10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

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 001-38168

CorePoint Lodging Inc.

(Exact name of registrant as specified in its charter)

Maryland				82-1497742
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)
125 E. John Carpenter Freeway, Suite 1650
	Irving,	Texas	75062
(Address of principal executive offices, including zip code)

(972) 893-3199

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	CPLG	New York Stock Exchange

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 every Interactive Data File required to be submitted 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 such files).     Yes  ☒   No   ☐ 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ☐    No  ☒

The registrant had outstanding 58,445,063 shares of common stock as of October 29, 2021.

COREPOINT LODGING INC.

FORM 10-Q TABLE OF CONTENTS

FOR THE PERIOD ENDED SEPTEMBER 30, 2021

		Page No.
	SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	1
PART I.	FINANCIAL INFORMATION	4
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets (Unaudited)	4
	Condensed Consolidated Statements of Operations (Unaudited)	5
	Condensed Consolidated Statements of Equity (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows (Unaudited)	7
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	43
PART II.	OTHER INFORMATION	44
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	46
Signatures		47

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

    This Quarterly Report on Form 10-Q of CorePoint Lodging Inc. (together with its consolidated subsidiaries, “CorePoint,” “we,” “our,” “us,” or the “Company”) contains “forward-looking statements” within the meaning of the federal securities laws. All statements, other than statements of historical facts included in this Quarterly Report on Form 10-Q, including statements concerning our plans, objectives, goals, beliefs, business strategies, future events, business conditions, results of operations, financial position and our business outlook, business trends and other information referred to in this Quarterly Report on Form 10-Q are forward-looking statements. When used in this Quarterly Report on Form 10-Q, the words “estimates,” “expects,” “contemplates,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts,” “may,” “will,” “should,” “could,” “seek” and variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not historical facts, and are based upon our current expectations, beliefs, estimates and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond our control. Our expectations, beliefs, estimates and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs, estimates and projections will result or be achieved, and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.

There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. Such risks, uncertainties and other important factors that could cause actual results to differ include, among others, the risks, uncertainties and factors set forth under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the Securities and Exchange Commission (the “SEC”) on March 12, 2021, and our Quarterly Report on Form 10-Q, for the quarterly period ended June 30, 2021, filed with the SEC on August 6, 2021, and in this Quarterly Report on Form 10-Q as such risk factors may be updated from time to time in our periodic filings with the SEC, and are accessible on the SEC’s website at www.sec.gov, and also include the following:

•the failure to complete the transaction announced on November 8, 2021 in a timely manner or at all could negatively impact the market price of our common stock, as well as our future business and our financial condition, results of operations and cash flows;

•the duration, severity and recovery from the novel coronavirus, including variants, (“COVID-19”) pandemic, is uncertain and could continue to have negative effects on our operations, liquidity, access to capital, and compliance with the agreements governing our indebtedness;

•we could experience increased operating expenses resulting from the COVID-19 pandemic and the recovery, including costs related to suspending and then resuming operations at hotels, increased cleaning due to regulatory requirements or traveler preferences, additional health and safety supplies, furloughing, re-hiring and retaining staff, increases in customer acquisition initiatives and marketing and increases related to general inflation in labor, goods and services if the demand for such items during the recovery exceeds supply;

•our business may be materially adversely affected if COVID-19 vaccines are ineffective or cause side effects, there are delays in the distribution of the vaccines or a general lack of acceptance by consumers of the vaccine or COVID-19 variants result in a new wave of infections such that the overall economy, and the hospitality business in particular, does not fully return to profitability levels experienced prior to the pandemic or requires an extended period to reach those levels;

•we may incur hotel operating expenses in anticipation, or in advance, of revenue increases resulting in increased operating losses until revenue increases are actually realized;

•we may be unable to access certain cash to meet our business or operating objectives during lender imposed cash traps, even if our results of operations continue to improve;

•we may be unable to execute our non-core hotel disposition strategy on satisfactory terms or in a timely manner;

•we are subject to the business and financial risks inherent to the lodging industry, including without limitation, operating requirements and adverse trends and preferences in consumer and business travel which are not consistent with our current business model and other hospitality services and require significant investment in order for us to remain competitive and grow our business, any of which could reduce our profits, the value of our properties and our ability to make distributions and limit opportunities for growth;

•macroeconomic and other factors beyond our control could adversely affect and reduce lodging demand;

1

•contraction in the United States and global economy or low levels of economic growth due to COVID-19 or other macroeconomic effects, including adverse effects related to reduced conventions, sporting events, concerts, school- related and other event-driven travel could adversely affect our revenue and profitability business models as well as limit or slow our future growth;

•the geographic concentration of our hotels exposes our business to the effects of regional events and occurrences, such as the February 2021 winter storm in Texas, economies, regulations and labor and operating costs;

•our hotels operate in a highly competitive industry;

•our hotels are concentrated in the La Quinta brand and any deterioration in the quality or reputation of the La Quinta brand or our relationship with the La Quinta brand could have an adverse effect on our financial condition or results of operations;

•we are dependent on the performance of LQ Management L.L.C. (“LQM”) and other future third-party hotel managers and could be materially and adversely affected if LQM or such other third-party hotel managers do not properly manage our hotels or otherwise act in our best interests;

•if we are unable to maintain good relationships with LQM, La Quinta Franchising LLC (“LQ Franchising”) and other third-party hotel managers and franchisors, such hotel managers or franchisors may terminate our management or franchise agreements;

•provisions in our hotel franchise agreements may limit or restrict the sale of our hotels or impose brand standards that could adversely impact our ability to dispose of our hotels and adversely affect our results of operations and profitability;

•our efforts to renovate, develop or redevelop our hotels, including restorations related to property damages, could be delayed or become more expensive which could reduce profits or impair our ability to compete effectively;

•the lodging industry is subject to seasonal and cyclical volatility which may contribute to fluctuations in our financial condition and results of operations;

•severe weather, natural disasters or other events resulting in property damage, increased operating costs or disruption of hotel operations could adversely affect our results of operations and profitability;

•we are exposed to the inherent risks resulting from our investments in real estate, including the relative illiquidity of such investments, which could increase our costs, reduce our profits and limit our ability to respond to market conditions;

•cyber intrusions or data breaches or disruptions of our hotel franchisors’, managers’ or our own information technology systems could materially adversely affect our business;

•the growth of internet reservation channels could adversely affect our business and profitability;

•the growth of single family housing as a competitive alternative to traditional hospitality offerings could adversely affect our business and profitability;

•disruptions to the functioning or transition of the reservation systems, accounting systems or other technology programs, including the upgrades and resulting transitions of those systems or the deferral of system maintenance, for our hotels have in the past had, and could in the future have, an adverse effect on our business;

•disruptions to our ability to access capital at times and on terms reasonably acceptable to us may adversely affect our business and results of operations;

•a negative outcome in the results of the current or future audits by the Internal Revenue Service (“IRS”) could require us to pay additional taxes, penalties and interest, including amounts related to state filings, which could have a material adverse effect on our liquidity, or if the eventual settlement is protracted, the resulting uncertainty could increase our cost of or restrict our access to capital or prevent us from achieving our business objectives;

•stockholder activity may limit our ability to fully utilize our tax net operating loss carryforwards;

•our substantial indebtedness, upcoming maturities and compliance with terms of the agreements governing our existing indebtedness such as debt service payments, liquidity requirements and other financial requirements, as well as related covenant restrictions limiting new indebtedness, certain investments and restricted payments such as paying dividends on or repurchasing common stock, could adversely affect our financial condition, our ability to raise additional capital to fund our operations, our ability to operate our business, our ability to react to changes in the economy, our industry, our ability to pay dividends and our ability to pay our debts and could expose us to interest rate risk to the extent of our variable rate debt and divert our cash flow from operations to make debt payments;

•if we do not maintain our qualifications as a real estate investment trust for U.S. federal income tax purposes (a “REIT”), we will be taxed as a C corporation and could face a substantial tax liability; and

2

•affiliates of Blackstone Inc. (“Blackstone”) own approximately 30% of our outstanding common stock and Blackstone’s interests may conflict with ours or yours in the future.

        We caution you that the risks, uncertainties and other factors referenced above may not contain all of the risks, uncertainties and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits or outcomes that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. There can be no assurance that (i) we have correctly measured or identified all of the factors affecting our business or the extent of these factors’ likely impact, (ii) the available information with respect to these factors on which such analysis is based is complete or accurate, (iii) such analysis is correct or (iv) our strategy, which is based in part on this analysis, will be successful. All forward-looking statements in this Quarterly Report on Form 10-Q apply only as of the date made and are expressly qualified in their entirety by the cautionary statements included in this Quarterly Report on Form 10-Q. Except as required by applicable law, we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

Available Information

We electronically file annual, quarterly and current reports, proxy statements and other information with the SEC. Copies of our filings with the SEC are available on our website at www.corepoint.com as soon as reasonably practicable after they are filed with or furnished to the SEC and may also be obtained from the SEC’s website at www.sec.gov. Access to these filings is free of charge. From time to time, we may use our website as a distribution channel of material company information. You may automatically receive email alerts and other information about us when you enroll your email address by visiting the Email Alerts section at www.corepoint.com/investors. Our website and the information contained on or connected to that site are not incorporated into this Quarterly Report on Form 10-Q.

3

PART I ‑ FINANCIAL INFORMATION

Item 1.    Financial Statements

CorePoint Lodging Inc.

Condensed Consolidated Balance Sheets (Unaudited)

($ in millions, except per share amounts)

	September 30, 2021		December 31, 2020
Assets:
Real estate:
Land	$	446	$	511
Buildings and improvements	1,590		1,813
Furniture, fixtures, and other equipment	239		293
Gross operating real estate	2,275		2,617
Less accumulated depreciation	(1,018)		(1,083)
Net operating real estate	1,257		1,534
Construction in progress	2		5
Total real estate, net	1,259		1,539
Right of use assets	14		16
Cash and cash equivalents	174		143
Accounts receivable	18		13
Lender and other escrows	45		35
Other assets	18		20
Total Assets	$	1,528	$	1,766
Liabilities and Equity:
Liabilities:
Debt, net	$	537	$	810
Mandatorily redeemable preferred stock	15		15
Accounts payable and accrued expenses	63		48
Other liabilities	34		36
Total Liabilities	649		909
Commitments and contingencies
Equity:
Common stock, $0.01 par value per share; 1.0 billion shares authorized; 58.4 million and 58.0 million shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively	1		1
Additional paid-in-capital	971		963
Accumulated deficit	(95)		(109)
Noncontrolling interest	2		2
Total Equity	879		857
Total Liabilities and Equity	$	1,528	$	1,766

See Notes to Condensed Consolidated Financial Statements.

4

CorePoint Lodging Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(in millions, except per share amounts)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues:
Rooms	$	139	$	105	$	369	$	318
Other	3		2		8		7
Total Revenues	142		107		377		325
Operating Expenses:
Rooms	58		52		161		171
Other departmental and support	20		20		59		59
Property tax, insurance and other	10		14		37		45
Management and royalty fees	14		11		37		32
Corporate general and administrative	10		7		24		21
Depreciation and amortization	33		39		108		121
Gain on sales of real estate	(29)		(27)		(81)		(59)
Gain on casualty	—		(4)		(3)		(7)
Impairment loss	4		—		4		54
Total Operating Expenses	120		112		346		437
Operating income (loss)	22		(5)		31		(112)
Other Income (Expense):
Interest expense	(6)		(9)		(20)		(35)
Other income, net	1		3		3		5
Total Other Expenses	(5)		(6)		(17)		(30)
Income (loss) before income taxes	17		(11)		14		(142)
Income tax benefit	—		3		—		6
Net income (loss)	$	17	$	(8)	$	14	$	(136)
Weighted average common shares outstanding:
Weighted average common shares outstanding - basic	57.1		56.7		57.0		56.6
Weighted average common shares outstanding - diluted	61.3		56.7		61.0		56.6
Earnings (loss) per share:
Basic earnings (loss) per share	$	0.30	$	(0.14)	$	0.25	$	(2.40)
Diluted earnings (loss) per share	$	0.28	$	(0.14)	$	0.23	$	(2.40)

See Notes to Condensed Consolidated Financial Statements.

5

CorePoint Lodging Inc.

Condensed Consolidated Statements of Equity (Unaudited)

(in millions, except per share amounts)

	Common Stock			Additional Paid-in- Capital		Retained  Earnings (Accumulated Deficit)		Noncontrolling Interest		Total Equity
	Shares	Par Value
Balance as of January 1, 2020	57.2	$	1	$	954	$	80	$	2	$	1,037
Net loss	—	—		—		(21)		—		(21)
Dividends on common stock ($0.20 per share)	—	—		—		(11)		—		(11)
Equity-based compensation	0.9	—		2		—		—		2
Balance as of March 31, 2020	58.1	$	1	$	956	$	48	$	2	$	1,007
Net loss	—	—		—		(107)		—		(107)
Equity-based compensation	0.1	—		3		—		—		3
Balance as of June 30, 2020	58.2	$	1	$	959	$	(59)	$	2	$	903
Net loss	—	—		—		(8)		—		(8)
Equity-based compensation	—	—		3		—		—		3
Balance as of September 30, 2020	58.2	$	1	$	962	$	(67)	$	2	$	898
Balance as of January 1, 2021	58.0	$	1	$	963	$	(109)	$	2	$	857
Net loss	—	—		—		(31)		—		(31)
Equity-based compensation	0.6	—		4		—		—		4
Balance as of March 31, 2021	58.6	$	1	$	967	$	(140)	$	2	$	830
Net income	—	—		—		28		—		28
Equity-based compensation	—	—		2		—		—		2
Purchase of common stock	(0.1)	—		(1)		—		—		(1)
Balance as of June 30, 2021	58.5	$	1	$	968	$	(112)	$	2	$	859
Net income	—	—		—		17		—		17
Equity-based compensation	(0.1)	—		3		—		—		3
Balance as of September 30, 2021	58.4	$	1	$	971	$	(95)	$	2	$	879

See Notes to Condensed Consolidated Financial Statements.

6

CorePoint Lodging Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in millions)

	Nine Months Ended September 30,
	2021		2020
Cash flows from operating activities:
Net income (loss)	$	14	$	(136)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	108		121
Amortization of deferred costs and other assets	1		11
Gain on sales of real estate	(81)		(59)
Gain on casualty	(3)		(7)
Equity-based compensation expense	7		8
Impairment loss	4		54
Deferred tax benefit	—		(2)
Changes in assets and liabilities:
Accounts receivable	1		(6)
Other assets	10		4
Accounts payable and accrued expenses	8		(8)
Other liabilities	—		(1)
Net cash provided by (used in) operating activities	69		(21)
Cash flows from investing activities:
Capital expenditures, primarily investments in existing real estate	(13)		(18)
Lender and other escrows	(8)		(10)
Insurance proceeds related to real estate casualties	7		11
Proceeds from sales of real estate	258		205
Net cash provided by investing activities	244		188
Cash flows from financing activities:
Proceeds from debt	—		110
Repayment of debt	(273)		(164)
Debt issuance costs	(1)		(1)
Payment of insurance financing	(7)		(10)
Dividends on common stock	—		(22)
Purchase of common stock	(1)		—
Net cash used in financing activities	(282)		(87)
Increase in cash and cash equivalents and restricted cash	31		80
Cash and cash equivalents and restricted cash at the beginning of the period	143		101
Cash and cash equivalents and restricted cash at the end of the period	$	174	$	181
The following table provides a reconciliation of cash, cash equivalents and restricted cash within the condensed consolidated balance sheets to the amount shown in the condensed consolidated statements of cash flows:
Cash and cash equivalents	$	174	$	180
Restricted cash (included in other assets)	—		1
Total cash, cash equivalents and restricted cash	$	174	$	181

See Notes to Condensed Consolidated Financial Statements.

7

CorePoint Lodging Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.     Organization and Basis of Presentation

Organization and Business

    CorePoint Lodging Inc., a Maryland corporation, is a publicly traded (NYSE: CPLG) self-administered lodging real estate investment trust (“REIT”) strategically focused on the midscale and upper midscale lodging segments, with a portfolio of select-service hotels located in the United States (“U.S.”). As used herein, “CorePoint,” “we,” “us,” “our,” or the “Company” refer to CorePoint Lodging Inc. and its subsidiaries unless the context otherwise requires. As of September 30, 2021, we owned interests in 160 hotels with approximately 22,000 rooms. As of December 31, 2020, we owned interests in 209 hotels with approximately 27,800 rooms. All but one of our hotels is wholly-owned.

For U.S. federal income tax purposes, we made an election to be taxed as a REIT, effective May 31, 2018, with the filing of our U.S. federal income tax return for the year ended December 31, 2018. We believe that we are organized and operate in a REIT-qualified manner, and we intend to continue to operate as such. As a REIT, we are generally not subject to federal corporate income tax on the portion of our net income that is currently distributed to our stockholders. To maintain our REIT status, we are required to meet several requirements as provided by the Internal Revenue Code of 1986, as amended (the “Code”). These include that the Company cannot operate or manage our hotels. Therefore, we lease the hotel properties to CorePoint TRS L.L.C., our wholly-owned taxable REIT subsidiary (“CorePoint TRS”), which engages third-party eligible independent contractors to manage the hotels. CorePoint TRS is subject to federal, state and local income taxes. To maintain our REIT status, we must distribute annually at least 90% of our “REIT taxable income,” as defined by the Code, to our stockholders. We intend to continue to meet our distribution and other requirements as required by the Code.

On November 6, 2021, we entered into an agreement and plan of merger. See Note. 16 “Subsequent Events” for details.

Interim Unaudited Financial Information

    The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted from this Quarterly Report on Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The results for the interim periods shown in this report are not necessarily indicative of future financial results. The accompanying condensed consolidated financial statements have not been audited by our independent registered public accounting firm. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, including normal recurring items, necessary to present fairly our condensed consolidated financial position as of September 30, 2021 and December 31, 2020, and our condensed consolidated results of operations and cash flows for the periods ended September 30, 2021 and 2020.

    The accompanying condensed consolidated financial statements include our accounts, as well as our wholly-owned subsidiaries and any consolidated variable interest entities (“VIEs”). We recognize noncontrolling interests for the proportionate share of operations for ownership interests not held by our stockholders. All intercompany transactions have been eliminated.

Reclassification

Certain amounts previously reflected in the prior year condensed consolidated balance sheet have been reclassified to conform to our September 30, 2021 presentation. The condensed consolidated balance sheet as of December 31, 2020 reflects a line “lender and other escrows” that was previously presented within the line “other assets.” This reclassification, which was due to the significance of lender and other escrows, had no effect on the previously reported total assets.

Use of Estimates

    The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. These estimates include such items related to the accounting for: income taxes, including assessments of probabilities of realization of income tax benefits; impairment of long-lived assets, including applicable cash flow projections, holding periods and fair value evaluations; and depreciation and amortization including determination of estimated useful lives. Actual results could differ from those estimates.

8

2.     Significant Accounting Policies and Recently Issued Accounting Standards

Investment in Real Estate

    Property and equipment and other investments in real estate are stated at cost less accumulated depreciation computed using a straight-line method over the following estimated useful life of each asset. Buildings and improvements have an initial estimated useful life of five to 40 years and furniture, fixtures and other equipment have an estimated useful life of two to ten years.

We capitalize expenditures that increase the overall value of an asset or extend an asset’s life, typically associated with hotel refurbishments, renovations, and major repairs. Such costs primarily include third-party contract labor, materials, professional design and other direct costs, and during the redevelopment and renovation period, interest, real estate taxes and insurance costs. The interest, real estate taxes and insurance capitalization period begins when the activities related to the development have begun and ceases when the project is substantially complete and the assets are held available for use or occupancy. Once such a project is substantially complete and the associated assets are ready for intended use, interest, real estate taxes and insurance costs are no longer capitalized. Construction in progress primarily includes capitalized costs for ongoing projects that have not yet been put into service. Normal maintenance and repair costs are expensed as incurred.

Impairment of Real Estate Related Assets

    For our investments in real estate, we monitor events and changes in circumstances indicating that the carrying amounts of the real estate assets may not be recoverable during the expected holding period. When such events or changes are present, we assess the property’s recoverability by comparing the carrying amount of the asset to our estimate of the aggregate undiscounted future operating cash flows expected to be generated over the holding period of the asset including its eventual disposition.  If the carrying amount exceeds the aggregate undiscounted future operating cash flows, we recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property. Any such impairment is treated for accounting purposes similar to an asset acquisition at the estimated fair value, which includes establishing a new cost basis and the elimination of the asset’s accumulated depreciation and amortization.

    In evaluating our investments for impairment, we undergo continuous evaluations of property level performance and real estate trends, and management makes several estimates and assumptions, including, but not limited to, the projected date of disposition, estimated sales price and future cash flows of each property during our estimated holding period. If our analysis or assumptions regarding the projected cash flows expected to result from the use and eventual disposition of our properties change, we incur additional costs and expenses during the holding period, or our expected hold periods change, we may incur future impairment losses.

Sales of Real Estate

    We classify hotels as held for sale when the criteria are met, in accordance with GAAP.  At that time, we present the assets and obligations associated with the real estate held for sale separately in our condensed consolidated balance sheet, and we cease recording depreciation and amortization expense related to that asset.  Real estate held for sale is reported at the lower of its carrying amount or its estimated fair value less estimated costs to sell.

    Upon the disposition of a property, we recognize a gain or loss at a point in time when we determine control of the underlying asset has been transferred to the buyer. Our performance obligation is generally satisfied at the closing of the transaction. Any continuing involvement is analyzed as a separate performance obligation in the contract, and a portion of the sales price is allocated to each performance obligation. There is significant judgment applied to estimate the amount of any variable consideration identified within the sales price and assess its probability of occurrence based on current market information, historical transactions, and forecasted information that is reasonably available.

    For sales of real estate (or assets classified as held for sale), we evaluate whether the disposition is a strategic shift that will have a major effect on our operations and financial results. When a disposition represents a strategic shift that will have a major effect on our operations and financial results, it will be classified as discontinued operations in our condensed consolidated financial statements for all periods presented.  

9

Cash and Cash Equivalents

    We classify all cash on hand, demand deposits with financial institutions, and short-term highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents are stated at cost, which approximates fair market value. Our Revolver Credit Agreement requires us to maintain a minimum liquidity of cash and cash equivalents, as defined, at all times. See Note 5 “Debt” for additional information.

    We classify cash and cash equivalents as restricted cash when contractual agreements or arrangements impose restrictions on our ability to access and utilize the cash and cash equivalent amounts for our operations.

Accounts Receivable

    Accounts receivable primarily consists of receivables due from insurance settlements, hotel guests, credit card companies, our hotel manager, and hotel buyers with deferred purchase price arrangements. Our receivables are carried at estimated collectable amounts. We periodically evaluate our receivables for collectability based on expected losses incurred over the life of the receivable, considering our historical experience, the length of time receivables are past due and the financial condition of the debtor. Accounts receivable are written off when collection is not probable. We record uncollectible operating lease receipts as a direct offset to room revenues. Our insurance settlement receivables are recorded based upon the terms of our insurance policies and our estimates of insurance losses.  

Debt and Deferred Debt Issuance Costs

    Deferred debt issuance costs include costs incurred in connection with issuance of debt, including costs associated with the entry into our loan agreements and revolving credit facility, and are presented as a direct reduction from the carrying amount of debt. These debt issuance costs are deferred and amortized to expense on a straight-line basis over the term of the debt, which approximates the effective interest amortization method. This amortization expense is included as a component of interest expense. When debt is paid prior to its scheduled maturity date and the underlying terms are materially modified, the remaining carrying value of deferred debt issuance costs, along with certain other payments to lenders, is included in loss on extinguishment of debt.

Lessee Accounting

    We determine if an arrangement is a lease at inception. Our operating lease agreements are primarily for ground leases and our corporate office lease, where the asset is classified within “right of use assets” and the operating lease liability is classified within “other liabilities” in our condensed consolidated balance sheets.

    Right of use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Right of use assets and operating lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Our variable lease payments consist of payments based on a rate or index established subsequent to the lease commencement date and non-lease services related to the ground lease, primarily real estate taxes. Variable lease payments are excluded from the right of use assets and operating lease liabilities and are recognized in the period in which the obligation for those payments is incurred. As our leases do not provide an implicit rate, we use our incremental borrowing rate. Our incremental borrowing rate is based on information available at the commencement date using our actual borrowing rates commensurate with the lease terms and a fully levered borrowing. Extension options on our leases are included in our minimum lease terms when they are reasonably certain to be exercised. In our evaluation of the lease term, we consider other arrangements, primarily our debt and franchise agreements, which may have economic consequences related to failure to renew certain ground leases. For accounting purposes, such lease terms are not adjusted unless the contractual terms are modified. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. We have elected to treat rent concessions related to the COVID-19 pandemic as variable lease payments.

Fair Value Measurement

    Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. In evaluating the fair value of both financial and non-financial assets and liabilities, GAAP establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels, which are as follows:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Valuations in this category are inherently less reliable than actively

10

quoted market prices due to the degree of subjectivity involved in determining appropriate methodologies and the applicable underlying observable market assumptions. We consider contractual pricing from a hotel under contract for sale as a Level 2 input.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. These inputs cannot be validated by readily determinable market data and generally involve considerable judgment by management.

    We use the highest level of observable market data if such data is available without undue cost and effort. 

Derivative Instruments

    We use derivative instruments as part of our overall strategy to manage our exposure to market risks associated with fluctuations in interest rates. We regularly monitor the financial stability and credit standing of the counterparties to our derivative instruments. We do not enter into derivative financial instruments for trading or speculative purposes.

    We record all derivatives at fair value. On the date the derivative contract is entered into, we designate the derivative as one of the following: a hedge of a forecasted transaction or the variability of cash flows to be paid (“Cash Flow Hedge”), a hedge of the fair value of a recognized asset or liability (“Fair Value Hedge”), or an undesignated hedge instrument. As of September 30, 2021 and December 31, 2020, all of our derivative instruments were interest rate caps, and none are designated as hedge instruments. Changes in fair value of undesignated hedge instruments are recorded in current period earnings.

Revenue Recognition

    Our revenues primarily consist of operating lease revenues from room rentals, which are accounted for under GAAP in accordance with lease accounting standards. Room revenue is recognized as earned on a daily basis, net of customer incentive discounts, cash rebates, and refunds. Other lease revenues primarily include lease revenue from restaurants, billboards and cell towers, all of which are operating leases. Such leases are recognized on a straight-line basis over the term of the lease when collections are considered probable and as earned and collected when collections are not considered probable. Uncollectible lease amounts are recorded as a direct offset to revenues.

    As a lessor, our operating leases do not contain purchase options or require significant assumptions or judgments. Some of our operating leases contain extension options. For those with extension options we assess the likelihood such options will be exercised in determining the lease term.

    Customer revenues include other hotel guest revenues generated by the incidental support of hotel operations and are recognized under the revenue accounting standard as the service obligation is completed.

Purchase of Common Stock

    Purchases of common stock are recorded on the trade date at cost, including commissions and other costs, through a removal of the stated par value with the excess recorded as additional paid-in-capital.

Equity-Based Compensation

    We have a stock-based incentive award plan for our employees and directors, which primarily includes time-based and performance-based awards. We recognize the cost of services received in an equity-based payment transaction with an employee or director as services are received and record either a corresponding increase in equity or a liability, depending on whether the instruments granted satisfy the equity or liability classification criteria. Equity-based compensation cost for these equity awards is measured at the grant date and is based on the estimated fair value of the award.

    The equity-based compensation expense is recognized for awards earned or expected to be earned. Accordingly, the compensation expense for all equity awards is recognized straight-line over the vesting period of the last separately identified vesting portion of the award. Forfeitures for time-based and performance-based awards are recognized as they occur. Performance awards with market-based criteria are recorded at fair value at the date of the grant and are not adjusted based on future performance. Performance awards with criteria other than market-based are assessed at each balance sheet date with respect to the expected achievement of the target. Equity-based compensation expense is classified in corporate general and administrative expenses.

11

Earnings Per Share

    Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of our common stock outstanding plus other potentially dilutive securities, except when the effect would be anti-dilutive. Dilutive securities primarily include equity-based awards issued under long-term incentive plans.  Dilutive securities are excluded from the calculation of earnings per share for periods of net loss because the effect would be anti-dilutive.

Income Taxes

    We are organized in conformity with and operate in a manner that allows us to be taxed as a REIT for U.S. federal income tax purposes. To the extent we continue to qualify as a REIT, we generally will not be subject to U.S. federal income tax on taxable income generated by our REIT activities that we distribute to our stockholders. Accordingly, no provision for U.S. federal income tax expense has been included in our accompanying condensed consolidated financial statements for the three and nine months ended September 30, 2021 or 2020 related to our REIT operations; however, CorePoint TRS, our wholly-owned taxable REIT subsidiary, is subject to U.S. federal, state and local income taxes and we may be subject to state and local taxes. Our provision for income taxes differs from the statutory federal tax rate of 21%, due to the impact of our REIT election, recognition of valuation allowances, accelerated deductions for certain real estate expenditures and state income taxes.  We have not recognized any income tax benefit for the three and nine months ended September 30, 2021, as we believe the realization of a benefit is not more likely than not.

    We use the asset and liability method of accounting for income taxes. Under this method, current income tax expense represents the amounts expected to be reported on our income tax returns, and 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 basis. The deferred tax assets and liabilities are measured using the enacted tax rates that are expected to be applied to taxable income in the years in which those temporary differences are expected to reverse.

    In determining our tax expense or benefit for financial statement reporting purposes, we must evaluate our compliance with the Code, including the transfer pricing determinations used in establishing rental payments between the REIT and CorePoint TRS. Accounting for income taxes requires, among others, interpretation of the Code, estimated tax effects of transactions, and evaluation of probabilities of sustaining tax positions, including realization of tax benefits. We recognize a valuation allowance for income tax benefits if it is more likely than not that all or a portion of the benefit will not be realized. We recognize tax positions only after determining that the relevant tax authority would more likely than not sustain the position following the audit. We measure the amount of the tax position as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon settlement with the tax authority. Our measurement considers the amounts and probabilities of the outcomes that could be realized upon settlement using the facts, circumstances and information available at the respective balance sheet reporting date. The final resolution of those assessments may subject us to additional taxes, penalties and interest. In addition, we may incur expenses defending our positions during Internal Revenue Service (“IRS”) tax examinations, even if we are able to eventually sustain our position with the tax authorities.

Concentrations of Credit Risk and Business Risk

    We have cash and cash equivalents deposited in certain financial institutions in excess of federally insured levels. As of September 30, 2021, approximately 40% of our total cash and cash equivalents were held in accounts fully covered by FDIC insurance or money market accounts collateralized by U.S. treasuries. For our remaining cash and cash equivalent accounts, we utilize financial institutions that we consider to be of high credit quality and consider the risk of default to be minimal. We have diversified our accounts with several banking institutions in an attempt to minimize exposure to any one of these institutions. We also monitor the creditworthiness of our customers and financial institutions before extending credit or making investments.  

    Substantially all of our revenues are derived from our lodging operations at our hotels. Lodging operations are particularly sensitive to adverse economic, social and competitive conditions and trends, including the COVID-19 pandemic, which could adversely affect our business, financial condition and results of operations.

12

We have a concentration of hotels operating in Florida, Texas and California. The number of hotels and percentages of total hotels as of September 30, 2021 and 2020, and the percentages of our total revenues, from these states for the nine months ended September 30, 2021 and 2020, is as follows:

	September 30, 2021					September 30, 2020
	Number of Hotels	Percentage of Total Hotels		Percentage of Total Revenue		Number of Hotels	Percentage of Total Hotels		Percentage of Total Revenue
Florida	31	19	%	17	%	44	20	%	20	%
Texas	29	18	%	16	%	41	19	%	17	%
California	17	11	%	12	%	19	9	%	12	%
Total	77	48	%	45	%	104	48	%	49	%

Segment Reporting

    Our hotel investments have similar economic characteristics and our service offerings and delivery of services are provided in a similar manner, using the same types of facilities and similar technologies. Our chief operating decision maker reviews our financial information on an aggregated basis. As a result, we have concluded that we have one operating and reportable business segment.

Principal Components of Expenses

    As more fully explained in Note 8 “Commitments and Contingencies” our third-party management company is responsible for the day to day operations of our hotels.  For many expenses, the manager directly contracts for the services in the capacity as a principal, and we reimburse our manager in accordance with the agreements.  We present the following expense components and only classify the fee portion of expense as management and royalty fees.  We classify all amounts owed to our manager and franchisor in accounts payable and accrued expenses.

