Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2019 | Nov. 01, 2019 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2019 | |
Document Transition Report | false | |
Entity File Number | 001-32319 | |
Entity Registrant Name | Sunstone Hotel Investors, Inc. | |
Entity Incorporation, State or Country Code | MD | |
Entity Tax Identification Number | 20-1296886 | |
Entity Address, Address Line One | 200 Spectrum Center Drive, 21st Floor | |
Entity Address, City or Town | Irvine | |
Entity Address, State or Province | CA | |
Entity Address, Postal Zip Code | 92618 | |
City Area Code | 949 | |
Local Phone Number | 330-4000 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 224,855,351 | |
Entity Central Index Key | 0001295810 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Common Stock | ||
Document Information [Line Items] | ||
Title of 12(b) Security | Common Stock, $0.01 par value | |
Trading Symbol | SHO | |
Security Exchange Name | NYSE | |
Series E Cumulative Redeemable Preferred Stock | ||
Document Information [Line Items] | ||
Title of 12(b) Security | Series E Cumulative Redeemable Preferred Stock, $0.01 par value | |
Trading Symbol | SHO.PRE | |
Security Exchange Name | NYSE | |
Series F Cumulative Redeemable Preferred Stock | ||
Document Information [Line Items] | ||
Title of 12(b) Security | Series F Cumulative Redeemable Preferred Stock, $0.01 par value | |
Trading Symbol | SHO.PRF | |
Security Exchange Name | NYSE |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 730,039 | $ 809,316 |
Restricted cash | 46,206 | 53,053 |
Accounts receivable, net | 44,021 | 33,844 |
Prepaid expenses and other current assets | 14,359 | 12,261 |
Assets held for sale, net | 18,481 | |
Total current assets | 853,106 | 908,474 |
Investment in hotel properties, net | 2,910,852 | 3,030,998 |
Finance lease right-of-use asset, net | 48,019 | |
Operating lease right-of-use assets, net | 61,512 | |
Deferred financing costs, net | 2,924 | 3,544 |
Other assets, net | 22,424 | 29,817 |
Total assets | 3,898,837 | 3,972,833 |
Current liabilities: | ||
Accounts payable and accrued expenses | 33,140 | 30,425 |
Accrued payroll and employee benefits | 21,371 | 25,039 |
Dividends and distributions payable | 14,451 | 126,461 |
Other current liabilities | 45,843 | 44,962 |
Current portion of notes payable, net | 6,271 | 5,838 |
Liabilities of assets held for sale | 12,446 | |
Total current liabilities | 133,522 | 232,725 |
Notes payable, less current portion, net | 966,496 | 971,225 |
Finance lease obligation, less current portion | 15,571 | 27,009 |
Operating lease obligations, less current portion | 50,905 | |
Other liabilities | 19,824 | 30,703 |
Total liabilities | 1,186,318 | 1,261,662 |
Commitments and contingencies (Note 12) | ||
Equity | ||
Common stock, $0.01 par value, 500,000,000 shares authorized, 224,861,978 shares issued and outstanding at September 30, 2019 and 228,246,247 shares issued and outstanding at December 31, 2018 | 2,249 | 2,282 |
Additional paid in capital | 2,681,754 | 2,728,684 |
Retained earnings | 1,274,039 | 1,182,722 |
Cumulative dividends and distributions | (1,483,907) | (1,440,202) |
Total stockholders' equity | 2,664,135 | 2,663,486 |
Noncontrolling interest in consolidated joint venture | 48,384 | 47,685 |
Total equity | 2,712,519 | 2,711,171 |
Total liabilities and equity | 3,898,837 | 3,972,833 |
Series E Cumulative Redeemable Preferred Stock | ||
Equity | ||
Cumulative Redeemable Preferred Stock | 115,000 | 115,000 |
Series F Cumulative Redeemable Preferred Stock | ||
Equity | ||
Cumulative Redeemable Preferred Stock | $ 75,000 | $ 75,000 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
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) | 224,861,978 | 228,246,247 |
Common stock, shares outstanding (in shares) | 224,861,978 | 228,246,247 |
Series E Cumulative Redeemable Preferred Stock | ||
Preferred stock, Cumulative Redeemable Preferred Stock, dividend rate (as a percent) | 6.95% | 6.95% |
Preferred stock, Cumulative Redeemable Preferred Stock, shares issued (in shares) | 4,600,000 | 4,600,000 |
Preferred stock, Cumulative Redeemable Preferred Stock, shares outstanding (in shares) | 4,600,000 | 4,600,000 |
Preferred stock, Cumulative Redeemable Preferred Stock, liquidation preference (in dollars per share) | $ 25 | $ 25 |
Series F Cumulative Redeemable Preferred Stock | ||
Preferred stock, Cumulative Redeemable Preferred Stock, dividend rate (as a percent) | 6.45% | 6.45% |
Preferred stock, Cumulative Redeemable Preferred Stock, shares issued (in shares) | 3,000,000 | 3,000,000 |
Preferred stock, Cumulative Redeemable Preferred Stock, shares outstanding (in shares) | 3,000,000 | 3,000,000 |
Preferred stock, Cumulative Redeemable Preferred Stock, liquidation preference (in dollars per share) | $ 25 | $ 25 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
REVENUES | ||||
Total revenues | $ 281,639 | $ 289,308 | $ 842,215 | $ 878,201 |
OPERATING EXPENSES | ||||
Advertising and promotion | 13,285 | 13,593 | 40,998 | 41,815 |
Repairs and Maintenance | 10,632 | 10,530 | 31,107 | 32,484 |
Utilities | 7,458 | 8,084 | 20,656 | 22,533 |
Franchise costs | 8,606 | 9,167 | 24,024 | 26,981 |
Property tax, ground lease and insurance | 21,880 | 20,369 | 62,842 | 63,658 |
Other property-level expenses | 30,913 | 31,580 | 97,768 | 101,005 |
Corporate overhead | 7,395 | 7,360 | 22,989 | 22,056 |
Depreciation and amortization | 37,573 | 36,159 | 110,484 | 110,181 |
Impairment loss | 1,394 | |||
Total operating expenses | 239,346 | 241,220 | 716,117 | 741,817 |
Interest and other income | 3,762 | 2,592 | 13,497 | 7,049 |
Interest expense | (13,259) | (11,549) | (43,401) | (31,609) |
Gain on sale of assets | 53,128 | 68,787 | ||
Income before income taxes | 32,796 | 92,259 | 96,194 | 180,611 |
Income tax benefit (provision), net | 749 | (673) | 1,185 | 692 |
NET INCOME | 33,545 | 91,586 | 97,379 | 181,303 |
Income from consolidated joint venture attributable to noncontrolling interest | (2,508) | (2,376) | (6,062) | (7,189) |
Preferred stock dividends | (3,208) | (3,208) | (9,622) | (9,622) |
INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ 27,829 | $ 86,002 | $ 81,695 | $ 164,492 |
Basic and diluted per share amounts: | ||||
Basic and diluted income attributable to common stockholders per common share (in dollars per share) | $ 0.12 | $ 0.38 | $ 0.36 | $ 0.73 |
Basic and diluted weighted average common shares outstanding (in shares) | 224,530 | 227,068 | 226,369 | 225,538 |
Room | ||||
REVENUES | ||||
Revenues | $ 200,242 | $ 207,657 | $ 580,835 | $ 608,237 |
OPERATING EXPENSES | ||||
Expenses | 52,514 | 53,928 | 152,606 | 159,923 |
Food and beverage | ||||
REVENUES | ||||
Revenues | 61,366 | 63,911 | 206,183 | 217,469 |
OPERATING EXPENSES | ||||
Expenses | 44,928 | 46,260 | 140,149 | 147,299 |
Other operating | ||||
REVENUES | ||||
Revenues | 20,031 | 17,740 | 55,197 | 52,495 |
OPERATING EXPENSES | ||||
Expenses | $ 4,162 | $ 4,190 | $ 12,494 | $ 12,488 |
CONSOLIDATED STATEMENTS OF EQUI
CONSOLIDATED STATEMENTS OF EQUITY - USD ($) | Series E Cumulative Redeemable Preferred StockPreferred Stock | Series E Cumulative Redeemable Preferred StockCumulative dividends and distributions | Series E Cumulative Redeemable Preferred Stock | Series F Cumulative Redeemable Preferred StockPreferred Stock | Series F Cumulative Redeemable Preferred StockCumulative dividends and distributions | Series F Cumulative Redeemable Preferred Stock | Common Stock | Additional Paid In Capital | Retained Earnings | Cumulative dividends and distributions | Noncontrolling Interest in Consolidated Joint Venture | Total |
Beginning Balance at Dec. 31, 2017 | $ 115,000,000 | $ 75,000,000 | $ 2,253,000 | $ 2,679,221,000 | $ 932,277,000 | $ (1,270,013,000) | $ 48,440,000 | $ 2,582,178,000 | ||||
Beginning Balance (in shares) at Dec. 31, 2017 | 4,600,000 | 3,000,000 | 225,321,660 | |||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||
Amortization of deferred stock compensation | 2,113,000 | 2,113,000 | ||||||||||
Issuance of restricted common stock, net | $ 3,000 | (4,235,000) | (4,232,000) | |||||||||
Issuance of restricted common stock, net (in shares) | 297,013 | |||||||||||
Forfeiture of restricted common stock (in shares) | (3,961) | |||||||||||
Common stock distributions and distributions payable | (11,281,000) | (11,281,000) | ||||||||||
Preferred stock dividends and dividends payable | $ (1,998,000) | $ (1,998,000) | $ (1,209,000) | $ (1,209,000) | ||||||||
Distributions to noncontrolling interest | (1,169,000) | (1,169,000) | ||||||||||
Net income | 36,016,000 | 2,439,000 | 38,455,000 | |||||||||
Ending Balance at Mar. 31, 2018 | $ 115,000,000 | $ 75,000,000 | $ 2,256,000 | 2,677,099,000 | 968,293,000 | (1,284,501,000) | 49,710,000 | 2,602,857,000 | ||||
Ending Balance (in shares) at Mar. 31, 2018 | 4,600,000 | 3,000,000 | 225,614,712 | |||||||||
Beginning Balance at Dec. 31, 2017 | $ 115,000,000 | $ 75,000,000 | $ 2,253,000 | 2,679,221,000 | 932,277,000 | (1,270,013,000) | 48,440,000 | 2,582,178,000 | ||||
Beginning Balance (in shares) at Dec. 31, 2017 | 4,600,000 | 3,000,000 | 225,321,660 | |||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||
Net income | 181,303,000 | |||||||||||
Ending Balance at Sep. 30, 2018 | $ 115,000,000 | $ 75,000,000 | $ 2,282,000 | 2,726,523,000 | 1,106,391,000 | (1,313,741,000) | 48,985,000 | 2,760,440,000 | ||||
Ending Balance (in shares) at Sep. 30, 2018 | 4,600,000 | 3,000,000 | 228,247,062 | |||||||||
Beginning Balance at Mar. 31, 2018 | $ 115,000,000 | $ 75,000,000 | $ 2,256,000 | 2,677,099,000 | 968,293,000 | (1,284,501,000) | 49,710,000 | 2,602,857,000 | ||||
Beginning Balance (in shares) at Mar. 31, 2018 | 4,600,000 | 3,000,000 | 225,614,712 | |||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||
Amortization of deferred stock compensation | 2,966,000 | 2,966,000 | ||||||||||
Issuance of restricted common stock | $ 1,000 | (1,000) | ||||||||||
Issuance of restricted common stock (in shares) | 49,513 | |||||||||||
Forfeiture of restricted common stock (in shares) | (824) | |||||||||||
Common stock distributions and distributions payable | (11,413,000) | (11,413,000) | ||||||||||
Preferred stock dividends and dividends payable | (1,998,000) | (1,998,000) | (1,209,000) | (1,209,000) | ||||||||
Distributions to noncontrolling interest | (1,475,000) | (1,475,000) | ||||||||||
Net proceeds from sale of common stock | $ 26,000 | 44,315,000 | 44,341,000 | |||||||||
Number of shares of common stock sold (in shares) | 2,590,854 | |||||||||||
Net income | 48,888,000 | 2,374,000 | 51,262,000 | |||||||||
Ending Balance at Jun. 30, 2018 | $ 115,000,000 | $ 75,000,000 | $ 2,283,000 | 2,724,379,000 | 1,017,181,000 | (1,299,121,000) | 50,609,000 | 2,685,331,000 | ||||
Ending Balance (in shares) at Jun. 30, 2018 | 4,600,000 | 3,000,000 | 228,254,255 | |||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||
Amortization of deferred stock compensation | 2,143,000 | 2,143,000 | ||||||||||
Forfeiture of restricted common stock (in shares) | (7,193) | |||||||||||
Forfeiture of restricted common stock | $ (1,000) | 1,000 | ||||||||||
Common stock distributions and distributions payable | (11,412,000) | (11,412,000) | ||||||||||
Preferred stock dividends and dividends payable | (1,998,000) | (1,998,000) | (1,210,000) | (1,210,000) | ||||||||
Distributions to noncontrolling interest | (4,000,000) | (4,000,000) | ||||||||||
Net income | 89,210,000 | 2,376,000 | 91,586,000 | |||||||||
Ending Balance at Sep. 30, 2018 | $ 115,000,000 | $ 75,000,000 | $ 2,282,000 | 2,726,523,000 | 1,106,391,000 | (1,313,741,000) | 48,985,000 | 2,760,440,000 | ||||
Ending Balance (in shares) at Sep. 30, 2018 | 4,600,000 | 3,000,000 | 228,247,062 | |||||||||
Beginning Balance at Dec. 31, 2018 | $ 115,000,000 | $ 75,000,000 | $ 2,282,000 | 2,728,684,000 | 1,182,722,000 | (1,440,202,000) | 47,685,000 | 2,711,171,000 | ||||
Beginning Balance (in shares) at Dec. 31, 2018 | 4,600,000 | 3,000,000 | 228,246,247 | |||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||
Amortization of deferred stock compensation | 2,221,000 | 2,221,000 | ||||||||||
Issuance of restricted common stock, net | $ 4,000 | (4,439,000) | (4,435,000) | |||||||||
Issuance of restricted common stock, net (in shares) | 345,132 | |||||||||||
Forfeiture of restricted common stock (in shares) | (3,932) | |||||||||||
Common stock distributions and distributions payable | (11,429,000) | (11,429,000) | ||||||||||
Preferred stock dividends and dividends payable | (1,998,000) | (1,998,000) | (1,209,000) | (1,209,000) | ||||||||
Distributions to noncontrolling interest | (1,950,000) | (1,950,000) | ||||||||||
Net income | 16,317,000 | 1,599,000 | 17,916,000 | |||||||||
Ending Balance at Mar. 31, 2019 | $ 115,000,000 | $ 75,000,000 | $ 2,286,000 | 2,726,466,000 | 1,199,039,000 | (1,454,838,000) | 47,334,000 | 2,710,287,000 | ||||
Ending Balance (in shares) at Mar. 31, 2019 | 4,600,000 | 3,000,000 | 228,587,447 | |||||||||
Beginning Balance at Dec. 31, 2018 | $ 115,000,000 | $ 75,000,000 | $ 2,282,000 | 2,728,684,000 | 1,182,722,000 | (1,440,202,000) | 47,685,000 | 2,711,171,000 | ||||
Beginning Balance (in shares) at Dec. 31, 2018 | 4,600,000 | 3,000,000 | 228,246,247 | |||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||
Net income | 97,379,000 | |||||||||||
Ending Balance at Sep. 30, 2019 | $ 115,000,000 | $ 75,000,000 | $ 2,249,000 | 2,681,754,000 | 1,274,039,000 | (1,483,907,000) | 48,384,000 | 2,712,519,000 | ||||
Ending Balance (in shares) at Sep. 30, 2019 | 4,600,000 | 3,000,000 | 224,861,978 | |||||||||
Beginning Balance at Mar. 31, 2019 | $ 115,000,000 | $ 75,000,000 | $ 2,286,000 | 2,726,466,000 | 1,199,039,000 | (1,454,838,000) | 47,334,000 | 2,710,287,000 | ||||
Beginning Balance (in shares) at Mar. 31, 2019 | 4,600,000 | 3,000,000 | 228,587,447 | |||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||
Amortization of deferred stock compensation | 3,002,000 | 3,002,000 | ||||||||||
Issuance of restricted common stock (in shares) | 51,840 | |||||||||||
Repurchase of outstanding common stock | $ (4,000) | (5,731,000) | (5,735,000) | |||||||||
Repurchase of outstanding common stock (in shares) | (432,464) | |||||||||||
Common stock distributions and distributions payable | (11,411,000) | (11,411,000) | ||||||||||
Preferred stock dividends and dividends payable | (1,998,000) | (1,998,000) | (1,209,000) | (1,209,000) | ||||||||
Distributions to noncontrolling interest | (788,000) | (788,000) | ||||||||||
Net income | 43,963,000 | 1,955,000 | 45,918,000 | |||||||||
Ending Balance at Jun. 30, 2019 | $ 115,000,000 | $ 75,000,000 | $ 2,282,000 | 2,723,737,000 | 1,243,002,000 | (1,469,456,000) | 48,501,000 | 2,738,066,000 | ||||
Ending Balance (in shares) at Jun. 30, 2019 | 4,600,000 | 3,000,000 | 228,206,823 | |||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||
Amortization of deferred stock compensation | 2,249,000 | 2,249,000 | ||||||||||
Repurchase of outstanding common stock | $ (33,000) | (44,232,000) | (44,265,000) | |||||||||
Repurchase of outstanding common stock (in shares) | (3,344,845) | |||||||||||
Common stock distributions and distributions payable | (11,243,000) | (11,243,000) | ||||||||||
Preferred stock dividends and dividends payable | $ (1,998,000) | $ (1,998,000) | $ (1,210,000) | $ (1,210,000) | ||||||||
Distributions to noncontrolling interest | (2,625,000) | (2,625,000) | ||||||||||
Net income | 31,037,000 | 2,508,000 | 33,545,000 | |||||||||
Ending Balance at Sep. 30, 2019 | $ 115,000,000 | $ 75,000,000 | $ 2,249,000 | $ 2,681,754,000 | $ 1,274,039,000 | $ (1,483,907,000) | $ 48,384,000 | $ 2,712,519,000 | ||||
Ending Balance (in shares) at Sep. 30, 2019 | 4,600,000 | 3,000,000 | 224,861,978 |
CONSOLIDATED STATEMENT OF EQUIT
CONSOLIDATED STATEMENT OF EQUITY (Parenthetical) - $ / shares | 3 Months Ended | |||||
Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | |
Common stock distributions and distributions payable, per share (in dollars per share) | $ 0.05 | $ 0.05 | $ 0.05 | $ 0.05 | $ 0.05 | $ 0.05 |
Series E Cumulative Redeemable Preferred Stock | ||||||
