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Leases
 12 Months Ended
Dec. 31, 2024
Leases [Abstract]  
Leases Leases
Seven of our hotel ground leases and one parking lot area are classified as operating leases, for which we have recorded right-of-use assets and lease liabilities. The lease liabilities for our operating leases assume the exercise of all available extension options, as we believe they are reasonably certain to be exercised. The components of operating lease expense are included in other property-level expenses in our consolidated statements of operations and comprehensive income.

In October 2024, we executed an extension of the ground lease underlying the Courtyard New York Manhattan/Fifth Avenue to add a second renewal option for an additional 36 years. Based on the modification of the lease terms, the ground lease is now classified as a finance lease. We remeasured the right-of-use asset and lease liability based on the present value of the future lease payments over the updated lease term. Costs related to the finance lease are included in interest expense and other property-level expenses within the consolidated statements of operations and comprehensive income.

The following table sets forth the lease-related assets and liabilities in our consolidated balance sheet as of December 31, 2024 and 2023 (in thousands):
Location in Consolidated Balance SheetsYear Ended December 31,
20242023
Assets
Operating lease assets, netRight-of-use assets$89,931 $97,692 
Finance lease assets, netPrepaid and other assets8,179 — 
Total lease assets$98,110 $97,692 
Liabilities
Operating lease liabilitiesLease liabilities$85,235 $112,866 
Finance lease liabilitiesAccounts payable and accrued expenses31,632 — 
Total lease liabilities$116,867 $112,866 
Weighted-average remaining lease term
Operating leases63 years
Finance leases97 years
Weighted-average discount rate
Operating leases5.77 %
Finance leases5.91 %

The following table sets forth the lease costs related to the operating and finance leases included in the consolidated statements of operations and comprehensive income for the year ended December 31, 2024, 2023, and 2022 (in thousands):

Location in Statements of Operations and Comprehensive IncomeYear Ended December 31,
202420232022
Operating lease costOther property-level expenses$10,889 $11,106 11,255 
Finance lease costs:
Amortization of lease assetsOther property-level expenses14 — — 
Interest on lease liabilitiesInterest expense122 — — 
Total lease costs$11,025 $11,106 $11,255 

The following table sets forth supplemental cash flow information related to the operating and finance leases (in thousands):
Year Ended December 31,
20242023
Cash paid for amounts included in the measurement of operating lease liabilities$3,950 $3,995 
Variable lease payments$1,972 $1,687 
Cash paid for amounts included in the measurement of finance lease liabilities$189 $— 

Future minimum lease payments included in the consolidated balance sheets are as follows (in thousands):
Year Ending December 31,Operating LeasesFinance Lease
2025$3,073 $1,133 
20263,571 1,133 
20273,534 1,204 
20283,604 1,416 
20293,678 1,416 
Thereafter593,357 404,379 
Total lease payments610,817 410,681 
Less imputed interest(525,582)(379,049)
Total lease liabilities$85,235 $31,632 

Six of our hotels are subject to ground lease agreements that cover all of the land underlying the respective hotel as of December 31, 2024:

•The Embassy Suites by Hilton Bethesda 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 2121, inclusive of two renewal options for 49 and 36 years, respectively. Our ability to exercise the second renewal option is contingent on the Company spending no less than $7.0 million on capital improvements by the end of 2026 (the “Capital Improvement Plan”). Assuming that we meet the Capital Improvement Plan and exercise all renewal options, the ground lease would expire in October 2121.

•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. The term of the ground lease covering the land under the hotel runs through 2106. The term of the ground lease covering the extension into the City Creek Center runs through 2056.

•The Westin Boston Seaport District 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 Hotel Clio 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.

We sublease a parking area near the Bourbon Orleans Hotel. The sublease runs through July 2069. There are no renewal options.

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 Seaport District, 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.

