Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Oct. 30, 2015 | |
Document and Entity Information | ||
Entity Registrant Name | Sunstone Hotel Investors, Inc. | |
Entity Central Index Key | 1,295,810 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 208,590,736 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q3 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Current assets: | ||
Cash and cash equivalents | $ 176,190 | $ 222,096 |
Restricted cash | 91,541 | 82,074 |
Accounts receivable, net | 47,818 | 34,227 |
Inventories | 1,363 | 1,439 |
Prepaid expenses | 11,877 | 14,909 |
Total current assets | 328,789 | 354,745 |
Investment in hotel properties, net | 3,523,290 | 3,538,129 |
Deferred financing fees, net | 10,637 | 8,201 |
Goodwill | 990 | 9,405 |
Other assets, net | 8,077 | 14,485 |
Total assets | 3,871,783 | 3,924,965 |
Current liabilities: | ||
Accounts payable and accrued expenses | 33,401 | 32,577 |
Accrued payroll and employee benefits | 30,495 | 31,919 |
Dividends payable | 12,730 | 76,694 |
Other current liabilities | 50,341 | 36,466 |
Current portion of notes payable | 206,822 | 121,328 |
Total current liabilities | 333,789 | 298,984 |
Notes payable, less current portion | 1,106,341 | 1,307,964 |
Capital lease obligations, less current portion | 15,575 | 15,576 |
Other liabilities | 35,258 | 33,607 |
Total liabilities | $ 1,490,963 | $ 1,656,131 |
Commitments and contingencies (Note 11) | ||
Preferred stock | ||
Common stock, $0.01 par value, 500,000,000 shares authorized, 207,604,391 shares issued and outstanding at September 30, 2015 and 204,766,718 shares issued and outstanding at December 31, 2014 | $ 2,076 | $ 2,048 |
Additional paid in capital | 2,457,566 | 2,418,567 |
Retained earnings | 416,804 | 305,503 |
Cumulative dividends | (662,744) | (624,545) |
Total stockholders' equity | 2,328,702 | 2,216,573 |
Non-controlling interests in consolidated joint ventures | 52,118 | 52,261 |
Total equity | 2,380,820 | 2,268,834 |
Total liabilities and equity | 3,871,783 | 3,924,965 |
Series D Cumulative Redeemable Preferred Stock | ||
Preferred stock | ||
Preferred stock 8.0% Cumulative Redeemable Preferred Stock | $ 115,000 | $ 115,000 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2015 | Dec. 31, 2014 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock, shares issued (in shares) | 207,604,391 | 204,766,718 |
Common stock, shares outstanding (in shares) | 207,604,391 | 204,766,718 |
Series D Cumulative Redeemable Preferred Stock | ||
Preferred stock, 8.0% Cumulative Redeemable Preferred Stock, shares issued (in shares) | 4,600,000 | 4,600,000 |
Preferred stock, 8.0% Cumulative Redeemable Preferred Stock, shares outstanding (in shares) | 4,600,000 | 4,600,000 |
Preferred stock, 8.0% Cumulative Redeemable Preferred Stock, dividend rate (as a percent) | 8.00% | 8.00% |
Preferred stock, 8.0% Cumulative Redeemable Preferred Stock, liquidation preference (in dollars per share) | $ 25 | $ 25 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
REVENUES | ||||
Room | $ 233,787 | $ 223,877 | $ 666,756 | $ 606,944 |
Food and beverage | 68,371 | 64,273 | 219,820 | 192,917 |
Other operating | 22,437 | 19,633 | 61,671 | 52,257 |
Total revenues | 324,595 | 307,783 | 948,247 | 852,118 |
OPERATING EXPENSES | ||||
Room | 58,332 | 57,492 | 169,742 | 159,829 |
Food and beverage | 50,381 | 45,649 | 153,412 | 133,666 |
Other operating | 5,605 | 5,475 | 16,073 | 15,476 |
Advertising and promotion | 15,325 | 14,114 | 46,252 | 40,740 |
Repairs and maintenance | 11,859 | 12,053 | 34,798 | 33,640 |
Utilities | 9,374 | 9,511 | 26,736 | 25,588 |
Franchise costs | 10,591 | 10,022 | 30,009 | 28,360 |
Property tax, ground lease and insurance | 25,649 | 22,550 | 72,413 | 63,015 |
Property general and administrative | 37,828 | 32,908 | 109,384 | 93,793 |
Corporate overhead | 6,046 | 7,177 | 27,222 | 21,410 |
Depreciation and amortization | 41,331 | 40,000 | 122,911 | 115,588 |
Total operating expenses | 272,321 | 256,951 | 808,952 | 731,105 |
Operating income | 52,274 | 50,832 | 139,295 | 121,013 |
Interest and other income | 576 | 981 | 3,350 | 2,588 |
Interest expense | (16,405) | (18,052) | (51,020) | (54,666) |
Loss on extinguishment of debt | (531) | (2) | (531) | |
Gain on sale of asset | 11,682 | 11,682 | ||
Income before income taxes and discontinued operations | 48,127 | 33,230 | 103,305 | 68,404 |
Income tax (provision) benefit | (938) | 413 | (1,256) | 79 |
Income from continuing operations | 47,189 | 33,643 | 102,049 | 68,483 |
Income from discontinued operations | 15,895 | 15,895 | 5,199 | |
NET INCOME | 63,084 | 33,643 | 117,944 | 73,682 |
Income from consolidated joint ventures attributable to non-controlling interests | (1,982) | (1,803) | (6,643) | (5,704) |
Preferred stock dividends | (2,300) | (2,300) | (6,900) | (6,900) |
INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS | 58,802 | 29,540 | 104,401 | 61,078 |
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ 58,802 | $ 29,540 | $ 104,401 | $ 61,078 |
Basic and diluted per share amounts: | ||||
Income from continuing operations attributable to common stockholders (in dollars per share) | $ 0.20 | $ 0.14 | $ 0.42 | $ 0.29 |
Income from discontinued operations (in dollars per share) | 0.08 | 0.08 | 0.03 | |
Basic and diluted income attributable to common stockholders per common share (in dollars per share) | $ 0.28 | $ 0.14 | $ 0.50 | $ 0.32 |
Basic and diluted weighted average common shares outstanding (in shares) | 207,604 | 202,800 | 207,264 | 188,901 |
Dividends declared per common share | $ 0.05 | $ 0.05 | $ 0.15 | $ 0.15 |
CONSOLIDATED STATEMENTS OF EQUI
CONSOLIDATED STATEMENTS OF EQUITY - 9 months ended Sep. 30, 2015 - USD ($) $ in Thousands | Series D Cumulative Redeemable Preferred StockPreferred Stock | Series D Cumulative Redeemable Preferred StockCumulative Dividends | Common Stock | Additional Paid In Capital | Retained Earnings | Cumulative Dividends | Non-Controlling Interests in Consolidated Joint Ventures | Total |
Beginning Balance at Dec. 31, 2014 | $ 115,000 | $ 2,048 | $ 2,418,567 | $ 305,503 | $ (624,545) | $ 52,261 | $ 2,268,834 | |
Beginning Balance (in shares) at Dec. 31, 2014 | 4,600,000 | 204,766,718 | ||||||
Increase (Decrease) in Stockholders' Equity | ||||||||
Vesting of restricted common stock | $ 7 | 1,671 | 1,678 | |||||
Vesting of restricted common stock (in shares) | 710,108 | |||||||
Distributions to non-controlling interests | (6,786) | (6,786) | ||||||
Issuance of common stock dividends | $ 21 | 37,328 | 37,349 | |||||
Issuance of common stock dividends (in shares) | 2,127,565 | |||||||
Common stock dividends and dividends payable | (31,299) | (31,299) | ||||||
Preferred stock dividends and dividends payable | $ (6,900) | (6,900) | ||||||
Net income | 111,301 | 6,643 | 117,944 | |||||
Ending Balance at Sep. 30, 2015 | $ 115,000 | $ 2,076 | $ 2,457,566 | $ 416,804 | $ (662,744) | $ 52,118 | $ 2,380,820 | |
Ending Balance (in shares) at Sep. 30, 2015 | 4,600,000 | 207,604,391 |
CONSOLIDATED STATEMENTS OF EQU6
CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) | 9 Months Ended |
Sep. 30, 2015$ / shares | |
CONSOLIDATED STATEMENTS OF EQUITY | |
Issuance of common stock dividends per share (in dollars per share) | $ 0.36 |
Common stock dividends and dividends payable, per share (in dollars per share) | 0.15 |
Series D preferred stock dividends and dividends payable, per share (in dollars per share) | $ 1.50 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income | $ 117,944 | $ 73,682 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Bad debt expense | 115 | 216 |
Gain on sales of assets, net | (27,708) | (5,281) |
Loss on extinguishment of debt | 2 | 531 |
Gain on redemption of note receivable | (939) | |
Loss (gain) on derivatives, net | 12 | (395) |
Depreciation | 119,811 | 113,297 |
Amortization of franchise fees and other intangibles | 6,048 | 5,507 |
Amortization and write-off of deferred financing fees | 2,472 | 2,145 |
Amortization of deferred stock compensation | 5,505 | 4,769 |
Changes in operating assets and liabilities: | ||
Restricted cash | 550 | (803) |
Accounts receivable | (13,892) | (15,302) |
Inventories | 76 | 200 |
Prepaid expenses and other assets | 1,403 | 5,441 |
Accounts payable and other liabilities | 14,075 | 15,475 |
Accrued payroll and employee benefits | (5,693) | 792 |
Net cash provided by operating activities | 219,781 | 200,274 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Proceeds from sales of other assets | 42,432 | 99 |
Proceeds from redemption of note receivable | 1,125 | |
Restricted cash - replacement reserve | (10,017) | (3,015) |
Acquisition of hotel property and other real estate | (276,558) | |
Renovations and additions to hotel properties | (106,575) | (93,364) |
Payment for interest rate derivative | (13) | |
Net cash used in investing activities | (73,048) | (372,838) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from common stock offerings | 264,192 | |
Payment of common stock offering costs | (614) | |
Proceeds from credit facility | 38,000 | 23,250 |
Payments on notes payable and credit facility | (154,129) | (40,833) |
Payments for costs related to extinguishment of notes payable | (2) | (25) |
Payments of deferred financing costs | (4,908) | (1,332) |
Dividends paid | (64,814) | (35,280) |
Distributions to non-controlling interests | (6,786) | (5,730) |
Net cash (used in) provided by financing activities | (192,639) | 203,628 |
Net (decrease) increase in cash and cash equivalents | (45,906) | 31,064 |
Cash and cash equivalents, beginning of period | 222,096 | 104,363 |
Cash and cash equivalents, end of period | 176,190 | 135,427 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||
Cash paid for interest | 47,319 | 51,654 |
Cash (refunds received) paid for income tax, net | (99) | 166 |
NONCASH INVESTING ACTIVITY | ||
Accounts payable related to renovations and additions to hotel properties | 11,450 | 8,863 |
Amortization of deferred stock compensation - construction activities | 442 | 354 |
NONCASH FINANCING ACTIVITY | ||
Issuance of common stock dividends | 37,349 | |
Issuance of common stock in connection with acquisition of hotel property | 60,000 | |
Dividends payable | $ 12,730 | $ 12,570 |
Organization and Description of
Organization and Description of Business | 9 Months Ended |
Sep. 30, 2015 | |
Organization and Description of Business | |
Organization and Description of Business | 1. Organization and Description of Business Sunstone Hotel Investors, Inc. (the “Company”) was incorporated in Maryland on June 28, 2004 in anticipation of an initial public offering of common stock, which was consummated on October 26, 2004. The Company, through its 100% controlling interest in Sunstone Hotel Partnership, LLC (the “Operating Partnership”), of which the Company is the sole managing member, and the subsidiaries of the Operating Partnership, including Sunstone Hotel TRS Lessee, Inc. (the “TRS Lessee”) and its subsidiaries, is currently engaged in acquiring, owning, asset managing and renovating hotel properties. The Company may also sell certain hotel properties from time to time. The Company operates as a real estate investment trust (“REIT”) for federal income tax purposes. As a REIT, certain tax laws limit the amount of “non-qualifying” income the Company can earn, including income derived directly from the operation of hotels. As a result, the Company leases all of its hotels to its TRS Lessee, which in turn enters into long-term management agreements with third parties to manage the operations of the Company’s hotels. As of September 30 , 2015, the Company had interests in 30 hotels (the “30 hotels”) held for investment, and the Company’s third-party managers included the following: Number of Hotels Subsidiaries of Marriott International, Inc. or Marriott Hotel Services, Inc. (collectively, “Marriott”) Interstate Hotels & Resorts, Inc. Highgate Hotels L.P. and an affiliate Crestline Hotels & Resorts Hilton Worldwide Hyatt Corporation Davidson Hotels & Resorts Fairmont Hotels & Resorts (U.S.) HEI Hotels & Resorts Total hotels held for investment In addition, prior to its sale in September 2015, the Company owned BuyEfficient, LLC (“BuyEfficient”), an electronic purchasing platform that allows members to procure food, operating supplies, furniture, fixtures and equipment. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2015 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements as of September 30, 2015 and December 31, 2014, and for the three and nine months ended September 30, 2015 and 2014, include the accounts of the Company, the Operating Partnership, the TRS Lessee and their subsidiaries. All significant intercompany balances and transactions have been eliminated. If the Company determines that it has an interest in a variable interest entity within the meaning of the Consolidation Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), the Company will consolidate the entity when it is determined to be the primary beneficiary of the entity. Based on its review, the Company determined that all of its subsidiaries were properly consolidated as of September 30, 2015 and December 31, 2014, and for the three and nine months ended September 30, 2015 and 2014. Non-controlling interests at both September 30, 2015 and December 31, 2014 represent the outside equity interests in various consolidated affiliates of the Company. The accompanying interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and in conformity with the rules and regulations of the Securities and Exchange Commission. In the Company’s opinion, the interim financial statements presented herein reflect all adjustments, consisting solely of normal and recurring adjustments, which are necessary to fairly present the interim financial statements. These financial statements should be read in conjunction with the financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed with the Securities and Exchange Commission on February 19, 2015. The Company has evaluated subsequent events through the date of issuance of these financial statements. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. Fair Value of Financial Instruments As of September 30, 2015 and December 31, 2014, the carrying amount of certain financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses were representative of their fair values due to the short-term maturity of these instruments. The Company follows the requirements of the Fair Value Measurement and Disclosure Topic of the FASB ASC, which establishes a framework for measuring fair value and disclosing fair value measurements by establishing a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: Level 1 Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the asset or the liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 Unobservable inputs reflecting the Company’s own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. As discussed in Note 5, the Company held two interest rate cap agreements a t September 30, 2015 and December 31, 2014 to manage, or hedge, interest rate risks related to its floating rate debt. The Company records interest rate protection agreements on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in the consolidated statements of operations and comprehensive income as they are not designated as hedges. In accordance with the Fair Value Measurement and Disclosure Topic of the FASB ASC, the Company estimates the fair value of its interest rate protection agreements based on quotes obtained from the counterparties, which are based upon the consideration that would be required to terminate the agreements. Using Level 2 measurements, the Company determined that the total values of its interest rate cap agreements were de minimis at both September 30, 2015 and December 31, 2014. The interest rate cap agreements are included in other assets, net on the accompanying consolidated balance sheets. On an annual basis and periodically when indicators of impairment exist, the Company analyzes the carrying values of its hotel properties and other assets using Level 3 measurements, including a discounted cash flow analysis to estimate the fair value of its hotel properties and other assets taking into account each property’s expected cash flow from operations, holding period and estimated proceeds from the disposition of the property. The factors addressed in determining estimated proceeds from disposition include anticipated operating cash flow in the year of disposition and terminal capitalization rate. The Company did not identify any properties or other assets with indicators of impairment during either the three or nine months ended September 30, 2015 and 2014 . On an annual basis and periodically when indicators of impairment exist, the Company also analyzes the carrying value of its goodwill using Level 3 measurements, including a discounted cash flow analysis to estimate the fair value of its reporting units. The Company did not identify any properties or other assets with indicators of goodwill impairment during either the three or nine months ended September 30, 2015 and 2014. As of September 30, 2015 and December 31, 2014, 69.4% and 71.6% , respectively, of the Company’s outstanding debt had fixed interest rates. The Company’s carrying value of its debt totaled $1.3 billion and $ 1.4 billion as of September 30, 2015 and December 31, 2014, respectively. Using Level 3 measurements, including the Company’s weighted average cost of debt of 4.5% , the Company estimates that the fair market value of its debt totaled $1.3 billion and $1.4 billion as of September 30, 2015 and December 31, 2014, respectively. The following table presents the Company’s assets measured at fair value on a recurring and non-recurring basis at September 30, 2015 and December 31, 2014 (in thousands): Fair Value Measurements at Reporting Date Total Level 1 Level 2 Level 3 September 30, 2015 (unaudited): Interest rate cap derivative agreements $ — $ — $ — $ — Life insurance policy (1) — — Total assets at September 30, 2015 $ $ — $ $ — December 31, 2014: Interest rate cap derivative agreements $ — $ — $ — $ — Life insurance policy (1) — — Total assets at December 31, 2014 $ $ — $ $ — (1) Includes the split life insurance policy for one of the Company’s former associates, which the Company values using Level 2 measurements. These amounts are included in other assets, net on the accompanying consolidated balance sheets, and will be used to reimburse the Company for payments made to the former associate from the related retirement benefit agreement, which is included in accrued payroll and employee benefits on the accompanying consolidated balance sheets. The following table presents the Company’s liabilities measured at fair value on a recurring and non-recurring basis at September 30, 2015 and December 31, 2014 (in thousands): Fair Value Measurements at Reporting Date Total Level 1 Level 2 Level 3 September 30, 2015 (unaudited): Retirement benefit agreement (1) $ $ — $ $ — December 31, 2014: Retirement benefit agreement (1) $ $ — $ $ — (1) Includes the retirement benefit agreement for one of the Company’s former associates, which the Company values using Level 2 measurements. The agreement calls for the balance of the retirement benefit to be paid out to the former associate in 10 annual installments, beginning in 2011. As such, the Company has paid the former associate a total of $1.0 million through September 30, 2015, which was reimbursed to the Company using funds from the related split life insurance policy noted above. These amounts are included in accrued payroll and employee benefits on the accompanying consolidated balance sheets. Accounts Receivable Accounts receivable primarily represents receivables from hotel guests who occupy hotel rooms and utilize hotel services. Accounts receivable also includes, among other things, receivables from tenants who lease space in the Company’s hotels. In addition, prior to the Company’s sale of BuyEfficient in September 2015 (see Notes 4 and 6), accounts receivable included receivables from customers who utilized purchase volume rebates through BuyEfficient. The Company maintains an allowance for doubtful accounts sufficient to cover potential credit losses. The Company’s accounts receivable includes an allowance for doubtful accounts of $0.2 million at both September 30, 2015 and December 31, 2014. Acquisitions of Hotel Properties and Other Entities Accounting for the acquisition of a hotel property or other entity as a purchase transaction requires an allocation of the purchase price to the assets acquired and the liabilities assumed in the transaction at their respective estimated fair values. The most difficult estimations of individual fair values are those involving long-lived assets, such as property, equipment, intangible assets and any capital lease obligations that are assumed as part of the acquisition of a leasehold interest. During 2014, the Company used all available information to make these fair value determinations, and engaged an independent valuation specialist to assist in the fair value determination of the long-lived assets acquired and the liabilities assumed in the Company’s purchase of the Wailea Beach Marriott Resort & Spa. Due to the inherent subjectivity in determining the estimated fair value of long-lived assets, the Company believes that the recording of acquired assets and liabilities is a critical accounting policy. Assets Held for Sale The Company considers a hotel or other asset held for sale if it is probable that the sale will be completed within twelve months, among other requirements. A sale may be considered probable once the buyer completes its due diligence of the asset, there is an executed purchase and sale agreement between the Company and the buyer, the buyer waives any closing contingencies, and the Company has received a substantial non-refundable deposit. Depreciation ceases when a property is held for sale. Should an impairment loss be required for assets held for sale, the related assets are adjusted to their estimated fair values, less costs to sell. If the sale of a hotel or other asset represents a strategic shift that will have a major effect on the Company’s operations and financial results, the hotel or other asset is included in discontinued operations, and operating results are removed from income from continuing operations and reported as discontinued operations. The operating results for any such assets for any prior periods presented must also be reclassified as discontinued operations. As of both September 30, 2015 and December 31, 2014, the Company had no hotels or other assets held for sale. Deferred Financing Fees Deferred financing fees consist of loan fees and other financing costs related to the Company’s outstanding indebtedness and credit facility commitments, and are amortized to interest expense over the terms of the related debt or commitment. If a loan is refinanced or paid before its maturity, any u namortized deferred financing costs will generally be expensed unless specific rules are met that would allow for the carryover of such costs to the refinanced debt. Earnings Per Share The Company applies the two-class method when computing its earnings per share as required by the Earnings Per Share Topic of the FASB ASC, which requires the net income per share for each class of stock (common stock and convertible preferred stock) to be calculated assuming all of the Company’s net income is distributed as dividends to each class of stock based on their contractual rights. To the extent the Company has undistributed earnings in any calendar quarter, the Company will follow the two-class method of computing earnings per share. The Company follows the requirements of the Earnings Per Share Topic of the FASB ASC, which states that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. For the three months ended September 30, 2015 and 2014, distributed earnings representing nonforfeitable dividends of $49,000 and $0.1 million, respectively, were allocated to the participating securities. For the nine months ended September 30, 2015 and 2014, distributed earnings representing nonforfeitable dividends of $ 0.2 million and $ 0.3 million, respectively, were allocated to the participating securities. For the three months ended September 30, 2015 and 2014, undistributed earnings representing nonforfeitable dividends of $ 0.2 million and $ 0.1 million , respectively, were allocated to the participating securities. For the nine months ended September 30, 2015 and 2014, undistributed earnings representing nonforfeitable dividends of $ 0.3 million and $ 0.2 million , respectively, were allocated to the participating securities. In accordance with the Earnings Per Share Topic of the FASB ASC, basic earnings (loss) attributable to common stockholders per common share is computed based on the weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) attributable to common stockholders per common share is computed based on the weighted average number of shares of common stock outstanding during each period, plus potential common shares considered outstanding during the period, as long as the inclusion of such awards is not anti-dilutive. Potential common shares consist of unvested restricted stock awards and the incremental common shares issuable upon the exercise of stock options, using the more dilutive of either the two-class method or the treasury stock method. The following table sets forth the computation of basic and diluted earnings per common share (in thousands, except per share data): Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014 (unaudited) (unaudited) (unaudited) (unaudited) Numerator: Net income $ $ $ $ Income from consolidated joint ventures attributable to non-controlling interests Preferred stock dividends Dividends paid on unvested restricted stock compensation Undistributed income allocated to unvested restricted stock compensation Numerator for basic and diluted income attributable to common stockholders $ $ $ $ Denominator: Weighted average basic and diluted common shares outstanding Basic and diluted income attributable to common stockholders per common share $ $ $ $ The Company’s unvested restricted shares associated with its long-term incentive plan and shares associated with common stock options have been excluded from the above calculation of earnings per share for the three and nine months ended September 30, 2015 and 2014, as their inclusion would have been anti-dilutive. Goodwill The Company follows the requirements of the Intangibles — Goodwill and Other Topic of the FASB ASC, which states that goodwill and intangible assets deemed to have indefinite lives are subject to annual impairment tests. As a result, the carrying value of goodwill allocated to hotel properties and other assets is reviewed at least annually for impairment. In addition, when facts and circumstances suggest that the Company’s goodwill may be impaired, an interim evaluation of goodwill is prepared. Such review entails comparing the carrying value of the individual hotel property or other asset (the reporting unit) including the allocated goodwill to the fair value determined for that reporting unit (see Fair Value of Financial Instruments for detail on the Company’s valuation methodology). If the aggregate carrying value of the reporting unit exceeds the fair value, the goodwill of the reporting unit is impaired to the extent of the difference between the fair value and the aggregate carrying value, not to exceed the carrying amount of the allocated goodwill. The Company’s annual impairment evaluation is performed each year as of December 31. In September 2015, the Company sold BuyEfficient (see Notes 4 and 6) . In conjunction with this sale, the Company removed $8.4 million of goodwill related to BuyEfficient from its balance sheet. Non-Controlling Interests The Company’s financial statements include entities in which the Company has a controlling financial interest. Non-controlling interest is the portion of equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. Such non-controlling interests are reported on the consolidated balance sheets within equity, separately from the Company’s equity. On the consolidated statements of operations and comprehensive income, revenues, expenses and net income or loss from less-than-wholly-owned subsidiaries are reported at the consolidated amounts, including both the amounts attributable to the Company and non-controlling interests. Income or loss is allocated to non-controlling interests based on their weighted average ownership percentage for the applicable period. The consolidated statements of equity include beginning balances, activity for the period and ending balances for each component of shareholders’ equity, non-controlling interests and total equity. At both September 30, 2015 and December 31, 2014, the non-controlling interests reported in the Company’s financial statements include Hilton Worldwide’s 25.0% ownership in the Hilton San Diego Bayfront, as well as investors that own a $0.1 million preferred equity interest in a subsidiary captive REIT that owns the Doubletree Guest Suites Times Square. Segment Reporting The Company considers each of its hotels to be an operating segment, none of which meets the threshold for a reportable segment in accordance with the Segment Reporting Topic of the FASB ASC. Currently, the Company operates in one segment, hotel ownership. |
Investment in Hotel Properties
Investment in Hotel Properties | 9 Months Ended |
Sep. 30, 2015 | |
Investment in Hotel Properties | |