Preferred stock dividends and dividends payable (in dollars per share) | 0.434375 | 0.434375 | 0.434375 | 0.434375 | 0.434375 | 0.434375 |
Series F Cumulative Redeemable Preferred Stock | ||||||
Preferred stock dividends and dividends payable (in dollars per share) | $ 0.403125 | $ 0.403125 | $ 0.403125 | $ 0.403125 | $ 0.403125 | $ 0.403125 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 24 Months Ended | |||||
Sep. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ 33,545 | $ 17,916 | $ 91,586 | $ 51,262 | $ 38,455 | $ 97,379 | $ 181,303 | |
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Bad debt expense | 405 | 682 | ||||||
Gain on sale of assets | (68,740) | |||||||
Noncash interest on derivatives and finance lease obligations, net | 1,155 | (818) | 6,908 | (4,995) | ||||
Depreciation | 110,416 | 108,744 | ||||||
Amortization of franchise fees and other intangibles | 68 | 1,468 | ||||||
Amortization of right-of-use assets | (523) | |||||||
Amortization of deferred financing costs | 698 | 748 | 2,094 | 2,240 | ||||
Amortization of deferred stock compensation | 7,168 | 6,938 | ||||||
Impairment loss | 1,394 | |||||||
Gain on hurricane-related damage | (1,100) | |||||||
Deferred income taxes, net | (246) | (1,100) | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (10,700) | (10,450) | ||||||
Prepaid expenses and other assets | (1,744) | 823 | ||||||
Accounts payable and other liabilities | 2,449 | 6,928 | ||||||
Accrued payroll and employee benefits | (3,045) | (4,599) | ||||||
Net cash provided by operating activities | 210,629 | 219,536 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Proceeds from sales of assets | 231,083 | |||||||
Disposition deposit | 3,000 | |||||||
Proceeds from property insurance | 1,100 | |||||||
Acquisitions of hotel property and other assets | (193) | (15,147) | ||||||
Acquisitions of intangible assets | (18,516) | |||||||
Renovations and additions to hotel properties and other assets | (75,277) | (125,854) | ||||||
Net cash (used in) provided by investing activities | (75,470) | 75,666 | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from common stock offerings | 45,125 | |||||||
Payment of common stock offering costs | (784) | |||||||
Repurchases of outstanding common stock | (50,000) | |||||||
Repurchase of common stock for employee withholding obligations | (4,435) | (4,232) | ||||||
Payments on notes payable | (5,770) | (5,486) | ||||||
Payments of deferred financing costs | (5) | |||||||
Dividends and distributions paid | (155,715) | (163,002) | ||||||
Distributions to noncontrolling interest | (5,363) | (6,644) | ||||||
Net cash used in financing activities | (221,283) | (135,028) | ||||||
Net (decrease) increase in cash and cash equivalents and restricted cash | (86,124) | 160,174 | ||||||
Cash and cash equivalents and restricted cash, beginning of period | $ 862,369 | 719,485 | $ 559,311 | 862,369 | 559,311 | |||
Cash and cash equivalents and restricted cash, end of period | 776,245 | 719,485 | 719,485 | 776,245 | 719,485 | $ 862,369 | ||
Supplemental Disclosure of Cash Flow Information | ||||||||
Cash and cash equivalents | 730,039 | 650,691 | 730,039 | 650,691 | 809,316 | |||
Restricted cash | 46,206 | 68,794 | 46,206 | 68,794 | 53,053 | |||
Cash and cash equivalents and restricted cash, end of period | 776,245 | 719,485 | $ 719,485 | 776,245 | 719,485 | $ 862,369 | ||
Cash paid for interest | 36,703 | 36,396 | ||||||
Cash paid for income taxes, net | 354 | 571 | ||||||
Supplemental Disclosure of Noncash Investing and Financing Activties | ||||||||
Accrued renovations and additions to hotel properties and other assets | 8,149 | 13,632 | ||||||
Amortization of deferred stock compensation - construction activities | 304 | 284 | ||||||
Dividends and distributions payable | $ 14,451 | $ 14,620 | $ 14,451 | $ 14,620 |
Organization and Description of
Organization and Description of Business | 9 Months Ended |
Sep. 30, 2019 | |
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 elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes, commencing with its taxable year ended on December 31, 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 or repositioning hotel properties, and may also selectively sell hotels that no longer fit its stated strategy. 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. 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, in transactions that are intended to generate qualifying income. As of September 30, 2019, the Company had interests in 21 hotels (the “21 Hotels”), one of which was considered held for sale, leaving 20 hotels (the “20 Hotels”) currently held for investment. The Company’s third-party managers included the following: Number of Hotels Subsidiaries of Marriott International, Inc. or Marriott Hotel Services, Inc. (collectively, “Marriott”) 8 Interstate Hotels & Resorts, Inc. 3 (1) Highgate Hotels L.P. and an affiliate 3 Crestline Hotels & Resorts 2 Hilton Worldwide 2 Davidson Hotels & Resorts 1 Hyatt Corporation 1 Singh Hospitality, LLC 1 Total hotels owned as of September 30, 2019 21 (1) The Courtyard by Marriott Los Angeles was considered held for sale as of September 30, 2019, and subsequently sold on October 23, 2019. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2019 | |
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, 2019 and December 31, 2018, and for the three and nine months ended September 30, 2019 and 2018, include the accounts of the Company, the Operating Partnership, the TRS Lessee and their controlled subsidiaries. All significant intercompany balances and transactions have been eliminated. If the Company determines that it has an interest in a variable interest entity, the Company will consolidate the entity when it is determined to be the primary beneficiary of the entity. 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, 2018, filed with the Securities and Exchange Commission on February 14, 2019. Operating results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. The Company does not have any comprehensive income other than what is included in net income. If the Company has any comprehensive income in the future such that a statement of comprehensive income would be necessary, the Company will include such statement in one continuous consolidated statement of operations. Certain prior year amounts in these financial statements have been reclassified to conform to the presentation for the three and nine months ended September 30, 2019. 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. Earnings Per Share The Company applies the two-class method when computing its earnings per share. Net income per share for each class of stock is calculated assuming all of the Company’s net income is distributed as dividends to each class of stock based on their contractual rights. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are considered participating securities and are included in the computation of earnings per share. 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 (before their expiration in April 2018), 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 (unaudited and in thousands, except per share data): Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Numerator: Net income $ 33,545 $ 91,586 $ 97,379 $ 181,303 Income from consolidated joint venture attributable to noncontrolling interest (2,508) (2,376) (6,062) (7,189) Preferred stock dividends (3,208) (3,208) (9,622) (9,622) Distributions paid on unvested restricted stock compensation (61) (59) (183) (177) Undistributed income allocated to unvested restricted stock compensation (89) (385) (257) (689) Numerator for basic and diluted income attributable to common stockholders $ 27,679 $ 85,558 $ 81,255 $ 163,626 Denominator: Weighted average basic and diluted common shares outstanding 224,530 227,068 226,369 225,538 Basic and diluted income attributable to common stockholders per common share $ 0.12 $ 0.38 $ 0.36 $ 0.73 The Company’s unvested restricted shares associated with its long-term incentive plan and shares associated with common stock options, as applicable, have been excluded from the above calculation of earnings per share for the three and nine months ended September 30, 2019 and 2018, as their inclusion would have been anti-dilutive. Noncontrolling Interest The Company’s consolidated financial statements include an entity in which the Company has a controlling financial interest. Noncontrolling interest is the portion of equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. Such noncontrolling interest is reported on the consolidated balance sheets within equity, separately from the Company’s equity. On the consolidated statements of operations, revenues, expenses and net income or loss from the less-than-wholly owned subsidiary are reported at their consolidated amounts, including both the amounts attributable to the Company and the noncontrolling interest. Income or loss is allocated to the noncontrolling interest based on its 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 stockholders’ equity, noncontrolling interest and total equity. At both September 30, 2019 and December 31, 2018, the noncontrolling interest reported in the Company’s consolidated financial statements consisted of a third-party’s 25.0% ownership interest in the Hilton San Diego Bayfront. Investment in Hotel Properties Investments in hotel properties, including land, buildings, furniture, fixtures and equipment (“FF&E”) and identifiable intangible assets are recorded at fair value upon acquisition. Property and equipment purchased after the hotel acquisition date is recorded at cost. Replacements and improvements are capitalized, while repairs and maintenance are expensed as incurred. Upon the sale or retirement of a fixed asset, the cost and related accumulated depreciation is removed from the Company’s accounts and any resulting gain or loss is included in the statements of operations. Depreciation expense is based on the estimated life of the Company’s assets. The life is based on a number of assumptions, including the cost and timing of capital expenditures to maintain and refurbish the Company’s hotels, as well as specific market and economic conditions. Hotel properties are depreciated using the straight-line method over estimated useful lives primarily ranging from five to 40 years for buildings and improvements and three to 12 years for FF&E. Intangible assets are amortized using the straight-line method over their estimated useful life or over the length of the related agreement, whichever is shorter. The Company’s investment in hotel properties, net also includes initial franchise fees which are recorded at cost and amortized using the straight-line method over the terms of the franchise agreements ranging from 14 to 27 years. All other franchise fees that are based on the Company’s results of operations are expensed as incurred. While the Company believes its estimates are reasonable, a change in the estimated lives could affect depreciation expense and net income or the gain or loss on the sale of any of the Company’s hotels. The Company has not changed the useful lives of any of its assets during the periods discussed. Impairment losses are recorded on long-lived assets to be held and used by the Company when indicators of impairment are present and the future undiscounted net cash flows expected to be generated by those assets, based on the Company’s anticipated investment horizon, are less than the assets’ carrying amount. No single indicator would necessarily result in the Company preparing an estimate to determine if a hotel’s future undiscounted cash flows are less than the book value of the hotel. The Company uses judgment to determine if the severity of any single indicator, or the fact there are a number of indicators of less severity that when combined, would result in an indication that a hotel requires an estimate of the undiscounted cash flows to determine if an impairment has occurred. If a hotel is considered to be impaired, the related assets are adjusted to their estimated fair value and an impairment loss is recognized. The impairment loss recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. The Company performs a fair value assessment using a discounted cash flow analysis to estimate the fair value of the hotel, taking into account the hotel’s expected cash flow from operations, the Company’s estimate of how long it will continue to own the hotel and the estimated proceeds from the disposition of the hotel. 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’s judgment is required in determining the discount rate applied to estimated cash flows, the estimated growth of revenues and expenses, net operating income and margins, the need for capital expenditures, as well as specific market and economic conditions. Fair value represents the amount at which an asset could be bought or sold in a current transaction between willing parties, that is, other than a forced or liquidation sale. The estimation process involved in determining if assets have been impaired and in the determination of fair value is inherently uncertain because it requires estimates of current market yields as well as future events and conditions. Such future events and conditions include economic and market conditions, as well as the availability of suitable financing. The realization of the Company’s investment in hotel properties is dependent upon future uncertain events and conditions and, accordingly, the actual timing and amounts realized by the Company may be materially different from their estimated fair values. Restricted Cash Restricted cash is comprised of reserve accounts for debt service, interest reserves, seasonality reserves, capital replacements, ground leases, property taxes and excess hotel-generated cash that is held in an account for the benefit of a lender. These restricted funds are subject to supervision and disbursement approval by certain of the Company’s lenders and/or hotel managers. Revenue Recognition Revenues are recognized when control of the promised goods or services is transferred to hotel guests, which is generally defined as the date upon which a guest occupies a room and/or utilizes the hotel’s services. Room revenue is recognized over a guest’s stay at a previously agreed upon daily rate. Additionally, some of the Company’s hotel rooms are booked through independent internet travel intermediaries. If the guest pays the independent internet travel intermediary directly, revenue for the room is recognized by the Company at the price the Company sold the room to the independent internet travel intermediary, less any discount or commission paid. If the guest pays the Company directly, revenue for the room is recognized by the Company on a gross basis, with the related discount or commission recognized in room expense. A majority of the Company’s hotels participate in frequent guest programs sponsored by the hotel brand owners whereby the hotel allows guests to earn loyalty points during their hotel stay. The Company expenses charges associated with these programs as incurred, and recognizes revenue at the amount it will receive from the brand when a guest redeems their loyalty points by staying at one of the Company’s hotels. In addition, some contracts for rooms or food and beverage services require an advance deposit, which the Company records as deferred revenue (or a contract liability) and recognizes once the performance obligations are satisfied. Food and beverage revenue and other ancillary services revenue are generated when a customer chooses to purchase goods or services separately from a hotel room. These revenue streams are recognized during the time the goods or services are provided to the customer at the amount the Company expects to be entitled to in exchange for those goods or services. For those ancillary services provided by third parties, the Company assesses whether it is the principal or the agent. If the Company is the principal, revenue is recognized based upon the gross sales price. If the Company is the agent, revenue is recognized based upon the commission earned from the third party. Additionally, the Company collects