and leasing of properties similar to the
Property and retain the Manager or a Qualified Hotel Manager, in either case pursuant to an Approved
Management Agreement; and
(j) Borrower or transferee shall pay all costs and expenses incurred by Lender in connection
with the Transfer, including title insurance premiums, documentation costs and reasonable attorneys’ fees.
Notwithstanding anything to the contrary contained herein, no transfer shall release Borrower or Guarantor
from their obligations under the Loan Documents, the Environmental Indemnity or the Guaranty with respect to
events arising or occurring prior to the date of Transfer.
Section 8.3 Prohibition on Additional Financing. Other than Permitted FF&E Financing, neither
Borrower nor TRS Entity shall incur or permit the incurring of (i) any financing in addition to the Loan that is
secured by a lien, security interest or other encumbrance of any part of the Property (including any loan or
financing which is repaid by assessments or other taxes related to the Property including, without limitation, any
Property-Assessed Clean Energy Loan) or (ii) any pledge
or encumbrance of a partnership, member or shareholder or beneficial interest or other direct or indirect interest
in Borrower or TRS Entity (collectively “ Secondary Financing ”), except to the extent expressly permitted by
Section 8.1(b)(iii).
Section 8.4 Restrictions on Additional Obligations. During the term of the Loan, neither Borrower
nor TRS Entity shall, without the prior written consent of Lender, become liable with respect to any
indebtedness or other obligation except for (i) the Loan, (ii) Leases entered into in the ordinary course of
owning and operating the Property for the Use, (iii) other liabilities incurred in the ordinary course of owning
and operating the Property for the Use but excluding any loans or borrowings other than Permitted FF&E
Financing and Permitted Indebtedness, (iv) liabilities or indebtedness disclosed in writing to and approved by
Lender on or before the Closing Date, and (v) any other single item of indebtedness or liability which does not
exceed $25,000.00 or, when aggregated with other items of indebtedness or liability, does not exceed
$100,000.00.
Section 8.5 Statements Regarding Ownership. Not later than thirty (30) days after written request
by Lender, which request shall be made no more than once per calendar year, Borrower agrees to submit or
cause to be submitted to Lender, a sworn, notarized certificate, signed by an authorized (i) individual who is
Borrower or one of the individuals comprising Borrower, (ii) member of Borrower, (iii) partner of Borrower or
(iv) officer of Borrower, as the case may be, stating whether (x) any part of the Property, or any interest in the
Property, has been conveyed, transferred, assigned, encumbered, or sold, and if so, to whom; (y) any
conveyance, transfer, pledge or encumbrance of any interest in Borrower or TRS Entity has been made and if
so, to whom; or (z) there has been any change in the individual(s) comprising Borrower or TRS Entity or in the
partners, members, stockholders or beneficiaries of Borrower or TRS Entity from those on the Closing Date,
and if so, a description of such change or changes.
Section 8.6 Compliance with Management Agreement Requirements. Any Transfer consummated
in accordance with this Article VIII shall at all times be subject to compliance with the terms of the
Management Agreement.
IX. ENVIRONMENTAL HAZARDS
Section 9.1 Representations and Warranties. Borrower and TRS Entity each hereby represents,
warrants, covenants and agrees to and with Lender that (i) neither Borrower nor TRS Entity nor, to Borrower’s
or TRS Entity’s actual knowledge, any Tenant, subtenant or occupant of the Property, has at any time placed,
suffered or permitted the presence of any Hazardous Materials at, on, under, within or about the Property except
as expressly approved by Lender in writing and (ii) all operations or activities upon the Property, and any use or
occupancy of the Property in each case by Borrower or TRS Entity are presently and shall in the future be in
compliance with all Requirements of Environmental Laws, (iii) Borrower and TRS Entity will use
commercially reasonable efforts to assure that Manager, any Tenant, subtenant or occupant of the Property shall
in the future be in compliance with all Requirements of Environmental Laws, and in the event of any
noncompliance, Borrower and TRS Entity will take all action required by and in accordance with the
Environmental Indemnity, (iv) Borrower and TRS Entity will use commercially reasonable efforts to assure all
operations or activities upon the Property by any third party are presently and shall in the future be in
compliance with all Requirements of Environmental Laws, and in the event of any noncompliance, Borrower
and TRS Entity will take all action required by and in accordance with the Environmental Indemnity, (v) neither
Borrower nor TRS Entity knows of or has received, any written or oral notice of other communication from any
person or entity (including, without limitation, a governmental entity) relating to any violation of Environmental
Laws or Remedial Work pertaining thereto, of
possible liability of any person or entity pursuant to any Requirements of Environmental Laws, or any actual
administrative or judicial proceedings in connection with any of the foregoing, (vi) neither Borrower nor TRS
Entity shall do or consent to Manager, any Tenant or other user of the Property taking or failing to take any
action that materially increases the dangers to human health or the environment, poses an unreasonable risk of
harm to any person or entity (whether on or off the Property), impairs or may impair the value of the Property,
is contrary to any requirement of any insurer, constitutes a public or private nuisance, constitutes waste, or
violates any covenant, condition, agreement or easement applicable to the Property, and (vii) Borrower has
truthfully and fully provided to Lender, in writing, any and all information relating to environmental conditions
in, on, under or from the Property that is known to Borrower or TRS Entity and that is contained in Borrower’s
or TRS Entity’s files and records, including, without limitation, any reports relating to Hazardous Materials in,
on, under or from the Property and/or to the environmental condition of the Property.
Section 9.2 Remedial Work. In the event any Remedial Work is required under any Requirements of
Environmental Laws, Borrower shall perform or cause to be performed the Remedial Work in compliance with
the applicable law, regulation, order or agreement. All Remedial Work undertaken by Borrower or an Affiliate
of Borrower shall be performed by one or more contractors, selected by Borrower and approved in advance in
writing by Lender, in Lender’s reasonable discretion, and under the supervision of a consulting engineer,
selected by Borrower and approved in advance in writing by Lender, in Lender’s reasonable discretion.
Notwithstanding the foregoing, in the event any Remedial Work on the Property is the obligation of a third
party unaffiliated with Borrower and such Remedial Work is performed by such unaffiliated third party, Lender
shall cooperate with Borrower in reviewing and approving any contractors or engineers performing Remedial
Work on the Property (which approval by Lender shall not be unreasonably withheld, conditioned or delayed),
Borrower shall use commercially reasonable efforts to cause or ensure that an authorized and capable entity is
undertaking the Remedial Work and that such Remedial Work is performed on the Property in compliance with
Requirements of Environmental Laws and in a manner as is necessary to permit the operation of the
improvements to the Property as contemplated by the Loan Documents. All costs and expenses of Remedial
Work shall be paid or cause to be paid by Borrower including, without limitation, the charges of the
contractor(s) and/or the consulting engineer, and Lender’s reasonable attorneys’, architects’ and/or consultants’
fees and costs incurred in connection with monitoring or review of the Remedial Work. In the event Borrower
shall fail to timely commence, or cause to be commenced, or fail to diligently prosecute to completion, the
Remedial Work, Lender may, but shall not be required to, cause such Remedial Work to be performed, subject
to the provisions of Section 12.13 of this Agreement.
Section 9.3 Environmental Site Assessment. Lender shall have the right, at any time and from time
to time, at Lender’s sole cost, to undertake, an environmental site assessment on the Property, including any
testing that Lender may determine, in its sole discretion, is necessary or desirable to ascertain the environmental
condition of the Property and the compliance of the Property with Requirements of Environmental Laws.
Borrower shall be responsible for the cost of any such environmental site assessments if (i) such environmental
site assessments are performed during the existence of an Event of Default, or (ii) Lender has a reasonable,
good faith belief that the Property is not in compliance with Requirements of Environmental Laws. Borrower
and TRS Entity shall cooperate fully with Lender and its consultants performing such assessments and tests.
