Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | May 01, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | Sunstone Hotel Investors, Inc. | |
Entity Central Index Key | 1,295,810 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 220,463,909 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 441,830 | $ 369,537 |
Restricted cash | 64,414 | 67,923 |
Accounts receivable, net | 50,229 | 39,337 |
Inventories | 1,252 | 1,225 |
Prepaid expenses | 13,252 | 10,489 |
Assets held for sale, net | 79,113 | |
Total current assets | 570,977 | 567,624 |
Investment in hotel properties, net | 3,149,472 | 3,158,219 |
Deferred financing fees, net | 2,087 | 4,002 |
Other assets, net | 9,945 | 9,389 |
Total assets | 3,732,481 | 3,739,234 |
Current liabilities: | ||
Accounts payable and accrued expenses | 36,327 | 36,110 |
Accrued payroll and employee benefits | 17,078 | 24,896 |
Dividends and distributions payable | 14,228 | 119,847 |
Other current liabilities | 43,786 | 39,869 |
Current portion of notes payable, net | 8,898 | 184,929 |
Liabilities of assets held for sale | 3,153 | |
Total current liabilities | 120,317 | 408,804 |
Notes payable, less current portion, net | 982,460 | 746,374 |
Capital lease obligations, less current portion | 15,574 | 15,574 |
Other liabilities | 36,917 | 36,650 |
Total liabilities | 1,155,268 | 1,207,402 |
Commitments and contingencies (Note 11) | ||
Equity | ||
Common stock, $0.01 par value, 500,000,000 shares authorized, 220,417,417 shares issued and outstanding at March 31, 2017 and 220,073,140 shares issued and outstanding at December 31, 2016 | 2,204 | 2,201 |
Additional paid in capital | 2,594,724 | 2,596,620 |
Retained earnings | 848,736 | 786,901 |
Cumulative dividends and distributions | (1,107,180) | (1,092,952) |
Total stockholders' equity | 2,528,484 | 2,482,770 |
Noncontrolling interest in consolidated joint venture | 48,729 | 49,062 |
Total equity | 2,577,213 | 2,531,832 |
Total liabilities and equity | 3,732,481 | 3,739,234 |
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 | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
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) | 220,417,417 | 220,073,140 |
Common stock, shares outstanding (in shares) | 220,417,417 | 220,073,140 |
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 | |
Mar. 31, 2017 | Mar. 31, 2016 | |
REVENUES | ||
Room | $ 190,367 | $ 187,297 |
Food and beverage | 75,501 | 71,234 |
Other operating | 14,875 | 15,761 |
Total revenues | 280,743 | 274,292 |
OPERATING EXPENSES | ||
Room | 51,292 | 51,044 |
Food and beverage | 50,537 | 51,929 |
Other operating | 3,831 | 4,056 |
Advertising and promotion | 14,946 | 14,993 |
Repairs and maintenance | 10,967 | 11,264 |
Utilities | 7,222 | 7,514 |
Franchise costs | 8,055 | 8,096 |
Property tax, ground lease and insurance | 21,287 | 22,840 |
Other property-level expenses | 34,738 | 34,713 |
Corporate overhead | 6,779 | 6,717 |
Depreciation and amortization | 40,807 | 40,047 |
Total operating expenses | 250,461 | 253,213 |
Operating income | 30,282 | 21,079 |
Interest and other income | 721 | 489 |
Interest expense | (11,249) | (20,010) |
Loss on extinguishment of debt | (4) | (105) |
Gain on sale of assets | 44,285 | |
Income before income taxes | 64,035 | 1,453 |
Income tax provision | (208) | (237) |
NET INCOME | 63,827 | 1,216 |
Income from consolidated joint venture attributable to noncontrolling interest | (1,992) | (1,650) |
Preferred stock dividends | (3,207) | (2,766) |
INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS | 58,628 | (3,200) |
Other comprehensive income: | ||
COMPREHENSIVE INCOME | 63,827 | 1,216 |
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ 58,628 | $ (3,200) |
Basic and diluted per share amounts: | ||
Basic and diluted income (loss) attributable to common stockholders per common share (in dollars per share) | $ 0.27 | $ (0.02) |
Basic and diluted weighted average common shares outstanding (in shares) | 219,093 | 212,887 |
Common stock distributions and distributions payable, per share (in dollars per share) | $ 0.05 | $ 0.05 |
CONSOLIDATED STATEMENTS OF EQUI
CONSOLIDATED STATEMENTS OF EQUITY - 3 months ended Mar. 31, 2017 - 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, 2016 | $ 115,000,000 | $ 75,000,000 | $ 2,201,000 | $ 2,596,620,000 | $ 786,901,000 | $ (1,092,952,000) | $ 49,062,000 | $ 2,531,832,000 | ||||
Beginning Balance (in shares) at Dec. 31, 2016 | 4,600,000 | 3,000,000 | 220,073,140 | |||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||
Deferred stock compensation, net | $ 3,000 | (1,896,000) | (1,893,000) | |||||||||
Deferred stock compensation, net (in shares) | 344,277 | |||||||||||
Common stock distributions and distributions payable | (11,021,000) | (11,021,000) | ||||||||||
Preferred stock dividends and dividends payable | $ (1,998,000) | $ (1,998,000) | $ (1,209,000) | $ (1,209,000) | ||||||||
Distributions to noncontrolling interest | (2,325,000) | (2,325,000) | ||||||||||
Net income | 61,835,000 | 1,992,000 | 63,827,000 | |||||||||
Ending Balance at Mar. 31, 2017 | $ 115,000,000 | $ 75,000,000 | $ 2,204,000 | $ 2,594,724,000 | $ 848,736,000 | $ (1,107,180,000) | $ 48,729,000 | $ 2,577,213,000 | ||||
Ending Balance (in shares) at Mar. 31, 2017 | 4,600,000 | 3,000,000 | 220,417,417 |
CONSOLIDATED STATEMENT OF EQUIT
CONSOLIDATED STATEMENT OF EQUITY (Parenthetical) | 3 Months Ended |
Mar. 31, 2017$ / shares | |
Common stock distributions and distributions payable, per share (in dollars per share) | $ 0.05 |
Series E Cumulative Redeemable Preferred Stock | |
Preferred stock dividends declared (in dollars per share) | 0.434375 |
Series F Cumulative Redeemable Preferred Stock | |
Preferred stock dividends declared (in dollars per share) | $ 0.403125 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income | $ 63,827 | $ 1,216 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Bad debt expense | 131 | 109 |
Gain on sale of assets, net | (44,570) | (7) |
Loss on extinguishment of debt | 4 | 105 |
(Gain) loss on derivatives, net | (657) | 6,402 |
Depreciation | 40,150 | 39,333 |
Amortization of franchise fees and other intangibles | 819 | 773 |
Amortization of deferred financing fees | 578 | 555 |
Amortization of deferred stock compensation | 1,749 | 1,614 |
Changes in operating assets and liabilities: | ||
Restricted cash | 4,013 | 8,176 |
Accounts receivable | (10,575) | (14,396) |
Inventories | 5 | 39 |
Prepaid expenses and other assets | (2,387) | (1,729) |
Accounts payable and other liabilities | (370) | 7,691 |
Accrued payroll and employee benefits | (8,569) | (6,790) |
Net cash provided by operating activities | 44,148 | 43,091 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Proceeds from sales of assets | 123,117 | 7 |
Restricted cash - replacement reserve | (504) | (309) |
Renovations and additions to hotel properties | (29,872) | (48,818) |
Payment for interest rate derivative | (19) | |
Net cash provided by (used in) investing activities | 92,722 | (49,120) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from preferred stock offerings | 115,000 | |
Payment of preferred stock offering costs | (4,016) | |
Repurchase of common stock for employee withholding obligations | (3,793) | (2,641) |
Proceeds from notes payable | 240,000 | 100,000 |
Payments on notes payable | (178,599) | (117,558) |
Payments of deferred financing costs | (13) | (78) |
Dividends and distributions paid | (119,847) | (186,301) |
Distributions to noncontrolling interest | (2,325) | (775) |
Net cash used in financing activities | (64,577) | (96,369) |
Net increase (decrease) in cash and cash equivalents | 72,293 | (102,398) |
Cash and cash equivalents, beginning of period | 369,537 | 499,067 |
Cash and cash equivalents, end of period | 441,830 | 396,669 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||
Cash paid for interest | 9,632 | 12,455 |
Cash paid for income taxes | 38 | 204 |
NONCASH INVESTING ACTIVITY | ||
Increase in accounts payable related to renovations and additions to hotel properties and other assets | 2,119 | 5,844 |
Amortization of deferred stock compensation - construction activities | 151 | 239 |
NONCASH FINANCING ACTIVITY | ||
Issuance of common stock distributions | 78,823 | |
Dividends and distributions payable | $ 14,228 | $ 13,592 |
Organization and Description of
Organization and Description of Business | 3 Months Ended |
Mar. 31, 2017 | |
Organization and Description of Business | |
Organization and Description of Business | 1. Organization and Description of Business Sunstone Hotel Investors, Inc. (the “Company”) was incorporated in Maryland on June 28, 2004 in anticipation of an initial public offering of common stock, which was consummated on October 26, 2004. The Company, through its 100% controlling interest in Sunstone Hotel Partnership, LLC (the “Operating Partnership”), of which the Company is the sole managing member, and the subsidiaries of the Operating Partnership, including Sunstone Hotel TRS Lessee, Inc. (the “TRS Lessee”) and its subsidiaries, is currently engaged in acquiring, owning, asset managing and renovating hotel properties. The Company may also sell certain hotel properties from time to time. The Company operates as a real estate investment trust (“REIT”) for federal income tax purposes. As a REIT, certain tax laws limit the amount of “non-qualifying” income the Company can earn, including income derived directly from the operation of hotels. 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 March 31, 2017, the Company had interests in 27 hotels (the “27 hotels”), and the Company’s third-party managers included the following: Number of Hotels Subsidiaries of Marriott International, Inc. or Marriott Hotel Services, Inc. (collectively, “Marriott”) 11 Interstate Hotels & Resorts, Inc. 5 Highgate Hotels L.P. and an affiliate 3 Crestline Hotels & Resorts 2 Hilton Worldwide 2 Hyatt Corporation 2 Davidson Hotels & Resorts 1 HEI Hotels & Resorts 1 Total hotels held for investment 27 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2017 | |
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 March 31, 2017 and December 31, 2016, and for the three months ended March 31, 2017 and 2016, include the accounts of the Company, the Operating Partnership, the TRS Lessee and their subsidiaries. All significant intercompany balances and transactions have been eliminated. If the Company determines that it has an interest in a variable interest entity within the meaning of the Consolidation Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), the Company will consolidate the entity when it is determined to be the primary beneficiary of the entity. Based on its review, the Company determined that all of its subsidiaries were properly consolidated as of March 31, 2017 and December 31, 2016, and for the three months ended March 31, 2017 and 2016. Noncontrolling interest at both March 31, 2017 and December 31, 2016 represents the outside 25.0% equity interest in the Hilton San Diego Bayfront, which the Company includes in its financial statements on a consolidated basis. 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, 2016, filed with the Securities and Exchange Commission on February 23, 2017. 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. As required by the Earnings Per Share Topic of the FASB ASC, the net income per share for each class of stock (common stock and convertible preferred 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. To the extent the Company has undistributed earnings in any calendar quarter, the Company will follow the two-class method of computing earnings per share. The Company follows the requirements of the Earnings Per Share Topic of the FASB ASC. