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Commitments and Contingencies

12 Months Ended

Dec. 31, 2024

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 a class action lawsuit pending in the state of California.

The class action lawsuit was filed in the Orange County Superior Court on September 6, 2023 under the title Teresa Garcia v. Island Hospitality Management III, LLC, now pending in the United States District Court, Central District of California, Case No. 8:24-cv-00583-DOC-ADS (“Action”). The class action relates to hotels operated by IHM in the state of California and owned by affiliates of the Company and/or certain third parties. The complaint alleges various wage and hour law violations and violation of certain California statutes. The plaintiffs seek injunctive relief, money damages, penalties, and interest. A settlement agreement has been negotiated and approved by the court. During the year ended December 31, 2024, the Company recorded $0.3 million of expense relating to this matter which is included in other charges in our consolidated

statements of operations. The $0.3 million 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 their 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 $10.7 million, $10.6 million and $10.1 million for the years ended December 31, 2024, 2023 and 2022, respectively. Incentive management fees paid to IHM for the years ended years ended December 31, 2024, 2023 and 2022 were $0.2 million, $0.2 million and $0.2 million, respectively.

As of December 31, 2024, certain key terms of the Company's management agreements are (dollars are not in thousands):

Property			Management Company			Base Management Fee			Monthly Accounting Fee			Monthly Revenue Management Fee			Incentive Management Fee Cap
Homewood Suites by Hilton Boston-Billerica/ Bedford/ Burlington			IHM			3.0		%	$1,200			$1,000			1.0		%
Homewood Suites by Hilton Nashville-Brentwood			IHM			3.0		%	$1,200			$1,000			1.0		%
Homewood Suites by Hilton Hartford-Farmington			IHM			3.0		%	$1,200			$1,000			1.0		%
Hampton Inn & Suites Houston-Medical Center			IHM			3.0		%	$1,200			$1,000			1.0		%
Residence Inn Long Island Holtsville			IHM			3.0		%	$1,200			$1,000			1.0		%
Residence Inn White Plains			IHM			3.0		%	$1,200			$1,000			1.0		%
Residence Inn New Rochelle			IHM			3.0		%	$1,200			$1,000			1.0		%
Residence Inn Garden Grove			IHM			3.0		%	$1,500			$1,000			1.0		%
Homewood Suites by Hilton San Antonio River Walk			IHM			3.0		%	$1,200			$1,000			1.0		%
Residence Inn Washington DC			IHM			3.0		%	$1,200			$1,000			1.0		%
Residence Inn Tysons Corner			IHM			3.0		%	$1,200			$1,000			1.0		%
Hampton Inn Portland Downtown			IHM			3.0		%	$1,200			$1,000			1.0		%
Courtyard Houston			IHM			3.0		%	$1,500			$1,000			1.0		%
Hyatt Place Pittsburgh North Shore			IHM			3.0		%	$1,500			$1,000			1.0		%
Hampton Inn Exeter			IHM			3.0		%	$1,200			$1,000			1.0		%
Residence Inn Bellevue			IHM			3.0		%	$1,500			$1,000			1.0		%
SpringHill Suites Savannah			IHM			3.0		%	$1,500			$1,000			1.0		%
Residence Inn Silicon Valley I			IHM			3.0		%	$1,200			$1,000			1.0		%
Residence Inn Silicon Valley II			IHM			3.0		%	$1,200			$1,000			1.0		%
Residence Inn San Mateo			IHM			3.0		%	$1,200			$1,000			1.0		%
Residence Inn Mountain View			IHM			3.0		%	$1,200			$1,000			1.0		%
Hyatt Place Cherry Creek			IHM			3.0		%	$1,500			$1,000			1.0		%
Courtyard Addison			IHM			3.0		%	$1,500			$1,000			1.0		%
Residence Inn San Diego Gaslamp			IHM			3.0		%	$1,500			$1,000			1.0		%
Hilton Garden Inn Marina del Rey			IHM			3.0		%	$1,500			$1,000			1.0		%
Residence Inn Dedham			IHM			3.0		%	$1,200			$1,000			1.0		%
Residence Inn Il Lugano			IHM			3.0		%	$1,500			$1,000			1.0		%
Hilton Garden Inn Portsmouth			IHM			3.0		%	$1,500			$1,000			1.0		%
Courtyard Summerville			IHM			3.0		%	$1,500			$1,000			1.0		%
Embassy Suites Springfield			IHM			3.0		%	$1,500			$1,000			1.0		%
Residence Inn Summerville			IHM			3.0		%	$1,500			$1,000			1.0		%
Courtyard Dallas			IHM			3.0		%	$1,500			$1,000			1.0		%
Residence Inn Austin Northwest/The Domain Area			IHM			3.0		%	$1,500			$1,000			1.0		%
TownePlace Suites Austin Northwest/The Domain Area			IHM			3.0		%	$1,500			$1,000			1.0		%
Home2 Suites Woodland Hills			IHM			3.0		%	$1,500			$1,000			1.0		%
Hilton Garden Inn Destin Miramar Beach			IHM			3.0		%	$1,500			$1,000			1.0		%
Home2 Suites Phoenix Downtown			IHM			3.0		%	$1,500			$1,000			1.0		%

