Investment in Hotel Properties

3 Months Ended

Mar. 31, 2020

Investment in hotel properties as of March 31, 2020 and December 31, 2019 consisted of the following (in thousands):



	March 31, 2020			December 31, 2019
Land	$	982,016		$	1,042,198
Buildings and improvements	4,853,709			4,998,108
Furniture, fixtures and equipment	506,773			522,631
Capital lease asset	134,063			134,063
Construction in progress	45,503			35,637
	$	6,522,064		$	6,732,637
Right-of-use asset, operating leases	333,611			335,272
Investment in hotel properties	$	6,855,675		$	7,067,909
Less: Accumulated depreciation	(748,732		)	(735,322		)
Investment in hotel properties, net	$	6,106,943		$	6,332,587

The Company reviews its investment in hotel properties for impairment whenever events or circumstances indicate potential impairment. As a result of the effects of the COVID-19 pandemic on our expected future operating cash flows, we determined certain impairment triggers had occurred and as a result, the Company assessed its investment in hotel properties for recoverability. Based on the analysis performed, the Company recognized an impairment loss of $20.6 million related to a retail component of a hotel as a result of the fair value being lower than its carrying value. The impairment loss was determined using level 2 inputs under authoritative guidance for fair value measurements.

On January 1, 2019, the Company adopted ASC 842, Leases and applied it prospectively. At adoption, the Company also elected the practical expedients which permitted it to not reassess its prior conclusions about lease identification, classification and initial direct costs. Consequently on January 1, 2019, the Company recognized right-of-use assets and related liabilities related to its ground leases, all of which are operating leases. Since most of the Company's leases do not provide an implicit rate, the Company used incremental borrowing rates, which ranged from 5.5% to 7.6%. All of these ground leases have long terms, ranging from 10 years to 88 years and the Company included the exercise of options to extend when it is reasonably certain the Company will exercise such option. See Note 11 for additional information about the ground leases. The right-of-use assets and liabilities are amortized to ground rent expense over the term of the underlying lease agreements. As of March 31, 2020, the Company's right-of-use assets of $333.6 million, which included favorable and unfavorable intangibles, are included in the investment in hotel properties and its related lease liabilities of $256.3 million are presented in accounts payable and accrued expenses in the Company's consolidated balance sheets. The adoption of this standard had minimal impact on the Company's consolidated statements of operations and comprehensive income.