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are considered participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. In accordance with the Earnings Per Share Topic of the FASB ASC, basic earnings (loss) attributable to common stockholders per common share is computed based on the weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) attributable to common stockholders per common share is computed based on the weighted average number of shares of common stock outstanding during each period, plus potential common shares considered outstanding during the period, as long as the inclusion of such awards is not anti-dilutive. Potential common shares consist of unvested restricted stock awards and the incremental common shares issuable upon the exercise of stock options, using the more dilutive of either the two-class method or the treasury stock method. The following table sets forth the computation of basic and diluted earnings per common share (in thousands, except per share data): Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 (unaudited) (unaudited) Numerator: Net income $ 63,827 $ 1,216 Income from consolidated joint venture attributable to noncontrolling interest (1,992) (1,650) Preferred stock dividends (3,207) (2,766) Distributions paid on unvested restricted stock compensation (60) (60) Undistributed income allocated to unvested restricted stock compensation (248) — Numerator for basic and diluted income (loss) attributable to common stockholders $ 58,320 $ (3,260) Denominator: Weighted average basic and diluted common shares outstanding 219,093 212,887 Basic and diluted income (loss) attributable to common stockholders per common share $ 0.27 $ (0.02) The Company’s unvested restricted shares associated with its long-term incentive plan and shares associated with common stock options have been excluded from the above calculation of earnings per share for the three months ended March 31, 2017 and 2016, as their inclusion would have been anti-dilutive. New Accounting Standards and Accounting Changes In May 2014, the FASB issued Accounting Standards Update No. 2014-09, “ Revenue from Contracts with Customers (Topic 606) ” (“ASU No. 2014-09”). The core principle of ASU No. 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity will need to apply a five-step model: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. ASU No. 2014-09 was originally to be effective during the first quarter of 2017; however, the FASB issued a one-year deferral so that it now becomes effective during the first quarter of 2018. ASU No. 2014-09 will require either a full retrospective approach or a modified retrospective approach, with early adoption permitted as of the original effective date. In March 2016, the FASB clarified the principal versus agent guidance in ASU No. 2014-09 with its issuance of Accounting Standards Update No. 2016-08, “ Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) ” (“ASU No. 2016-08”). In particular, ASU No. 2016-08 clarifies how an entity should identify the unit of accounting for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements, such as service transactions by explaining what a principal controls before the specified good or service is transferred to the customer. In addition, ASU No. 2016-08 reframes the indicators to focus on evidence that an entity is acting as a principal rather than as an agent. ASU No. 2016-08 will become effective, along with ASU No. 2014-09, during the first quarter of 2018. Similar to ASU No. 2014-09, ASU No. 2016-08 will require either a full retrospective approach or a modified retrospective approach, with early adoption permitted as of the original effective date. In May 2016, the FASB amended ASU No. 2014-09’s guidance on transition, collectability, noncash consideration and the presentation of sales and other similar taxes with its issuance of Accounting Standards Update No. 2016-12, “ Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients ” (“ASU No. 2016-12”). The amendments clarify that, for a contract to be considered completed at transition, all (or substantially all) of the revenue must have been recognized under legacy GAAP. This clarification is important because entities that use the modified retrospective transition approach need to apply the standard only to contracts that are not complete as of the date of initial application, and entities that use the full retrospective approach may apply certain practical expedients to completed contracts. In addition, ASU No. 2016-12 clarifies that an entity should consider the probability of collecting substantially all of the consideration to which it will be entitled in exchange for goods and services expected to be transferred to the customer rather than the total amount promised for all the goods or services in the contract. ASU No. 2016-12 also clarifies that an entity may consider its ability to manage its exposure to credit risk as part of the collectability assessment, as well as that the fair value of noncash consideration should be measured at contract inception when determining the transaction price. Finally, ASU No. 2016-12 allows an entity to make an accounting policy election to exclude from the transaction price certain types of taxes collected from a customer if it discloses that policy. ASU No. 2016-12 will become effective, along with ASU No. 2014-09, during the first quarter of 2018. Similar to ASU No. 2014-09, ASU No. 2016-12 will require either a full retrospective approach or a modified retrospective approach, with early adoption permitted as of the original effective date. The Company is in the process of evaluating the impact that ASU No. 2014-09, along with the related clarifications and amendments in ASU No. 2016-08 and ASU No. 2016-12, will have on its recognition of revenue included in its consolidated financial statements. While the Company is still evaluating the impact that the ASUs will have on accounting for the gain recognized upon the sale of a hotel, there is a possibility that the adoption of ASU No. 2014-09 will affect the timing of any gain recognition in the consolidated financial statements. For example, under current guidance, a gain on the sale of hotel properties with contingencies and some future involvement is deferred until all contingencies have been removed. Under the new guidance, however, the entire gain on sale may be recognized upon the close of escrow. The Company expects to adopt the new ASUs under the modified retrospective approach. In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “ Leases (Topic 842) ” (“ASU No. 2016-02”), which will require lessees to put most leases on their balance sheets but recognize expenses in the income statement in a manner similar to today’s accounting. The guidance also eliminates today’s real estate-specific provisions and changes the guidance on sale-leaseback transactions, initial direct costs and lease executory costs for all entities. For lessors, the standard modifies the classification criteria and the accounting for sales-type and direct financing leases. All entities will classify leases to determine how to recognize lease-related revenue and expense. Classification will continue to affect amounts that lessors record on the balance sheet. ASU No. 2016-02 will become effective during the first quarter of 2019, and will require a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company is currently evaluating the impact that ASU No. 2016-02 will have on its consolidated financial statements, and, other than the inclusion of operating leases on the Company’s balance sheet, such effects have not yet been determined. 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 ” (“ASU No. 2016-13”), which will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward looking “expected loss” model that generally will result in the earlier recognition of allowances for losses. In addition, entities will have to disclose significantly more information, including information they use to track credit quality by year of origination for most financing receivables. ASU No. 2016-13 will become effective during the first quarter of 2020. ASU No. 2016-13 will require a modified retrospective approach, with early adoption permitted during the first quarter of 2019. The Company does not believe that the adoption of ASU No. 2016-13 will have a material impact on its consolidated financial statements. In September 2016, the FASB issued Accounting Standards Update No. 2016-15, “ Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) ” (“ASU No. 2016-15”), which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. ASU No. 2016-15 addresses certain issues where diversity in practice was identified. It amends existing guidance, which is principles based and often requires judgment to determine the appropriate classification of cash flows as operating, investing or financing activities. In addition, ASU No. 2016-15 clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. ASU No. 2016-15 will become effective during the first quarter of 2018, and will generally require a retrospective approach. Early adoption is permitted. The Company does not believe that the adoption of ASU No. 2016-15 will have a material effect on its consolidated financial statements. In November 2016, the FASB issued Accounting Standards Update No. 2016-18, “ Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force) ” (“ASU No. 2016-18”), which will require entities to show the changes in total cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item on the balance sheet, the new guidance requires a reconciliation of the totals in the statement of cash flows to the related caption in the balance sheet. This reconciliation can be presented either on the face of the statement of cash flows or in the notes to the financial statements. ASU No. 2016-18 will become effective in the first quarter of 2018, and will require a retrospective approach. Early adoption in an interim period is permitted, but any adjustments must be reflected as of the beginning of the fiscal year that includes the interim period. Upon adoption of this standard, amounts included in restricted cash on the Company’s consolidated balance sheets will be included with cash and cash equivalents on its consolidated statements of cash flows. These amounts totaled $64.4 million and $67.9 million at March 31, 2017 and December 31, 2016, respectively. The adoption of this standard will not change the Company’s balance sheet presentation. In January 2017, the FASB issued Accounting Standards Update No. 2017-01, “ Business Combinations (Topic 805): Clarifying the Definition of a Business ” (“ASU No. 2017-01”), which changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. Under the new guidance, an entity first determines whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the set of transferred assets and activities is not a business. If it is not met, the entity then evaluates whether the set meets the requirement that a business include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. ASU No. 2017-01 will become effective in the first quarter of 2018, and the guidance is to be applied prospectively. Early adoption is permitted. Once adopted, the Company will be required to analyze future hotel acquisitions to determine if the transaction qualifies as the purchase of a business or an asset. Transaction costs associated with asset acquisitions will be capitalized, while the same costs associated with a business combination will continue to be expensed as incurred. In addition, asset acquisitions will not be subject to a measurement period, as are business combinations. Depending on the Company’s conclusion, ASU No. 2017-01 may have an effect on its consolidated financial statements. In January 2017, the FASB issued Accounting Standards Update No. 2017-04, “ Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ” (“ASU No. 2017-04”), which eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of today’s goodwill impairment test) to measure a goodwill impairment charge. Under the new guidance, if a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard does not change the guidance on completing Step 1 of the goodwill impairment test. An entity will still be able to perform today’s optional qualitative goodwill impairment assessment before determining whether to proceed to Step 1. ASU No. 2017-04 will become effective in the first quarter of 2019, and the guidance is to be applied prospectively. Early adoption is permitted. The Company does not believe that the adoption of ASU No. 2017-04 will have a material impact on its consolidated financial statements. 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 and comprehensive income, revenues, expenses and net income or loss from the less-than-wholly-owned subsidiary is reported at the consolidated amount, 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 statement of equity includes beginning balances, activity for the period and ending balances for each component of stockholders’ equity, noncontrolling interest and total equity. At both March 31, 2017 and December 31, 2016, the noncontrolling interest reported in the Company’s financial statements included the 25.0% outside ownership in the Hilton San Diego Bayfront. Segment Reporting The Company considers each of its hotels to be an operating segment, none of which meets the threshold for a separate reportable segment in accordance with the Segment Reporting Topic of the FASB ASC. Currently, the Company operates in one segment, hotel ownership. |
Investment in Hotel Properties
Investment in Hotel Properties | 3 Months Ended |
Mar. 31, 2017 | |
Investment in Hotel Properties | |