Rooms — These expenses include hotel operating expenses of housekeeping, reservation systems (per our franchise agreements), room and breakfast supplies and front desk costs.

Other departmental and support — These expenses include hotel operating expenses that constitute non-room operating expenses, including parking, telecommunications, on-site administrative labor, sales and marketing, loyalty program, recurring repairs and maintenance and utility expenses.

Property tax, insurance and other — These expenses consist primarily of real and personal property taxes, other local taxes, ground rent, equipment rent and insurance for our hotel properties.

Newly Issued Accounting Standards

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of Effects of Reference Rate Reform on Financial Reporting. The guidance provides optional expedients and exceptions related to the transition away from London Interbank Offered Rate (“LIBOR”) and other interbank offering rates to alternative reference rates. The expedients are applicable to contract modifications made and hedging relationships entered into on or before December 31, 2022. Our current debt agreements use LIBOR rates but provide for alternative rates when LIBOR is no longer available. We do not expect the adoption of this guidance to have a material impact on our consolidated financial position and results of operations.

Recently Adopted Accounting Standards

    In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The guidance enhances and simplifies various aspects of the current income tax guidance and reduces complexity by removing certain exceptions to the general framework. We adopted this guidance on January 1, 2021, and it did not have a material impact on our consolidated financial position and results of operations.

13

3.     Investments in Real Estate

During the nine months ended September 30, 2021, 49 hotels were sold for gross proceeds of $281 million resulting in a gain on sale of $81 million. During the nine months ended September 30, 2020, 50 hotels were sold for gross proceeds of $226 million resulting in a gain on sale of $59 million.

    We had a $4 million impairment loss for the three and nine months ended September 30, 2021 due to a change in the expected hold period for one of our hotel properties. We will continue to monitor events and changes in circumstances related to all of our real estate assets, including updated COVID-19 pandemic data and effects, analysis related to our operations, fair value, our holding periods and cash flow assumptions, that may indicate that the carrying amounts of our real estate assets may not be recoverable. Such changes in circumstances and analysis may result in impairment losses in future periods.

    For the nine months ended September 30, 2020, we had $54 million of impairment loss primarily due to a lower valuation of certain of our properties related to the impact of the COVID-19 pandemic on the lodging industry. We had no impairment loss for the three months ended September 30, 2020.

We experienced recent hurricane damages to certain of our hotels. We carry comprehensive property, casualty, flood and business interruption insurance that we anticipate will cover our losses at these hotels, subject to deductibles. For the nine months ended September 30, 2021, we had $3 million in involuntary conversion write-off of net book value of damaged assets, which is anticipated to be fully recoverable under our property insurance.

    As of September 30, 2021, we have not recognized any potential insurance claims related to COVID-19 pandemic losses. Given the contractual and judicial uncertainty of those claims, we cannot provide any assessment of whether such claims are realizable.     

4.     Other Assets

    The following table presents other assets as of September 30, 2021 and December 31, 2020 (in millions):

	September 30, 2021		December 31, 2020
Prepaid expenses	$	9	$	8
Intangible assets, net	4		4
Federal and state tax receivables	4		5
Other assets	1		3
Total other assets	$	18	$	20

5.     Debt

    The following table presents the carrying amount of our debt as of September 30, 2021 and December 31, 2020 (in millions):

	September 30, 2021		December 31, 2020
CMBS Facility	$	477	$	725
Revolving Facility	60		85
Total debt, net(1)	$	537	$	810

__________

(1) Unamortized debt issuance costs are not significant as of September 30, 2021 and December 31, 2020.

CMBS Facility

    Certain indirect wholly-owned subsidiaries of CorePoint Lodging Inc. (collectively, the “CorePoint CMBS Borrower”), CorePoint TRS and CorePoint Operating Partnership L.P. (“CorePoint OP”) are parties to a loan agreement (the “CMBS Loan Agreement”) providing for a mortgage loan secured primarily by mortgages for substantially all of our wholly-owned and ground leased hotels, an excess cash flow pledge for five owned and ground leased hotels and other collateral customary for mortgage loans of this type (the “CMBS Facility”).

14

The CMBS Facility currently matures on June 9, 2022, with three remaining one-year extension options, exercisable at the CorePoint CMBS Borrower’s election, provided there is no event of default existing as of the commencement of the applicable extension period and the CorePoint CMBS Borrower either extends the current interest rate cap or purchases a new interest rate cap covering the extension period at a strike price as set forth in the CMBS Loan Agreement.  No principal payments are due prior to the scheduled or extended maturity date. The CMBS Facility is pre-payable in whole or in part subject to payment of all accrued interest through the end of the applicable accrual period.

The CMBS Facility bears interest at a rate equal to the sum of an applicable margin plus one-month LIBOR. As of September 30, 2021 and December 31, 2020, one-month LIBOR was 0.08% and 0.14%, respectively. Interest is generally payable monthly. As of September 30, 2021, the weighted average applicable margin on the CMBS Facility was 3.04% and the weighted average interest rate was 3.12%. As of December 31, 2020, the weighted average applicable margin on the CMBS Facility was 2.82% and the weighted average interest rate was 2.96%. The applicable margin will increase by 15 basis points after June 2023 and an additional 10 basis points after June 2024. Additional prepayments, if any, will be applied to the lower interest bearing principal tranches, reducing total future interest expense but having the effect of increasing the applicable margin thereafter on the remaining outstanding principal balance. The applicable margins for the tranches range from 2.29% to 3.95%.

    We may obtain the release of individual properties from the CMBS Facility provided that certain conditions of the CMBS Loan Agreement are satisfied. The most restrictive of these conditions provide that after giving effect to such release the debt yield for the CMBS Facility (generally defined as hotel property operating net income before interest, depreciation and a fixed amount of corporate general and administrative expenses divided by the outstanding principal balance of the CMBS Facility, “Debt Yield”) is not less than the greater of (x) 16.44% and (y) the lesser of (i) the Debt Yield in effect immediately prior to such release and (ii) 16.94% (such result the “Release Debt Yield”). However, if such release is in connection with the sale of a property to an unrelated third party, such sold property may be released if the CorePoint CMBS Borrower prepays an amount equal to the greater of (x) the allocated portion of the outstanding CMBS Facility plus a premium ranging from 5% to 10%, as defined in the CMBS Loan Agreement, and (y) the lesser of (i) the full net proceeds from the sale of the property received by us and (ii) the amount necessary to satisfy the Release Debt Yield. Accordingly, such CMBS Loan Agreement release provisions could affect our ability to sell properties or restrict the use of sale proceeds only to (or substantially to) the required partial prepayment of the CMBS Facility. Since May 2020, substantially all net sale proceeds have been paid under the CMBS Loan Agreement as required to release the collateralized property under the CMBS Facility. During the nine months ended September 30, 2021, primarily in connection with the sale of 49 secured hotel properties, $248 million of net proceeds were used to pay down the principal of the CMBS Facility.

The CMBS Facility lender has the right to control the disbursement of hotel operating cash receipts and to establish escrow reserves for the benefit of the lender (referred to as a “CMBS Facility cash trap”). Cash and cash equivalents and lender escrows subject to the CMBS Facility cash trap are generally available for hotel operations, interest payments and certain corporate administrative expenses. Certain disbursements, primarily other corporate and general and administrative expenditures, dividends to common stockholders and repurchases of our common stock, would require consent of the CMBS Facility lender. As of September 30, 2021, the cash and cash equivalents and lender escrows subject to the CMBS Facility cash trap were $91 million and $8 million, respectively. We will be subject to the CMBS Facility cash trap until we meet the applicable debt yield requirement for two consecutive quarters or prepay the loan in an amount such that we meet the required debt yield. There can be no assurance that our future operating performance will be adequate for us to meet the requirements to be released from the CMBS Facility cash trap provisions.

    The CMBS Facility includes customary non-recourse carve-out guarantees, affirmative and negative covenants and events of default, including, among other things, guarantees for certain losses arising out of customary “bad-boy” acts of CorePoint OP and its affiliates and environmental matters (which will be recourse for environmental matters only to the CorePoint CMBS Borrower provided that the required environmental insurance is delivered to the lender), a full recourse guaranty with respect to certain bankruptcy events, restrictions on the ability of the CorePoint CMBS Borrower to incur additional debt and transfer, pledge or assign certain equity interests or its assets, and covenants requiring the CorePoint CMBS Borrower to exist as “special purpose entities,” maintain certain ongoing reserve funds and comply with other customary obligations for commercial mortgage-backed securities loan financings. As of September 30, 2021, we believe we were in compliance with these covenants.

The CorePoint CMBS Borrower has deposited in the loan servicer’s account $27 million in reserves for property improvement, environmental remediation and property insurance claims in progress and $4 million in reserves for unused property insurance deductibles, which funds may be periodically disbursed to the CorePoint CMBS Borrower throughout the term of the loan to cover such costs. These reserves are recorded in lender and other escrows.

Revolving Facility

CorePoint Lodging Inc., CorePoint Borrower L.L.C. (the “CorePoint Revolver Borrower”), CorePoint OP GP, L.L.C., and CorePoint OP are parties to a credit agreement, as amended (the “Revolver Credit Agreement”), providing for a revolving facility (the “Revolving Facility”). The CorePoint Revolver Borrower is our indirect wholly-owned subsidiary and the direct wholly-owned subsidiary of CorePoint OP. As of September 30, 2021, $60 million was outstanding under the Revolving Facility. In addition, as of September 30, 2021, there was $4 million in outstanding letters of credit issued under the Revolving Facility.

15

The Revolving Facility was amended in March 2021. In connection with the amendment, the Revolving Facility maturity was extended to May 2022 with no additional borrowings available. We made $20 million in total principal payments from June through September 2021. An additional $5 million required principal payment was made in October 2021 as our liquidity (as defined in the Revolver Credit Agreement) exceeded $100 million. The amendment also reset the interest rate to either a base rate plus a margin of 5.0% per annum or an adjusted LIBOR rate plus a margin of 6.0% per annum, an increase of 100 basis points from the prior margins. With respect to base rate loans, interest will be payable at the end of each quarter. With respect to LIBOR loans, interest will be payable at the end of the selected interest period but no less frequently than quarterly. As of September 30, 2021 and December 31, 2020, the Revolving Facility interest rate was 6.13% and 5.19%, respectively.

As of September 30, 2021 the Revolving Facility requires that we maintain a minimum liquidity of $67.5 million of cash and cash equivalents, as defined, at all times. The minimum liquidity amount will be reduced by 50% of any additional repayment amounts. The minimum liquidity requirement was reduced to $65 million of cash and cash equivalents as of October 31, 2021.

    The Revolving Facility lenders have rights to control the disbursement of our hotel operating cash receipts (referred to as the “Revolving Facility cash trap”). As of September 30, 2021, the cash and cash equivalents subject to the Revolving Facility cash trap, which is in addition to the CMBS cash trap, were $3 million. Cash and cash equivalents subject to the Revolving Facility cash trap are generally available for hotel operations, interest payments and certain corporate administrative expenses. Certain disbursements, primarily other corporate general and administrative expenditures, dividends to common stockholders and repurchases of our common stock, would require consent of our lenders. The terms of the CMBS Facility cash trap are senior to the Revolving Facility cash trap but are generally similar in scope and are not cumulative in the effect on our cash and cash equivalents. We will be subject to the Revolving Facility cash trap until we meet the applicable debt yield thresholds, which we may be unable to meet during the remainder of the term of the Revolving Facility.
    

The Revolving Facility also includes other covenants, representations and warranties customary for commercial revolver facilities. The obligations under the Revolving Facility are unconditionally and irrevocably guaranteed by CorePoint OP, CorePoint Lodging Inc. and CorePoint OP GP L.L.C. and, subject to certain exceptions, each of the CorePoint Revolver Borrower and its existing and future domestic subsidiaries that own equity interests in any CorePoint CMBS Borrower. Furthermore, CorePoint Lodging Inc., CorePoint OP GP L.L.C. and CorePoint OP each pledge certain equity interests in subsidiaries, representing substantially all of the Company’s hotel operations, as security for the obligations. As of September 30, 2021, we believe we were in compliance with these terms and covenants of the Revolver Credit Agreement.

6.     Mandatorily Redeemable Preferred Stock

    We have 15,000 shares of Cumulative Redeemable Series A Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), held by an unrelated third party. The Series A Preferred Stock has an aggregate liquidation preference of $15 million, plus any accrued and unpaid dividends thereon. The Series A Preferred Stock is senior to our common stock with respect to dividends and with respect to dissolution, liquidation or winding up of the Company. Except as described below, cash dividends on the Series A Preferred Stock are paid quarterly at a rate of 13% per annum. If our leverage ratio, as defined, exceeds 7.5 to 1.0 as of the last day of any fiscal quarter, or if an event of default occurs (or has occurred and has not been cured) with respect to the Series A Preferred Stock, we are required to pay a cash dividend on the Series A Preferred Stock equal to 15% per annum. Our dividend rate on the Series A Preferred Stock will increase to 16.5% per annum if, at any time, we are both in breach of the leverage ratio covenant and an event of default occurs (or has occurred and has not been cured) with respect to the Series A Preferred Stock. Beginning on July 1, 2020, we exceeded the 7.5 to 1.0 leverage ratio noted above, and accordingly, the Series A Preferred Stock dividend rate since then and in effect as of September 30, 2021 is at 15% per annum. Beginning on October 1, 2021, our leverage ratio was less than the 7.5 to 1.0 ratio, and accordingly, the Series A Preferred Stock dividend rate will return to 13% per annum for the fourth quarter of 2021.

    The Series A Preferred Stock is mandatorily redeemable by us in 2028, upon the tenth anniversary of the date of issuance. Beginning in 2025, upon the seventh anniversary of the issuance of the Series A Preferred Stock, we may redeem the outstanding Series A Preferred Stock for an amount equal to its aggregate liquidation preference, plus any accrued but unpaid dividends. The holders of the Series A Preferred Stock may also require us to redeem the Series A Preferred Stock upon a change of control of the Company for an amount equal to its aggregate liquidation preference plus any accrued and unpaid dividends thereon (and a premium if the change of control occurs prior to the seventh anniversary of the issuance of the Series A Preferred Stock). Due to the fact that the Series A Preferred Stock is mandatorily redeemable, the preferred shares are classified as a liability on the accompanying condensed consolidated balance sheets, and dividends on these preferred shares are classified as interest expense in the accompanying condensed consolidated statements of operations.

    Holders of Series A Preferred Stock generally have no voting rights. However, without the prior consent of the holders of a majority of the outstanding shares of Series A Preferred Stock, we are prohibited from (i) authorizing or issuing any additional shares of Series A Preferred Stock, or (ii) amending our charter or entering into, amending or altering any other agreement in any manner that would adversely affect the Series A Preferred Stock. Holders of shares of the Series A Preferred Stock have certain preemptive rights over issuances by us of any class or series of our stock ranking on parity with the Series A Preferred Stock. If we are either (a) in

16

arrears on the payment of dividends that were due on the Series A Preferred Stock on six or more quarterly dividend payment dates, whether or not such dates are consecutive, or (b) in default of our obligations to redeem the Series A Preferred Stock on the tenth anniversary of its issuance or following a change of control, the preferred stockholders may designate a representative to attend meetings of our board of directors as a non-voting observer until all unpaid Series A Preferred Stock dividends have either been paid or declared with an amount sufficient for payment set aside for payment, or the shares required to be redeemed have been redeemed, as applicable. As of September 30, 2021, neither event described above has occurred.

7.     Accounts Payable and Accrued Expenses and Other Liabilities

    Accounts payable, accrued expenses and other liabilities include the following as of September 30, 2021 and December 31, 2020 (in millions):

	September 30, 2021		December 31, 2020
Real estate taxes	$	17	$	17
Due to hotel manager	8		7
Sales and occupancy taxes	5		3
Other accounts payable and accrued expenses	33		21
Total accounts payable and accrued expenses	$	63	$	48
Operating lease liabilities	$	18	$	20
Insurance financing	3		2
Below market leases, net	2		3
Other liabilities	11		11
Total other liabilities	$	34	$	36

8.     Commitments and Contingencies

Hotel Management and Franchise Agreements

Management Fees

    On May 30, 2018, we entered into separate hotel management agreements for each of our hotels with LQ Management L.L.C. (“LQM”), whereby we pay a fee equal to 5% of total gross revenues, as defined therein. The term of the management agreements is through May 30, 2038, subject to two renewals of five years each, at LQM’s option. There are penalties for early termination in connection with property sales, currently calculated at approximately 3 times the trailing twelve month management fee of the sold property. Management termination fees are deducted in the determination of our gain on sale of real estate assets. For both three month periods ended September 30, 2021 and 2020, management termination fees were $4 million. For the nine month periods ended September 30, 2021 and 2020, our management termination fees were $11 million and $10 million, respectively.

    LQM generally has sole responsibility for all activities necessary for the operation of our hotels, including establishing room rates, processing reservations and promoting and publicizing the hotels. LQM also provides all employees for the hotels, prepares reports, budgets and projections, and provides other administrative and accounting support services to the hotels. We have consultative and limited approval rights with respect to certain actions of LQM, including entering into long-term or high value contracts, engaging in certain actions relating to legal proceedings, approving the operating budget, making certain capital expenditures and the hiring of certain management personnel. We are also responsible for reimbursing LQM for certain costs incurred by LQM during the fulfillment of their duties, such as payroll costs for certain of their employees, general and workers’ compensation liability insurance and other costs that the manager incurs to operate the hotels.

For the three months ended September 30, 2021 and 2020, our management fee expense was $7 million and $6 million, respectively. For the nine months ended September 30, 2021 and 2020, our management fee expense was $18 million and $16 million, respectively.

Royalty Fees

    On May 30, 2018, we entered into separate hotel franchise agreements for each of our hotels with La Quinta Franchising LLC (“LQ Franchising”). Pursuant to the franchise agreements, we were granted a limited, non-exclusive license to use our franchisor’s brand names, marks and system in the operation of our hotels. The franchisor also may provide us with a variety of services and

17

benefits, including centralized reservation systems, participation in customer loyalty programs, national advertising, marketing programs and publicity designed to increase brand awareness, as well as training of personnel. In return, we are required to operate franchised hotels consistent with the applicable brand standards.

    Our franchise agreements require that we pay a 5% royalty fee on gross room revenue. There are penalties for early termination. For the three months ended September 30, 2021 and 2020, our royalty fee expense was $7 million and $5 million, respectively. For the nine months ended September 30, 2021 and 2020, our royalty fee expense was $19 million and $16 million, respectively.

    In addition to the royalty fee, the franchise agreements include a reservation fee of 2% of gross room revenues, a marketing fee of 2.5% of gross room revenues, a loyalty program fee of 5% of eligible room night revenues, and other miscellaneous ancillary fees.  Reservation fees are included within rooms expense and the marketing fee and loyalty program fees are included within other departmental and support in the accompanying condensed consolidated statements of operations.

The term of the franchise agreement is through May 30, 2038, subject to one renewal of ten years, at our option, subject to certain conditions. There are penalties for early termination. Liquidated damages under the franchise agreements are currently calculated as approximately 7.5 times the trailing twelve month royalty fee, marketing fee and reservation fee of the identified property.

    Our requirement to meet certain brand standards imposed by our franchisor includes requirements that we incur certain capital expenditures, generally ranging from $1,500 to $7,500 per hotel room (with various specific amounts within this range being applicable to different groups of our hotels) during a prescribed period generally ranging from two to eleven years. These amounts are over and above the capital expenditures we are required to make each year for recurring furniture, fixtures and equipment maintenance.  However, these amounts that we are required to spend are subject to reduction, in varying degrees, by the amount of capital expenditures made for hotels in the applicable group over and above the capital expenditures required for the recurring maintenance in one or more years before receipt of the franchisor’s notice. The initial period during which the franchisor can notify us that we must make these capital expenditures is through 2028. At the franchisor’s discretion, subject to the franchise agreement provisions governing when such requirements may be imposed, the franchisor may provide a notice obligating us to meet those capital expenditure requirements generally within two to nine years of the notice. We expect to meet these requirements primarily through the ongoing capital expenditure program as provided in our franchise agreements. As of September 30, 2021, $15 million was held in lender escrows that can be used to fund these requirements.

On November 4, 2021 we entered into a letter agreement with LQM and LQ Franchising pursuant to which certain hotel management agreements would be terminated upon the closing of the proposed merger. See Note. 16 “Subsequent Events” for details.

Litigation

    We are a party to a number of pending claims and lawsuits arising in the normal course of business. We do not consider our ultimate liability with respect to any such claims or lawsuits, or the aggregate of such claims and lawsuits, to be material in relation to our condensed consolidated financial condition, results of operations or our cash flows taken as a whole.

    We maintain property and other liability insurance; however, certain losses or defense costs are within the retention or insurance deductible amount and are not covered by or are only partially covered by insurance policies. We regularly evaluate our ultimate liability costs with respect to such claims and lawsuits. We accrue costs from litigation as they become probable and estimable.

Tax Contingencies

    We are subject to regular audits by federal and state tax authorities, which may result in additional tax liabilities. In 2018, La Quinta Holdings Inc. completed the distribution to its stockholders of all the then-outstanding shares of common stock of CorePoint Lodging Inc. following which we became an independent, self-administered, publicly traded company (the “Spin-Off”). Subsequently, La Quinta Holdings Inc. merged with Wyndham Hotels & Resorts, Inc. (“Wyndham”). Entities in existence prior to the Spin-Off, most of which are our wholly-owned subsidiaries but certain entities are wholly-owned by Wyndham, are currently under audit by the Internal Revenue Service (the “IRS”) for tax years ended December 31, 2010 to 2013.

    In 2014, the IRS commenced a tax audit, primarily related to transfer pricing for internal rents charged by our prior REIT. Subsequently, we have supplied information to the IRS supporting our position. In November 2019, the IRS issued notices of proposed adjustments (“NOPA”, also known as a 30-Day Letter) proposing a redetermined rent adjustment resulting in approximately $138 million of additional federal taxes, attributable to tax years 2010 and 2011, exclusive of penalties and interest. Additionally, the November 2019 NOPA proposed an adjustment resulting in the loss of tax operating loss carryforwards generated in tax years 2006 through 2009. We have agreed to indemnify Wyndham for any obligations and expenses arising from these IRS audits, including the

18

legal and accounting defense expenses. The adjustment to the tax operating loss carryforwards, measured at the tax rates enacted during the year of utilization and exclusive of penalties and interest, is $31 million.

We and the IRS have respectively corresponded in disagreement with the other’s positions. The audit was transferred to the IRS Appeals office in 2020 and in April 2021, we and the IRS exam team met with the IRS Appeals office and each side presented their case. No resolution was achieved during the review by IRS Appeals, and in July 2021, we requested the matter to be heard in post-IRS Appeals mediation. The IRS, however, declined the request for mediation. The statute of limitations with respect to the IRS audit was extended to June 30, 2022.

    Based on our review of the tax matters and communications by the IRS, including their presentation to the IRS Appeals office, we concluded as of September 30, 2021 that the positions reported on our tax returns under audit by the IRS are, based on their technical merits, more likely than not to be sustained upon conclusion of the examination, including proceedings in mediation, settlement or tax court. Accordingly, as of September 30, 2021, we have not established any reserves related to this proposed adjustment or any other issues reflected on the returns under examination. If, however, we are unsuccessful in challenging the IRS, an excise tax and/or additional taxes would be imposed on the REIT, or its taxable REIT subsidiary, related to the excess rent, and we would be responsible for additional income taxes, interest and penalties, which could adversely affect our financial condition, results of operations and cash flows and the trading price of our common stock. Such adjustments could also give rise to additional state income taxes; however, as of September 30, 2021, no states have audited or commenced an audit for the periods related to the IRS audit. Such amounts would be in addition to expenses we may incur to defend our positions with the IRS, including legal costs, should the matter be resolved in tax court.

On November 5, 2021, we received a settlement offer from the IRS with respect to the IRS audit. See Note. 16 “Subsequent Events” for details.

Purchase Commitments

    As of September 30, 2021, we had approximately $12 million of purchase commitments related to certain continuing redevelopment and renovation projects and other hotel service contracts in the ordinary course of business. Approximately $8 million of this amount relates to long-term hotel service contracts payable over approximately three years.

Lease Commitments

    As a lessee, our lessee arrangements are primarily for ground leases at certain of our hotels. These ground leases generally include base rents, which may be reset based on inflation indexes or pre-established increases, contingent rents based upon the respective hotel’s revenues, and reimbursement or primary responsibility for related real estate taxes and insurance expenses. The initial base terms for the leases are generally in excess of 25 years, with initial term maturities occurring between 2022 and 2096. As of September 30, 2021, the weighted average remaining lease term is 33 years and the weighted-average discount rate related to these leases was 8.82%. Many of these arrangements also contain renewal options at the conclusion of the initial lease term, generally at fair value or pre-set amounts.  Our other leases primarily relate to our corporate office.

Rent expense was not significant for the three and nine months ended September 30, 2021 or 2020. Contractual annual rent expense is less than $3 million for each of the next five years. Differences between amounts expensed and cash paid were not significant. Rent expense is included in property tax, insurance and other expenses in our condensed consolidated statements of operations.

9.     Equity

    Our board of directors has authorized a $50 million share repurchase program, with $21 million remaining available as of September 30, 2021.  Under the share repurchase program, we may purchase common stock in the open market, in privately negotiated transactions or in such other manner as determined by us, including through repurchase plans complying with the rules and regulations of the SEC. The share repurchase program does not obligate us to repurchase any dollar amount or number of shares of common stock and the program may be suspended or discontinued at any time. Our Revolver Credit Agreement restricts us from making any purchases under the share repurchase program at this time. Accordingly, we have temporarily suspended purchases under the share repurchase program and no shares were acquired under the plan in 2020 or 2021. Such restrictions do not apply to share settlements for our equity-based stock compensation plans and we do purchase shares to satisfy tax withholding obligations incurred upon the vesting of equity-based stock awards to our employees under our 2018 Omnibus Incentive Plan.

    The Revolver Credit Agreement also restricts our ability to pay cash dividends on our common stock unless required to meet REIT federal income tax requirements.

19

10.     Revenues

    Revenues for the three and nine months ended September 30, 2021 and 2020 are comprised of the following components (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Operating lease revenues:
Rooms	$	139	$	105	$	369	$	318
Other	1		1		3		3
Total lease revenues	140		106		372		321
Customer revenues	2		1		5		4
Total revenues	$	142	$	107	$	377	$	325

    Other operating lease revenues primarily include lease arrangements for restaurants, billboards and cell towers. Customer revenues, which are classified within other revenues in the accompanying consolidated statements of operations, generally relate to amounts generated by the incidental support of the hotel operations, including service fees, parking and food. For each of the three and nine months ended September 30, 2021 and 2020, we did not have a significant amount of variable lease revenue.

11.    Earnings per Share

    The following table sets forth the calculation of basic and diluted net income (loss) per common share for the three and nine months ended September 30, 2021 and 2020 (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Numerator:
Net income (loss)	$	17	$	(8)	$	14	$	(136)
Denominator:
Weighted average common shares - basic	57.1		56.7		57.0		56.6
Effect of dilutive securities (1)	4.2		—		4.0		—
Weighted average common shares - diluted	61.3		56.7		61.0		56.6
Basic net income (loss) per share	$	0.30	$	(0.14)	$	0.25	$	(2.40)
Diluted net income (loss) per share	$	0.28	$	(0.14)	$	0.23	$	(2.40)

__________

(1) Dilutive securities primarily include equity-based compensation and are excluded from the calculation of earnings per share for periods of net loss because the effect would be anti-dilutive.

12.     Equity-Based Compensation

    Our 2018 Omnibus Incentive Plan (the “Plan”) authorizes the grant of restricted stock awards (“RSAs”), restricted stock units (“RSUs”), Performance Stock Units (“PSUs”), non-qualified and incentive stock options, dividend equivalents, and other stock-based awards. Approximately eight million shares of common stock have been authorized for issuance under the Plan and approximately five million shares of common stock were available for issuance as of September 30, 2021.

    The RSAs and RSUs are time-based and are not subject to future performance targets. The RSAs generally vest over one to three years. The RSUs generally vest over one to two years, with certain RSUs vesting immediately upon grant. RSAs and RSUs are initially recorded at the market price of our common stock at the time of the grant. The PSUs are subject to performance-based vesting, where the earned award is based on the achievement of established performance criteria, generally over two to three years. As of September 30, 2021, performance criteria related to relative and absolute total shareholder returns, as defined, are treated as market-based conditions and are recorded at the fair value of the award using a Monte Carlo simulation valuation model. The remaining PSUs are treated as non-market based and are recorded at fair value based on the period end assessment of achieving the performance criteria. The actual number of shares of common stock issued could range from zero shares to 175% of the number of PSUs granted. RSAs, RSUs and PSUs are subject to accelerated vesting in the event of certain defined events, including change of control events. For

20

each of the three month periods ended September 30, 2021 and 2020, we recognized $2 million and $3 million, respectively, of equity-based compensation expense. For each of the nine month periods ended September 30, 2021 and 2020, we recognized $7 million and $8 million, respectively, of equity-based compensation expense.

    The following tables summarize the activity of our RSAs, RSUs, and PSUs during the nine months ended September 30, 2021 and 2020:

	RSAs			PSUs			RSUs
	Number of Shares	Weighted-Average Grant Date Fair Value		Number of Units	Weighted-Average Grant Date Fair Value		Number of Units	Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2021	1,031,482	$	11.09	1,348,451	$	5.85	290,443	$	4.52
Granted	560,444	$	8.61	573,895	$	9.62	123,033	$	10.29
Converted	(180,072)	$	23.66	(185,171)	$	6.57	—	$	—
Forfeited	(87,082)	$	7.72	(80,958)	$	7.07	—	$	—
Outstanding at September 30, 2021 (1)	1,324,772	$	8.55	1,656,217	$	7.02	413,476	$	6.24

__________

(1) As of September 30, 2021, no outstanding RSAs or PSUs were vested, and 328,213 outstanding RSUs were vested.

	RSAs			PSUs			RSUs
	Number of Shares	Weighted-Average Grant Date Fair Value		Number of Units	Weighted-Average Grant Date Fair Value		Number of Units	Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2020	653,790	$	20.30	368,969	$	6.99	5,072	$	6.05
Granted	919,106	$	3.88	979,482	$	5.42	268,484	$	4.32
Converted	(80,097)	$	14.63	—	$	—	(4,787)	$	6.06
Outstanding at September 30, 2020 (1)	1,492,799	$	10.49	1,348,451	$	5.85	268,769	$	4.32

__________

(1) As of September 30, 2020, no outstanding RSAs and PSUs were vested. As of September 30, 2020, 64,738 outstanding RSUs were vested.

    RSAs are included in amounts for issued and outstanding common stock but are excluded in the computation of basic earnings (loss) per share.

13.     Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

    We use interest rate cap arrangements with financial institutions to manage our exposure to interest rate changes for our loans that utilize floating interest rates. As of September 30, 2021, we had an interest rate cap with an aggregate notional value of $640 million, a strike rate of 0.75% and a fair value and net book value of less than $1 million. The interest rate cap terminates in June 2022.

Financial Instruments Not Reported at Fair Value    

    For those financial instruments not carried at fair value, the carrying amount and estimated fair values of our financial assets and liabilities were as follows as of September 30, 2021 and December 31, 2020 (in millions):

	September 30, 2021				December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Debt - CMBS Facility(1)(2)	$	477	$	477	$	725	$	705
Debt - Revolving Facility(1)(2)	$	60	$	60	$	85	$	84
Mandatorily redeemable preferred stock(1)	$	15	$	16	$	15	$	15

 ____________________

(1)Classified as Level 3 under the fair value hierarchy.

(2)Unamortized debt issuance costs are not significant as of September 30, 2021 and December 31, 2020.

21

    We estimate the fair value of our debt and mandatorily redeemable preferred stock by using risk adjusted discounted cash flow analysis and current market inputs for similar types of arrangements, including prepayment terms that are at our option. Fluctuations in these assumptions, including changes in market assessments related to the COVID-19 pandemic financial effects, may result in different estimates of fair value.

    We believe the carrying amounts of our cash and cash equivalents, accounts receivable, lender and other escrows, and other liabilities approximate fair value as of September 30, 2021 and December 31, 2020, due to their short-term nature.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

    During 2020, we recorded non-cash impairment losses related to lower valuation of certain of our properties due to the ongoing impact of the COVID-19 pandemic on the lodging industry and final disposal costs related to a property previously impaired in 2019. Our process to estimate the fair value of an asset involves using the sales price of an executed sales agreement, which would be considered a Level 2 assumption within the fair value hierarchy. To the extent that this type of third-party information is unavailable, we estimate revenue multiples that we believe would be used by a third-party market participant in estimating the fair value of an asset. This is considered a Level 3 assumption within the fair value hierarchy.

