Investment in Hotel Properties, Net

9 Months Ended

Sep. 30, 2019

4. Investment in Hotel Properties, Net

Investment in hotel properties, net as of September 30, 2019 and December 31, 2018 consisted of the following:

	September 30, 2019			December 31, 2018
	(unaudited)
Land and land improvements	$	66,055,121		$	64,409,730
Buildings and improvements		437,705,155			424,657,327
Right of use assets		6,576,971			—
Furniture, fixtures and equipment		56,809,756			57,830,987
		567,147,003			546,898,044
Less: accumulated depreciation and impairment		(120,307,423	)		(111,172,230	)
Investment in Hotel Properties, Net	$	446,839,580		$	435,725,814

On January 1, 2019, we adopted ASU 842, Leases and applied it prospectively. At adoption, we also elected the practical expedients which permitted us to not reassess our prior conclusions about lease identification, classification, and initial direct costs. Consequently, on January 1, 2019, we recognized right-of-use assets and related liabilities related to our acquired operating ground lease, equipment, parking, office space and land leases, all of which are operating leases. Since most of our leases do not provide an implicit rate, we used incremental borrowing rates, which averaged to 8.0%. All of these leases have terms ranging from less than one year to 50 years and we included the exercise of options to extend when it is reasonably certain we will exercise such option. See Note 6 for additional information about the acquired operating ground lease, parking, office space and land leases. The right-of-use assets and liabilities are amortized to rent expense and depreciation and amortization expense over the term of the underlying lease agreements. As of September 30, 2019, our right-of-use assets, net of approximately $6.6 million, are included in the investment in hotel properties, net or prepaid expenses, inventory and other assets and our related lease liabilities of approximately $4.4 million are presented in accounts payable and accrued expenses in our consolidated balance sheets. The adoption of this standard had minimal impact on our statements of operations.