Investment in Hotel Properties | 3. Investment in Hotel Properties Investment in hotel properties, net consisted of the following (in thousands): March 31, December 31, 2017 2016 (unaudited) Land $ 531,660 $ 531,660 Buildings and improvements 3,174,081 3,135,806 Furniture, fixtures and equipment 522,806 512,372 Intangible assets 48,759 49,015 Franchise fees 1,021 1,021 Construction in process 48,856 65,449 Investment in hotel properties, gross 4,327,183 4,295,323 Accumulated depreciation and amortization (1,177,711) (1,137,104) Investment in hotel properties, net $ 3,149,472 $ 3,158,219 |
Disposals
Disposals | 3 Months Ended |
Mar. 31, 2017 | |
Disposals | |
Disposals | 4. Disposals In February 2017, the Company sold the 444-room Fairmont Newport Beach located in Newport Beach, California for net proceeds of $122.8 million. The Company recognized a net gain on the sale of $44.3 million. The sale did not represent a strategic shift that had a major impact on the Company’s business plan or its primary markets, and therefore, the sale of the hotel did not qualify as a discontinued operation. The Company classified the assets and liabilities of the Fairmont Newport Beach as held for sale as of December 31, 2016 as follows (in thousands): December 31, 2016 Accounts receivable, net $ 452 Inventories 126 Prepaid expenses 386 Investment in hotel property, net 77,971 Other assets, net 178 Assets held for sale, net $ 79,113 Accounts payable and accrued expenses $ 781 Accrued payroll and employee benefits 751 Other current liabilities 1,473 Other liabilities 148 Liabilities of assets held for sale $ 3,153 The following table provides summary results of operations for the Fairmont Newport Beach, as well as the Sheraton Cerritos that was sold during 2016, both of which are included in continuing operations (in thousands): Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 (unaudited) (unaudited) Revenues $ 3,541 $ 11,248 Income before income taxes $ 1,019 $ 1,347 Gain on sale of assets $ 44,285 $ — |
Fair Value Measurements and Int
Fair Value Measurements and Interest Rate Derivatives | 3 Months Ended |
Mar. 31, 2017 | |
Fair Value Measurements and Interest Rate Derivatives | |
Fair Value Measurements and Interest Rate Derivatives | 5. Fair Value Measurements and Interest Rate Derivatives Fair Value of Financial Instruments As of March 31, 2017 and December 31, 2016, the carrying amount of certain financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses were representative of their fair values due to the short-term maturity of these instruments. The Company follows the requirements of the Fair Value Measurement and Disclosure Topic of the FASB ASC, which establishes a framework for measuring fair value and disclosing fair value measurements by establishing a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: Level 1 Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the asset or the liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 Unobservable inputs reflecting the Company’s own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. As of March 31, 2017 and December 31, 2016, the only financial instruments that the Company measures at fair value are its interest rate derivatives, along with a life insurance policy and a related retirement benefit agreement. In accordance with the Fair Value Measurement and Disclosure Topic of the FASB ASC, 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 are for a former Company associate, are valued using Level 2 measurements. The following table presents the Company’s assets measured at fair value on a recurring and non-recurring basis at March 31, 2017 and December 31, 2016 (in thousands): Fair Value Measurements at Reporting Date Total Level 1 Level 2 Level 3 March 31, 2017 (unaudited): Interest rate cap derivatives $ 4 $ — $ 4 $ — Interest rate swap derivatives 2,421 — 2,421 — Life insurance policy (1) 855 — 855 — Total assets measured at fair value at March 31, 2017 $ 3,280 $ — $ 3,280 $ — December 31, 2016: Interest rate cap derivative $ — $ — $ — $ — Interest rate swap derivatives 1,749 — 1,749 — Life insurance policy (1) 861 — 861 — Total assets measured at fair value at December 31, 2016 $ 2,610 $ — $ 2,610 $ — (1) Includes the split life insurance policy for a former Company associate. These amounts are included in other assets, net on the accompanying consolidated balance sheets, and will be used to reimburse the Company for payments made to the former associate from the related retirement benefit agreement, which is included in accrued payroll and employee benefits on the accompanying consolidated balance sheets. The following table presents the Company’s liabilities measured at fair value on a recurring and non-recurring basis at March 31, 2017 and December 31, 2016 (in thousands): Fair Value Measurements at Reporting Date Total Level 1 Level 2 Level 3 March 31, 2017 (unaudited): Retirement benefit agreement (1) $ 855 $ — $ 855 $ — Total liabilities measured at fair value at March 31, 2017 $ 855 $ — $ 855 $ — December 31, 2016: Retirement benefit agreement (1) $ 861 $ — $ 861 $ — Total liabilities measured at fair value at December 31, 2016 $ 861 $ — $ 861 $ — (1) Includes the retirement benefit agreement for a former Company associate. The agreement calls for the balance of the retirement benefit to be paid out to the former associate in ten annual installments, beginning in 2011. As such, the Company has paid the former associate a total of $1.2 million through March 31, 2017, which was reimbursed to the Company using funds from the related split life insurance policy noted above. These amounts are included in accrued payroll and employee benefits on the accompanying consolidated balance sheets. Interest Rate Derivatives The Company’s interest rate derivatives, which are not designated as effective cash flow hedges, consisted of the following at March 31, 2017 (unaudited) and December 31, 2016 (in thousands): Estimated Fair Value Asset Strike / Capped Effective Maturity Notional March 31, December 31, Hedged Debt Type Rate Index Date Date Amount 2017 2016 Hilton San Diego Bayfront (1) Cap 4.250 % 1-Month LIBOR April 15, 2015 May 1, 2017 $ 110,772 $ — $ — Hilton San Diego Bayfront (1) Cap 4.250 % 1-Month LIBOR May 1, 2017 May 1, 2019 $ N/A 4 — $85.0 million term loan (2) Swap 3.391 % 1-Month LIBOR October 29, 2015 September 2, 2022 $ 85,000 1,610 1,336 $100.0 million term loan (3) Swap 3.653 % 1-Month LIBOR January 29, 2016 January 31, 2023 $ 100,000 811 413 $ 2,425 $ 1,749 (1) In March 2017, the Company purchased a new interest rate cap agreement for $19,000 related to the loan secured by the Hilton San Diego Bayfront. The new agreement, whose terms are substantially the same as the terms under the old cap agreement, will effectively replace the old agreement on May 1, 2017. The fair values of both Hilton San Diego Bayfront cap agreements are included in other assets, net on the accompanying consolidated balance sheets. (2) The fair value of the $85.0 million term loan swap agreement is included in other assets, net on the Company’s consolidated balance sheets. The 1-month LIBOR rate was swapped to a fixed rate of 1.591%. (3) The fair value of the $100.0 million term loan swap agreement is included in other assets, net on the Company’s consolidated balance sheets. The 1-month LIBOR rate was swapped to a fixed rate of 1.853%. Noncash changes in the fair values of the Company’s interest rate derivatives resulted in (decreases) increases to interest expense for the three months ended March 31, 2017 and 2016 as follows (in thousands): Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 (unaudited) (unaudited) (Gain) loss on derivatives, net $ (657) $ 6,402 Fair Value of Debt As of March 31, 2017 and December 31, 2016, 77.8% and 76.2%, respectively, of the Company’s outstanding debt had fixed interest rates, including the effects of interest rate swap agreements. The Company’s principal value of its consolidated debt totaled $1.0 billion and $0.9 billion as of March 31, 2017 and December 31, 2016, respectively. Using Level 3 measurements, the Company estimates that the fair market value of its debt totaled $1.0 billion and $0.9 billion as of March 31, 2017 and December 31, 2016, respectively. |
Other Assets
Other Assets | 3 Months Ended |
Mar. 31, 2017 | |
Other Assets | |
Other Assets | 6. Other Assets Other assets, net consisted of the following (in thousands): March 31, December 31, 2017 2016 (unaudited) Property and equipment, net $ 699 $ 779 Goodwill 990 990 Deferred expense on straight-lined third-party tenant leases 2,853 2,876 Interest rate derivatives 2,425 1,749 Other receivables 1,491 1,673 Other 1,487 1,322 Total other assets net $ 9,945 $ 9,389 The property and equipment, net noted above consisted of the following (in thousands): March 31, December 31, 2017 2016 (unaudited) Cost basis $ 10,843 $ 10,807 Accumulated depreciation (10,144) (10,028) Property and equipment, net $ 699 $ 779 |
Notes Payable
Notes Payable | 3 Months Ended |
Mar. 31, 2017 | |
Notes Payable | |
Notes Payable | 7. Notes Payable Notes payable consisted of the following (in thousands): March 31, December 31, 2017 2016 (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 March 31, 2017, and five hotel properties at December 31, 2016. $ 350,802 $ 528,604 Note payable requiring payments of interest and principal, bearing a blended rate of one-month LIBOR plus 225 basis points; maturing in August 2019. The note is collateralized by a first deed of trust on one hotel property. 221,544 222,340 Unsecured term loan requiring payments of interest only, with a blended interest rate based on a pricing grid with a range of 180 to 255 basis points over 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 3.391% based on the Company's current leverage. 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 180 to 255 basis points over 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 3.653% based on the Company's current leverage. Matures in January 2023. 100,000 100,000 Unsecured Series A Senior Notes requiring semi-annual payments of interest only, bearing interest at 4.69%; maturing in January 2026. 120,000 — Unsecured Series B Senior Notes requiring semi-annual payments of interest only, bearing interest at 4.79%; maturing in January 2028. 120,000 — Total notes payable $ 997,346 $ 935,944 Current portion of notes payable $ 10,167 $ 186,034 Less: current portion of deferred financing fees (1,269) (1,105) Carrying value of current portion of notes payable $ 8,898 $ 184,929 Notes payable, less current portion $ 987,179 $ 749,910 Less: long-term portion of deferred financing fees (4,719) (3,536) Carrying value of notes payable, less current portion $ 982,460 $ 746,374 Notes Payable Transactions - 2017 In January 2017, the Company received proceeds of $240.0 million in a private placement of senior unsecured notes. The private placement consisted of $120.0 million of notes bearing interest at a fixed rate of 4.69%, maturing in January 2026 (the “Series A Senior Notes”), and $120.0 million of notes bearing interest at a fixed rate of 4.79%, maturing in January 2028 (the “Series B Senior Notes”, together the “Senior Notes”). In January 2017, the Company used proceeds received from the Senior Notes to repay the loan secured by the Marriott Boston Long Wharf, which had a balance of $176.0 million and an interest rate of 5.58%. The Marriott Boston Long Wharf loan was scheduled to mature in April 2017, and was available to be repaid without penalty in January 2017. Interest Expense Total interest incurred and expensed on the notes payable was as follows (in thousands): Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 (unaudited) (unaudited) Interest expense on debt and capital lease obligations $ 11,328 $ 13,053 (Gain) loss on derivatives, net (657) 6,402 Amortization of deferred financing fees 578 555 Total interest expense $ 11,249 $ 20,010 |
Other Current Liabilities and O
Other Current Liabilities and Other Liabilities | 3 Months Ended |
Mar. 31, 2017 | |
Other Current Liabilities and Other Liabilities | |
Other Current Liabilities and Other Liabilities | 8. Other Current Liabilities and Other Liabilities Other current liabilities consisted of the following (in thousands): March 31, December 31, 2017 2016 (unaudited) Property, sales and use taxes payable $ 16,436 $ 16,965 Income tax payable 382 211 Accrued interest 3,568 1,996 Advance deposits 17,820 14,505 Management fees payable 1,140 1,645 Other 4,440 4,547 Total other current liabilities $ 43,786 $ 39,869 Other liabilities consisted of the following (in thousands): March 31, December 31, 2017 2016 (unaudited) Deferred gain on sale of asset $ 7,000 $ 7,000 Deferred revenue 6,149 6,045 Deferred rent 19,748 19,807 Deferred incentive management fees 201 — Other 3,819 3,798 Total other liabilities $ 36,917 $ 36,650 |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Mar. 31, 2017 | |
