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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2013
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies Litigation We are subject to various claims, lawsuits and legal proceedings, including routine litigation arising in the ordinary course of business, regarding the operation of our hotels and company matters. While it is not possible to ascertain the ultimate outcome of such matters, management believes that the aggregate amount of such liabilities, if any, in excess of amounts covered by insurance will not have a material adverse impact on our financial condition or results of operations. The outcome of claims, lawsuits and legal proceedings brought against the Company, however, is subject to significant uncertainties. Ground Leases Five of our hotels are subject to ground lease agreements that cover all of the land underlying the respective hotel:
• | The Bethesda Marriott Suites hotel is subject to a ground lease that runs until 2087. There are no renewal options.
• | The Courtyard Manhattan/Fifth Avenue is subject to a ground lease that runs until 2085, inclusive of one 49-year renewal option.
• | The Salt Lake City Marriott Downtown is subject to two ground leases: one ground lease covers the land under the hotel and the other ground lease covers the portion of the hotel that extends into the City Creek Project. The term of the ground lease covering the land under the hotel runs through 2056, inclusive of our renewal options, and the term of the ground lease covering the extension runs through 2017. We own a 21% interest in the land under the hotel.
• | The Westin Boston Waterfront is subject to a ground lease that runs until 2099. There are no renewal options.
• | The Hilton Minneapolis is subject to a ground lease that runs until 2091. There are no renewal options.
In addition, the golf course that is part of the Oak Brook Hills Resort is subject to a ground lease covering approximately 110 acres. The ground lease runs through 2045 including renewal options. Finally, a portion of the parking garage relating to the Renaissance Worthington is subject to three ground leases that cover, contiguously with each other, approximately one-fourth of the land on which the parking garage is constructed. Each of the ground leases has a term that runs through July 2067, inclusive of the three 15-year renewal options. The remainder of the land on which the parking garage is constructed is owned by us in fee simple. These ground leases generally require us to make rental payments (including a percentage of gross receipts as percentage rent with respect to the Courtyard Manhattan/Fifth Avenue ground lease) and payments for all, or in the case of the ground lease covering the Salt Lake City Marriott Downtown extension, our tenant's share of, charges, costs, expenses, assessments and liabilities, including real property taxes and utilities. Furthermore, these ground leases generally require us to obtain and maintain insurance covering the subject property. Ground rent expense from continuing operations was $15.0 million, $14.6 million and $14.2 million for the years ended December 31, 2013, 2012 and 2011, respectively. Cash paid for ground rent from continuing operations was $8.5 million, $8.2 million and $7.3 million for the years ended December 31, 2013, 2012 and 2011, respectively. The following table reflects the current and future annual rents under our ground leases:
| Property |  | Term (1) |  | Annual Rent
Ground leases under hotel: | Bethesda Marriott Suites |  | Through 4/2087 |  | $597,850 (2)
| Courtyard Manhattan/Fifth Avenue(3)(4) |  | 10/2007 - 9/2017 |  | $906,000
|  |  | 10/2017 - 9/2027 |  | $1,132,812
|  |  | 10/2027 - 9/2037 |  | $1,416,015
|  |  | 10/2037 - 9/2047 |  | $1,770,019
|  |  | 10/2047 - 9/2057 |  | $2,212,524
|  |  | 10/2057 - 9/2067 |  | $2,765,655
|  |  | 10/2067 - 9/2077 |  | $3,457,069
|  |  | 10/2077 - 9/2085 |  | $4,321,336
| Salt Lake City Marriott Downtown (Ground lease for hotel) (5) |  | Through 12/2056 |  | Greater of $132,000 or 2.6% of annual gross room sales
| (Ground lease for extension) |  | 1/2013 - 12/2017 |  | $11,305
| Westin Boston Waterfront Hotel (6) (Base rent) |  | 1/2013 - 12/2015 |  | $500,000
