Investment in Hotel Properties

3 Months Ended

Mar. 31, 2022

Investment in hotel properties as of March 31, 2022 and December 31, 2021 consisted of the following (in thousands):


	March 31, 2022		December 31, 2021
Land	$	902,262	$	926,330
Buildings and improvements	5,176,540		5,197,816
Furniture, fixtures and equipment	540,944		535,607
Finance lease asset	91,181		91,181
Construction in progress	13,624		15,869
	$	6,724,551	$	6,766,803
Right-of-use asset, operating leases	376,574		378,939
Investment in hotel properties	$	7,101,125	$	7,145,742
Less: Accumulated depreciation	(1,125,268)		(1,066,409)
Investment in hotel properties, net	$	5,975,857	$	6,079,333

Impairment

The Company reviews its investment in hotel properties for impairment whenever events or circumstances indicate potential impairment. As a result of the ongoing effects of the COVID-19 pandemic on its expected future operating cash flows and estimated hold periods for certain properties, the Company determined certain impairment triggers had occurred and therefore, the Company assessed its investment in hotel properties for recoverability. Based on the analyses performed, for the three months ended March 31, 2022, the Company recognized an impairment loss of $61.0 million related to two hotels as a result of their fair values being lower than their carrying values. The impairment loss was determined using Level 2 inputs under authoritative guidance for fair value measurements using information from marketing efforts for these properties. For the three months ended March 31, 2021, the Company recognized an impairment loss of $14.9 million related to one hotel as a result of its fair value being lower than its carrying value. The impairment loss was determined using Level 2 inputs under authoritative guidance for fair value measurements using information from marketing efforts for this property.

Right-of-use Assets and Lease Liabilities

The Company recognized right-of-use assets and related liabilities related to its ground leases, all of which are operating leases. When the rate implicit in the lease could not be determined, the Company used incremental borrowing rates, which ranged from 4.7% to 7.6%. In addition, the term used includes any options to exercise extensions when it is reasonably certain the Company will exercise such options. See Note 11. Commitments and Contingencies, 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, 2022, the Company's lease liabilities consisted of operating lease liabilities of $319.4 million and financing lease liabilities of $42.2 million. As of December 31, 2021, the Company's lease liabilities consisted of operating lease liabilities of $319.4 million and financing lease liabilities of $42.0 million. The financing lease liabilities are included in accounts payable, accrued expenses and other liabilities on the Company's accompanying consolidated balance sheets.