Stockholders' Equity | |
Stockholders' Equity | 9. 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. 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. 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, the Company may from time to time offer and sell shares of its common stock having an aggregate offering price of up to $300.0 million. The Company did not issue any shares of its common stock in connection with the ATM Agreements during the three months ended March 31, 2017. As of March 31, 2017, the Company has $300.0 million available for sale under the ATM Agreements. In February 2017, the Company’s board of directors authorized a share repurchase plan to acquire up to $300.0 million of the Company’s common and preferred stock. As of March 31, 2017, no shares of either the Company’s common or preferred stock have been repurchased. Future purchases 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 | 3 Months Ended |
Mar. 31, 2017 | |
Long-Term Incentive Plan | |
Long-Term Incentive Plan | 10. Long-Term Incentive Plan Stock Grants Restricted shares granted pursuant to the Company’s 2004 Long-Term Incentive Plan, as amended and restated May 1, 2014, generally vest over periods from three to five years from the date of grant. 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. In accordance with the Compensation Topic of the FASB ASC, 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 months ended March 31, 2017 and 2016 were as follows (in thousands): Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 (unaudited) (unaudited) Amortization expense, including forfeitures $ 1,749 $ 1,614 In addition, the Company capitalizes compensation costs related to all restricted shares granted to certain employees who work on the design and construction of its hotels. During both the three months ended March 31, 2017 and 2016, these capitalized costs totaled $0.2 million. Stock Options In April 2008, the Compensation Committee of the Company’s board of directors approved a grant of 200,000 non-qualified stock options (the “Options”) to one of the Company’s former associates. The Options fully vested in April 2009, and will expire in April 2018. The exercise price of the Options is $17.71 per share. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies | |
Commitments and Contingencies | 11. Commitments and Contingencies Management Agreements Management agreements with the Company’s third-party hotel managers require the Company to pay between 1.75% and 3.5% of total revenue of the managed hotels to the third-party managers each month as a basic management fee. In addition to basic management fees, provided that certain operating thresholds are met, the Company may also be required to pay incentive management fees to certain of its third-party managers. Total basic management fees, net of key money incentives received from third-party hotel managers, along with incentive management fees incurred by the Company during the three months ended March 31, 2017 and 2016 were included in other property-level expenses on the Company’s consolidated statements of operations and comprehensive income as follows (in thousands): Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 (unaudited) (unaudited) Basic management fees $ 7,895 $ 7,667 Incentive management fees 2,553 1,704 Total basic and incentive management fees $ 10,448 $ 9,371 License and Franchise Agreements The Company has entered into license and franchise agreements related to certain of its hotel properties. The license and franchise agreements require the Company to, among other things, pay monthly fees that are calculated based on specified percentages of certain revenues. The license and franchise agreements generally contain specific standards for, and restrictions and limitations on, the operation and maintenance of the hotels which are established by the franchisors to maintain uniformity in the system created by each such franchisor. Such standards generally regulate the appearance of the hotel, quality and type of goods and services offered, signage and protection of trademarks. Compliance with such standards may from time to time require the Company to make significant expenditures for capital improvements. Total license and franchise fees incurred by the Company during the three months ended March 31, 2017 and 2016 were included in franchise costs on the Company’s consolidated statements of operations and comprehensive income as follows (in thousands): Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 (unaudited) (unaudited) Franchise assessments (1) $ 5,927 $ 5,813 Franchise royalties 2,128 2,283 Total franchise costs $ 8,055 $ 8,096 (1) Includes advertising, reservation and frequent guest club assessments. Renovation and Construction Commitments At March 31, 2017, the Company had various contracts outstanding with third parties in connection with the renovation and repositioning of certain of its hotel properties. The remaining commitments under these contracts at March 31, 2017 totaled $46.1 million. Capital Leases The Hyatt Centric Chicago Magnificent Mile is subject to a building lease which expires in December 2097. Upon acquisition of the hotel in June 2012, the Company evaluated the terms of the lease agreement and determined the lease to be a capital lease pursuant to the Leases Topic of the FASB ASC. The capital lease asset was included in investment in hotel properties, net on the Company’s consolidated balance sheets as follows (in thousands): March 31, December 31, 2017 2016 (unaudited) Gross capital lease asset - buildings and improvements $ 58,799 $ 58,799 Accumulated depreciation (7,105) (6,738) Net capital lease asset - buildings and improvements $ 51,694 $ 52,061 Future minimum lease payments under the Company’s capital lease together with the present value of the net minimum lease payments as of March 31, 2017 are as follows (in thousands): 2017 $ 1,403 2018 1,403 2019 1,403 2020 1,403 2021 1,403 Thereafter 106,257 Total minimum lease payments (1) 113,272 Less: Amount representing interest (2) (97,697) Present value of net minimum lease payments (3) $ 15,575 (1) Minimum lease payments do not include percentage rent which may be paid under the Hyatt Centric Chicago Magnificent Mile building lease on the basis of 4.0% of the hotel’s gross room revenues over a certain threshold. No percentage rent was due during either the three months ended March 31, 2017 or 2016. (2) Interest includes the amount necessary to reduce net minimum lease payments to present value calculated at the Company’s incremental borrowing rate at lease inception. (3) The present value of net minimum lease payments are presented on the Company’s consolidated balance sheet as of March 31, 2017 as a current obligation of $1,000, which is included in accounts payable and accrued expenses, and as a long-term obligation of $15.6 million, which is included in capital lease obligations, less current portion. Ground, Building and Air Leases Total rent expense incurred pursuant to ground, building and air lease agreements for the three months ended March 31, 2017 and 2016 was included in property tax, ground lease and insurance on the Company’s consolidated statements of operations and comprehensive income as follows (in thousands): Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 (unaudited) (unaudited) Minimum rent, including straight-line adjustments $ 2,340 $ 2,396 Percentage rent (1) 1,585 2,060 Total $ 3,925 $ 4,456 (1) Several of the Company’s hotels pay percentage rent, which is calculated on operating revenues above certain thresholds. Rent expense incurred pursuant to a lease on the corporate facility totaled $0.1 million for both the three months ended March 31, 2017 and 2016, and is included in corporate overhead expense. Concentration of Risk The concentration of the Company’s hotels in California, Illinois, Massachusetts and the greater Washington DC area exposes the Company’s business to economic conditions, competition and real and personal property tax rates unique to these locales. As of March 31, 2017, 16 of the Company’s 27 hotels were concentrated in California, Illinois, Massachusetts and the greater Washington DC area as follows: Greater Washington DC California Illinois Massachusetts Area (unaudited) (unaudited) (unaudited) (unaudited) Number of hotels 7 3 3 3 Percentage of total rooms % % % % Percentage of total consolidated revenue during the past 12 months % % % % Other The Company has provided customary unsecured environmental indemnities to certain lenders. The Company has performed due diligence on the potential environmental risks, including obtaining an independent environmental review from outside environmental consultants. These indemnities obligate the Company to reimburse the indemnified parties for damages related to certain environmental matters. There is no term or damage limitation on these indemnities; however, if an environmental matter arises, the Company could have recourse against other previous owners or a claim against its environmental insurance policies. At March 31, 2017, the Company had $0.5 million of outstanding irrevocable letters of credit to guaranty the Company’s financial obligations related to workers’ compensation insurance programs from prior policy years. The beneficiaries of these letters of credit may draw upon these letters of credit in the event of a contractual default by the Company relating to each respective obligation. No draws have been made through March 31, 2017. 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 and Company matters. While it is not possible to ascertain the ultimate outcome of such matters, the Company believes that the aggregate 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. |
Summary of Significant Accoun19
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements as of March 31, 2017 and December 31, 2016, and for the three months ended March 31, 2017 and 2016, include the accounts of the Company, the Operating Partnership, the TRS Lessee and their subsidiaries. All significant intercompany balances and transactions have been eliminated. If the Company determines that it has an interest in a variable interest entity within the meaning of the Consolidation Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), the Company will consolidate the entity when it is determined to be the primary beneficiary of the entity. Based on its review, the Company determined that all of its subsidiaries were properly consolidated as of March 31, 2017 and December 31, 2016, and for the three months ended March 31, 2017 and 2016. Noncontrolling interest at both March 31, 2017 and December 31, 2016 represents the outside 25.0% equity interest in the Hilton San Diego Bayfront, which the Company includes in its financial statements on a consolidated basis. 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, 2016, filed with the Securities and Exchange Commission on February 23, 2017. 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. As required by the Earnings Per Share Topic of the FASB ASC, the net income per share for each class of stock (common stock and convertible preferred 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. To the extent the Company has undistributed earnings in any calendar quarter, the Company will follow the two-class method of computing earnings per share. The Company follows the requirements of the Earnings Per Share Topic of the FASB ASC. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are considered participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. In accordance with the Earnings Per Share Topic of the FASB ASC, basic earnings (loss) attributable to common stockholders per common share is computed based on the weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) attributable to common stockholders per common share is computed based on the weighted average number of shares of common stock outstanding during each period, plus potential common shares considered outstanding during the period, as long as the inclusion of such awards is not anti-dilutive. Potential common shares consist of unvested restricted stock awards and the incremental common shares issuable upon the exercise of stock options, using the more dilutive of either the two-class method or the treasury stock method. The following table sets forth the computation of basic and diluted earnings per common share (in thousands, except per share data): Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 (unaudited) (unaudited) Numerator: Net income $ 63,827 $ 1,216 Income from consolidated joint venture attributable to noncontrolling interest (1,992) (1,650) Preferred stock dividends (3,207) (2,766) Distributions paid on unvested restricted stock compensation (60) (60) Undistributed income allocated to unvested restricted stock compensation (248) — Numerator for basic and diluted income (loss) attributable to common stockholders $ 58,320 $ (3,260) Denominator: Weighted average basic and diluted common shares outstanding 219,093 212,887 Basic and diluted income (loss) attributable to common stockholders per common share $ 0.27 $ (0.02) The Company’s unvested restricted shares associated with its long-term incentive plan and shares associated with common stock options have been excluded from the above calculation of earnings per share for the three months ended March 31, 2017 and 2016, as their inclusion would have been anti-dilutive. |