|  |  | 1/2016 - 12/2020 |  | $750,000
|  |  | 1/2021 - 12/2025 |  | $1,000,000
|  |  | 1/2026 - 12/2030 |  | $1,500,000
|  |  | 1/2031 - 12/2035 |  | $1,750,000
|  |  | 1/2036 - 5/2099 |  | No base rent
| (Percentage rent) |  | Through 12/2015 |  | 0% of annual gross revenue
|  |  | 1/2016 - 12/2025 |  | 1.0% of annual gross revenue
|  |  | 1/2026 - 12/2035 |  | 1.5% of annual gross revenue
|  |  | 1/2036 - 12/2045 |  | 2.75% of annual gross revenue
|  |  | 1/2046 - 12/2055 |  | 3.0% of annual gross revenue
|  |  | 1/2056 - 12/2065 |  | 3.25% of annual gross revenue
|  |  | 1/2066 - 5/2099 |  | 3.5% of annual gross revenue
| Hilton Minneapolis (7) |  | 1/2013 - 12/2013 |  | $6,012,000
|  |  | 1/2014 - 12/2014 |  | $6,313,000
|  |  | 1/2015 - 12/2015 |  | $6,629,000
|  |  | 1/2016 - 12/2016 |  | $6,960,000
|  |  | 1/2017 - 12/2017 |  | $7,308,000
|  |  | 1/2018 - 12/2018 |  | $7,673,000
|  |  | 1/2019 - 10/2091 |  | Annual real estate taxes
Ground leases under parking garage: | Renaissance Worthington |  | 8/2013 - 7/2022 |  | $40,400
|  |  | 8/2022 - 7/2037 |  | $46,081
|  |  | 8/2037 - 7/2052 |  | $51,763
|  |  | 8/2052 - 7/2067 |  | $57,444
Ground lease under golf course: | Oak Brook Hills Resort Chicago |  | 10/1985 - 9/2025 |  | $1 (8)
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(1) | These terms assume our exercise of all renewal options.
(2) | Represents rent for the year ended December 31, 2013. Rent will increase annually by 5.5%.
(3) | The ground lease term is 49 years. We have the right to renew the ground lease for an additional 49 year term on the same terms then applicable to the ground lease.
(4) | The total annual rent includes the fixed rent noted in the table plus a percentage rent equal to 5% of gross receipts for each lease year, but only to the extent that 5% of gross receipts exceeds the minimum fixed rent in such lease year. There was no such percentage rent earned during the year ended December 31, 2013.
(5) | We own a 21% interest in the land underlying the hotel and, as a result, 21% of the annual rent under the ground lease is paid to us by the hotel.
(6) | Total annual rent under the ground lease is capped at 2.5% of hotel gross revenues during the initial 30 years of the ground lease.
(7) | The ground lease payment and related property tax liability were negotiated as a single payment in lieu of taxes. The single payments increase at a rate of 5% per year through 2018. Beginning in 2019, there will no longer be a stipulated single payment and the hotel will pay only the real property tax portion of the initial single payment based on the then assessed valuation and applicable tax rate.
(8) | We have the right to extend the term of this lease for two consecutive renewal terms of ten years each with rent at then market value.
Future minimum annual rental commitments under all non-cancelable operating leases as of December 31, 2013 are as follows (in thousands):
2014 | $ | 10,135 |
2015 | 10,237 |
2016 | 10,509 |
2017 | 10,815 |
2018 | 11,124 |
Thereafter | 615,532 |
| $ | 668,352 |
Hotel under Development On January 18, 2011, we entered into a purchase and sale agreement to acquire, upon completion, a hotel property under development on West 42nd Street in Times Square, New York City. Upon completion by the third-party developer, the hotel will have 282 guest rooms. The contractual purchase price is approximately $128 million, or approximately $450,000 per guest room. The purchase and sale agreement is for a fixed-price and we are not assuming any construction risk (including not assuming the risk of construction cost overruns). We expect that the hotel will open during 2014. Upon entering into the purchase and sale agreement, we deposited $20.0 million with a third-party escrow agent. During the years ended December 31, 2013 and 2012, we made $5.0 million and $1.9 million, respectively, of additional deposits. All deposits are interest bearing. We will forfeit our deposits if we do not close on the acquisition of the hotel upon substantial completion of construction, unless the seller fails to meet certain conditions, including substantial completion of the hotel within a specified time frame and construction of the hotel within the contractual scope.

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