Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2016

Schedule of basic and incentive management fees

Total basic management fees, net of key money incentives received from third-party hotel managers, along with incentive management fees incurred by the Company during the years ended December 31, 2016, 2015 and 2014 were included in the Company’s consolidated statements of operations as follows (in thousands):


	2016		2015		2014
Basic management fees	$	33,109	$	34,426	$	31,485
Incentive management fees		6,071		5,020		4,034
Total basic and incentive management fees	$	39,180	$	39,446	$	35,519

Schedule of License and Franchise Costs

Total license and franchise fees incurred by the Company during the years ended December 31, 2016, 2015 and 2014 were included in the Company’s consolidated statements of operations as follows (in thousands):


	2016		2015		2014
Franchise assessments (1)	$	26,399	$	28,193	$	26,689
Franchise royalties		10,248		11,903		11,582
Total franchise costs	$	36,647	$	40,096	$	38,271

(1)

Includes advertising, reservation and frequent guest club assessments.

Schedule of assets under capital lease

The capital lease asset was included in investment in hotel properties, net on the Company’s consolidated balance sheets as follows (in thousands):


	December 31,
	2016		2015
Gross capital lease asset - buildings and improvements	$	58,799	$	58,799
Accumulated depreciation		(6,738)		(5,268)
Net capital lease asset - buildings and improvements	$	52,061	$	53,531

Schedule of future minimum lease payments under capital lease

Future minimum lease payments under for the Company’s capital lease together with the present value of the net minimum lease payments as of December 31, 2016 are as follows (in thousands):


2017	$	1,403
2018		1,403
2019		1,403
2020		1,403
2021		1,403
Thereafter		106,607
Total minimum lease payments (1)		113,622
Less: Amount representing interest (2)		(98,047)
Present value of net minimum lease payments (3)	$	15,575

(1)

Minimum lease payments do not include percentage rent, which may be paid under the Hyatt Centric Chicago Magnificent Mile building lease on the basis of 4.0% of the hotel’s gross room revenues over a certain threshold. The Company recorded $0.1 million in percentage rent during both 2016 and 2015, and zero in percentage rent during 2014.

(2)

Interest includes the amount necessary to reduce net minimum lease payments to present value calculated at the Company’s incremental borrowing rate at lease inception.

(3)

The present value of net minimum lease payments are reflected in the Company’s consolidated balance sheet as of December 31, 2016 as a current obligation of $1,000, which is included in accounts payable and accrued expenses, and as a long-term obligation of $15.6 million, which is included in capital lease obligations, less current portion.

Entity's hotels obligated to unaffiliated third parties under the terms of ground, building and air leases

During 2016, 2015 and 2014, certain of the Company’s hotels were obligated to unaffiliated third parties under the terms of ground, building and air leases as follows:


	2016	2015	2014
Number of hotels with ground, building and/or air leases (1)	6	8	9

Number of ground leases (1)	6	7	8
Number of building leases (2)	1	1	1
Number of air leases (1)	1	2	3
Total number of ground, building and air leases	8	10	12

(1)

Both 2015 and 2014 include a ground lease related to the Sheraton Cerritos, which the Company sold in May 2016, as well as an air rights lease at the Renaissance Harborplace, which air rights the Company purchased in June 2016. 2014 includes ground and air leases related to the Doubletree Guest Suites Times Square, which the Company sold in December 2015.

(2)

The building lease is considered by the Company to be a capital lease, as noted above.

Schedule of ground, building and air lease rent

Total rent expense incurred pursuant to ground, building and air lease agreements for the years ended December 31, 2016, 2015 and 2014 was included in property tax, ground lease and insurance in the Company’s consolidated statements of operations as follows (in thousands):


	2016		2015		2014
Minimum rent, including straight-line adjustments	$	9,140	$	14,484	$	14,999
Percentage rent (1)		9,394		3,256		2,718
Total	$	18,534	$	17,740	$	17,717

(1)

Several of the Company’s hotels pay percentage rent, which is calculated on operating revenues above certain thresholds.

Schedule of future minimum payments of operating leases

Future minimum payments under the terms of the ground and air leases, as well as the sublease on the corporate facility, in effect at December 31, 2016 are as follows (in thousands):


2017	$	10,184
2018		10,143
2019		10,012
2020		10,029
2021		10,030
Thereafter		309,647
Total	$	360,045

Schedule of Hotel Geographic Concentration of Risk

As of December 31, 2016, 16 of the Company’s 27 hotels were concentrated in California, Illinois, Massachusetts and the greater Washington DC area as follows:


							Greater
							Washington DC
	California		Illinois		Massachusetts		Area
Number of hotels	7		3		3		3
Percentage of total rooms	29	%	9	%	15	%	14	%
Percentage of total revenue for the year ended December 31, 2016	34	%	7	%	15	%	13	%

- Definition

Tabular disclosure of a lessee's leasing arrangements including: (1) the basis on which contingent rental payments are determined, (2) the existence and terms of renewal or purchase options and escalation clauses, (3) restrictions imposed by lease arrangements, such as those concerning dividends, additional debt, and further leasing, (4) rent holidays, rent concessions, or leasehold improvement incentives and unusual provisions or conditions. Disclosure may also include the specific period used to amortize material leasehold improvements made at the inception of the lease or during the lease term. Additionally, for operating leases having initial or remaining noncancelable lease terms in excess of one year: (a) future minimum rental payments required as of the date of the latest balance sheet presented, in the aggregate and for each of the five succeeding fiscal years, (b) the total of minimum rentals to be received in the future under noncancelable subleases as of the date of the latest balance sheet presented, and (c) for all operating leases, rental expense for each period for which an income statement is presented, with separate amounts for minimum rentals, contingent rentals, and sublease rentals. Rental payments under leases with terms of a month or less that were not renewed need not be included.

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