Real Estate Properties

3 Months Ended

Mar. 31, 2020

Note 5. Real Estate Properties

At March 31, 2020, we owned 329 hotels with 51,358 rooms or suites and 813 service-oriented retail properties with approximately 14.5 million square feet that are primarily subject to “triple net” leases, or net leases where the tenant is generally responsible for payment of operating expenses and capital expenditures of the property during the lease term. Our properties had an aggregate undepreciated carrying value of $11,501,576, including $56,688 classified as held for sale as of March 31, 2020.

During the three months ended March 31, 2020, we funded $38,627 for improvements to certain of our properties which, pursuant to the terms of our management and lease agreements with our managers and tenants, resulted in increases in our contractual annual minimum returns and rents of $2,531. See Note 6 for further information about our management and lease agreements and our fundings of improvements to certain of our properties.

Acquisitions

We acquired a portfolio of three net lease properties during the three months ended March 31, 2020. We accounted for this transaction as an acquisition of assets. Our allocation of the purchase price for this acquisition based on the estimated fair value of the acquired assets is presented in the table below.



Acquisition Date	Location	Purchase Price		Land		Building and Improvements		Furniture, Fixtures and Equipment		Intangible Assets / Liabilities, net
3/12/2020	Various ⁽¹⁾	$	7,071	$	880	$	5,363	$	—	$	828


(1)	On March 12, 2020, we acquired three net lease properties with approximately 6,696 square feet in two states with leases requiring an aggregate of $387 of annual minimum rent for an aggregate purchase price of $7,071, including acquisition related costs.

Dispositions

We sold six net lease properties with an aggregate of 292,276 rentable square feet for aggregate proceeds of $8,010, excluding closing costs, in six separate transactions during the three months ended March 31, 2020. The sales of these properties, as presented in the table below, do not represent significant dispositions individually or in the aggregate nor do they represent a strategic shift. As a result, the results of operations of these properties are included in continuing operations through the date of sale in our condensed consolidated statements of income. As a result of these sales, we recorded a net loss on sale of real estate of $6,911 during the three months ended March 31, 2020.



Date of Sale	Number of Properties	Location	Tenant	Square Feet	Gross Sales Price
1/28/2020	1	Gothenburg, NE	Vacant	31,978	$	585
2/6/2020	1	Rochester, MN	Vacant	90,503	2,600
2/13/2020	1	Ainsworth, NE	Vacant	32,901	775
2/14/2020	1	Dekalb, IL	Vacant	5,052	1,050
3/2/2020	1	Eau Claire, MI	HOM Furniture, Inc.⁽¹⁾	98,824	2,600
3/28/2020	1	Stillwater, OK	Vacant	33,018	400
				292,276	$	8,010


(1)	The HOM Furniture, Inc. lease was scheduled to expire on April 30, 2020 and required annual minimum rent of $817.

As of March 31, 2020, six properties with 799,041 square feet with leases requiring annual minimum rent of $5,433 and an aggregate carrying value of $56,688 were classified as held for sale. See Note 13 for further information on these properties. We entered into agreements to sell seven properties with approximately 821,068 square feet in six states with leases requiring an aggregate sales price of $59,500, excluding closing costs. We expect these sales to be completed by the third quarter of 2020. See Note 13 for further information on these properties.

We were previously marketing for sale 20 Wyndham Hotels & Resorts, Inc., or Wyndham, branded hotels with an aggregate net carrying value of $110,465 and 33 Marriott International, Inc., or Marriott hotels with an aggregate net carrying value of $221,129 and were in the process of launching a marketing effort related to our 39 Sonesta ES Suites hotels, managed by Sonesta Holdco Corporation and its subsidiaries, or Sonesta, with an aggregate net carrying value of $461,263. We currently expect the sales of these hotels will be delayed until later in 2020 or until 2021 as a result of current market conditions and these transactions may be delayed further or may not occur.