sales, use, occupancy and other similar taxes at its hotels. These taxes are collected from customers at the time of purchase, but are not included in revenue. The Company records a liability upon collection of such taxes from the customer, and relieves the liability when payments are remitted to the applicable governmental agency. Trade receivables and contract liabilities consisted of the following (in thousands): September 30, December 31, 2019 2018 (unaudited) Trade receivables, net (1) $ 25,090 $ 18,982 Contract liabilities (2) $ 17,581 $ 16,711 (1) Trade receivables are included in accounts receivable, net on the accompanying consolidated balance sheets. (2) Contract liabilities consist of advance deposits, and are included in both other current liabilities and other liabilities on the accompanying consolidated balance sheets. Of the amount outstanding at December 31, 2018, approximately $1.0 million and $16.3 million were recognized in revenue during the three and nine months ended September 30, 2019, respectively. Segment Reporting The Company considers each of its hotels to be an operating segment, and allocates resources and assesses the operating performance for each hotel. Because all of the Company’s hotels have similar economic characteristics, facilities and services, the hotels have been aggregated into a single reportable segment, hotel ownership. New Accounting Standards and Accounting Changes In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-02, “ Leases (Topic 842) ● Lessees: Leases are accounted for using a dual approach, classifying leases as either operating or financing based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification determines whether the lease expense is recognized on a straight-line basis over the term of the lease (for operating leases) or based on an effective interest method (for finance leases). A lessee is required to record a right-of-use asset and a lease liability on its balance sheet for all leases with a term of greater than 12 months regardless of their classification as operating or finance leases. ● Lessors: Leases are accounted for using an approach that is substantially equivalent to existing guidance for operating, sales-type and financing leases, but aligned with the FASB’s revenue standard. Subsequent to the issuance of ASU No. 2016-02, the FASB issued several clarifications and updates, including Accounting Standards Update No. 2018-01, “ Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842 Codification Improvements to Topic 842, Leases Leases (Topic 842): Targeted Improvements Leases (Topic 842): Narrow-Scope Improvements for Lessors Leases (Topic 842): Codification Improvements The Company adopted ASU No. 2016-02 on January 1, 2019, along with its related clarifications and amendments, and made the following elections: ● to not separate lease components from nonlease components by underlying asset. By making this election, the Company is required to account for the nonlease components together with the related lease components as a single lease component (ASU No. 2016-02); ● to not reassess whether a land easement not previously accounted for as a lease would now be a lease (ASU No. 2018-01); ● to not reassess whether an expired or existing contract meets the definition of a lease (ASU No. 2018-11); ● to not reassess the lease classification at the adoption date for existing leases (ASU No. 2018-11); ● to not reassess whether costs previously capitalized as initial direct costs would continue to be amortized (ASU No. 2018-11); ● to apply the optional modified retrospective transition approach, allowing companies to initially apply the standard at the adoption date without revising comparable periods (ASU No. 2018-11); and ● to not evaluate whether sales taxes and other similar taxes imposed by a governmental authority on a specific lease revenue-producing transaction are the primary obligation of the lessor as owner of the underlying leased asset (ASU No. 2018-20). Lessee Perspective Balance Pre-Adoption Adjustments Balance Post-Adoption (unaudited) (unaudited) Operating lease right-of-use assets, net $ — $ 64,075 $ 64,075 Investment in hotel properties, net (intangible assets) $ 50,889 (18,398) $ 32,491 Total asset adjustments $ 45,677 Operating lease obligations, current and noncurrent $ — $ 58,663 $ 58,663 Other liabilities (deferred rent) $ 12,986 (12,986) $ — Total liability adjustments $ 45,677 Upon adoption of the new standard, the Company reclassified amounts related to its finance leases as follows (in thousands): Balance Pre-Adoption Adjustments Balance Post-Adoption (unaudited) (unaudited) Finance lease right-of-use assets, net $ — $ 55,727 $ 55,727 Investment in hotel properties, net (land) $ 611,993 (6,605) $ 605,388 Investment in hotel properties, net (buildings and improvements, net of accumulated depreciation) $ 2,167,680 (49,122) $ 2,118,558 Total asset adjustments $ — Finance lease obligations, current and noncurrent $ — $ 27,010 $ 27,010 Capital lease obligations, current and noncurrent $ 27,010 (27,010) $ — Total liability adjustments $ — The Company determines if a contract is a lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Expense for these short-term leases is recognized on a straight-line basis over the lease term. For leases with an initial term greater than 12 months, the Company records a ROU asset and a corresponding lease obligation. ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease obligations represent the Company’s obligation to make fixed lease payments as stipulated by the lease. Operating lease obligations are recognized at the lease commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate (“IBR”) based on information available at the commencement date in determining the present value of lease payments over the lease term. The IBR is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. In order to estimate the Company’s IBR, the Company first looks to its own unsecured debt offerings, and adjusts the rate for both length of term and secured borrowing using available market data as well as consultations with leading national financial institutions that are active in the issuance of both secured and unsecured notes. Operating lease ROU assets are recognized at the lease commencement date, and include the amount of the initial operating lease obligation, any lease payments made at or before the commencement date, excluding any lease incentives received, and any initial direct costs incurred. For leases that have extension options that the Company can exercise at its discretion, management uses judgment to determine if it is reasonably certain that the Company will in fact exercise such option. If the extension option is reasonably certain to occur, the Company includes the extended term’s lease payments in the calculation of the respective lease liability. None of the Company’s leases contain any material residual value guarantees or material restrictive covenants. The Company reviews its right-of-use assets for indicators of impairment. If such assets are considered to be impaired, the related assets are adjusted to their estimated fair value and an impairment loss is recognized. The impairment loss recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. Lessor Perspective See Note 9 for additional lease disclosures. In June 2016, the FASB issued Accounting Standards Update No. 2016-13, “ Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Codification Improvements to Topic 326, Financial Instruments-Credit Losses |
Investment in Hotel Properties
Investment in Hotel Properties | 9 Months Ended |
Sep. 30, 2019 | |
Investment in Hotel Properties | |
Investment in Hotel Properties | 3. Investment in Hotel Properties Investment in hotel properties, net for the 20 Hotels consisted of the following (in thousands): September 30, December 31, 2019 2018 (unaudited) Land $ 605,581 $ 611,993 Buildings and improvements 2,968,241 2,983,308 Furniture, fixtures and equipment 512,333 486,441 Intangible assets 33,050 56,021 Franchise fees 743 778 Construction in progress 34,884 60,744 Investment in hotel properties, gross 4,154,832 4,199,285 Accumulated depreciation and amortization (1,243,980) (1,168,287) Investment in hotel properties, net $ 2,910,852 $ 3,030,998 |
Disposals
Disposals | 9 Months Ended |
Sep. 30, 2019 | |
Disposal Group, Not Including Discontinued Operations | |
Disposals | 4. Disposals The Company classified the Courtyard by Marriott Los Angeles as held for sale at September 30, 2019, and subsequently sold the hotel in October 2019 (see Note 13). The sale did not represent a strategic shift that had a major impact on the Company’s business plan or its primary markets; therefore, the hotel did not qualify as a discontinued operation. The Company classified the assets and liabilities of the Courtyard by Marriott Los Angeles as held for sale at September 30, 2019 as follows (unaudited and in thousands): September 30, 2019 Accounts receivable $ 118 Prepaid expenses and other current assets 126 Investment in hotel properties, net 10,551 Finance lease right-of-use asset 6,605 Other assets 1,081 Assets held for sale, net $ 18,481 Accounts payable and accrued expenses $ 202 Accrued payroll and employee benefits 229 Other current liabilities 409 Finance lease obligation, less current portion (1) 11,606 Liabilities of assets held for sale $ 12,446 (1) The finance lease at the Courtyard by Marriott Los Angeles had a discount rate of 10.25% . |
Fair Value Measurements and Int
Fair Value Measurements and Interest Rate Derivatives | 9 Months Ended |
Sep. 30, 2019 | |
Fair Value Measurements and Interest Rate Derivatives | |
Fair Value Measurements and Interest Rate Derivatives | 5. Fair Value Measurements and Interest Rate Derivatives Fair Value Measurements As of September 30, 2019 and December 31, 2018, 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. A fair value measurement is based on the assumptions that market participants would use in pricing an asset or liability in an orderly transaction. The hierarchy for inputs used in measuring fair value is as follows: 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 of both September 30, 2019 and December 31, 2018, the Company measured its interest rate derivatives at fair value on a recurring basis. Prior to the Company’s release of collateral assignment in August 2019, the Company also measured a life insurance policy and a related retirement benefit agreement at fair value on a recurring basis. The Company estimates the fair value of its interest rate derivatives using Level 2 measurements based on quotes obtained from the counterparties, which are based upon the consideration that would be required to terminate the agreements. Both the life insurance policy and the related retirement benefit agreement, which were for a former Company associate, were valued using Level 2 measurements. No assets were measured at fair value at September 30, 2019. The following table presents the Company’s assets measured at fair value on a recurring and nonrecurring basis at December 31, 2018 (in thousands): Fair Value Measurements at Reporting Date Total Level 1 Level 2 Level 3 December 31, 2018: Interest rate swap derivatives $ 4,789 $ — $ 4,789 $ — Life insurance policy (1) 386 — 386 — Total assets measured at fair value at December 31, 2018 $ 5,175 $ — $ 5,175 $ — (1) Prior to the Company’s release of collateral assignment in August 2019, the split life insurance policy was for a former Company associate. As of December 31, 2018, the amount was included in other assets, net on the accompanying consolidated balance sheet. The following table presents the Company’s liabilities measured at fair value on a recurring and nonrecurring basis at September 30, 2019 and December 31, 2018 (in thousands): Fair Value Measurements at Reporting Date Total Level 1 Level 2 Level 3 September 30, 2019 (unaudited): Interest rate swap derivatives $ 1,951 $ — $ 1,951 $ — Total liabilities measured at fair value at September 30, 2019 $ 1,951 $ — $ 1,951 $ — December 31, 2018: Retirement benefit agreement (1) $ 386 $ — $ 386 $ — Total liabilities measured at fair value at December 31, 2018 $ 386 $ — $ 386 $ — (1) Prior to the Company’s release of collateral assignment in August 2019, the retirement benefit agreement was for a former Company associate. As of December 31, 2018, the amount was included in accrued payroll and employee benefits on the accompanying consolidated balance sheet. Interest Rate Derivatives The Company’s interest rate derivatives, which are not designated as effective cash flow hedges, consisted of the following at September 30, 2019 (unaudited) and December 31, 2018 (in thousands): Estimated Fair Value of Assets (Liabilities) (1) Strike / Capped Effective Maturity Notional September 30, December 31, Hedged Debt Type Rate Index Date Date Amount 2019 2018 Hilton San Diego Bayfront Cap 4.250 % 1-Month LIBOR May 1, 2017 May 1, 2019 N/A $ N/A $ — Hilton San Diego Bayfront Cap 6.000 % 1-Month LIBOR November 10, 2017 December 9, 2020 $ 220,000 — — $85.0 million term loan Swap 1.591 % 1-Month LIBOR October 29, 2015 September 2, 2022 $ 85,000 (453) 2,521 $100.0 million term loan Swap 1.853 % 1-Month LIBOR January 29, 2016 January 31, 2023 $ 100,000 (1,498) 2,268 $ (1,951) $ 4,789 (1) The fair values of both swap agreements are included in other liabilities and in other assets, net on the accompanying consolidated balance sheets as of September 30, 2019 and December 31, 2018, respectively. Noncash changes in the fair values of the Company’s interest rate derivatives resulted in increases (decreases) to interest expense for the three and nine months ended September 30, 2019 and 2018 as follows (unaudited and in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Noncash interest on derivatives $ 1,098 $ (870) $ 6,740 $ (5,147) Fair Value of Debt As of September 30, 2019 and December 31, 2018, 77.5% and 77.6%, respectively, of the Company’s outstanding debt had fixed interest rates, including the effects of interest rate swap agreements. The Company uses Level 3 measurements to estimate the fair value of its debt by discounting the future cash flows of each instrument at estimated market rates. The Company’s principal balances and fair market values of its consolidated debt as of September 30, 2019 (unaudited) and December 31, 2018 were as follows (in thousands): September 30, 2019 December 31, 2018 Carrying Amount (1) Fair Value Carrying Amount (1) Fair Value Debt $ 977,058 $ 979,569 $ 982,828 $ 971,082 (1) The principal balance of debt is presented before any unamortized deferred financing costs. |
Other Assets
Other Assets | 9 Months Ended |
Sep. 30, 2019 | |
Other Assets | |
Other Assets | 6. Other Assets Other assets, net consisted of the following (in thousands): September 30, December 31, 2019 2018 (unaudited) Property and equipment, net $ 7,833 $ 8,426 Goodwill — 990 Deferred rent on straight-lined third-party tenant leases 3,435 3,177 Deferred income tax asset, net 8,349 8,407 Interest rate derivatives — 4,789 Other receivables 2,478 3,209 Other 329 819 Total other assets, net $ 22,424 $ 29,817 |
Notes Payable
Notes Payable | 9 Months Ended |
Sep. 30, 2019 | |
Notes Payable | |
