As of December 31, 2021, 13 of Company's hotel properties were subject to ground lease agreements that cover the land underlying the respective hotels. The ground leases are classified as operating leases. The total ground lease expense was $13.1 million for the year ended December 31, 2021, which consisted of $11.6 million of fixed lease expense and $1.5 million of variable lease expense. The total ground lease expense was $12.4 million for the year ended December 31, 2020, which consisted of $11.6 million of fixed lease expense and $0.8 million of variable lease expense. The total ground lease expense was $15.7 million for the year ended December 31, 2019, which consisted of $11.6 million of fixed lease expense and $4.1 million of variable lease expense. The total ground lease expense is included in property tax, insurance and other in the accompanying consolidated statements of operations and comprehensive (loss) income.


			Ground Lease Expense
			For the year ended December 31,
Hotel Property Name	Initial Term Expiration	Extension Term(s) Expiration	2021		2020		2019

Wyndham Boston Beacon Hill	2028	—	$	556	$	400	$	900
Wyndham San Diego Bayside	2029	—	4,042		4,100		4,800
DoubleTree Suites by Hilton Orlando Lake Buena Vista	2032	2057	666		300		900
Residence Inn Palo Alto Los Altos	2033	—	86		100		100
Wyndham Pittsburgh University Center	2038	2083	726		700		700


Marriott Louisville Downtown	2053	2153 (1)	—		—		—
Embassy Suites San Francisco Airport Waterfront	2059	—	1,239		1,200		2,400
Wyndham New Orleans French Quarter	2065	—	487		500		500

Courtyard Charleston Historic District	2096	—	1,019		950		1,000
Courtyard Austin Downtown Convention Center and Residence Inn Downtown Convention Center	2100	—	555		449		800

Courtyard Waikiki Beach	2112	—	3,742		3,700		3,600
Moxy Denver Cherry Creek (2)	2115	—	5		—		—
			$	13,123	$	12,399	$	15,700

(2) In connection with the acquisition of this hotel property in December 2021, the Company recognized a lease liability of $3.1 million and related lease right-of-use asset of $7.4 million on the consolidated balance sheet for the ground lease. In order to determine the present value of the future lease payments over the lease term, the Company used an incremental borrowing rate of 6.9%.


	December 31, 2021
2022	$	11,521
2023	11,617
2024	11,677
2025	11,728
2026	11,003
Thereafter	542,537
Total future lease payments	600,083
Imputed interest	(477,052)
Lease liabilities	$	123,031

The Company is obligated to maintain cash reserve funds for future capital expenditures at the hotels (including the periodic replacement or refurbishment of FF&E) 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 cash ranging typically from 3.0% to 5.0% of the individual hotel’s revenues. Any unexpended amounts will remain the property of the Company upon termination of the management agreements, franchise agreements or mortgage loan documents. As of December 31, 2021 and 2020, approximately $48.5 million and $35.0 million, respectively, was available in the restricted cash reserves for future capital expenditures, real estate taxes and insurance, and debt obligations where certain lenders held restricted cash due to a cash trap event.

Neither the Company nor any of its subsidiaries is currently involved in any regulatory or legal proceedings that management believes will have a material and adverse effect on the Company's financial position, results of operations or cash flows.

As of December 31, 2021, 97 of the Company's consolidated hotel properties were operated pursuant to management agreements with initial terms ranging from one to 25 years, with 14 different management companies as noted in the table below. This number includes 29 consolidated hotel properties that receive the benefits of a franchise agreement pursuant to management agreements with Hilton, Hyatt, or Marriott.


Management Company						Number of Hotel Properties
Aimbridge Hospitality						30

Colwen Management, Inc.						1
Crestline Hotels and Resorts						1
Davidson Hotels and Resorts						2
Hilton Management and affiliates						19
HEI Hotels and Resorts						1
Highgate Hotels						4
Hyatt Corporation and affiliates						11

InnVentures						3


Marriott International, Inc.						3
Sage Hospitality						6
Urgo Hotels						3
White Lodging Services						8
Wyndham						5
						97

Each management company receives a base management fee between 1.75% and 3.5% of hotel revenues. Management agreements that include the benefits of a franchise agreement incur a base management fee between 2.0% and 7.0% of hotel revenues. The management companies are also eligible to receive an incentive management fee if hotel operating income, as defined in the management agreements, exceeds certain 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.

Management fees are included in management and franchise fee expense in the accompanying consolidated statements of operations and comprehensive (loss) income. For the years ended December 31, 2021, 2020 and 2019, the Company incurred management fee expense of approximately $24.2 million, $13.2 million and $45.5 million, respectively.

Subsequent to the year ended December 31, 2021, four hotel properties that were managed by White Lodging Services were transferred to Hersha Hospitality Management effective February 1, 2022.

As of December 31, 2021, 67 of the Company's consolidated hotel properties were operated under franchise agreements with initial terms ranging from one to 30 years. This number excludes 29 consolidated hotel properties that receive the benefits of a franchise agreement pursuant to management agreements with Hilton, Hyatt, or Marriott. In addition, The Knickerbocker is not operated with a hotel brand so the hotel does not have a franchise agreement. Franchise agreements allow the hotel properties to operate under the respective brands. Pursuant to the franchise agreements, the Company pays a royalty fee between 3.0% and 6.0% of room revenue, plus additional fees for marketing, central reservation systems and other franchisor costs between 1.0% and 4.3% of room revenue. Certain hotels are also charged a royalty fee between 1.5% and 3.0% of food and beverage revenues.

Franchise fees are included in management and franchise fee expense in the accompanying consolidated statements of operations and comprehensive (loss) income. For the years ended December 31, 2021, 2020 and 2019, the Company incurred franchise fee expense of approximately $43.2 million, $25.6 million and $75.3 million, respectively.

Prior to January 1, 2020, the Wyndham management agreements guaranteed minimum levels of annual net operating income at each of the Wyndham-managed hotels. In 2019, the Company entered into an agreement with Wyndham to terminate the net operating income guarantee effective December 31, 2019 and received termination payments totaling $36.0 million from Wyndham. In addition, during the year ended December 31, 2021, the Company extended certain Wyndham management agreements to December 31, 2022. For the years ended December 31, 2021 and 2020, the Company recognized approximately $14.1 million and $17.8 million, respectively, as a reduction to management and franchise fee expense related to the amortization of the termination payments over the remaining terms of the management agreements.