The following table summarizes the assets which were measured at fair value on a nonrecurring basis and impaired during the nine months ended September 30, 2021 and the year ended December 31, 2020 (in millions): 

			Basis of Fair Value Measurements
	Fair Value of Assets at Impairment		Quoted Prices in Active Market for Identical Items (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3) (1)		Total Losses
For the nine months ended September 30, 2021
Real estate and right of use asset (2)	$	—	N/A	N/A		$	—	$	4
For the year ended December 31, 2020
Real estate (3)	$	310	N/A	$	7	$	303	$	52

 ____________________

(1)     For the year ended December 31, 2020, the Level 3 unobservable inputs consist of internally developed cash flow models and fair value estimates that included projections of revenues, expenses and capital expenditures and market valuations based on multiples of revenue generally ranging from 2.0x to 3.0x. These assumptions were based on trends and comparable transactions in the lodging industry; our historical data and experience; our budgets, including those prepared by our third-party hotel manager; lodging industry valuation trends; and micro- and macro-economic trends and projections. Our estimated fair values also considered factors related to our franchise and management agreements, requirements to meet certain brand standards and other potential costs to be incurred during our projected holding period.

(2)    The fair value of a right of use asset associated with a ground lease and the associated real estate was determined to be zero as of September 30, 2021, which resulted in an impairment loss of $4 million.

(3)    The fair value of impaired real estate assets was $310 million as of the June 30, 2020 impairment date. The carrying value of these real estate assets was $267 million as of December 31, 2020. The change in fair value from June 30, 2020 to the December 31, 2020 carrying value relates to $14 million of depreciation expense and $29 million due to sales of assets subsequent to the impairment date.

14.    Related Party Transactions

    As of September 30, 2021, affiliates of Blackstone Inc. (“Blackstone”) beneficially owned approximately 30% of our outstanding shares of common stock and held horizontal risk retention certificates issued by the trust that holds our CMBS Facility indebtedness (“Class HRR Certificates”). As of both September 30, 2021 and December 31, 2020, the portion of our CMBS Facility outstanding balance that correlates to the Class HRR Certificates was $79 million. Total interest payments made to an affiliate of Blackstone as a holder of such Class HRR Certificates for each of the three month periods ended September 30, 2021 and 2020 were $1 million. Total interest payments made to an affiliate of Blackstone as a holder of such Class HRR Certificates for the nine month periods ended September 30, 2021 and 2020 were $2 million and $3 million, respectively.

22

15.     Supplemental Disclosures of Cash Flow Information

    The following table presents the supplemental cash flow information for the nine months ended September 30, 2021 and 2020 (in millions):

	Nine Months Ended September 30,
	2021		2020
Supplemental disclosure of cash flow information:
Interest paid during the period	$	20	$	29
Income taxes paid during the period, net of refunds	$	—	$	1
Non-cash investing and financing activities:
Capital expenditures included in accounts payable and accrued expenses	$	2	$	1
Insurance casualty receivable related to real estate and accounts payable	$	8	$	—
Financing of insurance	$	9	$	11

16.     Subsequent Events

    Subsequent to September 30, 2021, we sold five operating hotels with approximately 600 rooms for a gross sales price of $36 million, recognizing an estimated gain on sale of approximately $11 million. As of September 30, 2021, none of these hotels were classified as assets held for sale because the assets did not meet the accounting criteria established for such classification. We used $32 million of the net sales proceeds to pay down the principal on the CMBS Facility.

On November 6, 2021, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Cavalier Acquisition JV LP, a Delaware limited partnership (“Parent”), and Cavalier Acquisition Owner LP, a Delaware limited partnership and a wholly-owned subsidiary of Parent (“Merger Sub”). On the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the merger (the “Effective Time”), and as a result of the merger, each share of our common stock that is issued and outstanding immediately prior to the Effective Time will be converted into the right to receive $15.65 in cash plus, if applicable, incremental cash consideration per share in certain circumstances if we timely resolve the previously disclosed tax proceedings as discussed under Tax Contingencies in Note 8. “Commitment and Contingencies” (the “IRS Matter”). The payment of any such additional cash consideration is dependent on our entry into a definitive closing agreement with the IRS prior to the closing of the merger. The amount of such potential additional cash consideration, if any, payable to holders of our common stock is determined based on the amount, if any, by which the settlement amount with respect to the IRS Matter (including any penalties and accrued interest with respect thereto) is less than $160 million.

We received a settlement offer from the IRS with respect to the IRS Matter on November 5, 2021, and expect to accept such offer and enter into a definitive closing agreement with the IRS, which would provide for total payments by us of approximately $89.6 million plus statutory interest through the date of payment. Pursuant to this settlement offer, we estimate the total payment amount pursuant to the settlement will be approximately $155 million. As such, we currently expect that the amount of any such additional consideration will likely be approximately $0.10 per share. There can be no assurances that any additional consideration will be received by the holders of our common stock. Our entry into any IRS settlement is not a condition to the closing of the merger. This potential incremental consideration related to settling the IRS Matter is a change to the facts and circumstances in connection with our evaluation of our tax positions. In accordance with GAAP, recognition and measurement that results from this new information, if any, will be accounted for in our fourth quarter, the period in which the new information was received.

In addition, on November 4, 2021 we entered into a letter agreement with LQM and LQ Franchising pursuant to which certain hotel management agreements would be terminated upon the closing of the proposed merger. Pursuant to the agreement, we will make certain termination payments, expense reimbursements and other amounts of approximately $84 million, in the aggregate, payable in connection with the closing of the proposed merger.

The merger and related transactions are subject to customary closing conditions. There can be no assurance that the merger and related transactions will be completed on the terms or timeline currently contemplated or at all.

23

Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

    This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help provide an understanding of our business and results of operations. This MD&A should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This report, including the following MD&A, contains forward-looking statements regarding future events or trends that should be read in conjunction with the factors described under “Special Note Regarding Forward-Looking Statements” above in this Quarterly Report on Form 10-Q and “Risk Factors” in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (“Annual Report on Form 10-K”). Actual results may differ materially from those projected in such statements as a result of the factors described under “Special Note Regarding Forward-Looking Statements” and in “Risk Factors” in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K.

Overview

Our Business

    CorePoint is a leading owner in the midscale and upper midscale select-service hotel segments, primarily under the La Quinta brand. Our portfolio, as of September 30, 2021, consisted of 160 hotels representing approximately 22,000 rooms across 29 states in locations in or near employment centers, airports, and major travel thoroughfares. Approximately 45% of our revenue is derived from our hotels located in Florida, Texas and California and approximately 17% from the state of Florida alone. These hotels are currently experiencing consistently higher levels of recovery from the COVID-19 pandemic disruptions than most full-service hotels, largely attributable to “drive to destination-oriented” leisure travelers. Based on local economies, we expect these regions to continue to have improved travel demand, which would positively affect our operations; however, until business travel returns to pre-pandemic levels, we do not expect to consistently achieve 2019 operating results for our Comparable Hotels. All but one of our hotels is wholly-owned. We primarily derive our revenues from our select-service hotel operations, with approximately 98% of our revenues derived from daily room rentals.

    Generally, our hotels include the land, related easements and rights, buildings, improvements, furniture, fixtures and equipment. As of September 30, 2021, we have 13 hotels located on land leased by us pursuant to ground leases with third parties.

Proposed Transaction

On November 6, 2021, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Cavalier Acquisition JV LP, a Delaware limited partnership (“Parent”), and Cavalier Acquisition Owner LP, a Delaware limited partnership and a wholly-owned subsidiary of Parent (“Merger Sub”), pursuant to which, on the terms and subject to the conditions set forth in the Merger Agreement, we will merge with and into Merger Sub (the “Merger”), with Merger Sub continuing as the surviving entity in the Merger as a wholly-owned subsidiary of Parent. Our board of directors has approved the Merger Agreement and the transactions contemplated thereby, including the Merger.

The Merger is subject to customary closing conditions. There can be no assurance that the transaction will be completed on the terms or timeline currently contemplated or at all. If the Merger is not completed, we would continue to focus on our previously stated business strategies for the upcoming year. The discussions below in Management’s Discussion and Analysis of Financial Condition and Results of Operations do not include any effect of a transaction. See Note 16 “Subsequent Events” to our condensed consolidated financial statements included elsewhere in this report and “Item, 1A. Risk Factors—The failure to complete the transaction announced on November 8, 2021 in a timely manner or at all could negatively impact the market price of our common stock, as well as our future business and our financial condition, results of operations and cash flows” for additional detail.

Impact of the COVID-19 Pandemic

Update

Due to reduced COVID-19 infection rates in the U.S. and overall favorable trends in the economy, we have observed an increase in travel demand throughout most of our hotel portfolio. This has resulted in improvements during the third quarter of 2021 in our revenues, Hotel Adjusted EBITDAre (see “Non-GAAP Financial Measures” discussed below) and financial position, particularly related to liquidity and debt leverage, both on a sequential basis, as compared to the second quarter of 2021, as well as over the comparable period in 2020.

During the COVID-19 pandemic, we believe our hotel portfolio generally performed better than the lodging industry as a whole, primarily in comparison to full service hotels in urban or resort destination areas, and specifically as a result of the following portfolio characteristics: (1) our select-service business model; (2) our predominant focus on the midscale and upper midscale chain scales; (3) location in suburban market locations, with a concentration in sunbelt states near multiple demand generators and stronger local economies; and (4) leisure travel and transient focus. We also believe our portfolio characteristics positioned us to benefit from

24

pent-up travel demand. If travelers continue to be more comfortable traveling and if businesses and travel destinations continue to re-open, we expect continued improvements in our operations. We have experienced a faster recovery in leisure travel. For the nine months ended September 30, 2021, our Friday and Saturday occupancy, which is generally more attributable to leisure travelers, was 70%, while our weekday occupancy, which is generally more attributable to business travelers, was approximately 56%. For our most recent quarter, the three months ended September 30, 2021, the trend toward leisure travel was similar as our Friday and Saturday occupancy was approximately 73%, while our weekday occupancy was approximately 60%. As the economy recovers, more businesses open and convention and related activity resumes, we expect increases in business travel, although with the potential for delays in the recovery due to COVID-19 variants or other reasons.

Operating Results

During March 2021, we reached the one year anniversary of COVID-19 being declared a global pandemic by the World Health Organization. The first quarter of 2020 had less than one month of the full impact of the operational disruptions due to the COVID-19 pandemic. Accordingly, we are monitoring our progress compared to the similar periods in 2020 and in 2019, the last full year of pre-COVID-19 pandemic operations.

Room revenues for the third quarter of 2021 were approximately 3% higher than the second quarter of 2021 and approximately 32% higher than the third quarter of 2020, primarily driven by increased consumer demand and higher room rates. These increases were despite dispositions of certain of our non-core hotels, as described below. On a Comparable Hotel basis, revenues were up approximately 69% for the third quarter of 2021 compared to the third quarter of 2020. Our Comparable Hotel occupancy and RevPAR are illustrated in the charts and the graph below.

2021 to 2020 to 2019 Comparison -Comparable Hotel Occupancy %

2021 to 2020 to 2019 Comparison -Comparable Hotel RevPAR

25

2021 -Monthly Comparable Hotel RevPAR Percentage Change from 2020 and 2019

Subsequent to the first quarter of 2021, we have exceeded 2020 operating levels for all periods and have narrowed the variance between 2021 and 2019 performance. In the first quarter of 2021, our Comparable Hotel RevPAR deficit to the same period in 2019 was $30. Since the first quarter of 2021, that variance has been reduced to $11 in the second quarter and to only $4 in the third quarter. During July 2021, Comparable Hotel RevPAR performance for the month exceeded July 2019. Since then, monthly 2021 Comparable Hotel RevPAR has been 90% to 93% of 2019 Comparable Hotel RevPAR, with our October 2021 Comparable Hotel RevPAR at 93% of October 2019 Comparable Hotel RevPAR. We note that the number of Comparable Hotels in October was reduced to reflect the October 2021 sale of four hotels. We believe these results are primarily driven by leisure travelers, with a slight reduction toward the end of summer due to the termination of COVID-19 stimulus payments, back to school shifts in travel and the weakening effects of the COVID-19 pandemic on overall travel, and, in particular, business, group and convention travel.

Cost Management

In response to the COVID-19 pandemic, along with our hotel manager, we put in place a number of actions to reduce portions of our operating expenses, primarily related to hotel labor, supplies and maintenance. These cost saving measures primarily began in April 2020 and have substantially continued into 2021. The most significant of these actions were the suspension of buffet- style breakfast services, reduced hotel and housekeeping labor and deferred non-health or safety maintenance and capital expenditures. These expense savings were marginally offset by additional cleaning expenses and supplies and costs of furloughing and rehiring hotel employees.

These expense controls have continued; however, as occupancy demand continues to improve, we have and will continue to restore some of the expenses related to the underlying cost controls. In particular, we expect to have increased hotel labor, particularly housekeeping staff, as our hotel manager initiated new incentive programs in June 2021 to recruit and retain staff. Additionally, grab-and-go breakfast options are now offered at most of our hotels. A full resumption of buffet-style breakfast will increase expenses. When possible, we have instituted and expect to continue to institute these changes and the corresponding increase in operating expenses in line with revenue increases; however, given that certain of these items require some lead time to hire staff and order supplies, we may experience increases in operating expenses in advance of the realization of increased revenues. This may result in temporary decreases in operating margins and cash flows. However, certain supply constraints may result in longer term operating cost increases. These may result from competition for labor, which may be exacerbated by a decreased supply of workers and minimum wage actions setting higher wage expectations for all labor sectors. The cost and disruption to labor availability may be one of the longer term consequences from the pandemic. In addition, we have experienced expense increases that are outside of our direct control, such as increased travel commissions that have been shifting to more expensive online and franchisor sources. The COVID-19 pandemic has also contributed to certain raw material, energy, transportation and other supply constraints which are increasing costs.

26

We also have taken aggressive steps at the corporate level to control costs and preserve capital to mitigate the ongoing operational and financial impact in response to the COVID-19 pandemic. These initiatives include suspending our common stock dividend, restricting corporate travel and deferring all non-essential administrative expenses and capital expenditures. Similar to operating expense, these measures have continued into 2021. However, we have experienced certain administrative expense increases in 2021, primarily related to the resumption of travel and other activities.

Cash Flows

During 2021, we have had positive cash flow from operations each quarter. For the nine months ended September 30, 2021, we reported $69 million net cash provided by operating activities as compared to $21 million net cash used in operating activities for the nine months ended September 30, 2020. This trend was primarily as a result of improved operations in the second and third quarters of 2021, which combined generated approximately $66 million of cash provided by operating activities, due to revenue improvements, operating cost control measures and reduced interest expense. Our limits on capital expenditures also improved our cash flows compared to 2020. During the nine months ended September 30, 2021 we used $6 million for capital expenditures, net of collection of insurance proceeds, compared to $7 million and $48 million for capital expenditures, net of insurance proceeds, in the same periods for 2020 and 2019, respectively. As noted above, we are currently restricting our capital expenditures to only essential expenditures. However, as occupancy and revenues increase, we expect our capital expenditures to also increase.

While we generally expect future operations will continue to improve, due to uncertainties regarding the magnitude and timing of the resumption of business travel and other activities, including in-person work, schools, colleges, sporting events, special events and conferences, we expect higher volatility in travel demand, with certain regions experiencing a greater or smaller recovery at any given time frame. There is also uncertainty as to the effects on travel from the COVID-19 pandemic, particularly whether travel will continue based on the most recent trends or whether there will be a reduction due to restrictions imposed from increased infections and local and international restrictions. Accordingly, we are unable to forecast our near term operating results. Until travel demand fully returns and stabilizes, we may experience future periodic improvements and declines in cash flows from operations which may extend into the remainder of 2021 and beyond.

Based on our 2021 operating performance to date, we believe we have adequate liquidity to fund our operations. We have $174 million of cash and cash equivalents as of September 30, 2021, an increase of $31 million from December 31, 2020. We have also reduced our debt by $273 million, primarily from the execution of the non-core disposition program. Should operations continue to improve or continue at current levels, we would expect further improvements in our cash position, debt leverage and access to capital. (See “Liquidity and Capital Resources” below for additional discussion.)

Non-Core Hotel Disposition Strategy

    Our strategy has identified opportunities to dispose of our lower performing hotels and we refer to these as our non-core hotels. These hotels are generally older and have lower RevPAR (defined below) and higher capital expenditure requirements. As of December 31, 2019, we identified 166 hotels as non-core, and we have sold or disposed of 111 of these hotels as of September 30, 2021. We anticipate the non-core disposition program will be completed by the end of 2022; however, this period could be extended or shortened depending on market conditions, COVID-19 pandemic status and availability of capital for hotel purchasers. There can be no assurance as to the timing of any future sales, whether any approvals required under applicable franchise or ground lease agreements will be obtained or upon what terms, whether such sales will be completed at all, or, if completed, their effect on our future results.

The table below provides certain summary information of our core and non-core hotels as of September 30, 2021. Due to the disruptions to 2020 and 2021 RevPAR from the COVID-19 pandemic, we have provided RevPAR based on 2019 annual amounts. We believe the 2019 annual amounts are more comparable to historical metrics.

	Number of hotels	Approximate number of rooms	Average hotel age (years)	2019 RevPAR
Core	105	15,100	29	$	72.67
Non-Core	55	6,900	33	$	55.28
Total	160	22,000	30	$	67.18

During the nine months ended September 30, 2021, we sold 49 non-core hotels for gross consideration of $281 million. Subsequent to September 30, 2021, we sold an additional five non-core hotels for gross consideration of $36 million. As these hotels were among our lowest performing hotels, we believe these dispositions will positively impact portfolio RevPAR and gross margin. Further, as the net sales proceeds were substantially used to retire portions of our existing debt, these dispositions will reduce interest

27

expense. We expect to also benefit from no longer incurring capital expenditures for these sold hotels, increasing the availability of liquidity for other uses.

    Certain historical information related to the operating hotels sold during the nine months ended September 30, 2021 is presented in the table below. Due to the disruptions to 2020 and 2021 metrics from the COVID-19 pandemic, we have provided metrics based on 2019 annual amounts. We believe the 2019 annual amounts provide measures that may be more comparable to historical metrics. As the COVID-19 pandemic continues over a longer period, these metrics as well as the number of hotel sales may be affected ($ amounts in millions, except for RevPAR and price per key):

2021 Quarterly Activity	Number of hotels sold	Approximate number of rooms	Gross sales price		Gain on sales		Approximate price per key (5)		Revenue multiple (1)
1st Quarter	9	1,100	$	42	$	10	$	39,000	2.5x
2nd Quarter	25	2,900	143		42		$	50,000	2.7x
3rd Quarter	15	1,800	96		29		$	54,000	2.8x
2021	49	5,800	$	281	$	81	$	49,000	2.7x

2019 Annual Operating Data for Non-Core Hotels sold in the nine months ended September 30, 2021	Amount
Revenues	$	103.1
RevPAR (2)	$	48.88
Hotel Adjusted EBITDAre (3)	$	20.3
Hotel Adjusted EBITDAre multiple (4)	13.8		x
FFO (3)	$	12.7
Capital expenditures	$	7.2

____________________ 

(1)Revenue multiple is calculated as the gross sales price divided by 2019 annual revenues. Closing costs, management termination fees and other costs from the sale of the hotels have not been deducted in the gross sales price and have generally averaged approximately 10% of the gross sales price.

(2)Our Comparable Hotel RevPAR for the year ended December 31, 2019 was $67.18 and our Comparable Hotel RevPAR for core hotels alone was $72.67.

(3)Hotel Adjusted EBITDAre and FFO are non-GAAP financial measures. See “Non-GAAP Financial Measures” below for definitions and limitations of these terms. The FFO amount includes the related annualized interest expense based on the actual debt principal paid down for each hotel sale using the September 30, 2021 interest rate of 3.12%. The FFO amount includes only directly associated hotel expenses and does not include any general and administrative or other corporate expenses.

(4)Hotel Adjusted EBITDAre multiple is calculated as gross sales price divided by 2019 Hotel Adjusted EBITDAre.

(5)Approximate price per key is defined as gross sales price divided by the total rooms for hotels sold.

    As noted, the statistics above are based on the 2019 annual operating amounts. More current data would likely result in lower absolute amounts and higher multiples and yields as a result of the COVID-19 pandemic’s effects on hotel operations.

The hotel sales closed to date have been on substantially similar terms and pricing as previously experienced prior to the COVID-19 pandemic. The favorable trend in price per key is primarily due to the staging of sales, where lower performing, older and higher capital expenditure dependent hotels were generally sold first. During 2021, we also experienced continued demand for the non-core hotels as buyer revenue and operating expectations from the pandemic recovery were more favorable as the year progressed and capital for purchasers became more available. However, there can be no assurance as to the timing of any future sales, whether the terms of such sales will be similar to prior terms, whether any approvals required under applicable franchise agreements will be obtained or upon what terms, whether proposed federal income tax changes will affect buyer capital or demand and whether buyers will be able to complete such purchases, or, if completed, their effect on future results.

As noted above, the sale of hotels during 2021 contributed positively to our RevPAR and occupancy. Since substantially all of the proceeds from these hotel sales have been used to pay down debt, with no current or anticipated re-investments, these dispositions, in isolation from other changes in operations, are expected to result in reductions in revenues and other net operating results in future periods.

Hotel Capital Investment

    During the nine months ended September 30, 2021, we invested approximately $13 million in capital investments in our hotels. These represent approximately 3% of revenues for the nine months ended September 30, 2021. We generally expect these capital expenditures to fall within a range of 5% to 10% of annual revenues, with quarterly variances due to seasonality of revenues and timing of capital expenditures. Due to the COVID-19 pandemic, we have and expect to continue to defer elective capital expenditures, with the exception of life safety or critical operational needs. Deferring capital expenditures may result in additional

28

maintenance expenses when operations begin to improve and higher capital expenditures in future periods. However, to the extent we are able to complete the dispositions of non-core hotels, we anticipate that our total recurring maintenance and upgrade capital expenditures will decline on an absolute basis. We also anticipate that as operations improve deferred capital expenditures will increase and be given a priority from available liquidity.

In August 2021, Hurricane Ida damaged four of our hotel properties located in and around New Orleans, Louisiana with damages estimated at approximately $15 million. We expect a majority of these costs to be reimbursed by insurance. As of September 30, 2021, we have recorded an insurance claim receivable of $8 million for the net book value of damaged assets and the restoration expenses incurred as of September 30, 2021. We continue to work closely with our insurance adjusters, claims adjusters and construction staff to bring the affected rooms back online as quickly as possible. As of October 31, 2021, approximately 450 rooms remained out of service due to the impact of the hurricane. We expect these rooms to be placed back in service on a staggered basis over the next several months. Property and business interruption insurance claims will be made as determined through the evaluation process; however, the timing and amount of insurance proceeds are uncertain and may not be sufficient to cover all losses. We expect to fund restoration work from insurance proceeds and cash on hand.

Seasonality

    The hotel industry is seasonal in nature. Generally, our revenues are greater in the second and third quarters than in the first and fourth quarters. The timing of holidays, local special events and weekends can also impact our quarterly results. The periods during which our properties experience higher revenues may depend on specific locations and accordingly may vary from property to property. This seasonality can be expected to cause quarterly fluctuations in revenue, profit margin, net earnings and cash provided by operating activities. Additionally, our quarterly results may be seasonally affected by the timing of certain marketing programs or hotel maintenance. In addition, certain of our manager and franchisor fees are based on revenues which, as noted above, vary by season. Further, the impact of disruptions due to the COVID-19 pandemic, the timing of opening of newly constructed or renovated hotels and the timing of any hotel dispositions may cause a variation of revenue and earnings from quarter to quarter. Accordingly, our results for any partial period may not be indicative of our full year results or trends.

    Further, the COVID-19 pandemic began disrupting our operations during March 2020. The first quarter of 2020 was not affected by the COVID-19 pandemic until the last weeks of March 2020. Subsequent 2020 quarterly results also have different levels of operating disruptions. Accordingly, certain comparisons of 2021 results to similar periods in 2020 should be reviewed in the context of the status of the COVID-19 pandemic. Due to the fluidity of these disruptive developments and the degree and timing of the related recovery, we are not able to accurately project the level of operations for 2021 or if and when we will achieve pre-pandemic operating levels on a stable basis.

Segment Reporting

    Our hotel investments have similar economic characteristics and our service offerings and delivery of services are provided in a similar manner, using the same types of facilities and similar technologies. Our chief operating decision maker reviews our financial information on an aggregated basis.  As a result, we have concluded that we have one reportable business segment.

Key components and factors affecting our results of operations

Revenues

    Room revenues are primarily derived from room lease rentals at our hotels.  We recognize room revenues on a daily basis, based on an agreed-upon daily rate, after the guest has stayed at one of our hotels.  Customer incentive discounts, cash rebates, and refunds are recognized as a reduction of room revenues.  Occupancy, hotel, and sales taxes collected from customers and remitted to the taxing authorities are excluded from revenues in our condensed consolidated statements of operations.

Principal Components of Revenues

    Rooms. These revenues represent room lease rentals at our hotels and account for a substantial majority of our total revenue.

    Other revenue. These revenues represent revenue generated by the incidental support of operations at our hotels, including charges to guests for vending commissions, meeting and banquet rooms, and other rental income from operating leases associated with leasing space for restaurants, billboards and cell towers.

29

Factors Affecting our Revenues

    Hotel dispositions. As noted above, we continue dispositions of our non-core hotels. We sold 49 hotels during the nine months ended September 30, 2021, and we sold or disposed of 62 hotels during the year ended December 31, 2020.  The revenue from these sold or disposed hotels was $39 million and $84 million, for the nine months ended September 30, 2021 and 2020, respectively.

    Customer demand. Our customer mix includes both leisure travelers and business travelers. Customer demand for our products and services is closely linked to the performance of the general economy on both a national and regional basis and is sensitive to business and personal discretionary spending levels. As a result of the COVID-19 pandemic, leisure and business travel lodging demand continues to be impacted, and our mix of customers has changed to a higher proportion of leisure travelers which represents approximately two-thirds of our hotel portfolio. We are benefiting from “drive to” consumer demand, particularly for our hotels adjacent to highways and suburban areas. We are also benefiting from our hotel properties located in sunbelt states, primarily Florida, Texas and Southern California, that are experiencing an increase in post-pandemic travel demand. These areas are especially attractive to consumers looking for a two or three day trip. Weekend travel demand has been particularly high with occupancy rates at approximately 25% greater than weekday demand. Accordingly, we believe our customer demand is highly dependent on the timing and magnitude of the return of consumer and business travel, the proportion of the traveling population that is vaccinated and feels safe traveling, government assistance programs (such as unemployment benefits, child tax credits and stimulus payments) and the return of convention, sporting and other local events.

Supply. New room supply is an important factor that can affect the lodging industry’s performance. Room rates and occupancy, and thus RevPAR, tend to increase when demand growth exceeds supply growth and decline when supply growth exceeds demand growth. Our hotels have benefited from being open while competing hotels and substitute lodging options (e.g. homeowner rental programs) were temporarily closed or not fully operational; however, as travel demand increases, competition has increased and our competitive advantage has diminished or has been eliminated. Beginning in the third quarter of 2020, we noted instances where our hotels were losing pricing power relative to our competitors. We are also observing that many of the competitor hotels that temporarily closed in 2020 have re-opened. However, we do expect that the COVID-19 pandemic will reduce new supply coming into our markets, at least in the near term, as existing hotel projects were delayed and new projects would require some time for planning, governmental approvals and construction. The lodging industry in total may actually experience negative absorption during this lag, as some portion of the existing hotel stock may be taken out of operation.

Age and amenities. Newly constructed or remodeled hotels generally will drive higher room rates and occupancy than older properties with deferred maintenance. Similarly, hotels with greater and more current amenities, which are in demand by customers, will also be able to achieve higher room rates and occupancy. The average age of our hotels is approximately 30 years.

Expenses

Principal Components of Certain Expenses

    Rooms. These expenses include hotel operating expenses of housekeeping, reservation systems (per our franchise agreements), room and breakfast supplies and front desk costs.

    Other departmental and support. These expenses include hotel operating expenses that constitute non-room operating expenses, including parking, telecommunications, on-site administrative labor, sales and marketing, loyalty program, recurring repairs and maintenance and utility expenses.

    Property tax, insurance and other. These expenses consist primarily of real and personal property taxes, other local taxes, ground rent, equipment rent and insurance.

    Management and royalty fees. Management and royalty fees represent fees paid to third parties and are computed as a percentage of revenues.  

Factors Affecting our Costs and Expenses

    Variable expenses. Expenses associated with our room expenses are mainly affected by occupancy and correlate closely with their respective revenues.  Housekeeping labor, travel agency commissions and consumable supplies are most clearly associated with occupancy. Actual charges relating to travel agency commissions depend on our revenue channel distribution mix. For the nine months ended September 30, 2021, online travel agencies represented approximately 38% of our revenue channel mix. Our management and royalty fees are also primarily driven by our level of gross revenues or room revenues. Management fees represent 5% of total gross revenue and royalty fees represent 5% of our room revenues. In response to the COVID-19 pandemic, we implemented programs to reduce labor and consumable supplies (including eliminated or reduced breakfast offerings), and we have experienced reductions in royalty fees, management fees, travel agency commissions and supplies. However, as our revenue and occupancy demand returns, these expenses have increased and we expect will continue to increase. Limited labor supply and wage

30

pressures have increased, and we expect this will increase our labor costs, including through the impact of new worker incentive programs offered to recruit and retain staff. Further, some of these costs must be incurred in advance of the realization of increased revenue, as staff must be hired and supplies procured in time to meet the demand. Accordingly, certain variable expenses may temporarily increase at times faster than revenues.

    Fixed expenses. Many of the other expenses associated with our hotels are relatively fixed.  These expenses include portions of administrative field staff salaries, rent expense, property taxes, insurance and utilities.  Since we generally are unable to decrease these costs significantly or rapidly when demand for our hotels decreases, any resulting decline in our revenues can have a greater effect on our net cash flow, margins and profits.  This effect can be especially pronounced during periods of economic contraction or slow economic growth, as was the case during the early stages of the COVID-19 pandemic.  The effectiveness of our cost-cutting efforts was limited by the amount of fixed costs inherent in our business.  An operating hotel requires a minimum number of staff to manage the hotel front desk and provide administrative support and maintain the property. As a result, we were unable to fully offset revenue reductions through cost cutting.  Individuals employed at certain of our hotels are party to collective bargaining agreements with our hotel managers that may also limit the manager’s ability to make timely staffing or labor changes in response to declining revenues. In addition, any efforts to reduce costs, or to defer or cancel capital improvements, could adversely affect the economic value of our hotels.  We have taken steps to date to reduce our fixed costs and expect to continue these efforts throughout 2021 until revenues return. However, as the economy appears to be in the recovery phase of the COVID-19 pandemic and as our revenues return to prior levels, we anticipate positive impacts on our net cash flow, margins and profits as the increases in these fixed labor and other expenses will be proportionately less than the increase in room revenues.

    Changes in depreciation and amortization expense. Changes in depreciation expense are due to renovations of existing hotels, acquisition or development of new hotels, the disposition of existing hotels through sale or changes in estimates of the useful lives for new capital improvements. As we incur additions to our hotels or place new assets into service, we will be required to recognize additional depreciation expense on those assets. Conversely, impairment losses, which are effectively accelerated depreciation, will reduce future depreciation expenses at these hotels. Continued dispositions of non-core hotels will also reduce future depreciation.

Hotel dispositions. We continue dispositions of our non-core hotels, reducing hotel operating expenses. We sold 49 hotels during the nine months ended September 30, 2021, and we sold or disposed of 62 hotels during the year ended December 31, 2020.

    Age. As hotels age, maintenance expense tends to increase.  These expenses include more frequent and higher costing repairs, higher utility and insurance expenses, increased supplies and higher labor costs.  If these costs result in capitalized improvements, depreciation expense could increase over time as discussed above. Renovations and other hotel improvements can mitigate the maintenance expenses of older properties.    

Key indicators of financial condition and operating performance

    We use a variety of financial and other information in monitoring the financial condition and operating performance of our business. Some of this information is financial information that is prepared in accordance with GAAP, while other information may be financial in nature and may not be prepared in accordance with GAAP. Our management also uses other information that may not be financial in nature, including statistical information and comparative data that are commonly used within the lodging industry to evaluate hotel financial and operating performance. Our management uses this information to measure the performance of hotel properties and/or our business as a whole. Historical information is periodically compared to budgets, as well as against industry-wide information. We use this information for planning and monitoring our business, as well as in determining management and employee compensation.