Section 9.4 Unsecured Obligations. No amounts which may become owing by Borrower to Lender
under this Article IX or under any other provision of this Agreement as a result of a breach
of or violation of this Article IX shall be secured by the Security Instrument. The obligations shall continue in
full force and effect and any breach of this Article IX shall constitute an Event of Default. The lien of the
Security Instrument shall not secure (i) any Unsecured Obligations, or (ii) any other obligations to the extent
that they are the same or have the same effect as any of the Unsecured Obligations. The Unsecured Obligations
shall continue in full force, and any breach or default of any such obligations shall constitute a breach or default
under this Agreement but the proceeds of any foreclosure sale shall not be applied against Unsecured
Obligations. Nothing in this Section shall in any way limit or otherwise affect the right of Lender to obtain a
judgment in accordance with applicable law for any deficiency in recovery of all obligations that are secured by
the Security Instrument following foreclosure, notwithstanding that the deficiency judgment may result from
diminution in the value of the Property by reason of any event or occurrence pertaining to Hazardous Materials
or any Requirements of Environmental Laws.
X.
PARTICIPATION AND SALE OF LOAN
Section 10.1 Sale of Loan/Participation. Lender may sell, transfer or assign all or any portion of its
interest or one or more participation interests in the Loan, the Loan Documents, the Guaranty and the
Environmental Indemnity at any time and from time to time, including, without limitation, its rights and
obligations as servicer of the Loan. Lender may forward to each purchaser, transferee, assignee, servicer,
participant, investor in the Loan (collectively, the “ Investor ”) and each prospective Investor, all documents
and information which Lender now has or may hereafter acquire relating to the Loan and to Borrower, or TRS
Entity or any Guarantor and the Property, whether furnished by Borrower, TRS Entity, any Guarantor or
otherwise, as Lender determines necessary or desirable.
Lender, without in any way limiting Lender’s other rights hereunder, in its sole and absolute discretion,
shall have the right to divide the Loan into two or more tranches which may be evidenced by two or more notes,
which notes may be pari passu or senior/subordinate, provided that (i) the aggregate principal amount of the
notes immediately following such division shall equal the outstanding principal balance of the Loan and (ii) the
weighted average interest rate of the Loan immediately following such division shall equal the interest rate
which was applicable to the Loan immediately prior to such division. Borrower and TRS Entity shall, at
Lender’s sole cost, cooperate with reasonable requests of Lender in order to divide the Loan and shall execute
and deliver such documents as shall reasonably be required by Lender in connection therewith, including,
without limitation, new notes to replace the original Note, all in form and substance reasonably satisfactory to
Lender, provided that such documents shall contain terms, provisions and clauses (x) no less favorable to
Borrower than those contained herein and in the Note, and (y) which do not increase Borrower’s obligations
hereunder or decrease Borrower’s rights under the Loan Documents.
Section 10.2 Cooperation. Borrower and TRS Entity will reasonably cooperate with Lender in
furnishing such information and providing such other assistance, reports and legal opinions as Lender may
reasonably request in connection with any such transaction. In addition, Borrower acknowledges that Lender
may release or disclose to potential purchasers or transferees of the Loan, or potential participants in the Loan,
originals or copies of the Loan Documents, the Guaranty, the Environmental Indemnity, title information,
engineering reports, financial statements, operating statements, appraisals, Leases, rent rolls, and all other
materials, documents and information in Lender’s possession or which Lender is entitled to receive under the
Loan Documents, the Guaranty and the Environmental Indemnity with respect to the Loan, Borrower, any
Guarantor or the Property. Borrower and TRS Entity shall also furnish to such Investors or such prospective
Investors any and
all information concerning the Property, the Leases, the financial condition of Borrower, TRS Entity or any
Guarantor as may be requested by Lender, any Investor or any prospective Investor in connection with any sale,
transfer or participation interest, and Lender shall reimburse Borrower, TRS Entity and any Guarantor for any
reasonable, third party costs and expenses in connection with the performance by such parties of their
obligations pursuant to this Article X.
XI. DEFAULTS
Section 11.1 Event of Default.
Any of the following shall be deemed to be a material breach of Borrower’s or TRS Entity’s, as
applicable, covenants in this Agreement and shall constitute a default (“ Event of Default ”):
(a) The failure of Borrower to pay any installment of principal, interest or principal and
interest, any required escrow deposit or any other sum required to be paid under any Loan Document, whether
to Lender or otherwise, within seven (7) days of the due date of such payment;
(b) The failure of Borrower or TRS Entity to perform or observe any other term, provision,
covenant, condition or agreement under any Loan Document for a period of more than thirty (30) days after
receipt of notice of such failure;
(c) The filing by Borrower, TRS Entity or one of the Guarantors (an “Insolvent Entity ”) of a
voluntary petition or application for relief in bankruptcy, the filing against an Insolvent Entity of an involuntary
petition or application for relief in bankruptcy which is not dismissed within sixty (60) days, or an Insolvent
Entity’s adjudication as a bankrupt or insolvent, or the filing by an Insolvent Entity of any petition, application
for relief or answer seeking or acquiescing in any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief for itself under any present or future federal, state or other statute, law,
code or regulation relating to bankruptcy, insolvency or other relief for debtors, or an Insolvent Entity’s seeking
or consenting to or acquiescing in the appointment of any trustee, custodian, conservator, receiver or liquidator
of an Insolvent Entity or of all or any substantial part of the Property or of any or all of the Rents, or the making
by an Insolvent Entity of any general assignment for the benefit of creditors, or the admission in writing by an
Insolvent Entity of its inability to pay its debts generally as they become due;
(d) If any warranty, representation, certification, financial statement or other information
made or furnished at any time pursuant to the terms of the Loan Documents, the Guaranty or the Environmental
Indemnity by Borrower, TRS Entity or by any person or entity otherwise liable under any Loan Document, the
Guaranty or the Environmental Indemnity shall be materially false or misleading when made or provided;
(e) If Borrower or TRS Entity shall suffer or permit the Property, or any part of the Property,
to be used in a manner that might (1) impair Borrower’s title to the Property, (2) create rights of adverse use or
possession, or (3) constitute an implied dedication of any part of the Property;
(f) If Guarantor, if any, shall default, beyond any applicable notice and cure periods, under the
Guaranty executed by Guarantor in favor of Lender dated as of the Closing Date;
(g) Upon the occurrence and during the continuance of an Event of Default (other than an
Event of Default described in clause (c) above) and at any time thereafter Lender may, in
addition to any other rights or remedies available to it pursuant to this Agreement, the Guaranty, the
Environmental Indemnity and the other Loan Documents or at law or in equity, take such action, without notice
or demand, that Lender deems advisable to protect and enforce its rights against Borrower and in and to the
Property, including, without limitation, declaring the Debt to be immediately due and payable, and Lender may
enforce or avail itself of any or all rights or remedies provided in the Loan Documents, the Guaranty and the
Environmental Indemnity against Borrower, Guarantor and the Property, including, without limitation, all rights
or remedies available at law or in equity; and upon any Event of Default described in clause (c) above, the Debt
and all other obligations of Borrower hereunder and under the other Loan Documents shall immediately and
automatically become due and payable, without notice or demand, and Borrower hereby expressly waives any
such notice or demand, anything contained herein or in any other Loan Document to the contrary
notwithstanding;
(h) If a default has occurred and continues beyond any applicable cure period under the TRS
Lease, and such default permits a party to terminate or cancel the TRS Lease;
(i) If Borrower or TRS Entity terminates or cancels the TRS Lease, without Lender’s prior
written consent;
(j) If a default by Borrower or the TRS Entity has occurred and continues beyond any
applicable cure period under the Management Agreement, and such default permits a party to terminate or
cancel the Management Agreement;
(k) If Borrower or TRS Entity ceases to operate a Hyatt Hotel on the Property or terminates
such business for any reason whatsoever (other than temporary cessation in connection with any renovations to
the Property or restoration of the Property after Casualty or Condemnation) or abandons the Property or any
portion thereof, in each case without Lender’s prior written consent;
(l) If Borrower or TRS Entity terminates or cancels the Management Agreement or operates
the Property under the name of any hotel chain or system other than Hyatt, without Lender’s prior written
consent;
(m) If Borrower fails to perform and/or pay for any PIP Work under the Management
Agreement beyond any applicable notice and cure period under the Management Agreement;
(n) If a default has occurred and continues beyond any applicable cure period under any
Material Agreement, liquor license for the Property, or Parking Agreement and such default permits a party to
terminate or cancel the Material Agreement, liquor license or Parking Agreement, and, in the case of any
Material Agreement, the termination or cancellation of such Material Agreement is reasonably expected to have
a material adverse effect on the operation of the Property; or
(o) If the Parking Argument or liquor license for the Property is cancelled or terminated.
