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8. Commitments and Contingencies
The Company is obligated to maintain reserve funds for capital expenditures at the hotels (including the periodic replacement or refurbishment of furniture, fixtures and equipment) as determined pursuant to the management agreements, franchise agreements and/or mortgage loan documents. The management agreements, franchise agreements and/or mortgage loan documents require the Company to reserve restricted cash ranging from 1.0% to 5.0% of the individual hotel’s revenues and maintain the reserves in restricted cash reserve escrows. Amounts will be capitalized as incurred. Any unexpended amounts will remain the property of the Company upon termination of the management agreements, franchise agreements or mortgage loan documents. Additionally, some mortgage agreements require the Company to reserve restricted cash for the periodic payment of real estate taxes and insurance. As of June 30, 2011 and December 31, 2010, approximately $93.5 million and $65.9 million, respectively, was available in restricted cash reserves for future capital expenditures, real estate taxes and insurance.
As of June 30, 2011, the New York LaGuardia Airport Marriott was in default on it is mortgage loan. Under the terms of the mortgage loan, the lender receives the monthly net cash from operations from the hotel. As of June 30, 2011 and December 31, 2010, approximately $1.8 million and $4.6 million, respectively, of cash was held by the lender.
Litigation
Neither the Company nor any of its subsidiaries are currently involved in any regulatory or legal proceedings that management believes will have a material adverse effect on the financial position, operations or liquidity of the Company. |