Notes Payable | 7. Notes Payable Notes payable consisted of the following (in thousands): September 30, December 31, 2019 2018 (unaudited) Notes payable requiring payments of interest and principal, with fixed rates ranging from 4.12% to 5.95% ; maturing at dates ranging from November 2020 through January 2025 . The notes are collateralized by first deeds of trust on four hotel properties at both September 30, 2019 and December 31, 2018. $ 332,058 $ 337,828 Note payable requiring payments of interest only, bearing a blended rate of one -month LIBOR plus 105 basis points; initial maturity in December 2020 with three one -year extensions. The note is collateralized by a first deed of trust on one hotel property. 220,000 220,000 Unsecured term loan requiring payments of interest only, with a blended interest rate based on a pricing grid with a range of 135 to 220 basis points over one -month LIBOR, depending on the Company's leverage ratios. LIBOR has been swapped to a fixed rate of 1.591% , resulting in an effective interest rate of 2.941% . Matures in September 2022 . 85,000 85,000 Unsecured term loan requiring payments of interest only, with a blended interest rate based on a pricing grid with a range of 135 to 220 basis points over one -month LIBOR, depending on the Company's leverage ratios. LIBOR has been swapped to a fixed rate of 1.853% , resulting in an effective interest rate of 3.203% . Matures in January 2023 . 100,000 100,000 Unsecured Senior Notes requiring semi-annual payments of interest only, bearing interest at 4.69% ; maturing in January 2026 . 120,000 120,000 Unsecured Senior Notes requiring semi-annual payments of interest only, bearing interest at 4.79% ; maturing in January 2028 . 120,000 120,000 Total notes payable $ 977,058 $ 982,828 Current portion of notes payable $ 8,237 $ 7,804 Less: current portion of deferred financing costs (1,966) (1,966) Carrying value of current portion of notes payable $ 6,271 $ 5,838 Notes payable, less current portion $ 968,821 $ 975,024 Less: long-term portion of deferred financing costs (2,325) (3,799) Carrying value of notes payable, less current portion $ 966,496 $ 971,225 As of September 30, 2019, the Company had no outstanding amounts due under its credit facility. Interest Expense Total interest incurred and expensed on the notes payable was as follows (unaudited and in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Interest expense on debt and finance lease obligations $ 11,406 $ 11,619 $ 34,399 $ 34,364 Noncash interest on derivatives and finance lease obligations, net 1,155 (818) 6,908 (4,995) Amortization of deferred financing costs 698 748 2,094 2,240 Total interest expense $ 13,259 $ 11,549 $ 43,401 $ 31,609 |
Other Current Liabilities and O
Other Current Liabilities and Other Liabilities | 9 Months Ended |
Sep. 30, 2019 | |
Other Current Liabilities and Other Liabilities | |
Other Current Liabilities and Other Liabilities | 8. Other Current Liabilities and Other Liabilities Other Current Liabilities Other current liabilities consisted of the following (in thousands): September 30, December 31, 2019 2018 (unaudited) Property, sales and use taxes payable $ 18,934 $ 15,684 Income tax payable 25 125 Accrued interest 4,521 7,306 Advance deposits 17,085 16,711 Management fees payable 786 1,142 Other 4,492 3,994 Total other current liabilities $ 45,843 $ 44,962 Other Liabilities Other liabilities consisted of the following (in thousands): September 30, December 31, 2019 2018 (unaudited) Deferred revenue $ 5,296 $ 5,017 Deferred rent — 12,986 Deferred property taxes payable (1) 9,342 9,284 Interest rate derivatives 1,951 — Deferred income tax liability — 304 Other 3,235 3,112 Total other liabilities $ 19,824 $ 30,703 (1) Under the terms of a sublease agreement at the Hilton Times Square, sublease rent amounts are currently considered to be property taxes under a payment-in-lieu of taxes (“PILOT”) program, and will be paid beginning in 2020 through 2029. When the PILOT program ends in 2020, the sublease agreement will be modified, rent amounts will be reassessed and the Company will determine if the sublease agreement qualifies as a lease. |
Leases
Leases | 9 Months Ended |
Sep. 30, 2019 | |
Leases | |
Leases | 9. Leases Lessee Accounting The Company has both operating and finance leases for ground, building, office and air leases, maturing in dates ranging from 2028 through 2097, including expected renewal options. Including all renewal options available to the Company, the lease maturity date extends to 2147. Leases were included on the Company’s consolidated balance sheet as follows (unaudited and in thousands): September 30, 2019 Finance Lease: Right-of-use asset, net (buildings and improvements) $ 58,799 Accumulated depreciation (10,780) Right-of-use asset, net $ 48,019 Accounts payable and accrued expenses $ 1 Lease obligations, less current portion 15,571 Total lease obligation $ 15,572 Remaining lease term 78.3 years Discount rate 9.0 % Operating Leases: Right-of-use assets, net $ 61,512 Accounts payable and accrued expenses $ 4,671 Lease obligations, less current portion 50,905 Total lease obligations $ 55,576 Weighted average remaining lease term 24.7 years Weighted average discount rate 5.4 % The components of lease expense were as follows (unaudited and in thousands): Three Months Ended Nine Months Ended September 30, 2019 September 30, 2019 Finance lease cost: Amortization of right-of-use assets $ 367 $ 1,103 Interest on lease obligations (1) 647 1,936 Total finance lease cost $ 1,014 $ 3,039 Operating lease cost (2) $ 3,687 10,065 (1) Interest on lease obligations includes interest expense on the Courtyard by Marriott Los Angeles’s finance lease obligation, which, along with certain of the hotel’s other assets and liabilities, was classified as held for sale as of September 30, 2019 (see Note 4). For the three and nine months ended September 30, 2019, interest expense on the hotel’s finance lease obligation totaled $0.3 million and $0.9 million, respectively. (2) Several of the Company’s hotels pay percentage rent, which is calculated on operating revenues above certain thresholds. During the three and nine months ended September 30, 2019, the Company recorded $2.0 million and $4.9 million, respectively, in percentage rent related to its operating leases. Supplemental cash flow information related to leases was as follows (unaudited and in thousands): Nine Months Ended September 30, 2019 Operating cash flows used for operating leases $ 5,365 Operating right-of-use assets obtained in exchange for operating lease obligations $ 45,677 Future maturities of the Company’s finance and operating lease obligations at September 30, 2019 were as follows (unaudited and in thousands): Finance Lease (1) Operating Lease Year 1 $ 1,403 $ 7,506 Year 2 1,403 7,557 Year 3 1,403 7,608 Year 4 1,403 7,662 Year 5 1,403 7,717 Thereafter 102,751 75,925 Total lease payments 109,766 113,975 Less: interest (2) (94,194) (58,399) Present value of lease obligations $ 15,572 $ 55,576 (1) Does not include the finance lease obligation at the Courtyard by Marriott Los Angeles, which was classified as held for sale at September 30, 2019 (see Note 4). (2) Calculated using the appropriate discount rate for each lease. Lessor Accounting During the three and nine months ended September 30, 2019, the Company recognized $2.9 million and $8.3 million, respectively, in lease-related revenue, which is included in other operating revenue on the Company’s unaudited consolidated statement of operations. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2019 | |
Stockholders' Equity | |
Stockholders' Equity | 10. Stockholders’ Equity Series E Cumulative Redeemable Preferred Stock In March 2016, the Company issued 4,600,000 shares of its 6.95% Series E Cumulative Redeemable Preferred Stock (“Series E preferred stock”) with a liquidation preference of $25.00 per share for gross proceeds of $115.0 million. In conjunction with the offering, the Company incurred $4.0 million in preferred offering costs. On or after March 11, 2021, the Series E 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. Upon the occurrence of a change of control, as defined by the Articles Supplementary for Series E preferred stock, holders of the Series E preferred stock may, under certain circumstances, convert their preferred shares into shares of the Company’s common stock. Series F Cumulative Redeemable Preferred Stock In May 2016, the Company issued 3,000,000 shares of its 6.45% Series F Cumulative Redeemable Preferred Stock (“Series F preferred stock”) with a liquidation preference of $25.00 per share for gross proceeds of $75.0 million. In conjunction with the offering, the Company incurred $2.6 million in preferred offering costs. On or after May 17, 2021, the Series F 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. Upon the occurrence of a change of control, as defined by the Articles Supplementary for Series F preferred stock, holders of the Series F preferred stock may, under certain circumstances, convert their preferred shares into shares of the Company’s common stock. Common Stock In February 2017, the Company entered into separate “At the Market” Agreements (the “ATM Agreements”) with each of Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities LLC and Wells Fargo Securities, LLC In accordance with the terms of the ATM Agreements, In February 2017, the Company’s board of directors authorized a stock repurchase program to acquire up to an aggregate of $300.0 million of the Company’s common and preferred stock. During the three and nine months ended September 30, 2019, the Company repurchased 3,344,845 and 3,777,309 shares of its common stock, respectively, for $44.3 million and $50.0 million, including fees and commissions, respectively, leaving approximately $250.1 million of remaining authorized capacity under the program. As of September 30, 2019, no shares of the Company’s preferred stock have been repurchased. Future repurchases will depend on various factors, including the Company’s capital needs, as well as the Company’s common and preferred stock price. |
Long-Term Incentive Plan
Long-Term Incentive Plan | 9 Months Ended |
Sep. 30, 2019 | |
Long-Term Incentive Plan | |
Long-Term Incentive Plan | 11. Long-Term Incentive Plan Stock Grants Restricted shares granted pursuant to the Company’s Long-Term Incentive Plan (“LTIP”) generally vest over a period of three years from the date of grant. Should a stock grant be forfeited prior to its vesting, the shares covered by the stock grant are added back to the LTIP and remain available for future issuance. Shares of common stock tendered or withheld to satisfy the grant or exercise price or tax withholding obligations upon the vesting of a stock grant are not added back to the LTIP. Compensation expense related to awards of restricted 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 has elected to account for forfeitures as they occur. The Company’s amortization expense and forfeitures related to restricted shares for the three and nine months ended September 30, 2019 and 2018 were as follows (unaudited and in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Amortization expense, including forfeitures $ 2,146 $ 2,073 $ 7,168 $ 6,938 In addition, the Company capitalizes compensation costs related to restricted shares granted to certain employees whose work is directly related to the Company’s capital investment in its hotels. These capitalized costs totaled $0.1 million during both the three months ended September 30, 2019 and 2018, and $0.3 million during both the nine months ended September 30, 2019 and 2018. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2019 | |
Commitments and Contingencies | |
Commitments and Contingencies | 12. Commitments and Contingencies Management Agreements Management agreements with the Company’s third-party hotel managers require the Company to pay between 1.75% and 3.0% 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, 2019 and 2018 were included in other property-level expenses on the Company’s consolidated statements of operations as follows (unaudited and in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Basic management fees $ 7,767 $ 7,879 $ 23,404 $ 24,225 Incentive management fees 511 1,339 6,041 6,187 Total basic and incentive management fees $ 8,278 $ 9,218 $ 29,445 $ 30,412 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. Total license and franchise fees incurred by the Company during the three and nine months ended September 30, 2019 and 2018 were included in franchise costs on the Company’s consolidated statements of operations as follows (unaudited and in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Franchise assessments (1) $ 6,391 $ 6,501 $ 18,005 $ 19,633 Franchise royalties 2,215 2,666 6,019 7,348 Total franchise costs $ 8,606 $ 9,167 $ 24,024 $ 26,981 (1) Includes advertising, reservation and frequent guest program assessments. Renovation and Construction Commitments At September 30, 2019, the Company had various contracts outstanding with third parties in connection with the ongoing renovations of certain of its hotel properties. The remaining commitments under these contracts at September 30, 2019 totaled $53.3 million. Concentration of Risk The concentration of the Company’s hotels in California, Florida, the greater Washington DC area, Hawaii, Illinois and Massachusetts exposes the Company’s business to economic and severe weather conditions, competition and real and personal property tax rates unique to these locales. As of September 30, 2019, 15 of the 20 Hotels were geographically concentrated as follows (unaudited): Trailing 12-Month Percentage of Total Number of Hotels Total Rooms Consolidated Revenue California 5 30 % 33 % Florida 2 9 % 10 % Greater Washington DC area 2 13 % 11 % Hawaii 1 5 % 11 % Illinois 3 11 % 7 % Massachusetts 2 14 % 15 % Other The Company has provided customary unsecured indemnities to certain lenders, including in particular, environmental indemnities. 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, 2019, the Company had $0.4 million of outstanding irrevocable letters of credit to guarantee 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, 2019. The Company is subject to various claims, lawsuits and legal proceedings, including routine litigation arising in the ordinary course of business, regarding the operation of its hotels, its managers and other Company matters. While it is not possible to ascertain the ultimate outcome of such matters, the Company believes that the aggregate identifiable amount of such liabilities, if any, in excess of amounts covered by insurance will not have a material adverse impact on its financial condition or results of operations. The outcome of claims, lawsuits and legal proceedings brought against the Company, however, is subject to significant uncertainties. |
Subsequent Event
Subsequent Event | 9 Months Ended |
Sep. 30, 2019 | |
Subsequent Event | |
Subsequent Event | 13. Subsequent Event On October 23, 2019, the Company sold the leasehold interest in the Courtyard by Marriott Los Angeles for a gross sale price of $50.0 million. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2019 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements as of September 30, 2019 and December 31, 2018, and for the three and nine months ended September 30, 2019 and 2018, include the accounts of the Company, the Operating Partnership, the TRS Lessee and their controlled subsidiaries. All significant intercompany balances and transactions have been eliminated. If the Company determines that it has an interest in a variable interest entity, the Company will consolidate the entity when it is determined to be the primary beneficiary of the entity. 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, 2018, filed with the Securities and Exchange Commission on February 14, 2019. Operating results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. The Company does not have any comprehensive income other than what is included in net income. If the Company has any comprehensive income in the future such that a statement of comprehensive income would be necessary, the Company will include such statement in one continuous consolidated statement of operations. Certain prior year amounts in these financial statements have been reclassified to conform to the presentation for the three and nine months ended September 30, 2019. 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. |