Section 11.2 Remedies.
(a) Upon the occurrence and during the continuance of an Event of Default, all or any one or
more of the rights, powers, privileges and other remedies available to Lender against Borrower under this
Agreement or any of the other Loan Documents or the Environmental Indemnity executed and delivered by, or
applicable to, Borrower or at law or in equity may be exercised by Lender at any time and from time to time,
whether or not all or any of the Debt shall be declared due and payable, and whether or not Lender shall have
commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any
of the Loan Documents with respect to the Property. Any such actions taken by Lender shall be cumulative and
concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in
such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without
impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or
as set forth herein or in the other Loan Documents or the Environmental Indemnity. Without limiting the
generality of the foregoing, if an Event of Default is continuing, to the extent permitted by law, (i) Lender shall
not be subject to any “one action” or “election of remedies” law or rule, and (ii) all liens and other rights,
remedies or privileges provided to Lender shall remain in full force and effect until Lender has exhausted all of
its remedies against the Property and the Security Instrument has been foreclosed, sold and/or otherwise
realized upon in satisfaction of the Debt or the Debt has been paid in full.
(b) Upon the occurrence and during the continuance of an Event of Default, Lender shall have
the right from time to time to partially foreclose the Security Instrument in any manner and for any amounts
secured by the Security Instrument then due and payable as determined by Lender in its sole discretion
including, without limitation, the following circumstances: (i) upon the occurrence and during the continuance
of an Event of Default for non-payment of one or more scheduled payments of principal and interest, Lender
may foreclose the Security Instrument to recover such delinquent payments, or (ii) in the event Lender elects to
accelerate less than the entire outstanding principal balance of the Loan, Lender may foreclose the Security
Instrument to recover so much of the principal balance of the Loan as Lender may accelerate and such other
sums secured by the Security Instrument as Lender may elect. Notwithstanding one or more partial foreclosures,
the Property shall remain subject to the Security Instrument as reduced and modified following any such partial
foreclosure to secure payment of sums secured by the Security Instrument and not previously recovered.
(c) Any amounts recovered from the Property or any other collateral for the Loan following
the occurrence of an Event of Default may be applied by Lender toward the payment of any interest and/or
principal of the Loan and/or any other amounts due under the Loan Documents in such order, priority and
proportions as Lender in its sole discretion shall determine.
(d) During the continuance of an Event of Default, Borrower shall make no further
distributions to its partners, members or shareholders, as applicable.
Section 11.3 Right to Cure Defaults. Lender may, but without any obligation to do so and without
notice to or demand on Borrower and without releasing Borrower from any obligation hereunder or being
deemed to have cured any Event of Default hereunder, make, do or perform any obligation of Borrower
hereunder in such manner and to such extent as Lender may deem necessary. Lender is authorized to enter upon
the Property for such purposes, or appear in, defend, or bring any action or proceeding to protect its interest in
the Property for such purposes, and the cost and expense thereof (including reasonable attorneys’ fees to the
extent permitted by law), with interest as provided in this Section 11.3 , shall constitute a portion of the Debt
and shall be due and payable to Lender upon demand. All such costs and expenses incurred by Lender in
remedying such Event of Default or
such failed payment or act or in appearing in, defending, or bringing any action or proceeding shall bear interest
at the Default Rate, for the period after such cost or expense was incurred to the date of payment to Lender. All
such costs and expenses incurred by Lender together with interest thereon calculated at the Default Rate shall be
deemed to constitute a portion of the Debt and be secured by the liens, claims and security interests provided to
Lender under the Loan Documents and shall be immediately due and payable upon demand by Lender therefor.
Section 11.4 Remedies Cumulative. The rights, powers and remedies of Lender under this
Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have
against Borrower pursuant to this Agreement or the other Loan Documents or the Environmental Indemnity, or
existing at law or in equity or otherwise. Lender’s rights, powers and remedies may be pursued singly,
concurrently or otherwise, at such time and in such order as Lender may determine in Lender’s sole discretion.
No delay or omission to exercise any remedy, right or power accruing upon the occurrence of an Event of
Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such
remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver
of one Default or Event of Default with respect to Borrower shall not be construed to be a waiver of any
subsequent Default or Event of Default by Borrower or to impair any remedy, right or power consequent
thereon.
Section 11.5 Duration of Events of Default. If any Event of Default shall occur (irrespective of
whether or not the same consists of an ongoing condition, a one-time occurrence, or otherwise), the same shall
be deemed to continue at all times thereafter; provided, however, that such Event of Default shall cease to
continue only if Lender shall affirmatively accept performance of the defaulted obligation or shall execute and
deliver a written agreement in which Lender expressly states that such Event of Default has ceased to continue.
Upon Borrower’s written request, Lender shall promptly acknowledge and confirm whether or not Lender has
accepted performance of a defaulted obligation hereunder. Borrower shall have no right to cure any Event of
Default, and Lender shall not be obligated under any circumstances whatsoever to accept such cure or
performance or to execute and deliver any such writing. Without limitation, this Section shall govern in any
case where reference is made in the Loan Documents, the Guaranty and/or the Environmental Indemnity to (i)
any “cure” (whether by use of such word or otherwise) of any Event of Default, (ii) ”during an Event of
Default,” “the continuance of an Event of Default” or “after an Event of Default has ceased” (in each case,
whether by use of such words or otherwise), or (iii) any condition or event which continues beyond the time
when the same becomes an Event of Default.
XII.
MISCELLANEOUS
Section 12.1 Successors and Assigns; Terminology. All covenants, promises and agreements in this
Agreement, by or on behalf of Borrower, shall inure to the benefit of the legal representatives, successors and
assigns of Lender. The term “Borrower” shall include both the original Borrower and any subsequent owner or
owners of any of the Property. The term “Guarantor” shall include both the original Guarantor and any
subsequent or substituted Guarantor. In this Agreement, whenever the context so requires, the masculine gender
includes the feminine and/or neuter, and the singular number includes the plural.
Section 12.2 Lender’s Discretion. Whenever pursuant to this Agreement Lender exercises any right
given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender or any financial
ratio is to be calculated or determined, the decision of Lender to approve or disapprove or to decide whether
arrangements or terms are satisfactory or not satisfactory or Lender’s
calculation or determination shall (except as is otherwise expressly herein provided) be in the sole discretion of
Lender and shall be final and conclusive.
Section 12.3 Governing Law.
(a) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, THE
LOAN WAS MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF NEW YORK,
AND THE PROCEEDS OF THE LOAN DELIVERED PURSUANT HERETO WERE DISBURSED FROM
THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL
RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED
HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS
AGREEMENT, THE NOTE, THE OTHER LOAN DOCUMENTS AND THE ENVIRONMENTAL
INDEMNITY AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT
REGARD TO PRINCIPLES OF CONFLICT OF LAWS) AND ANY APPLICABLE LAW OF THE UNITED
STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION,
PERFECTION, PRIORITY AND ENFORCEMENT OF THE LIEN AND SECURITY INTEREST CREATED
PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS (OTHER THAN WITH
RESPECT TO LIENS AND SECURITY INTERESTS IN PROPERTY WHOSE PERFECTION AND
PRIORITY IS COVERED BY ARTICLE 9 OF THE UCC (INCLUDING, WITHOUT LIMITATION, THE
ACCOUNTS) WHICH SHALL BE GOVERNED BY THE LAW OF THE JURISDICTION APPLICABLE
THERETO IN ACCORDANCE WITH SECTIONS 9-301 THROUGH 9-307 OF THE UCC AS IN EFFECT
IN THE STATE OF NEW YORK) SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO
THE LAW OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IT BEING UNDERSTOOD
THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE
STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY
OF ALL LOAN DOCUMENTS AND THE ENVIRONMENTAL INDEMNITY AND ALL OF THE
OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED
BY LAW, BORROWER AND LENDER EACH HEREBY UNCONDITIONALLY AND IRREVOCABLY
WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS
AGREEMENT, THE NOTE, THE OTHER LOAN DOCUMENTS AND THE ENVIRONMENTAL
INDEMNITY, AND THIS AGREEMENT, THE NOTE, THE OTHER LOAN DOCUMENTS AND THE
ENVIRONMENTAL INDEMNITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTION 5 1401 OF THE NEW
YORK GENERAL OBLIGATIONS LAW EXCEPT AS SPECIFICALLY SET FORTH ABOVE.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR
BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS OR THE ENVIRONMENTAL INDEMNITY MAY AT LENDER’S OPTION BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW
YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND
BORROWER AND LENDER EACH WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR
HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON
CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION
OR PROCEEDING.
