Our interim condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not necessarily include all information and footnotes necessary for a fair statement of our condensed consolidated financial position, results of operations, and cash flows in accordance with generally accepted accounting principles in the United States (“GAAP”). The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.

In the opinion of management, the unaudited financial information for the interim periods presented in this Report reflects all normal and recurring adjustments necessary for a fair statement of financial position, results of operations, and cash flows. Our interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes for the year ended December 31, 2019, which are included in the 2019 Annual Report, as certain disclosures that would substantially duplicate those contained in the audited consolidated financial statements have not been included in this Report. Operating results for interim periods are not necessarily indicative of operating results for an entire year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in our condensed consolidated financial statements and the accompanying notes. Actual results could differ from those estimates.

Our condensed consolidated financial statements reflect all of our accounts, including those of our controlled subsidiaries. The portions of equity in consolidated subsidiaries that are not attributable, directly or indirectly, to us are presented as noncontrolling interests. All significant intercompany accounts and transactions have been eliminated.

When we obtain an economic interest in an entity, we evaluate the entity to determine if it should be deemed a VIE and, if so, whether we are the primary beneficiary and are therefore required to consolidate the entity. There have been no significant changes in our VIE policies from what was disclosed in the 2019 Annual Report.

As of both June 30, 2020 and December 31, 2019, we considered 19 entities to be VIEs, 18 of which we consolidated as we are considered the primary beneficiary. The following table presents a summary of selected financial data of the consolidated VIEs included in the condensed consolidated balance sheets (in thousands):



	June 30, 2020			December 31, 2019
Real estate — Land, buildings and improvements	$	351,709		$	359,886
Real estate under construction	315,270			233,220
In-place lease intangible assets	100,007			101,198
Accumulated depreciation and amortization	(84,645		)	(78,598		)
Total assets	714,394			642,648

Non-recourse secured debt, net	$	302,176		$	276,124
Total liabilities	361,527			330,549

As of both June 30, 2020 and December 31, 2019, we had one unconsolidated VIE, which we account for under the equity method of accounting. 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 on, but does not give us power over, decisions that significantly affect the economic performance of the entity. As of June 30, 2020 and December 31, 2019, the net carrying amount of this equity investment was $13.8 million and $14.9 million, respectively, and our maximum exposure to loss in this entity is limited to our investment.

The global spread of COVID-19 has created significant uncertainty and economic disruption, both in the near-term and potentially longer-term. The extent to which this pandemic could affect our financial condition, liquidity, and results of operations is difficult to predict and depends on evolving factors, including: duration, scope, government actions, and other social responses.

Our Advisor is closely monitoring the impact of COVID-19 on all aspects of our business, including how it will impact our portfolio and tenant credit health (including our tenants’ ability to pay rent) as well as our liquidity, capital allocation, and balance sheet management. Our Advisor continues to actively engage in discussions with our tenants and with the third-party managers of our operating properties regarding the impact of COVID-19 on business operations, liquidity, prospects, and financial position.

The extent to which the COVID-19 pandemic impacts our operations and those of our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity, and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. For both the three and six months ended June 30, 2020, approximately $3.0 million of rent was not collected due to the adverse impact of COVID-19, which reduced lease revenues in our condensed consolidated statements of operations for those periods.

We are subject to fluctuations in exchange rates between foreign currencies and the U.S. dollar (primarily the euro and the Norwegian krone and, to a lesser extent, the British pound sterling). The following table reflects the end-of-period rate of the U.S. dollar in relation to foreign currencies:

Beginning with the first quarter of 2020, we present Reimbursable tenant costs on its own line item in the condensed consolidated statements of operations. Previously, this line item was included within Property expenses (which is now presented as Property expenses, excluding reimbursable tenant costs).

Lease revenue (including straight-line lease revenue) is only recognized when deemed probable of collection. Collectibility is assessed for each tenant receivable using various criteria including credit ratings, guarantees, past collection issues, and the current economic and business environment affecting the tenant. If collectibility of the contractual rent stream is not deemed probable, revenue will only be recognized upon receipt of cash from the tenant. During the six months ended June 30, 2020, we wrote off $7.0 million in straight-line rent receivables based on our current assessment of less than a 75% likelihood of collecting all remaining contractual rent on certain net lease hotels. Additionally, we did not recognize $3.0 million of rent that was not collected during the second quarter (as discussed in the COVID-19 section above).

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the condensed consolidated statements of cash flows (in thousands):



	June 30, 2020		December 31, 2019
Cash and cash equivalents	$	70,750	$	144,148
Restricted cash ^(a)	22,478		19,250
Total cash and cash equivalents and restricted cash	$	93,228	$	163,398

Our deferred tax liabilities were $45.6 million and $48.6 million at June 30, 2020 and December 31, 2019, respectively, and are included in Accounts payable, accrued expenses and other liabilities in the condensed consolidated financial statements. Our deferred tax assets, net of valuation allowances, was $1.4 million at both June 30, 2020 and December 31, 2019, and are included in Accounts receivable and other assets, net in the condensed consolidated financial statements.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments — Credit Losses. ASU 2016-13 replaces the “incurred loss” model with an “expected loss” model, resulting in the earlier recognition of credit losses even if the risk of loss is remote. This standard applies to financial assets measured at amortized cost and certain other instruments, including loans receivable and net investments in direct financing leases. This standard does not apply to receivables arising from operating leases, which are within the scope of Topic 842.

We adopted ASU 2016-13 on January 1, 2020 using the modified retrospective method, under which we recorded a cumulative-effect adjustment as a charge to retained earnings of $6.9 million, which is reflected within our condensed consolidated statement of equity.

The allowance for credit losses, which is recorded as a reduction to Net investments in direct financing leases on our condensed consolidated balance sheets, was measured using a probability of default method based on the lessees’ respective credit ratings, and the expected value of the underlying collateral upon its repossession. Included in our model are factors that incorporate forward-looking information (Note 5).