The following table reflects the current and future annual rents under our ground leases:
Property
Term (1)
Annual Rent
Embassy Suites by Hilton BethesdaThrough 4/2087
$1,077,381 (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 - 9/2087$4,321,336
10/2087 - 9/2097$5,401,670
10/2097 - 9/2107$6,752,088
10/2107 - 9/2117$8,440,110
10/2117 - 9/2121$10,550,138
Salt Lake City Marriott (Ground lease for hotel) Through 12/2106
Greater of $132,000 or 2.6% of annual gross room sales
Salt Lake City Marriott (Ground lease for extension)1/2018 - 12/2056
$15,203 (4)
Westin Boston Seaport District (5) (Base rent)
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 Seaport District (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
Hotel Clio1/2021 - 12/2025$55,000
1/2026 - 12/2030 (6)
$60,000
Orchards Inn Sedona7/2018 - 12/2070
$150,993 (7)
Hotel Palomar Phoenix (Base Rent)4/2022 - 3/2085
$37,253 (8)
Hotel Palomar Phoenix (Government Property Lease Excise Tax) (9)
1/2022 - 6/2033$312,000
7/2033 - 6/2043$234,000
7/2043 - 6/2053$156,000
7/2053 - 6/2063$78,000
7/2063 - 3/2085$—
Cavallo Point (Base Rent)1/2019 - 12/2066
$140,531 (10)
Cavallo Point (11) (Percentage Rent)
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 (12) (Participation Rent)
Through 12/2066
10.0% of adjusted gross revenue over threshold
Bourbon Orleans Hotel parking subleaseThrough 7/2069
$36,000 (13)
__________
(1)These terms assume our exercise of all renewal options.
(2)
Represents rent for the year ended December 31, 2024. 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 years ended December 31, 2024 and 2023.
(4)
Represents rent for the year ended December 31, 2024. Rent increases annually based on the greater of 2% or a Consumer Price Index calculation.
(5)
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.
(6)
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%.
(7)Represents rent for the year ended December 31, 2024. Rent increases annually in June based on a Consumer Price Index calculation.
(8)
Represents rent for the year ended March 31, 2024. Rent increases annually each April by 2.5%.
(9)As the lessee of a government property, the hotel is subject to a Government Property Lease Excise Tax under Arizona state statute.
(10)
Represents rent for the year ending December 31, 2024. Base rent 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%. The next base rent reset will be January 2029.
(11)
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.
(12)
Participation rent is applied to annual adjusted gross revenues, as defined in the ground lease, over $42 million plus an annual increase based on a Consumer Price Index calculation.
(13)
Represents rent for the year ending December 31, 2024. Annual rent increases by $6,000 every five years. The next rent increase will be January 2027.
Leases Leases
Seven of our hotel ground leases and one parking lot area are classified as operating leases, for which we have recorded right-of-use assets and lease liabilities. The lease liabilities for our operating leases assume the exercise of all available extension options, as we believe they are reasonably certain to be exercised. The components of operating lease expense are included in other property-level expenses in our consolidated statements of operations and comprehensive income.

In October 2024, we executed an extension of the ground lease underlying the Courtyard New York Manhattan/Fifth Avenue to add a second renewal option for an additional 36 years. Based on the modification of the lease terms, the ground lease is now classified as a finance lease. We remeasured the right-of-use asset and lease liability based on the present value of the future lease payments over the updated lease term. Costs related to the finance lease are included in interest expense and other property-level expenses within the consolidated statements of operations and comprehensive income.

The following table sets forth the lease-related assets and liabilities in our consolidated balance sheet as of December 31, 2024 and 2023 (in thousands):
Location in Consolidated Balance SheetsYear Ended December 31,
20242023
Assets
Operating lease assets, netRight-of-use assets$89,931 $97,692 
Finance lease assets, netPrepaid and other assets8,179 — 
Total lease assets$98,110 $97,692 
Liabilities
Operating lease liabilitiesLease liabilities$85,235 $112,866 
Finance lease liabilitiesAccounts payable and accrued expenses31,632 — 
Total lease liabilities$116,867 $112,866 
Weighted-average remaining lease term
Operating leases63 years
Finance leases97 years
Weighted-average discount rate
Operating leases5.77 %
Finance leases5.91 %

The following table sets forth the lease costs related to the operating and finance leases included in the consolidated statements of operations and comprehensive income for the year ended December 31, 2024, 2023, and 2022 (in thousands):

Location in Statements of Operations and Comprehensive IncomeYear Ended December 31,
202420232022
Operating lease costOther property-level expenses$10,889 $11,106 11,255 
Finance lease costs:
Amortization of lease assetsOther property-level expenses14 — — 
Interest on lease liabilitiesInterest expense122 — — 
Total lease costs$11,025 $11,106 $11,255 

