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 that are 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, 2017 , 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 sheets as reflected in the sale leaseback financing obligation): Total 2018 $ 300,864 2019 297,407 2020 295,146 2021 292,177 2022 288,069 Thereafter 2,207,232 Total $ 3,680,895 The expenses related to our operating leases are included in site level operating expenses; selling, general and administrative expenses; and real estate rent expense in the operating expenses section of our consolidated statements of operations and comprehensive income (loss). Rent expense under our operating leases consisted of the following: Year Ended December 31, 2017 2016 2015 Minimum rent $ 278,806 $ 263,212 $ 233,211 Sublease rent 7,035 7,463 8,422 Contingent rent (1) 2,195 1,304 (1,266 ) Total rent expense $ 288,036 $ 271,979 $ 240,367 (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, 2017 , we leased from HPT a total of 199 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 rent and deferred rent balances owed by us under our HPT Leases as of December 31, 2017 , were as follows: Number of Properties Initial Term End Date (1) Minimum Annual Deferred Rent (2) TA Lease 1 40 December 31, 2029 $ 52,763 $ 27,421 TA Lease 2 40 December 31, 2028 53,681 29,107 TA Lease 3 39 December 31, 2026 54,006 29,324 TA Lease 4 40 December 31, 2030 52,290 21,233 Petro Lease 40 June 30, 2032 69,527 42,915 Total 199 $ 282,267 $ 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, we previously deferred as of December 31, 2010, a total of $150,000 of rent payable by us, which remained outstanding as of December 31, 2017 . This deferred rent obligation was 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. We recognized rent expense of $264,628 , $249,966 and $221,159 , for the years ended December 31, 2017 , 2016 and 2015 , 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 and $1,121 of percentage rent under our Petro Lease for the years ended December 31, 2016 and 2015, respectively, pursuant to a prior agreement. 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, 2017 , 2016 and 2015 , was $2,195 , $1,304 and $1,999 , respectively. 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, 2017 , 2016 and 2015 , we sold to HPT $84,632 , $109,926 and $99,896 , respectively, of improvements we previously made to properties leased from HPT, and, as a result, our minimum annual rent payable to HPT increased by $7,194 , $9,344 and $8,491 , respectively. At December 31, 2017 , our property and equipment balance included $16,408 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. On September 25, 2017 , HPT purchased land and improvements that previously were leased by HPT from a third party and subleased to us. Effective as of that date, our rent due to that third party pursuant to the terms of our sublease with HPT ceased. Also on that date, we and HPT amended our lease to reflect our direct lease from HPT of that land and those improvements and to increase our minimum annual rent due to HPT by $731 , which was 8.5% of HPT's investment. On September 14, 2016 , HPT purchased a vacant land parcel located adjacent to a property we lease from HPT 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 . On October 30, 2015 , HPT purchased land and improvements that previously were leased by HPT from a third party and subleased to us. Effective as of that date, our rent due to that third party pursuant to the terms of our sublease with HPT ceased. Also on that date, we and HPT amended our lease to reflect our direct lease from HPT of that land and those improvements and to increase our minimum annual rent due to HPT by $1,275 , which was 8.5% of HPT's investment. 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 real estate 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 real estate 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 . On May 3, 2017 , we sold the remaining development property to HPT for $27,602 . 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. HPT challenged VDOT's estimate of the property's value and during 2017 engaged in mediation. Following the mediation, VDOT agreed to pay, and HPT agreed to accept, the sum of $7,209 as full payment for VDOT's acquisition of the travel center. In 2017, VDOT subsequently made payment to HPT of $1,031 , representing the agreed settlement less amounts previously paid to HPT (exclusive of interest). After deducting from this payment our and HPT's share of third party costs and expenses incurred in connection with the challenge of VDOT's initial valuation of the property, we and HPT will allocate and apply the remaining amount of $1,031 as set forth in the lease. The following table sets forth the amounts of annual minimum lease payments required under the HPT Leases as of December 31, 2017 , in each of the years shown. Annual Minimum Rent Rent for Ground Leases Subleased from HPT 2018 $ 282,267 $ 8,891 2019 282,267 7,066 2020 282,267 6,822 2021 282,267 5,240 2022 282,267 1,997 2023 282,267 1,009 2024 (1) 325,182 775 2025 282,267 303 2026 (2) 319,212 78 2027 228,261 78 2028 (3) 266,317 78 2029 (4) 210,755 78 2030 (5) 152,826 78 2031 69,527 78 2032 (6) 48,638 78 (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 $7,621 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 $8,949 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 $8,753 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 $9,776 due on December 31, 2030. (6) Includes estimated cost of removing underground storage tanks on the leased properties of $13,874 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 income (loss). Year Ended December 31, 2017 2016 2015 Cash payments for rent under the HPT Leases $ 280,897 $ 265,482 $ 241,962 Change in accrued estimated percentage rent 356 430 (1,275 ) Adjustments to recognize expense on a straight line basis (383 ) (216 ) (4,910 ) Less: sale leaseback financing obligation amortization (658 ) (477 ) (974 ) Less: portion of rent payments recognized as interest expense (1,681 ) (1,729 ) (3,445 ) Less: deferred tenant improvements allowance amortization (3,770 ) (3,769 ) (5,019 ) Amortization of deferred gain on sale leaseback transactions (10,133 ) (9,755 ) (5,180 ) Rent expense related to HPT Leases 264,628 249,966 221,159 Rent paid to others (1) 12,813 12,447 10,583 Adjustments to recognize expense on a straight line basis for other leases (314 ) (115 ) (151 ) Total real estate rent expense $ 277,127 $ 262,298 $ 231,591 (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 $ 24,170 $ 22,868 Sale leaseback financing obligation (1) 863 484 Straight line rent accrual (2) 2,458 2,458 Deferred gain (3) 10,128 10,140 Deferred tenant improvements allowance (4) 3,770 3,770 Total current HPT Leases liabilities $ 41,389 $ 39,720 Noncurrent HPT Leases liabilities: Deferred rent obligation $ 150,000 $ 150,000 Sale leaseback financing obligation (1) 22,987 21,165 Straight line rent accrual (2) 46,937 47,771 Deferred gain (3) 111,041 121,331 Deferred tenant improvements allowance (4) 37,817 41,587 Total noncurrent HPT Leases liabilities $ 368,782 $ 381,854 (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 real estate rent expense. (2) Straight Line Rent Accrual. Straight line rent accrual includes the 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 real estate 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 real estate 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, 2017 , we leased to franchisees four travel centers. Two of the four franchisees exercised their final renewal term options and renewed their lease agreements during 2017, and the current terms of these two lease agreements expire in June 2022. The remaining two franchisees did not exercise their final renewal term options and therefore, the related lease agreements expired during 2017. One of these franchisees has filed, and the other has indicated an intent to file, requests for a preliminary injunction preventing their eviction from the lease premises until such time as a court can determine whether we breached the terms of the leases by proposing increases in rent during the final renewal terms or whether they have breached their agreements. As this matter proceeds through the courts, these two franchisees currently are operating under certain terms of the expired lease agreements. 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 $4,208 , $4,439 and $4,458 for the years ended December 31, 2017 , 2016 and 2015 , respectively. Future minimum lease payments due to us for the two leased sites under these operating leases as of December 31, 2017 , were $1,927 for each of the years 2018, 2019, 2020 and 2021, and $963 for 2022. |