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Investment in Unconsolidated Entities

6 Months Ended

Jun. 30, 2019

Equity Method Investments and Joint Ventures [Abstract]

Investment in Unconsolidated Entities

Investment in Unconsolidated Entities

 On June 9, 2014, the Company acquired a 10.3% interest in the NewINK JV, a joint venture between affiliates of NorthStar Realty Finance Corp. ("NorthStar") and the Operating Partnership. The Company accounts for this investment under the equity method. NorthStar merged with Colony Capital, Inc. ("Colony") on January 10, 2017 to form a new company, CLNY, which owns a 89.7% interest in the NewINK JV. The value of NewINK JV assets and liabilities were adjusted to reflect estimated fair market value at the time Colony merged with NorthStar. As of June 30, 2019 and 2018, the Company’s share of partners’ capital in the NewINK JV was approximately $46.4 million and $50.2 million, respectively, and the total difference between the carrying amount of investment and the Company’s share of partners’ capital was approximately $56.5 million and $57.8 million, respectively, (for which the basis difference related to amortizing assets is being recognized over the life of the related assets as a basis difference adjustment). The Company serves as managing member of the NewINK JV. During the three and six months ended June 30, 2019 and 2018, the Company received cash distributions from the NewINK JV as follows (in thousands):

			For the three months ended																		For the six months ended
			June 30,																		June 30,
			2019						2018						2019						2018
Cash generated from other activities and excess cash			$	411					$	874					$	411					$	1,593
Total			$	411					$	874					$	411					$	1,593

On November 17, 2014, the Company acquired a 10.0% interest in the Inland JV, a joint venture between affiliates of NorthStar and the Operating Partnership. The Company accounts for this investment under the equity method. NorthStar merged with Colony Capital, Inc. ("Colony") on January 10, 2017 to form a new company, CLNY, which owns a 90% interest in the Inland JV.  The value of Inland JV assets and liabilities were adjusted to reflect estimated fair market value at the time Colony merged with NorthStar. As of June 30, 2019 and 2018, the Company's share of partners' capital in the Inland JV was approximately $31.5 million and $33.7 million, respectively, and the total difference between the carrying amount of the investment and the Company's share of partners' capital was approximately $10.6 million and $10.9 million, respectively (for which the basis difference related to amortizing assets is being recognized over the life of the related assets as a basis difference adjustment).  The Company serves as managing member of the Inland JV. During the three and six months ended June 30, 2019 and 2018, the Company received cash distributions from the Inland JV as follows (in thousands):

			For the three months ended																		For the six months ended
			June 30,																		June 30,
			2019						2018						2019						2018
Cash generated from other activities and excess cash			$	—					$	950					—						$	1250
Total			$	—					$	950					—						$	1250

On May 9, 2017, the NewINK JV refinanced the $840.0 million loan collateralized by the 47 hotels with a new $850.0 million loan. The new non-recourse loan is with Morgan Stanley Bank, N.A. The new loan bears interest at a rate of LIBOR plus a spread of 2.79%, had an initial maturity date of June 7, 2019 and three one-year extension options. The NewINK JV exercised the first extension and the maturity has been extended to June 7, 2020.

On June 9, 2017, the Inland JV refinanced the $817.0 million loan collateralized by the 48 hotels with a new $780.0 million non-recourse loan with Column Financial, Inc. On June 9, 2017, the Company contributed an additional $5.0 million of capital related to its share in the Inland JV to reduce the debt collateralized by the 48 hotels. The new loan bears interest at a rate of LIBOR plus a spread of 3.3%, had an initial maturity date of July 9, 2019 and three one-year extension options. The Inland JV exercised the first extension and the maturity has been extended to July 9, 2020.

The Company’s ownership interests in the JVs are subject to change in the event that either the Company or CLNY calls for additional capital contributions to the respective JVs necessary for the conduct of business, including contributions to fund costs and expenses related to capital expenditures. In connection with (i) the non-recourse mortgage loan secured by the NewINK JV properties and the related non-recourse mezzanine loan secured by the membership interests in the owners of the NewINK JV properties  and (ii)  the non-recourse mortgage loan secured by the Inland JV properties, the Operating Partnership provided the applicable lenders with customary environmental indemnities, as well as  guarantees of certain customary non-recourse carve-out provisions such as fraud, material and intentional misrepresentations and misapplication of funds.  In some circumstances, such as the bankruptcy of the applicable borrowers, the guarantees are for the full amount of the outstanding debt, but in most circumstances, the guarantees are capped at 15% of the debt outstanding at the time in question (in the case of the NewINK JV loans) or 20% of the debt outstanding at the time in question (in the case of the Inland JV loans).  In connection with each of the NewINK JV and Inland JV loans, the Operating Partnership has entered into a contribution agreement with its JV partner whereby the JV partner is, in most cases, responsible to cover such JV partner’s pro rata share of any amounts due by the Operating Partnership under the applicable guarantees and environmental indemnities. The Company manages the JVs and will receive a promote interest in each applicable JV if it meets certain return thresholds for such JV. CLNY may also approve certain actions by the JVs without the Company’s consent, including certain property dispositions conducted at arm’s length, certain actions related to the restructuring of the applicable JV and removal of the Company as managing member in the event the Company fails to fulfill its material obligations under the applicable joint venture agreement.

The Company's investments in the NewINK JV and the Inland JV were $(10.1) million and $20.9 million, respectively, at June 30, 2019. The following table sets forth the combined components of net income, including the Company’s share, related to all JVs for the three and six months ended June 30, 2019 and 2018 (in thousands):

			For the three months ended																		For the six months ended
			June 30,																		June 30,
			2019						2018						2019						2018
Revenue			$	134,457					$	134,888					$	246,576					$	245,062
Total hotel operating expenses			84,974						83,635						164,073						161,659
Operating income			$	49,483					$	51,253					$	82,503					$	83,403
Net income (loss) from continuing operations			$	565					$	5,929					$	(14,454)					$	(5,472)
Net income (loss)			$	565					$	5,929					$	(14,454)					$	(5,472)
Income (loss) allocable to the Company			$	58					$	605					$	(1,464)					$	(548)
Basis difference adjustment			399						399						798						798
Total income from unconsolidated real estate entities attributable to the Company			$	457					$	1,004					$	(666)					$	250

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- References

No definition available.

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- Definition

The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section S99
-Paragraph 4
-Subparagraph (SX 210.3A-04)
-URI http://asc.fasb.org/extlink&oid=116822174&loc=d3e355119-122828

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 323
-URI http://asc.fasb.org/topic&trid=2196965

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