Section 12.4 Modification. Waiver in Writing. No modification, amendment, extension, discharge,
termination or waiver of any provision of this Agreement or of any other Loan Document, nor consent to any
departure by Borrower therefrom, shall in any event be effective unless the same shall be in a writing signed by
the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the
specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice
to, or demand on Borrower, shall entitle Borrower to any other or future notice or demand in the same, similar
or other circumstances.
Section 12.5 Delay Not a Waiver. Neither any failure nor any delay on the part of Lender in insisting
upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy
or privilege hereunder, or under any other Loan Document or the Environmental Indemnity, shall operate as or
constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or
the exercise of any other right, power, remedy or privilege. In particular, and not by way of limitation, by
accepting payment after the due date of any amount payable under this Agreement, any other Loan Document
or the Environmental Indemnity, Lender shall not be deemed to have waived any right either to require prompt
payment when due of all other amounts due under this Agreement, the other Loan Documents or the
Environmental Indemnity, or to declare an Event of Default for failure to effect prompt payment of any such
other amount.
Section 12.6 Notices. All notices, demands, requests, consents, approvals or other communications
(any of the foregoing, a “ Notice ”) required, permitted, or desired to be given hereunder shall be in writing sent
(i) by registered or certified mail, postage prepaid, return receipt requested or (ii) by nationally-recognized
overnight commercial courier service, in each case addressed to the party to be so notified at its address
hereinafter set forth, or to such other address as such party may hereafter specify in accordance with the
provisions of this Section 12.6. Any Notice shall be deemed to have been received upon receipt or refusal to
accept delivery, in each case as shown on the return receipt or the receipt of such overnight commercial courier
service.
If to Lender:
Metropolitan Life Insurance Company
10 Park Avenue, 3rd Floor
PO Box 1902
Morristown, New Jersey 07960
Attention: Senior Managing Director, Real Estate Investments
Facsimile No. (973) 355-4430
with a copy to:
Metropolitan Life Insurance Company
10 Park Avenue, 3rd Floor
PO Box 1902
Morristown, New Jersey 07960
Attention: Associate General Counsel, Real Estate Investments
Facsimile No. (973) 355-4920
with a copy to:
Goulston & Storrs PC
400 Atlantic Avenue
Boston, Massachusetts 02110
Attention: James H. Lerner, Esq.
Jean C. Bowe, Esq.
Facsimile: (617) 574-7607
If to Borrower:
CHSP Boston II LLC
c/o Chesapeake Lodging Trust
1997 Annapolis Exchange Parkway, Suite 410
Annapolis, Maryland 21401
Attention: Graham J. Wootten
Facsimile: (410) 972-4180
with copies to:
Polsinelli PC
1515 Wynkoop Street, Suite 600
Denver, Colorado 80202
Attention: Patricia L. Gruber, Esq.
Facsimile: (303) 572-7883
Polsinelli PC
1401 Eye (“I”) Street, N.W., Suite 800
Washington, DC 20005
Attn: Kevin Vold, Esq.
Facsimile: (202) 783-3535
Section 12.7 Trial by Jury. BORROWER AND LENDER EACH HEREBY AGREES NOT TO
ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT
TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS OR THE ENVIRONMENTAL
INDEMNITY, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION
THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND
VOLUNTARILY BY BORROWER AND LENDER, AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY
JURY WOULD OTHERWISE ACCRUE. EACH PARTY IS HEREBY AUTHORIZED TO FILE A COPY OF
THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER.
Section 12.8 Headings. The Article and/or Section headings and the Table of Contents in this
Agreement are inserted only as a matter of convenience and for reference, and in no way define, limit, or
describe the scope or intent of any provisions of this Agreement
Section 12.9 Severability. If any provision of this Agreement should be held unenforceable or void,
then that provision shall be separated from the remaining provisions and shall not affect the validity of this
Agreement except that if the unenforceable or void provision relates to the payment of any monetary sum, then,
Lender may, at its option, declare the Debt immediately due and payable.
Section 12.10 Preferences. Lender shall have the continuing and exclusive right to apply or reverse
and reapply any and all payments by Borrower to any portion of the obligations of Borrower hereunder. To the
extent Borrower makes a payment or payments to Lender, which payment or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause,
then, to the extent of such payment or proceeds received, the obligations hereunder or part thereof intended to
be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been
received by Lender.
Section 12.11 Waiver of Notice. Borrower shall not be entitled to any notices of any nature
whatsoever from Lender except with respect to matters for which this Agreement or the other Loan Documents
specifically and expressly provide for the giving of notice by Lender to Borrower and except with respect to
matters for which Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of
notice. Borrower hereby expressly waives the right to receive any notice from Lender with respect to any matter
for which this Agreement or the other Loan Documents do not specifically and expressly provide for the giving
of notice by Lender to Borrower.
Section 12.12 Remedies of Borrower. In the event that a claim or adjudication is made that Lender or
its agents have acted unreasonably or unreasonably delayed acting in any case where, by law or under this
Agreement, the other Loan Documents or the Environmental Indemnity, Lender or such agent, as the case may
be, has an obligation to act reasonably or promptly, neither Lender nor its agents shall be liable for any
monetary damages, and Borrower’s sole remedy shall be limited to commencing an action seeking injunctive
relief or declaratory judgment. Any action or proceeding to determine whether Lender has acted reasonably
shall be determined by an action seeking declaratory judgment.
Section 12.13 Expenses; Indemnity.