Investment in Hotel Properties | 3. Investment in Hotel Properties Investment in hotel properties, net consisted of the following (in thousands): September 30, December 31, 2015 2014 (unaudited) Land $ $ Buildings and improvements Furniture, fixtures and equipment Intangibles Franchise fees Construction in process Investment in hotel properties, gross Accumulated depreciation and amortization Investment in hotel properties, net $ $ In June 2014, the Company acquired the land underlying the Fairmont Newport Beach, and in July 2014, the Company acquired the Wailea Beach Marriott Resort & Spa. Acquired properties are included in the Company’s results of operations and comprehensive income from the date of acquisition. The following unaudited pro forma results of operations reflect the Company’s results as if the acquisitions of the Wailea Beach Marriott Resort & Spa and the land underlying the Fairmont Newport Beach had occurred on January 1, 2014. In the Company’s opinion, all significant adjustments necessary to reflect the effects of the acquisitions have been made (in thousands, except per share data): Three Months Ended Nine Months Ended September 30, 2014 September 30, 2014 (unaudited) (unaudited) Revenues $ $ Income attributable to common stockholders $ $ Income per diluted share attributable to common stockholders $ $ |
Disposals
Disposals | 9 Months Ended |
Sep. 30, 2015 | |
Disposals | |
Disposals | 4. Dis posals In September 2015, the Company sold BuyEfficient for net proceeds of $26.4 million. The Company recognized a net gain on the sale of $ 11.7 million. The sale did not represent a strategic shift that had a major impact on the Company’s business plan or its primary markets, and therefore, did not qualify as a discontinued operation. Coterminous with the sale of BuyEfficient, the Company wrote off $8.4 million of goodwill, along with net intangible assets of $6.2 million related to certain trademarks, customer and supplier relationships and intellectual property related to internally developed software (see Note 6). The following table provides summary results of operations for BuyEfficient, which are included in continuing operations (in thousands): Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014 (unaudited) (unaudited) (unaudited) (unaudited) Revenues $ $ $ $ Income (loss) before income taxes (1) $ $ $ $ Gain on sale of asset $ $ — $ $ — (1) Income (loss) before income taxes for both the three and nine months ended September 30, 2015 includes $1.6 million in severance costs related to the Company’s sale of BuyEfficient. These costs are included in property general and administrative expenses on the Company’s statements of operations and comprehensive income. In January 2013, the Company sold a four -hotel, 1,222 -room portfolio (the “Rochester Hotels”) and a commercial laundry facility (together with the Rochester Hotels, the “Rochester Portfolio”) in Rochester, Minnesota, to an unaffiliated third party. Upon sale of the Rochester Hotels in January 2013, t he Company retained a $25.0 million preferred equity investment (the “Preferred Equity Investment”) in the Rochester Hotels that yield ed an 11% dividend, and provided the buyer of the Rochester Portfolio with a $3.7 million working capital loan, resulting in a deferred gain on the sale. The gain w as to be deferred until the Preferred Equity Investment was either redeemed or sold and the working capital loan was repaid. Both the Preferred Equity Investment and the working capital loan were carried net of deferred gains, resulting in zero balances on the Company’s consolidated balance sheets as of both June 30, 2015 and December 31, 2014. I n July 2015, the Company sold its $25.0 million Preferred Equity Investment and settled its $3.7 million working capital loan provided to the buyer of the Rochester Portfolio for an aggregate payment of $16.0 million, plus accrued interest . In accordance with the Real Estate Sales Subtopic under the Property, Plant and Equipment Topic of the FASB ASC, the Company recognize d a $16.0 million gain on the sale of the Rochester Portfolio , along with related income tax expense of $0.1 million, in discontinued operations for the three and nine months ended September 30, 2015 , as these additional sales proceeds could not be recognized until realized. In May 2014, the Company was released from a $7.0 million pension plan liability related to the Rochester Portfolio, causing the Company to recognize additional gain on the sale of the Rochester Portfolio of $7.0 million, which is included in discontinued operations for the three and nine months ended September 30, 2014. In addition, during the second quarter of 2014, the Company accrued $1.8 million in accordance with the Contingencies Topic of the FASB ASC related to potential future costs for certain capital expenditures at one of the hotels in the Rochester Portfolio, which is also included in discontinued operations for the three and nine months ended September 30, 2014. During the first quarter of 2015 , the Company paid all remaining amounts due related to this contingency. |
Interest Rate Derivative Agreem
Interest Rate Derivative Agreements | 9 Months Ended |
Sep. 30, 2015 | |
Interest Rate Derivative Agreements | |
Interest Rate Derivative Agreements | 5. Interest Rate Derivative Agreements At September 30, 2015 and December 31, 2014, the Company held two interest rate cap agreements to mitigate its exposure to the interest rate risks related to its floating rate debt. The first interest rate cap agreement is on the Hilton San Diego Bayfront mortgage, which mortgage currently bears an interest rate of one-month LIBOR plus 225 basis points. In April 2015, the Company and its joint venture partner entered into a new interest rate cap agreement on the Hilton San Diego Bayfront mortgage which caps the interest rate at 4.25% and matures in May 2017. The previous Hilton San Diego Bayfront cap agreement capped the LIBOR rate at 3.75% until April 2015. The notional amount of the related debt capped totaled $113.2 million and $117.0 million at September 30, 2015 and December 31, 2014, respectively. The second interest rate cap agreement is on the Doubletree Guest Suites Times Square mortgage, which mortgage currently bears an interest rate of one-month LIBOR plus 325 basis points. The Doubletree Guest Suites Times Square cap agreement caps the LIBOR rate at 4.0% until October 2015. The notional amount of the related debt capped totaled $175.6 million and $177.4 million at September 30, 2015 and December 31, 2014, respectively. None of the interest rate derivative agreements qualifies for effective hedge accounting treatment. Accordingly, changes in the fair value of the Company’s interest rate derivative agreements are reflected as increases or decreases in interest expense on the Company’s statements of operations and comprehensive income. During both the three and nine months ended September 30, 2015 and 2014, changes in the fair value of the Company’s interest rate cap agreements resulted in nominal losses reflected as increases in interest expense during the respective periods. As of both September 30, 2015 and December 31, 2014, the fair values of the interest rate cap agreements were de minimis. The interest rate cap agreements are included in other assets, net on the Company’s consolidated balance sheets. During the three and nine months ended September 30, 2014, the Company also had an interest rate swap agreement on the JW Marriott New Orleans mortgage, which swap agreement was terminated in December 2014. Changes in the fair value of the interest rate swap agreement resulted in net gains of $0.2 million and $0.4 million for the three and nine months ended September 30, 2014, respectively, which are reflected as decreases in interest expense for the three and nine months ended September 30, 2014. |
Other Assets
Other Assets | 9 Months Ended |
Sep. 30, 2015 | |
Other Assets | |
Other Assets | 6. Other Assets Other assets, net consisted of the following (in thousands): September 30, December 31, 2015 2014 (unaudited) Property and equipment, net $ $ Land held for development Intangibles, net — Deferred expense on straightlined third-party tenant leases Other receivables Other Total other assets $ $ Property and equipment , net consisted of the following (in thousands): September 30, December 31, 2015 2014 (unaudited) Cost basis $ $ Accumulated depreciation Property and equipment, net $ $ Prior to the sale of BuyEfficient in September 2015 (see Note 4), the Company’s other assets, net included BuyEfficient’s intangible assets related to certain trademarks, customer and supplier relationships and intellectual property related to internally developed software . Coterminous with the sale of BuyEfficient, the Company wrote off $ 6.2 million of net intangible assets. A s of December 31, 2014, these intangible assets total ed $6.7 million , net of accumulated amortization . BuyEfficient’s in tangibles were amortized using the straight-line method over their useful lives ranging between seven and 20 years. Accumulated amortization totaled zero and $2.4 million at September 30, 2015 and December 31, 2014 , respectively . Amortization expense totaled $0.1 million for both the three months ended September 30, 2015 and 2014, and $0.4 million for both the nine months ended September 30, 2015 and 2014. |
Notes Payable
Notes Payable | 9 Months Ended |
Sep. 30, 2015 | |
Notes Payable | |
Notes Payable | 7. Notes Payable Notes payable consisted of the following (in thousands): September 30, December 31, 2015 2014 (unaudited) Notes payable requiring payments of interest and principal, with fixed rates ranging from 4.12% to 5.95%; maturing at dates ranging from January 2016 through January 2025. The notes are collateralized by first deeds of trust on 10 hotel properties at September 30, 2015, and 14 hotel properties at December 31, 2014. $ $ Note payable requiring payments of interest and principal, bearing a blended rate of one -month LIBOR plus 225 basis points; maturing in August 2019. The note is collateralized by a first deed of trust on one hotel property. Note payable requiring payments of interest only through October 2013, and interest and principal thereafter, with a blended interest rate of one -month LIBOR plus 325 basis points; maturing in October 2018. The note is collateralized by a first deed of trust on one hotel property. Total notes payable Less: current portion Notes payable, less current portion $ $ In April 2015, the Company entered into a $400.0 million senior unsecured credit facility, which replaced its prior $150.0 million senior unsecured credit facility. The credit facility’s interest rate is based on a pricing grid with a range of 155 to 230 basis points over LIBOR , depending on the Company’s leverage ratios, and represents a decline in pricing from the prior credit facility of approximately 30 to 60 basis points. The initial term of the credit facility is four years, expiring in April 2019, with an option to extend for an additional one year subject to the satisfaction of certain customary conditions. The credit facility also includes an accordion option, which allows the Company to request additional lender commitments for up to a total capacity of $800.0 million. During the second quarter of 2015, the Company wrote off $0.5 million in deferred financing fees related to its prior credit facility. As of September 30, 2015, the Company has no outstanding amounts due under its credit facility. During September 2015, however, the Company entered into a term loan supplement agreement under its credit facility, which provides the Company with a six month period within which the Company has the option to borrow up to $85.0 million (see Note 12) . In May 2015, the Company repaid $99.1 million of debt secured by four of its hotels: the Marriott Houston, the Marriott Park City, the Marriott Philadelphia and the Marriott Tysons Corner. Following the repayment of the four mortgages, the Company has 18 unencumbered hotels. During the three months ended September 30, 2015, the Company paid $0.8 million in deferred financing fees related to its new credit facility and the related term loan supplement. During the nine months ended September 30, 2015, the Company paid $ 4.9 million in deferred financing fees related to its new credit facility and related term loan supplement , as well as its new loans entered into in December 2014 secured by the Embassy Suites La Jolla and the JW Marriott New Orleans. During both the three and nine months ended September 30, 2014, the Company paid $1.3 million in deferred financing fees related to the amendment of the loan secured by the Hilton San Diego Bayfront. Total interest incurred and expensed on the notes payable was as follows (in thousands): Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014 (unaudited) (unaudited) (unaudited) (unaudited) Interest expense on debt and capital lease obligations $ $ $ $ Loss (gain) on derivatives, net Amortization and write-off of deferred financing fees Total interest expense $ $ $ $ |
Other Current Liabilities and O
Other Current Liabilities and Other Liabilities | 9 Months Ended |
Sep. 30, 2015 | |
Other Current Liabilities and Other Liabilities | |
Other Current Liabilities and Other Liabilities | 8 . Other Current Liabilities and Other Liabilities Other current liabilities consisted of the following (in thousands): September 30, December 31, 2015 2014 (unaudited) Property, sales and use taxes payable $ $ Income tax payable Accrued interest Advance deposits Management fees payable Other Total other current liabilities $ $ Other liabilities consisted of the following (in thousands): September 30, December 31, 2015 2014 (unaudited) Deferred gain on sale of asset $ $ Accrued income tax Deferred revenue Deferred rent Deferred incentive management fees Other Total other liabilities $ $ |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2015 | |
Stockholders' Equity | |
Stockholders' Equity | 9 . Stockholders’ Equity Series D Cumulative Redeemable Preferred Stock The Company’s 4,600,000 shares of 8.0% Series D Cumulative Redeemable Preferred Stock (“Series D preferred stock”) have a liquidation preference of $25.00 per share. On or after April 6, 2016, the Series D preferred stock will be redeemable at the Company’s option, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus accrued and unpaid dividends up to, but not including, the redemption date. Common Stock In February 2014, the Company entered into separate Equity Distribution Agreements (the “Agreements”) with Wells Fargo Securities, LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the “Managers”). Under the terms of the Agreements, the Company may issue and sell from time to time through or to the Managers, as sales agents and/or principals, shares of the Company’s common stock having an aggregate offering amount of up to $150.0 million. The Company did not issue any shares of its common stock in connection with the Agreements during either the three or nine months ended September 30 , 2015. As of September 30 , 2015, the Company has $128.4 million available for sale under the Agreements. |
