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Commitments and Contingencies
 6 Months Ended
Jun. 17, 2011
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies


Litigation


Except as described below, we are not involved in any material litigation nor, to our knowledge, is any material litigation pending or threatened against us. We are involved in routine litigation arising out of the ordinary course of business, all of which is expected to be covered by insurance and is not expected to have a material adverse impact on our financial condition or results of operations.


We hold the senior mortgage loan secured by the Allerton Hotel, located in downtown Chicago, Illinois. The loan matured in January 2010 and is in default. On May 5, 2011, the borrower under the loan filed for bankruptcy protection in the Northern District of Illinois under chapter 11 of Title 11 of the U.S. Code, 11 U.S.C. §§ 101 et seq., as amended.  The senior mortgage loan is secured by substantially all of the assets of the borrower, including, without limitation, the Allerton Hotel. The filing of the bankruptcy case had the effect of, among other things, automatically staying the foreclosure proceedings that we had previously filed against the borrower.  While we intend to continue to vigorously pursue our rights in the bankruptcy case, it is too early in the process to determine the likelihood of potential outcomes.


In addition, certain employees at the Los Angeles Airport Marriott Hotel and certain employees at other hotels in the vicinity of the Los Angeles Airport, have brought a claim against the Company and Marriott and other LAX area hotel owners and operators alleging that these hotels did not comply with an ordinance adopted by the Los Angeles City Council governing payment of service charges to certain employees at these hotels. The litigation is in the discovery phase. We cannot presently determine the likelihood of the outcome or amount of potential loss, if any.


Performance Termination Provisions Under Management Agreements


Our management agreements provide us with termination rights upon a hotel’s failure to meet certain financial performance criteria. Our termination rights may, in certain cases, be extinguished if the manager of the hotel elects to cure the failure by making a cure payment. Based on our forecasts and the hotels’ budgets, the Orlando Airport Marriott and Oak Brook Hills Marriott Resort are likely to fail to satisfy their performance termination criteria, which will give us the right to terminate the management agreements for these hotels, subject to the managers’ right to cure.


If we elect to terminate a hotel manager under the performance termination provisions we will evaluate the most appropriate action plan for the hotel. This action plan could include disposition of the hotel, rebranding the hotel, or maintaining the existing hotel brand with an independent hotel manager.


The Conrad Chicago failed the performance criteria under our management agreement with Hilton. Hilton elected not to make a cure payment to continue to manage the hotel. On May 17, 2011, we entered into a termination agreement with Hilton, which allows us to notify Hilton, with 30-day written notice, of a termination date on or prior to December 31, 2011. If termination does not occur on or prior to December 31, 2011, the existing management agreement remains in effect. At the termination date, we are required to pay a $1.0 million termination fee, reflecting partial repayment of key money provided by Hilton when it entered into the management agreement. Upon execution of the termination agreement with Hilton, we concluded that the $1.0 million repayment of key money to Hilton was probable and, accordingly, we accrued a liability during the second fiscal quarter.


Income Taxes


We had no accruals for tax uncertainties as of June 17, 2011 and December 31, 2010. As of June 17, 2011, all of our federal income tax returns and state tax returns for the jurisdictions in which our hotels are located remain subject to examination by the respective jurisdiction tax authorities.