(a) Borrower shall pay or, if Borrower fails to pay, reimburse Lender upon receipt of notice
from Lender, for all reasonable, third party costs and expenses (including reasonable attorneys’ fees and
disbursements) incurred by Lender in connection with (i) Borrower’s or TRS Entity’s ongoing performance of
and compliance with Borrower’s and TRS Entity’s agreements and covenants contained in this Agreement, the
other Loan Documents and the Environmental Indemnity on its part to be performed or complied with after the
Closing Date, including, without limitation, confirming compliance with environmental and insurance
requirements; (ii) Lender’s ongoing performance of and compliance with all agreements and covenants
contained in this Agreement, the other Loan Documents and the Environmental Indemnity on its part to be
performed or complied with after the Closing Date; (iii) the negotiation, preparation, execution, delivery and
administration of any consents, amendments, waivers or other modifications to this Agreement, the other Loan
Documents, the Environmental Indemnity and any other documents or matters requested by Borrower; (iv) the
filing and recording fees and expenses, title insurance and reasonable fees and
expenses of counsel for providing to Lender all required legal opinions, and other similar expenses incurred, in
creating and perfecting the Liens in favor of Lender pursuant to this Agreement and the other Loan Documents;
(v) enforcing or preserving any rights, in response to third party claims or the prosecuting or defending of any
action or proceeding or other litigation or otherwise, in each case against, under or affecting Borrower, this
Agreement, the other Loan Documents, the Environmental Indemnity, the Property, or any other security given
for the Loan; and (vi) enforcing any obligations of or collecting any payments due from Borrower under this
Agreement, the other Loan Documents, the Environmental Indemnity or with respect to the Property or in
connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in
the nature of a “work out” or of any insolvency or bankruptcy proceedings; provided, however, that Borrower
shall not be liable for the payment of any such costs and expenses to the extent the same arise by reason of the
gross negligence, illegal acts, fraud or willful misconduct of Lender. All payments made, or funds expended or
advanced by Lender pursuant to the provisions of any Loan Document, shall (1) become a part of the Debt, (2)
bear interest at the Interest Rate from the date such payments are made or funds expended or advanced, (3)
become due and payable by Borrower upon demand by Lender, and (4) bear interest at the Default Rate from
the date of such demand. Borrower shall reimburse Lender within ten (10) days after receipt of written demand
for such amounts. If Lender becomes a party (by intervention or otherwise) to any action or proceeding
affecting, directly or indirectly, Borrower, the Property or the title thereto or Lender's interest under the Security
Instrument, or employs an attorney to collect any of the Debt or to enforce performance of the obligations,
covenants and agreements of the Loan Documents, Borrower shall reimburse Lender in accordance with this
Section 12.13 for all expenses, costs, charges and legal fees incurred by Lender (including, without limitation,
the fees and expenses of experts and consultants), whether or not suit is commenced
(b) Borrower shall indemnify, defend and hold harmless Lender and its officers, directors,
agents, employees (and the successors and assigns of the foregoing) (the “ Lender Indemnitees ”) from and
against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs,
expenses and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees
and disbursements of counsel for the Lender Indemnitees in connection with any investigative, administrative or
judicial proceeding commenced or threatened, whether or not the Lender Indemnitees shall be designated a
party thereto), that may be imposed on, incurred by, or asserted against the Lender Indemnitees in any manner
relating to or arising out of (i) any breach by Borrower of its obligations under, or any material
misrepresentation by Borrower contained in, this Agreement, the other Loan Documents or the Environmental
Indemnity, or (ii) the use or intended use of the proceeds of the Loan (collectively, the “ Indemnified
Liabilities ”); provided, however, that Borrower shall not be liable for the payment of any such costs and
expenses to the extent that such Indemnified Liabilities arise from the gross negligence, illegal acts, fraud or
willful misconduct of the Lender Indemnitees. To the extent that the undertaking to indemnify, defend and hold
harmless set forth in the preceding sentence may be unenforceable because it violates any law or public policy,
Borrower shall pay the maximum portion that it is permitted to pay and satisfy under applicable law to the
payment and satisfaction of all Indemnified Liabilities incurred by the Lender Indemnitees.
Section 12.14 Waiver of Consequential Damages. Borrower covenants and agrees that in no event
shall Lender be liable for consequential damages, and to the fullest extent permitted by law, Borrower expressly
waives all existing and future claims that it may have against Lender for consequential damages.
Section 12.15 Schedules and Exhibits Incorporated. The Schedules and Exhibits annexed hereto
are hereby incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof.
Section 12.16 Offsets, Counterclaims and Defenses. Any assignee of Lender’s interest in and to this
Agreement, the other Loan Documents and the Environmental Indemnity shall take the same free and clear of
all offsets, counterclaims or defenses which are unrelated to such documents which Borrower may otherwise
have against any assignor of such documents, and no such unrelated counterclaim or defense shall be interposed
or asserted by Borrower in any action or proceeding brought by any such assignee upon such documents and
any such right to interpose or assert any such unrelated offset, counterclaim or defense in any such action or
proceeding is hereby expressly waived by Borrower, other than a mandatory or compulsory counterclaim.
Section 12.17 No Joint Venture or Partnership; No Third Party Beneficiaries.
(a) Borrower and Lender intend that the relationships created hereunder and under the other
Loan Documents be solely that of borrower and lender. Nothing herein or therein is intended to create a joint
venture, partnership, tenancy in common, or joint tenancy relationship between Borrower and Lender nor to
grant Lender any interest in the Property other than that of mortgagee, beneficiary or lender.
(b) This Agreement, the other Loan Documents and the Environmental Indemnity are solely
for the benefit of Lender and nothing contained in this Agreement, the other Loan Documents or the
Environmental Indemnity shall be deemed to confer upon anyone other than Lender and Borrower any right to
insist upon or to enforce the performance or observance of any of the obligations contained herein or therein.
All conditions to the obligations of Lender to make the Loan hereunder are imposed solely and exclusively for
the benefit of Lender and no other Person shall have standing to require satisfaction of such conditions in
accordance with their terms or be entitled to assume that Lender will refuse to make the Loan in the absence of
strict compliance with any or all thereof and no other Person shall under any circumstances be deemed to be a
beneficiary of such conditions, any or all of which may be freely waived in whole or in part by Lender if, in
Lender’s sole discretion, Lender deems it advisable or desirable to do so.
Section 12.18 Publicity. All news releases, publicity or advertising by Borrower or its Affiliates
through any media intended to reach the general public which refers to the Loan Documents or the financing
evidenced by the Loan Documents or to Lender or any of its Affiliates shall be subject to the prior approval of
Lender except with respect to disclosures or public reporting as may be required by law, regulation or
professional standard.
Section 12.19 Waiver of Marshalling of Assets. To the fullest extent permitted by law, Borrower, for
itself and its successors and assigns, waives all rights to a marshalling of the assets of Borrower, Borrower’s
partners and others with interests in Borrower, and of the Property, and shall not assert any right under any laws
pertaining to the marshalling of assets, the sale in inverse order of alienation, homestead exemption, the
administration of estates of decedents, or any other matters whatsoever to defeat, reduce or affect the right of
Lender under the Loan Documents to a sale of the Property for the collection of the Debt without any prior or
different resort for collection or of the right of Lender to the payment of the Debt out of the net proceeds of the
Property in preference to every other claimant whatsoever.
Section 12.20 Waiver of Offsets/Defenses/Counterclaims. Borrower hereby waives the right to
assert a counterclaim, other than a mandatory or compulsory counterclaim, in any action or proceeding brought
against it by Lender or its agents or otherwise to offset any obligations to make the payments required by the
Loan Documents or the Environmental Indemnity. No failure by Lender to perform any of its obligations
hereunder shall be a valid defense to, or result in any offset against, any payments which Borrower is obligated
to make under any of the Loan Documents or the Environmental Indemnity. No single or partial exercise by
Lender, or delay or omission in the exercise by Lender, of any right or remedy under the Loan Documents shall
preclude, waive or limit the exercise of any other right or remedy. Lender shall at all times have the right to
proceed against any portion of, or interest in, the Property without waiving any other rights or remedies with
respect to any other portion of the Property. No right or remedy under any of the Loan Documents is intended to
be exclusive of any other right or remedy but shall be cumulative and may be exercised concurrently with or
independently from any other right and remedy under any of the Loan Documents or under applicable law.
Section 12.21 Conflict; Construction of Documents; Reliance. In the event of any conflict between
the provisions of this Agreement and any of the other Loan Documents or the Environmental Indemnity, the
provisions of this Agreement shall control. The parties hereto acknowledge that they were represented by
competent counsel in connection with the negotiation, drafting and execution of the Loan Documents and the
Environmental Indemnity and that such Loan Documents and the Environmental Indemnity shall not be subject
to the principle of construing their meaning against the party which drafted same. Borrower acknowledges that,
with respect to the Loan, Borrower shall rely solely on its own judgment and advisors in entering into the Loan
without relying in any manner on any statements, representations or recommendations of Lender or any parent,
subsidiary or Affiliate of Lender. Lender shall not be subject to any limitation whatsoever in the exercise of any
rights or remedies available to it under any of the Loan Documents, the Environmental Indemnity or any other
agreements or instruments which govern the Loan by virtue of the ownership by it or any parent, subsidiary or
Affiliate of Lender of any equity interest any of them may acquire in Borrower, and Borrower hereby
irrevocably waives the right to raise any defense or take any action on the basis of the foregoing with respect to
Lender’s exercise of any such rights or remedies. Borrower acknowledges that Lender engages in the business
of real estate financings and other real estate transactions and investments which may be viewed as adverse to
or competitive with the business of Borrower or its Affiliates.
