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Leases | 9 Months Ended
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Sep. 30, 2024
Leases [Abstract] |
Leases | Leases The Company is the lessee under ground, property, air rights, garage and office lease agreements for certain of its properties. The Company's leases are classified as operating or finance leases. The Company recognizes a ROU asset and lease liability at the estimated present value of the minimum lease payments over the lease term. These leases typically provide multi-year renewal options to extend the term as lessee at the Company's option. Option periods are included in the calculation of the lease obligation liability only when options are reasonably certain to be exercised. In calculating the Company's lease obligations under the various leases, the Company uses discount rates estimated to be equal to what the Company would have to pay to borrow on a collateralized basis over a similar term, for an amount equal to the lease payments, in a similar economic environment. Lease obligations are based on contractually required cash payments, while lease expense is recognized on a straight-line basis for its operating leases and as interest expense on the lease liability for its finance lease. Operating Leases The Residence Inn Gaslamp hotel property is subject to a ground lease with an expiration date of January 31, 2065 with an extension option by the Company of up to three additional terms of ten years each. Monthly payments are currently approximately $44 thousand per month and increase 10% every five years. The hotel is subject to annual supplemental rent payments calculated as 5% of gross revenues during the applicable lease year, minus 12 times the monthly base rent scheduled for the lease year. The Residence Inn New Rochelle hotel property is subject to an air rights lease and garage lease that each expire on December 1, 2104. The lease agreements with the City of New Rochelle cover the space above the parking garage that is occupied by the hotel as well as 128 parking spaces in a parking garage that is attached to the hotel. The annual base rent for the garage lease is the hotel’s proportionate share of the city’s adopted budget for the operations, management and maintenance of the garage and established reserves to fund for the cost of capital repairs. Aggregate rent for 2024 is approximately $32 thousand per quarter. The Hilton Garden Inn Marina del Rey hotel property is subject to a ground lease with an expiration date of December 31, 2067. Minimum monthly payments are currently approximately $47 thousand per month and a percentage rent payment less the minimum rent is due in arrears equal to 5% to 25% of gross income based on the type of income. The Company entered into a corporate office lease in September 2015. The lease is for a term of 11 years and includes a 12-month rent abatement period and certain tenant improvement allowances. The Company has a renewal option of up to two successive terms of five years each. On June 1, 2023, the Company executed an amendment to the corporate office lease to vacate and surrender possession of 7,374 rentable square feet in exchange for an early termination payment of $0.1 million. The partial termination of this lease required the Company to apply ASC 842 and remeasure the right of use asset and lease liability and recognize those adjustments in the consolidated statement of operations. The Company shares the space with a related party and is reimbursed for the pro-rata share of rentable space occupied by the related party. The Company signed a new 10-year corporate office lease in May 2024, which was subsequently amended in September 2024, that will commence when the Company takes possession of the space for leasehold improvements, on or before September 1, 2026. Annual base rent will range from $0.6 million to $0.7 million over the term of the lease. The new office lease will be shared with a related party and the Company will be reimbursed for the pro-rata share of rentable space that will be occupied by the related party. For the nine months ended September 30, 2024, the Company made $0.9 million of fixed lease payments and $0.7 million of variable lease payments, which are included in property taxes, ground rent and insurance in our consolidated statement of operations. For the nine months ended September 30, 2024, the Company made $0.5 million of fixed lease payments related to its corporate office lease, which is included in general and administrative expense in our consolidated statement of operations. Finance Leases The Home2 Phoenix hotel property is subject to a Government Property Lease Excise Tax ("GPLET") agreement with the City of Phoenix. As part of the agreement, title of the hotel property was conveyed to the City of Phoenix and leased back to the Company for a term of 8 years with fixed annual rent payments ranging from $26 thousand to $81 thousand. Title of the hotel property will be re-conveyed to the Company at no cost at the expiration of the 8-year lease term. The GPLET agreement can be terminated by the lessee at any time for a fee of $0.1 million and title of the hotel property would be re-conveyed back to the Company. The Home2 Phoenix ROU assets are recorded as finance lease assets within Investment in hotel properties, net and the lease liability is recorded within Lease liability in the Company’s consolidated balance sheet. Expenses related to the finance lease are included in depreciation and amortization and interest expense, in the Company’s consolidated statement of operations. The following table includes information regarding the ROU assets and lease liabilities of the Company as of September 30, 2024 and December 31, 2023 (in thousands):
| Balance Sheet Classification |  | ROU Asset as of September 30, 2024 |  | ROU Asset as of December 31, 2023
Finance lease assets, net | Investment in hotel properties, net |  | $ | 43,174 |  |  | $ | — |
Operating lease assets, net | Right of use asset, net |  | 17,699 |  |  | 18,141 |
Total ROU asset, net |  |  | $ | 60,873 |  |  | $ | 18,141 |
| Balance Sheet Classification |  | Lease Liability as of September 30, 2024 |  | Lease Liability as of December 31, 2023
Finance lease liability | Lease liability |  | $ | 278 |  |  | $ | — |
Operating lease liability | Lease liability |  | 20,471 |  |  | 20,808 |
Total lease liability |  |  | $ | 20,749 |  |  | $ | 20,808 |
Lease Term and Discount Rate | September 30, 2024
Weighted-average remaining lease term (years) | 41.6
Weighted-average discount rate | 6.89%
The following table includes information regarding the Company's total minimum lease payments for which it is the lessee, as of September 30, 2024, for each of the next five calendar years and thereafter (in thousands):
Total Future Lease Payments | Amount
2024 (remaining three months) | $ | 472 |
2025 | 1,966 |
2026 | 1,768 |
2027 | 1,313 |
2028 | 1,338 |
Thereafter | 62,510 |
Total lease payments | $ | 69,367 |
Less: Imputed interest | (48,618) |
Present value of lease liabilities | $ | 20,749 |

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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 842 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/842-20/tableOfContent + Details
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