The following table sets forth supplemental cash flow information related to the operating and finance leases (in thousands):
Year Ended December 31,
20242023
Cash paid for amounts included in the measurement of operating lease liabilities$3,950 $3,995 
Variable lease payments$1,972 $1,687 
Cash paid for amounts included in the measurement of finance lease liabilities$189 $— 

Future minimum lease payments included in the consolidated balance sheets are as follows (in thousands):
Year Ending December 31,Operating LeasesFinance Lease
2025$3,073 $1,133 
20263,571 1,133 
20273,534 1,204 
20283,604 1,416 
20293,678 1,416 
Thereafter593,357 404,379 
Total lease payments610,817 410,681 
Less imputed interest(525,582)(379,049)
Total lease liabilities$85,235 $31,632 

Six of our hotels are subject to ground lease agreements that cover all of the land underlying the respective hotel as of December 31, 2024:

•The Embassy Suites by Hilton Bethesda 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 2121, inclusive of two renewal options for 49 and 36 years, respectively. Our ability to exercise the second renewal option is contingent on the Company spending no less than $7.0 million on capital improvements by the end of 2026 (the “Capital Improvement Plan”). Assuming that we meet the Capital Improvement Plan and exercise all renewal options, the ground lease would expire in October 2121.

•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. The term of the ground lease covering the land under the hotel runs through 2106. The term of the ground lease covering the extension into the City Creek Center runs through 2056.

•The Westin Boston Seaport District 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 Hotel Clio 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.

We sublease a parking area near the Bourbon Orleans Hotel. The sublease runs through July 2069. There are no renewal options.

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 Seaport District, 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.

The following table reflects the current and future annual rents under our ground leases:
Property
Term (1)
Annual Rent
Embassy Suites by Hilton BethesdaThrough 4/2087
$1,077,381 (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 - 9/2087$4,321,336
10/2087 - 9/2097$5,401,670
10/2097 - 9/2107$6,752,088
10/2107 - 9/2117$8,440,110
10/2117 - 9/2121$10,550,138
Salt Lake City Marriott (Ground lease for hotel) Through 12/2106
Greater of $132,000 or 2.6% of annual gross room sales
Salt Lake City Marriott (Ground lease for extension)1/2018 - 12/2056
$15,203 (4)
Westin Boston Seaport District (5) (Base rent)
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 Seaport District (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
Hotel Clio1/2021 - 12/2025$55,000
1/2026 - 12/2030 (6)
$60,000
Orchards Inn Sedona7/2018 - 12/2070
$150,993 (7)
Hotel Palomar Phoenix (Base Rent)4/2022 - 3/2085
$37,253 (8)
Hotel Palomar Phoenix (Government Property Lease Excise Tax) (9)
1/2022 - 6/2033$312,000
7/2033 - 6/2043$234,000
7/2043 - 6/2053$156,000
7/2053 - 6/2063$78,000
7/2063 - 3/2085$—
Cavallo Point (Base Rent)1/2019 - 12/2066
$140,531 (10)
Cavallo Point (11) (Percentage Rent)
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 (12) (Participation Rent)
Through 12/2066
10.0% of adjusted gross revenue over threshold
Bourbon Orleans Hotel parking subleaseThrough 7/2069
$36,000 (13)
__________
(1)These terms assume our exercise of all renewal options.
(2)
Represents rent for the year ended December 31, 2024. 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 years ended December 31, 2024 and 2023.
(4)
Represents rent for the year ended December 31, 2024. Rent increases annually based on the greater of 2% or a Consumer Price Index calculation.
(5)
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.
(6)
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%.
(7)Represents rent for the year ended December 31, 2024. Rent increases annually in June based on a Consumer Price Index calculation.
(8)
Represents rent for the year ended March 31, 2024. Rent increases annually each April by 2.5%.
(9)As the lessee of a government property, the hotel is subject to a Government Property Lease Excise Tax under Arizona state statute.
(10)
Represents rent for the year ending December 31, 2024. Base rent 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%. The next base rent reset will be January 2029.
(11)
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.
(12)
Participation rent is applied to annual adjusted gross revenues, as defined in the ground lease, over $42 million plus an annual increase based on a Consumer Price Index calculation.
(13)
Represents rent for the year ending December 31, 2024. Annual rent increases by $6,000 every five years. The next rent increase will be January 2027.