Leasing Transactions | Leasing Transactions As a lessee. We have entered into lease agreements covering many of our retail locations, office and warehouse space, and various equipment and vehicles, with the most significant leases being our five leases with HPT as further described below. Certain leases include renewal options, and certain leases include escalation clauses and purchase options. Future minimum lease payments required under leases that had remaining noncancelable lease terms in excess of one year as of December 31, 2016 , were as follows (included herein are the full payments due under the HPT Leases including the amount attributed to the lease of those sites that are accounted for as a financing in our consolidated balance sheet as reflected in the sale leaseback financing obligation): Total 2017 $ 292,347 2018 289,723 2019 286,019 2020 283,406 2021 280,680 Thereafter 2,407,323 Total $ 3,839,498 The expenses related to our operating leases are included in site level operating expenses; selling, general and administrative expenses; and real estate rent in the operating expenses section of our consolidated statements of operations and comprehensive (loss) income. Rent expense under our operating leases consisted of the following: Year Ended December 31, 2016 2015 2014 Minimum rent $ 263,212 $ 233,211 $ 212,711 Sublease rent 7,463 8,422 8,932 Contingent rent (1) 1,304 (1,266 ) 3,671 Total rent expense $ 271,979 $ 240,367 $ 225,314 (1) Since 2007, we had accrued contingent rent associated with one site leased from HPT. In June 2015, we became no longer liable for this contingent rent, and the related accrual was reversed during the year ended December 31, 2015. HPT Leases. As of December 31, 2016 , we leased from HPT a total of 198 properties under five leases, four of which we refer to as our TA Leases and one of which we refer to as the Petro Lease, and which we refer to collectively as the HPT Leases. The number of properties leased, the terms, the minimum annual rents and deferred rent balances owed by us under our HPT Leases as of December 31, 2016, were as follows: Number of Properties Initial Term End Date (1) Minimum Annual Rent as of December 31, 2016 Deferred Rent (2) TA Lease 1 40 December 31, 2029 $ 51,435 $ 27,421 TA Lease 2 40 December 31, 2028 52,327 29,107 TA Lease 3 39 December 31, 2026 52,665 29,324 TA Lease 4 39 December 31, 2030 47,996 21,233 Petro Lease 40 June 30, 2032 67,573 42,915 Total 198 $ 271,996 $ 150,000 (1) We have two renewal options of 15 years each under each of our HPT Leases. (2) Pursuant to a rent deferral agreement with HPT, from July 2008 through December 31, 2010, HPT deferred a total of $150,000 of rent payable by us, which remained outstanding as of December 31, 2016. This deferred rent obligation was subsequently allocated among the HPT Leases and is due at the end of the respective initial term end dates for the TA Leases noted above. Deferred rent for the Petro Lease is due and payable on June 30, 2024. Deferred rent is subject to acceleration at HPT's option upon an uncured default by, or a change in control of, us. The HPT Leases are "triple net" leases that require us to pay all costs incurred in the operation of the leased properties, including costs related to personnel, utilities, inventory acquisition and provision of services to customers, insurance, real estate and personal property taxes, environmental related expenses, underground storage tank removal costs and ground lease payments at those properties at which HPT leases the property and subleases it to us. We also are required generally to indemnify HPT for certain environmental matters and for liabilities that arise during the terms of the leases from ownership or operation of the leased properties and, at lease expiration, we are required to pay an amount equal to an estimate of the cost of removing underground storage tanks on the leased properties. The HPT Leases require us to maintain the leased properties, including structural and non-structural components. Under our HPT Leases, we may request that HPT purchase approved amounts of renovations, improvements and equipment at the leased properties in return for increases in our minimum annual rent according to the following formula: the minimum annual rent will be increased by an amount equal to the amount paid by HPT multiplied by the greater of (i) 8.5% or (ii) a benchmark U.S. Treasury interest rate plus 3.5% . During the years ended December 31, 2016 , 2015 and 2014 , we sold to HPT $109,926 , $99,896 and $66,133 , respectively, of improvements we previously made to properties leased from HPT, and, as a result, our minimum annual rent payable to HPT increased by $9,344 , $8,491 and $5,621 , respectively. At December 31, 2016 , our property and equipment balance included $57,201 of improvements of the type that we typically request that HPT purchase for an increase in minimum annual rent; however, HPT is not obligated to purchase these improvements. We recognized rent expense of $249,966 , $221,159 and $206,639 , for the years ended December 31, 2016 , 2015 and 2014 , respectively, under our HPT Leases. In addition to the payment of minimum annual rent, the TA Leases provide for payment to HPT of percentage rent, beginning in 2016, based on increases in total nonfuel revenues over base year levels ( 3% of nonfuel revenues above 2015 nonfuel revenues) and the Petro Lease provides for payment to HPT of percentage rent based on increases in total nonfuel revenues over base year levels ( 3% of nonfuel revenues above 2012 nonfuel revenues). HPT waived $372 of percentage rent under our Petro Lease for the year ended December 31, 2016 , pursuant