Section 12.22 Brokers and Financial Advisors. Borrower hereby represents that it has dealt with no
financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the transactions
contemplated by this Agreement other than Columbia National Real Estate Finance, LLC (“ Broker ”), and
Borrower shall be solely responsible for payment of all commissions, finder’s fees or similar amounts due and
payable to Broker pursuant to the terms of their separate agreement, all of which commissions, finder’s fees or
similar amounts shall be paid to Broker by Borrower on the Closing Date. Borrower shall indemnify, defend
and hold Lender harmless from and against any and all claims, liabilities, costs and expenses of any kind
(including Lender’s reasonable attorneys’ fees and disbursements) in any way relating to or arising from a claim
by any Person (including Broker) that such Person acted on behalf of Borrower or Lender in connection with
the transactions contemplated herein. The provisions of this Section 12.22 shall survive the expiration and
termination of this Agreement and the payment of the Debt. Borrower acknowledges that Lender may have
been involved in other transactions with Broker, and Borrower agrees that it shall have no rights against Lender
or defenses to Borrower’s obligations under the Loan Documents or the Environmental Indemnity due to any
such relationship.
Section 12.23 Exculpation. Upon the occurrence of an Event of Default, except as provided in this
Section 12.23 , Lender will look solely to the Property and the security under the Loan Documents for the
repayment of the Debt and will not enforce a deficiency judgment against Borrower. However, nothing
contained in this Section shall limit the rights of Lender to proceed against Borrower, TRS Entity and the
general partners of Borrower, TRS Entity and/or the Guarantor, if any (provided, however that Lender may only
proceed against TRS Entity to the extent necessary to enforce a performance obligation under the Loan
Documents or to exercise remedies against collateral for the Debt, but not for recovery of the payment of
money), (i) to enforce any Leases entered into by Borrower, TRS Entity or their affiliates as Tenant; (ii) to
recover actual damages for fraud, material misrepresentation, material breach of warranty or waste; (iii) to
recover any Award or Insurance Proceeds or other similar funds which have been misapplied by Borrower or
TRS Entity or which, under the terms of the Loan Documents, should have been paid to Lender; (iv) to recover
any tenant security deposits, tenant letters of credit or other deposits or fees paid to Borrower or TRS Entity or
prepaid rents for a period of more than 30 days; (v) to recover Rents received by Borrower or TRS Entity after
the first day of the month in which an Event of Default occurs and prior to the date Lender acquires title to the
Property which have not been applied to the Debt or in accordance with the Loan Documents to operating and
maintenance expenses of the Property; (vi) to recover damages, costs and expenses arising from, or in
connection with Article IX of this Agreement pertaining to hazardous materials or the Environmental
Indemnity; (vii) to recover all amounts due and payable pursuant to Section 12.13 of this Agreement; (viii) to
recover costs and damages arising from Borrower’s or TRS Entity’s failure, as applicable, to pay Insurance
Premiums or Taxes in the event Borrower is not required to deposit such amounts with Lender pursuant to
Article III of this Agreement; and/or (ix) to recover damages arising from Borrower’s failure to comply with
Section 5.2.11 of this Agreement pertaining to ERISA.
The limitation of liability set forth in this Section 12.23 shall not apply and the Loan shall be fully
recourse in the event that prior to the repayment of the Loan, Borrower or TRS Entity commences a voluntary
bankruptcy or insolvency proceeding or an involuntary bankruptcy or insolvency proceeding is commenced
against Borrower or TRS Entity and is not dismissed within 90 days of filing. In addition, this agreement shall
not waive any rights which Lender would have under any provisions of the U.S. Bankruptcy Code to file a
claim for the full amount of the Loan or to require that the Property shall continue to secure all of the Loan.
Notwithstanding the foregoing, the Loan shall be fully recourse to the Borrower, in the event there is a
Transfer or Secondary Financing except as permitted in the Loan Documents or otherwise approved in writing
by Lender.
Section 12.24 Prior Agreements. This Agreement, the other Loan Documents and the Environmental
Indemnity contain the entire agreement of the parties hereto and thereto in respect of the transactions
contemplated hereby and thereby, and all prior agreements among or between such parties, whether oral or
written, including, without limitation, the loan application, are superseded by the terms of this Agreement, the
other Loan Documents and the Environmental Indemnity.
Section 12.25 Servicer.
(a) At the option of Lender, the Loan may be serviced by a servicer (the “Servicer”) selected
by Lender and Lender may delegate all or any portion of its responsibilities under this Agreement, the other
Loan Documents and the Environmental Indemnity to the Servicer pursuant to a servicing agreement (the “
Servicing Agreement ”) between Lender and Servicer;
provided that, so long as no Event of Default shall have occurred and be continuing, the Servicer shall be
retained at Lender’s sole cost and expense.
(b) Without limiting the foregoing, Servicer shall have the right to exercise all rights of
Lender and to enforce all obligations of Borrower, Guarantor and other Persons pursuant to the terms and
provisions of this Agreement, the Note, the Guaranty, the Environmental Indemnity and the other Loan
Documents.
(c) Borrower shall deliver to Servicer duplicate originals of all notices, documents and other
instruments which Borrower may or shall be required to deliver to Lender pursuant to this Agreement, the Note,
the other Loan Documents and the Environmental Indemnity (and no delivery of such notices, documents or
other instruments by Borrower to Lender shall be of any force or effect unless the same are simultaneously
delivered to Servicer).
Section 12.26 Replacement of Note. Upon notice to Borrower of the loss, theft, destruction or
mutilation of the Note, Borrower will execute and deliver, in lieu of the original Note, a replacement note,
identical in form and substance to the Note and dated as of the Closing Date. Upon the execution and delivery
of the replacement note, all references in any of the Loan Documents or the Environmental Indemnity to the
Note shall refer to the replacement note.
Section 12.27 Joint and Several Liability. If more than one Person has executed this Agreement as
“Borrower,” the representations, covenants, warranties and obligations of all such Persons hereunder shall be
joint and several.
Section 12.28 Counterparts. This Agreement may be executed in any number of duplicate originals
and each duplicate original shall be deemed to be an original and all of which together shall constitute a single
agreement.
Section 12.29 Creation of Security Interest. Notwithstanding any other provision set forth in this
Agreement, the Note, the Security Instrument or any of the other Loan Documents, Lender may at any time
create a security interest in all or any portion of its rights under this Agreement, the Note, the Security
Instrument and any other Loan Document (including, without limitation, the advances owing to it) in favor of
any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve
System.
Section 12.30 Time Of The Essence. Time shall be of the essence with respect to all of Borrower’s
obligations under this Agreement, the other Loan Documents and the Environmental Indemnity.
[NO FURTHER TEXT ON THIS PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
duly authorized representatives, all as of the day and year first above written.
LENDER:
METROPOLITAN LIFE INSURANCE COMPANY, a
New York corporation
By:___/s/ Christopher B. Wilson_____________
Name: Christopher B. Wilson
Title: Director
BORROWER:
CHSP BOSTON II LLC,
a Delaware limited liability company
By:___/s/ Graham J. Wootten__________________
Name: Graham J. Wootten
Title: Vice President
CHSP TRS BOSTON II LLC hereby joins in the Agreement for the purpose of binding itself to Sections 3.4,
4.1, 4.2, 5.1, 5.2, 6.2.1, 6.2.2, 7.1 – 7.3, 8.3, 8.4, 9.1, 9.3, 10.1, 10.2, 11.1 and 12.21 of the within Agreement
any breach of which shall constitute an Event of Default hereunder.
CHSP TRS BOSTON II LLC,
a Delaware limited liability company
By:___/s/ Graham J. Wootten__________________
Name: Graham J. Wootten
Title: Vice President
[Signature Page to Loan Agreement]
SCHEDULE 4.1.22
ORGANIZATIONAL CHART
Sch. 4.1.22 - 1
SCHEDULE 4.1.23
MATERIAL AGREEMENTS
None.