New Accounting Standards and Accounting Changes | New Accounting Standards and Accounting Changes In May 2014, the FASB issued Accounting Standards Update No. 2014-09, “ Revenue from Contracts with Customers (Topic 606) ” (“ASU No. 2014-09”). The core principle of ASU No. 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity will need to apply a five-step model: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. ASU No. 2014-09 was originally to be effective during the first quarter of 2017; however, the FASB issued a one-year deferral so that it now becomes effective during the first quarter of 2018. ASU No. 2014-09 will require either a full retrospective approach or a modified retrospective approach, with early adoption permitted as of the original effective date. In March 2016, the FASB clarified the principal versus agent guidance in ASU No. 2014-09 with its issuance of Accounting Standards Update No. 2016-08, “ Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) ” (“ASU No. 2016-08”). In particular, ASU No. 2016-08 clarifies how an entity should identify the unit of accounting for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements, such as service transactions by explaining what a principal controls before the specified good or service is transferred to the customer. In addition, ASU No. 2016-08 reframes the indicators to focus on evidence that an entity is acting as a principal rather than as an agent. ASU No. 2016-08 will become effective, along with ASU No. 2014-09, during the first quarter of 2018. Similar to ASU No. 2014-09, ASU No. 2016-08 will require either a full retrospective approach or a modified retrospective approach, with early adoption permitted as of the original effective date. In May 2016, the FASB amended ASU No. 2014-09’s guidance on transition, collectability, noncash consideration and the presentation of sales and other similar taxes with its issuance of Accounting Standards Update No. 2016-12, “ Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients ” (“ASU No. 2016-12”). The amendments clarify that, for a contract to be considered completed at transition, all (or substantially all) of the revenue must have been recognized under legacy GAAP. This clarification is important because entities that use the modified retrospective transition approach need to apply the standard only to contracts that are not complete as of the date of initial application, and entities that use the full retrospective approach may apply certain practical expedients to completed contracts. In addition, ASU No. 2016-12 clarifies that an entity should consider the probability of collecting substantially all of the consideration to which it will be entitled in exchange for goods and services expected to be transferred to the customer rather than the total amount promised for all the goods or services in the contract. ASU No. 2016-12 also clarifies that an entity may consider its ability to manage its exposure to credit risk as part of the collectability assessment, as well as that the fair value of noncash consideration should be measured at contract inception when determining the transaction price. Finally, ASU No. 2016-12 allows an entity to make an accounting policy election to exclude from the transaction price certain types of taxes collected from a customer if it discloses that policy. ASU No. 2016-12 will become effective, along with ASU No. 2014-09, during the first quarter of 2018. Similar to ASU No. 2014-09, ASU No. 2016-12 will require either a full retrospective approach or a modified retrospective approach, with early adoption permitted as of the original effective date. The Company is in the process of evaluating the impact that ASU No. 2014-09, along with the related clarifications and amendments in ASU No. 2016-08 and ASU No. 2016-12, will have on its recognition of revenue included in its consolidated financial statements. While the Company is still evaluating the impact that the ASUs will have on accounting for the gain recognized upon the sale of a hotel, there is a possibility that the adoption of ASU No. 2014-09 will affect the timing of any gain recognition in the consolidated financial statements. For example, under current guidance, a gain on the sale of hotel properties with contingencies and some future involvement is deferred until all contingencies have been removed. Under the new guidance, however, the entire gain on sale may be recognized upon the close of escrow. The Company expects to adopt the new ASUs under the modified retrospective approach. In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “ Leases (Topic 842) ” (“ASU No. 2016-02”), which will require lessees to put most leases on their balance sheets but recognize expenses in the income statement in a manner similar to today’s accounting. The guidance also eliminates today’s real estate-specific provisions and changes the guidance on sale-leaseback transactions, initial direct costs and lease executory costs for all entities. For lessors, the standard modifies the classification criteria and the accounting for sales-type and direct financing leases. All entities will classify leases to determine how to recognize lease-related revenue and expense. Classification will continue to affect amounts that lessors record on the balance sheet. ASU No. 2016-02 will become effective during the first quarter of 2019, and will require a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company is currently evaluating the impact that ASU No. 2016-02 will have on its consolidated financial statements, and, other than the inclusion of operating leases on the Company’s balance sheet, such effects have not yet been determined. 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 ” (“ASU No. 2016-13”), which will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward looking “expected loss” model that generally will result in the earlier recognition of allowances for losses. In addition, entities will have to disclose significantly more information, including information they use to track credit quality by year of origination for most financing receivables. ASU No. 2016-13 will become effective during the first quarter of 2020. ASU No. 2016-13 will require a modified retrospective approach, with early adoption permitted during the first quarter of 2019. The Company does not believe that the adoption of ASU No. 2016-13 will have a material impact on its consolidated financial statements. In September 2016, the FASB issued Accounting Standards Update No. 2016-15, “ Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) ” (“ASU No. 2016-15”), which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. ASU No. 2016-15 addresses certain issues where diversity in practice was identified. It amends existing guidance, which is principles based and often requires judgment to determine the appropriate classification of cash flows as operating, investing or financing activities. In addition, ASU No. 2016-15 clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. ASU No. 2016-15 will become effective during the first quarter of 2018, and will generally require a retrospective approach. Early adoption is permitted. The Company does not believe that the adoption of ASU No. 2016-15 will have a material effect on its consolidated financial statements. In November 2016, the FASB issued Accounting Standards Update No. 2016-18, “ Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force) ” (“ASU No. 2016-18”), which will require entities to show the changes in total cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item on the balance sheet, the new guidance requires a reconciliation of the totals in the statement of cash flows to the related caption in the balance sheet. This reconciliation can be presented either on the face of the statement of cash flows or in the notes to the financial statements. ASU No. 2016-18 will become effective in the first quarter of 2018, and will require a retrospective approach. Early adoption in an interim period is permitted, but any adjustments must be reflected as of the beginning of the fiscal year that includes the interim period. Upon adoption of this standard, amounts included in restricted cash on the Company’s consolidated balance sheets will be included with cash and cash equivalents on its consolidated statements of cash flows. These amounts totaled $64.4 million and $67.9 million at March 31, 2017 and December 31, 2016, respectively. The adoption of this standard will not change the Company’s balance sheet presentation. In January 2017, the FASB issued Accounting Standards Update No. 2017-01, “ Business Combinations (Topic 805): Clarifying the Definition of a Business ” (“ASU No. 2017-01”), which changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. Under the new guidance, an entity first determines whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the set of transferred assets and activities is not a business. If it is not met, the entity then evaluates whether the set meets the requirement that a business include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. ASU No. 2017-01 will become effective in the first quarter of 2018, and the guidance is to be applied prospectively. Early adoption is permitted. Once adopted, the Company will be required to analyze future hotel acquisitions to determine if the transaction qualifies as the purchase of a business or an asset. Transaction costs associated with asset acquisitions will be capitalized, while the same costs associated with a business combination will continue to be expensed as incurred. In addition, asset acquisitions will not be subject to a measurement period, as are business combinations. Depending on the Company’s conclusion, ASU No. 2017-01 may have an effect on its consolidated financial statements. In January 2017, the FASB issued Accounting Standards Update No. 2017-04, “ Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ” (“ASU No. 2017-04”), which eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of today’s goodwill impairment test) to measure a goodwill impairment charge. Under the new guidance, if a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard does not change the guidance on completing Step 1 of the goodwill impairment test. An entity will still be able to perform today’s optional qualitative goodwill impairment assessment before determining whether to proceed to Step 1. ASU No. 2017-04 will become effective in the first quarter of 2019, and the guidance is to be applied prospectively. Early adoption is permitted. The Company does not believe that the adoption of ASU No. 2017-04 will have a material impact on its consolidated financial statements. |
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 and comprehensive income, revenues, expenses and net income or loss from the less-than-wholly-owned subsidiary is reported at the consolidated amount, 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 statement of equity includes beginning balances, activity for the period and ending balances for each component of stockholders’ equity, noncontrolling interest and total equity. At both March 31, 2017 and December 31, 2016, the noncontrolling interest reported in the Company’s financial statements included the 25.0% outside ownership in the Hilton San Diego Bayfront. |
Segment Reporting | Segment Reporting The Company considers each of its hotels to be an operating segment, none of which meets the threshold for a separate reportable segment in accordance with the Segment Reporting Topic of the FASB ASC. Currently, the Company operates in one segment, hotel ownership. |
Organization and Description 20
Organization and Description of Business (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Organization and Description of Business | |