Earnings Per Share | Earnings Per Share The Company applies the two-class method when computing its earnings per share. Net income per share for each class of stock is calculated assuming all of the Company’s net income is distributed as dividends to each class of stock based on their contractual rights. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are considered participating securities and are included in the computation of earnings per share. 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 (before their expiration in April 2018), 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 (unaudited and in thousands, except per share data): Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Numerator: Net income $ 33,545 $ 91,586 $ 97,379 $ 181,303 Income from consolidated joint venture attributable to noncontrolling interest (2,508) (2,376) (6,062) (7,189) Preferred stock dividends (3,208) (3,208) (9,622) (9,622) Distributions paid on unvested restricted stock compensation (61) (59) (183) (177) Undistributed income allocated to unvested restricted stock compensation (89) (385) (257) (689) Numerator for basic and diluted income attributable to common stockholders $ 27,679 $ 85,558 $ 81,255 $ 163,626 Denominator: Weighted average basic and diluted common shares outstanding 224,530 227,068 226,369 225,538 Basic and diluted income attributable to common stockholders per common share $ 0.12 $ 0.38 $ 0.36 $ 0.73 The Company’s unvested restricted shares associated with its long-term incentive plan and shares associated with common stock options, as applicable, have been excluded from the above calculation of earnings per share for the three and nine months ended September 30, 2019 and 2018, as their inclusion would have been anti-dilutive. |
Noncontrolling Interest | Noncontrolling Interest The Company’s consolidated financial statements include an entity in which the Company has a controlling financial interest. Noncontrolling interest is the portion of equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. Such noncontrolling interest is reported on the consolidated balance sheets within equity, separately from the Company’s equity. On the consolidated statements of operations, revenues, expenses and net income or loss from the less-than-wholly owned subsidiary are reported at their consolidated amounts, including both the amounts attributable to the Company and the noncontrolling interest. Income or loss is allocated to the noncontrolling interest based on its 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 stockholders’ equity, noncontrolling interest and total equity. At both September 30, 2019 and December 31, 2018, the noncontrolling interest reported in the Company’s consolidated financial statements consisted of a third-party’s 25.0% ownership interest in the Hilton San Diego Bayfront. |
Investment in Hotel Properties | Investment in Hotel Properties Investments in hotel properties, including land, buildings, furniture, fixtures and equipment (“FF&E”) and identifiable intangible assets are recorded at fair value upon acquisition. Property and equipment purchased after the hotel acquisition date is recorded at cost. Replacements and improvements are capitalized, while repairs and maintenance are expensed as incurred. Upon the sale or retirement of a fixed asset, the cost and related accumulated depreciation is removed from the Company’s accounts and any resulting gain or loss is included in the statements of operations. Depreciation expense is based on the estimated life of the Company’s assets. The life is based on a number of assumptions, including the cost and timing of capital expenditures to maintain and refurbish the Company’s hotels, as well as specific market and economic conditions. Hotel properties are depreciated using the straight-line method over estimated useful lives primarily ranging from five to 40 years for buildings and improvements and three to 12 years for FF&E. Intangible assets are amortized using the straight-line method over their estimated useful life or over the length of the related agreement, whichever is shorter. The Company’s investment in hotel properties, net also includes initial franchise fees which are recorded at cost and amortized using the straight-line method over the terms of the franchise agreements ranging from 14 to 27 years. All other franchise fees that are based on the Company’s results of operations are expensed as incurred. While the Company believes its estimates are reasonable, a change in the estimated lives could affect depreciation expense and net income or the gain or loss on the sale of any of the Company’s hotels. The Company has not changed the useful lives of any of its assets during the periods discussed. Impairment losses are recorded on long-lived assets to be held and used by the Company when indicators of impairment are present and the future undiscounted net cash flows expected to be generated by those assets, based on the Company’s anticipated investment horizon, are less than the assets’ carrying amount. No single indicator would necessarily result in the Company preparing an estimate to determine if a hotel’s future undiscounted cash flows are less than the book value of the hotel. The Company uses judgment to determine if the severity of any single indicator, or the fact there are a number of indicators of less severity that when combined, would result in an indication that a hotel requires an estimate of the undiscounted cash flows to determine if an impairment has occurred. If a hotel is considered to be impaired, the related assets are adjusted to their estimated fair value and an impairment loss is recognized. The impairment loss recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. The Company performs a fair value assessment using a discounted cash flow analysis to estimate the fair value of the hotel, taking into account the hotel’s expected cash flow from operations, the Company’s estimate of how long it will continue to own the hotel and the estimated proceeds from the disposition of the hotel. 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’s judgment is required in determining the discount rate applied to estimated cash flows, the estimated growth of revenues and expenses, net operating income and margins, the need for capital expenditures, as well as specific market and economic conditions. Fair value represents the amount at which an asset could be bought or sold in a current transaction between willing parties, that is, other than a forced or liquidation sale. The estimation process involved in determining if assets have been impaired and in the determination of fair value is inherently uncertain because it requires estimates of current market yields as well as future events and conditions. Such future events and conditions include economic and market conditions, as well as the availability of suitable financing. The realization of the Company’s investment in hotel properties is dependent upon future uncertain events and conditions and, accordingly, the actual timing and amounts realized by the Company may be materially different from their estimated fair values. |
Restricted Cash | Restricted Cash Restricted cash is comprised of reserve accounts for debt service, interest reserves, seasonality reserves, capital replacements, ground leases, property taxes and excess hotel-generated cash that is held in an account for the benefit of a lender. These restricted funds are subject to supervision and disbursement approval by certain of the Company’s lenders and/or hotel managers. |
Revenue Recognition | Revenue Recognition Revenues are recognized when control of the promised goods or services is transferred to hotel guests, which is generally defined as the date upon which a guest occupies a room and/or utilizes the hotel’s services. Room revenue is recognized over a guest’s stay at a previously agreed upon daily rate. Additionally, some of the Company’s hotel rooms are booked through independent internet travel intermediaries. If the guest pays the independent internet travel intermediary directly, revenue for the room is recognized by the Company at the price the Company sold the room to the independent internet travel intermediary, less any discount or commission paid. If the guest pays the Company directly, revenue for the room is recognized by the Company on a gross basis, with the related discount or commission recognized in room expense. A majority of the Company’s hotels participate in frequent guest programs sponsored by the hotel brand owners whereby the hotel allows guests to earn loyalty points during their hotel stay. The Company expenses charges associated with these programs as incurred, and recognizes revenue at the amount it will receive from the brand when a guest redeems their loyalty points by staying at one of the Company’s hotels. In addition, some contracts for rooms or food and beverage services require an advance deposit, which the Company records as deferred revenue (or a contract liability) and recognizes once the performance obligations are satisfied. Food and beverage revenue and other ancillary services revenue are generated when a customer chooses to purchase goods or services separately from a hotel room. These revenue streams are recognized during the time the goods or services are provided to the customer at the amount the Company expects to be entitled to in exchange for those goods or services. For those ancillary services provided by third parties, the Company assesses whether it is the principal or the agent. If the Company is the principal, revenue is recognized based upon the gross sales price. If the Company is the agent, revenue is recognized based upon the commission earned from the third party. Additionally, the Company collects sales, use, occupancy and other similar taxes at its hotels. These taxes are collected from customers at the time of purchase, but are not included in revenue. The Company records a liability upon collection of such taxes from the customer, and relieves the liability when payments are remitted to the applicable governmental agency. Trade receivables and contract liabilities consisted of the following (in thousands): September 30, December 31, 2019 2018 (unaudited) Trade receivables, net (1) $ 25,090 $ 18,982 Contract liabilities (2) $ 17,581 $ 16,711 (1) Trade receivables are included in accounts receivable, net on the accompanying consolidated balance sheets. (2) Contract liabilities consist of advance deposits, and are included in both other current liabilities and other liabilities on the accompanying consolidated balance sheets. Of the amount outstanding at December 31, 2018, approximately $1.0 million and $16.3 million were recognized in revenue during the three and nine months ended September 30, 2019, respectively. |
Segment Reporting | Segment Reporting The Company considers each of its hotels to be an operating segment, and allocates resources and assesses the operating performance for each hotel. Because all of the Company’s hotels have similar economic characteristics, facilities and services, the hotels have been aggregated into a single reportable segment, hotel ownership. |
New Accounting Standards and Accounting Changes | New Accounting Standards and Accounting Changes In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-02, “ Leases (Topic 842) ● Lessees: Leases are accounted for using a dual approach, classifying leases as either operating or financing based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification determines whether the lease expense is recognized on a straight-line basis over the term of the lease (for operating leases) or based on an effective interest method (for finance leases). A lessee is required to record a right-of-use asset and a lease liability on its balance sheet for all leases with a term of greater than 12 months regardless of their classification as operating or finance leases. ● Lessors: Leases are accounted for using an approach that is substantially equivalent to existing guidance for operating, sales-type and financing leases, but aligned with the FASB’s revenue standard. Subsequent to the issuance of ASU No. 2016-02, the FASB issued several clarifications and updates, including Accounting Standards Update No. 2018-01, “ Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842 Codification Improvements to Topic 842, Leases Leases (Topic 842): Targeted Improvements Leases (Topic 842): Narrow-Scope Improvements for Lessors Leases (Topic 842): Codification Improvements The Company adopted ASU No. 2016-02 on January 1, 2019, along with its related clarifications and amendments, and made the following elections: ● to not separate lease components from nonlease components by underlying asset. By making this election, the Company is required to account for the nonlease components together with the related lease components as a single lease component (ASU No. 2016-02); ● to not reassess whether a land easement not previously accounted for as a lease would now be a lease (ASU No. 2018-01); ● to not reassess whether an expired or existing contract meets the definition of a lease (ASU No. 2018-11); ● to not reassess the lease classification at the adoption date for existing leases (ASU No. 2018-11); ● to not reassess whether costs previously capitalized as initial direct costs would continue to be amortized (ASU No. 2018-11); ● to apply the optional modified retrospective transition approach, allowing companies to initially apply the standard at the adoption date without revising comparable periods (ASU No. 2018-11); and ● to not evaluate whether sales taxes and other similar taxes imposed by a governmental authority on a specific lease revenue-producing transaction are the primary obligation of the lessor as owner of the underlying leased asset (ASU No. 2018-20). Lessee Perspective Balance Pre-Adoption Adjustments Balance Post-Adoption (unaudited) (unaudited) Operating lease right-of-use assets, net $ — $ 64,075 $ 64,075 Investment in hotel properties, net (intangible assets) $ 50,889 (18,398) $ 32,491 Total asset adjustments $ 45,677 Operating lease obligations, current and noncurrent $ — $ 58,663 $ 58,663 Other liabilities (deferred rent) $ 12,986 (12,986) $ — Total liability adjustments $ 45,677 Upon adoption of the new standard, the Company reclassified amounts related to its finance leases as follows (in thousands): Balance Pre-Adoption Adjustments Balance Post-Adoption (unaudited) (unaudited) Finance lease right-of-use assets, net $ — $ 55,727 $ 55,727 Investment in hotel properties, net (land) $ 611,993 (6,605) $ 605,388 Investment in hotel properties, net (buildings and improvements, net of accumulated depreciation) $ 2,167,680 (49,122) $ 2,118,558 Total asset adjustments $ — Finance lease obligations, current and noncurrent $ — $ 27,010 $ 27,010 Capital lease obligations, current and noncurrent $ 27,010 (27,010) $ — Total liability adjustments $ — The Company determines if a contract is a lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Expense for these short-term leases is recognized on a straight-line basis over the lease term. For leases with an initial term greater than 12 months, the Company records a ROU asset and a corresponding lease obligation. ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease obligations represent the Company’s obligation to make fixed lease payments as stipulated by the lease. Operating lease obligations are recognized at the lease commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate (“IBR”) based on information available at the commencement date in determining the present value of lease payments over the lease term. The IBR is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. In order to estimate the Company’s IBR, the Company first looks to its own unsecured debt offerings, and adjusts the rate for both length of term and secured borrowing using available market data as well as consultations with leading national financial institutions that are active in the issuance of both secured and unsecured notes. Operating lease ROU assets are recognized at the lease commencement date, and include the amount of the initial operating lease obligation, any lease payments made at or before the commencement date, excluding any lease incentives received, and any initial direct costs incurred. For leases that have extension options that the Company can exercise at its discretion, management uses judgment to determine if it is reasonably certain that the Company will in fact exercise such option. If the extension option is reasonably certain to occur, the Company includes the extended term’s lease payments in the calculation of the respective lease liability. None of the Company’s leases contain any material residual value guarantees or material restrictive covenants. The Company reviews its right-of-use assets for indicators of impairment. If such assets are considered to be impaired, the related assets are adjusted to their estimated fair value and an impairment loss is recognized. The impairment loss recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. Lessor Perspective See Note 9 for additional lease disclosures. In June 2016, the FASB issued Accounting Standards Update No. 2016-13, “ Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Codification Improvements to Topic 326, Financial Instruments-Credit Losses |