    Average daily rate (“ADR”) represents hotel room revenues divided by total number of rooms rented in a given period. ADR measures the average room price attained by a hotel or group of hotels, and ADR trends provide useful information concerning pricing policies and the nature of the guest base of a hotel or group of hotels. Changes in room rates have an impact on overall revenues and profitability. ADR is also used by the lodging industry to classify hotels by chain scale.

    Occupancy represents the total number of rooms rented in a given period divided by the total number of rooms available at a hotel or group of hotels. Occupancy measures the utilization of our hotels’ available capacity, which may be affected from time to time by our repositioning, property casualties and other activities. Management uses occupancy to gauge demand at a specific hotel or group of hotels in a given period. Occupancy levels also help us determine achievable ADR levels as demand for hotel rooms increases or decreases.

    Revenue per available room (“RevPAR”) is defined as the product of the ADR charged and the average daily occupancy achieved. RevPAR does not include bad debt expense or other ancillary, non-room revenues, such as food and beverage revenues or parking, telephone or other guest service revenues generated by a hotel, which are not significant for us.

31

    RevPAR changes that are driven predominately by occupancy have different implications for overall revenue levels and incremental hotel operating profit than changes driven predominately by ADR. For example, increases in occupancy at a hotel would lead to increases in room and other revenues, as well as incremental operating costs (including, but not limited to, housekeeping services, utilities and room amenity costs). RevPAR increases due to higher ADR, however, would generally not result in additional operating costs, with the exception of those charged or incurred as a percentage of revenue, such as management and royalty fees, credit card fees and booking commissions. As a result, changes in RevPAR driven by increases or decreases in ADR generally have a greater effect on operating profitability at our hotels than changes in RevPAR driven by occupancy levels.

    Comparable Hotels are defined as hotels that were active and operating in our system for at least one full calendar year as of the end of the applicable reporting period and were active and operating as of January 1st of the previous year. Comparable Hotels exclude: (i) hotels that sustained substantial property damage or other business interruption; (ii) hotels that are sold or classified as held for sale; or (iii) hotels in which comparable results are otherwise not available. Management uses Comparable Hotels as the basis upon which to evaluate ADR, occupancy, and RevPAR. Management calculates comparable ADR, occupancy, and RevPAR using the same set of Comparable Hotels as defined above. Further, we report variances in comparable ADR, occupancy, and RevPAR between periods for the set of Comparable Hotels existing at the reporting date versus the results of the same set of hotels in the prior period. As of September 30, 2021, all 160 owned hotels have been classified as Comparable Hotels.

    As an owner of hotels, we can capture the full benefit of increases in operating profits during periods of increasing demand or ADR. As demand and ADR increase over time, the pace of increase in operating profits typically is higher than the pace of increase of revenues. We benefited from this favorable operating environment during the third quarter of 2021, as Comparable Hotel occupancy was generally flat from the second quarter to the third quarter, but Comparable Hotel ADR increased, and consequently RevPAR, was up approximately 12%. Hotel ownership is capital intensive, as we are responsible for the costs and capital expenditures for our hotels. The profits realized by us are generally significantly affected by economic downturns and declines in revenues. Given the performance disruptions from the COVID-19 pandemic and the resulting recovery, we expect increased volatility in revenues and operating profits during the near term.     

The rent potential for a hotel is measured by its ADR and is primarily a factor of its chain scale, location, local demand drivers and competition. Chain scale groupings are determined using lodging industry standards. Accordingly, as a result of the COVID-19 pandemic, certain hotels have experienced decreases in ADR which has resulted in a temporary reclassification to lower scales and we expect these to be reclassified to higher scales as ADR trends stabilize. The table below reflects our chain scale groupings for hotels owned as of September 30, 2021, using annual 2019 ADR and occupancy metrics. We believe the 2019 annual amounts provide measures that may be more comparable to historical metrics. There is no assurance as to when or whether these hotels will return to their 2019 operating levels. In addition, 55 of the hotels are classified as non-core and are included in our disposition program.

2019 Annual ADR and Occupancy for hotels owned as of September 30, 2021	Number of Hotels	ADR		Occupancy
Upper upscale	3	$	164.22	78.6	%
Upscale	18	$	130.40	71.2	%
Upper midscale	54	$	104.31	66.5	%
Midscale	79	$	84.81	67.6	%
Economy	6	$	62.82	71.2	%
Total	160	$	98.62	68.1	%

Non-GAAP Financial Measures

    We also evaluate the performance of our business through certain other financial measures that are not recognized under GAAP.  Each of these non-GAAP financial measures should be considered by investors as supplemental measures to GAAP performance measures such as total revenues, operating profit and net income.  These measurements are not to be considered more relevant or accurate than the measurements presented in accordance with GAAP.  In compliance with SEC requirements, our non-GAAP measurements are reconciled to the most directly comparable GAAP performance measurement.  For all non-GAAP measurements, neither the SEC nor any other regulatory body has passed judgment on these non-GAAP measurements.

32

EBITDA, EBITDAre, Adjusted EBITDAre and Hotel Adjusted EBITDAre

     “EBITDA.” Earnings before interest, income taxes, depreciation and amortization (“EBITDA”) is a commonly used measure in many REIT and non-REIT related industries. We believe EBITDA is useful in evaluating our operating performance because it provides an indication of our ability to incur and service debt, to satisfy general operating expenses, and to make capital expenditures. We calculate EBITDA excluding discontinued operations. EBITDA is intended to be a supplemental non-GAAP financial measure that is independent of a company’s capital structure.

    “EBITDAre.” We present EBITDAre in accordance with guidelines established by the National Association of Real Estate Investment Trusts (“Nareit”). Nareit defines EBITDAre as EBITDA adjusted for gains or losses on the disposition of properties, impairments, and adjustments to reflect the entity’s share of EBITDAre of unconsolidated affiliates. We believe EBITDAre is a useful performance measure to help investors evaluate and compare the results of our operations from period to period.

    “Adjusted EBITDAre.” Adjusted EBITDAre is calculated as EBITDAre adjusted for certain items, such as restructuring and separation transaction expenses, acquisition transaction expenses, stock-based compensation expense, severance expense, and other items not indicative of ongoing operating performance.

    “Hotel Adjusted EBITDAre” measures property-level results at our hotels before corporate-level expenses and is a key measure of a hotel’s profitability. We present Hotel Adjusted EBITDAre to assist us and our investors in evaluating the ongoing operating performance of our properties.

    We believe that EBITDA, EBITDAre, Adjusted EBITDAre and Hotel Adjusted EBITDAre provide useful information to investors about our financial condition and results of operations for the following reasons: (i) EBITDA, EBITDAre, Adjusted EBITDAre and Hotel Adjusted EBITDAre are among the measures used by our management to evaluate its operating performance and make day-to-day operating decisions; and (ii) EBITDA, EBITDAre, Adjusted EBITDAre and Hotel Adjusted EBITDAre are frequently used by securities analysts, investors, lenders and other interested parties as a common performance measure to compare results or estimate valuations across companies in and apart from our industry sector.

    EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel Adjusted EBITDAre have limitations as analytical tools and should not be considered either in isolation or as a substitute for net income (loss), cash flow or other methods of analyzing our results as reported under GAAP. Some of these limitations are that these measures:

•    do not reflect changes in, or cash requirements for, our working capital needs;

•     do not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness;

•     do not reflect our tax expense or the cash requirements to pay our taxes;

•     do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;

•     EBITDAre, Adjusted EBITDAre and Hotel Adjusted EBITDAre do not include gains or losses on the disposition of properties which may be material to our operating performance and cash flow;

•     Adjusted EBITDAre and Hotel Adjusted EBITDAre do not reflect the impact on earnings or changes resulting from matters that we consider not to be indicative of our future operations, including but not limited to impairment, acquisition and disposition activities and restructuring expenses;

•     although depreciation, amortization and impairment are non-cash charges, the assets being depreciated, amortized or impaired will often have to be replaced, upgraded or repositioned in the future, and EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel Adjusted EBITDAre do not reflect any cash requirements for such replacements; and

•other companies in our industry may calculate EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel Adjusted EBITDAre differently, limiting their usefulness as comparative measures.

    Because of these limitations, EBITDA, EBITDAre, Adjusted EBITDAre and Hotel Adjusted EBITDAre should not be considered as a replacement to net income (loss) presented in accordance with GAAP, discretionary cash available to us to reinvest in the growth of our business or as measures of cash that will be available to us to meet our obligations.

33

    The following is a reconciliation of our net income (loss) to EBITDA, EBITDAre, Adjusted EBITDAre and Hotel Adjusted EBITDAre for the three and nine months ended September 30, 2021 and 2020 (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income (loss)	$	17	$	(8)	$	14	$	(136)
Interest expense	6		9		20		35
Income tax benefit	—		(3)		—		(6)
Depreciation and amortization	33		39		108		121
EBITDA	56		37		142		14
Gain on sales of real estate	(29)		(27)		(81)		(59)
Gain on casualty	—		(4)		(3)		(7)
Impairment loss	4		—		4		54
EBITDAre	31		6		62		2
Equity-based compensation expense	2		3		7		8
Income from lease modification	(1)		—		(1)		—
Strategic alternatives exploration expenses	1		—		1		—
Income from terminated hotel sale contracts	—		(1)		—		(1)
Other, net	1		—		(1)		1
Adjusted EBITDAre	34		8		68		10
Corporate general and administrative expenses	6		4		15		12
Hotel Adjusted EBITDAre	$	40	$	12	$	83	$	22

Additional information:

•Other, net represents additional income and expenses that are not representative of our current or future operating performance, which are individually less significant. For the three and nine months ended September 30, 2021, other, net includes $1 million and $2 million of business interruption insurance proceeds, respectively. For the three and nine months ended September 30, 2020, other, net includes $2 million and $4 million of business interruption insurance proceeds, respectively.

•Corporate general and administrative expenses include the additional corporate-level expenses not already adjusted in calculating Adjusted EBITDAre.

Nareit FFO attributable to common stockholders and Adjusted FFO attributable to common stockholders

    We present Nareit FFO attributable to common stockholders (as defined below) as non-GAAP measures of our performance. We calculate funds from operations (“FFO”) attributable to common stockholders for a given operating period in accordance with standards established by Nareit, as net income or loss (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains or losses on sales of certain real estate assets, impairment write-downs of real estate assets, discontinued operations, income taxes related to sales of certain real estate assets, and the cumulative effect of changes in accounting principles, plus similar adjustments for unconsolidated joint ventures. Adjustments for unconsolidated joint ventures are calculated to reflect our pro rata share of the FFO of those entities on the same basis. Since real estate values historically have risen or fallen with market conditions, many industry investors have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. For these reasons, Nareit adopted the FFO metric in order to promote an industry wide measure of REIT operating performance. We believe Nareit FFO provides useful information to investors regarding our operating performance and can facilitate comparisons of operating performance between periods and between REITs.

    We also present Adjusted FFO attributable to common stockholders when evaluating our performance because we believe that the exclusion of certain additional items described below provides useful supplemental information to investors regarding our ongoing operating performance. Management historically has made the adjustments detailed below in evaluating our performance and in our annual budget process. We believe that the presentation of Adjusted FFO provides useful supplemental information that is beneficial to an investor’s complete understanding of our operating performance. We adjust Nareit FFO attributable to common stockholders for the following items, and refer to this measure as Adjusted FFO attributable to common stockholders: transaction expense associated with the potential disposition of or acquisition of real estate or businesses; severance expense; share-based compensation expense; litigation gains and losses outside the ordinary course of business; amortization of debt issuance costs; reorganization costs and separation transaction expenses; loss on early extinguishment of debt; straight-line ground lease expense;

34

casualty losses; deferred tax expense; and other items that we believe are not representative of our current or future operating performance.

    Nareit FFO attributable to common stockholders and Adjusted FFO attributable to common stockholders have limitations as analytical tools and should not be considered either in isolation or as a substitute for net income (loss), cash flow or other methods of analyzing our results as reported under GAAP. Nareit FFO is not an indication of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to fund dividends. Nareit FFO is also not a useful measure in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining Nareit FFO. Investors are cautioned that we may not recover any impairment charges in the future. Accordingly, Nareit FFO should be reviewed in connection with GAAP measurements. We believe our presentation of Nareit FFO is in accordance with the Nareit definition; however, our Nareit FFO may not be comparable to amounts calculated by other REITs.

    The following table provides a reconciliation of net income (loss) to Nareit FFO attributable to common stockholders and Adjusted FFO attributable to common stockholders for the three and nine months ended September 30, 2021 and 2020 (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income (loss)	$	17	$	(8)	$	14	$	(136)
Depreciation and amortization	33		39		108		121
Gain on sales of real estate	(29)		(27)		(81)		(59)
Gain on casualty	—		(4)		(3)		(7)
Impairment loss	4		—		4		54
Nareit defined FFO attributable to common stockholders	25		—		42		(27)
Equity-based compensation expense	2		3		7		8
Non-cash income tax benefit	—		(3)		—		(2)
Amortization expense of debt issuance costs	1		1		1		7
Income from lease modification	(1)		—		(1)		—
Strategic alternatives exploration expenses	1		—		1		—
Income from terminated hotel sale contracts	—		(1)		—		(1)
Other, net	1		—		(1)		1
Adjusted FFO attributable to common stockholders	$	29	$	—	$	49	$	(14)
Weighted average number of shares outstanding, diluted	61.3		56.7		61.0		56.6

Additional information:

•Other, net represents additional income and expenses that are not representative of our current or future operating performance, which are individually less significant. For the three and nine months ended September 30, 2021, other, net includes $1 million and $2 million of business interruption insurance proceeds, respectively. For the three and nine months ended September 30, 2020, other, net includes $2 million and $4 million of business interruption insurance proceeds, respectively.

•Weighted average number of shares outstanding, diluted presented above may differ from weighted average number of shares outstanding, diluted presented for GAAP purposes when there is a net loss and all potentially dilutive securities are anti-dilutive. There are no dilutive securities for purposes of calculating net loss or negative FFO.

The increases in each of our non-GAAP performance measures is primarily due to the 2021 improvements from the 2020 COVID-19 pandemic disruptions. Our operations are also benefiting from increased rental rates while maintaining approximately the same variable occupancy expenses. The 2021 increase in our operations is partially offset by the impact from the sale of hotels. As of September 30, 2021 we owned 160 hotels, compared to 220 hotels owned as of September 30, 2020. FFO and Adjusted FFO also improved from our use of proceeds to reduce total outstanding debt and consequently, less interest expense. For the nine months ended September 30, 2021, interest expense was $15 million less than the comparable period in 2020. See further discussion below regarding operating activity, debt repayments and property sales.

35

Operational Overview

    The following discussion provides an overview of our operations and transactions for the nine months ended September 30, 2021 and should be read in conjunction with the full discussion of our operating results, liquidity, capital resources and risk factors included elsewhere in this Quarterly Report on Form 10-Q.

    During the nine months ended September 30, 2021, we reported net income of $14 million as compared to net loss of $136 million for the same period in 2020. The increase was primarily due to $50 million more impairment losses recorded in the nine months ended September 30, 2020 as compared to the same period in 2021. Gain on sales of real estate increased $22 million for the nine months ended September 30, 2021 as compared to the same period in 2020. We sold 49 hotels sold in the nine months ended September 30, 2021 as compared to 50 hotels for the nine months ended September 30, 2020. In addition, our Hotel Adjusted EBITDAre for the nine months ended September 30, 2021 improved $61 million over the same period in 2020 (see details in the tables below).

Offsetting these increases were revenue decreases due to execution of our non-core disposition program. As of December 31, 2019, we identified 166 hotels as non-core with the intent to dispose of these hotels generally by the end of 2022. As of September 30, 2021, we have sold or disposed of 111 of these non-core hotels. These sold or disposed properties contributed $5 million in revenue for the three months ended September 30, 2021 as compared to $26 million in revenue for the three months ended September 30, 2020. These sold or disposed properties contributed $39 million in revenue for the nine months ended September 30, 2021 as compared to $84 million in revenue for the nine months ended September 30, 2020.

As of September 30, 2021, we have 55 remaining non-core hotels identified for disposition by the end of 2022. Our ability to enter into and to close sale contracts could be affected by the uncertainties related to the COVID-19 pandemic.

The following table provides additional information about Comparable Hotels and non-comparable hotels for the three and nine months ended September 30, 2021 and 2020 (in millions):

	Comparable Hotels (1)				Non-comparable Hotels				Total
	Three Months Ended September 30,				Three Months Ended September 30,				Three Months Ended September 30,
	2021		2020		2021		2020		2021		2020
Total Revenues	$	137	$	81	$	5	$	26	$	142	$	107
Property-level expenses	(98)		(71)		(4)		(24)		(102)		(95)
Hotel Adjusted EBITDAre	$	39	$	10	$	1	$	2	$	40	$	12

	Comparable Hotels (1)				Non-comparable Hotels				Total
	Nine Months Ended September 30,				Nine Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020		2021		2020
Total Revenues	$	338	$	241	$	39	$	84	$	377	$	325
Property-level expenses	(260)		(221)		(34)		(82)		(294)		(303)
Hotel Adjusted EBITDAre	$	78	$	20	$	5	$	2	$	83	$	22

_____________

(1)     Comparable Hotels includes the 160 hotels in our portfolio as of September 30, 2021. During the nine months ended September 30, 2021, we sold 49 hotels, and during the year ended December 31, 2020, we sold or disposed of 62 hotels.

Results of Operations

Three months ended September 30, 2021 as compared to three months ended September 30, 2020

Revenues

    Room revenues for the three months ended September 30, 2021 were $139 million as compared to $105 million for the three months ended September 30, 2020, an increase of $34 million or 32.4%. The increase was primarily driven by 71.4% higher RevPAR at our Comparable Hotels for the three months ended September 30, 2021 as compared to the prior year period. The increase in RevPAR was driven primarily by a 40.0% increase in ADR and an increase in occupancy of 1,170 basis points. This increase is primarily due to increased demand in 2021 allowing for higher rates as compared to the COVID-19 pandemic impacted 2020 demand, particularly for business and weekday travelers. We have experienced strong demand and room rental rates for weekends and for most of the summer, we exceeded RevPAR as compared to 2019 levels. We continue to experience increased demand for our hotels located

36

in sunbelt states, particularly Florida, Texas and Southern California. We believe this demand particularly relates to weekend and leisure locations. However, weekday revenues are still significantly below 2019 levels given that such days continue to experience weaker demand, primarily driven by fewer business travelers.

    These increases were partially offset by a decline in revenues due to the sales of our non-core hotels. During the nine months ended September 30, 2021, we sold 49 hotels. During the year ended December 31, 2020, we sold or disposed of 62 hotels. These 111 previously sold or disposed properties contributed $5 million in revenue for the three months ended September 30, 2021 as compared to $26 million of revenue in the three months ended September 30, 2020, a decrease of $21 million.

The following table summarizes our key operating statistics for our Comparable Hotels for the three months ended September 30, 2021 and 2020:

	Three Months Ended September 30,
	2021			2020
Occupancy	63.3		%	51.6		%
ADR	$	104.93		$	74.97
RevPAR	$	66.38		$	38.72

RevPAR growth is more the result of higher ADR than occupancy improvements. This is primarily due to the ability to increase rates for leisure travelers. The effect was also greater during the 2021 summer months and is not as pronounced during earlier periods of 2021.

Expenses

Rooms expense was $58 million for the three months ended September 30, 2021 as compared to $52 million for the three months ended September 30, 2020, an increase of $6 million or 11.5%. This percentage increase was substantially less than the revenue increase of 32% due to the larger impact on revenue from ADR, rather than occupancy, which would have the effect of decreasing the required operating costs for rooms for the given revenue level. The increase in rooms expenses was also a result of the 2020 cost containment measures which were put in place in response to the COVID-19 pandemic, which are gradually being reduced in 2021. These costs primarily related to housekeeping labor, suspension of buffet-style breakfast and consumable supplies, where we manage the expenses based on overall traveler demand and guest expectations. This increase is partially offset by fewer operating hotels in the hotel portfolio in 2021 as compared to 2020. We may incur additional costs in future periods, such as staff re-hiring costs, full resumption of buffet-style breakfasts, cleaning costs and additional hygiene costs due to increased occupancy, increased operating requirements or other factors. Labor costs may also be affected by supply constraints and wage pressures. Such increases could be temporarily higher than our increases in revenue for certain periods.

Property tax, insurance and other was $10 million for the three months ended September 30, 2021 as compared to $14 million for the three months ended September 30, 2020, a decrease of $4 million. The decrease was primarily due to fewer hotels in the portfolio and lower COVID-19 related property tax valuations for certain of our properties in the current and prior years.

    Management and royalty fees were $14 million for the three months ended September 30, 2021 as compared to $11 million for the three months ended September 30, 2020, an increase of $3 million, due to increased revenue. Our management fees are computed as 5% of total gross revenue and royalty fees are computed as 5% of total gross room revenues.

Corporate general and administrative expenses were $10 million for the three months ended September 30, 2021 as compared to $7 million for the three months ended September 30, 2020, an increase of $3 million, primarily due to increased salary and bonus expense, performance-based stock compensation expenses and expenses related to our exploration of strategic alternatives including professional costs and staff retention.

Depreciation and amortization expenses were $33 million for the three months ended September 30, 2021 as compared to $39 million for the three months ended September 30, 2020, a decrease of $6 million. The decrease was primarily due to fewer hotels and the effects of prior year impairment cost basis adjustments.

Gain on sales of real estate was $29 million for the three months ended September 30, 2021 as a result of the sale of 15 properties. We had $27 million of gain on sales of real estate for the three months ended September 30, 2020, as the result of the sale of 20 properties.

37

We had impairment loss of $4 million for the three months ended September 30, 2021 as a result of a change in expected holding period for one of our hotel properties related to a ground lease. We had no impairment loss for the three months ended September 30, 2020.

Interest expense was $6 million for the three months ended September 30, 2021 as compared to $9 million for the three months ended September 30, 2020, a decrease of $3 million. The decrease was primarily due to lower borrowings due to the repayment of outstanding principal, primarily in connection with hotel sales. The interest rate and the amount outstanding on our CMBS Facility was 3.12% and $477 million, respectively, as of September 30, 2021, compared to 2.94% and $767 million, respectively, as of September 30, 2020. The interest rate and the amount outstanding on our Revolving Facility was 6.13% and $60 million, respectively, as of September 30, 2021, compared to 5.15% and $100 million, respectively, as of September 30, 2020.

Nine months ended September 30, 2021 as compared to nine months ended September 30, 2020

Revenues

    Room revenues for the nine months ended September 30, 2021 were $369 million as compared to $318 million for the nine months ended September 30, 2020, an increase of $51 million or 16.0%. The increase was primarily driven by 42.1% higher RevPAR at our Comparable Hotels for the nine months ended September 30, 2021 as compared to the prior year period. The increase in RevPAR was driven primarily by a 12.2% increase in ADR and an increase in occupancy of 1,260 basis points, a more balanced proportion of occupancy and rate increases as compared to what was experienced in the third quarter of 2021 on a standalone basis. This increase is primarily as a result of increased demand in 2021 as compared to the COVID-19 pandemic impacted 2020 demand, particularly for leisure weekend travelers. We continue to experience increased demand for our hotels located in sunbelt states, particularly Florida, Texas and Southern California. Business and weekday traveler RevPAR continues to have slower improvement compared to pre-pandemic levels, which is reflective of work from home, fewer conventions and group activity.

    This increase was partially offset by a decline in revenues due to the sales of our non-core hotels. During the nine months ended September 30, 2021, we sold 49 hotels. We sold or disposed of 62 hotels in 2020. These 111 sold or disposed properties contributed $39 million in revenue for the nine months ended September 30, 2021, as compared to $84 million for the nine months ended September 30, 2020, a decrease of $45 million.

The following table summarizes our key operating statistics for our Comparable Hotels for the nine months ended September 30, 2021 and 2020:

	Nine Months Ended September 30,
	2021			2020
Occupancy	59.7		%	47.1		%
ADR	$	92.30		$	82.26
RevPAR	$	55.08		$	38.77

As noted above, the Comparable Hotel operating statistics for the nine months ended September 30, 2021 reflect a more even balance between growth of occupancy and ADR, than what was achieved during the third quarter of 2021 on a standalone basis.

Operating expenses 

    Rooms expense was $161 million for the nine months ended September 30, 2021 as compared to $171 million for the nine months ended September 30, 2020, a decrease of $10 million or 5.8%. The decrease was primarily a result of fewer operating hotels in the hotel portfolio in 2021 as compared to 2020 and cost containment measures put in place as a result of the COVID-19 pandemic. As the cost containment measures are gradually being reduced in 2021, the variable portion of room expenses is more in line with the increased revenues for the comparable periods of 2021 and 2020. These costs primarily relate to housekeeping labor, and consumable supplies. We may incur additional costs in future periods, such as staff re-hiring costs, cleaning costs, and additional hygiene costs due to increased occupancy, increased operating requirements or other factors. Such increases could be disproportionate to our increases in revenue.

Property tax, insurance and other was $37 million for the nine months ended September 30, 2021 as compared to $45 million for the nine months ended September 30, 2020, a decrease of $8 million. The decrease was primarily due to fewer hotels in the portfolio and lower COVID-19 related property tax valuations for certain of our properties in the current and prior years.

Management and royalty fees were $37 million for the nine months ended September 30, 2021 as compared to $32 million for the nine months ended September 30, 2020, an increase of $5 million due to increased revenue. Our management fees are computed as 5% of total gross revenue and royalty fees are computed as 5% of total gross rooms revenues.

38

    Corporate general and administrative expenses were $24 million for the nine months ended September 30, 2021 as compared to $21 million for the nine months ended September 30, 2020, an increase of $3 million, primarily due to increased salary and bonus expense, performance-based stock compensation expenses and expenses related to our exploration of strategic alternatives including professional costs and staff retention.

Depreciation and amortization expenses were $108 million for the nine months ended September 30, 2021 as compared to $121 million for the nine months ended September 30, 2020, a decrease of $13 million. The decrease was primarily due to fewer hotels and the effects of prior year impairment cost basis adjustments.

Gain on sales of real estate was $81 million for the nine months ended September 30, 2021 as a result of the sale of 49 hotels. We had gain on sales of real estate of $59 million for the nine months ended September 30, 2020 as the result of the sale of 50 properties.    

We had $4 million in impairment loss for the nine months ended September 30, 2021 as a result of a change in expected holding period for one of our hotel properties related to a ground lease. Impairment loss was $54 million for the nine months ended September 30, 2020 primarily due to lower valuation of certain of our properties related to the impact of the COVID-19 pandemic on the lodging industry.

Interest expense was $20 million for the nine months ended September 30, 2021 as compared to $35 million for the nine months ended September 30, 2020, a decrease of $15 million. The decrease was primarily due to lower borrowings due to the repayment of outstanding principal, primarily in connection with hotel sales. The interest rate and the amount outstanding on our CMBS Facility was 3.12% and $477 million, respectively, as of September 30, 2021, compared to 2.94% and $767 million, respectively, as of September 30, 2020. The interest rate and the amount outstanding on our Revolving Facility was 6.13% and $60 million, respectively, as of September 30, 2021, compared to 5.15% and $100 million, respectively, as of September 30, 2020.

Cash Flow Analysis

Nine months ended September 30, 2021 as compared to nine months ended September 30, 2020

Operating activities

Net cash provided by operating activities was $69 million for the nine months ended September 30, 2021, as compared to net cash used in operating activities of $21 million for the nine months ended September 30, 2020, an increase of $90 million. The increase was generally consistent with the increase in Hotel Adjusted EBITDAre of $61 million, explained above, and interest expense reductions of $15 million due to the debt repayments from the proceeds from the sales of real estate.

Investing activities

    Net cash provided by investing activities during the nine months ended September 30, 2021 was $244 million, as compared to $188 million for the nine months ended September 30, 2020. The $56 million increase in net cash provided by investing activities was primarily attributable to a $53 million increase in proceeds from the sales of real estate and a $5 million decrease in capital expenditures. Due to the COVID-19 pandemic, we have reduced or deferred certain discretionary capital expenditures. We may incur higher levels of capital expenditures in future periods.

Financing activities

    Net cash used in financing activities during the nine months ended September 30, 2021 was $282 million as compared to $87 million during the nine months ended September 30, 2020. The $195 million increase in net cash used in financing activities was primarily due to the 2021 debt repayment of $273 million as compared to the 2020 repayments of debt, net of proceeds from debt, of $54 million. Debt repayments were primarily driven from use of proceeds from sales of real estate and required contractual repayments. We also had cash dividends paid on common stock of $22 million during the nine months ended September 30, 2020 and no cash dividends paid on common stock during the nine months ended September 30, 2021. We have suspended our common stock dividend for the near term.

Our debt repayments primarily relate to the use of real estate sale proceeds to partially retire our CMBS Facility debt, as well as repayments on the Revolving Facility. To the extent we continue disposing of real estate assets as a part of our property strategy review, we expect debt repayments to be a significant use of cash flow in financing activities. To the extent we generate certain excess liquidity, as defined in the Revolver Credit Agreement, we are required to make additional principal payments up to $5 million during the fourth quarter of 2021.

39

Liquidity and Capital Resources

Short-term liquidity

    As of September 30, 2021, we had total cash and cash equivalents of $174 million, which is our current primary source of liquidity. Our known liquidity requirements primarily consist of funds necessary to pay for operating expenses associated with our hotels and other expenditures, including corporate expenses, legal costs, interest and scheduled principal payments on our outstanding indebtedness, capital expenditures for renovations and maintenance at our hotels and other purchase commitments, primarily related to prior years’ storm and other casualty damages. We have no borrowing availability under our Revolving Facility and require consent from the Revolving Facility lenders to incur certain other indebtedness. Our CMBS Facility currently requires that all proceeds from hotel sales are applied to principal repayments. Accordingly, hotel sales are not expected to be a significant source of liquidity in the near term.

For the nine months ended September 30, 2021, we reported $69 million of net cash provided by operating activities and our cash and cash equivalents increased by $31 million. The increase was primarily due to improved operations in the second and third quarter of 2021. With the increased operating cash flow, we have been able to fund our Revolving Facility principal payments since inception of $50 million and still increase cash and cash equivalents. An additional $5 million principal payment was made in October 2021, as our liquidity (as defined in the Revolver Credit Agreement) exceeded $100 million.

Not included in our cash and cash equivalents is $45 million of lender escrows. These escrows are primarily held in reserve for future capital expenditures, as discussed below, hotel operations, insurance claim repairs and collateralized issued letters of credit. To the extent these escrows are not used for such purposes, we would expect the lender escrows to be returned to the Company as cash at the final maturity of the CMBS Facility.

As of September 30, 2021, we are subject to a cash trap on both our Revolving Facility and our CMBS Facility. Each of the cash traps impose restrictions on our use of cash, which, so long as there is no continuing event of default, generally allow for payment of our hotel operating expenses. Certain disbursements, primarily other corporate general and administrative expenditures, dividends to common stockholders and repurchases of our common stock, would require consent of our lenders. As of September 30, 2021, the cash and cash equivalents subject to these cash traps was $94 million. In the second quarter of 2021 we began to generate surplus operating cash from the hotels, where such surplus liquidity is controlled by our lenders for the disbursements noted above. Most uses of that cash for corporate purposes or payments to stockholders require lender consents. We expect to be subject to these cash traps through 2021. With the maturity of the Revolving Facility in May 2022 and continued similar operating trends through early 2022, we may be released from all lender cash traps during the second quarter of 2022. However, until such time, which cannot be assured, our cash balances and the source of those balances, including amounts subject to the cash traps, represent the critical determinant of our short term liquidity.

As of September 30, 2021, the Revolving Facility requires that we maintain a minimum liquidity of $67.5 million of cash and cash equivalents, as defined thereunder, at all times. The minimum liquidity amount is reduced by 50% of any additional repayment amounts utilized to repay and reduce commitments under the Revolving Facility.

We believe our cash will be adequate to meet anticipated requirements for operating expenses, debt service and other expenditures, including corporate expenses, payroll and related benefits, dividends to preferred stockholders, legal costs, and purchase commitments under existing operating conditions for the foreseeable future. To the extent that our hotel operations required additional liquidity, we would consider contributing additional funds into the cash traps.

