Investment in Hotel Properties

3 Months Ended

Mar. 31, 2024

Investment in hotel properties as of March 31, 2024 and December 31, 2023 consisted of the following (in thousands):


	March 31, 2024		December 31, 2023
Land	$	810,671	$	810,633
Buildings and improvements	5,023,153		5,005,894
Furniture, fixtures and equipment	517,028		511,451
Finance lease asset	91,181		91,181
Construction in progress	48,190		27,123
	$	6,490,223	$	6,446,282
Right-of-use asset, operating leases	358,357		360,761
Investment in hotel properties	$	6,848,580	$	6,807,043
Less: Accumulated depreciation	(1,373,130)		(1,316,267)
Investment in hotel properties, net	$	5,475,450	$	5,490,776

Hurricane Ian

On September 27, 2022, LaPlaya Beach Resort & Club ("LaPlaya") located in Naples, Florida, was impacted by the effects of Hurricane Ian. 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. As of the first quarter of 2024, LaPlaya's remediation and repair was substantially complete.

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 three months ended March 31, 2024 and 2023, the Company incurred $0.1 million and $2.8 million, respectively, of costs 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 March 31, 2024, the Company received a total of $100.0 million in preliminary advances from the insurance providers. The Company 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 this review, the Company may identify an impairment trigger has occurred and assess its investment in hotel properties for recoverability.

During the three months ended March 31, 2024 and 2023, no impairment losses were incurred.

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 March 31, 2024, the Company's lease liabilities consisted of operating lease liabilities of $320.6 million and financing lease liabilities of $43.5 million. 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. The financing lease liabilities are included in accounts payable, accrued expenses and other liabilities on the Company's accompanying consolidated balance sheets.