Pebblebrook Hotel Trust (PEB) risk factors, FY2024 10-K

Risks Related to Our Business and Properties

1. 01We depend on the efforts and expertise of our executive officers and would be adversely affected by the loss of their services
2. 02Our returns could be negatively impacted if the third-party management companies that operate our hotels do not manage our hotel properties effectively
3. 03Due to our exclusive focus on hotels and resorts, and our concentration in hotel investments primarily in major gateway urban and resort markets, a downturn in the lodging industry generally or regional downturns in the markets in which we operate would adversely affect our operations and financial condition
4. 04If we cannot obtain financing, our growth will be limited
5. 05Our ability to make distributions to our shareholders is subject to fluctuations in our financial performance, operating results and capital improvements requirements
6. 06We may pay taxable distributions in cash and our common shares, in which case shareholders may sell their common shares to pay tax on such distributions, placing downward pressure on the market price of our common shares
7. 07Restrictive covenants in our management contracts could preclude us from taking actions with respect to the sale or refinancing of a hotel property that would otherwise be in our best interest
8. 08We invest primarily in upper-upscale hotel properties, which, as a highly competitive sector and generally subject to greater volatility than most other lodging sectors, could negatively affect our profitability
9. 09Our TRS lessee structure subjects us to the risk of increased hotel operating expenses
10. 10Our hotels operated under franchise agreements are subject to risks arising from adverse developments with respect to the franchise brand and to costs associated with maintaining the franchise license
11. 11Our senior executive officers have broad discretion to make investments, and they may make investments where the returns are substantially below expectations or which result in net operating losses
12. 12Some of our hotels are subject to rights of first offer which may adversely affect our ability to sell those properties on favorable terms or at all
13. 13The purchase or sale of properties we put under contract may not be consummated
14. 14Our cash and cash equivalents are maintained in a limited number of financial institutions and the funds in those institutions may not be fully or federally insured
15. 15Our conflicts of interest policy may not adequately address all of the conflicts of interest that may arise with respect to our activities
16. 16Any joint venture investments that we may make in the future could be adversely affected by our lack of sole decision-making authority, our reliance on our co-venturers' financial condition and disputes between us and our co-venturers

Risks Related to Debt and Financing

1. 17Debt service obligations could adversely affect our overall operating results, may require us to sell hotel properties, may jeopardize our qualification as a REIT and could adversely affect our ability to make distributions to our shareholders and the market price of our common shares
2. 18Our existing indebtedness contains financial covenants that could limit our operations and our ability to make distributions to our shareholders
3. 19Our existing mortgage loan agreements contain, and mortgage loan agreements we may enter into in the future may contain, “cash trap” provisions that could limit our ability to make distributions to our shareholders
4. 20There is refinancing risk associated with our debt
5. 21Our mortgage loans are secured by either single property first mortgage liens or leasehold interests under the ground leases on the applicable hotel. If we default on a secured loan, the applicable lender will be able to foreclose on the property pledged to secure the loan
6. 22Acquiring outstanding debt secured by a hotel or resort property may expose us to risks of costs and delays in acquiring the underlying property

Risks Related to the Lodging Industry

1. 23Economic conditions may reduce demand for hotel properties and adversely affect hotel profitability
2. 24Our operating results and ability to make distributions to our shareholders may be adversely affected by various operating risks common to the lodging industry
3. 25Competition for acquisitions may reduce the number of properties we can acquire
4. 26The seasonality of the lodging industry may cause fluctuations in our quarterly revenues that cause us to borrow money to fund distributions to our shareholders
5. 27The cyclical nature of the lodging industry may cause the returns from our investments to be less than we expect
6. 28Capital expenditure requirements at our properties may be costly and require us to incur debt, postpone improvements, reduce distributions or otherwise adversely affect the results of our operations and the market price of our common shares
7. 29Hotel and resort development and redevelopment is subject to timing, budgeting and other risks that may adversely affect our financial condition, results of operations, the market price of our common shares and our ability to make distributions to our shareholders
8. 30The increasing use by consumers of Internet travel intermediaries and alternative lodging marketplaces may reduce our revenues
9. 31We may be adversely affected by the increased use of technology that reduces the need for business-related travel
10. 32Our hotel managers and we rely on information technology in our operations, and any material failure, inadequacy, interruption or security failure of that technology could harm our business
11. 33We are subject to risks associated with the employment of hotel personnel, particularly with hotels that employ unionized labor
12. 34There can be no assurance that climate change will not have a material adverse effect on our hotels, operating results or cash flows
13. 35Terrorist attacks or changes in terror alert levels could adversely affect travel and hotel demand
14. 36Uninsured and underinsured losses could result in a loss of capital
15. 37Our hotels may be subject to unknown or contingent liabilities which could cause us to incur substantial costs
16. 38Noncompliance with environmental laws and regulations could subject us to fines and liabilities which could adversely affect our operating results
17. 39Compliance with the Americans with Disabilities Act could require us to incur substantial costs
18. 40Our hotel properties may contain or develop harmful mold, which could lead to liability for adverse health effects and costs of remediating the problem
19. 41The nature of the operations of our hotels exposes us to the risk of claims and litigation that may arise in the normal course of business
20. 42Illiquidity of real estate investments could significantly impede our ability to sell hotels or otherwise respond to adverse changes in the performance of our hotel properties
21. 43The costs of compliance with or liabilities under environmental laws could significantly reduce our profitability