Our CMBS Facility matures in June 2022 with three one-year extension options remaining. We currently intend to refinance the CMBS Facility before its maturity or extend the maturity for an additional year. Our Revolving Facility matures in May 2022 with no extension options contractually available. We currently intend to retire the Revolving Facility with cash on hand or from refinancing proceeds. Any future refinancing will be dependent on the current status of the capital markets, the economy and the economic recovery, particularly in the lodging industry, related to the COVID-19 pandemic.

As we execute our disposition strategy, we expect to utilize a significant portion of the net sales proceeds to retire our CMBS Facility. Accordingly, the disposition strategy may reduce our outstanding debt, and the related interest expense, but may not be a significant source of immediate liquidity. However, as we reduce our total outstanding debt, we may reduce our interest expense and improve our ability to obtain other capital sources.

Hotel Sales

    In the execution of our disposition strategy, during the nine months ended September 30, 2021, we sold 49 hotels for gross sales consideration of $281 million. These properties produced approximately $20 million of annual Hotel Adjusted EBITDAre in

40

2019; however, these sold hotels also incurred approximately $7 million of annual capital expenditures during 2019. In addition, the annual interest savings from the partial debt repayment, based on interest rates as of September 30, 2021, are estimated at $8 million.

    The provisions of our CMBS Facility require that a portion of, and in certain instances all, net proceeds from a secured hotel sale be applied to the outstanding principal balance. Due to disruptions from the COVID-19 pandemic, currently all sales proceeds are required to be applied to pay down debt and accordingly, net sales proceeds will not be a near term source of liquidity. However, as the principal balance is reduced and other factors change over time, particularly if operations improve or lower EBITDA earning hotels are sold, other uses of net disposition proceeds may be available to us. Further, any remaining net sales proceeds after any applicable debt paydowns are currently subject to our lender cash traps.

    As of September 30, 2021, we have 55 remaining non-core hotels. These hotels are older, have lower RevPAR and have higher capital expenditures. We anticipate we will complete the sale of these properties by the end of 2022. The volume and timing of future hotel sales activity could be dependent on the participation by lenders and continuation of these incentive programs as well as the timing, scope and success of vaccine deployments.

We believe the completion of our disposition strategy will reposition our hotel portfolio to be more focused on our key markets with younger hotels, higher RevPAR and less capital requirements. However, as we dispose of the non-core hotels we would expect to report decreased revenue and Hotel Adjusted EBITDAre.

Capital Expenditures and Commitments

    Our capital expenditures are generally paid using cash on hand and, to the extent available, cash flows from operations, although other sources discussed herein may also be used. During the nine months ended September 30, 2021, we invested $13 million in hotel related capital expenditures. During the nine months ended September 30, 2020, we invested $18 million in capital expenditures. Capital expenditures for the year ended December 31, 2019, related to the 49 hotels sold during the nine months ended September 30, 2021, were $7 million.

    As of September 30, 2021, we had outstanding commitments under capital expenditure and other contracts of $12 million related to certain continuing redevelopment and renovation projects, casualty replacements, information technology enhancements and other hotel service contracts in the ordinary course of business. Approximately $8 million of this amount relates to long-term hotel service contracts payable over approximately three years. As the services related to these contracts are standard for our hotel operations, we expect to continue these service contracts either with the current provider or a new provider at the end of the term; however, if cancellation of a contract occurred, our commitment would be any costs incurred up to the cancellation date, in addition to any costs associated with the discharge of the contract.

    Due to the impact of the COVID-19 pandemic, we are currently deferring all non-committed, non-essential capital investments and expenditures, with the exception of life safety or critical operational needs, resulting in an expected annual capital spend estimate of $15 million to $20 million. As a result of deferring certain of these capital expenditures as a result of the pandemic, we may incur higher levels of capital expenditures in future periods. Should operations improve and provide additional liquidity, we expect to prioritize certain of these deferred capital expenditures as well as consider revenue enhancing improvements. Accordingly, such capital expenditures may begin to increase over time and could include a mixture of expenditures to preserve existing revenue as well as to generate incrementally new revenues. Our ability to fund those capital expenditures will be dependent on cash flow from operations and other sources discussed. Until post COVID-19 pandemic operations have stabilized, there is no assurance those funding sources will be available or of sufficient size when needed.

Long-term Liquidity

    As of September 30, 2021, we had cash and cash equivalents of $174 million and no borrowing availability under our Revolving Facility. We do not expect to have any additional borrowing capacity under our Revolving Facility for the remainder of the Revolving Facility term. As discussed above, our loan agreements require that we maintain minimum liquidity requirements and subject us to lender cash traps. Due to the disruptions to our operations from the COVID-19 pandemic and the contractual lender requirements related to these lender provisions, we are uncertain when or if these provisions will be removed prior to the full maturity of each of these debts. Maintaining minimum cash amounts and being subject to cash traps and potential excess liquidity principal payments will restrict our access to portions of our cash on hand and affect our long-term liquidity, even if our operations improve in the future. Accordingly, these lender provisions may impair our access to liquidity for new investments, stockholder payments and other corporate initiatives. We will seek to amend or refinance these debts prior to their maturity, but there is no assurance such refinancings are available to us or on favorable terms.

The Revolving Facility matures in May 2022 with no extension options. We intend to fund the repayment of the outstanding principal from existing cash and cash equivalents or proceeds from refinancing.

41

    The CMBS Facility matures in June 2022 with three remaining one-year extension options. As of September 30, 2021, the outstanding principal balance on the CMBS Facility is $477 million, a reduction of $558 million from the initial aggregate principal amount of this debt, due primarily to proceeds from hotel sales. As discussed above, we expect that future hotel sales will also be applied to reduce the outstanding principal balance. Accordingly, we may refinance the existing CMBS Facility prior to the next scheduled maturity if favorable terms are available. Otherwise, we would expect to exercise our extension option.

The Series A Preferred Stock has a mandatory redemption repayment of $15 million by 2028, with elective redemption by us beginning in 2025. Due to exceeding a leverage ratio of 7.5 to 1.0, the Series A Preferred Stock dividend rate was set at 15% per annum, beginning July 1, 2020, an increase from the previous dividend rate of 13%. Beginning on October 1, 2021, our leverage ratio was less than the 7.5 to 1.0 ratio, and accordingly, the Series A Preferred Stock dividend rate will return to 13% per annum for the fourth quarter of 2021.

Other than the daily liquidity requirement under our Revolving Facility, the Revolving Facility, CMBS Facility and Series A Preferred Stock do not have financial covenant requirements that would provide rights for the holders to demand payment of the outstanding amounts due to covenant or financial metric requirements. However, as discussed above, failure to meet certain financial metric requirements have resulted in cash traps, an increased dividend rate and increased amounts of hotel sales proceeds to be used to pay down outstanding debt.

The Revolving Facility and CMBS Facility each uses London Interbank Offering Rate (“LIBOR”) as a benchmark for establishing the interest rate. As a result of reference rate reform, the LIBOR index for new contracts will cease as of December 31, 2021 and the LIBOR index will no longer be published after June 30, 2023. Our Revolving Facility and CMBS Facility provide for alternate interest rate calculations, which could be implemented prior to June 30, 2023. There is no assurance that such alternative interest rate calculations will not increase our cost of borrowing under the Revolving Facility and CMBS Facility or their refinanced debt.

We may also access other debt and equity capital sources, which may include refinancing of the CMBS Facility. However, due to restrictions from the Revolving Facility, our access to such sources may require us to fully retire and terminate the Revolving Facility. Further, due to operating disruptions from the COVID-19 pandemic, such capital sources may require significant cash reserves. Accordingly, there is no assurance that such capital sources would be available to us or that net proceeds available would be sufficient to retire the Revolving Facility or provide significant net liquidity to us.

Dividends and Share Repurchases

    Dividends are authorized at the discretion of our board of directors based on an analysis of our prior performance, market distribution rates of our industry peer group, our desire to minimize our income tax liability, expectations of performance for future periods, including actual and anticipated operating cash flow, changes in market capitalization rates for investments suitable for our portfolio, capital expenditure needs, dispositions, general financial condition and other factors that our board of directors deems relevant.  The board’s decision will be influenced, in part, by its obligation to ensure that we maintain our status as a REIT.

    To date, income tax capital gains have not been a significant factor in our taxable income. However, as we execute our disposition strategy, we may recognize increased capital gains, which may result in additional regular or special distributions. Such distributions are not required in order to maintain REIT status and are at the discretion of our board of directors.

    Our Revolver Credit Agreement restricts our ability to pay cash dividends on our common stock, except in circumstances when such dividends are required to maintain our REIT tax status.

On March 21, 2019, our board of directors authorized a $50 million share repurchase program. Due to restrictions imposed by the covenants governing our indebtedness, our share repurchase program has been temporarily suspended and no share repurchases have been made under the program since September 2019. As of September 30, 2021, approximately $21 million remained available for share repurchases under the program authorized by our board of directors.

Off-balance Sheet Arrangements

    We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

42

New Accounting Pronouncements

    See Note 2 “Significant Accounting Policies and Recently Issued Accounting Standards” to our condensed consolidated financial statements included elsewhere in this report for a description of recently adopted accounting pronouncements.

Critical Accounting Policies and Estimates

    The preparation of our financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the condensed consolidated financial statements, the reported amounts of revenues and expenses during the reporting periods and the related disclosures in the condensed consolidated financial statements and accompanying footnotes. On an ongoing basis, we evaluate these estimates and judgments based on historical experiences and various other factors that are believed to reflect the current circumstances. While we believe our estimates, assumptions and judgments are reasonable, they are based on information presently available. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K describes the critical accounting estimates used in preparation of our condensed consolidated financial statements.

    There have been no material changes to our significant accounting policies or other new significant estimates that are considered material to our condensed consolidated financial statements as compared to the critical accounting policies and estimates as described in our Annual Report on Form 10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

    As of September 30, 2021, our management, with the participation of our principal executive officer and principal financial officer, has evaluated our 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”). Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired controls objectives. Based upon that evaluation, our principal executive officer and principal financial officer have concluded that, as of September 30, 2021, our disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control Over Financial Reporting

    There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

43

PART II ‑ OTHER INFORMATION

Item 1.    Legal Proceedings

    We are not currently party to, and none of our properties are currently subject to, any material legal proceedings. From time to time, we are a party to various claims and legal proceedings that arise in the ordinary course of business.

Item 1A.    Risk Factors

    For information regarding factors that could affect the Company's results of operations, financial condition and liquidity, see the risk factors discussed in “Part I - Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020. The following additional risk factor should be read in conjunction with the risk factors contained in our Annual Report on Form 10-K.

The failure to complete the transaction announced on November 8, 2021 in a timely manner or at all could negatively impact the market price of our common stock, as well as our future business and our financial condition, results of operations and cash flows.

On November 8, 2021, we announced our entry into a Merger Agreement providing for the acquisition of our business by a joint venture between affiliates of Highgate Hotels, L.P. and Cerberus Capital Management, L.P. (the “Proposed Transaction”). Completion of the Proposed Transaction is subject to various risks and uncertainties related to, among other things, its terms, timing, structure, benefits, costs and completion; required approvals to complete the Proposed Transaction by our stockholders and the receipt of certain regulatory approvals, to the extent required, and the timing and conditions for such approvals; and the satisfaction of the closing conditions to the Proposed Transaction. There is no assurance that all of the various conditions will be satisfied, or the Proposed Transaction will be completed on the proposed terms, within the expect timeframe, or at all. Furthermore, there are additional inherent risks in the Proposed Transaction, including the risks detailed below.

During the period prior to the closing of the Proposed Transaction, our business is exposed to certain inherent risks due to the effect of the announcement or pendency of the Proposed Transaction on our business relationships, financial condition, operating results and business, including:

•the possibility of disruption to our business and operations, including diversion of management attention and resources;

•the inability to attract and retain key personnel, and the possibility that our current employees could be distracted, and their productivity declines as a result, due to uncertainty regarding the Proposed Transaction;

•limitations on our ability to pursue alternative business opportunities or make changes to our business pending the completion of the Proposed Transaction, and other restrictions on our ability to conduct our business;

•our inability to solicit other acquisition proposals during the pendency of the Proposed Transaction;

•the amount of the costs, fees, expenses and charges related to the Merger Agreement and the Proposed Transaction; and

•other developments beyond our control, including, but not limited to, changes in domestic or global economic conditions that may affect the timing or success of the Proposed Transaction.

The Proposed Transaction may be delayed, and may ultimately not be completed, due to a number of factors, including:

•the failure to satisfy the conditions to the completion of the Proposed Transaction, including the possibility that a Material Adverse Effect (as defined in the Merger Agreement) on the Company could permit Parent (as defined in the Merger Agreement) not to close the Proposed Transaction; and

•potential additional future stockholder litigation and other legal and regulatory proceedings including completion of our settlement of the IRS Matter, which could delay or prevent the Proposed Transaction.

If the Proposed Transaction does not close, our business and stockholders would be exposed to additional risks, including:

•to the extent that the current market price of our stock reflects an assumption that the Proposed Transaction will be completed, the price of our common stock could decrease if the Proposed Transaction is not completed.

•investor confidence could decline, additional stockholder litigation could be brought against us, relationships with existing and prospective customers, service providers, investors, lenders and other business partners may be adversely impacted, we may be unable to retain key personnel, and profitability may be adversely impacted due to costs incurred in connection with the Proposed Transaction.

•the requirement that we pay a termination fee of $29 million if the Merger Agreement is terminated in certain circumstances, including by the Company to enter into a superior proposal or by Parent because our board of directors withdraws its recommendation in favor of the Proposed Transaction.

44

Even if successfully completed, there are certain risks or drawbacks to our stockholders from the Proposed Transaction, including:

•other than potential additional consideration payable to our stockholders based upon resolution of certain tax proceedings with the IRS, the amount of cash to be paid under the Merger Agreement is fixed and will not be adjusted for changes in our business, assets, liabilities, prospects, outlook, financial condition or operating results or in the event of any change in the market price of, analyst estimates of, or projections relating to, our common stock;

•there is no assurance that stockholders will receive any additional consideration as a result of the resolution of tax proceedings with the IRS;

•the fact that receipt of the all-cash per share merger consideration under the Merger Agreement is taxable to stockholders that are treated as U.S. holders for U.S. federal income tax purposes; and

•the fact that, if the Proposed Transaction is completed, our stockholders will forego the opportunity to realize the potential long-term value of the successful execution of our current strategy as an independent company.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

(a)Unregistered Sales of Securities

None.

(b)Use of Proceeds

None.

(c)Issuer Purchases of Equity Securities

The following table sets forth information with respect to shares of our common stock we purchased for the quarter ended September 30, 2021:

Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
July 1 through July 31, 2021	1,066	$	11.24	—	$	21,060,769
August 1 through August 31, 2021	2,039	$	14.38	—	$	21,060,769
September 1 through September 30, 2021	—	$	—	—	$	21,060,769
Total	3,105	$	13.30	—

_________

(1)Reflects shares purchased to satisfy tax withholding obligations incurred upon the vesting of equity-based stock awards to our employees under our 2018 Omnibus Incentive Plan.

(2)On March 21, 2019, our board of directors authorized a $50 million share repurchase program. We may purchase shares of common stock in the open market, in privately negotiated transactions or in such other manner as determined by us, including through repurchase plans complying with the rules and regulations of the SEC. The share repurchase program does not obligate us to repurchase any dollar amount or number of shares of common stock and the program may be suspended or discontinued at any time. Due to restrictions imposed by the covenants governing our indebtedness, our share repurchase program has been temporarily suspended.

Item 3.    Defaults Upon Senior Securities

    None.

Item 4.    Mine Safety Disclosures

    Not applicable.

Item 5.    Other Information

    None.

45

Item 6.    Exhibits

    The following is a list of all exhibits filed or furnished as part of this report: 

Exhibit No.	Description
2.1	Separation and Distribution Agreement, dated as of January 17, 2018, by and between La Quinta Holdings Inc. and CorePoint Lodging Inc. (incorporated by reference to Exhibit 2.1 to the Registrant’s Registration Statement on Form 10/A filed on April 3, 2018 (File no. 001-38168))
2.2	Agreement and Plan of Merger, dated as of November 6, 2021, by and among CorePoint Lodging Inc., Cavalier Acquisition JV LP and Cavalier Acquisition Owner LP (incorporated by reference to Exhibit 2.1 to Form 8-K filed on November 8, 2021)
31.1	Certification of Periodic Report by Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Periodic Report by Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
101	The following materials from the Company’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2021 formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Statements of Operations, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Cash Flows, (iv) the Consolidated Statements of Equity and (v) related notes.
104	Cover Page Interactive Data file (formatted as Inline XBRL and contained in Exhibit 101)

    The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

46

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.

		COREPOINT LODGING INC.
		(Registrant)
Date:	November 8, 2021	By:	/s/ Keith A. Cline
			Keith A. Cline
			President and Chief Executive Officer
			(Principal Executive Officer)
Date:	November 8, 2021	By:	/s/ Daniel E. Swanstrom II
			Daniel E. Swanstrom II
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)
Date:	November 8, 2021	By:	/s/ Howard Garfield
			Howard Garfield
			Senior Vice President, Chief Accounting Officer and Treasurer
			(Principal Accounting Officer)

47

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Keith A. Cline, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021 of CorePoint Lodging Inc.;

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:

a) 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;

b) 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;

c) 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

d) 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 directors (or persons performing the equivalent functions):

a) 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

b) 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.

November 8, 2021	/s/ Keith A. Cline
	Keith A. Cline
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Daniel E. Swanstrom II, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021 of CorePoint Lodging Inc.;

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:

a) 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;

b) 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;

c) 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

d) 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 directors (or persons performing the equivalent functions):

a) 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

b) 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.

November 8, 2021	/s/ Daniel E. Swanstrom II
	Daniel E. Swanstrom II
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

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 CorePoint Lodging Inc. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Keith A. Cline, President, Chief Executive Officer and Director of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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 Company.

Date: November 8, 2021	/s/ Keith A. Cline
	Keith A. Cline
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-32.2

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 CorePoint Lodging Inc. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel E. Swanstrom II, Executive Vice President and Chief Financial Officer, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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 Company.

Date: November 8, 2021	/s/ Daniel E. Swanstrom II
	Daniel E. Swanstrom II
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

XML

Cover Page - shares	9 Months Ended
	Sep. 30, 2021	Oct. 29, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2021
Document Transition Report	false
Entity File Number	001-38168
Entity Registrant Name	CorePoint Lodging Inc.
Entity Incorporation, State or Country Code	MD
Entity Tax Identification Number	82-1497742
Entity Address, Address Line One	125 E. John Carpenter Freeway, Suite 1650
Entity Address, City or Town	Irving,
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	75062
City Area Code	972
Local Phone Number	893-3199
Title of 12(b) Security	Common Stock, $0.01 par value per share
Trading Symbol	CPLG
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		58,445,063
Entity Central Index Key	0001707178
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Millions	Sep. 30, 2021	Dec. 31, 2020
Real estate:
Land	$ 446	$ 511
Buildings and improvements	1,590	1,813
Furniture, fixtures, and other equipment	239	293
Gross operating real estate	2,275	2,617
Less accumulated depreciation	(1,018)	(1,083)
Net operating real estate	1,257	1,534
Construction in progress	2	5
Total real estate, net	1,259	1,539
Right of use assets	14	16
Cash and cash equivalents	174	143
Accounts receivable	18	13
Lender and other escrows	45	35
Other assets	18	20
Total Assets	1,528	1,766
Liabilities:
Debt, net	537	810
Mandatorily redeemable preferred stock	15	15
Accounts payable and accrued expenses	63	48
Other liabilities	34	36
Total Liabilities	649	909
Commitments and contingencies
Equity:
Common stock, $0.01 par value per share; 1.0 billion shares authorized; 58.4 million and 58.0 million shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively	1	1
Additional paid-in-capital	971	963
Accumulated deficit	(95)	(109)
Noncontrolling interest	2	2
Total Equity	879	857
Total Liabilities and Equity	$ 1,528	$ 1,766

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Common Stock, par value (in usd per share)	$ 0.01	$ 0.01
Common Stock, shares authorized (in shares)	1,000,000,000.0	1,000,000,000.0
Common Stock, shares issued (in shares)	58,400,000	58,000,000.0
Common Stock, shares outstanding (in shares)	58,400,000	58,000,000.0

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Revenues:
Revenues	$ 142	$ 107	$ 377	$ 325
Operating Expenses:
Property tax, insurance and other	10	14	37	45
Management and royalty fees	14	11	37	32
Corporate general and administrative	10	7	24	21
Depreciation and amortization	33	39	108	121
Gain on sales of real estate	(29)	(27)	(81)	(59)
Gain on casualty	0	(4)	(3)	(7)
Impairment loss	4	0	4	54
Total Operating Expenses	120	112	346	437
Operating income (loss)	22	(5)	31	(112)
Other Income (Expense):
Interest expense	(6)	(9)	(20)	(35)
Other income, net	1	3	3	5
Total Other Expenses	(5)	(6)	(17)	(30)
Income (loss) before income taxes	17	(11)	14	(142)
Income tax benefit	0	3	0	6
Net income (loss)	$ 17	$ (8)	$ 14	$ (136)
Weighted average common shares outstanding:
Weighted average common shares outstanding - basic (in shares)	57.1	56.7	57.0	56.6
Weighted average common shares outstanding - diluted (in shares)	61.3	56.7	61.0	56.6
Earnings (loss) per share:
Basic earnings (loss) per share (in usd per share)	$ 0.30	$ (0.14)	$ 0.25	$ (2.40)
Diluted earnings (loss) per share (in usd per share)	$ 0.28	$ (0.14)	$ 0.23	$ (2.40)
Rooms
Revenues:
Revenues	$ 139	$ 105	$ 369	$ 318
Operating Expenses:
Cost of goods and services	58	52	161	171
Other
Revenues:
Revenues	3	2	8	7
Operating Expenses:
Cost of goods and services	$ 20	$ 20	$ 59	$ 59

XML

Condensed Consolidated Statements of Equity (Unaudited) - USD ($) shares in Millions, $ in Millions	Total	Common Stock	Additional Paid-in- Capital	Retained  Earnings (Accumulated Deficit)	Noncontrolling Interest
Beginning balance (in shares) at Dec. 31, 2019		57.2
Beginning balance at Dec. 31, 2019	$ 1,037	$ 1	$ 954	$ 80	$ 2
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(21)			(21)
Dividends on common stock	(11)			(11)
Equity-based compensation (in shares)		0.9
Equity-based compensation	2		2
Ending balance (in shares) at Mar. 31, 2020		58.1
Ending balance at Mar. 31, 2020	1,007	$ 1	956	48	2
Beginning balance (in shares) at Dec. 31, 2019		57.2
Beginning balance at Dec. 31, 2019	1,037	$ 1	954	80	2
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(136)
Ending balance (in shares) at Sep. 30, 2020		58.2
Ending balance at Sep. 30, 2020	898	$ 1	962	(67)	2
Beginning balance (in shares) at Mar. 31, 2020		58.1
Beginning balance at Mar. 31, 2020	1,007	$ 1	956	48	2
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(107)			(107)
Equity-based compensation (in shares)		0.1
Equity-based compensation	3		3
Ending balance (in shares) at Jun. 30, 2020		58.2
Ending balance at Jun. 30, 2020	903	$ 1	959	(59)	2
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(8)			(8)
Equity-based compensation (in shares)		0.0
Equity-based compensation	3		3
Ending balance (in shares) at Sep. 30, 2020		58.2
Ending balance at Sep. 30, 2020	$ 898	$ 1	962	(67)	2
Beginning balance (in shares) at Dec. 31, 2020	58.0	58.0
Beginning balance at Dec. 31, 2020	$ 857	$ 1	963	(109)	2
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(31)			(31)
Equity-based compensation (in shares)		0.6
Equity-based compensation	4		4
Ending balance (in shares) at Mar. 31, 2021		58.6
Ending balance at Mar. 31, 2021	$ 830	$ 1	967	(140)	2
Beginning balance (in shares) at Dec. 31, 2020	58.0	58.0
Beginning balance at Dec. 31, 2020	$ 857	$ 1	963	(109)	2
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	$ 14
Ending balance (in shares) at Sep. 30, 2021	58.4	58.4
Ending balance at Sep. 30, 2021	$ 879	$ 1	971	(95)	2
Beginning balance (in shares) at Mar. 31, 2021		58.6
Beginning balance at Mar. 31, 2021	830	$ 1	967	(140)	2
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	28			28
Equity-based compensation	2		2
Purchase of common stock (in shares)		(0.1)
Purchase of common stock	(1)		(1)
Ending balance (in shares) at Jun. 30, 2021		58.5
Ending balance at Jun. 30, 2021	859	$ 1	968	(112)	2
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	17			17
Equity-based compensation (in shares)		(0.1)
Equity-based compensation	$ 3		3
Ending balance (in shares) at Sep. 30, 2021	58.4	58.4
Ending balance at Sep. 30, 2021	$ 879	$ 1	$ 971	$ (95)	$ 2

XML

Condensed Consolidated Statements of Equity (Unaudited) (Parenthetical)	3 Months Ended
	Mar. 31, 2020 $ / shares
Statement of Stockholders' Equity [Abstract]
Dividends on common stock, per share	$ 0.20

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Cash flows from operating activities:
Net income (loss)	$ 17	$ (8)	$ 14	$ (136)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization			108	121
Amortization of deferred costs and other assets			1	11
Gain on sales of real estate	(29)	(27)	(81)	(59)
Gain on casualty			(3)	(7)
Equity-based compensation expense			7	8
Impairment loss	4	0	4	54
Deferred income tax expense			0	(2)
Changes in assets and liabilities:
Accounts receivable			1	(6)
Other assets			10	4
Accounts payable and accrued expenses			8	(8)
Other liabilities			0	(1)
Net cash provided by (used in) operating activities			69	(21)
Cash flows from investing activities:
Capital expenditures, primarily investments in existing real estate			(13)	(18)
Lender and other escrows			(8)	(10)
Insurance proceeds related to real estate casualties			7	11
Proceeds from sales of real estate			258	205
Net cash provided by investing activities			244	188
Cash flows from financing activities:
Proceeds from debt			0	110
Repayment of debt			(273)	(164)
Debt issuance costs			(1)	(1)
Payment of insurance financing			(7)	(10)
Dividends on common stock			0	(22)
Purchase of common stock			(1)	0
Net cash used in financing activities			(282)	(87)
Increase in cash and cash equivalents and restricted cash			31	80
Cash and cash equivalents and restricted cash at the beginning of the period			143	101
Cash and cash equivalents and restricted cash at the end of the period	174	181	174	181
The following table provides a reconciliation of cash, cash equivalents and restricted cash within the condensed consolidated balance sheets to the amount shown in the condensed consolidated statements of cash flows:
Cash and cash equivalents	174	180	174	180
Restricted cash (included in other assets)	0	1	0	1
Total cash, cash equivalents and restricted cash	$ 174	$ 181	$ 174	$ 181

XML

Organization and Basis of Presentation

9 Months Ended

Sep. 30, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Basis of Presentation

Organization and Basis of Presentation

Organization and Business

    CorePoint Lodging Inc., a Maryland corporation, is a publicly traded (NYSE: CPLG) self-administered lodging real estate investment trust (“REIT”) strategically focused on the midscale and upper midscale lodging segments, with a portfolio of select-service hotels located in the United States (“U.S.”). As used herein, “CorePoint,” “we,” “us,” “our,” or the “Company” refer to CorePoint Lodging Inc. and its subsidiaries unless the context otherwise requires. As of September 30, 2021, we owned interests in 160 hotels with approximately 22,000 rooms. As of December 31, 2020, we owned interests in 209 hotels with approximately 27,800 rooms. All but one of our hotels is wholly-owned.

For U.S. federal income tax purposes, we made an election to be taxed as a REIT, effective May 31, 2018, with the filing of our U.S. federal income tax return for the year ended December 31, 2018. We believe that we are organized and operate in a REIT-qualified manner, and we intend to continue to operate as such. As a REIT, we are generally not subject to federal corporate income tax on the portion of our net income that is currently distributed to our stockholders. To maintain our REIT status, we are required to meet several requirements as provided by the Internal Revenue Code of 1986, as amended (the “Code”). These include that the Company cannot operate or manage our hotels. Therefore, we lease the hotel properties to CorePoint TRS L.L.C., our wholly-owned taxable REIT subsidiary (“CorePoint TRS”), which engages third-party eligible independent contractors to manage the hotels. CorePoint TRS is subject to federal, state and local income taxes. To maintain our REIT status, we must distribute annually at least 90% of our “REIT taxable income,” as defined by the Code, to our stockholders. We intend to continue to meet our distribution and other requirements as required by the Code.

On November 6, 2021, we entered into an agreement and plan of merger. See Note. 16 “Subsequent Events” for details.

Interim Unaudited Financial Information

    The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted from this Quarterly Report on Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The results for the interim periods shown in this report are not necessarily indicative of future financial results. The accompanying condensed consolidated financial statements have not been audited by our independent registered public accounting firm. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, including normal recurring items, necessary to present fairly our condensed consolidated financial position as of September 30, 2021 and December 31, 2020, and our condensed consolidated results of operations and cash flows for the periods ended September 30, 2021 and 2020.

    The accompanying condensed consolidated financial statements include our accounts, as well as our wholly-owned subsidiaries and any consolidated variable interest entities (“VIEs”). We recognize noncontrolling interests for the proportionate share of operations for ownership interests not held by our stockholders. All intercompany transactions have been eliminated.

Reclassification

Certain amounts previously reflected in the prior year condensed consolidated balance sheet have been reclassified to conform to our September 30, 2021 presentation. The condensed consolidated balance sheet as of December 31, 2020 reflects a line “lender and other escrows” that was previously presented within the line “other assets.” This reclassification, which was due to the significance of lender and other escrows, had no effect on the previously reported total assets.

Use of Estimates

    The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. These estimates include such items related to the accounting for: income taxes, including assessments of probabilities of realization of income tax benefits; impairment of long-lived assets, including applicable cash flow projections, holding periods and fair value evaluations; and depreciation and amortization including determination of estimated useful lives. Actual results could differ from those estimates.

XML

Significant Accounting Policies and Recently Issued Accounting Standards

9 Months Ended

Sep. 30, 2021

Accounting Policies [Abstract]

Significant Accounting Policies and Recently Issued Accounting Standards

Significant Accounting Policies and Recently Issued Accounting Standards

Investment in Real Estate

    Property and equipment and other investments in real estate are stated at cost less accumulated depreciation computed using a straight-line method over the following estimated useful life of each asset. Buildings and improvements have an initial estimated useful life of five to 40 years and furniture, fixtures and other equipment have an estimated useful life of two to ten years.

We capitalize expenditures that increase the overall value of an asset or extend an asset’s life, typically associated with hotel refurbishments, renovations, and major repairs. Such costs primarily include third-party contract labor, materials, professional design and other direct costs, and during the redevelopment and renovation period, interest, real estate taxes and insurance costs. The interest, real estate taxes and insurance capitalization period begins when the activities related to the development have begun and ceases when the project is substantially complete and the assets are held available for use or occupancy. Once such a project is substantially complete and the associated assets are ready for intended use, interest, real estate taxes and insurance costs are no longer capitalized. Construction in progress primarily includes capitalized costs for ongoing projects that have not yet been put into service. Normal maintenance and repair costs are expensed as incurred.

Impairment of Real Estate Related Assets

    For our investments in real estate, we monitor events and changes in circumstances indicating that the carrying amounts of the real estate assets may not be recoverable during the expected holding period. When such events or changes are present, we assess the property’s recoverability by comparing the carrying amount of the asset to our estimate of the aggregate undiscounted future operating cash flows expected to be generated over the holding period of the asset including its eventual disposition.  If the carrying amount exceeds the aggregate undiscounted future operating cash flows, we recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property. Any such impairment is treated for accounting purposes similar to an asset acquisition at the estimated fair value, which includes establishing a new cost basis and the elimination of the asset’s accumulated depreciation and amortization.

    In evaluating our investments for impairment, we undergo continuous evaluations of property level performance and real estate trends, and management makes several estimates and assumptions, including, but not limited to, the projected date of disposition, estimated sales price and future cash flows of each property during our estimated holding period. If our analysis or assumptions regarding the projected cash flows expected to result from the use and eventual disposition of our properties change, we incur additional costs and expenses during the holding period, or our expected hold periods change, we may incur future impairment losses.

Sales of Real Estate

    We classify hotels as held for sale when the criteria are met, in accordance with GAAP.  At that time, we present the assets and obligations associated with the real estate held for sale separately in our condensed consolidated balance sheet, and we cease recording depreciation and amortization expense related to that asset.  Real estate held for sale is reported at the lower of its carrying amount or its estimated fair value less estimated costs to sell.

