Leases (Tables)

12 Months Ended

Dec. 31, 2019

Leases

Schedule of supplemental balance sheet information related to leases

Leases were included on the Company’s consolidated balance sheet as follows (in thousands):

	December 31,
	2019
Finance Lease:
Right-of-use asset, net (buildings and improvements)	$	58,799
Accumulated depreciation		(11,147)
Right-of-use asset, net	$	47,652
Accounts payable and accrued expenses	$	1
Lease obligations, less current portion		15,570
Total lease obligation	$	15,571
Remaining lease term		78 years
Discount rate		9.0	%
Operating Leases:
Right-of-use assets, net	$	60,629
Accounts payable and accrued expenses	$	4,743
Lease obligations, less current portion		49,691
Total lease obligations	$	54,434
Weighted average remaining lease term		25 years
Weighted average discount rate		5.4	%

Lease costs

The components of lease expense were as follows (in thousands):

	2019
Finance lease cost:
Amortization of right-of-use asset	$	1,470
Interest on lease obligations (1)		2,357
Total finance lease cost	$	3,827
Operating lease cost (2)	$	13,056

(1) Interest on lease obligations includes interest expense of $1.0 million on the Courtyard by Marriott Los Angeles’s finance lease obligation before the hotel’s sale in October 2019 (see Note 4).

(2) Several of the Company’s hotels pay percentage rent, which is calculated on operating revenues above certain thresholds. During the year ended December 31, 2019, the Company recorded $6.1 million in percentage rent related to its operating leases.

Schedule of supplemental cash flow information related to leases

Supplemental cash flow information related to leases was as follows (in thousands):

	2019
Operating cash flows used for operating leases	$	7,238
Changes in operating lease right-of-use assets	$	3,447
Changes in operating lease obligations		(4,229)
Changes in operating lease right-of-use assets and lease obligations, net	$	(782)
Operating right-of-use assets obtained in exchange for operating lease obligations	$	45,677

Summary of Future payments on leases, Finance lease

Future maturities of the Company’s finance and operating lease obligations at December 31, 2019 were as follows (in thousands):

	Finance Lease		Operating Leases
2020	$	1,403	$	7,519
2021		1,403		7,570
2022		1,403		7,622
2023		1,403		7,676
2024		1,403		7,732
Thereafter		102,400		73,983
Total lease payments		109,415		112,102
Less: interest (1)		(93,844)		(57,668)
Present value of lease obligations	$	15,571	$	54,434

(1) Calculated using the appropriate discount rate for each lease.

Summary of Future payments on leases, Operating lease

	Finance Lease		Operating Leases
2020	$	1,403	$	7,519
2021		1,403		7,570
2022		1,403		7,622
2023		1,403		7,676
2024		1,403		7,732
Thereafter		102,400		73,983
Total lease payments		109,415		112,102
Less: interest (1)		(93,844)		(57,668)
Present value of lease obligations	$	15,571	$	54,434

(1) Calculated using the appropriate discount rate for each lease.

Schedule of Capital Leased Assets

Prior to the Company’s adoption of the new leases standard, as of December 31, 2018, capital lease assets were included in investment in hotel properties, net on the Company’s consolidated balance sheets as follows (in thousands):

	December 31,
	2018
Gross capital lease asset - buildings and improvements	$	58,799
Gross capital lease asset - land		6,605
Gross capital lease assets		65,404
Accumulated depreciation		(9,677)
Net capital lease assets		55,727

Schedule of Future Minimum Rental Payments for Operating Leases

Prior to the Company’s adoption of the new leases standard, as of December 31, 2018, future minimum undiscounted operating lease payments, along with the present value of net future capital lease payments were as follows (in thousands):

	Operating Leases
2019	$	8,159
2020		8,441
2021		8,486
2022		8,531
2023		8,576
Thereafter		159,190
Total operating lease payments	$	201,383

Schedule of Future Minimum Lease Payments for Capital Leases

	Capital Leases
2019	$	2,357
2020		2,357
2021		2,389
2022		2,453
2023		2,453
Thereafter		136,220
Total capital lease payments		148,229
Less: interest (1)		(121,219)
Present value of capital lease payments	$	27,010

(1) 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.