Leases (Tables)

9 Months Ended

Sep. 30, 2020

Leases

Schedule of supplemental balance sheet information related to leases

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

	September 30,			December 31,
	2020			2019
	(unaudited)
Finance Lease:
Right-of-use asset, gross (buildings and improvements)	$	58,799		$	58,799
Accumulated amortization		(12,250)			(11,147)
Right-of-use asset, net	$	46,549		$	47,652
Accounts payable and accrued expenses	$	1		$	1
Lease obligation, less current portion		15,569			15,570
Total lease obligation	$	15,570		$	15,571
Remaining lease term		77 years
Discount rate		9.0	%
Operating Leases:
Right-of-use assets, net (1)	$	39,489		$	60,629
Accounts payable and accrued expenses	$	4,972		$	4,743
Lease obligations, less current portion		45,939			49,691
Total lease obligations	$	50,911		$	54,434
Weighted average remaining lease term		25 years
Weighted average discount rate		5.4	%

(1) During the first quarter of 2020, the Company wrote down its operating lease right-of-use assets, net and recorded an impairment loss of $18.5 million on the Hilton Times Square (see Note 5).

Lease costs

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Finance lease cost:
Amortization of right-of-use asset	$	368	$	367	$	1,103	$	1,103
Interest on lease obligations		351		647		1,053		1,936
Operating lease cost (1)		2,681		1,729		6,751		5,187
Variable lease cost		15		1,958		39		4,878
Total lease cost	$	3,415	$	4,701	$	8,946	$	13,104

(1) Under the terms of the operating lease at the Hilton Times Square, the variable rent amount was adjusted in May 2020 based on the fair market value of the land. While the Company is negotiating with the landlord to agree on the fair market value of the land, the Company is recording operating lease cost in accordance with the lease based on 90.0% of the landlord’s estimate of fair value. The operating lease requires monthly rental payments be paid to the landlord, which the Company has not made since March 2020. As such, the Company has received a default notice from the landlord, and a total of $2.4 million in accrued operating lease rental payments is included in accounts payable and accrued expenses on the Company’s consolidated balance sheet as of September 30, 2020. (see Notes 7 and 8).

Schedule of supplemental cash flow information related to leases

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

	Nine Months Ended September 30,
	2020		2019
Operating cash flows used for operating leases	$	4,923	$	5,365
Changes in operating lease right-of-use assets	$	2,606	$	2,564
Changes in operating lease obligations		(3,529)		(3,087)
Changes in operating lease right-of-use assets and lease obligations, net	$	(923)	$	(523)
Operating right-of-use assets obtained in exchange for operating lease obligations	$	—	$	45,677