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Commitments and Contingencies | 9 Months Ended
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Sep. 30, 2024
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies Hotel Management Agreements The Company’s hotel properties are operated pursuant to management agreements with various management companies. The remaining terms of these management agreements are up to 10 years, not including renewals, and up to 28 years, including renewals. The majority of the Company’s management agreements are terminable at will by the Company upon paying a termination fee and some are terminable by the Company upon sale of the property, with, in some cases, the payment of termination fees. Most of the agreements also provide the Company the ability to terminate based on failure to achieve defined operating performance thresholds. Termination fees range from zero to up to three times the annual base management and incentive management fees, depending on the agreement and the reason for termination. Certain of the Company’s management agreements are non-terminable except upon the manager’s breach of a material representation or the manager’s failure to meet performance thresholds as defined in the management agreement. The management agreements require the payment of a base management fee generally between 1% and 4% of hotel revenues. Under certain management agreements, the management companies are also eligible to receive an incentive management fee if hotel operating income, cash flows or other performance measures, as defined in the agreements, exceed certain performance thresholds. The incentive management fee is generally calculated as a percentage of hotel operating income after the Company has received a priority return on its investment in the hotel. For the three and nine months ended September 30, 2024, combined base and incentive management fees were $11.8 million and $31.0 million, respectively. For the three and nine months ended September 30, 2023, combined base and incentive management fees were $11.1 million and $29.9 million, respectively. Base and incentive management fees are included in other direct and indirect expenses in the Company's accompanying consolidated statements of operations and comprehensive income. Reserve Funds Certain of the Company’s agreements with its hotel managers, franchisors, ground lessors and lenders have provisions for the Company to provide funds, typically 4.0% of hotel revenues, sufficient to cover the cost of (a) certain non-routine repairs and maintenance to the hotels and (b) replacements and renewals to the hotels’ furniture, fixtures and equipment. Restricted Cash At September 30, 2024 and December 31, 2023, the Company had $10.3 million and $9.9 million, respectively, in restricted cash, which consisted of funds held in cash management accounts held by a lender, reserves for replacement of furniture and fixtures, and reserves to pay for real estate taxes, ground rent or property insurance under certain hotel management agreements or loan agreements. Hotel, Ground and Finance Leases As of September 30, 2024, the following hotels were subject to leases as follows:
Lease Properties |  | Lease Type |  | Lease Expiration Date |
Restaurant at Southernmost Beach Resort |  | Operating lease |  | April 2029 |
Paradise Point Resort & Spa |  | Operating lease |  | May 2050 |
Harbor Court Hotel San Francisco |  | Finance lease |  | August 2052 |
Hotel Monaco Washington DC |  | Operating lease |  | November 2059 |
Argonaut Hotel |  | Operating lease |  | December 2059 |
Hotel Zephyr Fisherman's Wharf and Retail |  | Operating lease |  | February 2062 |
Viceroy Santa Monica Hotel |  | Operating lease |  | September 2065 |
Estancia La Jolla Hotel & Spa |  | Operating lease |  | January 2066 |
San Diego Mission Bay Resort |  | Operating lease |  | July 2068 |
1 Hotel San Francisco |  | Operating lease |  | March 2070 | (1)
Hyatt Regency Boston Harbor |  | Operating lease |  | April 2077 |
The Westin Copley Place, Boston |  | Operating lease |  | December 2077 | (2)
The Liberty, a Luxury Collection Hotel, Boston |  | Operating lease |  | May 2080 |
Jekyll Island Club Resort and Restaurant |  | Operating lease |  | January 2089 |
Hotel Zeppelin San Francisco |  | Operating and finance lease |  | June 2089 | (4)
Hotel Zelos San Francisco |  | Operating lease |  | June 2097 |
Hotel Palomar Los Angeles Beverly Hills |  | Operating lease |  | January 2107 | (3)
Margaritaville Hollywood Beach Resort |  | Operating lease |  | July 2112 |
______________________ (1) The expiration date assumes the exercise of a 14-year extension option. (2) No payments are required through maturity. (3) The expiration date assumes the exercise of all 19 five-year extension options. (4) The expiration date assumes the exercise of a 30-year extension option. The Company's leases may require minimum fixed rent payments, percentage rent payments based on a percentage of revenues in excess of certain thresholds or rent payments equal to the greater of a minimum fixed rent or percentage rent. Minimum fixed rent may be adjusted annually by increases in the consumer price index and may be subject to minimum and maximum increases. Some leases also contain certain restrictions on modifications that can be made to the hotel structures due to their status as national historic landmarks. The Company records expense on a straight-line basis for leases that provide for minimum rental payments that increase in pre-established amounts over the remaining terms of the leases. Ground rent expense is included in real estate taxes, personal property taxes, property insurance and ground rent in the Company's accompanying consolidated statements of operations and comprehensive income. The components of ground rent expense for the three and nine months ended September 30, 2024 and 2023 are as follows (in thousands):
| For the three months ended September 30, |  | For the nine months ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Fixed ground rent | $ | 4,795 |  |  | $ | 4,795 |  |  | $ | 14,387 |  |  | $ | 14,359 |
Variable ground rent | 6,327 |  |  | 6,362 |  |  | 15,390 |  |  | 15,481 |
Total ground rent | $ | 11,122 |  |  | $ | 11,157 |  |  | $ | 29,777 |  |  | $ | 29,840 |
Litigation The nature of the operations of hotels exposes the Company's hotels, the Company and the Operating Partnership to the risk of claims and litigation in the normal course of their business. The Company has insurance to cover certain potential material losses. The Company is not presently subject to any material litigation nor, to the Company’s knowledge, is any material litigation threatened against the Company.

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