Investment in Hotel Properties

12 Months Ended

Dec. 31, 2023

Investment in hotel properties as of December 31, 2023 and 2022 consisted of the following (in thousands):


	December 31, 2023		December 31, 2022
Land	$	810,633	$	897,756
Buildings and improvements	5,005,894		5,170,976
Furniture, fixtures and equipment	511,451		504,518
Finance lease asset	91,181		91,181
Construction in progress	27,123		11,961
	$	6,446,282	$	6,676,392
Right-of-use asset, operating leases	360,761		370,383
Investment in hotel properties	$	6,807,043	$	7,046,775
Less: Accumulated depreciation	(1,316,267)		(1,171,899)
Investment in hotel properties, net	$	5,490,776	$	5,874,876

Hurricane Ian

On September 27, 2022, LaPlaya Beach Resort & Club ("LaPlaya") and Inn on Fifth, both located in Naples, Florida, and Southernmost Beach Resort, located in Key West, Florida, were impacted by the effects of Hurricane Ian. Inn on Fifth and Southernmost Beach Resort did not suffer significant damage or disruption. LaPlaya was closed in anticipation of the storm and required remediation and repairs from the damage and remained closed. In 2023, LaPlaya began to reopen in stages as the buildings and facilities were repaired. The Company expects LaPlaya's remediation and repair to be substantially completed in the first quarter of 2024.

The Company’s insurance policies provide coverage for property damage, business interruption and reimbursement for other costs that were incurred relating to damages sustained during Hurricane Ian and the Company has recorded a receivable for the expenditures to date which it anticipates to collect from the insurance providers in excess of the deductibles. For the years ended December 31, 2023 and 2022, the Company recognized an aggregate impairment loss of zero and $7.9 million, respectively, for the damage to LaPlaya and Southernmost Beach Resort. For the year ended December 31, 2023, the Company incurred $6.6 million of expenses related to payroll, repair and claims administration for which reimbursement from insurance policies is uncertain and therefore is included in other operating expenses in the Company's consolidated statements of operations and comprehensive income. Through December 31, 2023 and 2022, the Company has received a total of $84.3 million in preliminary advances from the insurance providers and continues to work with the insurance providers on the settlement of the property and business interruption claims.

Impairment

The Company reviews its investment in hotel properties for impairment whenever events or circumstances indicate potential impairment. The Company periodically adjusts its estimate of future operating cash flows and estimated hold periods for certain properties. As a result of its review, the Company may identify an impairment trigger has occurred and assess its investment in hotel properties for recoverability.

For the years ended December 31, 2023, 2022, and 2021, the Company recognized impairment losses of $81.8 million related to three hotels and one retail component of a hotel property, $81.7 million related to three hotels and $14.9 million related to one hotel, respectively, as a result of their fair values being lower than their carrying values. The impairment losses were determined using Level 2 inputs under authoritative guidance for fair value measurements using purchase and sale agreements and information from marketing efforts for these properties.

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 option. 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 December 31, 2023, the Company's lease liabilities consisted of operating lease liabilities of $320.6 million and financing lease liabilities of $43.4 million. As of December 31, 2022, the Company's lease liabilities consisted of operating lease liabilities of $320.4 million and financing lease liabilities of $42.7 million. The financing lease liabilities are included in accounts payable, accrued expenses and other liabilities on the Company's accompanying consolidated balance sheets.