Schedule of number of hotels managed by each third-party manager | Number of Hotels Subsidiaries of Marriott International, Inc. or Marriott Hotel Services, Inc. (collectively, “Marriott”) 11 Interstate Hotels & Resorts, Inc. 5 Highgate Hotels L.P. and an affiliate 3 Crestline Hotels & Resorts 2 Hilton Worldwide 2 Hyatt Corporation 2 Davidson Hotels & Resorts 1 HEI Hotels & Resorts 1 Total hotels held for investment 27 |
Summary of Significant Accoun21
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
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 (in thousands, except per share data): Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 (unaudited) (unaudited) Numerator: Net income $ 63,827 $ 1,216 Income from consolidated joint venture attributable to noncontrolling interest (1,992) (1,650) Preferred stock dividends (3,207) (2,766) Distributions paid on unvested restricted stock compensation (60) (60) Undistributed income allocated to unvested restricted stock compensation (248) — Numerator for basic and diluted income (loss) attributable to common stockholders $ 58,320 $ (3,260) Denominator: Weighted average basic and diluted common shares outstanding 219,093 212,887 Basic and diluted income (loss) attributable to common stockholders per common share $ 0.27 $ (0.02) |
Investment in Hotel Properties
Investment in Hotel Properties (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Investment in Hotel Properties | |
Schedule of investment in hotel properties | Investment in hotel properties, net consisted of the following (in thousands): March 31, December 31, 2017 2016 (unaudited) Land $ 531,660 $ 531,660 Buildings and improvements 3,174,081 3,135,806 Furniture, fixtures and equipment 522,806 512,372 Intangible assets 48,759 49,015 Franchise fees 1,021 1,021 Construction in process 48,856 65,449 Investment in hotel properties, gross 4,327,183 4,295,323 Accumulated depreciation and amortization (1,177,711) (1,137,104) Investment in hotel properties, net $ 3,149,472 $ 3,158,219 |
Disposals (Tables)
Disposals (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Disposals | |
Schedule of amounts held for sale | The Company classified the assets and liabilities of the Fairmont Newport Beach as held for sale as of December 31, 2016 as follows (in thousands): December 31, 2016 Accounts receivable, net $ 452 Inventories 126 Prepaid expenses 386 Investment in hotel property, net 77,971 Other assets, net 178 Assets held for sale, net $ 79,113 Accounts payable and accrued expenses $ 781 Accrued payroll and employee benefits 751 Other current liabilities 1,473 Other liabilities 148 Liabilities of assets held for sale $ 3,153 |
Schedule of operating results for sold entities | The following table provides summary results of operations for the Fairmont Newport Beach, as well as the Sheraton Cerritos that was sold during 2016, both of which are included in continuing operations (in thousands): Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 (unaudited) (unaudited) Revenues $ 3,541 $ 11,248 Income before income taxes $ 1,019 $ 1,347 Gain on sale of assets $ 44,285 $ — |
Fair Value Measurements and I24
Fair Value Measurements and Interest Rate Derivatives (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Fair Value Measurements and Interest Rate Derivatives | |
Schedule of assets measured at fair value on a recurring and non-recurring basis | The following table presents the Company’s assets measured at fair value on a recurring and non-recurring basis at March 31, 2017 and December 31, 2016 (in thousands): Fair Value Measurements at Reporting Date Total Level 1 Level 2 Level 3 March 31, 2017 (unaudited): Interest rate cap derivatives $ 4 $ — $ 4 $ — Interest rate swap derivatives 2,421 — 2,421 — Life insurance policy (1) 855 — 855 — Total assets measured at fair value at March 31, 2017 $ 3,280 $ — $ 3,280 $ — December 31, 2016: Interest rate cap derivative $ — $ — $ — $ — Interest rate swap derivatives 1,749 — 1,749 — Life insurance policy (1) 861 — 861 — Total assets measured at fair value at December 31, 2016 $ 2,610 $ — $ 2,610 $ — (1) Includes the split life insurance policy for a former Company associate. These amounts are included in other assets, net on the accompanying consolidated balance sheets, and will be used to reimburse the Company for payments made to the former associate from the related retirement benefit agreement, which is included in accrued payroll and employee benefits on the accompanying consolidated balance sheets. |
Schedule of liabilities measured at fair value on a recurring and non-recurring basis | The following table presents the Company’s liabilities measured at fair value on a recurring and non-recurring basis at March 31, 2017 and December 31, 2016 (in thousands): Fair Value Measurements at Reporting Date Total Level 1 Level 2 Level 3 March 31, 2017 (unaudited): Retirement benefit agreement (1) $ 855 $ — $ 855 $ — Total liabilities measured at fair value at March 31, 2017 $ 855 $ — $ 855 $ — December 31, 2016: Retirement benefit agreement (1) $ 861 $ — $ 861 $ — Total liabilities measured at fair value at December 31, 2016 $ 861 $ — $ 861 $ — (1) Includes the retirement benefit agreement for a former Company associate. The agreement calls for the balance of the retirement benefit to be paid out to the former associate in ten annual installments, beginning in 2011. As such, the Company has paid the former associate a total of $1.2 million through March 31, 2017, which was reimbursed to the Company using funds from the related split life insurance policy noted above. These amounts are included in accrued payroll and employee benefits on the accompanying consolidated balance sheets. |
Schedule of interest rate derivatives | The Company’s interest rate derivatives, which are not designated as effective cash flow hedges, consisted of the following at March 31, 2017 (unaudited) and December 31, 2016 (in thousands): Estimated Fair Value Asset Strike / Capped Effective Maturity Notional March 31, December 31, Hedged Debt Type Rate Index Date Date Amount 2017 2016 Hilton San Diego Bayfront (1) Cap 4.250 % 1-Month LIBOR April 15, 2015 May 1, 2017 $ 110,772 $ — $ — Hilton San Diego Bayfront (1) Cap 4.250 % 1-Month LIBOR May 1, 2017 May 1, 2019 $ N/A 4 — $85.0 million term loan (2) Swap 3.391 % 1-Month LIBOR October 29, 2015 September 2, 2022 $ 85,000 1,610 1,336 $100.0 million term loan (3) Swap 3.653 % 1-Month LIBOR January 29, 2016 January 31, 2023 $ 100,000 811 413 $ 2,425 $ 1,749 (1) In March 2017, the Company purchased a new interest rate cap agreement for $19,000 related to the loan secured by the Hilton San Diego Bayfront. The new agreement, whose terms are substantially the same as the terms under the old cap agreement, will effectively replace the old agreement on May 1, 2017. The fair values of both Hilton San Diego Bayfront cap agreements are included in other assets, net on the accompanying consolidated balance sheets. (2) The fair value of the $85.0 million term loan swap agreement is included in other assets, net on the Company’s consolidated balance sheets. The 1-month LIBOR rate was swapped to a fixed rate of 1.591%. (3) The fair value of the $100.0 million term loan swap agreement is included in other assets, net on the Company’s consolidated balance sheets. The 1-month LIBOR rate was swapped to a fixed rate of 1.853%. |
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 (decreases) increases to interest expense for the three months ended March 31, 2017 and 2016 as follows (in thousands): Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 (unaudited) (unaudited) (Gain) loss on derivatives, net $ (657) $ 6,402 |
Other Assets (Tables)
Other Assets (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Other Assets | |
Schedule of other assets | Other assets, net consisted of the following (in thousands): March 31, December 31, 2017 2016 (unaudited) Property and equipment, net $ 699 $ 779 Goodwill 990 990 Deferred expense on straight-lined third-party tenant leases 2,853 2,876 Interest rate derivatives 2,425 1,749 Other receivables 1,491 1,673 Other 1,487 1,322 Total other assets net $ 9,945 $ 9,389 |
Schedule of property and equipment | The property and equipment, net noted above consisted of the following (in thousands): March 31, December 31, 2017 2016 (unaudited) Cost basis $ 10,843 $ 10,807 Accumulated depreciation (10,144) (10,028) Property and equipment, net $ 699 $ 779 |
Notes Payable (Tables)
Notes Payable (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Notes Payable | |
Schedule of notes payable | Notes payable consisted of the following (in thousands): March 31, December 31, 2017 2016 (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 March 31, 2017, and five hotel properties at December 31, 2016. $ 350,802 $ 528,604 Note payable requiring payments of interest and principal, bearing a blended rate of one-month LIBOR plus 225 basis points; maturing in August 2019. The note is collateralized by a first deed of trust on one hotel property. 221,544 222,340 Unsecured term loan requiring payments of interest only, with a blended interest rate based on a pricing grid with a range of 180 to 255 basis points over 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 3.391% based on the Company's current leverage. 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 180 to 255 basis points over 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 3.653% based on the Company's current leverage. Matures in January 2023. 100,000 100,000 Unsecured Series A Senior Notes requiring semi-annual payments of interest only, bearing interest at 4.69%; maturing in January 2026. 120,000 — Unsecured Series B Senior Notes requiring semi-annual payments of interest only, bearing interest at 4.79%; maturing in January 2028. 120,000 — Total notes payable $ 997,346 $ 935,944 Current portion of notes payable $ 10,167 $ 186,034 Less: current portion of deferred financing fees (1,269) (1,105) Carrying value of current portion of notes payable $ 8,898 $ 184,929 Notes payable, less current portion $ 987,179 $ 749,910 Less: long-term portion of deferred financing fees (4,719) (3,536) Carrying value of notes payable, less current portion $ 982,460 $ 746,374 |
Schedule of interest incurred and expensed | Total interest incurred and expensed on the notes payable was as follows (in thousands): Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 (unaudited) (unaudited) Interest expense on debt and capital lease obligations $ 11,328 $ 13,053 (Gain) loss on derivatives, net (657) 6,402 Amortization of deferred financing fees 578 555 Total interest expense $ 11,249 $ 20,010 |
Other Current Liabilities and27
Other Current Liabilities and Other Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Other Current Liabilities and Other Liabilities | |
Schedule of other current liabilities | Other current liabilities consisted of the following (in thousands): March 31, December 31, 2017 2016 (unaudited) Property, sales and use taxes payable $ 16,436 $ 16,965 Income tax payable 382 211 Accrued interest 3,568 1,996 Advance deposits 17,820 14,505 Management fees payable 1,140 1,645 Other 4,440 4,547 Total other current liabilities $ 43,786 $ 39,869 |
Schedule of other liabilities | Other liabilities consisted of the following (in thousands): March 31, December 31, 2017 2016 (unaudited) Deferred gain on sale of asset $ 7,000 $ 7,000 Deferred revenue 6,149 6,045 Deferred rent 19,748 19,807 Deferred incentive management fees 201 — Other 3,819 3,798 Total other liabilities $ 36,917 $ 36,650 |
Long-Term Incentive Plan (Table
Long-Term Incentive Plan (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Long-Term Incentive Plan | |
Schedule of amortization expense and forfeitures related to restricted shares and performance awards | In accordance with the Compensation Topic of the FASB ASC, 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 months ended March 31, 2017 and 2016 were as follows (in thousands): Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 (unaudited) (unaudited) Amortization expense, including forfeitures $ 1,749 $ 1,614 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies | |
Schedule of basic and incentive management fees | Total basic management fees, net of key money incentives received from third-party hotel managers, along with incentive management fees incurred by the Company during the three months ended March 31, 2017 and 2016 were included in other property-level expenses on the Company’s consolidated statements of operations and comprehensive income as follows (in thousands): Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 (unaudited) (unaudited) Basic management fees $ 7,895 $ 7,667 Incentive management fees 2,553 1,704 Total basic and incentive management fees $ 10,448 $ 9,371 |