Organization and Description _2
Organization and Description of Business (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Organization and Description of Business | |
Schedule of number of hotels managed by each third-party manager | As of September 30, 2019, the Company had interests in 21 hotels (the “21 Hotels”), one of which was considered held for sale, leaving 20 hotels (the “20 Hotels”) currently held for investment. The Company’s third-party managers included the following: Number of Hotels Subsidiaries of Marriott International, Inc. or Marriott Hotel Services, Inc. (collectively, “Marriott”) 8 Interstate Hotels & Resorts, Inc. 3 (1) Highgate Hotels L.P. and an affiliate 3 Crestline Hotels & Resorts 2 Hilton Worldwide 2 Davidson Hotels & Resorts 1 Hyatt Corporation 1 Singh Hospitality, LLC 1 Total hotels owned as of September 30, 2019 21 (1) The Courtyard by Marriott Los Angeles was considered held for sale as of September 30, 2019, and subsequently sold on October 23, 2019. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Summary of Significant Accounting Policies | |
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 (unaudited and in thousands, except per share data): Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Numerator: Net income $ 33,545 $ 91,586 $ 97,379 $ 181,303 Income from consolidated joint venture attributable to noncontrolling interest (2,508) (2,376) (6,062) (7,189) Preferred stock dividends (3,208) (3,208) (9,622) (9,622) Distributions paid on unvested restricted stock compensation (61) (59) (183) (177) Undistributed income allocated to unvested restricted stock compensation (89) (385) (257) (689) Numerator for basic and diluted income attributable to common stockholders $ 27,679 $ 85,558 $ 81,255 $ 163,626 Denominator: Weighted average basic and diluted common shares outstanding 224,530 227,068 226,369 225,538 Basic and diluted income attributable to common stockholders per common share $ 0.12 $ 0.38 $ 0.36 $ 0.73 |
Schedule of contract assets and liabilities | Trade receivables and contract liabilities consisted of the following (in thousands): September 30, December 31, 2019 2018 (unaudited) Trade receivables, net (1) $ 25,090 $ 18,982 Contract liabilities (2) $ 17,581 $ 16,711 (1) Trade receivables are included in accounts receivable, net on the accompanying consolidated balance sheets. (2) Contract liabilities consist of advance deposits, and are included in both other current liabilities and other liabilities on the accompanying consolidated balance sheets. Of the amount outstanding at December 31, 2018, approximately $1.0 million and $16.3 million were recognized in revenue during the three and nine months ended September 30, 2019, respectively. |
Schedule of financial statement adjustments due to adoption of ASU 2016-02 | The adjustments related to operating leases affected the Company’s January 1, 2019 consolidated balance sheet as follows (in thousands): Balance Pre-Adoption Adjustments Balance Post-Adoption (unaudited) (unaudited) Operating lease right-of-use assets, net $ — $ 64,075 $ 64,075 Investment in hotel properties, net (intangible assets) $ 50,889 (18,398) $ 32,491 Total asset adjustments $ 45,677 Operating lease obligations, current and noncurrent $ — $ 58,663 $ 58,663 Other liabilities (deferred rent) $ 12,986 (12,986) $ — Total liability adjustments $ 45,677 Upon adoption of the new standard, the Company reclassified amounts related to its finance leases as follows (in thousands): Balance Pre-Adoption Adjustments Balance Post-Adoption (unaudited) (unaudited) Finance lease right-of-use assets, net $ — $ 55,727 $ 55,727 Investment in hotel properties, net (land) $ 611,993 (6,605) $ 605,388 Investment in hotel properties, net (buildings and improvements, net of accumulated depreciation) $ 2,167,680 (49,122) $ 2,118,558 Total asset adjustments $ — Finance lease obligations, current and noncurrent $ — $ 27,010 $ 27,010 Capital lease obligations, current and noncurrent $ 27,010 (27,010) $ — Total liability adjustments $ — |
Investment in Hotel Properties
Investment in Hotel Properties (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Investment in Hotel Properties | |
Schedule of investment in hotel properties | Investment in hotel properties, net for the 20 Hotels consisted of the following (in thousands): September 30, December 31, 2019 2018 (unaudited) Land $ 605,581 $ 611,993 Buildings and improvements 2,968,241 2,983,308 Furniture, fixtures and equipment 512,333 486,441 Intangible assets 33,050 56,021 Franchise fees 743 778 Construction in progress 34,884 60,744 Investment in hotel properties, gross 4,154,832 4,199,285 Accumulated depreciation and amortization (1,243,980) (1,168,287) Investment in hotel properties, net $ 2,910,852 $ 3,030,998 |
Disposals (Tables)
Disposals (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Courtyard by Marriott Los Angeles | Held for sale, not considered a discontinued operation | |
Schedule of assets and liabilities held for sale | The Company classified the assets and liabilities of the Courtyard by Marriott Los Angeles as held for sale at September 30, 2019 as follows (unaudited and in thousands): September 30, 2019 Accounts receivable $ 118 Prepaid expenses and other current assets 126 Investment in hotel properties, net 10,551 Finance lease right-of-use asset 6,605 Other assets 1,081 Assets held for sale, net $ 18,481 Accounts payable and accrued expenses $ 202 Accrued payroll and employee benefits 229 Other current liabilities 409 Finance lease obligation, less current portion (1) 11,606 Liabilities of assets held for sale $ 12,446 (1) The finance lease at the Courtyard by Marriott Los Angeles had a discount rate of 10.25% . |
Fair Value Measurements and I_2
Fair Value Measurements and Interest Rate Derivatives (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Fair Value Measurements and Interest Rate Derivatives | |
Schedule of assets measured at fair value on a recurring and nonrecurring basis | No assets were measured at fair value at September 30, 2019. The following table presents the Company’s assets measured at fair value on a recurring and nonrecurring basis at December 31, 2018 (in thousands): Fair Value Measurements at Reporting Date Total Level 1 Level 2 Level 3 December 31, 2018: Interest rate swap derivatives $ 4,789 $ — $ 4,789 $ — Life insurance policy (1) 386 — 386 — Total assets measured at fair value at December 31, 2018 $ 5,175 $ — $ 5,175 $ — (1) Prior to the Company’s release of collateral assignment in August 2019, the split life insurance policy was for a former Company associate. As of December 31, 2018, the amount was included in other assets, net on the accompanying consolidated balance sheet. |
Schedule of liabilities measured at fair value on a recurring and nonrecurring basis | The following table presents the Company’s liabilities measured at fair value on a recurring and nonrecurring basis at September 30, 2019 and December 31, 2018 (in thousands): Fair Value Measurements at Reporting Date Total Level 1 Level 2 Level 3 September 30, 2019 (unaudited): Interest rate swap derivatives $ 1,951 $ — $ 1,951 $ — Total liabilities measured at fair value at September 30, 2019 $ 1,951 $ — $ 1,951 $ — December 31, 2018: Retirement benefit agreement (1) $ 386 $ — $ 386 $ — Total liabilities measured at fair value at December 31, 2018 $ 386 $ — $ 386 $ — (1) Prior to the Company’s release of collateral assignment in August 2019, the retirement benefit agreement was for a former Company associate. As of December 31, 2018, the amount was included in accrued payroll and employee benefits on the accompanying consolidated balance sheet. |
Schedule of interest rate derivatives | The Company’s interest rate derivatives, which are not designated as effective cash flow hedges, consisted of the following at September 30, 2019 (unaudited) and December 31, 2018 (in thousands): Estimated Fair Value of Assets (Liabilities) (1) Strike / Capped Effective Maturity Notional September 30, December 31, Hedged Debt Type Rate Index Date Date Amount 2019 2018 Hilton San Diego Bayfront Cap 4.250 % 1-Month LIBOR May 1, 2017 May 1, 2019 N/A $ N/A $ — Hilton San Diego Bayfront Cap 6.000 % 1-Month LIBOR November 10, 2017 December 9, 2020 $ 220,000 — — $85.0 million term loan Swap 1.591 % 1-Month LIBOR October 29, 2015 September 2, 2022 $ 85,000 (453) 2,521 $100.0 million term loan Swap 1.853 % 1-Month LIBOR January 29, 2016 January 31, 2023 $ 100,000 (1,498) 2,268 $ (1,951) $ 4,789 (1) The fair values of both swap agreements are included in other liabilities and in other assets, net on the accompanying consolidated balance sheets as of September 30, 2019 and December 31, 2018, respectively. |
Schedule of changes in fair value of interest rate derivatives | Noncash changes in the fair values of the Company’s interest rate derivatives resulted in increases (decreases) to interest expense for the three and nine months ended September 30, 2019 and 2018 as follows (unaudited and in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Noncash interest on derivatives $ 1,098 $ (870) $ 6,740 $ (5,147) |
Schedule of principal values and estimated fair values of debt | The Company’s principal balances and fair market values of its consolidated debt as of September 30, 2019 (unaudited) and December 31, 2018 were as follows (in thousands): September 30, 2019 December 31, 2018 Carrying Amount (1) Fair Value Carrying Amount (1) Fair Value Debt $ 977,058 $ 979,569 $ 982,828 $ 971,082 (1) The principal balance of debt is presented before any unamortized deferred financing costs. |
Other Assets (Tables)
Other Assets (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Other Assets | |
Schedule of other assets | Other assets, net consisted of the following (in thousands): September 30, December 31, 2019 2018 (unaudited) Property and equipment, net $ 7,833 $ 8,426 Goodwill — 990 Deferred rent on straight-lined third-party tenant leases 3,435 3,177 Deferred income tax asset, net 8,349 8,407 Interest rate derivatives — 4,789 Other receivables 2,478 3,209 Other 329 819 Total other assets, net $ 22,424 $ 29,817 |
Notes Payable (Tables)
Notes Payable (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Notes Payable | |
Schedule of notes payable | Notes payable consisted of the following (in thousands): September 30, December 31, 2019 2018 (unaudited) Notes payable requiring payments of interest and principal, with fixed rates ranging from 4.12% to 5.95% ; maturing at dates ranging from November 2020 through January 2025 . The notes are collateralized by first deeds of trust on four hotel properties at both September 30, 2019 and December 31, 2018. $ 332,058 $ 337,828 Note payable requiring payments of interest only, bearing a blended rate of one -month LIBOR plus 105 basis points; initial maturity in December 2020 with three one -year extensions. The note is collateralized by a first deed of trust on one hotel property. 220,000 220,000 Unsecured term loan requiring payments of interest only, with a blended interest rate based on a pricing grid with a range of 135 to 220 basis points over one -month LIBOR, depending on the Company's leverage ratios. LIBOR has been swapped to a fixed rate of 1.591% , resulting in an effective interest rate of 2.941% . Matures in September 2022 . 85,000 85,000 Unsecured term loan requiring payments of interest only, with a blended interest rate based on a pricing grid with a range of 135 to 220 basis points over one -month LIBOR, depending on the Company's leverage ratios. LIBOR has been swapped to a fixed rate of 1.853% , resulting in an effective interest rate of 3.203% . Matures in January 2023 . 100,000 100,000 Unsecured Senior Notes requiring semi-annual payments of interest only, bearing interest at 4.69% ; maturing in January 2026 . 120,000 120,000 Unsecured Senior Notes requiring semi-annual payments of interest only, bearing interest at 4.79% ; maturing in January 2028 . 120,000 120,000 Total notes payable $ 977,058 $ 982,828 Current portion of notes payable $ 8,237 $ 7,804 Less: current portion of deferred financing costs (1,966) (1,966) Carrying value of current portion of notes payable $ 6,271 $ 5,838 Notes payable, less current portion $ 968,821 $ 975,024 Less: long-term portion of deferred financing costs (2,325) (3,799) Carrying value of notes payable, less current portion $ 966,496 $ 971,225 |
Schedule of interest expense | Total interest incurred and expensed on the notes payable was as follows (unaudited and in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Interest expense on debt and finance lease obligations $ 11,406 $ 11,619 $ 34,399 $ 34,364 Noncash interest on derivatives and finance lease obligations, net 1,155 (818) 6,908 (4,995) Amortization of deferred financing costs 698 748 2,094 2,240 Total interest expense $ 13,259 $ 11,549 $ 43,401 $ 31,609 |
Other Current Liabilities and_2
Other Current Liabilities and Other Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Other Current Liabilities and Other Liabilities | |
Schedule of other current liabilities | Other Current Liabilities Other current liabilities consisted of the following (in thousands): September 30, December 31, 2019 2018 (unaudited) Property, sales and use taxes payable $ 18,934 $ 15,684 Income tax payable 25 125 Accrued interest 4,521 7,306 Advance deposits 17,085 16,711 Management fees payable 786 1,142 Other 4,492 3,994 Total other current liabilities $ 45,843 $ 44,962 |
Schedule of other liabilities | Other liabilities consisted of the following (in thousands): September 30, December 31, 2019 2018 (unaudited) Deferred revenue $ 5,296 $ 5,017 Deferred rent — 12,986 Deferred property taxes payable (1) 9,342 9,284 Interest rate derivatives 1,951 — Deferred income tax liability — 304 Other 3,235 3,112 Total other liabilities $ 19,824 $ 30,703 (1) Under the terms of a sublease agreement at the Hilton Times Square, sublease rent amounts are currently considered to be property taxes under a payment-in-lieu of taxes (“PILOT”) program, and will be paid beginning in 2020 through 2029. When the PILOT program ends in 2020, the sublease agreement will be modified, rent amounts will be reassessed and the Company will determine if the sublease agreement qualifies as a lease. |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Leases | |
Schedule of supplemental balance sheet information related to leases | Leases were included on the Company’s consolidated balance sheet as follows (unaudited and in thousands): September 30, 2019 Finance Lease: Right-of-use asset, net (buildings and improvements) $ 58,799 Accumulated depreciation (10,780) Right-of-use asset, net $ 48,019 Accounts payable and accrued expenses $ 1 Lease obligations, less current portion 15,571 Total lease obligation $ 15,572 Remaining lease term 78.3 years Discount rate 9.0 % Operating Leases: Right-of-use assets, net $ 61,512 Accounts payable and accrued expenses $ 4,671 Lease obligations, less current portion 50,905 Total lease obligations $ 55,576 Weighted average remaining lease term 24.7 years Weighted average discount rate 5.4 % |