Long-Term Incentive Plan
Long-Term Incentive Plan | 9 Months Ended |
Sep. 30, 2015 | |
Long-Term Incentive Plan | |
Long-Term Incentive Plan | 10. Long-Term Incentive Plan Stock Grants Restricted shares granted pursuant to the Company’s Long-Term Incentive Plan (“LTIP”) generally vest over periods from three to five years from the date of grant. Compensation expense related to awards of restricted shares and performance shares are measured at fair value on the date of grant and amortized over the relevant requisite service period or derived service period. The Company’s compensation expense and forfeitures related to restricted shares and performance awards for the three and nine months ended September 30, 2015 and 2014 were as follows (in thousands): Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014 (unaudited) (unaudited) (unaudited) (unaudited) Compensation expense, including forfeitures $ $ $ $ The Company’s total compensation expense differs from the vesting of restricted common stock amount presented in the Company’s consolidated statement of equity due to the Company withholding and using a portion of its restricted shares granted pursuant to its LTIP for purposes of remitting statutory minimum withholding and payroll taxes in connection with the release of restricted common shares to plan participants (“net-settle”). In addition, the Company capitalizes compensation costs related to all restricted shares granted to certain of those employees who work on the design and construction of its hotels. The Company’s total compensation expense in relation to its vesting of restricted common stock presented in the Company’s consolidated statement of equity for the nine months ended September 30, 2015 is as follows (in thousands): Nine Months Ended September 30, 2015 (unaudited) Compensation expense, including forfeitures $ Net-settle adjustment Amortization related to shares issued to design and construction employees Vesting of restricted stock presented on statement of equity $ In January 2015, the Company recognized a total of $2.5 million in stock compensation and amortization expense related to the departure of its former Chief Executive Officer, including $1.6 million in deferred stock amortization. I n conjunction with the Company’s sale of BuyEfficient in September 2015, the Company reversed $0.2 million of stock compensation expense previously recorded during the nine months ended September 30, 2015 for all BuyEfficient employees i n accordance with the C ompensation – Stock Compensation Topic of the FASB ASC . Stock Grants In April 2008, the Compensation Committee of the Company’s board of directors approved a grant of 200,000 non-qualified stock options (the “Options”) to one of the Company’s former associates. The Options fully vested in April 2009, and will expire in April 2018. The exercise price of the options is $17.71 per share. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies | |
Commitments and Contingencies | 11. Commitments and Contingencies Management Agreements Management agreements with the Company’s third-party hotel managers require the Company to pay between 1.5% and 3.5% of total revenue of the managed hotels to the third-party managers each month as a basic management fee. In addition to basic management fees, provided that certain operating thresholds are met, the Company may also be required to pay incentive management fees to certain of its third-party managers. Total basic and incentive management fees incurred by the Company during the three and nine months ended September 30, 2015 and 2014 were included in property general and administrative expense on the Company’s consolidated statements of operations and comprehensive income as follows (in thousands): Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014 (unaudited) (unaudited) (unaudited) (unaudited) Basic management fees $ $ $ $ Incentive management fees Total basic and incentive management fees $ $ $ $ License and Franchise Agreements The Company has entered into license and franchise agreements related to certain of its hotel properties. The license and franchise agreements require the Company to, among other things, pay monthly fees that are calculated based on specified percentages of certain revenues. The license and franchise agreements generally contain specific standards for, and restrictions and limitations on, the operation and maintenance of the hotels which are established by the franchisors to maintain uniformity in the system created by each such franchisor. Such standards generally regulate the appearance of the hotel, quality and type of goods and services offered, signage and protection of trademarks. Compliance with such standards may from time to time require the Company to make significant expenditures for capital improvements. Total license and franchise costs incurred by the Company during the three and nine months ended September 30, 2015 and 2014 were included in the Company’s consolidated statements of operations and comprehensive income as follows (in thousands): Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014 (unaudited) (unaudited) (unaudited) (unaudited) Franchise assessments (1) $ $ $ $ Franchise royalties Total franchise costs $ $ $ $ (1) Includes advertising, reservation and priority club assessments. Renovation and Construction Commitments At September 30, 2015, the Company had various contracts outstanding with third parties in connection with the renovation of certain of its hotel properties aimed at maintaining the appearance and quality of its hotels. The remaining commitments under these contracts at September 30, 2015 totaled $73.4 million. Capital Leases The Hyatt Chicago Magnificent Mile is subject to a building lease which expires in December 2097. Upon acquisition of the hotel in June 2012, the Company evaluated the terms of the lease agreement and determined the lease to be a capital lease pursuant to the Leases Topic of the FASB ASC. The Company leases certain printers and copiers which leases have been determined to be capital leases pursuant to the Leases Topic of the FASB ASC. All of the leases expired in December 2014. Assets under capital lease were included in investment in hotel properties, net on the Company’s consolidated balance sheets as follows (in thousands): September 30, December 31, 2015 2014 (unaudited) Buildings and improvements $ $ Furniture, fixtures and equipment — Capital lease assets, gross Accumulated depreciation Capital lease assets, net $ $ Future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of September 30, 2015 are as follows (in thousands): 2015 $ 2016 2017 2018 2019 Thereafter Total minimum lease payments (1) Less: Amount representing interest (2) Present value of net minimum lease payments (3) $ (1) Minimum lease payments do not include percentage rent which may be paid under the Hyatt Chicago Magnificent Mile building lease on the basis of 4.0% of the hotel’s gross room revenues over a certain threshold. For the three and nine months ended September 30, 2015, $45,000 and $0.1 million, respectively, in percentage rent was due under the Hyatt Chicago Magnificent Mile’s building lease. No percentage rent was due for either the three or nine months ended September 30, 2014. (2) Interest includes the amount necessary to reduce net minimum lease payments to present value calculated at the Company’s incremental borrowing rate at lease inception. (3) The present value of net minimum lease payments are presented on the Company’s consolidated balance sheet as of September 30, 2015 as a current obligation of $1,000 , which is included in accounts payable and accrued expenses, and as a long term obligation of $ 15.6 million, which is included in capital lease obligations, less current portion. Ground, Building and Air Leases Total rent expense incurred pursuant to ground, building and air lease agreements for the three and nine months ended September 30, 2015 and 2014 was included in property tax, ground lease and insurance on the Company’s consolidated statements of operations and comprehensive income as follows (in thousands): Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014 (unaudited) (unaudited) (unaudited) (unaudited) Minimum rent, including straightline adjustments $ $ $ $ Percentage rent (1) Total $ $ $ $ (1) Several of the Company’s hotels pay percentage rent, which is calculated on operating revenues above certain thresholds. Prior to the Company’s June 2014 acquisition of the land underlying the Fairmont Newport Beach, the land was leased to the Company by a third party. Ground lease expense for the land underlying the Fairmont Newport Beach totaled zero and $0.3 million for the three and nine months ended September 30, 2014, respectively. Rent expense incurred pursuant to leases on the corporate facility, which is included in corporate overhead expense, totaled $0.1 million for both the three months ended September 30, 2015 and 2014, and $0.3 million for both the nine months ended September 30, 2015 and 2014. Concentration of Risk The concentration of the Company’s hotels in California, New York, Illinois, Massachusetts and the greater Washington DC area exposes the Company’s business to economic conditions, competition and real and personal property tax rates unique to these locales. As of September 30, 2015, 21 of the Company’s 30 hotels were concentrated in California, New York, Illinois, Massachusetts and the greater Washington DC area as follows: Greater Washington DC California New York Illinois Massachusetts Area (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Number of hotels Percentage of total rooms % % % % % Percentage of total consolidated revenue for the nine months ended September 30, 2015 % % % % % Other The Company has provided customary unsecured environmental indemnities to certain lenders. The Company has performed due diligence on the potential environmental risks, including obtaining an independent environmental review from outside environmental consultants. These indemnities obligate the Company to reimburse the indemnified parties for damages related to certain environmental matters. There is no term or damage limitation on these indemnities; however, if an environmental matter arises, the Company could have recourse against other previous owners or a claim against its environmental insurance policies. At September 30, 2015, the Company had $0.6 million of outstanding irrevocable letters of credit to guaranty the Company’s financial obligations related to workers’ compensation insurance programs from prior policy years. The beneficiaries of these letters of credit may draw upon these letters of credit in the event of a contractual default by the Company relating to each respective obligation. No draws have been made through September 30, 2015. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2015 | |
Subsequent Events | |
Subsequent Events | 12. Subsequent Events On October 29, 2015, the Company drew the total available funds of $85.0 million provided by the unsecured term loan under its credit facility. The Company used the proceeds on October 30, 2015, combined with cash on hand, to repay the $85.9 million loan secured by the Renaissance Harborplace, which loan was scheduled to mature in January 2016. The $85.0 million unsecured term loan matures in September 2022, and bears interest based on a pricing grid with a range of 180 to 225 basis points over LIBOR , depending on the Company’s leverage ratios . Additionally, the Company entered into a swap agreement effective October 29, 2015, fixing the LIBOR rate at 1.591% for the duration of the $85.0 million term loan. Based on the Company’s current leverage, the loan reflects a fixed rate of 3.39% . Following the Company’s repayment of the loan secured by the Renaissance Harborplace in October 2015, it has 19 unencumbered hotels. |
Summary of Significant Accoun20
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements as of September 30, 2015 and December 31, 2014, and for the three and nine months ended September 30, 2015 and 2014, include the accounts of the Company, the Operating Partnership, the TRS Lessee and their subsidiaries. All significant intercompany balances and transactions have been eliminated. If the Company determines that it has an interest in a variable interest entity within the meaning of the Consolidation Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), the Company will consolidate the entity when it is determined to be the primary beneficiary of the entity. Based on its review, the Company determined that all of its subsidiaries were properly consolidated as of September 30, 2015 and December 31, 2014, and for the three and nine months ended September 30, 2015 and 2014. Non-controlling interests at both September 30, 2015 and December 31, 2014 represent the outside equity interests in various consolidated affiliates of the Company. The accompanying interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and in conformity with the rules and regulations of the Securities and Exchange Commission. In the Company’s opinion, the interim financial statements presented herein reflect all adjustments, consisting solely of normal and recurring adjustments, which are necessary to fairly present the interim financial statements. These financial statements should be read in conjunction with the financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed with the Securities and Exchange Commission on February 19, 2015. The Company has evaluated subsequent events through the date of issuance of these financial statements. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments As of September 30, 2015 and December 31, 2014, the carrying amount of certain financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses were representative of their fair values due to the short-term maturity of these instruments. The Company follows the requirements of the Fair Value Measurement and Disclosure Topic of the FASB ASC, which establishes a framework for measuring fair value and disclosing fair value measurements by establishing a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: Level 1 Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the asset or the liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 Unobservable inputs reflecting the Company’s own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. As discussed in Note 5, the Company held two interest rate cap agreements a t September 30, 2015 and December 31, 2014 to manage, or hedge, interest rate risks related to its floating rate debt. The Company records interest rate protection agreements on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in the consolidated statements of operations and comprehensive income as they are not designated as hedges. In accordance with the Fair Value Measurement and Disclosure Topic of the FASB ASC, the Company estimates the fair value of its interest rate protection agreements based on quotes obtained from the counterparties, which are based upon the consideration that would be required to terminate the agreements. Using Level 2 measurements, the Company determined that the total values of its interest rate cap agreements were de minimis at both September 30, 2015 and December 31, 2014. The interest rate cap agreements are included in other assets, net on the accompanying consolidated balance sheets. On an annual basis and periodically when indicators of impairment exist, the Company analyzes the carrying values of its hotel properties and other assets using Level 3 measurements, including a discounted cash flow analysis to estimate the fair value of its hotel properties and other assets taking into account each property’s expected cash flow from operations, holding period and estimated proceeds from the disposition of the property. The factors addressed in determining estimated proceeds from disposition include anticipated operating cash flow in the year of disposition and terminal capitalization rate. The Company did not identify any properties or other assets with indicators of impairment during either the three or nine months ended September 30, 2015 and 2014 . On an annual basis and periodically when indicators of impairment exist, the Company also analyzes the carrying value of its goodwill using Level 3 measurements, including a discounted cash flow analysis to estimate the fair value of its reporting units. The Company did not identify any properties or other assets with indicators of goodwill impairment during either the three or nine months ended September 30, 2015 and 2014. As of September 30, 2015 and December 31, 2014, 69.4% and 71.6% , respectively, of the Company’s outstanding debt had fixed interest rates. The Company’s carrying value of its debt totaled $1.3 billion and $ 1.4 billion as of September 30, 2015 and December 31, 2014, respectively. Using Level 3 measurements, including the Company’s weighted average cost of debt of 4.5% , the Company estimates that the fair market value of its debt totaled $1.3 billion and $1.4 billion as of September 30, 2015 and December 31, 2014, respectively. The following table presents the Company’s assets measured at fair value on a recurring and non-recurring basis at September 30, 2015 and December 31, 2014 (in thousands): Fair Value Measurements at Reporting Date Total Level 1 Level 2 Level 3 September 30, 2015 (unaudited): Interest rate cap derivative agreements $ — $ — $ — $ — Life insurance policy (1) — — Total assets at September 30, 2015 $ $ — $ $ — December 31, 2014: Interest rate cap derivative agreements $ — $ — $ — $ — Life insurance policy (1) — — Total assets at December 31, 2014 $ $ — $ $ — (1) Includes the split life insurance policy for one of the Company’s former associates, which the Company values using Level 2 measurements. These amounts are included in other assets, net on the accompanying consolidated balance sheets, and will be used to reimburse the Company for payments made to the former associate from the related retirement benefit agreement, which is included in accrued payroll and employee benefits on the accompanying consolidated balance sheets. The following table presents the Company’s liabilities measured at fair value on a recurring and non-recurring basis at September 30, 2015 and December 31, 2014 (in thousands): Fair Value Measurements at Reporting Date Total Level 1 Level 2 Level 3 September 30, 2015 (unaudited): Retirement benefit agreement (1) $ $ — $ $ — December 31, 2014: Retirement benefit agreement (1) $ $ — $ $ — (1) Includes the retirement benefit agreement for one of the Company’s former associates, which the Company values using Level 2 measurements. The agreement calls for the balance of the retirement benefit to be paid out to the former associate in 10 annual installments, beginning in 2011. As such, the Company has paid the former associate a total of $1.0 million through September 30, 2015, which was reimbursed to the Company using funds from the related split life insurance policy noted above. These amounts are included in accrued payroll and employee benefits on the accompanying consolidated balance sheets. |
Accounts Receivable | Accounts Receivable Accounts receivable primarily represents receivables from hotel guests who occupy hotel rooms and utilize hotel services. Accounts receivable also includes, among other things, receivables from tenants who lease space in the Company’s hotels. In addition, prior to the Company’s sale of BuyEfficient in September 2015 (see Notes 4 and 6), accounts receivable included receivables from customers who utilized purchase volume rebates through BuyEfficient. The Company maintains an allowance for doubtful accounts sufficient to cover potential credit losses. The Company’s accounts receivable includes an allowance for doubtful accounts of $0.2 million at both September 30, 2015 and December 31, 2014. |
Acquisitions of Hotel Properties and Other Entities | Acquisitions of Hotel Properties and Other Entities Accounting for the acquisition of a hotel property or other entity as a purchase transaction requires an allocation of the purchase price to the assets acquired and the liabilities assumed in the transaction at their respective estimated fair values. The most difficult estimations of individual fair values are those involving long-lived assets, such as property, equipment, intangible assets and any capital lease obligations that are assumed as part of the acquisition of a leasehold interest. During 2014, the Company used all available information to make these fair value determinations, and engaged an independent valuation specialist to assist in the fair value determination of the long-lived assets acquired and the liabilities assumed in the Company’s purchase of the Wailea Beach Marriott Resort & Spa. Due to the inherent subjectivity in determining the estimated fair value of long-lived assets, the Company believes that the recording of acquired assets and liabilities is a critical accounting policy. |
Assets Held for Sale | Assets Held for Sale The Company considers a hotel or other asset held for sale if it is probable that the sale will be completed within twelve months, among other requirements. A sale may be considered probable once the buyer completes its due diligence of the asset, there is an executed purchase and sale agreement between the Company and the buyer, the buyer waives any closing contingencies, and the Company has received a substantial non-refundable deposit. Depreciation ceases when a property is held for sale. Should an impairment loss be required for assets held for sale, the related assets are adjusted to their estimated fair values, less costs to sell. If the sale of a hotel or other asset represents a strategic shift that will have a major effect on the Company’s operations and financial results, the hotel or other asset is included in discontinued operations, and operating results are removed from income from continuing operations and reported as discontinued operations. The operating results for any such assets for any prior periods presented must also be reclassified as discontinued operations. As of both September 30, 2015 and December 31, 2014, the Company had no hotels or other assets held for sale. |
Deferred Financing Fees | Deferred Financing Fees Deferred financing fees consist of loan fees and other financing costs related to the Company’s outstanding indebtedness and credit facility commitments, and are amortized to interest expense over the terms of the related debt or commitment. If a loan is refinanced or paid before its maturity, any u namortized deferred financing costs will generally be expensed unless specific rules are met that would allow for the carryover of such costs to the refinanced debt. |
Earnings Per Share | Earnings Per Share The Company applies the two-class method when computing its earnings per share as required by the Earnings Per Share Topic of the FASB ASC, which requires the net income per share for each class of stock (common stock and convertible preferred stock) to be calculated assuming all of the Company’s net income is distributed as dividends to each class of stock based on their contractual rights. To the extent the Company has undistributed earnings in any calendar quarter, the Company will follow the two-class method of computing earnings per share. The Company follows the requirements of the Earnings Per Share Topic of the FASB ASC, which states that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. For the three months ended September 30, 2015 and 2014, distributed earnings representing nonforfeitable dividends of $49,000 and $0.1 million, respectively, were allocated to the participating securities. For the nine months ended September 30, 2015 and 2014, distributed earnings representing nonforfeitable dividends of $ 0.2 million and $ 0.3 million, respectively, were allocated to the participating securities. For the three months ended September 30, 2015 and 2014, undistributed earnings representing nonforfeitable dividends of $ 0.2 million and $ 0.1 million , respectively, were allocated to the participating securities. For the nine months ended September 30, 2015 and 2014, undistributed earnings representing nonforfeitable dividends of $ 0.3 million and $ 0.2 million , respectively, were allocated to the participating securities. In accordance with the Earnings Per Share Topic of the FASB ASC, basic earnings (loss) attributable to common stockholders per common share is computed based on the weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) attributable to common stockholders per common share is computed based on the weighted average number of shares of common stock outstanding during each period, plus potential common shares considered outstanding during the period, as long as the inclusion of such awards is not anti-dilutive. Potential common shares consist of unvested restricted stock awards and the incremental common shares issuable upon the exercise of stock options, using the more dilutive of either the two-class method or the treasury stock method. The following table sets forth the computation of basic and diluted earnings per common share (in thousands, except per share data): Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014 (unaudited) (unaudited) (unaudited) (unaudited) Numerator: Net income $ $ $ $ Income from consolidated joint ventures attributable to non-controlling interests Preferred stock dividends Dividends paid on unvested restricted stock compensation Undistributed income allocated to unvested restricted stock compensation Numerator for basic and diluted income attributable to common stockholders $ $ $ $ Denominator: Weighted average basic and diluted common shares outstanding Basic and diluted income attributable to common stockholders per common share $ $ $ $ The Company’s unvested restricted shares associated with its long-term incentive plan and shares associated with common stock options have been excluded from the above calculation of earnings per share for the three and nine months ended September 30, 2015 and 2014, as their inclusion would have been anti-dilutive. |
Goodwill | Goodwill The Company follows the requirements of the Intangibles — Goodwill and Other Topic of the FASB ASC, which states that goodwill and intangible assets deemed to have indefinite lives are subject to annual impairment tests. As a result, the carrying value of goodwill allocated to hotel properties and other assets is reviewed at least annually for impairment. In addition, when facts and circumstances suggest that the Company’s goodwill may be impaired, an interim evaluation of goodwill is prepared. Such review entails comparing the carrying value of the individual hotel property or other asset (the reporting unit) including the allocated goodwill to the fair value determined for that reporting unit (see Fair Value of Financial Instruments for detail on the Company’s valuation methodology). If the aggregate carrying value of the reporting unit exceeds the fair value, the goodwill of the reporting unit is impaired to the extent of the difference between the fair value and the aggregate carrying value, not to exceed the carrying amount of the allocated goodwill. The Company’s annual impairment evaluation is performed each year as of December 31. In September 2015, the Company sold BuyEfficient (see Notes 4 and 6) . In conjunction with this sale, the Company removed $8.4 million of goodwill related to BuyEfficient from its balance sheet. |
Non-Controlling Interests | Non-Controlling Interests The Company’s financial statements include entities in which the Company has a controlling financial interest. Non-controlling interest is the portion of equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. Such non-controlling interests are reported on the consolidated balance sheets within equity, separately from the Company’s equity. On the consolidated statements of operations and comprehensive income, revenues, expenses and net income or loss from less-than-wholly-owned subsidiaries are reported at the consolidated amounts, including both the amounts attributable to the Company and non-controlling interests. Income or loss is allocated to non-controlling interests based on their weighted average ownership percentage for the applicable period. The consolidated statements of equity include beginning balances, activity for the period and ending balances for each component of shareholders’ equity, non-controlling interests and total equity. At both September 30, 2015 and December 31, 2014, the non-controlling interests reported in the Company’s financial statements include Hilton Worldwide’s 25.0% ownership in the Hilton San Diego Bayfront, as well as investors that own a $0.1 million preferred equity interest in a subsidiary captive REIT that owns the Doubletree Guest Suites Times Square. |
Segment Reporting | Segment Reporting The Company considers each of its hotels to be an operating segment, none of which meets the threshold for a reportable segment in accordance with the Segment Reporting Topic of the FASB ASC. Currently, the Company operates in one segment, hotel ownership. |
Organization and Description 21
Organization and Description of Business (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Organization and Description of Business | |