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/program fees totaled approximately $25.4 million, $24.9 million and $23.7 million for the years ended December 31, 2024, 2023 and 2022, respectively. The initial terms of the agreements range from 10 to 30 years with the weighted-average expiration being May 2035.

As of December 31, 2024, certain key terms of the Company's franchise agreements are:

Property						Franchise/Royalty Fee			Marketing/Program Fee			Expiration
Homewood Suites by Hilton Boston-Billerica/ Bedford/ Burlington						4.0		%	4.0		%	2025
Homewood Suites by Hilton Nashville-Brentwood						4.0		%	4.0		%	2025
Homewood Suites by Hilton Hartford-Farmington						4.0		%	4.0		%	2025
Hampton Inn & Suites Houston-Medical Center						6.0		%	4.0		%	2035
Residence Inn Long Island Holtsville						5.5		%	2.5		%	2025
Residence Inn White Plains						5.5		%	2.5		%	2030
Residence Inn New Rochelle						5.5		%	2.5		%	2030
Residence Inn Garden Grove						5.0		%	2.5		%	2031
Homewood Suites by Hilton San Antonio River Walk						4.0		%	4.0		%	2026
Residence Inn Washington DC						5.5		%	2.5		%	2033
Residence Inn Tysons Corner						5.0		%	2.5		%	2031
Hampton Inn Portland Downtown						6.0		%	4.0		%	2032
Courtyard Houston						5.5		%	2.0		%	2030
Hyatt Place Pittsburgh North Shore						5.0		%	3.5		%	2030
Hampton Inn Exeter						6.0		%	4.0		%	2031
Residence Inn Bellevue						5.5		%	2.5		%	2033
SpringHill Suites Savannah						5.0		%	2.5		%	2033
Residence Inn Silicon Valley I						5.5		%	2.5		%	2029
Residence Inn Silicon Valley II						5.5		%	2.5		%	2029
Residence Inn San Mateo						5.5		%	2.5		%	2029
Residence Inn Mountain View						5.5		%	2.5		%	2029
Hyatt Place Cherry Creek						5.0		%	3.5		%	2034
Courtyard Addison						5.5		%	2.0		%	2029
Residence Inn San Diego Gaslamp						6.0		%	2.5		%	2035
Hilton Garden Inn Marina del Rey						5.5		%	4.3		%	2030
Residence Inn Dedham						6.0		%	2.5		%	2030
Residence Inn Il Lugano						6.0		%	2.5		%	2045
Hilton Garden Inn Portsmouth						5.5		%	4.0		%	2037
Courtyard Summerville						6.0		%	2.5		%	2037
Embassy Suites Springfield						5.5		%	4.0		%	2037
Residence Inn Summerville						6.0		%	2.5		%	2038
Courtyard Dallas						6.0		%	2.0		%	2038
Residence Inn Austin Northwest/The Domain Area						6.0		%	2.5		%	2036
TownePlace Suites Austin Northwest/The Domain Area						5.5		%	2.0		%	2041
Home2 Suites Woodland Hills						5.0%			3.0		%	2040
Hilton Garden Inn Destin Miramar Beach						5.5		%	4.0		%	2042
Home2 Suites Phoenix Downtown						3.0% to 5.0%			3.5		%	2044

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The entire disclosure for commitments and contingencies.

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