Equity Investments in Real Estate

At June 30, 2019, we owned equity interests in four Unconsolidated Hotels, two with unrelated third parties and two with CWI 2. We do not control the ventures that own these hotels, but we exercise significant influence over them. We account for these investments under the equity method of accounting (i.e., at cost, increased or decreased by our share of earnings or losses, less distributions, plus contributions and other adjustments required by equity method accounting, such as basis differences from acquisition costs paid to our Advisor that we incur and other-than-temporary impairment charges, if any).

Under the conventional approach of accounting for equity method investments, an investor applies its percentage ownership interest to the venture’s net income to determine the investor’s share of the earnings or losses of the venture. This approach is inappropriate if the venture’s capital structure gives different rights and priorities to its investors. We have priority returns on several of our equity method investments. Therefore, we follow the hypothetical liquidation at book value (“HLBV”) method in determining our share of these ventures’ earnings or losses for the reporting period, as this method better reflects our claim on the ventures’ book value at the end of each reporting period. Earnings for our equity method investments are recognized in accordance with each respective investment agreement and, where applicable, based upon the allocation of the investment’s net assets at book value as if the investment was hypothetically liquidated at the end of each reporting period.

The following table sets forth our ownership interests in our equity investments in real estate and their respective carrying values. The carrying values of these ventures are affected by the timing and nature of distributions (dollars in thousands):



Unconsolidated Hotels	State	Number of Rooms	% Owned	Hotel Type	Carrying Value at
Unconsolidated Hotels	State	Number of Rooms	% Owned	Hotel Type	June 30, 2019		December 31, 2018
Ritz-Carlton Bacara, Santa Barbara Venture ^{(a) (b)}	CA	358	40%	Resort	$	57,863	$	56,814
Ritz-Carlton Philadelphia Venture ^(c)	PA	301	60%	Full-service	28,018		29,951
Marriott Sawgrass Golf Resort & Spa Venture ^{(d) (e)}	FL	514	50%	Resort	26,777		25,439
Hyatt Centric French Quarter Venture ^(f)	LA	254	80%	Full-service	473		511
		1,427			$	113,131	$	112,715

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(a)	This investment represents a tenancy-in-common interest; the remaining 60.0% interest is owned by CWI 2.


(b)	We contributed $1.7 million and $3.4 million to this investment during the three and six months ended June 30, 2019, respectively, which included funding for the hotel’s renovation.


(c)	We received cash distributions of $0.9 million from this investment during both the three and six months ended June 30, 2019.


(d)	We received cash distributions of $1.6 million and $1.8 million from this investment during the three and six months ended June 30, 2019, respectively.


(e)	This investment is considered a VIE (Note 2). We do not consolidate this entity because we are not the primary beneficiary and the nature of our involvement in the activities of the entity allows us to exercise significant influence, but does not give us power over decisions that significantly affect the economic performance of the entity.


(f)	We received cash distributions of $0.7 million and $1.1 million from this investment during the three and six months ended June 30, 2019, respectively.

The following table sets forth our share of equity in earnings (losses) from our Unconsolidated Hotels, which is based on the HLBV model, as well as certain amortization adjustments related to basis differentials from acquisitions of investments (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
Venture	2019			2018			2019			2018
Hyatt Centric French Quarter Venture	$	675		$	669		$	1,104		$	1,056
Marriott Sawgrass Golf Resort & Spa Venture	648			488			3,140			2,111
Ritz-Carlton Philadelphia Venture	424			693			(1,061		)	(783		)
Ritz-Carlton Bacara, Santa Barbara Venture	(346		)	(889		)	(2,323		)	(2,838		)
Westin Atlanta Venture ^(a)	—			114			—			505
Total equity in earnings of equity method investments in real estate, net	$	1,401		$	1,075		$	860		$	51

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(a)	On October 19, 2017, the venture sold the Westin Atlanta Perimeter North to an unaffiliated third party. Our share of equity in earnings during the three and six months ended June 30, 2018 was the result of additional cash distributions received in those periods in connection with the disposition.

No other-than-temporary impairment charges related to our investments in these ventures were recognized during the three or six months ended June 30, 2019 or 2018.

At June 30, 2019 and December 31, 2018, the unamortized basis differences on our equity investments were $6.4 million and $7.3 million, respectively. Net amortization of the basis differences reduced the carrying values of our equity investments by$0.1 million during both the three months ended June 30, 2019 and 2018 and by $0.2 million for both the six months ended June 30, 2019 and 2018.

Hurricane-Related Disruption

The Marriott Sawgrass Golf Resort & Spa was impacted by Hurricane Irma when it made landfall in September 2017. The hotel sustained damage and was forced to close for a short period of time. Below is a summary of the items that comprised the loss (gain) recognized by the venture related to Hurricane Irma (in thousands):



	Three Months Ended June 30,
	2019			2018
Net write-off of fixed assets	$	543		$	150
Remediation work performed	—			486
(Increase) decrease in property damage insurance receivables	(543		)	265
Loss on hurricane-related property damage ^(a)	$	—		$	901



	Six Months Ended June 30,
	2019			2018
Net write-off (write-up) of fixed assets	$	3,586		$	(426	)
Remediation work performed	—			110
(Increase) decrease in property damage insurance receivables	(3,596		)	905
(Gain) loss on hurricane-related property damage ^(a)	$	(10	)	$	589

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(a)	Includes losses totaling $0.7 million and $1.3 million during the three and six months ended June 30, 2018, respectively, resulting from pre-existing damage (which was discovered as a result of the hurricane and is not covered by insurance).

As the restoration work continues to be performed, the estimated total costs will change. Any changes to property damage estimates will be recorded in the periods in which they are determined and any additional remediation work will be recorded in the periods in which it is performed.