Schedule of License and Franchise Costs | Total license and franchise fees incurred by the Company during the three months ended March 31, 2017 and 2016 were included in franchise costs on the Company’s consolidated statements of operations and comprehensive income as follows (in thousands): Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 (unaudited) (unaudited) Franchise assessments (1) $ 5,927 $ 5,813 Franchise royalties 2,128 2,283 Total franchise costs $ 8,055 $ 8,096 (1) Includes advertising, reservation and frequent guest club assessments. |
Schedule of assets under capital lease | The capital lease asset was included in investment in hotel properties, net on the Company’s consolidated balance sheets as follows (in thousands): March 31, December 31, 2017 2016 (unaudited) Gross capital lease asset - buildings and improvements $ 58,799 $ 58,799 Accumulated depreciation (7,105) (6,738) Net capital lease asset - buildings and improvements $ 51,694 $ 52,061 |
Schedule of future minimum lease payments under capital lease | Future minimum lease payments under the Company’s capital lease together with the present value of the net minimum lease payments as of March 31, 2017 are as follows (in thousands): 2017 $ 1,403 2018 1,403 2019 1,403 2020 1,403 2021 1,403 Thereafter 106,257 Total minimum lease payments (1) 113,272 Less: Amount representing interest (2) (97,697) Present value of net minimum lease payments (3) $ 15,575 (1) Minimum lease payments do not include percentage rent which may be paid under the Hyatt Centric Chicago Magnificent Mile building lease on the basis of 4.0% of the hotel’s gross room revenues over a certain threshold. No percentage rent was due during either the three months ended March 31, 2017 or 2016. (2) Interest includes the amount necessary to reduce net minimum lease payments to present value calculated at the Company’s incremental borrowing rate at lease inception. (3) The present value of net minimum lease payments are presented on the Company’s consolidated balance sheet as of March 31, 2017 as a current obligation of $1,000, which is included in accounts payable and accrued expenses, and as a long-term obligation of $15.6 million, which is included in capital lease obligations, less current portion. |
Schedule of ground, building and air lease rent | Total rent expense incurred pursuant to ground, building and air lease agreements for the three months ended March 31, 2017 and 2016 was included in property tax, ground lease and insurance on the Company’s consolidated statements of operations and comprehensive income as follows (in thousands): Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 (unaudited) (unaudited) Minimum rent, including straight-line adjustments $ 2,340 $ 2,396 Percentage rent (1) 1,585 2,060 Total $ 3,925 $ 4,456 (1) Several of the Company’s hotels pay percentage rent, which is calculated on operating revenues above certain thresholds. |
Schedule of Hotel Geographic Concentration of Risk | As of March 31, 2017, 16 of the Company’s 27 hotels were concentrated in California, Illinois, Massachusetts and the greater Washington DC area as follows: Greater Washington DC California Illinois Massachusetts Area (unaudited) (unaudited) (unaudited) (unaudited) Number of hotels 7 3 3 3 Percentage of total rooms % % % % Percentage of total consolidated revenue during the past 12 months % % % % |
Organization and Description 30
Organization and Description of Business (Details) | 3 Months Ended |
Mar. 31, 2017propertyitem | |
Organization and Description of Business | |
Number of hotels held for investment | property | 27 |
Number of hotels managed by third parties | 27 |
Marriott | |
Organization and Description of Business | |
Number of hotels managed by third parties | 11 |
Interstate Hotels & Resorts, Inc | |
Organization and Description of Business | |
Number of hotels managed by third parties | 5 |
Highgate Hotels L.P. and an affiliate | |
Organization and Description of Business | |
Number of hotels managed by third parties | 3 |
Crestline Hotels & Resorts | |
Organization and Description of Business | |
Number of hotels managed by third parties | 2 |
Hilton Worldwide | |
Organization and Description of Business | |
Number of hotels managed by third parties | 2 |
Hyatt Corporation | |
Organization and Description of Business | |
Number of hotels managed by third parties | 2 |
Davidson Hotels & Resorts | |
Organization and Description of Business | |
Number of hotels managed by third parties | 1 |
HEI Hotels & Resorts | |
Organization and Description of Business | |
Number of hotels managed by third parties | 1 |
Sunstone Hotel Partnership, LLC | |
Organization and Description of Business | |
Controlling interest owned (as a percent) | 100.00% |
Summary of Significant Accoun31
Summary of Significant Accounting Policies (Details) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017USD ($)item$ / sharesshares | Mar. 31, 2016USD ($)$ / sharesshares | Dec. 31, 2016USD ($) | |
Numerator: | |||
Net income | $ 63,827 | $ 1,216 | |
Income from consolidated joint venture attributable to noncontrolling interest | (1,992) | (1,650) | |
Preferred stock dividends | (3,207) | (2,766) | |
Distributions paid on unvested restricted stock compensation | (60) | (60) | |
Undistributed income allocated to unvested restricted stock compensation | (248) | ||
Numerator for basic and diluted income (loss) attributable to common stockholders | $ 58,320 | $ (3,260) | |
Denominator: | |||
Weighted average basic and diluted common shares outstanding (in shares) | shares | 219,093 | 212,887 | |
Basic and diluted income (loss) attributable to common stockholders per common share (in dollars per share) | $ / shares | $ 0.27 | $ (0.02) | |
ASU 2016-18 - New Accounting Pronouncement | |||
Restricted cash to be included with cash upon adoption of ASU 2016-18 | $ 64,414 | $ 67,923 | |
Segment Reporting | |||
Number of operating segments | item | 1 | ||
Hilton San Diego Bayfront | |||
Basis of Presentation | |||
Noncontrolling interest percentage in Hilton San Diego Bayfront | 25.00% | 25.00% | |
Stockholders' Equity Attributable to Noncontrolling Interest | |||
Noncontrolling interest percentage in Hilton San Diego Bayfront | 25.00% | 25.00% |
Investment in Hotel Propertie32
Investment in Hotel Properties (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Investment in Hotel Properties | ||
Land | $ 531,660 | $ 531,660 |
Buildings and improvements | 3,174,081 | 3,135,806 |
Furniture, fixtures and equipment | 522,806 | 512,372 |
Intangible assets | 48,759 | 49,015 |
Franchise fees | 1,021 | 1,021 |
Construction in process | 48,856 | 65,449 |
Investment in hotel properties, gross | 4,327,183 | 4,295,323 |
Accumulated depreciation and amortization | (1,177,711) | (1,137,104) |
Investment in hotel properties, net | $ 3,149,472 | $ 3,158,219 |
Disposals (Details)
Disposals (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | ||
Feb. 28, 2017USD ($)room | Mar. 31, 2017USD ($) | Mar. 31, 2016USD ($) | Dec. 31, 2016USD ($) | |
Disposals | ||||
Gain on sale of assets | $ 44,285 | |||
Detail of Amounts Held for Sale | ||||
Assets held for sale, net | $ 79,113 | |||
Liabilities of assets held for sale | 3,153 | |||
Sold, not considered a discontinued operation | Fairmont Newport Beach | ||||
Disposals | ||||
Number of rooms sold | room | 444 | |||
Net proceeds received from sale | $ 122,800 | |||
Gain on sale of assets | $ 44,300 | 44,285 | ||
Detail of Amounts Held for Sale | ||||
Accounts receivable, net | 452 | |||
Inventories | 126 | |||
Prepaid expenses | 386 | |||
Investment in hotel property, net | 77,971 | |||
Other assets, net | 178 | |||
Assets held for sale, net | 79,113 | |||
Accounts payable and accrued expenses | 781 | |||
Accrued payroll and employee benefits | 751 | |||
Other current liabilities | 1,473 | |||
Other liabilities | 148 | |||
Liabilities of assets held for sale | $ 3,153 | |||
Total revenues | 3,541 | |||
Income before income taxes | $ 1,019 | |||
Sold, not considered a discontinued operation | Fairmont Newport Beach and Sheraton Cerritos | ||||
Detail of Amounts Held for Sale | ||||
Total revenues | $ 11,248 | |||
Income before income taxes | $ 1,347 |
Fair Value Measurements and I34
Fair Value Measurements and Interest Rate Derivatives - Fair Value Measurements (Details) $ in Thousands | Mar. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Dec. 31, 2011item |
Assets: | |||
Interest rate derivatives | $ 2,425 | $ 1,749 | |
Former Chairman | |||
Liabilities: | |||
Number of installments to be paid out under the Retirement Benefit Agreement | item | 10 | ||
Total amount paid to date under the Retirement Benefit Agreement | 1,200 | ||
Level 2 | |||
Assets: | |||
Life insurance policy | 855 | 861 | |
Total assets | 3,280 | 2,610 | |
Liabilities: | |||
Retirement benefit agreement | 855 | 861 | |
Total liabilities | 855 | 861 | |
Level 2 | Hilton San Diego Bayfront new interest rate cap | |||
Assets: | |||
Interest rate derivatives | 4 | ||
Level 2 | Interest Rate Swap | |||
Assets: | |||
Interest rate derivatives | 2,421 | 1,749 | |
Total at the end of the period | |||
Assets: | |||
Life insurance policy | 855 | 861 | |
Total assets | 3,280 | 2,610 | |
Liabilities: | |||
Retirement benefit agreement | 855 | 861 | |
Total liabilities | 855 | 861 | |
Total at the end of the period | Hilton San Diego Bayfront new interest rate cap | |||
Assets: | |||
Interest rate derivatives | 4 | ||
Total at the end of the period | Interest Rate Swap | |||
Assets: | |||
Interest rate derivatives | $ 2,421 | $ 1,749 |
Fair Value Measurements and I35
Fair Value Measurements and Interest Rate Derivatives - Interest Rate Derivatives (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Interest Rate Derivatives | ||||
Fair value of interest rate derivatives | $ 2,425,000 | $ 2,425,000 | $ 1,749,000 | |
Fair values of derivative assets | $ 2,425,000 | 2,425,000 | $ 1,749,000 | |
Payment for interest rate derivative | 19,000 | |||
(Gain) loss on derivatives, net | $ (657,000) | $ 6,402,000 | ||
Hilton San Diego Bayfront mortgage payable | ||||
Interest Rate Derivatives | ||||
Interest rate, description of reference rate | one-month LIBOR | one-month LIBOR | ||
Interest rate added to base rate (as a percent) | 2.25% | 2.25% | ||
$85.0 million term loan | ||||
Interest Rate Derivatives | ||||
Term loan total interest rate, including effect of swap agreement | 3.391% | 3.391% | 3.391% | |
$100.0 million term loan | ||||
Interest Rate Derivatives | ||||
Term loan total interest rate, including effect of swap agreement | 3.653% | 3.653% | 3.653% | |
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 | 1-Month LIBOR | 1-Month LIBOR | ||
Effective date | Apr. 15, 2015 | Apr. 15, 2015 | ||
Maturity Date | May 1, 2017 | May 1, 2017 | ||
Notional amount | $ 110,772,000 | $ 110,772,000 | ||
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 | 4.25% | 4.25% | ||
Interest rate, description of reference rate | 1-Month LIBOR | |||
Effective date | May 1, 2017 | |||
Maturity Date | May 1, 2019 | |||
Fair value of interest rate derivatives | $ 4,000 | $ 4,000 | ||
Payment for interest rate derivative | $ 19,000 | |||
Interest Rate Swap | $85.0 million term loan | ||||
Interest Rate Derivatives | ||||
Fixed rate under interest rate swap agreement | 1.591% | 1.591% | 1.591% | |
Interest Rate Swap | $100.0 million term loan | ||||
Interest Rate Derivatives | ||||
Fixed rate under interest rate swap agreement | 1.853% | 1.853% | 1.853% | |
Interest Rate Swap | Not designated as hedging instrument | $85.0 million term loan | ||||
Interest Rate Derivatives | ||||
Term loan total interest rate, including effect of swap agreement | 3.391% | 3.391% | 3.391% | |
Interest rate, description of reference rate | 1-Month LIBOR | 1-Month LIBOR | ||
Effective date | Oct. 29, 2015 | Oct. 29, 2015 | ||
Maturity Date | Sep. 2, 2022 | Sep. 2, 2022 | ||
Notional amount | $ 85,000,000 | $ 85,000,000 | ||
Fair value of interest rate derivatives | $ 1,610,000 | $ 1,610,000 | $ 1,336,000 | |
Fixed rate under interest rate swap agreement | 1.591% | 1.591% | 1.591% | |
Interest Rate Swap | Not designated as hedging instrument | $100.0 million term loan | ||||
Interest Rate Derivatives | ||||
Term loan total interest rate, including effect of swap agreement | 3.653% | 3.653% | 3.653% | |
Interest rate, description of reference rate | 1-Month LIBOR | 1-Month LIBOR | ||
Effective date | Jan. 29, 2016 | Jan. 29, 2016 | ||
Maturity Date | Jan. 31, 2023 | Jan. 31, 2023 | ||
Notional amount | $ 100,000,000 | $ 100,000,000 | ||
Fair value of interest rate derivatives | $ 811,000 | $ 811,000 | $ 413,000 | |
Fixed rate under interest rate swap agreement | 1.853% | 1.853% | 1.853% |
Fair Value Measurements and I36