    Upon the disposition of a property, we recognize a gain or loss at a point in time when we determine control of the underlying asset has been transferred to the buyer. Our performance obligation is generally satisfied at the closing of the transaction. Any continuing involvement is analyzed as a separate performance obligation in the contract, and a portion of the sales price is allocated to each performance obligation. There is significant judgment applied to estimate the amount of any variable consideration identified within the sales price and assess its probability of occurrence based on current market information, historical transactions, and forecasted information that is reasonably available.

    For sales of real estate (or assets classified as held for sale), we evaluate whether the disposition is a strategic shift that will have a major effect on our operations and financial results. When a disposition represents a strategic shift that will have a major effect on our operations and financial results, it will be classified as discontinued operations in our condensed consolidated financial statements for all periods presented.  

Cash and Cash Equivalents

    We classify all cash on hand, demand deposits with financial institutions, and short-term highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents are stated at cost, which approximates fair market value. Our Revolver Credit Agreement requires us to maintain a minimum liquidity of cash and cash equivalents, as defined, at all times. See Note 5 “Debt” for additional information.

    We classify cash and cash equivalents as restricted cash when contractual agreements or arrangements impose restrictions on our ability to access and utilize the cash and cash equivalent amounts for our operations.

Accounts Receivable

    Accounts receivable primarily consists of receivables due from insurance settlements, hotel guests, credit card companies, our hotel manager, and hotel buyers with deferred purchase price arrangements. Our receivables are carried at estimated collectable amounts. We periodically evaluate our receivables for collectability based on expected losses incurred over the life of the receivable, considering our historical experience, the length of time receivables are past due and the financial condition of the debtor. Accounts receivable are written off when collection is not probable. We record uncollectible operating lease receipts as a direct offset to room revenues. Our insurance settlement receivables are recorded based upon the terms of our insurance policies and our estimates of insurance losses.  

Debt and Deferred Debt Issuance Costs

    Deferred debt issuance costs include costs incurred in connection with issuance of debt, including costs associated with the entry into our loan agreements and revolving credit facility, and are presented as a direct reduction from the carrying amount of debt. These debt issuance costs are deferred and amortized to expense on a straight-line basis over the term of the debt, which approximates the effective interest amortization method. This amortization expense is included as a component of interest expense. When debt is paid prior to its scheduled maturity date and the underlying terms are materially modified, the remaining carrying value of deferred debt issuance costs, along with certain other payments to lenders, is included in loss on extinguishment of debt.

Lessee Accounting

    We determine if an arrangement is a lease at inception. Our operating lease agreements are primarily for ground leases and our corporate office lease, where the asset is classified within “right of use assets” and the operating lease liability is classified within “other liabilities” in our condensed consolidated balance sheets.

    Right of use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Right of use assets and operating lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Our variable lease payments consist of payments based on a rate or index established subsequent to the lease commencement date and non-lease services related to the ground lease, primarily real estate taxes. Variable lease payments are excluded from the right of use assets and operating lease liabilities and are recognized in the period in which the obligation for those payments is incurred. As our leases do not provide an implicit rate, we use our incremental borrowing rate. Our incremental borrowing rate is based on information available at the commencement date using our actual borrowing rates commensurate with the lease terms and a fully levered borrowing. Extension options on our leases are included in our minimum lease terms when they are reasonably certain to be exercised. In our evaluation of the lease term, we consider other arrangements, primarily our debt and franchise agreements, which may have economic consequences related to failure to renew certain ground leases. For accounting purposes, such lease terms are not adjusted unless the contractual terms are modified. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. We have elected to treat rent concessions related to the COVID-19 pandemic as variable lease payments.

Fair Value Measurement

    Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. In evaluating the fair value of both financial and non-financial assets and liabilities, GAAP establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels, which are as follows:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Valuations in this category are inherently less reliable than actively

quoted market prices due to the degree of subjectivity involved in determining appropriate methodologies and the applicable underlying observable market assumptions. We consider contractual pricing from a hotel under contract for sale as a Level 2 input.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. These inputs cannot be validated by readily determinable market data and generally involve considerable judgment by management.

    We use the highest level of observable market data if such data is available without undue cost and effort. 

Derivative Instruments

    We use derivative instruments as part of our overall strategy to manage our exposure to market risks associated with fluctuations in interest rates. We regularly monitor the financial stability and credit standing of the counterparties to our derivative instruments. We do not enter into derivative financial instruments for trading or speculative purposes.

    We record all derivatives at fair value. On the date the derivative contract is entered into, we designate the derivative as one of the following: a hedge of a forecasted transaction or the variability of cash flows to be paid (“Cash Flow Hedge”), a hedge of the fair value of a recognized asset or liability (“Fair Value Hedge”), or an undesignated hedge instrument. As of September 30, 2021 and December 31, 2020, all of our derivative instruments were interest rate caps, and none are designated as hedge instruments. Changes in fair value of undesignated hedge instruments are recorded in current period earnings.

Revenue Recognition

    Our revenues primarily consist of operating lease revenues from room rentals, which are accounted for under GAAP in accordance with lease accounting standards. Room revenue is recognized as earned on a daily basis, net of customer incentive discounts, cash rebates, and refunds. Other lease revenues primarily include lease revenue from restaurants, billboards and cell towers, all of which are operating leases. Such leases are recognized on a straight-line basis over the term of the lease when collections are considered probable and as earned and collected when collections are not considered probable. Uncollectible lease amounts are recorded as a direct offset to revenues.

    As a lessor, our operating leases do not contain purchase options or require significant assumptions or judgments. Some of our operating leases contain extension options. For those with extension options we assess the likelihood such options will be exercised in determining the lease term.

    Customer revenues include other hotel guest revenues generated by the incidental support of hotel operations and are recognized under the revenue accounting standard as the service obligation is completed.

Purchase of Common Stock

    Purchases of common stock are recorded on the trade date at cost, including commissions and other costs, through a removal of the stated par value with the excess recorded as additional paid-in-capital.

Equity-Based Compensation

    We have a stock-based incentive award plan for our employees and directors, which primarily includes time-based and performance-based awards. We recognize the cost of services received in an equity-based payment transaction with an employee or director as services are received and record either a corresponding increase in equity or a liability, depending on whether the instruments granted satisfy the equity or liability classification criteria. Equity-based compensation cost for these equity awards is measured at the grant date and is based on the estimated fair value of the award.

    The equity-based compensation expense is recognized for awards earned or expected to be earned. Accordingly, the compensation expense for all equity awards is recognized straight-line over the vesting period of the last separately identified vesting portion of the award. Forfeitures for time-based and performance-based awards are recognized as they occur. Performance awards with market-based criteria are recorded at fair value at the date of the grant and are not adjusted based on future performance. Performance awards with criteria other than market-based are assessed at each balance sheet date with respect to the expected achievement of the target. Equity-based compensation expense is classified in corporate general and administrative expenses.

Earnings Per Share

    Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of our common stock outstanding plus other potentially dilutive securities, except when the effect would be anti-dilutive. Dilutive securities primarily include equity-based awards issued under long-term incentive plans.  Dilutive securities are excluded from the calculation of earnings per share for periods of net loss because the effect would be anti-dilutive.

Income Taxes

    We are organized in conformity with and operate in a manner that allows us to be taxed as a REIT for U.S. federal income tax purposes. To the extent we continue to qualify as a REIT, we generally will not be subject to U.S. federal income tax on taxable income generated by our REIT activities that we distribute to our stockholders. Accordingly, no provision for U.S. federal income tax expense has been included in our accompanying condensed consolidated financial statements for the three and nine months ended September 30, 2021 or 2020 related to our REIT operations; however, CorePoint TRS, our wholly-owned taxable REIT subsidiary, is subject to U.S. federal, state and local income taxes and we may be subject to state and local taxes. Our provision for income taxes differs from the statutory federal tax rate of 21%, due to the impact of our REIT election, recognition of valuation allowances, accelerated deductions for certain real estate expenditures and state income taxes.  We have not recognized any income tax benefit for the three and nine months ended September 30, 2021, as we believe the realization of a benefit is not more likely than not.

    We use the asset and liability method of accounting for income taxes. Under this method, current income tax expense represents the amounts expected to be reported on our income tax returns, and 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 basis. The deferred tax assets and liabilities are measured using the enacted tax rates that are expected to be applied to taxable income in the years in which those temporary differences are expected to reverse.

    In determining our tax expense or benefit for financial statement reporting purposes, we must evaluate our compliance with the Code, including the transfer pricing determinations used in establishing rental payments between the REIT and CorePoint TRS. Accounting for income taxes requires, among others, interpretation of the Code, estimated tax effects of transactions, and evaluation of probabilities of sustaining tax positions, including realization of tax benefits. We recognize a valuation allowance for income tax benefits if it is more likely than not that all or a portion of the benefit will not be realized. We recognize tax positions only after determining that the relevant tax authority would more likely than not sustain the position following the audit. We measure the amount of the tax position as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon settlement with the tax authority. Our measurement considers the amounts and probabilities of the outcomes that could be realized upon settlement using the facts, circumstances and information available at the respective balance sheet reporting date. The final resolution of those assessments may subject us to additional taxes, penalties and interest. In addition, we may incur expenses defending our positions during Internal Revenue Service (“IRS”) tax examinations, even if we are able to eventually sustain our position with the tax authorities.

Concentrations of Credit Risk and Business Risk

    We have cash and cash equivalents deposited in certain financial institutions in excess of federally insured levels. As of September 30, 2021, approximately 40% of our total cash and cash equivalents were held in accounts fully covered by FDIC insurance or money market accounts collateralized by U.S. treasuries. For our remaining cash and cash equivalent accounts, we utilize financial institutions that we consider to be of high credit quality and consider the risk of default to be minimal. We have diversified our accounts with several banking institutions in an attempt to minimize exposure to any one of these institutions. We also monitor the creditworthiness of our customers and financial institutions before extending credit or making investments.  

    Substantially all of our revenues are derived from our lodging operations at our hotels. Lodging operations are particularly sensitive to adverse economic, social and competitive conditions and trends, including the COVID-19 pandemic, which could adversely affect our business, financial condition and results of operations.

We have a concentration of hotels operating in Florida, Texas and California. The number of hotels and percentages of total hotels as of September 30, 2021 and 2020, and the percentages of our total revenues, from these states for the nine months ended September 30, 2021 and 2020, is as follows:

	September 30, 2021					September 30, 2020
	Number of Hotels	Percentage of Total Hotels		Percentage of Total Revenue		Number of Hotels	Percentage of Total Hotels		Percentage of Total Revenue
Florida	31	19	%	17	%	44	20	%	20	%
Texas	29	18	%	16	%	41	19	%	17	%
California	17	11	%	12	%	19	9	%	12	%
Total	77	48	%	45	%	104	48	%	49	%

Segment Reporting

    Our hotel investments have similar economic characteristics and our service offerings and delivery of services are provided in a similar manner, using the same types of facilities and similar technologies. Our chief operating decision maker reviews our financial information on an aggregated basis. As a result, we have concluded that we have one operating and reportable business segment.

Principal Components of Expenses

    As more fully explained in Note 8 “Commitments and Contingencies” our third-party management company is responsible for the day to day operations of our hotels.  For many expenses, the manager directly contracts for the services in the capacity as a principal, and we reimburse our manager in accordance with the agreements.  We present the following expense components and only classify the fee portion of expense as management and royalty fees.  We classify all amounts owed to our manager and franchisor in accounts payable and accrued expenses.

Rooms — These expenses include hotel operating expenses of housekeeping, reservation systems (per our franchise agreements), room and breakfast supplies and front desk costs.

Other departmental and support — These expenses include hotel operating expenses that constitute non-room operating expenses, including parking, telecommunications, on-site administrative labor, sales and marketing, loyalty program, recurring repairs and maintenance and utility expenses.

Property tax, insurance and other — These expenses consist primarily of real and personal property taxes, other local taxes, ground rent, equipment rent and insurance for our hotel properties.

Newly Issued Accounting Standards

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of Effects of Reference Rate Reform on Financial Reporting. The guidance provides optional expedients and exceptions related to the transition away from London Interbank Offered Rate (“LIBOR”) and other interbank offering rates to alternative reference rates. The expedients are applicable to contract modifications made and hedging relationships entered into on or before December 31, 2022. Our current debt agreements use LIBOR rates but provide for alternative rates when LIBOR is no longer available. We do not expect the adoption of this guidance to have a material impact on our consolidated financial position and results of operations.

Recently Adopted Accounting Standards

    In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The guidance enhances and simplifies various aspects of the current income tax guidance and reduces complexity by removing certain exceptions to the general framework. We adopted this guidance on January 1, 2021, and it did not have a material impact on our consolidated financial position and results of operations.

XML

Investments In Real Estate

9 Months Ended

Sep. 30, 2021

Real Estate Investments, Net [Abstract]

Investments In Real Estate

Investments in Real Estate

During the nine months ended September 30, 2021, 49 hotels were sold for gross proceeds of $281 million resulting in a gain on sale of $81 million. During the nine months ended September 30, 2020, 50 hotels were sold for gross proceeds of $226 million resulting in a gain on sale of $59 million.

    We had a $4 million impairment loss for the three and nine months ended September 30, 2021 due to a change in the expected hold period for one of our hotel properties. We will continue to monitor events and changes in circumstances related to all of our real estate assets, including updated COVID-19 pandemic data and effects, analysis related to our operations, fair value, our holding periods and cash flow assumptions, that may indicate that the carrying amounts of our real estate assets may not be recoverable. Such changes in circumstances and analysis may result in impairment losses in future periods.

    For the nine months ended September 30, 2020, we had $54 million of impairment loss primarily due to a lower valuation of certain of our properties related to the impact of the COVID-19 pandemic on the lodging industry. We had no impairment loss for the three months ended September 30, 2020.

We experienced recent hurricane damages to certain of our hotels. We carry comprehensive property, casualty, flood and business interruption insurance that we anticipate will cover our losses at these hotels, subject to deductibles. For the nine months ended September 30, 2021, we had $3 million in involuntary conversion write-off of net book value of damaged assets, which is anticipated to be fully recoverable under our property insurance.

    As of September 30, 2021, we have not recognized any potential insurance claims related to COVID-19 pandemic losses. Given the contractual and judicial uncertainty of those claims, we cannot provide any assessment of whether such claims are realizable.

XML

Other Assets

9 Months Ended

Sep. 30, 2021

Other Assets [Abstract]

Other Assets

Other Assets

    The following table presents other assets as of September 30, 2021 and December 31, 2020 (in millions):

	September 30, 2021		December 31, 2020
Prepaid expenses	$	9	$	8
Intangible assets, net	4		4
Federal and state tax receivables	4		5
Other assets	1		3
Total other assets	$	18	$	20

XML

Debt

9 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

Debt

Debt

    The following table presents the carrying amount of our debt as of September 30, 2021 and December 31, 2020 (in millions):

	September 30, 2021		December 31, 2020
CMBS Facility	$	477	$	725
Revolving Facility	60		85
Total debt, net(1)	$	537	$	810

__________

(1) Unamortized debt issuance costs are not significant as of September 30, 2021 and December 31, 2020.

CMBS Facility

    Certain indirect wholly-owned subsidiaries of CorePoint Lodging Inc. (collectively, the “CorePoint CMBS Borrower”), CorePoint TRS and CorePoint Operating Partnership L.P. (“CorePoint OP”) are parties to a loan agreement (the “CMBS Loan Agreement”) providing for a mortgage loan secured primarily by mortgages for substantially all of our wholly-owned and ground leased hotels, an excess cash flow pledge for five owned and ground leased hotels and other collateral customary for mortgage loans of this type (the “CMBS Facility”).

The CMBS Facility currently matures on June 9, 2022, with three remaining one-year extension options, exercisable at the CorePoint CMBS Borrower’s election, provided there is no event of default existing as of the commencement of the applicable extension period and the CorePoint CMBS Borrower either extends the current interest rate cap or purchases a new interest rate cap covering the extension period at a strike price as set forth in the CMBS Loan Agreement.  No principal payments are due prior to the scheduled or extended maturity date. The CMBS Facility is pre-payable in whole or in part subject to payment of all accrued interest through the end of the applicable accrual period.

The CMBS Facility bears interest at a rate equal to the sum of an applicable margin plus one-month LIBOR. As of September 30, 2021 and December 31, 2020, one-month LIBOR was 0.08% and 0.14%, respectively. Interest is generally payable monthly. As of September 30, 2021, the weighted average applicable margin on the CMBS Facility was 3.04% and the weighted average interest rate was 3.12%. As of December 31, 2020, the weighted average applicable margin on the CMBS Facility was 2.82% and the weighted average interest rate was 2.96%. The applicable margin will increase by 15 basis points after June 2023 and an additional 10 basis points after June 2024. Additional prepayments, if any, will be applied to the lower interest bearing principal tranches, reducing total future interest expense but having the effect of increasing the applicable margin thereafter on the remaining outstanding principal balance. The applicable margins for the tranches range from 2.29% to 3.95%.

    We may obtain the release of individual properties from the CMBS Facility provided that certain conditions of the CMBS Loan Agreement are satisfied. The most restrictive of these conditions provide that after giving effect to such release the debt yield for the CMBS Facility (generally defined as hotel property operating net income before interest, depreciation and a fixed amount of corporate general and administrative expenses divided by the outstanding principal balance of the CMBS Facility, “Debt Yield”) is not less than the greater of (x) 16.44% and (y) the lesser of (i) the Debt Yield in effect immediately prior to such release and (ii) 16.94% (such result the “Release Debt Yield”). However, if such release is in connection with the sale of a property to an unrelated third party, such sold property may be released if the CorePoint CMBS Borrower prepays an amount equal to the greater of (x) the allocated portion of the outstanding CMBS Facility plus a premium ranging from 5% to 10%, as defined in the CMBS Loan Agreement, and (y) the lesser of (i) the full net proceeds from the sale of the property received by us and (ii) the amount necessary to satisfy the Release Debt Yield. Accordingly, such CMBS Loan Agreement release provisions could affect our ability to sell properties or restrict the use of sale proceeds only to (or substantially to) the required partial prepayment of the CMBS Facility. Since May 2020, substantially all net sale proceeds have been paid under the CMBS Loan Agreement as required to release the collateralized property under the CMBS Facility. During the nine months ended September 30, 2021, primarily in connection with the sale of 49 secured hotel properties, $248 million of net proceeds were used to pay down the principal of the CMBS Facility.

The CMBS Facility lender has the right to control the disbursement of hotel operating cash receipts and to establish escrow reserves for the benefit of the lender (referred to as a “CMBS Facility cash trap”). Cash and cash equivalents and lender escrows subject to the CMBS Facility cash trap are generally available for hotel operations, interest payments and certain corporate administrative expenses. Certain disbursements, primarily other corporate and general and administrative expenditures, dividends to common stockholders and repurchases of our common stock, would require consent of the CMBS Facility lender. As of September 30, 2021, the cash and cash equivalents and lender escrows subject to the CMBS Facility cash trap were $91 million and $8 million, respectively. We will be subject to the CMBS Facility cash trap until we meet the applicable debt yield requirement for two consecutive quarters or prepay the loan in an amount such that we meet the required debt yield. There can be no assurance that our future operating performance will be adequate for us to meet the requirements to be released from the CMBS Facility cash trap provisions.

    The CMBS Facility includes customary non-recourse carve-out guarantees, affirmative and negative covenants and events of default, including, among other things, guarantees for certain losses arising out of customary “bad-boy” acts of CorePoint OP and its affiliates and environmental matters (which will be recourse for environmental matters only to the CorePoint CMBS Borrower provided that the required environmental insurance is delivered to the lender), a full recourse guaranty with respect to certain bankruptcy events, restrictions on the ability of the CorePoint CMBS Borrower to incur additional debt and transfer, pledge or assign certain equity interests or its assets, and covenants requiring the CorePoint CMBS Borrower to exist as “special purpose entities,” maintain certain ongoing reserve funds and comply with other customary obligations for commercial mortgage-backed securities loan financings. As of September 30, 2021, we believe we were in compliance with these covenants.

The CorePoint CMBS Borrower has deposited in the loan servicer’s account $27 million in reserves for property improvement, environmental remediation and property insurance claims in progress and $4 million in reserves for unused property insurance deductibles, which funds may be periodically disbursed to the CorePoint CMBS Borrower throughout the term of the loan to cover such costs. These reserves are recorded in lender and other escrows.

Revolving Facility

CorePoint Lodging Inc., CorePoint Borrower L.L.C. (the “CorePoint Revolver Borrower”), CorePoint OP GP, L.L.C., and CorePoint OP are parties to a credit agreement, as amended (the “Revolver Credit Agreement”), providing for a revolving facility (the “Revolving Facility”). The CorePoint Revolver Borrower is our indirect wholly-owned subsidiary and the direct wholly-owned subsidiary of CorePoint OP. As of September 30, 2021, $60 million was outstanding under the Revolving Facility. In addition, as of September 30, 2021, there was $4 million in outstanding letters of credit issued under the Revolving Facility.

The Revolving Facility was amended in March 2021. In connection with the amendment, the Revolving Facility maturity was extended to May 2022 with no additional borrowings available. We made $20 million in total principal payments from June through September 2021. An additional $5 million required principal payment was made in October 2021 as our liquidity (as defined in the Revolver Credit Agreement) exceeded $100 million. The amendment also reset the interest rate to either a base rate plus a margin of 5.0% per annum or an adjusted LIBOR rate plus a margin of 6.0% per annum, an increase of 100 basis points from the prior margins. With respect to base rate loans, interest will be payable at the end of each quarter. With respect to LIBOR loans, interest will be payable at the end of the selected interest period but no less frequently than quarterly. As of September 30, 2021 and December 31, 2020, the Revolving Facility interest rate was 6.13% and 5.19%, respectively.

As of September 30, 2021 the Revolving Facility requires that we maintain a minimum liquidity of $67.5 million of cash and cash equivalents, as defined, at all times. The minimum liquidity amount will be reduced by 50% of any additional repayment amounts. The minimum liquidity requirement was reduced to $65 million of cash and cash equivalents as of October 31, 2021.

    The Revolving Facility lenders have rights to control the disbursement of our hotel operating cash receipts (referred to as the “Revolving Facility cash trap”). As of September 30, 2021, the cash and cash equivalents subject to the Revolving Facility cash trap, which is in addition to the CMBS cash trap, were $3 million. Cash and cash equivalents subject to the Revolving Facility cash trap are generally available for hotel operations, interest payments and certain corporate administrative expenses. Certain disbursements, primarily other corporate general and administrative expenditures, dividends to common stockholders and repurchases of our common stock, would require consent of our lenders. The terms of the CMBS Facility cash trap are senior to the Revolving Facility cash trap but are generally similar in scope and are not cumulative in the effect on our cash and cash equivalents. We will be subject to the Revolving Facility cash trap until we meet the applicable debt yield thresholds, which we may be unable to meet during the remainder of the term of the Revolving Facility.
    

The Revolving Facility also includes other covenants, representations and warranties customary for commercial revolver facilities. The obligations under the Revolving Facility are unconditionally and irrevocably guaranteed by CorePoint OP, CorePoint Lodging Inc. and CorePoint OP GP L.L.C. and, subject to certain exceptions, each of the CorePoint Revolver Borrower and its existing and future domestic subsidiaries that own equity interests in any CorePoint CMBS Borrower. Furthermore, CorePoint Lodging Inc., CorePoint OP GP L.L.C. and CorePoint OP each pledge certain equity interests in subsidiaries, representing substantially all of the Company’s hotel operations, as security for the obligations. As of September 30, 2021, we believe we were in compliance with these terms and covenants of the Revolver Credit Agreement.

XML

Mandatorily Redeemable Preferred Stock

9 Months Ended

Sep. 30, 2021

Equity [Abstract]

Mandatorily Redeemable Preferred Stock

Mandatorily Redeemable Preferred Stock

    We have 15,000 shares of Cumulative Redeemable Series A Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), held by an unrelated third party. The Series A Preferred Stock has an aggregate liquidation preference of $15 million, plus any accrued and unpaid dividends thereon. The Series A Preferred Stock is senior to our common stock with respect to dividends and with respect to dissolution, liquidation or winding up of the Company. Except as described below, cash dividends on the Series A Preferred Stock are paid quarterly at a rate of 13% per annum. If our leverage ratio, as defined, exceeds 7.5 to 1.0 as of the last day of any fiscal quarter, or if an event of default occurs (or has occurred and has not been cured) with respect to the Series A Preferred Stock, we are required to pay a cash dividend on the Series A Preferred Stock equal to 15% per annum. Our dividend rate on the Series A Preferred Stock will increase to 16.5% per annum if, at any time, we are both in breach of the leverage ratio covenant and an event of default occurs (or has occurred and has not been cured) with respect to the Series A Preferred Stock. Beginning on July 1, 2020, we exceeded the 7.5 to 1.0 leverage ratio noted above, and accordingly, the Series A Preferred Stock dividend rate since then and in effect as of September 30, 2021 is at 15% per annum. Beginning on October 1, 2021, our leverage ratio was less than the 7.5 to 1.0 ratio, and accordingly, the Series A Preferred Stock dividend rate will return to 13% per annum for the fourth quarter of 2021.

    The Series A Preferred Stock is mandatorily redeemable by us in 2028, upon the tenth anniversary of the date of issuance. Beginning in 2025, upon the seventh anniversary of the issuance of the Series A Preferred Stock, we may redeem the outstanding Series A Preferred Stock for an amount equal to its aggregate liquidation preference, plus any accrued but unpaid dividends. The holders of the Series A Preferred Stock may also require us to redeem the Series A Preferred Stock upon a change of control of the Company for an amount equal to its aggregate liquidation preference plus any accrued and unpaid dividends thereon (and a premium if the change of control occurs prior to the seventh anniversary of the issuance of the Series A Preferred Stock). Due to the fact that the Series A Preferred Stock is mandatorily redeemable, the preferred shares are classified as a liability on the accompanying condensed consolidated balance sheets, and dividends on these preferred shares are classified as interest expense in the accompanying condensed consolidated statements of operations.

    Holders of Series A Preferred Stock generally have no voting rights. However, without the prior consent of the holders of a majority of the outstanding shares of Series A Preferred Stock, we are prohibited from (i) authorizing or issuing any additional shares of Series A Preferred Stock, or (ii) amending our charter or entering into, amending or altering any other agreement in any manner that would adversely affect the Series A Preferred Stock. Holders of shares of the Series A Preferred Stock have certain preemptive rights over issuances by us of any class or series of our stock ranking on parity with the Series A Preferred Stock. If we are either (a) in

arrears on the payment of dividends that were due on the Series A Preferred Stock on six or more quarterly dividend payment dates, whether or not such dates are consecutive, or (b) in default of our obligations to redeem the Series A Preferred Stock on the tenth anniversary of its issuance or following a change of control, the preferred stockholders may designate a representative to attend meetings of our board of directors as a non-voting observer until all unpaid Series A Preferred Stock dividends have either been paid or declared with an amount sufficient for payment set aside for payment, or the shares required to be redeemed have been redeemed, as applicable. As of September 30, 2021, neither event described above has occurred.

XML

Accounts Payable and Accrued Expenses and Other Liabilities

9 Months Ended

Sep. 30, 2021

Payables and Accruals [Abstract]

Accounts Payable and Accrued Expenses and Other Liabilities

Accounts Payable and Accrued Expenses and Other Liabilities

    Accounts payable, accrued expenses and other liabilities include the following as of September 30, 2021 and December 31, 2020 (in millions):

	September 30, 2021		December 31, 2020
Real estate taxes	$	17	$	17
Due to hotel manager	8		7
Sales and occupancy taxes	5		3
Other accounts payable and accrued expenses	33		21
Total accounts payable and accrued expenses	$	63	$	48
Operating lease liabilities	$	18	$	20
Insurance financing	3		2
Below market leases, net	2		3
Other liabilities	11		11
Total other liabilities	$	34	$	36

XML

Commitments and Contingencies

9 Months Ended

Sep. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Hotel Management and Franchise Agreements

Management Fees

    On May 30, 2018, we entered into separate hotel management agreements for each of our hotels with LQ Management L.L.C. (“LQM”), whereby we pay a fee equal to 5% of total gross revenues, as defined therein. The term of the management agreements is through May 30, 2038, subject to two renewals of five years each, at LQM’s option. There are penalties for early termination in connection with property sales, currently calculated at approximately 3 times the trailing twelve month management fee of the sold property. Management termination fees are deducted in the determination of our gain on sale of real estate assets. For both three month periods ended September 30, 2021 and 2020, management termination fees were $4 million. For the nine month periods ended September 30, 2021 and 2020, our management termination fees were $11 million and $10 million, respectively.

    LQM generally has sole responsibility for all activities necessary for the operation of our hotels, including establishing room rates, processing reservations and promoting and publicizing the hotels. LQM also provides all employees for the hotels, prepares reports, budgets and projections, and provides other administrative and accounting support services to the hotels. We have consultative and limited approval rights with respect to certain actions of LQM, including entering into long-term or high value contracts, engaging in certain actions relating to legal proceedings, approving the operating budget, making certain capital expenditures and the hiring of certain management personnel. We are also responsible for reimbursing LQM for certain costs incurred by LQM during the fulfillment of their duties, such as payroll costs for certain of their employees, general and workers’ compensation liability insurance and other costs that the manager incurs to operate the hotels.

For the three months ended September 30, 2021 and 2020, our management fee expense was $7 million and $6 million, respectively. For the nine months ended September 30, 2021 and 2020, our management fee expense was $18 million and $16 million, respectively.

Royalty Fees

    On May 30, 2018, we entered into separate hotel franchise agreements for each of our hotels with La Quinta Franchising LLC (“LQ Franchising”). Pursuant to the franchise agreements, we were granted a limited, non-exclusive license to use our franchisor’s brand names, marks and system in the operation of our hotels. The franchisor also may provide us with a variety of services and

benefits, including centralized reservation systems, participation in customer loyalty programs, national advertising, marketing programs and publicity designed to increase brand awareness, as well as training of personnel. In return, we are required to operate franchised hotels consistent with the applicable brand standards.

    Our franchise agreements require that we pay a 5% royalty fee on gross room revenue. There are penalties for early termination. For the three months ended September 30, 2021 and 2020, our royalty fee expense was $7 million and $5 million, respectively. For the nine months ended September 30, 2021 and 2020, our royalty fee expense was $19 million and $16 million, respectively.

    In addition to the royalty fee, the franchise agreements include a reservation fee of 2% of gross room revenues, a marketing fee of 2.5% of gross room revenues, a loyalty program fee of 5% of eligible room night revenues, and other miscellaneous ancillary fees.  Reservation fees are included within rooms expense and the marketing fee and loyalty program fees are included within other departmental and support in the accompanying condensed consolidated statements of operations.

The term of the franchise agreement is through May 30, 2038, subject to one renewal of ten years, at our option, subject to certain conditions. There are penalties for early termination. Liquidated damages under the franchise agreements are currently calculated as approximately 7.5 times the trailing twelve month royalty fee, marketing fee and reservation fee of the identified property.

    Our requirement to meet certain brand standards imposed by our franchisor includes requirements that we incur certain capital expenditures, generally ranging from $1,500 to $7,500 per hotel room (with various specific amounts within this range being applicable to different groups of our hotels) during a prescribed period generally ranging from two to eleven years. These amounts are over and above the capital expenditures we are required to make each year for recurring furniture, fixtures and equipment maintenance.  However, these amounts that we are required to spend are subject to reduction, in varying degrees, by the amount of capital expenditures made for hotels in the applicable group over and above the capital expenditures required for the recurring maintenance in one or more years before receipt of the franchisor’s notice. The initial period during which the franchisor can notify us that we must make these capital expenditures is through 2028. At the franchisor’s discretion, subject to the franchise agreement provisions governing when such requirements may be imposed, the franchisor may provide a notice obligating us to meet those capital expenditure requirements generally within two to nine years of the notice. We expect to meet these requirements primarily through the ongoing capital expenditure program as provided in our franchise agreements. As of September 30, 2021, $15 million was held in lender escrows that can be used to fund these requirements.

On November 4, 2021 we entered into a letter agreement with LQM and LQ Franchising pursuant to which certain hotel management agreements would be terminated upon the closing of the proposed merger. See Note. 16 “Subsequent Events” for details.

Litigation

    We are a party to a number of pending claims and lawsuits arising in the normal course of business. We do not consider our ultimate liability with respect to any such claims or lawsuits, or the aggregate of such claims and lawsuits, to be material in relation to our condensed consolidated financial condition, results of operations or our cash flows taken as a whole.

