Relationships with Managers and Franchisors

9 Months Ended

Sep. 30, 2020

Real Estate [Abstract]

Relationships with Managers and Franchisors

Relationships with Managers and Franchisors

On August 27, 2020, we entered into several agreements with Marriott covering a number of our properties, as described in the following paragraphs.

We terminated the existing management agreements with Marriott and entered into new franchise agreements with Marriott for the following hotel properties:

Hotel	Franchise Effective Date	Franchise Expiration Date	Franchise Fees
Atlanta Marriott Alpharetta	September 9, 2020	September 9, 2040 (1)	6% of gross room sales and 3% of gross food and beverage sales (2)
Salt Lake City Marriott Downtown at City Creek	September 3, 2020	September 3, 2040 (1)	6% of gross room sales and 3% of gross food and beverage sales (2)
The Lodge at Sonoma Renaissance Resort & Spa	September 1, 2020	December 31, 2035	5% of gross room sales (2)
Renaissance Charleston Historic District Hotel	September 23, 2020	December 31, 2031	5% of gross room sales (3)
Courtyard New York Manhattan/Fifth Avenue	October 1, 2020	December 28, 2035	6% of gross room sales

_______________________

(1)The franchise agreement may be extended at Marriott's option for one 10-year term.

(2)The franchise agreement limits total franchise fees prior to December 31, 2020 to 3% of gross revenues.

(3)The franchise agreement limits total franchise fees prior to December 31, 2020 to 3.5% of gross revenues.

The term of each of the new franchise agreements is generally equivalent to the term remaining under each of the management agreements that were terminated, including Marriott’s extension options. The franchise agreement for The Lodge at Sonoma Renaissance Resort & Spa provides us an option through July 2022 to convert the hotel to an Autograph Collection Hotel for the remaining franchise term. In connection with the change in hotel manager of the Renaissance Charleston Historic District Hotel, we recognized $1.4 million of accelerated amortization of the unfavorable management agreement liability. The accelerated amortization is included as a reduction to management fees on the accompanying consolidated statements of operations for the three and nine months ended September 30, 2020.

We entered into a new franchise agreement for the Vail Marriott Mountain Resort to convert the brand to a Luxury Collection Hotel. The new franchise agreement has a term of 20 years, and the brand conversion will be effective upon the completion of an agreed-upon renovation. The franchise fees ramp up for the first two years to stabilize in the third year at the standard fees of 5% of gross room sales and 2% of gross food and beverage sales thereafter.

The franchise agreement for The Lexington Hotel was amended to provide the Company with a right to terminate such agreement on or after April 2, 2021, subject to the payment of unamortized key money as of the date of termination and payment of a termination fee.

The franchise agreements for the JW Marriott Denver Cherry Creek, Westin Washington D.C. City Center and Westin San Diego Downtown were amended to extend the term of each agreement by 10 years. The amended franchise agreement for the JW Marriott Denver Cherry Creek provides the Company with an option to convert the hotel to a Luxury Collection Hotel, subject to the completion of a property improvement plan.