Fair Value Measurements and Interest Rate Derivatives - Fair Value of Debt (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Percentage of Debt Bearing Fixed Interest Rates | 77.80% | 76.20% |
Notes payable | $ 997,346 | $ 935,944 |
Level 3 | ||
Fair value of debt | $ 1,000,000 | $ 900,000 |
Other Assets (Details)
Other Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Other assets, net | ||
Property and equipment, net | $ 699 | $ 779 |
Goodwill | 990 | 990 |
Deferred expense on straight-lined third-party tenant leases | 2,853 | 2,876 |
Interest rate derivatives | 2,425 | 1,749 |
Other receivables | 1,491 | 1,673 |
Other | 1,487 | 1,322 |
Total other assets, net | $ 9,945 | $ 9,389 |
Other Assets - Property and Equ
Other Assets - Property and Equipment (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Other Assets | ||
Property and equipment, gross | $ 10,843 | $ 10,807 |
Accumulated depreciation | (10,144) | (10,028) |
Property and equipment, net | $ 699 | $ 779 |
Notes Payable (Details)
Notes Payable (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2017USD ($)property | Dec. 31, 2016USD ($)property | Jan. 31, 2017 | |
Notes payable | |||
Total notes payable | $ 997,346 | $ 935,944 | |
Current portion of notes payable | 10,167 | 186,034 | |
Less: current portion of deferred financing fees | (1,269) | (1,105) | |
Current portion of notes payable, net | 8,898 | 184,929 | |
Notes payable, less current portion | 987,179 | 749,910 | |
Less: long-term portion of deferred financing fees | (4,719) | (3,536) | |
Carrying value of notes payable, less current portion | $ 982,460 | $ 746,374 | |
Notes payable maturing in various years | |||
Notes payable | |||
Number of hotels provided as collateral | property | 4 | 5 | |
Total notes payable | $ 350,802 | $ 528,604 | |
Notes payable maturing in various years | Minimum | |||
Notes payable | |||
Fixed interest rate (as a percent) | 4.12% | 4.12% | |
Notes payable maturing in various years | Maximum | |||
Notes payable | |||
Fixed interest rate (as a percent) | 5.95% | 5.95% | |
Hilton San Diego Bayfront mortgage payable | |||
Notes payable | |||
Number of hotels provided as collateral | property | 1 | 1 | |
Interest rate, description of reference rate | one-month LIBOR | one-month LIBOR | |
Interest rate added to base rate (as a percent) | 2.25% | 2.25% | |
Total notes payable | $ 221,544 | $ 222,340 | |
$85.0 million term loan | |||
Notes payable | |||
Term loan total interest rate, including effect of swap agreement | 3.391% | 3.391% | |
Total notes payable | $ 85,000 | $ 85,000 | |
$85.0 million term loan | Minimum | |||
Notes payable | |||
Interest rate added to base rate (as a percent) | 1.80% | 1.80% | |
$85.0 million term loan | Maximum | |||
Notes payable | |||
Interest rate added to base rate (as a percent) | 2.55% | 2.55% | |
$100.0 million term loan | |||
Notes payable | |||
Term loan total interest rate, including effect of swap agreement | 3.653% | 3.653% | |
Total notes payable | $ 100,000 | $ 100,000 | |
$100.0 million term loan | Minimum | |||
Notes payable | |||
Interest rate added to base rate (as a percent) | 1.80% | 1.80% | |
$100.0 million term loan | Maximum | |||
Notes payable | |||
Interest rate added to base rate (as a percent) | 2.55% | 2.55% | |
Series A Senior Notes | |||
Notes payable | |||
Fixed interest rate (as a percent) | 4.69% | 4.69% | |
Total notes payable | $ 120,000 | ||
Series B Senior Notes | |||
Notes payable | |||
Fixed interest rate (as a percent) | 4.79% | 4.79% | |
Total notes payable | $ 120,000 | ||
Interest Rate Swap | $85.0 million term loan | |||
Notes payable | |||
Fixed rate under interest rate swap agreement | 1.591% | 1.591% | |
Interest Rate Swap | $100.0 million term loan | |||
Notes payable | |||
Fixed rate under interest rate swap agreement | 1.853% | 1.853% | |
Not designated as hedging instrument | Interest Rate Cap | Hilton San Diego Bayfront mortgage payable | |||
Notes payable | |||
Interest rate, description of reference rate | 1-Month LIBOR | 1-Month LIBOR | |
Not designated as hedging instrument | Interest Rate Swap | $85.0 million term loan | |||
Notes payable | |||
Interest rate, description of reference rate | 1-Month LIBOR | 1-Month LIBOR | |
Fixed rate under interest rate swap agreement | 1.591% | 1.591% | |
Term loan total interest rate, including effect of swap agreement | 3.391% | 3.391% | |
Not designated as hedging instrument | Interest Rate Swap | $100.0 million term loan | |||
Notes payable | |||
Interest rate, description of reference rate | 1-Month LIBOR | 1-Month LIBOR | |
Fixed rate under interest rate swap agreement | 1.853% | 1.853% | |
Term loan total interest rate, including effect of swap agreement | 3.653% | 3.653% |
Notes Payable - Transactions (D
Notes Payable - Transactions (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | |
Jan. 31, 2017 | Mar. 31, 2017 | Mar. 31, 2016 | |
Notes Payable Transactions | |||
Proceeds from notes payable | $ 240,000 | $ 100,000 | |
Senior Notes | |||
Notes Payable Transactions | |||
Proceeds from notes payable | $ 240,000 | ||
Series A Senior Notes | |||
Notes Payable Transactions | |||
Proceeds from notes payable | $ 120,000 | ||
Fixed interest rate (as a percent) | 4.69% | 4.69% | |
Series B Senior Notes | |||
Notes Payable Transactions | |||
Proceeds from notes payable | $ 120,000 | ||
Fixed interest rate (as a percent) | 4.79% | 4.79% | |
Marriott Boston Long Wharf mortgage payable | |||
Notes Payable Transactions | |||
Fixed interest rate (as a percent) | 5.58% | ||
Repayment of mortgage debt | $ 176,000 |
Notes Payable - Interest Expens
Notes Payable - Interest Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Interest incurred and expensed | ||
Interest expense on debt and capital lease obligations | $ 11,328 | $ 13,053 |
(Gain) loss on derivatives, net | (657) | 6,402 |
Amortization of deferred financing fees | 578 | 555 |
Total interest incurred and expensed on debt and capital lease obligations | $ 11,249 | $ 20,010 |
Other Current Liabilities and42
Other Current Liabilities and Other Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Other Current Liabilities | ||
Property, sales and use taxes payable | $ 16,436 | $ 16,965 |
Income tax payable | 382 | 211 |
Accrued interest | 3,568 | 1,996 |
Advance deposits | 17,820 | 14,505 |
Management fees payable | 1,140 | 1,645 |
Other | 4,440 | 4,547 |
Total other current liabilities | 43,786 | 39,869 |
Other Liabilities | ||
Deferred gain on sale of asset | 7,000 | 7,000 |
Deferred revenue | 6,149 | 6,045 |
Deferred rent | 19,748 | 19,807 |
Deferred incentive management fees | 201 | |
Other | 3,819 | 3,798 |
Total other liabilities | $ 36,917 | $ 36,650 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||
May 31, 2016 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | Feb. 28, 2017 | |
Stockholders' equity | ||||||
Proceeds from preferred stock offerings | $ 115,000 | |||||
Payment of preferred stock offering costs | $ 4,016 | |||||
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 | $ 25 | ||
Proceeds from preferred stock offerings | $ 115,000 | |||||
Payment of preferred stock offering costs | $ 4,000 | |||||
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 | $ 75,000 | |||||
Payment of preferred stock offering costs | $ 2,600 | |||||
Redemption price (in dollars per share) | $ 25 | |||||
Cumulative Redeemable Preferred Stock | ||||||
Stockholders' equity | ||||||
Repurchase Program, number of shares repurchased (in shares) | 0 | |||||
Common Stock | ||||||
Stockholders' equity | ||||||
Repurchase Program, number of shares repurchased (in shares) | 0 | |||||
Common Stock | At The Market | ||||||
Stockholders' equity | ||||||
ATM Program, number of shares sold or issued (in shares) | 0 | |||||
ATM Program, remaining amount authorized for issuance | $ 300,000 | |||||
Common Stock | Maximum | ||||||
Stockholders' equity | ||||||
Repurchase Program, maximum amount authorized for repurchase | $ 300,000 | |||||
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 ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | |
Apr. 30, 2008 | Mar. 31, 2017 | Mar. 31, 2016 | |
Long-Term Incentive Plan | |||
Amortization related to shares issued to design and construction employees | $ 151 | $ 239 | |
Restricted Shares | |||
Long-Term Incentive Plan | |||
Amortization Expense, including forfeitures | 1,749 | 1,614 | |
Amortization related to shares issued to design and construction employees | $ 200 | $ 200 | |
Restricted Shares | Minimum | |||
Long-Term Incentive Plan | |||
Vesting period | 3 years | ||
Restricted Shares | Maximum | |||
Long-Term Incentive Plan | |||
Vesting period | 5 years | ||
Stock Options | Former Chairman | |||
Stock options | |||
Number of nonqualified stock options approved by the compensation committee of the Company's board of directors (in shares) | 200,000 | ||
Exercise price of outstanding options (in dollars per share) | $ 17.71 |
Commitments and Contingencies45
Commitments and Contingencies (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Basic and incentive management fees incurred | ||
Basic management fees | $ 7,895 | $ 7,667 |
Incentive management fees | 2,553 | 1,704 |
Total basic and incentive management fees | 10,448 | 9,371 |
License and Franchise Agreements | ||
Franchise assessments | 5,927 | 5,813 |
Franchise royalties | 2,128 | 2,283 |
Total franchise costs | $ 8,055 | $ 8,096 |
Minimum | ||
Management Agreements | ||
Basic management fees (as a percent) | 1.75% | |
Maximum | ||
Management Agreements | ||
Basic management fees (as a percent) | 3.50% | |
Renovation and Construction Commitments | ||
Renovation and Construction Commitments | ||
Remaining construction commitments | $ 46,100 |
Commitments and Contingencies -
Commitments and Contingencies - Capital and Operating Leases (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Future minimum lease payments under capital leases | |||
2,017 | $ 1,403,000 | ||
2,018 | 1,403,000 | ||
2,019 | 1,403,000 | ||
2,020 | 1,403,000 | ||
2,021 | 1,403,000 | ||
Thereafter | 106,257,000 | ||
Total minimum lease payments | 113,272,000 | ||
Less: Amount representing interest | (97,697,000) | ||
Present value of net minimum lease payments | 15,575,000 | ||
Capital lease obligation, current | 1,000 | ||
Capital lease obligation, noncurrent | 15,574,000 | $ 15,574,000 | |
Ground and Operating Leases | |||
Minimum rent, including straight-line adjustments | 2,340,000 | $ 2,396,000 | |
Percentage rent | 1,585,000 | 2,060,000 | |
Total rent expense included in property tax, ground lease and insurance | 3,925,000 | 4,456,000 | |
Lease expense on corporate facility | $ 100,000 | $ 100,000 | |
Hyatt Centric Chicago Magnificent Mile | |||
Future minimum lease payments under capital leases | |||
Capital lease contingent rent criteria (as a percent) | 4.00% | 4.00% | |
Percentage rent due | $ 0 | $ 0 | |
Hyatt Centric Chicago Magnificent Mile | Buildings and improvements | |||
Assets under capital lease | |||
Capital Leased Assets, Gross | 58,799,000 | 58,799,000 | |
Accumulated depreciation | (7,105,000) | (6,738,000) | |
Capital lease assets, net | $ 51,694,000 | $ 52,061,000 |
Commitments and Contingencies47
Commitments and Contingencies - Concentration of Risk and Other (Details) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017USD ($)property | Mar. 31, 2017USD ($)property | |
Concentration of Risk | ||
Number of hotels which are held for investment | 27 | 27 |
Other | ||
Term of unsecured environmental indemnities | 0 years | |
Damage limitation of unsecured environmental indemnities | $ | $ 0 | |
California | ||
Concentration of Risk | ||
Number of hotels which are held for investment | 7 | 7 |
Illinois | ||
Concentration of Risk | ||
Number of hotels which are held for investment | 3 | 3 |
Massachusetts | ||
Concentration of Risk | ||
Number of hotels which are held for investment | 3 | 3 |
Greater Washington DC Area | ||
Concentration of Risk | ||
Number of hotels which are held for investment | 3 | 3 |
Percentage of total rooms | California | ||
Concentration of Risk | ||
Concentration risk (as a percent) | 29.00% | |
Percentage of total rooms | Illinois | ||
Concentration of Risk | ||
Concentration risk (as a percent) | 9.00% | |
Percentage of total rooms | Massachusetts | ||
Concentration of Risk | ||
Concentration risk (as a percent) | 15.00% | |
Percentage of total rooms | Greater Washington DC Area | ||
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) | 34.00% | |
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% | |
Percentage of total revenue generated by hotels | Greater Washington DC Area | ||
Concentration of Risk | ||
Concentration risk (as a percent) | 14.00% | |
Workers' compensation insurance programs | ||
Other | ||
Outstanding irrevocable letters of credit | $ | $ 500 | $ 500 |
Draws on letters of credit | $ | $ 0 |