Lease costs | The components of lease expense were as follows (unaudited and in thousands): Three Months Ended Nine Months Ended September 30, 2019 September 30, 2019 Finance lease cost: Amortization of right-of-use assets $ 367 $ 1,103 Interest on lease obligations (1) 647 1,936 Total finance lease cost $ 1,014 $ 3,039 Operating lease cost (2) $ 3,687 10,065 (1) Interest on lease obligations includes interest expense on the Courtyard by Marriott Los Angeles’s finance lease obligation, which, along with certain of the hotel’s other assets and liabilities, was classified as held for sale as of September 30, 2019 (see Note 4). For the three and nine months ended September 30, 2019, interest expense on the hotel’s finance lease obligation totaled $0.3 million and $0.9 million, respectively. (2) Several of the Company’s hotels pay percentage rent, which is calculated on operating revenues above certain thresholds. During the three and nine months ended September 30, 2019, the Company recorded $2.0 million and $4.9 million, respectively, in percentage rent related to its operating leases. |
Schedule of supplemental cash flow information related to leases | Supplemental cash flow information related to leases was as follows (unaudited and in thousands): Nine Months Ended September 30, 2019 Operating cash flows used for operating leases $ 5,365 Operating right-of-use assets obtained in exchange for operating lease obligations $ 45,677 |
Summary of Future payments on leases, Operating lease | Future maturities of the Company’s finance and operating lease obligations at September 30, 2019 were as follows (unaudited and in thousands): Finance Lease (1) Operating Lease Year 1 $ 1,403 $ 7,506 Year 2 1,403 7,557 Year 3 1,403 7,608 Year 4 1,403 7,662 Year 5 1,403 7,717 Thereafter 102,751 75,925 Total lease payments 109,766 113,975 Less: interest (2) (94,194) (58,399) Present value of lease obligations $ 15,572 $ 55,576 (1) Does not include the finance lease obligation at the Courtyard by Marriott Los Angeles, which was classified as held for sale at September 30, 2019 (see Note 4). (2) Calculated using the appropriate discount rate for each lease. |
Summary of Future payments on leases, Finance lease | Finance Lease (1) Operating Lease Year 1 $ 1,403 $ 7,506 Year 2 1,403 7,557 Year 3 1,403 7,608 Year 4 1,403 7,662 Year 5 1,403 7,717 Thereafter 102,751 75,925 Total lease payments 109,766 113,975 Less: interest (2) (94,194) (58,399) Present value of lease obligations $ 15,572 $ 55,576 (1) Does not include the finance lease obligation at the Courtyard by Marriott Los Angeles, which was classified as held for sale at September 30, 2019 (see Note 4). (2) Calculated using the appropriate discount rate for each lease. |
Long-Term Incentive Plan (Table
Long-Term Incentive Plan (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Long-Term Incentive Plan | |
Schedule of amortization expense and forfeitures related to restricted shares | The Company’s amortization expense and forfeitures related to restricted shares for the three and nine months ended September 30, 2019 and 2018 were as follows (unaudited and in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Amortization expense, including forfeitures $ 2,146 $ 2,073 $ 7,168 $ 6,938 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
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, 2019 and 2018 were included in other property-level expenses on the Company’s consolidated statements of operations as follows (unaudited and in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Basic management fees $ 7,767 $ 7,879 $ 23,404 $ 24,225 Incentive management fees 511 1,339 6,041 6,187 Total basic and incentive management fees $ 8,278 $ 9,218 $ 29,445 $ 30,412 |
Schedule of license and franchise costs | Total license and franchise fees incurred by the Company during the three and nine months ended September 30, 2019 and 2018 were included in franchise costs on the Company’s consolidated statements of operations as follows (unaudited and in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Franchise assessments (1) $ 6,391 $ 6,501 $ 18,005 $ 19,633 Franchise royalties 2,215 2,666 6,019 7,348 Total franchise costs $ 8,606 $ 9,167 $ 24,024 $ 26,981 (1) Includes advertising, reservation and frequent guest program assessments. |
Schedule of hotel geographic concentration of risk | As of September 30, 2019, 15 of the 20 Hotels were geographically concentrated as follows (unaudited): Trailing 12-Month Percentage of Total Number of Hotels Total Rooms Consolidated Revenue California 5 30 % 33 % Florida 2 9 % 10 % Greater Washington DC area 2 13 % 11 % Hawaii 1 5 % 11 % Illinois 3 11 % 7 % Massachusetts 2 14 % 15 % |
Organization and Description _3
Organization and Description of Business (Details) | 9 Months Ended |
Sep. 30, 2019property | |
Organization and Description of Business | |
Number of hotels owned by the Company | 21 |
Number of hotels held for investment | 20 |
Sunstone Hotel Partnership, LLC | |
Organization and Description of Business | |
Controlling interest owned (as a percent) | 100.00% |
Hotel owned by the Company | |
Organization and Description of Business | |
Number of hotels owned by the Company | 21 |
Hotel owned by the Company | Marriott | |
Organization and Description of Business | |
Number of hotels owned by the Company | 8 |
Hotel owned by the Company | Interstate Hotels & Resorts, Inc | |
Organization and Description of Business | |
Number of hotels owned by the Company | 3 |
Hotel owned by the Company | Highgate Hotels L.P. and an affiliate | |
Organization and Description of Business | |
Number of hotels owned by the Company | 3 |
Hotel owned by the Company | Crestline Hotels & Resorts | |
Organization and Description of Business | |
Number of hotels owned by the Company | 2 |
Hotel owned by the Company | Hilton Worldwide | |
Organization and Description of Business | |
Number of hotels owned by the Company | 2 |
Hotel owned by the Company | Davidson Hotels & Resorts | |
Organization and Description of Business | |
Number of hotels owned by the Company | 1 |
Hotel owned by the Company | Hyatt Corporation | |
Organization and Description of Business | |
Number of hotels owned by the Company | 1 |
Hotel owned by the Company | Singh Hospitality, LLC | |
Organization and Description of Business | |
Number of hotels owned by the Company | 1 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Numerator: | ||||||||
Net income | $ 33,545 | $ 45,918 | $ 17,916 | $ 91,586 | $ 51,262 | $ 38,455 | $ 97,379 | $ 181,303 |
Income from consolidated joint venture attributable to noncontrolling interest | (2,508) | (2,376) | (6,062) | (7,189) | ||||
Preferred stock dividends | (3,208) | (3,208) | (9,622) | (9,622) | ||||
Distributions paid on unvested restricted stock compensation | (61) | (59) | (183) | (177) | ||||
Undistributed income allocated to unvested restricted stock compensation | (89) | (385) | (257) | (689) | ||||
Numerator for basic and diluted income attributable to common stockholders | $ 27,679 | $ 85,558 | $ 81,255 | $ 163,626 | ||||
Denominator: | ||||||||
Weighted average basic and diluted common shares outstanding (in shares) | 224,530 | 227,068 | 226,369 | 225,538 | ||||
Basic and diluted income attributable to common stockholders per common share (in dollars per share) | $ 0.12 | $ 0.38 | $ 0.36 | $ 0.73 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2019 | Dec. 31, 2018 | |
Revenue Recognition | |||
Trade receivables, net | $ 25,090 | $ 25,090 | $ 18,982 |
Contract liabilities | 17,581 | 17,581 | $ 16,711 |
Deferred revenue recognized | $ 1,000 | $ 16,300 | |
Hilton San Diego Bayfront | |||
Stockholders' Equity Attributable to Noncontrolling Interest | |||
Noncontrolling interest percentage in Hilton San Diego Bayfront | 25.00% | 25.00% | 25.00% |
Initial franchise fees | Minimum | |||
Investments in Hotel Properties | |||
Estimated useful life | 14 years | ||
Initial franchise fees | Maximum | |||
Investments in Hotel Properties | |||
Estimated useful life | 27 years | ||
Buildings and improvements | Minimum | |||
Investments in Hotel Properties | |||
Estimated useful life for property, plant and equipment | 5 years | ||
Buildings and improvements | Maximum | |||
Investments in Hotel Properties | |||
Estimated useful life for property, plant and equipment | 40 years | ||
Furniture, fixtures and equipment | Minimum | |||
Investments in Hotel Properties | |||
Estimated useful life for property, plant and equipment | 3 years | ||
Furniture, fixtures and equipment | Maximum | |||
Investments in Hotel Properties | |||
Estimated useful life for property, plant and equipment | 12 years |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Adoption of New Lease Standard (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2019 | Jan. 01, 2019 | Dec. 31, 2018 | |
Operating Leases | |||
Operating lease right-of-use assets, net | $ 61,512 | $ 64,075 | |
Intangible assets | 33,050 | 32,491 | $ 56,021 |
Assets | 3,898,837 | 3,972,833 | |
Operating lease obligations, current and noncurrent | 55,576 | 58,663 | |
Deferred rent | 12,986 | ||
Liabilities | 1,186,318 | 1,261,662 | |
Finance Lease | |||
Finance lease right-of-use assets, net | 48,019 | 55,727 | |
Land | 605,581 | 605,388 | 611,993 |
Building and improvements, net | 2,118,558 | ||
Finance lease obligations, current and noncurrent | $ 15,572 | 27,010 | |
Leases | |||
Leases Initial Maximum Term Not Recorded On Balance Sheet | 12 months | ||
Leases Initial Minimum Term Recorded Right Of Use Assets | 12 months | ||
Buildings and improvements | |||
Finance Lease | |||
Finance lease right-of-use assets, net | $ 58,799 | ||
Balance Pre-Adoption | |||
Operating Leases | |||
Intangible assets | 50,889 | ||
Deferred rent | 12,986 | ||
Finance Lease | |||
Land | 611,993 | ||
Building and improvements, net | 2,167,680 | ||
Capital lease obligations, current and noncurrent | $ 27,010 | ||
New Lease Standard Adjustments | |||
Operating Leases | |||
Operating lease right-of-use assets, net | 64,075 | ||
Intangible assets | (18,398) | ||
Assets | 45,677 | ||
Operating lease obligations, current and noncurrent | 58,663 | ||
Deferred rent | (12,986) | ||
Liabilities | 45,677 | ||
Finance Lease | |||
Finance lease right-of-use assets, net | 55,727 | ||
Land | (6,605) | ||
Building and improvements, net | (49,122) | ||
Finance lease obligations, current and noncurrent | 27,010 | ||
Capital lease obligations, current and noncurrent | $ (27,010) |
Investment in Hotel Propertie_2
Investment in Hotel Properties (Details) $ in Thousands | Sep. 30, 2019USD ($)property | Jan. 01, 2019USD ($) | Dec. 31, 2018USD ($) |
Investment in Hotel Properties | |||
Number of hotels held for investment | property | 20 | ||
Land | $ 605,581 | $ 605,388 | $ 611,993 |
Buildings and improvements | 2,968,241 | 2,983,308 | |
Furniture, fixtures and equipment | 512,333 | 486,441 | |
Intangible assets | 33,050 | $ 32,491 | 56,021 |
Franchise fees | 743 | 778 | |
Construction in progress | 34,884 | 60,744 | |
Investment in hotel properties, gross | 4,154,832 | 4,199,285 | |
Accumulated depreciation and amortization | (1,243,980) | (1,168,287) | |
Investment in hotel properties, net | $ 2,910,852 | $ 3,030,998 |
Disposals (Details)
Disposals (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Detail of Amounts Held for Sale | ||
Prepaid expenses and other current assets | $ 14,359 | $ 12,261 |
Assets held for sale, net | 18,481 | |
Finance lease obligation, less current portion | 15,571 | $ 27,009 |
Liabilities of assets held for sale | $ 12,446 | |
Weighted average finance lease discount rate | 9.00% | |
Held for sale, not considered a discontinued operation | Courtyard by Marriott Los Angeles | ||
Detail of Amounts Held for Sale | ||
Accounts receivable | $ 118 | |
Prepaid expenses and other current assets | 126 | |
Investment in hotel properties net | 10,551 | |
Finance lease right-of-use asset | 6,605 | |
Other assets | 1,081 | |
Assets held for sale, net | 18,481 | |
Accounts payable and accrued expenses | 202 | |
Accrued payroll and employee benefits | 229 | |
Other current liabilities | 409 | |
Finance lease obligation, less current portion | 11,606 | |
Liabilities of assets held for sale | $ 12,446 | |
Weighted average finance lease discount rate | 10.25% |
Fair Value Measurements and I_3
Fair Value Measurements and Interest Rate Derivatives - Fair Value Measurements (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2019 | Dec. 31, 2018 | |
Fair value of assets and liabilities measured at fair value on a recurring and nonrecurring basis | |||
Impairment loss | $ 1,394 | ||
Assets: | |||
Interest rate derivative assets | $ 4,789 | ||
Liabilities: | |||
Interest rate derivative liabilities | $ 1,951 | ||
Level 2 | |||
Assets: | |||
Life insurance policy | 386 | ||
Total assets | 5,175 | ||
Liabilities: | |||
Retirement benefit agreement | 386 | ||
Total liabilities | 1,951 | 386 | |
Level 2 | Interest Rate Swap | |||
Assets: | |||
Interest rate derivative assets | 4,789 | ||
Liabilities: | |||
Interest rate derivative liabilities | 1,951 | ||
Total at the end of the period | |||
Assets: | |||
Life insurance policy | 386 | ||
Total assets | 5,175 | ||
Liabilities: | |||
Retirement benefit agreement | 386 | ||
Total liabilities | 1,951 | 386 | |
Total at the end of the period | Interest Rate Swap | |||
Assets: | |||
Interest rate derivative assets | $ 4,789 | ||
Liabilities: | |||
Interest rate derivative liabilities | $ 1,951 |
Fair Value Measurements and I_4
Fair Value Measurements and Interest Rate Derivatives - Interest Rate Derivatives (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Interest Rate Derivatives | |||||
Fair value of interest rate derivatives | $ (1,951) | $ (1,951) | $ 4,789 | ||
Fair values of derivative assets | $ 4,789 | ||||
Noncash interest on derivatives | $ 1,098 | $ (870) | $ 6,740 | $ (5,147) | |
Hilton San Diego Bayfront mortgage payable | |||||
Interest Rate Derivatives | |||||
Interest rate, description of reference rate | one-month LIBOR | one-month LIBOR | |||
Interest Rate Cap | Not designated as hedging instrument | Hilton San Diego Bayfront mortgage payable | |||||
Interest Rate Derivatives | |||||
Strike rate under interest rate cap agreement | 4.25% | 4.25% | 4.25% | ||
Interest rate, description of reference rate | one-month LIBOR | one-month LIBOR | |||
Effective date | May 1, 2017 | May 1, 2017 | |||
Interest rate derivative maturity date | May 1, 2019 | May 1, 2019 | |||
Hilton San Diego Bayfront new interest rate cap | Not designated as hedging instrument | Hilton San Diego Bayfront mortgage payable | |||||
Interest Rate Derivatives | |||||
Strike rate under interest rate cap agreement | 6.00% | 6.00% | 6.00% | ||
Interest rate, description of reference rate | one-month LIBOR | one-month LIBOR | |||
Effective date | Nov. 10, 2017 | Nov. 10, 2017 | |||
Interest rate derivative maturity date | Dec. 9, 2020 | Dec. 9, 2020 | |||
Notional amount | $ 220,000 | $ 220,000 | |||
Interest Rate Swap | Not designated as hedging instrument | $85.0 million term loan | |||||
Interest Rate Derivatives | |||||
Fixed rate under interest rate swap agreement | 1.591% | 1.591% | 1.591% | ||
Interest rate, description of reference rate | one-month LIBOR | one-month LIBOR | |||
Effective date | Oct. 29, 2015 | Oct. 29, 2015 | |||
Interest rate derivative maturity date | Sep. 2, 2022 | Sep. 2, 2022 | |||
Notional amount | $ 85,000 | $ 85,000 | |||
Fair value of interest rate derivatives | $ (453) | $ (453) | $ 2,521 | ||
Interest Rate Swap | Not designated as hedging instrument | $100.0 million term loan | |||||
Interest Rate Derivatives | |||||
Fixed rate under interest rate swap agreement | 1.853% | 1.853% | 1.853% | ||
Interest rate, description of reference rate | one-month LIBOR | one-month LIBOR | |||
Effective date | Jan. 29, 2016 | Jan. 29, 2016 | |||
Interest rate derivative maturity date | Jan. 31, 2023 | Jan. 31, 2023 | |||
Notional amount | $ 100,000 | $ 100,000 | |||
Fair value of interest rate derivatives | $ (1,498) | $ (1,498) | $ 2,268 |
Fair Value Measurements and I_5
Fair Value Measurements and Interest Rate Derivatives - Fair Value of Debt (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Percentage of Debt Bearing Fixed Interest Rates | 77.50% | 77.60% |
Total notes payable | $ 977,058 | $ 982,828 |
Level 3 | ||
Fair value of debt | $ 979,569 | $ 971,082 |
Other Assets (Details)
Other Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Other assets, net | ||
