Acquisitions

12 Months Ended

Dec. 31, 2019

We had no acquisitions during the year ended December 31, 2019.

2018 Acquisitions

On March 1, 2018, we acquired the 77-room Landing Resort & Spa in South Lake Tahoe, California, for a total contractual purchase price of $42 million. The acquisition was funded with corporate cash. The acquisition is accounted for as an acquisition of assets; accordingly, direct acquisition costs were capitalized.

On March 1, 2018, we acquired the 242-room Hotel Palomar in Phoenix, Arizona, for a total contractual purchase price of $80 million. The acquisition was funded with corporate cash. In connection with the acquisition, we assumed a $2.9 million loan under a qualified New Market Tax Credit program. Refer to Note 8 for additional information about the loan. The acquisition is accounted for as an acquisition of assets; accordingly, our direct acquisition costs were capitalized.

We lease the surface and air rights of the hotel property pursuant to a ground lease with the City of Phoenix. We own the building improvements fee simple. The ground lease expires in 2085, including all extension options. Refer to Note 12 for additional information about this lease. As lessee of government property, we are subject to a Government Property Lease Excise Tax (“GPLET”) under Arizona state statute in lieu of ad valorem real estate taxes through the end of the term of the ground lease. We reviewed the terms of the ground lease and GPLET agreement and concluded that the terms of the ground lease are favorable to us compared with a comparable market ground lease. Accordingly, we allocated $20.0 million of the total acquisition cost to a favorable ground lease asset. Upon adoption of ASC 842 on January 1, 2019, the right-of-use asset was adjusted for the unamortized balance of this favorable lease asset.

We assumed an agreement previously made with the lessee of the subsurface parking facility under the hotel, which requires us to pay 50% of the lessee's lease payments to the landlord—the City of Phoenix. The agreement is coterminous with the underlying subsurface ground lease, which expires in 2085, including all extension options. We reviewed the terms of the parking agreement and concluded that the terms are unfavorable to us compared with a typical market parking agreement. Accordingly, we allocated $4.6 million of the total acquisition cost to an unfavorable agreement liability that will be amortized over the remaining term of the parking agreement, including all extension options.

On December 12, 2018, we acquired the 142-room Cavallo Point for a total contractual purchase price of $152 million. The acquisition was funded through a combination of corporate cash, proceeds from the new $50 million unsecured term loan and the issuance of OP units. The acquisition is accounted for as an acquisition of assets; accordingly, our direct acquisition costs were capitalized.

Cavallo Point is subject to a long-term ground lease agreement with the United States National Park Service that expires in 2066. Refer to Note 12 for additional information about this lease. We reviewed the terms of the ground lease and concluded that the terms of the ground lease are favorable to us compared with a comparable market ground lease. Accordingly, we allocated $17.9 million of the total acquisition cost to a favorable ground lease asset. Upon adoption of ASC 842 on January 1, 2019, the right-of-use asset was adjusted for the unamortized balance of this favorable lease asset.

The following table summarizes the assets acquired and liabilities assumed in our 2018 acquisitions (in thousands):



	Cavallo Point			Landing Resort & Spa			Hotel Palomar Phoenix
Land	$	—		$	14,816		$	—
Building and improvements	123,100			24,351			59,703
Furniture, fixtures and equipment	10,470			3,346			5,207
Construction in progress	1,734			—			—
Total fixed assets	135,304			42,513			64,910
Favorable lease asset	17,907			—			20,012
Unfavorable lease liability	—			—			(4,644		)
New Market Tax Credit loan assumption	—			—			(2,943		)
Other assets and liabilities, net	(5,083		)	(658		)	497
Total	$	148,128		$	41,855		$	77,832