Leases (Tables)

12 Months Ended

Dec. 31, 2020

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,			December 31,
	2020			2019
Finance Lease:
Right-of-use asset, gross (buildings and improvements)	$	58,799			58,799
Accumulated amortization		(12,617)			(11,147)
Right-of-use asset, net	$	46,182		$	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)	$	26,093		$	60,629

Accounts payable and accrued expenses	$	5,028		$	4,743
Lease obligations, less current portion		29,954			49,691
Total lease obligations (1)	$	34,982		$	54,434

Weighted average remaining lease term		7 years
Weighted average discount rate		5.1	%

(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). In conjunction with the execution of the Company’s December 2020 assignment-in-lieu agreement with the Hilton Times Square’s mortgage holder, the Company wrote off its $12.5 million operating lease right-of-use asset and its $14.7 million operating lease obligation related to the hotel (see Notes 4 and 7).

Lease costs

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


	2020		2019
Finance lease cost:
Amortization of right-of-use asset	$	1,470	$	1,470
Interest on lease obligations (1)		1,404		2,357
Operating lease cost (2)		9,300		6,914
Variable lease cost (3)		27		6,142
Total lease cost	$	12,201	$	16,883

(1)	Interest on lease obligations for the year ended December 31, 2019 included 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)

Prior to the Company’s December 2020 assignment-in-lieu agreement with the Hilton Times Square’s mortgage holder (see Notes 4 and 7), operating lease cost increased by $2.6 million in 2020 under the terms of the operating lease agreement based on 90% of the landlord’s estimate of the lease land’s fair value. As noted above, the operating lease obligation was written off in conjunction with the Company’s execution of the assignment-in-lieu agreement.

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

Summary of Future payments on leases, Finance lease

Future maturities of the Company’s finance and operating lease obligations at December 31, 2020 were as follows (in thousands):


	Finance Lease		Operating Leases
2021	$	1,403	$	6,676
2022		1,403		6,728
2023		1,403		6,781
2024		1,403		6,837
2025		1,403		6,894
Thereafter		100,997		7,918
Total lease payments		108,012		41,834
Less: interest (1)		(92,442)		(6,852)
Present value of lease obligations	$	15,570	$	34,982

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

Summary of Future payments on leases, Operating lease


	Finance Lease		Operating Leases
2021	$	1,403	$	6,676
2022		1,403		6,728
2023		1,403		6,781
2024		1,403		6,837
2025		1,403		6,894
Thereafter		100,997		7,918
Total lease payments		108,012		41,834
Less: interest (1)		(92,442)		(6,852)
Present value of lease obligations	$	15,570	$	34,982

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