XML 32 R22.htm IDEA: XBRL DOCUMENT

Commitments and Contingencies	6 Months Ended
Commitments and Contingencies	Jun. 30, 2019
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and Contingencies Litigation The nature of the operations of the Company's hotels exposes those hotels, the Company and the Operating Partnership to the risk of claims and litigation in the normal course of their business. IHM is currently a defendant in two class action lawsuits pending in the Santa Clara County Superior Court. The first class action lawsuit was filed on October 21, 2016 under the title Ruffy, et al, v. Island Hospitality Management, LLC, et al. Case No. 16-CV-301473 and the second class action lawsuit was filed on March 21, 2018 under the title Doonan, et al, v. Island Hospitality Management, LLC, et al. Case No. 18-CV-325187. The class actions relate to hotels operated by IHM in the state of California and owned by affiliates of the Company and the NewINK JV, and/or certain third parties. The complaints allege various wage and hour law violations based on alleged misclassification of certain hotel managerial staff and violation of certain California statutes regarding incorrect information contained on employee paystubs. The plaintiffs seek injunctive relief, money damages, penalties, and interest. None of the potential classes has been certified and we are defending our case vigorously. As of June 30, 2019, included in accounts payable is $0.1 million which represents an estimate of the Company’s total exposure to the litigation based on standard indemnification obligations under hotel management agreements with IHM. Management Agreements The management agreements with IHM have an initial term of five years and automatically renew for two five-year periods unless IHM provides written notice to us no later than 90 days prior to the then current term’s expiration date of its intent not to renew. The IHM management agreements provide for early termination at the Company’s option upon sale of any IHM-managed hotel for no termination fee, with six months advance notice. The IHM management agreements may be terminated for cause, including the failure of the managed hotel to meet specified performance levels. Base management fees are calculated as a percentage of the hotel's gross room revenue. If certain financial thresholds are met or exceeded, an incentive management fee is calculated as 10% of the hotel's net operating income less fixed costs, base management fees and a specified return threshold. The incentive management fee is capped at 1% of gross hotel revenues for the applicable calculation. Management fees totaled approximately $2.9 million and $2.8 million, respectively, for the three months ended June 30, 2019 and 2018, respectively, and approximately $5.4 million and $5.2 million, respectfully, for the six months ended June 30, 2019 and 2018. Franchise Agreements The fees associated with the franchise agreements are calculated as a specified percentage of the hotel's gross room revenue. Franchise and marketing fees totaled approximately $7.0 million and $6.6 million, respectively, for the three months ended June 30, 2019 and 2018 and approximately $12.9 million and $12.1 million, respectively, for the six months ended June 30, 2019 and 2018. The initial term of the agreements range from 10 to 30 years with the weighted average expiration being May 2030.