Schedule of number of hotels managed by each third-party manager | Number of Hotels Subsidiaries of Marriott International, Inc. or Marriott Hotel Services, Inc. (collectively, “Marriott”) Interstate Hotels & Resorts, Inc. Highgate Hotels L.P. and an affiliate Crestline Hotels & Resorts Hilton Worldwide Hyatt Corporation Davidson Hotels & Resorts Fairmont Hotels & Resorts (U.S.) HEI Hotels & Resorts Total hotels held for investment |
Summary of Significant Accoun22
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Summary of Significant Accounting Policies | |
Schedule of assets measured at fair value on a recurring and non-recurring basis | The following table presents the Company’s assets measured at fair value on a recurring and non-recurring basis at September 30, 2015 and December 31, 2014 (in thousands): Fair Value Measurements at Reporting Date Total Level 1 Level 2 Level 3 September 30, 2015 (unaudited): Interest rate cap derivative agreements $ — $ — $ — $ — Life insurance policy (1) — — Total assets at September 30, 2015 $ $ — $ $ — December 31, 2014: Interest rate cap derivative agreements $ — $ — $ — $ — Life insurance policy (1) — — Total assets at December 31, 2014 $ $ — $ $ — (1) Includes the split life insurance policy for one of the Company’s former associates, which the Company values using Level 2 measurements. These amounts are included in other assets, net on the accompanying consolidated balance sheets, and will be used to reimburse the Company for payments made to the former associate from the related retirement benefit agreement, which is included in accrued payroll and employee benefits on the accompanying consolidated balance sheets. |
Schedule of liabilities measured at fair value on a recurring and non-recurring basis | The following table presents the Company’s liabilities measured at fair value on a recurring and non-recurring basis at September 30, 2015 and December 31, 2014 (in thousands): Fair Value Measurements at Reporting Date Total Level 1 Level 2 Level 3 September 30, 2015 (unaudited): Retirement benefit agreement (1) $ $ — $ $ — December 31, 2014: Retirement benefit agreement (1) $ $ — $ $ — Includes the retirement benefit agreement for one of the Company’s former associates, which the Company values using Level 2 measurements. The agreement calls for the balance of the retirement benefit to be paid out to the former associate in 10 annual installments, beginning in 2011. As such, the Company has paid the former associate a total of $1.0 million through September 30, 2015, which was reimbursed to the Company using funds from the related split life insurance policy noted above. These amounts are included in accrued payroll and employee benefits on the accompanying consolidated balance sheets. |
Schedule of computation of basic and diluted earnings per common share | The following table sets forth the computation of basic and diluted earnings per common share (in thousands, except per share data): Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014 (unaudited) (unaudited) (unaudited) (unaudited) Numerator: Net income $ $ $ $ Income from consolidated joint ventures attributable to non-controlling interests Preferred stock dividends Dividends paid on unvested restricted stock compensation Undistributed income allocated to unvested restricted stock compensation Numerator for basic and diluted income attributable to common stockholders $ $ $ $ Denominator: Weighted average basic and diluted common shares outstanding Basic and diluted income attributable to common stockholders per common share $ $ $ $ |
Investment in Hotel Properties
Investment in Hotel Properties (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Investment in Hotel Properties | |
Schedule of investment in hotel properties | Investment in hotel properties, net consisted of the following (in thousands): September 30, December 31, 2015 2014 (unaudited) Land $ $ Buildings and improvements Furniture, fixtures and equipment Intangibles Franchise fees Construction in process Investment in hotel properties, gross Accumulated depreciation and amortization Investment in hotel properties, net $ $ |
Effect of acquisitions on results of operations | In the Company’s opinion, all significant adjustments necessary to reflect the effects of the acquisitions have been made (in thousands, except per share data): Three Months Ended Nine Months Ended September 30, 2014 September 30, 2014 (unaudited) (unaudited) Revenues $ $ Income attributable to common stockholders $ $ Income per diluted share attributable to common stockholders $ $ |
Disposals (Tables)
Disposals (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Disposals | |
Schedule of operating results for sold entity included in continuing operations | The following table provides summary results of operations for BuyEfficient, which are included in continuing operations (in thousands): Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014 (unaudited) (unaudited) (unaudited) (unaudited) Revenues $ $ $ $ Income (loss) before income taxes (1) $ $ $ $ Gain on sale of asset $ $ — $ $ — Income (loss) before income taxes for both the three and nine months ended September 30, 2015 includes $1.6 million in severance costs related to the Company’s sale of BuyEfficient. These costs are included in property general and administrative expenses on the Company’s statements of operations and comprehensive income. |
Other Assets (Tables)
Other Assets (Tables) | 9 Months Ended |
Sep. 30, 2014 | |
Other Assets | |
Schedule of other assets | Other assets, net consisted of the following (in thousands): September 30, December 31, 2015 2014 (unaudited) Property and equipment, net $ $ Land held for development Intangibles, net — Deferred expense on straightlined third-party tenant leases Other receivables Other Total other assets $ $ |
Schedule of property and equipment | Property and equipment , net consisted of the following (in thousands): September 30, December 31, 2015 2014 (unaudited) Cost basis $ $ Accumulated depreciation Property and equipment, net $ $ |
Notes Payable (Tables)
Notes Payable (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Notes Payable | |
Schedule of notes payable | Notes payable consisted of the following (in thousands): September 30, December 31, 2015 2014 (unaudited) Notes payable requiring payments of interest and principal, with fixed rates ranging from 4.12% to 5.95%; maturing at dates ranging from January 2016 through January 2025. The notes are collateralized by first deeds of trust on 10 hotel properties at September 30, 2015, and 14 hotel properties at December 31, 2014. $ $ Note payable requiring payments of interest and principal, bearing a blended rate of one -month LIBOR plus 225 basis points; maturing in August 2019. The note is collateralized by a first deed of trust on one hotel property. Note payable requiring payments of interest only through October 2013, and interest and principal thereafter, with a blended interest rate of one -month LIBOR plus 325 basis points; maturing in October 2018. The note is collateralized by a first deed of trust on one hotel property. Total notes payable Less: current portion Notes payable, less current portion $ $ |
Schedule of interest expense on notes payable | Total interest incurred and expensed on the notes payable was as follows (in thousands): Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014 (unaudited) (unaudited) (unaudited) (unaudited) Interest expense on debt and capital lease obligations $ $ $ $ Loss (gain) on derivatives, net Amortization and write-off of deferred financing fees Total interest expense $ $ $ $ |
Other Current Liabilities and27
Other Current Liabilities and Other Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Other Current Liabilities and Other Liabilities | |
Schedule of other current liabilities | Other current liabilities consisted of the following (in thousands): September 30, December 31, 2015 2014 (unaudited) Property, sales and use taxes payable $ $ Income tax payable Accrued interest Advance deposits Management fees payable Other Total other current liabilities $ $ |
Schedule of other liabilities | Other liabilities consisted of the following (in thousands): September 30, December 31, 2015 2014 (unaudited) Deferred gain on sale of asset $ $ Accrued income tax Deferred revenue Deferred rent Deferred incentive management fees Other Total other liabilities $ $ |
Long-Term Incentive Plan (Table
Long-Term Incentive Plan (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Long-Term Incentive Plan | |
Schedule of compensation expense and forfeitures related to restricted shares and performance awards | The Company’s compensation expense and forfeitures related to restricted shares and performance awards for the three and nine months ended September 30, 2015 and 2014 were as follows (in thousands): Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014 (unaudited) (unaudited) (unaudited) (unaudited) Compensation expense, including forfeitures $ $ $ $ |
Summary of total compensation expense in relation to vesting of restricted common stock | The Company’s total compensation expense in relation to its vesting of restricted common stock presented in the Company’s consolidated statement of equity for the nine months ended September 30, 2015 is as follows (in thousands): Nine Months Ended September 30, 2015 (unaudited) Compensation expense, including forfeitures $ Net-settle adjustment Amortization related to shares issued to design and construction employees Vesting of restricted stock presented on statement of equity $ |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies | |
Schedule of basic and incentive management fees | Total basic and incentive management fees incurred by the Company during the three and nine months ended September 30, 2015 and 2014 were included in property general and administrative expense on the Company’s consolidated statements of operations and comprehensive income as follows (in thousands): Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014 (unaudited) (unaudited) (unaudited) (unaudited) Basic management fees $ $ $ $ Incentive management fees Total basic and incentive management fees $ $ $ $ |
Schedule of license and franchise costs | Total license and franchise costs incurred by the Company during the three and nine months ended September 30, 2015 and 2014 were included in the Company’s consolidated statements of operations and comprehensive income as follows (in thousands): Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014 (unaudited) (unaudited) (unaudited) (unaudited) Franchise assessments (1) $ $ $ $ Franchise royalties Total franchise costs $ $ $ $ (1) Includes advertising, reservation and priority club assessments. |
Schedule of assets under capital lease | Assets under capital lease were included in investment in hotel properties, net on the Company’s consolidated balance sheets as follows (in thousands): September 30, December 31, 2015 2014 (unaudited) Buildings and improvements $ $ Furniture, fixtures and equipment — Capital lease assets, gross Accumulated depreciation Capital lease assets, net $ $ |
Schedule of future minimum lease payments under capital leases | Future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of September 30, 2015 are as follows (in thousands): 2015 $ 2016 2017 2018 2019 Thereafter Total minimum lease payments (1) Less: Amount representing interest (2) Present value of net minimum lease payments (3) $ (1) Minimum lease payments do not include percentage rent which may be paid under the Hyatt Chicago Magnificent Mile building lease on the basis of 4.0% of the hotel’s gross room revenues over a certain threshold. For the three and nine months ended September 30, 2015, $45,000 and $0.1 million, respectively, in percentage rent was due under the Hyatt Chicago Magnificent Mile’s building lease. No percentage rent was due for either the three or nine months ended September 30, 2014. (2) Interest includes the amount necessary to reduce net minimum lease payments to present value calculated at the Company’s incremental borrowing rate at lease inception. (3) The present value of net minimum lease payments are presented on the Company’s consolidated balance sheet as of September 30, 2015 as a current obligation of $1,000 , which is included in accounts payable and accrued expenses, and as a long term obligation of $ 15.6 million, which is included in capital lease obligations, less current portion. |
Schedule of ground, building and air lease rent | Total rent expense incurred pursuant to ground, building and air lease agreements for the three and nine months ended September 30, 2015 and 2014 was included in property tax, ground lease and insurance on the Company’s consolidated statements of operations and comprehensive income as follows (in thousands): Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014 (unaudited) (unaudited) (unaudited) (unaudited) Minimum rent, including straightline adjustments $ $ $ $ Percentage rent (1) Total $ $ $ $ (1) Several of the Company’s hotels pay percentage rent, which is calculated on operating revenues above certain thresholds. |
Schedule of hotel geographic concentration of risk | Greater Washington DC California New York Illinois Massachusetts Area (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Number of hotels Percentage of total rooms % % % % % Percentage of total consolidated revenue for the nine months ended September 30, 2015 % % % % % |
Organization and Description 30
Organization and Description of Business (Details) - item | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2015 | |
Organization and Description of Business | ||
Number of hotels in which the company has interests | 30 | |
Number of hotels managed by third parties | 30 | |
Marriott | ||
Organization and Description of Business | ||
Number of hotels managed by third parties | 11 | |
Interstate Hotels & Resorts, Inc | ||
Organization and Description of Business | ||
Number of hotels managed by third parties | 6 | |
Highgate Hotels L.P. and an affiliate | ||
Organization and Description of Business | ||
Number of hotels managed by third parties | 4 | |
Crestline Hotels & Resorts | ||
Organization and Description of Business | ||
Number of hotels managed by third parties | 2 | |
Hilton Worldwide | ||
Organization and Description of Business | ||
Number of hotels managed by third parties | 2 | |
Hyatt Corporation | ||
Organization and Description of Business | ||
Number of hotels managed by third parties | 2 | |
Davidson Hotels & Resorts | ||
Organization and Description of Business | ||
Number of hotels managed by third parties | 1 | |
Fairmont Hotels & Resorts (U.S.) | ||
Organization and Description of Business | ||