    We maintain property and other liability insurance; however, certain losses or defense costs are within the retention or insurance deductible amount and are not covered by or are only partially covered by insurance policies. We regularly evaluate our ultimate liability costs with respect to such claims and lawsuits. We accrue costs from litigation as they become probable and estimable.

Tax Contingencies

    We are subject to regular audits by federal and state tax authorities, which may result in additional tax liabilities. In 2018, La Quinta Holdings Inc. completed the distribution to its stockholders of all the then-outstanding shares of common stock of CorePoint Lodging Inc. following which we became an independent, self-administered, publicly traded company (the “Spin-Off”). Subsequently, La Quinta Holdings Inc. merged with Wyndham Hotels & Resorts, Inc. (“Wyndham”). Entities in existence prior to the Spin-Off, most of which are our wholly-owned subsidiaries but certain entities are wholly-owned by Wyndham, are currently under audit by the Internal Revenue Service (the “IRS”) for tax years ended December 31, 2010 to 2013.

    In 2014, the IRS commenced a tax audit, primarily related to transfer pricing for internal rents charged by our prior REIT. Subsequently, we have supplied information to the IRS supporting our position. In November 2019, the IRS issued notices of proposed adjustments (“NOPA”, also known as a 30-Day Letter) proposing a redetermined rent adjustment resulting in approximately $138 million of additional federal taxes, attributable to tax years 2010 and 2011, exclusive of penalties and interest. Additionally, the November 2019 NOPA proposed an adjustment resulting in the loss of tax operating loss carryforwards generated in tax years 2006 through 2009. We have agreed to indemnify Wyndham for any obligations and expenses arising from these IRS audits, including the

legal and accounting defense expenses. The adjustment to the tax operating loss carryforwards, measured at the tax rates enacted during the year of utilization and exclusive of penalties and interest, is $31 million.

We and the IRS have respectively corresponded in disagreement with the other’s positions. The audit was transferred to the IRS Appeals office in 2020 and in April 2021, we and the IRS exam team met with the IRS Appeals office and each side presented their case. No resolution was achieved during the review by IRS Appeals, and in July 2021, we requested the matter to be heard in post-IRS Appeals mediation. The IRS, however, declined the request for mediation. The statute of limitations with respect to the IRS audit was extended to June 30, 2022.

    Based on our review of the tax matters and communications by the IRS, including their presentation to the IRS Appeals office, we concluded as of September 30, 2021 that the positions reported on our tax returns under audit by the IRS are, based on their technical merits, more likely than not to be sustained upon conclusion of the examination, including proceedings in mediation, settlement or tax court. Accordingly, as of September 30, 2021, we have not established any reserves related to this proposed adjustment or any other issues reflected on the returns under examination. If, however, we are unsuccessful in challenging the IRS, an excise tax and/or additional taxes would be imposed on the REIT, or its taxable REIT subsidiary, related to the excess rent, and we would be responsible for additional income taxes, interest and penalties, which could adversely affect our financial condition, results of operations and cash flows and the trading price of our common stock. Such adjustments could also give rise to additional state income taxes; however, as of September 30, 2021, no states have audited or commenced an audit for the periods related to the IRS audit. Such amounts would be in addition to expenses we may incur to defend our positions with the IRS, including legal costs, should the matter be resolved in tax court.

On November 5, 2021, we received a settlement offer from the IRS with respect to the IRS audit. See Note. 16 “Subsequent Events” for details.

Purchase Commitments

    As of September 30, 2021, we had approximately $12 million of purchase commitments related to certain continuing redevelopment and renovation projects and other hotel service contracts in the ordinary course of business. Approximately $8 million of this amount relates to long-term hotel service contracts payable over approximately three years.

Lease Commitments

    As a lessee, our lessee arrangements are primarily for ground leases at certain of our hotels. These ground leases generally include base rents, which may be reset based on inflation indexes or pre-established increases, contingent rents based upon the respective hotel’s revenues, and reimbursement or primary responsibility for related real estate taxes and insurance expenses. The initial base terms for the leases are generally in excess of 25 years, with initial term maturities occurring between 2022 and 2096. As of September 30, 2021, the weighted average remaining lease term is 33 years and the weighted-average discount rate related to these leases was 8.82%. Many of these arrangements also contain renewal options at the conclusion of the initial lease term, generally at fair value or pre-set amounts.  Our other leases primarily relate to our corporate office.

Rent expense was not significant for the three and nine months ended September 30, 2021 or 2020. Contractual annual rent expense is less than $3 million for each of the next five years. Differences between amounts expensed and cash paid were not significant. Rent expense is included in property tax, insurance and other expenses in our condensed consolidated statements of operations.

XML

Equity

9 Months Ended

Sep. 30, 2021

Equity [Abstract]

Equity

Equity

    Our board of directors has authorized a $50 million share repurchase program, with $21 million remaining available as of September 30, 2021.  Under the share repurchase program, we may purchase common stock in the open market, in privately negotiated transactions or in such other manner as determined by us, including through repurchase plans complying with the rules and regulations of the SEC. The share repurchase program does not obligate us to repurchase any dollar amount or number of shares of common stock and the program may be suspended or discontinued at any time. Our Revolver Credit Agreement restricts us from making any purchases under the share repurchase program at this time. Accordingly, we have temporarily suspended purchases under the share repurchase program and no shares were acquired under the plan in 2020 or 2021. Such restrictions do not apply to share settlements for our equity-based stock compensation plans and we do purchase shares to satisfy tax withholding obligations incurred upon the vesting of equity-based stock awards to our employees under our 2018 Omnibus Incentive Plan.

    The Revolver Credit Agreement also restricts our ability to pay cash dividends on our common stock unless required to meet REIT federal income tax requirements.

XML

Revenue

9 Months Ended

Sep. 30, 2021

Revenues [Abstract]

Revenue

Revenues

    Revenues for the three and nine months ended September 30, 2021 and 2020 are comprised of the following components (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Operating lease revenues:
Rooms	$	139	$	105	$	369	$	318
Other	1		1		3		3
Total lease revenues	140		106		372		321
Customer revenues	2		1		5		4
Total revenues	$	142	$	107	$	377	$	325

    Other operating lease revenues primarily include lease arrangements for restaurants, billboards and cell towers. Customer revenues, which are classified within other revenues in the accompanying consolidated statements of operations, generally relate to amounts generated by the incidental support of the hotel operations, including service fees, parking and food. For each of the three and nine months ended September 30, 2021 and 2020, we did not have a significant amount of variable lease revenue.

XML

Earnings Per Share

9 Months Ended

Sep. 30, 2021

Earnings Per Share [Abstract]

Earnings Per Share

Earnings per Share

    The following table sets forth the calculation of basic and diluted net income (loss) per common share for the three and nine months ended September 30, 2021 and 2020 (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Numerator:
Net income (loss)	$	17	$	(8)	$	14	$	(136)
Denominator:
Weighted average common shares - basic	57.1		56.7		57.0		56.6
Effect of dilutive securities (1)	4.2		—		4.0		—
Weighted average common shares - diluted	61.3		56.7		61.0		56.6
Basic net income (loss) per share	$	0.30	$	(0.14)	$	0.25	$	(2.40)
Diluted net income (loss) per share	$	0.28	$	(0.14)	$	0.23	$	(2.40)

__________

(1) Dilutive securities primarily include equity-based compensation and are excluded from the calculation of earnings per share for periods of net loss because the effect would be anti-dilutive.

XML

Equity-Based Compensation

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

Equity-Based Compensation

Equity-Based Compensation

    Our 2018 Omnibus Incentive Plan (the “Plan”) authorizes the grant of restricted stock awards (“RSAs”), restricted stock units (“RSUs”), Performance Stock Units (“PSUs”), non-qualified and incentive stock options, dividend equivalents, and other stock-based awards. Approximately eight million shares of common stock have been authorized for issuance under the Plan and approximately five million shares of common stock were available for issuance as of September 30, 2021.

    The RSAs and RSUs are time-based and are not subject to future performance targets. The RSAs generally vest over one to three years. The RSUs generally vest over one to two years, with certain RSUs vesting immediately upon grant. RSAs and RSUs are initially recorded at the market price of our common stock at the time of the grant. The PSUs are subject to performance-based vesting, where the earned award is based on the achievement of established performance criteria, generally over two to three years. As of September 30, 2021, performance criteria related to relative and absolute total shareholder returns, as defined, are treated as market-based conditions and are recorded at the fair value of the award using a Monte Carlo simulation valuation model. The remaining PSUs are treated as non-market based and are recorded at fair value based on the period end assessment of achieving the performance criteria. The actual number of shares of common stock issued could range from zero shares to 175% of the number of PSUs granted. RSAs, RSUs and PSUs are subject to accelerated vesting in the event of certain defined events, including change of control events. For

each of the three month periods ended September 30, 2021 and 2020, we recognized $2 million and $3 million, respectively, of equity-based compensation expense. For each of the nine month periods ended September 30, 2021 and 2020, we recognized $7 million and $8 million, respectively, of equity-based compensation expense.The following tables summarize the activity of our RSAs, RSUs, and PSUs during the nine months ended September 30, 2021 and 2020:

	RSAs			PSUs			RSUs
	Number of Shares	Weighted-Average Grant Date Fair Value		Number of Units	Weighted-Average Grant Date Fair Value		Number of Units	Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2021	1,031,482	$	11.09	1,348,451	$	5.85	290,443	$	4.52
Granted	560,444	$	8.61	573,895	$	9.62	123,033	$	10.29
Converted	(180,072)	$	23.66	(185,171)	$	6.57	—	$	—
Forfeited	(87,082)	$	7.72	(80,958)	$	7.07	—	$	—
Outstanding at September 30, 2021 (1)	1,324,772	$	8.55	1,656,217	$	7.02	413,476	$	6.24

__________

(1) As of September 30, 2021, no outstanding RSAs or PSUs were vested, and 328,213 outstanding RSUs were vested.

	RSAs			PSUs			RSUs
	Number of Shares	Weighted-Average Grant Date Fair Value		Number of Units	Weighted-Average Grant Date Fair Value		Number of Units	Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2020	653,790	$	20.30	368,969	$	6.99	5,072	$	6.05
Granted	919,106	$	3.88	979,482	$	5.42	268,484	$	4.32
Converted	(80,097)	$	14.63	—	$	—	(4,787)	$	6.06
Outstanding at September 30, 2020 (1)	1,492,799	$	10.49	1,348,451	$	5.85	268,769	$	4.32

__________

(1) As of September 30, 2020, no outstanding RSAs and PSUs were vested. As of September 30, 2020, 64,738 outstanding RSUs were vested.

    RSAs are included in amounts for issued and outstanding common stock but are excluded in the computation of basic earnings (loss) per share.

XML

Fair Value Measurements

9 Months Ended

Sep. 30, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

    We use interest rate cap arrangements with financial institutions to manage our exposure to interest rate changes for our loans that utilize floating interest rates. As of September 30, 2021, we had an interest rate cap with an aggregate notional value of $640 million, a strike rate of 0.75% and a fair value and net book value of less than $1 million. The interest rate cap terminates in June 2022.

Financial Instruments Not Reported at Fair Value    

    For those financial instruments not carried at fair value, the carrying amount and estimated fair values of our financial assets and liabilities were as follows as of September 30, 2021 and December 31, 2020 (in millions):

	September 30, 2021				December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Debt - CMBS Facility(1)(2)	$	477	$	477	$	725	$	705
Debt - Revolving Facility(1)(2)	$	60	$	60	$	85	$	84
Mandatorily redeemable preferred stock(1)	$	15	$	16	$	15	$	15

 ____________________

(1)Classified as Level 3 under the fair value hierarchy.

(2)Unamortized debt issuance costs are not significant as of September 30, 2021 and December 31, 2020.

    We estimate the fair value of our debt and mandatorily redeemable preferred stock by using risk adjusted discounted cash flow analysis and current market inputs for similar types of arrangements, including prepayment terms that are at our option. Fluctuations in these assumptions, including changes in market assessments related to the COVID-19 pandemic financial effects, may result in different estimates of fair value.

    We believe the carrying amounts of our cash and cash equivalents, accounts receivable, lender and other escrows, and other liabilities approximate fair value as of September 30, 2021 and December 31, 2020, due to their short-term nature.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

    During 2020, we recorded non-cash impairment losses related to lower valuation of certain of our properties due to the ongoing impact of the COVID-19 pandemic on the lodging industry and final disposal costs related to a property previously impaired in 2019. Our process to estimate the fair value of an asset involves using the sales price of an executed sales agreement, which would be considered a Level 2 assumption within the fair value hierarchy. To the extent that this type of third-party information is unavailable, we estimate revenue multiples that we believe would be used by a third-party market participant in estimating the fair value of an asset. This is considered a Level 3 assumption within the fair value hierarchy.

The following table summarizes the assets which were measured at fair value on a nonrecurring basis and impaired during the nine months ended September 30, 2021 and the year ended December 31, 2020 (in millions): 

			Basis of Fair Value Measurements
	Fair Value of Assets at Impairment		Quoted Prices in Active Market for Identical Items (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3) (1)		Total Losses
For the nine months ended September 30, 2021
Real estate and right of use asset (2)	$	—	N/A	N/A		$	—	$	4
For the year ended December 31, 2020
Real estate (3)	$	310	N/A	$	7	$	303	$	52

 ____________________

(1)     For the year ended December 31, 2020, the Level 3 unobservable inputs consist of internally developed cash flow models and fair value estimates that included projections of revenues, expenses and capital expenditures and market valuations based on multiples of revenue generally ranging from 2.0x to 3.0x. These assumptions were based on trends and comparable transactions in the lodging industry; our historical data and experience; our budgets, including those prepared by our third-party hotel manager; lodging industry valuation trends; and micro- and macro-economic trends and projections. Our estimated fair values also considered factors related to our franchise and management agreements, requirements to meet certain brand standards and other potential costs to be incurred during our projected holding period.

(2)    The fair value of a right of use asset associated with a ground lease and the associated real estate was determined to be zero as of September 30, 2021, which resulted in an impairment loss of $4 million.

(3)    The fair value of impaired real estate assets was $310 million as of the June 30, 2020 impairment date. The carrying value of these real estate assets was $267 million as of December 31, 2020. The change in fair value from June 30, 2020 to the December 31, 2020 carrying value relates to $14 million of depreciation expense and $29 million due to sales of assets subsequent to the impairment date.

XML

Related Party Transactions	9 Months Ended
	Sep. 30, 2021
Related Party Transactions [Abstract]
Related Party Transactions	Related Party Transactions    As of September 30, 2021, affiliates of Blackstone Inc. (“Blackstone”) beneficially owned approximately 30% of our outstanding shares of common stock and held horizontal risk retention certificates issued by the trust that holds our CMBS Facility indebtedness (“Class HRR Certificates”). As of both September 30, 2021 and December 31, 2020, the portion of our CMBS Facility outstanding balance that correlates to the Class HRR Certificates was $79 million. Total interest payments made to an affiliate of Blackstone as a holder of such Class HRR Certificates for each of the three month periods ended September 30, 2021 and 2020 were $1 million. Total interest payments made to an affiliate of Blackstone as a holder of such Class HRR Certificates for the nine month periods ended September 30, 2021 and 2020 were $2 million and $3 million, respectively.

XML

Supplemental Disclosures of Cash Flow Information

9 Months Ended

Sep. 30, 2021

Supplemental Cash Flow Elements [Abstract]

Supplemental Disclosures of Cash Flow Information

Supplemental Disclosures of Cash Flow Information

    The following table presents the supplemental cash flow information for the nine months ended September 30, 2021 and 2020 (in millions):

	Nine Months Ended September 30,
	2021		2020
Supplemental disclosure of cash flow information:
Interest paid during the period	$	20	$	29
Income taxes paid during the period, net of refunds	$	—	$	1
Non-cash investing and financing activities:
Capital expenditures included in accounts payable and accrued expenses	$	2	$	1
Insurance casualty receivable related to real estate and accounts payable	$	8	$	—
Financing of insurance	$	9	$	11

XML

Subsequent Events

9 Months Ended

Sep. 30, 2021

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

    Subsequent to September 30, 2021, we sold five operating hotels with approximately 600 rooms for a gross sales price of $36 million, recognizing an estimated gain on sale of approximately $11 million. As of September 30, 2021, none of these hotels were classified as assets held for sale because the assets did not meet the accounting criteria established for such classification. We used $32 million of the net sales proceeds to pay down the principal on the CMBS Facility.

On November 6, 2021, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Cavalier Acquisition JV LP, a Delaware limited partnership (“Parent”), and Cavalier Acquisition Owner LP, a Delaware limited partnership and a wholly-owned subsidiary of Parent (“Merger Sub”). On the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the merger (the “Effective Time”), and as a result of the merger, each share of our common stock that is issued and outstanding immediately prior to the Effective Time will be converted into the right to receive $15.65 in cash plus, if applicable, incremental cash consideration per share in certain circumstances if we timely resolve the previously disclosed tax proceedings as discussed under Tax Contingencies in Note 8. “Commitment and Contingencies” (the “IRS Matter”). The payment of any such additional cash consideration is dependent on our entry into a definitive closing agreement with the IRS prior to the closing of the merger. The amount of such potential additional cash consideration, if any, payable to holders of our common stock is determined based on the amount, if any, by which the settlement amount with respect to the IRS Matter (including any penalties and accrued interest with respect thereto) is less than $160 million.

We received a settlement offer from the IRS with respect to the IRS Matter on November 5, 2021, and expect to accept such offer and enter into a definitive closing agreement with the IRS, which would provide for total payments by us of approximately $89.6 million plus statutory interest through the date of payment. Pursuant to this settlement offer, we estimate the total payment amount pursuant to the settlement will be approximately $155 million. As such, we currently expect that the amount of any such additional consideration will likely be approximately $0.10 per share. There can be no assurances that any additional consideration will be received by the holders of our common stock. Our entry into any IRS settlement is not a condition to the closing of the merger. This potential incremental consideration related to settling the IRS Matter is a change to the facts and circumstances in connection with our evaluation of our tax positions. In accordance with GAAP, recognition and measurement that results from this new information, if any, will be accounted for in our fourth quarter, the period in which the new information was received.

In addition, on November 4, 2021 we entered into a letter agreement with LQM and LQ Franchising pursuant to which certain hotel management agreements would be terminated upon the closing of the proposed merger. Pursuant to the agreement, we will make certain termination payments, expense reimbursements and other amounts of approximately $84 million, in the aggregate, payable in connection with the closing of the proposed merger.

The merger and related transactions are subject to customary closing conditions. There can be no assurance that the merger and related transactions will be completed on the terms or timeline currently contemplated or at all.

XML

Significant Accounting Policies and Recently Issued Accounting Standards (Policies)

9 Months Ended

Sep. 30, 2021

Accounting Policies [Abstract]

Interim Unaudited Financial Information

Interim Unaudited Financial Information

    The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted from this Quarterly Report on Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The results for the interim periods shown in this report are not necessarily indicative of future financial results. The accompanying condensed consolidated financial statements have not been audited by our independent registered public accounting firm. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, including normal recurring items, necessary to present fairly our condensed consolidated financial position as of September 30, 2021 and December 31, 2020, and our condensed consolidated results of operations and cash flows for the periods ended September 30, 2021 and 2020.

    The accompanying condensed consolidated financial statements include our accounts, as well as our wholly-owned subsidiaries and any consolidated variable interest entities (“VIEs”). We recognize noncontrolling interests for the proportionate share of operations for ownership interests not held by our stockholders. All intercompany transactions have been eliminated.

Reclassification

Reclassification

Certain amounts previously reflected in the prior year condensed consolidated balance sheet have been reclassified to conform to our September 30, 2021 presentation. The condensed consolidated balance sheet as of December 31, 2020 reflects a line “lender and other escrows” that was previously presented within the line “other assets.” This reclassification, which was due to the significance of lender and other escrows, had no effect on the previously reported total assets.

Use of Estimates

Use of Estimates     The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. These estimates include such items related to the accounting for: income taxes, including assessments of probabilities of realization of income tax benefits; impairment of long-lived assets, including applicable cash flow projections, holding periods and fair value evaluations; and depreciation and amortization including determination of estimated useful lives. Actual results could differ from those estimates.

Investment in Real Estate

Investment in Real Estate

    Property and equipment and other investments in real estate are stated at cost less accumulated depreciation computed using a straight-line method over the following estimated useful life of each asset. Buildings and improvements have an initial estimated useful life of five to 40 years and furniture, fixtures and other equipment have an estimated useful life of two to ten years.

We capitalize expenditures that increase the overall value of an asset or extend an asset’s life, typically associated with hotel refurbishments, renovations, and major repairs. Such costs primarily include third-party contract labor, materials, professional design and other direct costs, and during the redevelopment and renovation period, interest, real estate taxes and insurance costs. The interest, real estate taxes and insurance capitalization period begins when the activities related to the development have begun and ceases when the project is substantially complete and the assets are held available for use or occupancy. Once such a project is substantially complete and the associated assets are ready for intended use, interest, real estate taxes and insurance costs are no longer capitalized. Construction in progress primarily includes capitalized costs for ongoing projects that have not yet been put into service. Normal maintenance and repair costs are expensed as incurred.

Impairment of Real Estate Related Assets

Impairment of Real Estate Related Assets

    For our investments in real estate, we monitor events and changes in circumstances indicating that the carrying amounts of the real estate assets may not be recoverable during the expected holding period. When such events or changes are present, we assess the property’s recoverability by comparing the carrying amount of the asset to our estimate of the aggregate undiscounted future operating cash flows expected to be generated over the holding period of the asset including its eventual disposition.  If the carrying amount exceeds the aggregate undiscounted future operating cash flows, we recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property. Any such impairment is treated for accounting purposes similar to an asset acquisition at the estimated fair value, which includes establishing a new cost basis and the elimination of the asset’s accumulated depreciation and amortization.

    In evaluating our investments for impairment, we undergo continuous evaluations of property level performance and real estate trends, and management makes several estimates and assumptions, including, but not limited to, the projected date of disposition, estimated sales price and future cash flows of each property during our estimated holding period. If our analysis or assumptions regarding the projected cash flows expected to result from the use and eventual disposition of our properties change, we incur additional costs and expenses during the holding period, or our expected hold periods change, we may incur future impairment losses.

Sales of Real Estate

Sales of Real Estate

    We classify hotels as held for sale when the criteria are met, in accordance with GAAP.  At that time, we present the assets and obligations associated with the real estate held for sale separately in our condensed consolidated balance sheet, and we cease recording depreciation and amortization expense related to that asset.  Real estate held for sale is reported at the lower of its carrying amount or its estimated fair value less estimated costs to sell.

    Upon the disposition of a property, we recognize a gain or loss at a point in time when we determine control of the underlying asset has been transferred to the buyer. Our performance obligation is generally satisfied at the closing of the transaction. Any continuing involvement is analyzed as a separate performance obligation in the contract, and a portion of the sales price is allocated to each performance obligation. There is significant judgment applied to estimate the amount of any variable consideration identified within the sales price and assess its probability of occurrence based on current market information, historical transactions, and forecasted information that is reasonably available.

    For sales of real estate (or assets classified as held for sale), we evaluate whether the disposition is a strategic shift that will have a major effect on our operations and financial results. When a disposition represents a strategic shift that will have a major effect on our operations and financial results, it will be classified as discontinued operations in our condensed consolidated financial statements for all periods presented.

Cash and Cash Equivalents

Cash and Cash Equivalents

    We classify all cash on hand, demand deposits with financial institutions, and short-term highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents are stated at cost, which approximates fair market value. Our Revolver Credit Agreement requires us to maintain a minimum liquidity of cash and cash equivalents, as defined, at all times. See Note 5 “Debt” for additional information.

    We classify cash and cash equivalents as restricted cash when contractual agreements or arrangements impose restrictions on our ability to access and utilize the cash and cash equivalent amounts for our operations.

Accounts Receivable

Accounts Receivable     Accounts receivable primarily consists of receivables due from insurance settlements, hotel guests, credit card companies, our hotel manager, and hotel buyers with deferred purchase price arrangements. Our receivables are carried at estimated collectable amounts. We periodically evaluate our receivables for collectability based on expected losses incurred over the life of the receivable, considering our historical experience, the length of time receivables are past due and the financial condition of the debtor. Accounts receivable are written off when collection is not probable. We record uncollectible operating lease receipts as a direct offset to room revenues. Our insurance settlement receivables are recorded based upon the terms of our insurance policies and our estimates of insurance losses.

Debt and Deferred Debt Issuance Costs

Debt and Deferred Debt Issuance Costs    Deferred debt issuance costs include costs incurred in connection with issuance of debt, including costs associated with the entry into our loan agreements and revolving credit facility, and are presented as a direct reduction from the carrying amount of debt. These debt issuance costs are deferred and amortized to expense on a straight-line basis over the term of the debt, which approximates the effective interest amortization method. This amortization expense is included as a component of interest expense. When debt is paid prior to its scheduled maturity date and the underlying terms are materially modified, the remaining carrying value of deferred debt issuance costs, along with certain other payments to lenders, is included in loss on extinguishment of debt.

Lessee Accounting

Lessee Accounting

    We determine if an arrangement is a lease at inception. Our operating lease agreements are primarily for ground leases and our corporate office lease, where the asset is classified within “right of use assets” and the operating lease liability is classified within “other liabilities” in our condensed consolidated balance sheets.

    Right of use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Right of use assets and operating lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Our variable lease payments consist of payments based on a rate or index established subsequent to the lease commencement date and non-lease services related to the ground lease, primarily real estate taxes. Variable lease payments are excluded from the right of use assets and operating lease liabilities and are recognized in the period in which the obligation for those payments is incurred. As our leases do not provide an implicit rate, we use our incremental borrowing rate. Our incremental borrowing rate is based on information available at the commencement date using our actual borrowing rates commensurate with the lease terms and a fully levered borrowing. Extension options on our leases are included in our minimum lease terms when they are reasonably certain to be exercised. In our evaluation of the lease term, we consider other arrangements, primarily our debt and franchise agreements, which may have economic consequences related to failure to renew certain ground leases. For accounting purposes, such lease terms are not adjusted unless the contractual terms are modified. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. We have elected to treat rent concessions related to the COVID-19 pandemic as variable lease payments.

Fair Value Measurement

Fair Value Measurement

    Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. In evaluating the fair value of both financial and non-financial assets and liabilities, GAAP establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels, which are as follows:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Valuations in this category are inherently less reliable than actively

quoted market prices due to the degree of subjectivity involved in determining appropriate methodologies and the applicable underlying observable market assumptions. We consider contractual pricing from a hotel under contract for sale as a Level 2 input.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. These inputs cannot be validated by readily determinable market data and generally involve considerable judgment by management.

    We use the highest level of observable market data if such data is available without undue cost and effort.

Derivative Instruments

Derivative Instruments

    We use derivative instruments as part of our overall strategy to manage our exposure to market risks associated with fluctuations in interest rates. We regularly monitor the financial stability and credit standing of the counterparties to our derivative instruments. We do not enter into derivative financial instruments for trading or speculative purposes.

    We record all derivatives at fair value. On the date the derivative contract is entered into, we designate the derivative as one of the following: a hedge of a forecasted transaction or the variability of cash flows to be paid (“Cash Flow Hedge”), a hedge of the fair value of a recognized asset or liability (“Fair Value Hedge”), or an undesignated hedge instrument. As of September 30, 2021 and December 31, 2020, all of our derivative instruments were interest rate caps, and none are designated as hedge instruments. Changes in fair value of undesignated hedge instruments are recorded in current period earnings.

Revenue Recognition

Revenue Recognition

    Our revenues primarily consist of operating lease revenues from room rentals, which are accounted for under GAAP in accordance with lease accounting standards. Room revenue is recognized as earned on a daily basis, net of customer incentive discounts, cash rebates, and refunds. Other lease revenues primarily include lease revenue from restaurants, billboards and cell towers, all of which are operating leases. Such leases are recognized on a straight-line basis over the term of the lease when collections are considered probable and as earned and collected when collections are not considered probable. Uncollectible lease amounts are recorded as a direct offset to revenues.

    As a lessor, our operating leases do not contain purchase options or require significant assumptions or judgments. Some of our operating leases contain extension options. For those with extension options we assess the likelihood such options will be exercised in determining the lease term.

    Customer revenues include other hotel guest revenues generated by the incidental support of hotel operations and are recognized under the revenue accounting standard as the service obligation is completed.

Purchase of Common Stock

Purchase of Common Stock    Purchases of common stock are recorded on the trade date at cost, including commissions and other costs, through a removal of the stated par value with the excess recorded as additional paid-in-capital.

Equity-Based Compensation

Equity-Based Compensation

    We have a stock-based incentive award plan for our employees and directors, which primarily includes time-based and performance-based awards. We recognize the cost of services received in an equity-based payment transaction with an employee or director as services are received and record either a corresponding increase in equity or a liability, depending on whether the instruments granted satisfy the equity or liability classification criteria. Equity-based compensation cost for these equity awards is measured at the grant date and is based on the estimated fair value of the award.

    The equity-based compensation expense is recognized for awards earned or expected to be earned. Accordingly, the compensation expense for all equity awards is recognized straight-line over the vesting period of the last separately identified vesting portion of the award. Forfeitures for time-based and performance-based awards are recognized as they occur. Performance awards with market-based criteria are recorded at fair value at the date of the grant and are not adjusted based on future performance. Performance awards with criteria other than market-based are assessed at each balance sheet date with respect to the expected achievement of the target. Equity-based compensation expense is classified in corporate general and administrative expenses.

Earnings Per Share

Earnings Per Share     Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of our common stock outstanding plus other potentially dilutive securities, except when the effect would be anti-dilutive. Dilutive securities primarily include equity-based awards issued under long-term incentive plans.  Dilutive securities are excluded from the calculation of earnings per share for periods of net loss because the effect would be anti-dilutive.

Income Taxes

Income Taxes

    We are organized in conformity with and operate in a manner that allows us to be taxed as a REIT for U.S. federal income tax purposes. To the extent we continue to qualify as a REIT, we generally will not be subject to U.S. federal income tax on taxable income generated by our REIT activities that we distribute to our stockholders. Accordingly, no provision for U.S. federal income tax expense has been included in our accompanying condensed consolidated financial statements for the three and nine months ended September 30, 2021 or 2020 related to our REIT operations; however, CorePoint TRS, our wholly-owned taxable REIT subsidiary, is subject to U.S. federal, state and local income taxes and we may be subject to state and local taxes. Our provision for income taxes differs from the statutory federal tax rate of 21%, due to the impact of our REIT election, recognition of valuation allowances, accelerated deductions for certain real estate expenditures and state income taxes.  We have not recognized any income tax benefit for the three and nine months ended September 30, 2021, as we believe the realization of a benefit is not more likely than not.

    We use the asset and liability method of accounting for income taxes. Under this method, current income tax expense represents the amounts expected to be reported on our income tax returns, and 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 basis. The deferred tax assets and liabilities are measured using the enacted tax rates that are expected to be applied to taxable income in the years in which those temporary differences are expected to reverse.

    In determining our tax expense or benefit for financial statement reporting purposes, we must evaluate our compliance with the Code, including the transfer pricing determinations used in establishing rental payments between the REIT and CorePoint TRS. Accounting for income taxes requires, among others, interpretation of the Code, estimated tax effects of transactions, and evaluation of probabilities of sustaining tax positions, including realization of tax benefits. We recognize a valuation allowance for income tax benefits if it is more likely than not that all or a portion of the benefit will not be realized. We recognize tax positions only after determining that the relevant tax authority would more likely than not sustain the position following the audit. We measure the amount of the tax position as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon settlement with the tax authority. Our measurement considers the amounts and probabilities of the outcomes that could be realized upon settlement using the facts, circumstances and information available at the respective balance sheet reporting date. The final resolution of those assessments may subject us to additional taxes, penalties and interest. In addition, we may incur expenses defending our positions during Internal Revenue Service (“IRS”) tax examinations, even if we are able to eventually sustain our position with the tax authorities.

Concentrations of Credit Risk and Business Risk

Concentrations of Credit Risk and Business Risk

    We have cash and cash equivalents deposited in certain financial institutions in excess of federally insured levels. As of September 30, 2021, approximately 40% of our total cash and cash equivalents were held in accounts fully covered by FDIC insurance or money market accounts collateralized by U.S. treasuries. For our remaining cash and cash equivalent accounts, we utilize financial institutions that we consider to be of high credit quality and consider the risk of default to be minimal. We have diversified our accounts with several banking institutions in an attempt to minimize exposure to any one of these institutions. We also monitor the creditworthiness of our customers and financial institutions before extending credit or making investments.  