Risks Related to Our Organization and Structure

1. 44Provisions of our declaration of trust may limit the ability of a third party to acquire control of us by authorizing our board of trustees to authorize issuances of additional securities
2. 45Provisions of Maryland law may limit the ability of a third party to acquire control of us by requiring our board of trustees or shareholders to approve proposals to acquire our company or effect a change of control
3. 46The ownership limitations in our declaration of trust may restrict or prevent shareholders from engaging in certain transfers of our common shares
4. 47Our rights and the rights of our shareholders to take action against our trustees and officers are limited, which could limit shareholders' recourse in the event of actions not in their best interests
5. 48Our declaration of trust contains provisions that make removal of our trustees difficult, making it difficult for our shareholders to effect changes to our management
6. 49The ability of our board of trustees to change our major policies without the consent of shareholders may not be in our shareholders' interest
7. 50Further issuances of equity securities may be dilutive to current shareholders
8. 51Future offerings of debt securities or preferred shares, which would be senior to our common shares upon liquidation and for the purpose of distributions, may cause the market price of our common shares to decline
9. 52Holders of our outstanding preferred shares have dividend, liquidation and other rights that are senior to the rights of the holders of our common shares
10. 53The change of control conversion and redemption features of the Series E Preferred Shares, the Series F Preferred Shares, the Series G Preferred Shares and the Series H Preferred Shares may make it more difficult for a party to take over our company or discourage a party from taking over our company
11. 54If we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud. As a result, our shareholders could lose confidence in our financial results, which could harm our business and the value of our common shares
12. 55Our failure to maintain our qualification as a REIT would result in higher taxes and reduced cash available for distribution to our shareholders
13. 56We could face adverse tax consequences if LaSalle failed to qualify as a REIT prior to the merger
14. 57Complying with REIT requirements may cause us to forego otherwise attractive business opportunities or liquidate otherwise attractive investments
15. 58To maintain our qualification as a REIT and avoid corporate income tax and excise tax, we must distribute annually a certain percentage of our REIT taxable income, which could require us to raise capital on terms or sell properties at prices or at times that are unfavorable
16. 59We may pay taxable dividends partly in shares and partly in cash, in which case shareholders may sell our shares to pay tax on such dividends, placing downward pressure on the market price of our shares
17. 60Our TRS lessees increase our overall tax liability
18. 61Our ownership of our TRSs is limited and our transactions with our TRSs will cause us to be subject to a 100 percent penalty tax on certain income or deductions if those transactions are not conducted on arm's-length terms
19. 62If the leases of our hotel properties to our TRS lessees are not respected as true leases for U.S. federal income tax purposes, we would fail to qualify as a REIT and would be subject to higher taxes and have less cash available for distribution to our shareholders
20. 63If our Operating Partnership failed to qualify as a partnership for U.S. federal income tax purposes, we would cease to qualify as a REIT and would be subject to higher taxes and have less cash available for distribution to our shareholders and suffer other adverse consequences
21. 64If our TRSs fail to qualify as TRSs for U.S. federal income tax purposes or our hotel managers do not qualify as “eligible independent contractors,” we would fail to qualify as a REIT
22. 65Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends
23. 66Complying with REIT requirements may limit our ability to hedge our liabilities effectively and may cause us to incur tax liabilities
24. 67If our subsidiary REITs failed to qualify as REITs, we could be subject to higher taxes and could fail to remain qualified as REITs
25. 68The ability of our board of trustees to revoke our REIT qualification without shareholder approval may subject us to U.S. federal and state income tax and reduce distributions to our shareholders
26. 69The share ownership restrictions of the Code for REITs and the 9.8 percent share ownership limit in our declaration of trust may inhibit market activity in our shares and restrict our business combination opportunities
27. 70The prohibited transactions tax may limit our ability to engage in transactions, including dispositions of assets that would be treated as sales for U.S. federal income tax purposes
28. 71We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability, reduce the tax benefits of our REIT structure compared to non-REIT corporations, reduce our operating flexibility and reduce the market price of our shares