Sch. 4.1.23 - 1
EXHIBIT A
LEGAL DESCRIPTION OF PROPERTY
The real property situated in the City of Boston, County of Suffolk and Commonwealth of Massachusetts
described as follows:
The Lafayette Hotel Parcel shall consist of the following volumes of space, together with the improvements
therein, within the “Lafayette Parcel,” as defined in the Deed and Agreement from the City of Boston to
Lafayette Place Associates dated September 11, 1979, recorded with the Suffolk County Registry of Deeds in
Book 9288, Page 90 (the “Original Deed”), as amended by a First Amendment to Deed and Agreement dated
February 17, 1982, recorded with said Deeds in Book 9927, Page 265 (the “First Amendment”), by a Second
Amendment to Deed and Agreement dated June 8, 1983, recorded with said Deeds in Book 10389, Page 16 (the
“Second Amendment”), and by a Third Amendment to Deed and Agreement dated as of March 31, 1988
recorded with said Deeds in Book 22332, Page 220 (the “Third Amendment”) and Fourth Amendment to Deed
and Agreement dated as of December 30, 1998, and recorded with said Deeds in Book 23311, Page 337, (the
“Fourth Amendment,” and together with the Original Deed, the First Amendment, the Second Amendment, the
Third Amendment, and the Fourth Amendment, the “Deed and Agreement”). The real property retained by
Lafayette Place Associates in the grant by Lafayette Place Associates to Lafayette Place Hotel Associates by
Deed dated November 1, 1984, recorded with said Deeds in Book 11238, Page 226, as amended by First
Amendment to Hotel Deed dated as of March 31, 1998, recorded with said Deeds in Book 22332, Page 275; as
further amended by Second Amendment to Hotel Deed dated as of 12/30/98 and recorded with said Deeds in
Book 23285, Page 175, together with such additional real property as is designated as or made a part of the
Lafayette Retail Parcel in the Third Amendment, is hereinafter called the “Retail Facility.” The real property
retained by the City in the Deed and Agreement is hereafter called the “City Parcel,” and the parking garage
located therein is hereinafter called the “Parking Facility.”
Parcel One
Parcel One shall consist of the air rights parcel (the “Principal Hotel Parcel”) lying on and above the horizontal
planes at the several elevations above the City of Boston Base (as defined below) shown as Level +5 on Sheet 5
of the Plans (as defined in the First Amendment to Hotel Deed by and between Patriot Games, L.L.C. and
BRE/Swiss L.L.C. dated March 31, 1998 and recorded with said Deeds in Book 22332, Page 275 within the
vertical planes of the perimeter of the area bounded and described according to the Plans as follows:
Beginning on said Level +5 at the intersection of the westerly sideline of Chauncy Street and the
northeasterly sideline of Avenue de Lafayette;
thence turning and running N 33º-33’-22” E along the westerly sideline of Chauncy Street a distance of
160.00 feet;
Exh. A - 1
thence turning and running N 35º’-27’-33” E along the westerly sideline of Chauncy Street a distance of
37.15 feet;
thence turning and running N 35º-18’-40” E along the westerly sideline of Chauncy Street a distance of
1.78 feet;
thence turning and running N 56º-26’-38” W at a distance of 17.29 feet;
thence turning and running N 33º-33’-22” E a distance of 134.42 feet;
thence turning and running N 56º-26’-38” W a distance of 187.84 feet; thence turning and running S
33º-33’-22” W a distance of 95.26 feet;
thence turning and running southwesterly along a curve of radius 59.14 feet as it turns to the right a
distance of 73.81 feet;
thence turning and running S 33º-33’-22” W a distance of 28.34 feet;
thence turning and running N 56º-26’-38” W a distance of 3.31 feet;
thence turning and running S 33º-33’-22” W a distance of 33.33 feet;
thence turning and running S 56º-26’-38” E a distance of 14.50 feet;
thence turning and running S 33º-33’-22” W a distance of 120.78 feet to the northeasterly sideline of
Avenue de Lafayette;
thence turning and running S 56º-44’-33” E along the northeasterly sideline of Avenue de Lafayette a
distance of 152.34 feet to westerly sideline of Chauncy Street and the point of beginning.
Containing 55,674 +/- square feet as shown on Sheet 5 of the Plans.
Parcel Two A
Parcel Two A shall consist of the air rights parcel lying on and between (i) the horizontal planes at the several
elevations above the City of Boston Base shown as Level +1 on Sheet 1 of the Plans and (ii) the horizontal
planes at the several elevations above the City of Boston Base shown as Level +2 on Sheet 2 of the Plans, and
located within the vertical planes of the perimeter of the planes of the following area:
Beginning at a point 79.50 feet N 56º-44’-33” W of the intersection of the northerly sideline of Avenue
de Lafayette and the westerly sideline of Chauncy Street (being 69.55 feet N 56º-44’-33” W of the point
of curvature shown on said Sheet 1 of the Plans);
thence running N 56º-44’-33” W along the said northerly sideline of Avenue de Lafayette a distance of
69.51 feet;
Exh. A - 2
thence turning and running N 33º-33’-22” E a distance of 13.94 feet;
thence turning and running S 56º-26’-38” E a distance of 69.51 feet;
thence turning and running S 33º-33’-22” W a distance of 13.57 feet to the point of beginning;
Containing 956 square feet as shown on said Sheet 1.
Parcel Two C
Parcel Two C shall consist of the air rights parcel lying above and between (i) the horizontal planes at the
several elevations above the City of Boston Base shown as Level +2 on Sheet 2 of the Plans and (ii) the
horizontal planes at the several elevations above the City of Boston Base shown as Level +3 on Sheet 3 of the
Plans and located within the vertical planes of the following areas:
Beginning at a point 114.51 feet N 56º-44’-33” W of the intersection of the northerly sideline of
Avenue de Lafayette and the westerly sideline of Chauncy Street;
thence running N 56º-44’-33” W along said northerly sideline of Avenue de Lafayette a distance of
34.50 feet;
thence turning and running N 33º-33’-22” E a distance of 13.75 feet;
thence turning and running S 56º-26’-38” E a distance of 34.50 feet;
thence turning and running S 33º-33’-22” W a distance of 13.57 feet to the point of beginning.
Containing 471 square feet as shown on said Sheet 2.
Parcel Two D
Parcel Two D shall consist of the air rights parcel lying on and between (i) the horizontal planes at the several
elevations above the City of Boston Base shown as Level +3 on Sheet 3 of the Plans and (ii) the horizontal
planes at the several elevations above the City of Boston Base shown as Level +4 on Sheet 4 of the Plans, and
located within the vertical planes of the perimeter of the area bounded and described according to Sheet 3 of the
Plans as follows:
Beginning on said Level +3 at the intersection of the westerly sideline of Chauncy Street and the
northeasterly sideline of Avenue de Lafayette;
thence turning and running N 33º-33’-22” E along the westerly sideline of Chauncy Street a distance of
160.00 feet;
Exh. A - 3
thence turning and running N 35º-27’-33” E along the westerly sideline of Chauncy Street a distance of
37.15 feet;
thence turning and running N 35º-18’-40” E along the westerly sideline of Chauncy Street a distance of
1.78 feet;
thence turning and running N 56º-26’-38” W a distance of 17.29 feet;
thence turning and running N 33º- 33’-22” E a distance of 134.42 feet;
thence turning and running N 56º-26’-38” W a distance of 44.62 feet;
thence turning and running S 33º-33’-22” W a distance of 1.49 feet;
thence turning and running N 56º-26’-38” W a distance of 5.65 feet;
thence turning and running S 33º-33’-22” W a distance of 4.67 feet;
thence turning and running N 56º-26’-38” W a distance of 29.97 feet;
thence turning and running N 33º-33’-22” E a distance of 3.31 feet;
thence turning and running N 56º-26’-38” W a distance of 14.90 feet;
thence turning and running S 33º-33’-22” W a distance of 18.80 feet;
thence turning and running N 56º-26’-38” W a distance of 29.15 feet;
thence turning and running S 33º-33’-22” W a distance of 9.50 feet;
thence turning and running N 56º-26’-38” W a distance of 30.63 feet;
thence turning and running S 33º-33’-22” W a distance of 27.90 feet;
thence turning and running S 56º-26’-38” E a distance of 9 +/- feet;
thence turning and running S 33º-33’-22” W a distance of 63 +/- feet;
thence turning and running N 56º-26’-38” W a distance of 8 +/- feet;
thence turning and running southwesterly along a curve of radius 59.14 feet as it turns to the right a
distance of 31 +/- feet;
thence turning and running S 33º-33’-22” W a distance of 28.34 feet;
thence turning and running S 56º-26’-38” E a distance of 5.59 feet;
thence turning and running S 33º-33’-22” W a distance of 30.00 feet;
Exh. A - 4
thence turning and running S 56º-26’-38” E a distance of 5.58 feet;
thence turning and running S 33º-33’-22” W a distance of 123.87 feet to the northeasterly sideline of
Avenue de Lafayette;
thence turning and running S 56º-44’-33” E along the northeasterly sideline of Avenue de Lafayette a
distance of 152.34 feet to westerly sideline of Chauncy Street and the point of beginning.