Number of hotels managed by third parties | 1 | |
HEI Hotels & Resorts | ||
Organization and Description of Business | ||
Number of hotels managed by third parties | 1 | |
Sunstone Hotel Partnership, LLC | ||
Organization and Description of Business | ||
Controlling interest owned (as a percent) | 100.00% |
Summary of Significant Accoun31
Summary of Significant Accounting Policies (Details) - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 |
Accounts Receivable | ||
Allowance for doubtful accounts (in dollars) | $ 0.2 | $ 0.2 |
Summary of Significant Accoun32
Summary of Significant Accounting Policies (Details) | Sep. 30, 2015USD ($)item | Dec. 31, 2014USD ($)item | Sep. 30, 2015USD ($)item | Sep. 30, 2014USD ($) | Sep. 30, 2015USD ($)item | Sep. 30, 2014USD ($) | Dec. 31, 2011item |
Fair value of assets and liabilities measured at fair value on a recurring and non-recurring basis | |||||||
Impairment loss on continuing operations | $ 0 | $ 0 | $ 0 | $ 0 | |||
Goodwill impairment loss | $ 0 | $ 0 | $ 0 | $ 0 | |||
Percentage of debt having fixed interest rates | 69.40% | 71.60% | 69.40% | 69.40% | |||
Assets: | |||||||
Life insurance policy | $ 984,000 | $ 1,198,000 | $ 984,000 | $ 984,000 | |||
Total assets | 984,000 | 1,198,000 | 984,000 | 984,000 | |||
Liabilities: | |||||||
Retirement benefit agreement | 984,000 | 1,198,000 | 984,000 | 984,000 | |||
Robert A. Alter | |||||||
Liabilities: | |||||||
Number of installments to be paid out under the Retirement Benefit Agreement | item | 10 | ||||||
Amount paid under the Retirement Benefit Agreement | 1,000,000 | 1,000,000 | 1,000,000 | ||||
Level 2 | |||||||
Assets: | |||||||
Life insurance policy | 984,000 | 1,198,000 | 984,000 | 984,000 | |||
Total assets | 984,000 | 1,198,000 | 984,000 | 984,000 | |||
Liabilities: | |||||||
Retirement benefit agreement | $ 984,000 | $ 1,198,000 | 984,000 | 984,000 | |||
Level 3 | |||||||
Fair value of assets and liabilities measured at fair value on a recurring and non-recurring basis | |||||||
Weighted average cost of debt (as a percent) | 4.50% | 4.50% | |||||
Fair value of debt | $ 1,300,000,000 | $ 1,400,000,000 | $ 1,300,000,000 | $ 1,300,000,000 | |||
Interest Rate Cap Agreement | |||||||
Fair value of assets and liabilities measured at fair value on a recurring and non-recurring basis | |||||||
Number of derivative agreements | item | 2 | 2 | 2 | 2 |
Summary of Significant Accoun33
Summary of Significant Accounting Policies (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Jun. 30, 2015USD ($) | Sep. 30, 2014USD ($) | Sep. 30, 2015USD ($)item | Sep. 30, 2014USD ($) | Dec. 31, 2014item | |
Assets Held for Sale | |||||
Maximum time period for sale for classification of asset as held for sale | 12 months | 12 months | |||
Number of hotels and/or other assets held for sale | item | 0 | 0 | |||
Deferred Financing Fees | |||||
Loss on extinguishment of debt | $ (531) | $ (2) | $ (531) | ||
Senior corporate credit facility | |||||
Deferred Financing Fees | |||||
Write-off of deferred financing fees | $ 500 |
Summary of Significant Accoun34
Summary of Significant Accounting Policies (Details) $ / shares in Units, shares in Thousands, $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015USD ($) | Sep. 30, 2015USD ($)$ / sharesshares | Sep. 30, 2014USD ($)$ / sharesshares | Sep. 30, 2015USD ($)item$ / sharesshares | Sep. 30, 2014USD ($)$ / sharesshares | |
Numerator: | |||||
Net income | $ 63,084 | $ 33,643 | $ 117,944 | $ 73,682 | |
Income from consolidated joint ventures attributable to non-controlling interests | (1,982) | (1,803) | (6,643) | (5,704) | |
Preferred stock dividends | (2,300) | (2,300) | (6,900) | (6,900) | |
Dividends paid on unvested restricted stock compensation | (49) | (94) | (162) | (291) | |
Undistributed income allocated to unvested restricted stock compensation | (161) | (119) | (270) | (213) | |
Numerator for basic and diluted income attributable to common stockholders | $ 58,592 | $ 29,327 | $ 103,969 | $ 60,574 | |
Denominator: | |||||
Weighted average basic and diluted common shares outstanding (in shares) | shares | 207,604 | 202,800 | 207,264 | 188,901 | |
Basic and diluted income attributable to common stockholders per common share (in dollars per share) | $ / shares | $ 0.28 | $ 0.14 | $ 0.50 | $ 0.32 | |
Segment Reporting | |||||
Number of operating segments | item | 1 | ||||
BuyEfficient, LLC | Disposal Group, Disposed of by Sale, Not Discontinued Operations [Member] | |||||
Denominator: | |||||
Goodwill written off due to sale of asset | $ 8,400 |
Summary of Significant Accoun35
Summary of Significant Accounting Policies (Details) - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 |
Doubletree Guest Suites Times Square | ||
Non-Controlling Interests | ||
Preferred equity interest in Doubletree Guest Suites Times Square captive REIT | $ 0.1 | $ 0.1 |
Hilton San Diego Bayfront | ||
Non-Controlling Interests | ||
Minority interest percentage in Hilton San Diego Bayfront | 25.00% | 25.00% |
Investment in Hotel Propertie36
Investment in Hotel Properties (Details) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Investment in Hotel Properties | ||
Land | $ 570,011 | $ 570,011 |
Buildings and improvements | 3,300,555 | 3,237,596 |
Furniture, fixtures and equipment | 486,333 | 450,057 |
Intangibles | 147,703 | 147,947 |
Franchise fees | 1,167 | 1,167 |
Construction in process | 78,790 | 68,275 |
Investment in hotel properties, gross | 4,584,559 | 4,475,053 |
Accumulated depreciation and amortization | (1,061,269) | (936,924) |
Investment in hotel properties, net | $ 3,523,290 | $ 3,538,129 |
Investment in Hotel Propertie37
Investment in Hotel Properties (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2014 | Sep. 30, 2014 | |
Unaudited pro forma results of operations | ||
Revenues | $ 310,268 | $ 885,487 |
Income from continuing operations attributable to common stockholders | $ 30,390 | $ 63,508 |
Income from continuing operations per diluted share attributable to common stockholders | $ 0.15 | $ 0.34 |
Disposals (Details)
Disposals (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Disposals | |||||
Revenues from disposal group not discontinued operations | $ 2,002 | $ 1,824 | $ 5,730 | $ 5,155 | |
Income (loss) before income taxes from a disposal group not discontinued operations | (1,092) | $ 543 | (352) | $ 1,169 | |
Gain on sale of asset | 11,682 | 11,682 | |||
Disposal Group, Disposed of by Sale, Not Discontinued Operations [Member] | BuyEfficient, LLC | |||||
Disposals | |||||
Net proceeds received from sale | $ 26,400 | ||||
Goodwill written off due to sale of asset | 8,400 | ||||
Intangible assets written off due to sale of asset | 6,200 | $ 6,200 | $ 6,200 | ||
Severance Costs | $ 1,600 |
Disposals (Details)39
Disposals (Details) - Rochester Portfolio | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||||||||
May. 31, 2014USD ($) | Jan. 31, 2013USD ($)roomproperty | Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | Jun. 30, 2014USD ($) | Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | Jul. 31, 2015USD ($) | Jun. 30, 2015USD ($) | Mar. 31, 2015USD ($) | Dec. 31, 2014USD ($) | |
Working capital advance provided to buyer | |||||||||||
Disposals | |||||||||||
Working capital advance provided to buyer | $ 3,700,000 | ||||||||||
Carrying Value of Asset Net of Deferred Gain | $ 0 | $ 0 | |||||||||
Preferred equity investment | |||||||||||
Disposals | |||||||||||
Preferred equity investment | $ 25,000,000 | ||||||||||
Dividend yield on preferred equity investment (as a percent) | 11.00% | ||||||||||
Carrying Value of Asset Net of Deferred Gain | $ 0 | $ 0 | |||||||||
Indemnification Agreement [Member] | |||||||||||
Disposals | |||||||||||
Balance of accrued settlement costs | $ 0 | ||||||||||
Discontinued Operations, Disposed of by Sale [Member] | |||||||||||
Disposals | |||||||||||
Number of hotels and/or other assets sold | property | 4 | ||||||||||
Number of rooms sold | room | 1,222 | ||||||||||
Proceeds received on sale of preferred equity investment and settlement of loan | $ 16,000,000 | ||||||||||
Pretax gain on sale of discontinued operation | $ 16,000,000 | $ 16,000,000 | |||||||||
Income tax expense related to gain on sale of discontinued operation | $ 100,000 | $ 100,000 | |||||||||
Gain on sale of discontinued operation, net of tax | $ 7,000,000 | $ 7,000,000 | |||||||||
Discontinued Operations, Disposed of by Sale [Member] | Indemnification Agreement [Member] | |||||||||||
Disposals | |||||||||||
Settlement costs accrued during the period | $ 1,800,000 | ||||||||||
Number of hotels for which potential future costs for certain capital expenditures exist | $ 1 | ||||||||||
Discontinued Operations, Disposed of by Sale [Member] | Retirement plans | |||||||||||
Disposals | |||||||||||
Reduction in pension plan liability | $ (7,000,000) |
Interest Rate Derivative Agre40
Interest Rate Derivative Agreements (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Mar. 31, 2015 | Sep. 30, 2014USD ($) | Sep. 30, 2015USD ($)item | Sep. 30, 2014USD ($) | Dec. 31, 2014USD ($)item | |
Interest Rate Derivative Agreements | |||||
Cost of new interest rate cap agreement | $ 13 | ||||
Net gain due to changes in the fair value of the company's derivative agreements | $ (12) | $ 395 | |||
Doubletree Guest Suites Times Square Mortgage Payable | |||||
Interest Rate Derivative Agreements | |||||
Interest rate, description of reference rate | one-month LIBOR | one-month LIBOR | |||
Interest rate added to base rate (as a percent) | 3.25% | 3.25% | |||
Entity that owns the Hilton San Diego Bayfront Mortgage Payable | |||||
Interest Rate Derivative Agreements | |||||
Interest rate, description of reference rate | one-month LIBOR | one-month LIBOR | |||
Interest rate added to base rate (as a percent) | 2.25% | 2.25% | |||
Interest rate derivative agreements. | Designated as hedging instrument | |||||
Interest Rate Derivative Agreements | |||||
Number of derivative agreements designated and qualifying as hedging instruments | item | 0 | 0 | |||
Interest Rate Cap Agreement | |||||
Interest Rate Derivative Agreements | |||||
Number of interest rate cap derivative agreements | item | 2 | 2 | |||
Interest Rate Cap Agreement | Not designated as hedging instrument | Other assets, net | |||||
Interest Rate Derivative Agreements | |||||
Number of interest rate cap derivative agreements | item | 2 | 2 | |||
Interest Rate Cap Agreement | Not designated as hedging instrument | Doubletree Guest Suites Times Square Mortgage Payable | |||||
Interest Rate Derivative Agreements | |||||
Interest rate, description of reference rate | LIBOR | LIBOR | |||
Strike rate under interest rate cap agreement | 4.00% | 4.00% | |||
Notional amount | $ 175,600 | $ 177,400 | |||
Interest Rate Cap Agreement | Not designated as hedging instrument | Entity that owns the Hilton San Diego Bayfront Mortgage Payable | |||||
Interest Rate Derivative Agreements | |||||
Interest rate, description of reference rate | LIBOR | LIBOR | LIBOR | ||
Strike rate under interest rate cap agreement | 3.75% | 4.25% | 3.75% | ||
Notional amount | $ 113,200 | $ 117,000 | |||
Interest Rate Swap Agreement | Not designated as hedging instrument | JW Marriott New Orleans Original Mortgage Payable | |||||
Interest Rate Derivative Agreements | |||||
Net gain due to changes in the fair value of the company's derivative agreements | $ 200 | $ 400 |
Other Assets (Details)
Other Assets (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Jun. 30, 2015 | Dec. 31, 2014 | |
Other assets, net | ||||||
Property and equipment, net | $ 1,400,000 | $ 1,400,000 | $ 2,127,000 | |||
Land held for development | 188,000 | 188,000 | 188,000 | |||
Intangibles, net | 6,677,000 | |||||
Deferred expense on straightlined third-party tenant leases | 3,206,000 | 3,206,000 | 1,426,000 | |||
Other receivables | 1,337,000 | 1,337,000 | 2,094,000 | |||
Other | 1,946,000 | 1,946,000 | 1,973,000 | |||
Total other assets, net | 8,077,000 | 8,077,000 | 14,485,000 | |||
Amortization expense | 6,048,000 | $ 5,507,000 | ||||
BuyEfficient, LLC | ||||||
Other assets, net | ||||||
Accumulated amortization | 0 | 0 | 2,400,000 | |||
Amortization expense | 100,000 | $ 100,000 | $ 400,000 | $ 400,000 | ||
BuyEfficient, LLC | Minimum | ||||||
Other assets, net | ||||||
Useful life of intangibles | 7 years | |||||
BuyEfficient, LLC | Maximum | ||||||
Other assets, net | ||||||
Useful life of intangibles | 20 years | |||||
Rochester Portfolio | Preferred equity investment | ||||||
Other assets, net | ||||||
Carrying value of asset net of deferred gain | $ 0 | $ 0 | ||||
Disposal Group, Disposed of by Sale, Not Discontinued Operations [Member] | BuyEfficient, LLC | ||||||
Other assets, net | ||||||
Intangible assets written off due to sale of asset | $ 6,200,000 | $ 6,200,000 |
Other Assets (Details)42
Other Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Other Assets | ||
Property and equipment cost basis | $ 10,691 | $ 11,573 |
Accumulated depreciation | (9,291) | (9,446) |
Property and equipment, net | $ 1,400 | $ 2,127 |
Notes Payable (Details)
Notes Payable (Details) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015USD ($)property | Dec. 31, 2014USD ($)property | |
Notes payable | ||
Notes payable | $ 1,313,163 | $ 1,429,292 |
Less: current portion | (206,822) | (121,328) |
Notes payable, less current portion | 1,106,341 | 1,307,964 |
Notes payable maturing in various years | ||
Notes payable | ||
Notes payable | $ 911,574 | $ 1,023,780 |
Number of hotels provided as collateral | property | 10 | 14 |
Notes payable maturing in various years | Minimum | ||
Notes payable | ||
Fixed interest rate, low end of range (as a percent) | 4.12% | 4.12% |
Notes payable maturing in various years | Maximum | ||
Notes payable | ||
Fixed interest rate, high end of range (as a percent) | 5.95% | 5.95% |
Entity that owns the Hilton San Diego Bayfront Mortgage Payable | ||
Notes payable | ||
Notes payable | $ 226,146 | $ 228,296 |
Number of hotels provided as collateral | property | 1 | 1 |
Interest rate, description of reference rate | one-month LIBOR | one-month LIBOR |
Interest rate added to base rate (as a percent) | 2.25% | 2.25% |
Doubletree Guest Suites Times Square Mortgage Payable | ||
Notes payable | ||
Notes payable | $ 175,443 | $ 177,216 |
Number of hotels provided as collateral | property | 1 | 1 |
Interest rate, description of reference rate | one-month LIBOR | one-month LIBOR |
Interest rate added to base rate (as a percent) | 3.25% | 3.25% |
Notes Payable (Details)44
Notes Payable (Details) | Sep. 30, 2015USD ($)property | May. 01, 2015USD ($)propertyitem | Apr. 02, 2015USD ($) | Apr. 02, 2014USD ($) | Sep. 30, 2015USD ($)property | Sep. 30, 2015USD ($)property | Jun. 30, 2015USD ($) | Sep. 30, 2014USD ($) | Sep. 30, 2015USD ($)property | Sep. 30, 2015USD ($)property | Sep. 30, 2014USD ($) | Dec. 31, 2014property | Mar. 31, 2015USD ($) |
