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. Prior to the purchase of the remaining interest in the Atlanta JV on February 14, 2020 (see Note 3), the Company accounted for the Atlanta JV under the equity method. Condor owned 80% of the Atlanta JV with TWC owning the remaining 20%. The Atlanta JV was comprised of two companies: Spring Street Hotel Property II LLC, of which the operating partnership indirectly owned an 80% equity interest, and Spring Street Hotel OpCo II LLC, of which our TRS indirectly owned an 80% equity interest. TWC owned the remaining 20% equity interest in these two companies.

The purchase was partially funded with a $33,750 term loan secured by the property. 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 original term loan, which was terminated following the repayment. The New Term Loan was included in full on the balance sheet of the Atlanta JV prior to the acquisition of the remaining interest by the Company in 2020.

The New Term Loan matured upon the earlier to occur of (a) consummation of the merger under the Merger Agreement (see Note 1) and (b) May 8, 2020. The New Term Loan was refinanced in May 2020 (see Note 6). The New Term Loan bore interest, at the Borrower’s option, at either LIBOR plus 2.25% or a base rate plus 1.25%. The New Term Loan required monthly interest payments and principal is due on the maturity date. The Borrowers could, 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 New Term Loan was 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 was guaranteed by the Company and certain of its subsidiaries.

Under the Atlanta JV agreement, the Atlanta JV was managed by TWC in accordance with business plans and budgets approved by both partners. Major decisions as detailed in the agreement also required joint approval. Condor could remove TWC as manager of the Atlanta JV and appoint a new manager only upon the occurrence of certain events. The Atlanta Aloft hotel was managed by Boast Hotel Management Company LLC (“Boast”), an affiliate of TWC. The Atlanta JV paid to Boast total management fees of $61 during the first quarter of 2020 and paid management fees of $91 and $303 for the three and nine months ended September 30, 2019, respectively. The management of the Atlanta Aloft hotel was moved to Aimbridge Hospitality on March 1, 2020 following the acquisition of the remaining interest in the Atlanta JV by Condor.

Net cash flow from the Atlanta JV was 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 were allocated in the same proportion as net cash flow. Losses were allocated based on pro-rata equity ownership. Cash distributions totaling $480 were received from the Atlanta JV in the first quarter of 2020 prior to its acquisition by Condor, and cash distributions totaling $960 and $1,813, were received in the three and nine months ended September 30, 2019, respectively.

The Atlanta JV agreement also included buy-sell rights for both members (generally after three years of hotel ownership for Condor and after five years for TWC) and Condor had 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 December 31, 2019:


	As of
	December 31, 2019
Investment in hotel properties, net	$	45,547
Cash and cash equivalents		661
Accounts receivable, prepaid expenses, and other assets		279
Total Assets	$	46,487

Accounts payable, accrued expenses, and other liabilities	$	1,026
Land option liability		6,190
Long-term debt, net of deferred financing costs		33,966
Total Liabilities		41,182
Condor equity		4,244
TWC equity		1,061
Total Equity		5,305
Total Liabilities and Equity	$	46,487

The table below provides the components of net earnings, including the Company’s share of the Atlanta JV, for the first quarter of 2020 prior to its acquisition by the Company and for the three and nine months ended September 30, 2019.


		For the period of January 1 to February 14,		Three months ended September 30,		Nine months ended September 30,
	2020		2019		2019
Revenue
Room rentals and other hotel services	$	1,522	$	3,057	$	10,115
Operating Expenses
Hotel and property operations		960		1,943		6,020
Depreciation and amortization		181		374		1,119
Total operating expenses		1,141		2,317		7,139
Operating income		381		740		2,976
Net loss on disposition of assets		-		(2)		(2)
Net loss on derivative		-		-		(1)
Interest expense		(281)		(671)		(2,057)
Loss on extinguishment of debt		-		(172)		(172)
Net earnings	$	100	$	(105)	$	744

Condor allocated earnings	$	80	$	(84)	$	595
TWC allocated earnings		20		(21)		149
Net earnings	$	100	$	(105)	$	744