to an agreement we and HPT entered in 2011. As of June 30, 2016, HPT had cumulatively waived all of the $2,500 of percentage rent it previously agreed to waive. The total amount of percentage rent (which is net of any waived amounts) that we incurred during the years ended December 31, 2016 , 2015 and 2014 , was $1,304 , $1,999 and $2,984 , respectively. On June 1, 2015 , we entered into a transaction agreement, or the Transaction Agreement, with HPT pursuant to which, among other things, we agreed to sell to, and lease back from, HPT 14 travel centers we owned and certain assets we owned at 11 properties we lease from HPT for an aggregate of $279,383 . As of December 31, 2015, we had completed the sale to, and lease back from, HPT of the 14 travel centers we owned and certain assets we owned at 11 properties and our minimum annual rent increased by $24,027 . These sales generated an aggregate gain of $133,668 , which was deferred and is being amortized as a reduction of our rent expense over the terms of the TA Leases. On June 9, 2015, pursuant to the Transaction Agreement, we purchased from HPT, for $45,042 , five travel centers that we previously leased from HPT and subleased to franchisees. The lease of these properties had been accounted for as a financing, with the related assets recognized in our consolidated balance sheets. The purchase prices paid for the properties exceeded the unamortized balance of the sale leaseback financing obligation, resulting in our recognition of a loss on extinguishment of debt of $10,502 . Our minimum annual rent payment decreased by $3,874 as a result of the completion of our purchase of these properties. Also pursuant to the Transaction Agreement, we agreed to sell to, and lease back from, HPT five travel centers upon the completion of their development for a purchase price equal to their development costs. On March 31, 2016, we sold one of these development properties to HPT for $19,683 . On June 22, 2016, we and HPT amended the Transaction Agreement to, among other things, replace one development property with two alternative travel centers owned by us. Pursuant to the Transaction Agreement, as amended, on June 22, 2016, we sold the two alternative travel centers to HPT for an aggregate of $23,876 . The sale of these two properties generated a gain of $11,794 that was deferred and is being amortized on a straight line basis over the terms of the related leases as a reduction of rent expense. On June 30, 2016, we sold one of these development properties to HPT for $22,297 . On September 30, 2016, we sold one of these development properties to HPT for $16,557 . As of December 31, 2016 , the sale and lease back of the remaining development property pursuant to the terms of the Transaction Agreement is expected to be completed before June 30, 2017. On August 13, 2013, the travel center located in Roanoke, VA that we leased from HPT was taken by eminent domain proceedings brought by the Virginia Department of Transportation, or VDOT, in connection with planned highway construction. In January 2014, HPT received proceeds from VDOT of $6,178 , which is a substantial portion of VDOT's estimate of the value of the property, and as a result the minimum annual rent payable by us to HPT under the then applicable lease was reduced by $525 effective January 6, 2014. We and HPT are challenging VDOT's estimate of this property's value and we expect that the final resolution of this matter will take considerable time. On October 30, 2015, HPT completed the purchase of the land and improvements at a travel center it then leased from a third party and subleased to us located in Waterloo, NY. Upon HPT's acquisition, the land and improvements were directly leased to us under the Petro Lease. The Petro Lease was amended and, as a result of this transaction, minimum annual rent increased by $1,275 , but our obligation to pay the ground rent of $1,260 annually was terminated. On September 14, 2016, HPT purchased a vacant land parcel located adjacent to a property we lease from HPT in Holbrook, AZ for $325 ; and we and HPT amended our TA Lease 4 to add this parcel and our minimum annual rent under our TA Lease 4 increased by $28 . The following table sets forth the amounts of annual minimum lease payments required under the HPT Leases as of December 31, 2016 , in each of the years shown. Annual Minimum Rent Rent for Ground Leases Subleased from HPT 2017 $ 271,996 $ 9,520 2018 271,996 8,943 2019 271,996 7,117 2020 271,996 6,254 2021 271,996 4,591 2022 271,996 1,571 2023 271,996 934 2024 (1) 314,911 700 2025 271,996 228 2026 (2) 309,113 2 2027 219,332 — 2028 (3) 257,387 — 2029 (4) 203,344 — 2030 (5) 146,674 — 2031 67,573 — 2032 (6) 47,644 — (1) Includes previously deferred rent payments of $42,915 due on June 30, 2024. (2) Includes previously deferred rent payments of $29,324 and estimated cost of removing underground storage tanks on the leased properties of $7,793 due on December 31, 2026. (3) Includes previously deferred rent payments of $29,107 and estimated cost of removing underground storage tanks on the leased properties of $8,948 due on December 31, 2028. (4) Includes previously deferred rent payments of $27,421 and estimated cost of removing underground storage tanks on the leased properties of $8,918 due on December 31, 2029. (5) Includes previously deferred rent payments of $21,233 and estimated cost of removing underground storage tanks on the leased properties of $9,872 due on December 31, 2030. (6) Includes estimated cost of removing underground storage tanks on the leased properties of $13,858 due on June 30, 2032. The following table summarizes the various amounts related to the