Debt Instrument [Line Items] | |||||||||||||
Number of unencumbered hotels | property | 18 | 18 | 18 | 18 | 18 | ||||||||
Payments of deferred financing costs | $ (4,908,000) | $ (1,332,000) | |||||||||||
Loss on extinguishment of debt | $ (531,000) | (2,000) | (531,000) | ||||||||||
Senior corporate credit facility | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Payments of deferred financing costs | $ 800,000 | ||||||||||||
Senior Unsecured Credit Facility | |||||||||||||
Maximum borrowing capacity of credit facility | $ 400,000,000 | $ 400,000,000 | $ 400,000,000 | 400,000,000 | $ 400,000,000 | 400,000,000 | $ 150,000,000 | ||||||
Interest rate, description of reference rate | LIBOR | LIBOR | |||||||||||
Term of new credit facility | 4 years | ||||||||||||
Extended maturity period | 1 year | ||||||||||||
Maximum borrowing capacity of credit facility with lender approval | $ 800,000,000 | $ 800,000,000 | 800,000,000 | 800,000,000 | 800,000,000 | 800,000,000 | |||||||
Write-off of deferred financing fees | $ 500,000 | ||||||||||||
Outstanding indebtedness under credit facility | 0 | $ 0 | 0 | 0 | 0 | ||||||||
Term loan supplement agreement option period | 6 months | ||||||||||||
Amount available under the term loan supplement agreement | $ 85,000,000 | $ 85,000,000 | $ 85,000,000 | $ 85,000,000 | 85,000,000 | ||||||||
Notes maturing in May 2015 | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Number of hotels provided as collateral | property | 4 | ||||||||||||
Repayment of mortgage debt | $ 99,100,000 | ||||||||||||
Number of loans to be repaid | item | 4 | ||||||||||||
Embassy Suites La Jolla and JW Marriott New Orleans Amended Mortgages and Senior Corporate Credit Facility | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Payments of deferred financing costs | $ 4,900,000 | ||||||||||||
Entity that owns the Hilton San Diego Bayfront Mortgage Payable | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Number of hotels provided as collateral | property | 1 | 1 | 1 | 1 | 1 | 1 | |||||||
Payments of deferred financing costs | $ 1,300,000 | $ 1,300,000 | |||||||||||
Senior Unsecured Credit Facility | |||||||||||||
Interest rate, description of reference rate | one-month LIBOR | one-month LIBOR | |||||||||||
Interest rate added to base rate (as a percent) | 2.25% | 2.25% | |||||||||||
Minimum | Senior corporate credit facility | |||||||||||||
Senior Unsecured Credit Facility | |||||||||||||
Interest rate added to base rate (as a percent) | 1.55% | 1.55% | |||||||||||
Decline in pricing from the old credit facility | (0.30%) | ||||||||||||
Maximum | Senior corporate credit facility | |||||||||||||
Senior Unsecured Credit Facility | |||||||||||||
Interest rate added to base rate (as a percent) | 2.30% | 2.30% | |||||||||||
Decline in pricing from the old credit facility | (0.60%) |
Notes Payable (Details)45
Notes Payable (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Interest incurred and expensed on the notes payable | ||||
Loss (gain) on derivatives, net | $ 12 | $ (395) | ||
Amortization and write-off of deferred financing fees | 2,472 | 2,145 | ||
Total interest incurred and expensed on debt and capital lease obligations | $ 16,405 | $ 18,052 | 51,020 | 54,666 |
Notes payable and capital lease obligations | ||||
Interest incurred and expensed on the notes payable | ||||
Interest expense on debt and capital lease obligations | 15,711 | 17,540 | 48,536 | 52,916 |
Loss (gain) on derivatives, net | 2 | (161) | 12 | (395) |
Amortization and write-off of deferred financing fees | 692 | 673 | 2,472 | 2,145 |
Total interest incurred and expensed on debt and capital lease obligations | $ 16,405 | $ 18,052 | $ 51,020 | $ 54,666 |
Other Current Liabilities and46
Other Current Liabilities and Other Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Other Current Liabilities | ||
Property, sales and use taxes payable | $ 22,907 | $ 14,490 |
Income tax payable | 1,056 | 295 |
Accrued interest | 4,211 | 3,289 |
Advance deposits | 14,704 | 10,742 |
Management fees payable | 2,122 | 3,467 |
Other | 5,341 | 4,183 |
Other Current Liabilities | 50,341 | 36,466 |
Other Liabilities | ||
Deferred gain on sale of asset | 7,000 | 7,000 |
Accrued income tax | 1,581 | 1,541 |
Deferred revenue | 5,964 | 6,790 |
Deferred rent | 17,124 | 15,075 |
Deferred incentive management fees | 1,106 | 534 |
Other | 2,483 | 2,667 |
Other Liabilities | $ 35,258 | $ 33,607 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - USD ($) $ / shares in Units, $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 | Sep. 30, 2015 | Sep. 30, 2015 | Feb. 28, 2014 |
Series D Cumulative Redeemable Preferred Stock | |||||
Stockholders' equity | |||||
Number of shares of stock issued | 4,600,000 | 4,600,000 | 4,600,000 | 4,600,000 | |
Preferred stock, 8.0% Cumulative Redeemable Preferred Stock, dividend rate (as a percent) | 8.00% | 8.00% | |||
Liquidation preference (in dollars per share) | $ 25 | $ 25 | $ 25 | $ 25 | |
Future redemption price (in dollars per share) | $ 25 | $ 25 | |||
Common Stock | At The Market | |||||
Stockholders' equity | |||||
Stock issuance program, remaining amount | $ 128.4 | $ 128.4 | $ 128.4 | ||
Number of shares issued | 0 | 0 | |||
Common Stock | Maximum | At The Market | |||||
Stockholders' equity | |||||
Stock issuance program, authorized amount | $ 150 |
Long-Term Incentive Plan (Detai
Long-Term Incentive Plan (Details) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2015 | Jan. 31, 2015 | Apr. 30, 2008 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Long-Term Incentive Plan | |||||||
Amortization related to shares issued to design and construction employees | $ 442 | $ 354 | |||||
Vesting of restricted stock presented on statement of equity | 1,678 | ||||||
Amortization of deferred stock compensation | 5,505 | 4,769 | |||||
Restricted Shares and Performance awards | |||||||
Long-Term Incentive Plan | |||||||
Compensation Expense, including forfeitures | $ 1,262 | $ 2,178 | 8,106 | $ 6,885 | |||
Net-settle adjustment | (6,870) | ||||||
Amortization related to shares issued to design and construction employees | 442 | ||||||
Vesting of restricted stock presented on statement of equity | $ 1,678 | ||||||
Restricted Shares and Performance awards | Minimum | |||||||
Long-Term Incentive Plan | |||||||
Vesting period | 3 years | ||||||
Restricted Shares and Performance awards | Maximum | |||||||
Long-Term Incentive Plan | |||||||
Vesting period | 5 years | ||||||
Restricted Shares and Performance awards | Kenneth E. Cruse | |||||||
Long-Term Incentive Plan | |||||||
Compensation Expense, including forfeitures | $ 2,500 | ||||||
Amortization of deferred stock compensation | $ 1,600 | ||||||
Stock Options | Robert A. Alter | |||||||
Stock options | |||||||
Number of nonqualified stock options approved by the compensation committee of the Company's board of directors (in shares) | 200,000 | ||||||
Exercise price of options vested (in dollars per share) | $ 17.71 | $ 17.71 | $ 17.71 | $ 17.71 | |||
BuyEfficient, LLC | Disposal Group, Disposed of by Sale, Not Discontinued Operations [Member] | |||||||
Long-Term Incentive Plan | |||||||
Compensation Expense, reversal | $ 200 |
Commitments and Contingencies49
Commitments and Contingencies (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Basic and incentive management fees incurred | ||||
Basic management fees | $ 8,965 | $ 8,474 | $ 26,096 | $ 23,455 |
Incentive management fees | 1,313 | 1,143 | 4,548 | 3,101 |
Total basic and incentive management fees | 10,278 | 9,617 | 30,644 | 26,556 |
License and Franchise Agreements | ||||
Franchise assessments | 7,310 | 6,911 | 20,978 | 19,631 |
Franchise royalties | 3,281 | 3,111 | 9,031 | 8,729 |
Total license and franchise costs | 10,591 | $ 10,022 | $ 30,009 | $ 28,360 |
Minimum | ||||
Management Agreements | ||||
Basic management fees (as a percent) | 1.50% | |||
Maximum | ||||
Management Agreements | ||||
Basic management fees (as a percent) | 3.50% | |||
Renovation and Construction Commitments | ||||
Renovation and Construction Commitments | ||||
Remaining construction commitments | $ 73,400 | $ 73,400 |
Commitments and Contingencies50
Commitments and Contingencies (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Capital Leases | |||||
Capital lease obligation, noncurrent | $ 15,575,000 | $ 15,575,000 | $ 15,576,000 | ||
Capital lease obligation, current | 1,000 | 1,000 | |||
Assets under capital lease | |||||
Capital Leased Assets, Gross | 58,799,000 | 58,799,000 | 58,903,000 | ||
Accumulated depreciation | (4,900,000) | (4,900,000) | (3,841,000) | ||
Capital lease assets, net | 53,899,000 | 53,899,000 | 55,062,000 | ||
Future minimum lease payments under capital leases | |||||
2,015 | 1,403,000 | 1,403,000 | |||
2,016 | 1,403,000 | 1,403,000 | |||
2,017 | 1,403,000 | 1,403,000 | |||
2,018 | 1,403,000 | 1,403,000 | |||
2,019 | 1,403,000 | 1,403,000 | |||
Thereafter | 108,361,000 | 108,361,000 | |||
Future minimum lease payments under capital leases | |||||
Total minimum lease payments | 115,376,000 | 115,376,000 | |||
Less: Amount representing interest | (99,800,000) | (99,800,000) | |||
Present value of net minimum lease payments | 15,576,000 | 15,576,000 | |||
Ground and Operating Leases | |||||
Minimum rent, including straightline adjustments | 3,725,000 | $ 3,670,000 | 11,145,000 | $ 11,280,000 | |
Percentage rent | 948,000 | 837,000 | 2,677,000 | 2,194,000 | |
Total rent expense included in property tax, ground lease and insurance | 4,673,000 | 4,507,000 | 13,822,000 | 13,474,000 | |
Lease expense on corporate facility | 100,000 | $ 100,000 | 300,000 | $ 300,000 | |
Buildings and improvements | |||||
Assets under capital lease | |||||
Capital Leased Assets, Gross | $ 58,799,000 | $ 58,799,000 | 58,799,000 | ||
Furniture, fixtures and equipment | |||||
Assets under capital lease | |||||
Capital Leased Assets, Gross | $ 104,000 | ||||
Hyatt Chicago Magnificent Mile | |||||
Capital Leases | |||||
Capital lease contingent rent criteria (as a percent) | 4.00% | 4.00% | 4.00% | 4.00% | |
Percentage rent due | $ 45,000 | $ 0 | $ 100,000 | $ 0 | |
Fairmont Newport Beach Land Member | |||||
Ground and Operating Leases | |||||
Total rent expense included in property tax, ground lease and insurance | $ 0 | $ 300,000 |
Commitments and Contingencies51
Commitments and Contingencies (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2015USD ($)propertyitem | |
Concentration of Risk | |
Number of hotels which are held for investment | 30 |
Other | |
Term of unsecured environmental indemnities | 0 years |
Damage limitation of unsecured environmental indemnities | $ | $ 0 |
California | |
Concentration of Risk | |
Number of hotels which are held for investment | 9 |
New York | |
Concentration of Risk | |
Number of hotels which are held for investment | 3 |
Illinois | |
Concentration of Risk | |
Number of hotels which are held for investment | 3 |
Massachusetts | |
Concentration of Risk | |
Number of hotels which are held for investment | 3 |
Greater Washington DC Area | |
Concentration of Risk | |
Number of hotels which are held for investment | 3 |
CA, NY, IL, MA, Greater Washington DC. Area [Member] | |
Concentration of Risk | |
Number of hotels which are held for investment | property | 21 |
Number of rooms | California | |
Concentration of Risk | |
Concentration risk (as a percent) | 31.00% |
Number of rooms | New York | |
Concentration of Risk | |
Concentration risk (as a percent) | 9.00% |
Number of rooms | Illinois | |
Concentration of Risk | |
Concentration risk (as a percent) | 8.00% |
Number of rooms | Massachusetts | |
Concentration of Risk | |
Concentration risk (as a percent) | 14.00% |
Number of rooms | Greater Washington DC Area | |
Concentration of Risk | |
Concentration risk (as a percent) | 13.00% |
Revenue generated by hotels | California | |
Concentration of Risk | |
Concentration risk (as a percent) | 35.00% |
Revenue generated by hotels | New York | |
Concentration of Risk | |
Concentration risk (as a percent) | 11.00% |
Revenue generated by hotels | Illinois | |
Concentration of Risk | |
Concentration risk (as a percent) | 7.00% |
Revenue generated by hotels | Massachusetts | |
Concentration of Risk | |
Concentration risk (as a percent) | 13.00% |
Revenue generated by hotels | Greater Washington DC Area | |
Concentration of Risk | |
Concentration risk (as a percent) | 12.00% |
Workers' compensation insurance programs | |
Other | |
Outstanding irrevocable letters of credit | $ | $ 600 |
Draws on letters of credit | $ | $ 0 |
Subsequent Events (Details)
Subsequent Events (Details) $ in Millions | Oct. 30, 2015USD ($)property | Oct. 29, 2015USD ($) | Sep. 30, 2015USD ($)property | May. 01, 2015USD ($) | Apr. 02, 2015 | Apr. 02, 2014 | Sep. 30, 2015USD ($)property | Sep. 30, 2015USD ($)property | Dec. 31, 2014 |
Subsequent Events | |||||||||
Number of unencumbered hotels | property | 18 | 18 | 18 | ||||||
Senior corporate credit facility | |||||||||
Subsequent Events | |||||||||
Amount available under the term loan supplement agreement | $ 85 | $ 85 | $ 85 | ||||||
Interest rate, description of reference rate | LIBOR | LIBOR | |||||||
Notes maturing in May 2015 | |||||||||
Subsequent Events | |||||||||
Repayment of mortgage debt | $ 99.1 | ||||||||
Doubletree Guest Suites Times Square Mortgage Payable | |||||||||
Subsequent Events | |||||||||
Interest rate added to base rate (as a percent) | 3.25% | 3.25% | |||||||
Interest rate, description of reference rate | one-month LIBOR | one-month LIBOR | |||||||
Minimum | Senior corporate credit facility | |||||||||
Subsequent Events | |||||||||
Interest rate added to base rate (as a percent) | 1.55% | 1.55% | |||||||
Maximum | Senior corporate credit facility | |||||||||
Subsequent Events | |||||||||
Interest rate added to base rate (as a percent) | 2.30% | 2.30% | |||||||
Subsequent Event | |||||||||
Subsequent Events | |||||||||
Number of unencumbered hotels | property | 19 | ||||||||
Subsequent Event | Unsecured term loan | |||||||||
Subsequent Events | |||||||||
New mortgage loan | $ 85 | ||||||||
Interest rate, description of reference rate | LIBOR | ||||||||
Subsequent Event | Renaissance Harborplace Mortgage Payable | |||||||||
Subsequent Events | |||||||||
Repayment of mortgage debt | $ 85.9 | ||||||||
Subsequent Event | Minimum | Unsecured term loan | |||||||||
Subsequent Events | |||||||||
Interest rate added to base rate (as a percent) | 1.80% | ||||||||
Subsequent Event | Maximum | Unsecured term loan | |||||||||
Subsequent Events | |||||||||
Interest rate added to base rate (as a percent) | 2.25% | ||||||||
Interest Rate Swap Agreement | Subsequent Event | Unsecured term loan | |||||||||
Subsequent Events | |||||||||
Fixed rate under interest rate swap agreement | 1.591% | ||||||||
Variable rate under interest rate swap agreement | 3.39% |