Commitments and Contingencies

12 Months Ended

Dec. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

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

Additional information regarding our leases can be found in Note 4.

Six of our hotels are subject to ground lease agreements that cover all of the land underlying the respective hotel as of December 31, 2020:

•The Bethesda Marriott Suites hotel is subject to a ground lease that runs until 2087. There are no renewal options.

•The Courtyard New York 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 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 adjacent City Creek Center. We own a 21% interest in the land under the hotel. The term of the ground lease covering the land under the hotel runs through 2056, inclusive of renewal options. The term of the ground lease covering the extension into the City Creek Center is

coterminous with the term of the ground lease covering the land under the hotel. As such, the term also runs through 2056, inclusive of renewal options.

•The Westin Boston Waterfront is subject to a ground lease that runs until 2099. There are no renewal options.

•The Hotel Palomar Phoenix is subject to a ground lease that runs until 2085, inclusive of three renewal options of five years each.

•Cavallo Point is subject to a ground lease with the United States National Park Service that runs until 2066. There are no renewal options.

A portion of the parking garage relating to the Worthington Renaissance Fort Worth Hotel 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 three 15-year renewal options. The remainder of the land on which the parking garage is constructed is owned by us in fee simple.

A portion of the JW Marriott Denver Cherry Creek is subject to a ground lease that covers approximately 5,500 square feet. The term of the ground lease runs through December 2030, inclusive of two 5-year renewal options. The lease may be indefinitely extended thereafter in one-year increments. The remainder of the land on which the hotel is constructed is owned by us in fee simple.

We lease the buildings and sublease the underlying land containing 28 of the 70 rooms at the Orchards Inn Sedona, which expires in 2070, including all extension options. The remainder of the land underlying the hotel 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 New York Manhattan/Fifth Avenue, Westin Boston Waterfront, Salt Lake City Marriott, and Cavallo Point ground leases). Most of our ground leases require us to make payments for all 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.

In March 2020, we acquired the remaining 4.5% interest in the land underlying the Kimpton Shorebreak Resort located in Huntington Beach, California, for a purchase price of $1.6 million and are now no longer subject to a ground lease.

The following table reflects the current and future annual rents under our ground leases:

Property

Term (1)

Annual Rent

Bethesda Marriott Suites

Through 4/2087

$869,679 (2)

Courtyard New York Manhattan/Fifth Avenue (3)

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 (Ground lease for hotel) (4)

Through 12/2056

Greater of $132,000 or 2.6% of annual gross room sales

Salt Lake City Marriott (Ground lease for extension)

1/2018 - 12/2056 (5)

$13,500

Westin Boston Waterfront (6) (Base rent)

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

Westin Boston Waterfront (Percentage rent)

6/2016 - 5/2026

1.0% of annual gross revenue

6/2026 - 5/2036

1.5% of annual gross revenue

6/2036 - 5/2046

2.75% of annual gross revenue

6/2046 - 5/2056

3.0% of annual gross revenue

6/2056 - 5/2066

3.25% of annual gross revenue

6/2066 - 5/2099

3.5% of annual gross revenue

JW Marriott Denver Cherry Creek

1/2016 - 12/2020

$50,000

1/2021 - 12/2025

$55,000

1/2026 - 12/2030 (7)

$60,000

Orchards Inn Sedona

Through 6/2018

$117,780

7/2018 - 12/2070

$123,499 (8)

Hotel Palomar Phoenix (Base Rent)

Through 3/2020

$16,875

4/2020 - 3/2021

$33,750

4/2021 - 3/2085

$34,594 (9)

Hotel Palomar Phoenix (Government Property Lease Excise Tax) (10)

1/2022 - 12/2023

$390,000

1/2024 - 12/2033

$312,000

1/2034 - 12/2043

$234,000

1/2044 - 12/2053

$156,000

1/2054 - 12/2063

$78,000

1/2064 - 3/2085

$—

Cavallo Point (Base Rent)

Through 12/2018

1/2019 - 12/2066

$67,034 (11)

Cavallo Point (12) (Percentage Rent)

Through 12/2018

1.0% of adjusted gross revenue over threshold

1/2019 - 12/2023

2.0% of adjusted gross revenue over threshold

1/2024 - 12/2028

3.0% of adjusted gross revenue over threshold

1/2029 - 12/2033

4.0% of adjusted gross revenue over threshold

1/2034 - 12/2066

5.0% of adjusted gross revenue over threshold

Cavallo Point (13) (Participation Rent)

Through 12/2066

10.0% of adjusted gross revenue over threshold

Property

Term (1)

Annual Rent

Worthington Renaissance Fort Worth Hotel garage ground lease

8/2013 - 7/2022

$40,400

8/2022 - 7/2037

$46,081

8/2037 - 7/2052

$51,763

8/2052 - 7/2067

$57,444

__________


(1)			These terms assume our exercise of all renewal options.

(2)			Represents rent for the year ended December 31, 2020. Rent increases annually by 5.5%.

(3)			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, 2020.

(4)			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.


(5)			Rent will increase from the prior year's rent based on a Consumer Price Index calculation on each January 1, beginning January 1, 2019 and through the end of the lease.

(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)			Beginning January 2031, we have the right to renew the ground lease in one-year increments at the prior year's annual rent plus 3%.


(8)			Represents rent for the year ended December 31, 2020. Rent increases based on a Consumer Price Index calculation annually.

(9)			Represents rent for the year ended March 31, 2021. Rent increases annually each April by 2.5%.

(10)			As lessee of government property, the hotel is subject to a Government Property Lease Excise Tax under Arizona state statute with payments beginning in 2022.

(11)			Base rent increased in January 2019 and resets every five years based on the average of the previous three years of adjusted gross revenues, as defined in the ground lease, multiplied by 75%.

(12)			Percentage rent is applied to annual adjusted gross revenues, as defined in the ground lease, between $30 million and the participation rent threshold. Base rent is deducted from the percentage rent.

(13)			Participation rent is applied to annual adjusted gross revenues, as defined in the ground lease, over $40 million in 2018, $42 million in 2019, and $42 million plus an annual increase based on a Consumer Price Index calculation for 2020 and every year thereafter through the end of the lease term.