HPT Leases and leases with other lessors that are reflected in real estate rent expense in our consolidated statements of operations and comprehensive (loss) income. Year Ended December 31, 2016 2015 2014 Cash payments for rent under the HPT Leases $ 265,482 $ 241,962 $ 222,722 Change in accrued estimated percentage rent 430 (1,275 ) 959 Adjustments to recognize expense on a straight line basis (216 ) (4,910 ) (1,621 ) Less: sale leaseback financing obligation amortization (477 ) (974 ) (2,380 ) Less: portion of rent payments recognized as interest expense (1,729 ) (3,445 ) (5,887 ) Less: deferred tenant improvements allowance amortization (3,769 ) (5,019 ) (6,769 ) Amortization of deferred gain on sale leaseback transactions (9,755 ) (5,180 ) (385 ) Rent expense related to HPT Leases 249,966 221,159 206,639 Rent paid to others (1) 12,447 10,583 10,786 Adjustments to recognize expense on a straight line basis for other leases (115 ) (151 ) (270 ) Total real estate rent expense $ 262,298 $ 231,591 $ 217,155 (1) Includes rent paid directly to HPT's landlords under leases for properties we sublease from HPT as well as rent related to properties we lease from landlords other than HPT. The following table summarizes the various amounts related to the HPT Leases that are included in our consolidated balance sheets. December 31, December 31, Current HPT Leases liabilities: Accrued rent $ 22,868 $ 21,098 Sale leaseback financing obligation (1) 484 469 Straight line rent accrual (2) 2,458 2,458 Deferred gain (3) 10,140 9,235 Deferred tenant improvements allowance (4) 3,770 3,770 Total Current HPT Leases liabilities $ 39,720 $ 37,030 Noncurrent HPT Leases liabilities: Deferred rent obligation $ 150,000 $ 150,000 Sale leaseback financing obligation (1) 21,165 20,719 Straight line rent accrual (2) 47,771 48,373 Deferred gain (3) 121,331 121,049 Deferred tenant improvements allowance (4) 41,587 45,357 Total Noncurrent HPT Leases liabilities $ 381,854 $ 385,498 (1) Sale Leaseback Financing Obligation. Prior to the Transaction Agreement, the assets related to nine travel centers we leased from HPT were reflected in our consolidated balance sheets, as was the related financing obligation. This accounting was required primarily because, at the time of the inception of the prior leases with HPT, more than a minor portion of these nine travel centers was subleased to third parties. As part of the June 2015 Transaction Agreement, we purchased five of these nine travel centers from HPT. That purchase was accounted for as an extinguishment of the related financing obligation and resulted in a loss on extinguishment of debt of $10,502 because the price we paid to HPT to purchase the five properties was $10,502 in excess of the then remaining related financing obligation. Also, because the TA Leases we entered into with HPT in connection with the Transaction Agreement were accounted for as new leases and two of the remaining four properties reflected as financings under the Prior TA Lease then qualified for operating lease treatment, the remaining net assets and financing obligation related to these two properties were eliminated, resulting in a gain of $1,033 , which was deferred and will be recognized over the terms of the applicable TA Leases as a reduction of rent expense. (2) Straight Line Rent Accrual. We accrued rent expense from 2007 to 2012 for stated increases in our minimum annual rents due under our then existing TA lease. While the TA Leases we entered into with HPT in connection with the Transaction Agreement contain no stated rent payment increases, we continue to amortize this accrual on a straight line basis over the current terms of the TA Leases as a reduction to real estate rent expense. The straight line rent accrual also includes our obligation for the estimated cost of removal of underground storage tanks at properties leased from HPT at the end of the related lease; we recognize these obligations on a straight line basis over the term of the related leases as additional rent expense. (3) Deferred Gain. The deferred gain primarily includes $145,462 of gains from the sales of travel centers and certain other assets to HPT during 2015 and 2016 pursuant to the Transaction Agreement and the amended Transaction Agreement. We amortize the deferred gains on a straight line basis over the terms of the related leases as a reduction of rent expense. (4) Deferred Tenant Improvements Allowance. HPT funded certain capital projects at the properties we lease under the HPT Leases without an increase in rent payable by us. In connection with HPT's initial capital commitment, we recognized a liability for rent deemed to be related to this capital commitment as a deferred tenant improvements allowance. We amortize the deferred tenant improvements allowance on a straight line basis over the terms of the HPT Leases as a reduction of real estate rent expense. As a lessor. As of December 31, 2016 , we leased to franchisees five travel centers. The current terms of the five lease agreements with franchisees expire between June and September 2017. Four of the five leases have one remaining renewal option for an additional five year term; the fifth lease has no further renewal option. These leases include rent escalations that are contingent on future events, namely inflation or our investing in capital improvements at these travel centers. Rent revenue from these operating leases totaled $4,439 , $4,458 and $4,365 for the years ended December 31, 2016 , 2015 and 2014 , respectively. Future minimum lease payments due to us for the five leased sites under these operating leases as of December 31, 2016 , was $2,478 , all due within 2017. |