    Substantially all of our revenues are derived from our lodging operations at our hotels. Lodging operations are particularly sensitive to adverse economic, social and competitive conditions and trends, including the COVID-19 pandemic, which could adversely affect our business, financial condition and results of operations.

We have a concentration of hotels operating in Florida, Texas and California.

Segment Reporting

Segment Reporting

    Our hotel investments have similar economic characteristics and our service offerings and delivery of services are provided in a similar manner, using the same types of facilities and similar technologies. Our chief operating decision maker reviews our financial information on an aggregated basis. As a result, we have concluded that we have one operating and reportable business segment.

Principal Components of Expenses

Principal Components of Expenses

    As more fully explained in Note 8 “Commitments and Contingencies” our third-party management company is responsible for the day to day operations of our hotels.  For many expenses, the manager directly contracts for the services in the capacity as a principal, and we reimburse our manager in accordance with the agreements.  We present the following expense components and only classify the fee portion of expense as management and royalty fees.  We classify all amounts owed to our manager and franchisor in accounts payable and accrued expenses.

Rooms — These expenses include hotel operating expenses of housekeeping, reservation systems (per our franchise agreements), room and breakfast supplies and front desk costs.

Other departmental and support — These expenses include hotel operating expenses that constitute non-room operating expenses, including parking, telecommunications, on-site administrative labor, sales and marketing, loyalty program, recurring repairs and maintenance and utility expenses.

Property tax, insurance and other — These expenses consist primarily of real and personal property taxes, other local taxes, ground rent, equipment rent and insurance for our hotel properties.

Newly Issued Accounting Standards and Recently Adopted Accounting Standards

Newly Issued Accounting Standards

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of Effects of Reference Rate Reform on Financial Reporting. The guidance provides optional expedients and exceptions related to the transition away from London Interbank Offered Rate (“LIBOR”) and other interbank offering rates to alternative reference rates. The expedients are applicable to contract modifications made and hedging relationships entered into on or before December 31, 2022. Our current debt agreements use LIBOR rates but provide for alternative rates when LIBOR is no longer available. We do not expect the adoption of this guidance to have a material impact on our consolidated financial position and results of operations.

Recently Adopted Accounting Standards

    In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The guidance enhances and simplifies various aspects of the current income tax guidance and reduces complexity by removing certain exceptions to the general framework. We adopted this guidance on January 1, 2021, and it did not have a material impact on our consolidated financial position and results of operations.

XML

Significant Accounting Policies and Recently Issued Accounting Standards (Tables)

9 Months Ended

Sep. 30, 2021

Accounting Policies [Abstract]

Summary of Hotels, by Percentages of Total Hotels and Total Revenues

The number of hotels and percentages of total hotels as of September 30, 2021 and 2020, and the percentages of our total revenues, from these states for the nine months ended September 30, 2021 and 2020, is as follows:

	September 30, 2021					September 30, 2020
	Number of Hotels	Percentage of Total Hotels		Percentage of Total Revenue		Number of Hotels	Percentage of Total Hotels		Percentage of Total Revenue
Florida	31	19	%	17	%	44	20	%	20	%
Texas	29	18	%	16	%	41	19	%	17	%
California	17	11	%	12	%	19	9	%	12	%
Total	77	48	%	45	%	104	48	%	49	%

XML

Other Assets (Tables)

9 Months Ended

Sep. 30, 2021

Other Assets [Abstract]

Schedule of Other Assets

The following table presents other assets as of September 30, 2021 and December 31, 2020 (in millions):

	September 30, 2021		December 31, 2020
Prepaid expenses	$	9	$	8
Intangible assets, net	4		4
Federal and state tax receivables	4		5
Other assets	1		3
Total other assets	$	18	$	20

XML

Debt (Tables)

9 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

Schedule of Long-Term Debt

The following table presents the carrying amount of our debt as of September 30, 2021 and December 31, 2020 (in millions):

	September 30, 2021		December 31, 2020
CMBS Facility	$	477	$	725
Revolving Facility	60		85
Total debt, net(1)	$	537	$	810

__________

(1) Unamortized debt issuance costs are not significant as of September 30, 2021 and December 31, 2020.

XML

Accounts Payable and Accrued Expenses and Other Liabilities (Tables)

9 Months Ended

Sep. 30, 2021

Payables and Accruals [Abstract]

Summary of Accounts Payable, Accrued Expenses and Other Liabilities

Accounts payable, accrued expenses and other liabilities include the following as of September 30, 2021 and December 31, 2020 (in millions):

	September 30, 2021		December 31, 2020
Real estate taxes	$	17	$	17
Due to hotel manager	8		7
Sales and occupancy taxes	5		3
Other accounts payable and accrued expenses	33		21
Total accounts payable and accrued expenses	$	63	$	48
Operating lease liabilities	$	18	$	20
Insurance financing	3		2
Below market leases, net	2		3
Other liabilities	11		11
Total other liabilities	$	34	$	36

XML

Revenue (Tables)

9 Months Ended

Sep. 30, 2021

Revenues [Abstract]

Schedule of Revenue Components

Revenues for the three and nine months ended September 30, 2021 and 2020 are comprised of the following components (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Operating lease revenues:
Rooms	$	139	$	105	$	369	$	318
Other	1		1		3		3
Total lease revenues	140		106		372		321
Customer revenues	2		1		5		4
Total revenues	$	142	$	107	$	377	$	325

XML

Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2021

Earnings Per Share [Abstract]

Computation of Basic and Diluted Net Income (Loss) Per Common Share

The following table sets forth the calculation of basic and diluted net income (loss) per common share for the three and nine months ended September 30, 2021 and 2020 (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Numerator:
Net income (loss)	$	17	$	(8)	$	14	$	(136)
Denominator:
Weighted average common shares - basic	57.1		56.7		57.0		56.6
Effect of dilutive securities (1)	4.2		—		4.0		—
Weighted average common shares - diluted	61.3		56.7		61.0		56.6
Basic net income (loss) per share	$	0.30	$	(0.14)	$	0.25	$	(2.40)
Diluted net income (loss) per share	$	0.28	$	(0.14)	$	0.23	$	(2.40)

__________(1) Dilutive securities primarily include equity-based compensation and are excluded from the calculation of earnings per share for periods of net loss because the effect would be anti-dilutive.

XML

Equity-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

Summary of Activity of RSAs, RSUs and PSUs

The following tables summarize the activity of our RSAs, RSUs, and PSUs during the nine months ended September 30, 2021 and 2020:

	RSAs			PSUs			RSUs
	Number of Shares	Weighted-Average Grant Date Fair Value		Number of Units	Weighted-Average Grant Date Fair Value		Number of Units	Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2021	1,031,482	$	11.09	1,348,451	$	5.85	290,443	$	4.52
Granted	560,444	$	8.61	573,895	$	9.62	123,033	$	10.29
Converted	(180,072)	$	23.66	(185,171)	$	6.57	—	$	—
Forfeited	(87,082)	$	7.72	(80,958)	$	7.07	—	$	—
Outstanding at September 30, 2021 (1)	1,324,772	$	8.55	1,656,217	$	7.02	413,476	$	6.24

__________

(1) As of September 30, 2021, no outstanding RSAs or PSUs were vested, and 328,213 outstanding RSUs were vested.

	RSAs			PSUs			RSUs
	Number of Shares	Weighted-Average Grant Date Fair Value		Number of Units	Weighted-Average Grant Date Fair Value		Number of Units	Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2020	653,790	$	20.30	368,969	$	6.99	5,072	$	6.05
Granted	919,106	$	3.88	979,482	$	5.42	268,484	$	4.32
Converted	(80,097)	$	14.63	—	$	—	(4,787)	$	6.06
Outstanding at September 30, 2020 (1)	1,492,799	$	10.49	1,348,451	$	5.85	268,769	$	4.32

__________

(1) As of September 30, 2020, no outstanding RSAs and PSUs were vested. As of September 30, 2020, 64,738 outstanding RSUs were vested.

    RSAs are included in amounts for issued and outstanding common stock but are excluded in the computation of basic earnings (loss) per share.

XML

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2021

Fair Value Disclosures [Abstract]

Carrying Amount and Estimated Fair Values of Financial Assets and Liabilities

For those financial instruments not carried at fair value, the carrying amount and estimated fair values of our financial assets and liabilities were as follows as of September 30, 2021 and December 31, 2020 (in millions):

	September 30, 2021				December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Debt - CMBS Facility(1)(2)	$	477	$	477	$	725	$	705
Debt - Revolving Facility(1)(2)	$	60	$	60	$	85	$	84
Mandatorily redeemable preferred stock(1)	$	15	$	16	$	15	$	15

 ____________________

(1)Classified as Level 3 under the fair value hierarchy.

(2)Unamortized debt issuance costs are not significant as of September 30, 2021 and December 31, 2020.

Fair Value, Assets Measured on Recurring and Nonrecurring Basis

The following table summarizes the assets which were measured at fair value on a nonrecurring basis and impaired during the nine months ended September 30, 2021 and the year ended December 31, 2020 (in millions): 

			Basis of Fair Value Measurements
	Fair Value of Assets at Impairment		Quoted Prices in Active Market for Identical Items (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3) (1)		Total Losses
For the nine months ended September 30, 2021
Real estate and right of use asset (2)	$	—	N/A	N/A		$	—	$	4
For the year ended December 31, 2020
Real estate (3)	$	310	N/A	$	7	$	303	$	52

 ____________________

(1)     For the year ended December 31, 2020, the Level 3 unobservable inputs consist of internally developed cash flow models and fair value estimates that included projections of revenues, expenses and capital expenditures and market valuations based on multiples of revenue generally ranging from 2.0x to 3.0x. These assumptions were based on trends and comparable transactions in the lodging industry; our historical data and experience; our budgets, including those prepared by our third-party hotel manager; lodging industry valuation trends; and micro- and macro-economic trends and projections. Our estimated fair values also considered factors related to our franchise and management agreements, requirements to meet certain brand standards and other potential costs to be incurred during our projected holding period.

(2)    The fair value of a right of use asset associated with a ground lease and the associated real estate was determined to be zero as of September 30, 2021, which resulted in an impairment loss of $4 million.

(3)    The fair value of impaired real estate assets was $310 million as of the June 30, 2020 impairment date. The carrying value of these real estate assets was $267 million as of December 31, 2020. The change in fair value from June 30, 2020 to the December 31, 2020 carrying value relates to $14 million of depreciation expense and $29 million due to sales of assets subsequent to the impairment date.

XML

Supplemental Disclosures of Cash Flow Information (Tables)

9 Months Ended

Sep. 30, 2021

Supplemental Cash Flow Elements [Abstract]

Summary of Supplemental Cash Flow Information

The following table presents the supplemental cash flow information for the nine months ended September 30, 2021 and 2020 (in millions):

	Nine Months Ended September 30,
	2021		2020
Supplemental disclosure of cash flow information:
Interest paid during the period	$	20	$	29
Income taxes paid during the period, net of refunds	$	—	$	1
Non-cash investing and financing activities:
Capital expenditures included in accounts payable and accrued expenses	$	2	$	1
Insurance casualty receivable related to real estate and accounts payable	$	8	$	—
Financing of insurance	$	9	$	11

XML

Organization and Basis of Presentation - Summary of Number of Owned and Joint Venture Hotels and Number of Rooms at Such Hotels (Detail)	Sep. 30, 2021 room hotel	Dec. 31, 2020 hotel room
Real Estate Properties [Line Items]
Number of hotels not wholly owned	1	1
Owned
Real Estate Properties [Line Items]
Number of hotels	160	209
Number of rooms | room	22,000	27,800

XML

Significant Accounting Policies and Recently Issued Accounting Standards - Additional Information (Detail)	3 Months Ended		9 Months Ended
	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) segment	Sep. 30, 2020 USD ($)
Summary Of Significant Accounting Policies [Line Items]
Provision for income tax	$ 0	$ (3,000,000)	$ 0	$ (6,000,000)
Percentage of cash and cash equivalents held in accounts fully covered by FDIC or US Treasuries	40.00%		40.00%
Reportable business segments | segment			1
Buildings and Improvements | Minimum
Summary Of Significant Accounting Policies [Line Items]
Useful life			5 years
Buildings and Improvements | Maximum
Summary Of Significant Accounting Policies [Line Items]
Useful life			40 years
Furniture, Fixtures and Other Equipment | Minimum
Summary Of Significant Accounting Policies [Line Items]
Useful life			2 years
Furniture, Fixtures and Other Equipment | Maximum
Summary Of Significant Accounting Policies [Line Items]
Useful life			10 years
REIT
Summary Of Significant Accounting Policies [Line Items]
Provision for income tax	$ 0	$ 0	$ 0	$ 0

XML

Significant Accounting Policies and Recently Issued Accounting Standards - Summary Of The Number of Hotels, Percentages of Total Hotels And Total Revenues (Detail) - hotel	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Concentration Risk [Line Items]
Number of Hotels	77	104
Percentage of Total Hotels	48.00%	48.00%
Percentage of Total Revenue	45.00%	49.00%
Florida
Concentration Risk [Line Items]
Number of Hotels	31	44
Percentage of Total Hotels	19.00%	20.00%
Percentage of Total Revenue	17.00%	20.00%
Texas
Concentration Risk [Line Items]
Number of Hotels	29	41
Percentage of Total Hotels	18.00%	19.00%
Percentage of Total Revenue	16.00%	17.00%
California
Concentration Risk [Line Items]
Number of Hotels	17	19
Percentage of Total Hotels	11.00%	9.00%
Percentage of Total Revenue	12.00%	12.00%

XML

Investments In Real Estate - Additional Information (Detail) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021 USD ($) property	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) property hotel	Sep. 30, 2020 USD ($) hotel
Real Estate Investments, Net [Abstract]
Hotels classified as investment in real estate sold | hotel			49	50
Proceeds from sale of hotel			$ 281	$ 226
Gain (loss) on sales of hotels			81	59
Impaired Long-Lived Assets Held and Used [Line Items]
Impairment loss	$ 4	$ 0	$ 4	$ 54
Number of impaired properties | property	1		1
Hurricane
Impaired Long-Lived Assets Held and Used [Line Items]
Damaged assets			$ 3

XML

Other Assets - Schedule of Other Assets (Detail) - USD ($) $ in Millions	Sep. 30, 2021	Dec. 31, 2020
Other Assets [Abstract]
Prepaid expenses	$ 9	$ 8
Intangible assets, net	4	4
Federal and state tax receivables	4	5
Other assets	1	3
Total other assets	$ 18	$ 20

XML

Debt - Schedule of Long-Term Debt (Detail) - USD ($) $ in Millions	Sep. 30, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Total debt, net	$ 537	$ 810
CMBS Facility
Debt Instrument [Line Items]
Carrying Amount	477	725
CMBS Facility | CMBS Facility
Debt Instrument [Line Items]
Carrying Amount	477	725
Revolving Facility | Revolving Facility
Debt Instrument [Line Items]
Carrying Amount	$ 60	$ 85

XML

Debt - Additional Information (Detail)			1 Months Ended		2 Months Ended	9 Months Ended		12 Months Ended
	Oct. 31, 2021 USD ($)	Sep. 30, 2021 USD ($)	Oct. 31, 2021 USD ($)	Mar. 31, 2021 USD ($)	Feb. 28, 2021	Sep. 30, 2021 USD ($) extension hotel	Sep. 30, 2020 hotel	Jun. 30, 2025	Jun. 30, 2024	Dec. 31, 2020 USD ($)
Debt Instrument [Line Items]
Hotels classified as investment in real estate sold | hotel						49	50
Escrow deposit		$ 45,000,000				$ 45,000,000				$ 35,000,000
LIBOR
Debt Instrument [Line Items]
One-month LIBOR rate		0.08%				0.08%				0.14%
Revolving Facility
Debt Instrument [Line Items]
Cash and cash equivalents, cash trap		$ 3,000,000				$ 3,000,000
Monthly principal payments						$ 20,000,000
Minimum liquidity requirement, exclusive of certain restricted cash				$ 100,000,000
Interest rate period end		6.13%				6.13%				5.19%
Minimum liquidity requirement, revolving facility		$ 67,500,000
Minimum liquidity requirement percentage, revolving facility		50.00%
Revolving Facility | Subsequent Event
Debt Instrument [Line Items]
Monthly principal payments			$ 5,000,000
Minimum liquidity requirement, revolving facility	$ 65,000,000
Revolving Facility | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate				6.00%
Basis spread on variable rate, period increase					1.00%
Revolving Facility | Base Rate
Debt Instrument [Line Items]
Basis spread on variable rate				5.00%
Revolving Facility | Core Point Borrower L L C
Debt Instrument [Line Items]
Letters of credit outstanding, amount		$ 4,000,000				$ 4,000,000
CMBS Facility
Debt Instrument [Line Items]
Extension options | extension						3
CMBS facility, extension option period						1 year
Interest rate		3.12%				3.12%				2.96%
Debt yield condition 1						16.44%
Debt yield condition 2						16.94%
Net proceeds from sale of properties						$ 248,000,000
Cash and cash equivalents, cash trap		$ 91,000,000				91,000,000
Escrow deposit		8,000,000				8,000,000
Amount outstanding		477,000,000				477,000,000				$ 725,000,000
CMBS Facility | Reserve For Property Improvements And Environmental Remediation, Property Insurance Coverage
Debt Instrument [Line Items]
Cash reserve deposit required and made		27,000,000				27,000,000
CMBS Facility | Reserve For Higher Property Insurance Deductibles
Debt Instrument [Line Items]
Cash reserve deposit required and made		4,000,000				$ 4,000,000
CMBS Facility | Minimum
Debt Instrument [Line Items]
Basis spread on variable rate						2.29%
CMBS Facility | Maximum
Debt Instrument [Line Items]
Basis spread on variable rate						3.95%
CMBS Facility | Forecast
Debt Instrument [Line Items]
Basis points increase								0.10%	0.15%
CMBS Facility | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate						3.04%				2.82%
CMBS Facility | CMBS Facility
Debt Instrument [Line Items]
Amount outstanding		477,000,000				$ 477,000,000				$ 725,000,000
CMBS Facility | CorePoint CMBS Borrower
Debt Instrument [Line Items]
Premium percentage minimum						5.00%
Premium percentage maximum						10.00%
CMBS Facility | CorePoint CMBS Borrower | Commercial Mortgage Backed Securities | CMBS Facility
Debt Instrument [Line Items]
Owned and ground leased hotels | hotel						5
Revolving Facility | Revolving Facility
Debt Instrument [Line Items]
Amount outstanding		$ 60,000,000				$ 60,000,000				$ 85,000,000

XML

Mandatorily Redeemable Preferred Shares - Additional Information (Detail) - Series A Preferred Stock $ / shares in Units, shares in Thousands, $ in Millions	9 Months Ended
	Sep. 30, 2021 USD ($) $ / shares shares
Class of Stock [Line Items]
Aggregate liquidation preference | $	$ 15
Preferred stock leverage ratio, maximum	7.5
Preferred stock, dividend rate, percentage	15.00%
Preferred tock leverage ratio, actual	7.5
Minimum
Class of Stock [Line Items]
Preferred stock, dividend rate, percentage	13.00%
Maximum
Class of Stock [Line Items]
Preferred stock, dividend rate, percentage	16.50%
Wholly Owned Subsidiary of LQH Parent
Class of Stock [Line Items]
Number of shares issued (in shares) | shares	15
Preferred stock, par value (in usd per share) | $ / shares	$ 0.01

XML

Accounts Payable and Accrued Expenses and Other Liabilities - Summary of Accounts Payable, Accrued Expenses and Other Liabilities (Detail) - USD ($) $ in Millions	Sep. 30, 2021	Dec. 31, 2020
Payables and Accruals [Abstract]
Real estate taxes	$ 17	$ 17
Due to hotel manager	8	7
Sales and occupancy taxes	5	3
Other accounts payable and accrued expenses	33	21
Total accounts payable and accrued expenses	63	48
Operating lease liabilities	18	20
Insurance financing	3	2
Below market leases, net	2	3
Other liabilities	11	11
Total other liabilities	$ 34	$ 36

XML

Commitments and Contingencies - Additional Information (Detail)	3 Months Ended		9 Months Ended
	Sep. 30, 2021 USD ($) option extension	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) option extension	Sep. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)
Commitments And Contingencies [Line Items]
Management termination fees	$ 4,000,000	$ 4,000,000	$ 11,000,000	$ 10,000,000
Management fee	7,000,000	6,000,000	18,000,000	16,000,000
Royalty fee expense	7,000,000	$ 5,000,000	19,000,000	$ 16,000,000
Escrowed casualty insurance proceeds	45,000,000		45,000,000		$ 35,000,000
Purchase commitments	$ 12,000,000		$ 12,000,000
Operating lease contract term	25 years		25 years
Weighted average remaining lease term	33 years		33 years
Weighted average discount rate	8.82%		8.82%
Remainder of fiscal year (less than)	$ 3,000,000		$ 3,000,000
2022 (less than)	3,000,000		3,000,000
2023 (less than)	3,000,000		3,000,000
2024 (less than)	3,000,000		3,000,000
2025 (less than)	3,000,000		3,000,000
Long-Term Hotel Service Contracts Payable
Commitments And Contingencies [Line Items]
Purchase commitments	8,000,000		$ 8,000,000
Purchase commitment payable period			3 years
Internal Revenue Service (IRS)
Commitments And Contingencies [Line Items]
Notice of taxable adjustment from IRS	138,000,000		$ 138,000,000
Adjustment to tax operating loss carryforwards	$ 31,000,000		$ 31,000,000
La Quinta Management L.L.C
Commitments And Contingencies [Line Items]
Management fees			5.00%
Renewal options | option	2		2
Renewal period			5 years
Penalty for termination, multiplier of property sold			3
Penalty determination trailing period			12 months
La Quinta Franchising LLC
Commitments And Contingencies [Line Items]
Royalty fee			5.00%
Reservation fee			2.00%
Marketing fee			2.50%
Loyalty program fee			5.00%
Escrowed casualty insurance proceeds	$ 15,000,000		$ 15,000,000
La Quinta Franchising LLC | Minimum
Commitments And Contingencies [Line Items]
Capital expenditures			$ 1,500
Capital expenditure period			2 years
Capital expenditure period, franchisor's discretion			2 years
La Quinta Franchising LLC | Maximum
Commitments And Contingencies [Line Items]
Capital expenditures			$ 7,500
Capital expenditure period			11 years
Capital expenditure period, franchisor's discretion			9 years
Affiliated Entity
Commitments And Contingencies [Line Items]
Franchise renewal options | extension	1		1
Franchise agreements renewal period			10 years
Liquidated damage multiplier			7.5
Trailing period			12 months

XML

Equity - Additional Information (Detail) - USD ($)	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Class of Stock [Line Items]
Authorized amount, share repurchase program	$ 50,000,000
Remaining authorized repurchase amount	$ 21,000,000
Share Repurchase Program
Class of Stock [Line Items]
Purchase of common stock (in shares)	0	0

XML

Revenue - Schedule of Revenue Components (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Disaggregation of Revenue [Line Items]
Total revenues	$ 142	$ 107	$ 377	$ 325
Rooms
Disaggregation of Revenue [Line Items]
Total revenues	139	105	369	318
Other
Disaggregation of Revenue [Line Items]
Total revenues	1	1	3	3
Total lease revenues
Disaggregation of Revenue [Line Items]
Total revenues	140	106	372	321
Customer revenues
Disaggregation of Revenue [Line Items]
Total revenues	$ 2	$ 1	$ 5	$ 4

XML

Earnings Per Share - Computation of Basic and Diluted Net Income (Loss) Per Common Share (Detail) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Numerator:
Net income (loss)	$ 17	$ (8)	$ 14	$ (136)
Denominator:
Weighted average common shares - basic (in shares)	57.1	56.7	57.0	56.6
Effect of dilutive securities (in shares)	4.2	0.0	4.0	0.0
Weighted average common shares - diluted (in shares)	61.3	56.7	61.0	56.6
Basic net income (loss) per share (in usd per share)	$ 0.30	$ (0.14)	$ 0.25	$ (2.40)
Diluted net income (loss) per share (in usd per share)	$ 0.28	$ (0.14)	$ 0.23	$ (2.40)

XML

Equity-Based Compensation - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized (in shares)	1,000,000,000.0		1,000,000,000.0		1,000,000,000.0
Equity-based compensation expense recognized	$ 2	$ 3	$ 7	$ 8
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Actual number of shares of common stock issuable as percent of issued number of units granted			0.00%
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Actual number of shares of common stock issuable as percent of issued number of units granted			175.00%
Omnibus Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized (in shares)	8,000,000		8,000,000
Shares available for issuance (in shares)	5,000,000		5,000,000
Omnibus Incentive Plan | RSAs | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			1 year
Omnibus Incentive Plan | RSAs | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			3 years
Omnibus Incentive Plan | RSUs | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			1 year
Omnibus Incentive Plan | RSUs | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			2 years
Omnibus Incentive Plan | PSUs | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			2 years
Omnibus Incentive Plan | PSUs | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			3 years

XML

Equity-Based Compensation - Summary of Activity of RSAs, RSUs and PSUs (Detail) - $ / shares	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Weighted-Average Grant Date Fair Value
Number of equity instruments vested (in shares)		0
RSAs
Number of Shares/Units
Beginning balance (in shares/units)	1,031,482	653,790
Granted (in shares/units)	560,444	919,106
Converted (in shares/units)	(180,072)	(80,097)
Forfeited (in shares/units)	(87,082)
Ending balance (in shares/units)	1,324,772	1,492,799
Weighted-Average Grant Date Fair Value
Beginning balance (in usd per share/unit)	$ 11.09	$ 20.30
Granted (in usd per share/unit)	8.61	3.88
Converted (in usd per share/unit)	23.66	14.63
Forfeited (in usd per share/unit)	7.72
Ending balance (in usd per share/unit)	$ 8.55	$ 10.49
Number of equity instruments vested (in shares)	0	0
PSUs
Number of Shares/Units
Beginning balance (in shares/units)	1,348,451	368,969
Granted (in shares/units)	573,895	979,482
Converted (in shares/units)	(185,171)	0
Forfeited (in shares/units)	(80,958)
Ending balance (in shares/units)	1,656,217	1,348,451
Weighted-Average Grant Date Fair Value
Beginning balance (in usd per share/unit)	$ 5.85	$ 6.99
Granted (in usd per share/unit)	9.62	5.42
Converted (in usd per share/unit)	6.57	0
Forfeited (in usd per share/unit)	7.07
Ending balance (in usd per share/unit)	$ 7.02	$ 5.85
Number of equity instruments vested (in shares)	0	0
RSUs
Number of Shares/Units
Beginning balance (in shares/units)	290,443	5,072
Granted (in shares/units)	123,033	268,484
Converted (in shares/units)	0	(4,787)
Forfeited (in shares/units)	0
Ending balance (in shares/units)	413,476	268,769
Weighted-Average Grant Date Fair Value
Beginning balance (in usd per share/unit)	$ 4.52	$ 6.05
Granted (in usd per share/unit)	10.29	4.32
Converted (in usd per share/unit)	0	6.06
Forfeited (in usd per share/unit)	0
Ending balance (in usd per share/unit)	$ 6.24	$ 4.32
Number of equity instruments vested (in shares)	328,213	64,738

XML

Fair Value Measurements - Additional Information (Detail)	Sep. 30, 2021 USD ($)
Significant Other Observable Inputs (Level 2) | Interest Rate Cap
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Strike rate	0.75%
Interest Rate Cap
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Notional amount	$ 640,000,000
Interest Rate Cap | Significant Other Observable Inputs (Level 2)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets fair value (less than)	$ 1,000,000

XML

Fair Value Measurements - Carrying Amount and Estimated Fair Values of Financial Assets and Liabilities (Detail) - USD ($) $ in Millions	Sep. 30, 2021	Dec. 31, 2020
Mandatorily redeemable preferred stock
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Carrying Amount	$ 15	$ 15
Mandatorily redeemable preferred stock | Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair Value	16	15
Debt - CMBS Facility
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Carrying Amount	477	725
Debt - CMBS Facility | Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair Value	477	705
Debt - Revolving Facility
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Carrying Amount	60	85
Debt - Revolving Facility | Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair Value	$ 60	$ 84

XML

Fair Value Measurements - Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis (Details)	6 Months Ended	9 Months Ended	12 Months Ended
	Dec. 31, 2020 USD ($)	Sep. 30, 2021 USD ($)	Dec. 31, 2020 USD ($)	Jun. 30, 2020 USD ($)
Assets, Fair Value Disclosure [Abstract]
Total Losses		$ 4,000,000	$ 52,000,000
Depreciation	$ 14,000,000
Sale of real estate assets	29,000,000
Fair Value of Assets at Impairment
Assets, Fair Value Disclosure [Abstract]
Real estate and right of use asset		0
Real estate	310,000,000		310,000,000
Significant Other Observable Inputs (Level 2)
Assets, Fair Value Disclosure [Abstract]
Real estate	7,000,000		7,000,000
Significant Unobservable Inputs (Level 3)
Assets, Fair Value Disclosure [Abstract]
Real estate and right of use asset		$ 0
Real estate	303,000,000		$ 303,000,000
Significant Unobservable Inputs (Level 3) | Measurement Input, Revenue Multiple | Valuation Technique, Discounted Cash Flow | Hotels Encumbered With Ground Lease | Minimum
Assets, Fair Value Disclosure [Abstract]
Real estate investment, measurement input			2.0
Significant Unobservable Inputs (Level 3) | Measurement Input, Revenue Multiple | Valuation Technique, Discounted Cash Flow | Hotels Encumbered With Ground Lease | Maximum
Assets, Fair Value Disclosure [Abstract]
Real estate investment, measurement input			3.0
Nonrecurring
Assets, Fair Value Disclosure [Abstract]
Real estate	$ 267,000,000		$ 267,000,000	$ 310,000,000

XML

Related Party Transactions - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Related Party Transaction [Line Items]
Outstanding balance	$ 537		$ 537		$ 810
Total interest payments			20	$ 29
CMBS Facility | Blackstone
Related Party Transaction [Line Items]
Outstanding balance	79		79		$ 79
Total interest payments	$ 1	$ 1	$ 2	$ 3
CorePoint Lodging Inc. | Affiliate Of Blackstone
Related Party Transaction [Line Items]
Ownership percent	30.00%		30.00%

XML

Supplemental Disclosures of Cash Flow Information - Summary of Supplemental Cash Flow Information (Detail) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Supplemental disclosure of cash flow information:
Interest paid during the period	$ 20	$ 29
Income taxes paid during the period, net of refunds	0	1
Non-cash investing and financing activities:
Capital expenditures included in accounts payable and accrued expenses	2	1
Insurance casualty receivable related to real estate and accounts payable	8	0
Financing of insurance	$ 9	$ 11

XML

Subsequent Events - Additional Information (Detail) $ / shares in Units, $ in Millions		1 Months Ended	9 Months Ended
	Nov. 04, 2021 USD ($)	Nov. 08, 2021 USD ($) hotel room	Sep. 30, 2021 USD ($) hotel	Sep. 30, 2020 USD ($) hotel	Nov. 06, 2021 USD ($) $ / shares	Nov. 05, 2021 USD ($) $ / shares
Subsequent Event [Line Items]
Hotels classified as investment in real estate sold | hotel			49	50
Gross proceeds from sales of hotels			$ 281.0	$ 226.0
Gain (loss) on sales of hotels			$ 81.0	$ 59.0
Subsequent Event | Merger Agreement | Cavalier Acquisition JV LP
Subsequent Event [Line Items]
Share price (in USD per share) | $ / shares					$ 15.65
Termination and expense reimbursement payments	$ 84.0
Subsequent Event | IRS Audit | Internal Revenue Service (IRS) | Cavalier Acquisition JV LP
Subsequent Event [Line Items]
Total settlement amount (less than)					$ 160.0
Subsequent Event | Unfavorable Regulatory Action | Internal Revenue Service (IRS) | Settlement Amount Before Interest
Subsequent Event [Line Items]
Estimated possible loss						$ 89.6
Estimated possible loss per share (in dollars per share) | $ / shares						$ 0.10
Subsequent Event | Unfavorable Regulatory Action | Internal Revenue Service (IRS) | Settlement Amount Plus Statutory Interest
Subsequent Event [Line Items]
Estimated possible loss						$ 155.0
Subsequent Event | CMBS Facility
Subsequent Event [Line Items]
Principal repayment of debt		$ 32.0
Building | Subsequent Event
Subsequent Event [Line Items]
Hotels classified as investment in real estate sold | hotel		5
Number of rooms | room		600
Gross proceeds from sales of hotels		$ 36.0
Gain (loss) on sales of hotels		$ 11.0