Containing 49,200 +/- square feet as shown on Sheet 3 of the Plans.
Parcel Two E
Parcel Two E shall consist of the air rights parcel lying on and between (i) the horizontal planes at the several
elevations above the City of Boston Base shown as Level +4 on Sheet 4 of the Plans and (ii) the horizontal
planes at the several elevations above the City of Boston Base shown as Level +5 on Sheet 5 of the Plans, and
located within the vertical planes of the perimeter of the area bounded and described according to Sheet 4 of the
Plans as follows:
Beginning on said Level +4 at the intersection of the westerly sideline of Chauncy Street and the
northeasterly sideline of Avenue de Lafayette;
thence turning and running N 33º-33’-22” E along the westerly sideline of Chauncy Street a distance of
160.00 feet;
thence turning and running N 35º-27-33” E along the westerly sideline of Chauncy Street a distance of
37.15 feet;
thence turning and running N 35º-18’-40” E along the westerly sideline of Chauncy Street a distance of
1.78 feet;
thence turning and running N 56º-26’-38” W a distance of 17.29 feet;
thence turning and running N 33º-33’-22” E a distance of 134.43 feet;
thence turning and running N 56º-26’-38” W a distance of 197.34 feet;
thence turning and running S 33º-33’-22” W a distance of 64 +/- feet;
thence turning and running S 56º-26’-38” E a distance of 9.50 feet;
thence turning and running S 33º-33’-22” W a distance of 31 +/- feet;
thence turning and running southwesterly along a curve of radius 59.14 feet as it turns to the right a
distance of 73.81 feet;
thence turning and running S 33º-33’-22” W a distance of 28.34 feet;
Exh. A - 5
thence turning and running N 56º-26’-38” W a distance of 3.31 feet;
thence turning and running S 33º-33’-22” W a distance of 33.33 feet;
thence turning and running S 56º-26’-38” E a distance of 14.50 feet;
thence turning and running S 33º-33’-22” W a distance of 120.78 feet to the northeasterly sideline of
Avenue de Lafayette;
thence turning and running S 56º-44’-33” E along the northeasterly sideline of Avenue de Lafayette a
distance of 152.34 feet to westerly sideline of Chauncy Street and the point of beginning;
Containing 56,280 +/- square feet as shown on Sheet 4 of the Plans.
Parcel Three
Parcel Three shall consist of two parcels of space (referred to in the Hotel Deed as the “Bay Window Parcels”)
constituting certain space discontinued in Avenue de Lafayette as described in an order of the Public
Improvement Commission of the City of Boston dated March 3, 1983, recorded with the Suffolk Deeds at Book
10329, Page 185, and shown on a plan entitled City of Boston, Public Works Dept. Engineering Division
Discontinuance Plan, Avenue de Lafayette, recorded with Suffolk Deeds at Book 10329, Page 185, and
consisting of (i) the air space between the horizontal planes at elevations 68 feet and 265 feet above the City of
Boston Base and within the vertical planes of the perimeter of that certain area of 8 square feet as shown on said
plan, and (ii) the air space between the horizontal planes at elevations of 79 feet and 99.50 feet above the City
of Boston Base and within the vertical planes of the perimeter of that certain area of 60 square feet as shown on
said plan.
The term “City of Boston Base” as used in this description of premises means the vertical datum plane that is
5.65 feet below the mean sea level datum of 1929, now known as the National Geodetic Vertical Datum.
Subject to and Together with the appurtenant rights and easements described in the Deed from Lafayette Place
Associates to Lafayette Place Hotel Associates dated November 1, 1984 and recorded with Suffolk County
Registry of Deeds on November 2, 1984 in Book 11238, Page 226, as amended by First Amendment to Hotel
Deed by and between Patriot Games, L.L.C. and BRE/Swiss L.L.C. dated as of March 31, 1998, recorded with
said Deeds in Book 22332, Page 275, as further amended by Second Amendment to Hotel Deed by and between
Patriot Holding, Inc. and BRE/Swiss L.L.C. dated as of December 30, 1998 and recorded with said Deeds in
Book 23285, Page 175, together with the appurtenant rights and easements described in the Deed and
Agreement from the City of Boston and Lafayette Place Associates dated September 11, 1979 and recorded
with said Deeds in Book 9388, Page 90, as amended by First Amendment to Deed and Agreement between the
City of Boston and Lafayette Place Associates dated as of February 17, 1982 and recorded with said Deeds in
Book 9927, Page 265 and by Second Amendment to Deed and Agreement also between the City of Boston and
Lafayette Place Associates dated as of
Exh. A - 6
June 8, 1983 and recorded with said Deeds in Book 10389, Page 16 and Third Amendment to Deed and
Agreement dated March 31, 1998 and recorded with said Deeds in Book 22332, Page 220, including the use of
those parking spaces identified in Section 14 of the Third Amendment, and Fourth Amendment to Deed and
Agreement dated as of December 30, 1998 and recorded with said Deeds in Book 23311, Page 337 and together
with the appurtenant rights and easements contained in the Maintenance and Easement Agreement dated June 1,
1979 and recorded with said Deeds in Book 9288, Page 135 and filed with Suffolk County Registry District of
the Land Court as Document No. 347419, as amended by First Amendment to Maintenance and Easement
Agreement dated as of May 15, 1985 and recorded with said Deeds in Book 12099, Page 315 and filed with said
Land Court District as Document No. 398792; as further amended by Second Amendment to Maintenance and
Easement Agreement dated February 24, 1998 and recorded with said Deeds in Book 22332, Page 252 and filed
with said Land Court District as Document No. 564765, all in accordance with the terms thereof, together with
the improvements therein located over Avenue de Lafayette, Chauncy Street and Washington Street in the City
of Boston, Suffolk County, Commonwealth of Massachusetts, known and numbered as 2 Avenue de Lafayette
in said City of Boston.
Exh. A - 7
Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James L. Francis, President and Chief Executive Officer, certify that:
(1 I have reviewed this report on Form 10-Q of Chesapeake Lodging
) Trust;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
(4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(1) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(2) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(3) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(4) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons
performing the equivalent functions):
(1) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(2) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: July 29, 2016
/s/ James L. Francis
President and Chief Executive Officer
Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Douglas W. Vicari, Executive Vice President and Chief Financial Officer, certify that:
(1 I have reviewed this report on Form 10-Q of Chesapeake Lodging
) Trust;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
(4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(1) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(2) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(3) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(4) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons
performing the equivalent functions):
(1) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(2) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: July 29, 2016
/s/ Douglas W.
Vicari
Executive Vice
President and
Chief Financial
Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Chesapeake Lodging Trust (the “Trust”) on Form 10-Q for the period ended June 30, 2016,
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James L. Francis, President and Chief
Executive Officer of the Trust, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Trust.
Date: July 29, 2016
/s/ James L.
Francis
President and
Chief Executive
Officer
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Chesapeake Lodging Trust (the “Trust”) on Form 10-Q for the period ended June 30, 2016,
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Douglas W. Vicari, Executive Vice
President and Chief Financial Officer of the Trust, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Trust.
Date: July 29, 2016
/s/ Douglas W.
Vicari
Executive Vice
President and
Chief Financial
Officer