Property and equipment, net | $ 7,833 | $ 8,426 |
Goodwill | 990 | |
Deferred rent on straight-lined third-party tenant leases | 3,435 | 3,177 |
Deferred income tax asset, net | 8,349 | 8,407 |
Interest rate derivative assets | 4,789 | |
Other receivables | 2,478 | 3,209 |
Other | 329 | 819 |
Total other assets, net | $ 22,424 | $ 29,817 |
Notes Payable (Details)
Notes Payable (Details) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019USD ($)property | Dec. 31, 2018USD ($)property | |
Notes payable | ||
Total notes payable | $ 977,058 | $ 982,828 |
Current portion of notes payable | 8,237 | 7,804 |
Less: current portion of deferred financing costs | (1,966) | (1,966) |
Current portion of notes payable, net | 6,271 | 5,838 |
Notes payable, less current portion | 968,821 | 975,024 |
Less: long-term portion of deferred financing costs | (2,325) | (3,799) |
Carrying value of notes payable, less current portion | $ 966,496 | $ 971,225 |
Notes payable maturing in various years | ||
Notes payable | ||
Number of hotels provided as collateral | property | 4 | 4 |
Total notes payable | $ 332,058 | $ 337,828 |
Notes payable maturing in various years | Minimum | ||
Notes payable | ||
Fixed interest rate (as a percent) | 4.12% | 4.12% |
Debt maturity date | Nov. 1, 2020 | Nov. 1, 2020 |
Notes payable maturing in various years | Maximum | ||
Notes payable | ||
Fixed interest rate (as a percent) | 5.95% | 5.95% |
Debt maturity date | Jan. 6, 2025 | Jan. 6, 2025 |
Hilton San Diego Bayfront mortgage payable | ||
Notes payable | ||
Number of hotels provided as collateral | property | 1 | 1 |
Debt maturity date | Dec. 9, 2020 | Dec. 9, 2020 |
Interest rate, description of reference rate | one-month LIBOR | one-month LIBOR |
Interest rate added to base rate (as a percent) | 1.05% | 1.05% |
Number of extension periods available for secured debt | 3 | 3 |
Term of extension period for secured debt | 1 year | 1 year |
Total notes payable | $ 220,000 | $ 220,000 |
$85.0 million term loan | ||
Notes payable | ||
Debt maturity date | Sep. 3, 2022 | Sep. 3, 2022 |
Term loan total interest rate, including effect of swap agreement | 2.941% | 2.941% |
Total notes payable | $ 85,000 | $ 85,000 |
$85.0 million term loan | Minimum | ||
Notes payable | ||
Interest rate added to base rate (as a percent) | 1.35% | 1.35% |
$85.0 million term loan | Maximum | ||
Notes payable | ||
Interest rate added to base rate (as a percent) | 2.20% | 2.20% |
$100.0 million term loan | ||
Notes payable | ||
Debt maturity date | Jan. 31, 2023 | Jan. 31, 2023 |
Term loan total interest rate, including effect of swap agreement | 3.203% | 3.203% |
Total notes payable | $ 100,000 | $ 100,000 |
$100.0 million term loan | Minimum | ||
Notes payable | ||
Interest rate added to base rate (as a percent) | 1.35% | 1.35% |
$100.0 million term loan | Maximum | ||
Notes payable | ||
Interest rate added to base rate (as a percent) | 2.20% | 2.20% |
Series A Senior Notes | ||
Notes payable | ||
Fixed interest rate (as a percent) | 4.69% | 4.69% |
Debt maturity date | Jan. 10, 2026 | Jan. 10, 2026 |
Total notes payable | $ 120,000 | $ 120,000 |
Series B Senior Notes | ||
Notes payable | ||
Fixed interest rate (as a percent) | 4.79% | 4.79% |
Debt maturity date | Jan. 10, 2028 | Jan. 10, 2028 |
Total notes payable | $ 120,000 | $ 120,000 |
Not designated as hedging instrument | Interest Rate Cap | Hilton San Diego Bayfront mortgage payable | ||
Notes payable | ||
Interest rate, description of reference rate | one-month LIBOR | one-month LIBOR |
Not designated as hedging instrument | Interest Rate Swap | $85.0 million term loan | ||
Notes payable | ||
Interest rate, description of reference rate | one-month LIBOR | one-month LIBOR |
Fixed rate under interest rate swap agreement | 1.591% | 1.591% |
Not designated as hedging instrument | Interest Rate Swap | $100.0 million term loan | ||
Notes payable | ||
Interest rate, description of reference rate | one-month LIBOR | one-month LIBOR |
Fixed rate under interest rate swap agreement | 1.853% | 1.853% |
Notes Payable - Interest Expens
Notes Payable - Interest Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Interest Expense | ||||
Interest expense on debt and finance lease obligations | $ 11,406 | $ 11,619 | $ 34,399 | $ 34,364 |
Noncash interest on derivatives and finance lease obligations, net | 1,155 | (818) | 6,908 | (4,995) |
Amortization of deferred financing costs | 698 | 748 | 2,094 | 2,240 |
Total interest expense | $ 13,259 | $ 11,549 | $ 43,401 | $ 31,609 |
Other Current Liabilities and_3
Other Current Liabilities and Other Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Other Current Liabilities | ||
Property, sales and use taxes payable | $ 18,934 | $ 15,684 |
Income tax payable | 25 | 125 |
Accrued interest | 4,521 | 7,306 |
Advance deposits | 17,085 | 16,711 |
Management fees payable | 786 | 1,142 |
Other | 4,492 | 3,994 |
Total other current liabilities | 45,843 | 44,962 |
Other Liabilities | ||
Deferred revenue | 5,296 | 5,017 |
Deferred rent | 12,986 | |
Deferred property taxes payable | 9,342 | 9,284 |
Interest rate derivative liabilities | 1,951 | |
Deferred income tax liability | 304 | |
Other | 3,235 | 3,112 |
Total other liabilities | $ 19,824 | $ 30,703 |
Leases - Supplemental Balance S
Leases - Supplemental Balance Sheet Information Related to Leases (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Jan. 01, 2019 | Dec. 31, 2018 |
Finance Lease | |||
Accumulated depreciation | $ (10,780) | ||
Finance lease right-of-use asset, net | 48,019 | $ 55,727 | |
Accounts payable and accrued expenses | 1 | ||
Finance lease obligation, less current portion | 15,571 | $ 27,009 | |
Total finance lease obligation | $ 15,572 | 27,010 | |
Weighted average remaining finance lease term | 78 years 3 months | ||
Weighted average finance lease discount rate | 9.00% | ||
Operating Leases | |||
Operating lease right-of-use assets, net | $ 61,512 | 64,075 | |
Accounts payable and accrued expenses | 4,671 | ||
Operating lease obligations, less current portion | 50,905 | ||
Total operating lease obligations | $ 55,576 | $ 58,663 | |
Weighted average remaining operating lease term | 24 years 8 months | ||
Weighted average operating lease discount rate | 5.40% | ||
Buildings and improvements | |||
Finance Lease | |||
Finance lease right-of-use asset, net | $ 58,799 |
Leases - Components of Lease Co
Leases - Components of Lease Cost (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2019 | Sep. 30, 2019 | |
Finance lease | ||
Lease cost | ||
Amortization of right-of-use assets | $ 367 | $ 1,103 |
Interest on lease obligations | 647 | 1,936 |
Finance lease cost | 1,014 | 3,039 |
Operating lease | ||
Lease cost | ||
Operating lease cost | 3,687 | 10,065 |
Percentage rent | 2,000 | 4,900 |
Held for sale, not considered a discontinued operation | Courtyard by Marriott Los Angeles | Finance lease | ||
Lease cost | ||
Interest on lease obligations | $ 300 | $ 900 |
Leases - Supplemental Cash Flow
Leases - Supplemental Cash Flow Information Related to Leases (Detail) $ in Thousands | 9 Months Ended |
Sep. 30, 2019USD ($) | |
Cash payments on lease obligations | |
Operating cash flows from operating leases | $ 5,365 |
Right-of-use assets obtained in exchange for lease obligations | |
Operating leases | $ 45,677 |
Leases - Future Maturities of L
Leases - Future Maturities of Lease Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Jan. 01, 2019 |
Finance Lease | ||
Year 1 | $ 1,403 | |
Year 2 | 1,403 | |
Year 3 | 1,403 | |
Year 4 | 1,403 | |
Year 5 | 1,403 | |
Thereafter | 102,751 | |
Total lease payments | 109,766 | |
Less: interest | (94,194) | |
Present value of lease obligations | 15,572 | $ 27,010 |
Operating Leases | ||
Year 1 | 7,506 | |
Year 2 | 7,557 | |
Year 3 | 7,608 | |
Year 4 | 7,662 | |
Year 5 | 7,717 | |
Thereafter | 75,925 | |
Total lease payments | 113,975 | |
Less: interest | (58,399) | |
Present value of lease obligations | $ 55,576 | $ 58,663 |
Leases - Lessor Information (De
Leases - Lessor Information (Details) - Other operating - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2019 | Sep. 30, 2019 | |
Lease-related revenue | ||
Lease-related revenue | $ 2.9 | $ 8.3 |
Operating Lease, Income, Comprehensive Income [Extensible List] | Revenues | Revenues |
Stockholders' Equity - Preferre
Stockholders' Equity - Preferred Stock (Details) - USD ($) $ / shares in Units, $ in Millions | 1 Months Ended | 9 Months Ended | 12 Months Ended | |
May 31, 2016 | Mar. 31, 2016 | Sep. 30, 2019 | Dec. 31, 2018 | |
Series E Cumulative Redeemable Preferred Stock | ||||
Stockholders' equity | ||||
Number of shares of preferred stock sold (in shares) | 4,600,000 | |||
Preferred stock, Cumulative Redeemable Preferred Stock, dividend rate (as a percent) | 6.95% | 6.95% | 6.95% | |
Liquidation preference (in dollars per share) | $ 25 | $ 25 | $ 25 | |
Proceeds from preferred stock offerings | $ 115 | |||
Payment of preferred stock offering costs | $ 4 | |||
Redemption price (in dollars per share) | $ 25 | |||
Series F Cumulative Redeemable Preferred Stock | ||||
Stockholders' equity | ||||
Number of shares of preferred stock sold (in shares) | 3,000,000 | |||
Preferred stock, Cumulative Redeemable Preferred Stock, dividend rate (as a percent) | 6.45% | 6.45% | 6.45% | |
Liquidation preference (in dollars per share) | $ 25 | $ 25 | $ 25 | |
Proceeds from preferred stock offerings | $ 75 | |||
Payment of preferred stock offering costs | $ 2.6 | |||
Redemption price (in dollars per share) | $ 25 |
Stockholders' Equity - Common S
Stockholders' Equity - Common Stock (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 24 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Feb. 28, 2017 | |
Stockholders' equity | |||||
Proceeds from issuance of common stock | $ 45,125 | ||||
Payments of stock issuance costs | $ 784 | ||||
Share repurchase program | |||||
Stockholders' equity | |||||
Repurchase Program, number of shares repurchased (in shares) | 3,344,845 | 3,777,309 | |||
Repurchase Program, value of shares repurchased | $ 44,300 | $ 50,000 | |||
Repurchase Program, remaining authorized capacity | $ 250,100 | $ 250,100 | |||
Maximum | Share repurchase program | |||||
Stockholders' equity | |||||
Repurchase Program, maximum amount authorized for repurchase | $ 300,000 | ||||
Common Stock | At The Market | |||||
Stockholders' equity | |||||
Proceeds from issuance of common stock | $ 124,500 | ||||
Payments of stock issuance costs | $ 2,300 | ||||
ATM Program, number of shares sold or issued (in shares) | 0 | 0 | 7,467,709 | ||
ATM Program, remaining amount authorized for issuance | $ 175,500 | $ 175,500 | |||
Common Stock | Maximum | At The Market | |||||
Stockholders' equity | |||||
ATM Program, maximum amount authorized for issuance | $ 300,000 |
Long-Term Incentive Plan (Detai
Long-Term Incentive Plan (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Compensation expense and forfeitures | ||||
Capitalized compensation cost related to shares issued to design and construction employees | $ 304 | $ 284 | ||
Restricted Shares | ||||
Compensation expense and forfeitures | ||||
Amortization Expense, including forfeitures | $ 2,146 | $ 2,073 | 7,168 | 6,938 |
Capitalized compensation cost related to shares issued to design and construction employees | $ 100 | $ 100 | $ 300 | $ 300 |
Restricted Shares | Minimum | ||||
Long-Term Incentive Plan | ||||
Vesting period | 3 years |
Commitments and Contingencies -
Commitments and Contingencies - Management Fees, Franchise Costs and Renovation Commitments (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Basic and incentive management fees incurred | ||||
Other property-level expenses | $ 30,913 | $ 31,580 | $ 97,768 | $ 101,005 |
License and Franchise Agreements | ||||
Franchise assessments | 6,391 | 6,501 | 18,005 | 19,633 |
Franchise royalties | 2,215 | 2,666 | 6,019 | 7,348 |
Franchise costs | 8,606 | 9,167 | 24,024 | 26,981 |
Basic management fees | ||||
Basic and incentive management fees incurred | ||||
Other property-level expenses | 7,767 | 7,879 | 23,404 | 24,225 |
Incentive management fees | ||||
Basic and incentive management fees incurred | ||||
Other property-level expenses | 511 | 1,339 | 6,041 | 6,187 |
Total basic and incentive management fees | ||||
Basic and incentive management fees incurred | ||||
Other property-level expenses | 8,278 | $ 9,218 | $ 29,445 | $ 30,412 |
Minimum | ||||
Management Agreements | ||||
Basic management fees (as a percent) | 1.75% | |||
Maximum | ||||
Management Agreements | ||||
Basic management fees (as a percent) | 3.00% | |||
Renovation and Construction Commitments | ||||
Renovation and Construction Commitments | ||||
Remaining construction commitments | $ 53,300 | $ 53,300 |
Commitments and Contingencies_2
Commitments and Contingencies - Other Commitments and Concentration of Risk (Details) $ in Thousands | Sep. 30, 2019USD ($)property | Sep. 30, 2019USD ($)property | Sep. 30, 2019USD ($)property |
Concentration of Risk | |||
Number of hotels held for investment | 20 | 20 | 20 |
Number of hotels owned by the Company | 21 | 21 | 21 |
Other | |||
Term of unsecured environmental indemnities | 0 years | ||
Damage limitation of unsecured environmental indemnities | $ | $ 0 | ||
Percentage of total rooms | California | |||
Concentration of Risk | |||
Concentration risk (as a percent) | 30.00% | ||
Percentage of total rooms | Florida | |||
Concentration of Risk | |||
Concentration risk (as a percent) | 9.00% | ||
Percentage of total rooms | Greater Washington DC area | |||
Concentration of Risk | |||
Concentration risk (as a percent) | 13.00% | ||
Percentage of total rooms | Hawaii | |||
Concentration of Risk | |||
Concentration risk (as a percent) | 5.00% | ||
Percentage of total rooms | Illinois | |||
Concentration of Risk | |||
Concentration risk (as a percent) | 11.00% | ||
Percentage of total rooms | Massachusetts | |||
Concentration of Risk | |||
Concentration risk (as a percent) | 14.00% | ||
Percentage of total revenue generated by hotels | California | |||
Concentration of Risk | |||
Concentration risk (as a percent) | 33.00% | ||
Percentage of total revenue generated by hotels | Florida | |||
Concentration of Risk | |||
Concentration risk (as a percent) | 10.00% | ||
Percentage of total revenue generated by hotels | Greater Washington DC area | |||
Concentration of Risk | |||
Concentration risk (as a percent) | 11.00% | ||
Percentage of total revenue generated by hotels | Hawaii | |||
Concentration of Risk | |||
Concentration risk (as a percent) | 11.00% | ||
Percentage of total revenue generated by hotels | Illinois | |||
Concentration of Risk | |||
Concentration risk (as a percent) | 7.00% | ||
Percentage of total revenue generated by hotels | Massachusetts | |||
Concentration of Risk | |||
Concentration risk (as a percent) | 15.00% | ||
Workers' compensation insurance programs | |||
Other | |||
Outstanding irrevocable letters of credit | $ | $ 400 | 400 | $ 400 |
Draws on letters of credit | $ | $ 0 | ||
Hotel owned by the Company | |||
Concentration of Risk | |||
Number of hotels owned by the Company | 21 | 21 | 21 |
Hotel owned by the Company | California | |||
Concentration of Risk | |||
Number of hotels owned by the Company | 5 | 5 | 5 |
Hotel owned by the Company | Florida | |||
Concentration of Risk | |||
Number of hotels owned by the Company | 2 | 2 | 2 |
Hotel owned by the Company | Greater Washington DC area | |||
Concentration of Risk | |||
Number of hotels owned by the Company | 2 | 2 | 2 |
Hotel owned by the Company | Hawaii | |||
Concentration of Risk | |||
Number of hotels owned by the Company | 1 | 1 | 1 |
Hotel owned by the Company | Illinois | |||
Concentration of Risk | |||
Number of hotels owned by the Company | 3 | 3 | 3 |
Hotel owned by the Company | Massachusetts | |||
Concentration of Risk | |||
Number of hotels owned by the Company | 2 | 2 | 2 |
Subsequent Event (Details)
Subsequent Event (Details) $ in Millions | Oct. 23, 2019USD ($) |
Subsequent Events | Sold, not considered a discontinued operation | Courtyard by Marriott Los Angeles | |
Subsequent Event | |
Gross sale price of hotel | $ 50 |