NOTE 4. INVESTMENT IN UNCONSOLIDATED JOINT VENTURE

On August 1, 2016, the Company entered into a joint venture, the Atlanta JV, with Three Wall Capital LLC and certain of its affiliates (“TWC”) to acquire an Aloft hotel in downtown Atlanta, Georgia. The Atlanta Aloft acquisition had a total purchase price of $43,550 and closed on August 22, 2016. The Company accounts for the Atlanta JV under the equity method. Condor owns 80% of the Atlanta JV with TWC owning the remaining 20%. The Atlanta JV is comprised of two companies: Spring Street Hotel Property II LLC, of which the operating partnership indirectly owns an 80% equity interest, and Spring Street Hotel OpCo II LLC, of which our TRS indirectly owns an 80% equity interest. TWC owns the remaining 20% equity interest in these two companies.

The purchase was partially funded with a $33,750 term loan secured by the property. The term loan (the “Old Term Loan”), obtained from LoanCore Capital Credit REIT LLC, had an initial term of 24 months with three 12-month extension periods, which could be exercised at the Atlanta JV’s option subject to certain conditions and fees. The first of these extension options was exercised by the Atlanta JV on September 9, 2018. The loan was non-recourse to the Atlanta JV, subject to specified exceptions. The loan was also non-recourse to Condor, except for certain customary carve-outs which are guaranteed by the Company.

On August 9, 2019, the operating partnership and the owner and lessee of the Aloft Atlanta hotel in the Atlanta JV (Spring Street Hotel Property LLC and Spring Street Hotel OpCo LLC, respectively), as Borrowers, closed on a $34,080 term loan pursuant to a term loan agreement with KeyBank National Association and the other lenders party thereto, as Lenders, and KeyBank National Association, as Agent for the Lenders (the “New Term Loan”). The proceeds of the New Term Loan were used to repay the Old Term Loan, which was terminated following the repayment. The New Term Loan is included in full on the balance sheet of the Atlanta JV at September 30, 2019.

The New Term Loan matures upon the earlier to occur of (a) consummation of the merger under the Merger Agreement (see Note 1) and (b) February 9, 2020. The New Term Loan bears interest, at the Borrower’s option, at either LIBOR plus 2.25% or a base rate plus 1.25%. The New Term Loan requires monthly interest payments and principal is due on the maturity date. The Borrowers may, at any time, voluntarily prepay the New Term Loan in whole or in part without premium or penalty (other than customary LIBOR breakage costs). The current interest rate on the New Term Loan on September 30, 2019 was 4.29%. The New Term Loan is secured by a first priority lien and security interest on the Aloft Atlanta hotel and the tangible and intangible personal property used in connection with such hotel, including inventory, equipment, fixtures, accounts and general intangibles. The New Term Loan is guaranteed by the Company and certain of its subsidiaries.

Under the Atlanta JV agreement, the Atlanta JV is managed by TWC in accordance with business plans and budgets approved by both partners. Major decisions as detailed in the agreement also require joint approval. Condor may remove TWC as manager of the Atlanta JV and appoint a new manager only upon the occurrence of certain events. The Atlanta Aloft hotel is managed by Boast Hotel Management Company LLC (“Boast”), an affiliate of TWC. The Atlanta JV paid to Boast total management fees of $91 and $92 for the three months ended September 30, 2019 and 2018, respectively, and $303 and $283 for the nine months ended September 30, 2019 and 2018, respectively.

Net cash flow from the Atlanta JV is distributed each quarter first with a 10% annual preferred return on capital contributions to Condor, second with a 10% annual preferred return on capital contributions to TWC, and third with any remainder distributed to the partners based on their pro-rata equity ownership. Profits are allocated in the same proportion as net cash flow. Losses are allocated based on pro-rata equity ownership. Cash distributions totaling $960 and $400 in the three months ended September 30, 2019 and 2018, respectively, and $1,813 and $1,360 in the nine months ended September 30, 2019 and 2018, respectively, were received by the Company from the Atlanta JV.

The Atlanta JV agreement also includes buy-sell rights for both members (generally after three years of hotel ownership for Condor and after five years for TWC) and Condor has a purchase option for TWC’s Atlanta JV ownership interest exercisable between the third and fifth anniversary of the hotel closing.

The following table represents the total assets, liabilities, and equity, including the Company’s share, of the Atlanta JV as of September 30, 2019 and December 31, 2018:


	As of
	September 30, 2019		December 31, 2018
Investment in hotel properties, net	$	45,916	$	46,933
Cash and cash equivalents		426		913
Restricted cash, property escrows		0		366
Accounts receivable, prepaid expenses, and other assets		469		294
Total Assets	$	46,811	$	48,506

Accounts payable, accrued expenses, and other liabilities	$	1,105	$	1,375
Land option liability		6,190		6,190
Long-term debt, net of deferred financing costs		33,705		33,608
Total Liabilities		41,000		41,173
Condor equity		4,649		5,866
TWC equity		1,162		1,467
Total Equity		5,811		7,333
Total Liabilities and Equity	$	46,811	$	48,506

The table below provides the components of net earnings, including the Company’s share of the Atlanta JV, for the three and nine months ended September 30, 2019 and 2018.


	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Revenue
Room rentals and other hotel services	$	3,057	$	3,106	$	10,115	$	9,484
Operating Expenses
Hotel and property operations		1,943		2,097		6,020		6,110
Depreciation and amortization		374		362		1,119		1,083
Total operating expenses		2,317		2,459		7,139		7,193
Operating income		740		647		2,976		2,291
Net loss on disposition of assets		(2)		(19)		(2)		(36)
Net loss on derivative		-		-		(1)		-
Interest expense		(671)		(679)		(2,057)		(1,941)
Loss on extinguishment of debt		(172)		-		(172)		-
Net earnings (loss)	$	(105)	$	(51)	$	744	$	314

Condor allocated earnings (loss)	$	(84)	$	(41)	$	595	$	251
TWC allocated earnings (loss)		(21)		(10)		149		63
Net earnings (loss)	$	(105)	$	(51)	$	744	$	314