Leasing Transactions | Leasing Transactions As a Lessee We have lease agreements covering many of our properties, as well as various equipment, with the most significant leases being our five leases with Service Properties Trust, or SVC, which are further described below. Certain of our leases include renewal options, and certain leases include escalation clauses and purchase options. Renewal periods are included in calculating our operating lease assets and liabilities when they are reasonably certain. Leases with an initial term of 12 months or less are not recognized in our consolidated balance sheets. As of March 31, 2022, most of our SVC Leases (as defined below), the leases covering our other properties and most of our equipment leases were classified as operating leases and certain of our other equipment leases and one ground lease pursuant to one SVC Lease were classified as finance leases. Finance lease assets were included in other noncurrent assets other current liabilities other noncurrent liabilities Leasing Agreements with SVC As of March 31, 2022, we leased from SVC a total of 179 properties under five leases. We refer to these five leases collectively as the SVC Leases. The SVC Leases expire between 2029 and 2035, subject to our right to extend those leases. We have two renewal options of 15 years under each of the SVC Leases. On March 9, 2021, we and SVC amended one of the SVC Leases to reflect the renewal of a third party ground lease at one of the 179 travel center properties that we lease from SVC. This ground lease, which was previously accounted for as an operating lease, is now accounted for as a finance lease. As a result of this ground lease modification, we recorded $28,201 in other noncurrent assets, $1,158 in other current liabilities and $27,046 in other noncurrent liabilities on our consolidated balance sheets in the first quarter of 2021. We recognized total real estate rent expense under the SVC Leases of $63,907 and $61,003 for the three months ended March 31, 2022 and 2021, respectively. Included in these rent expense amounts are percentage rent payable of $2,499 and $1,386 respectively, which are based on a percentage of the increases in total nonfuel revenues at each leased property over base year levels, deferred rent of $4,404 for each of the three months ended March 31, 2022 and 2021, and adjustments to record minimum annual rent on a straight line basis over the terms of the leases and estimated future payments by us for the cost of removing underground storage tanks on a straight line basis of $444 and $480 for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, the estimated future payments related to these underground storage tanks were $25,943 and are recorded in other noncurrent liabilities on our consolidated balance sheets. The remaining balance of our deferred rent obligations was $17,615 as of March 31, 2022 and is scheduled to be fully paid by January 31, 2023. As of March 31, 2022, our aggregate annual minimum rent payable to SVC under the SVC Leases was $243,914. Pursuant to the SVC Leases, we may request that SVC purchase qualifying capital improvements we make at the leased travel centers in return for increased annual minimum rent. We did not sell to SVC any improvements we made to properties leased from SVC for the three months ended March 31, 2022 and 2021. As permitted by the SVC Leases, we sublease a portion of certain travel centers to third parties to operate other retail operations. These subleases are classified as operating leases. We recognized sublease rental income of $423 and $487 for the three months ended March 31, 2022 and 2021, respectively. Lease Costs Our lease costs are included in various balances in our consolidated statements of operations and comprehensive income (loss), as shown in the following table. For the three months ended March 31, 2022 and 2021, our lease costs consisted of the following: Classification in our Consolidated Three Months Ended 2022 2021 Operating lease costs: SVC Leases Real estate rent expense $ 60,964 $ 59,137 Operating lease costs: other Real estate rent expense 552 2,684 Variable lease costs: SVC Leases Real estate rent expense 2,943 1,866 Variable lease costs: other Real estate rent expense 187 182 Total real estate rent expense 64,646 63,869 Operating lease costs: equipment and other Site level operating expense and selling, general and administrative expense 942 846 Financing lease costs: equipment and other Site level operating expense 155 22 Short-term lease costs Site level operating expense and selling, general and administrative expense 105 167 Amortization of finance lease assets: Depreciation and amortization expense 553 184 Amortization of finance lease assets: other Depreciation and amortization expense 757 250 Interest on finance lease liabilities: Interest expense, net 298 103 Interest on finance lease liabilities: other Interest expense, net 164 82 Sublease income Nonfuel revenues (423) (487) Net lease costs $ 67,197 $ 65,036 Lease Assets and Liabilities As of March 31, 2022 and December 31, 2021, our operating lease assets and liabilities consisted of the following: March 31, December 31, Operating lease assets: SVC Leases $ 1,627,915 $ 1,649,142 Other 18,229 10,384 Total operating lease assets $ 1,646,144 $ 1,659,526 Current operating lease liabilities: SVC Leases $ 116,740 $ 114,372 Other 4,163 3,633 Total current operating lease liabilities $ 120,903 $ 118,005 Noncurrent operating lease liabilities: SVC Leases $ 1,618,200 $ 1,648,112 Other 14,553 7,247 Total noncurrent operating lease liabilities $ 1,632,753 $ 1,655,359 As of March 31, 2022 and December 31, 2021, our finance lease assets and liabilities consisted of the following: March 31, December 31, Finance lease assets: SVC Leases $ 25,989 $ 26,542 Other 15,905 15,781 Total finance lease assets $ 41,894 $ 42,323 Current finance lease liabilities: SVC Leases $ 1,547 $ 1,517 Other 2,956 2,814 Total current finance lease liabilities $ 4,503 $ 4,331 Noncurrent finance lease liabilities: SVC Leases $ 25,598 $ 25,974 Other 13,369 13,240 Total noncurrent finance lease liabilities $ 38,967 $ 39,214 Lease Maturities and Other Information Maturities of our operating lease liabilities that had remaining noncancelable lease terms in excess of one year as of March 31, 2022, were as follows: SVC Leases Other Total Years ended December 31: 2022 $ 201,761 $ 3,623 $ 205,384 2023 255,469 3,735 259,204 2024 251,295 2,650 253,945 2025 251,283 2,560 253,843 2026 251,278 2,262 253,540 Thereafter 1,538,649 6,434 1,545,083 Total operating lease payments 2,749,735 21,264 2,770,999 Less: present value discount (1) (1,014,795) (2,548) (1,017,343) Present value of operating lease liabilities $ 1,734,940 $ 18,716 $ 1,753,656 (1) The discount rate used to derive the present value of unpaid lease payments is based on the rates implicit in the SVC Leases and our incremental borrowing rate for all other leases. The weighted average remaining lease term for our operating leases as of March 31, 2022, was approximately 11 years. Our weighted average discount rate for our operating leases as of March 31, 2022, was approximately 9.1%. During the three months ended March 31, 2022 and 2021, we paid $70,371 and $70,161, respectively, for amounts that had been included in the measurement of our operating lease liabilities. Maturities of our finance lease liabilities that had remaining noncancelable lease terms in excess of one year as of March 31, 2022, were as follows: SVC Lease Other Total Years ended December 31: 2022 $ 1,947 $ 2,643 $ 4,590 2023 2,656 3,513 6,169 2024 2,722 3,071 5,793 2025 2,790 2,760 5,550 2026 2,860 2,760 5,620 Thereafter 22,126 3,548 25,674 Total finance lease payments 35,101 18,295 53,396 Less: present value discount (1) (7,956) (1,970) (9,926) Present value of finance lease liabilities $ 27,145 $ 16,325 $ 43,470 (1) The discount rate used to derive the present value of unpaid lease payments is based on our incremental borrowing rate. The weighted average remaining lease term for our finance leases as of March 31, 2022, was approximately 10 years. Our weighted average discount rate for our finance leases as of March 31, 2022, was approximately 4.3%. During the three months ended March 31, 2022 and 2021, we paid $1,035 and $396, respectively, for amounts that had been included in the measurement of our finance lease liabilities. As a Lessor We leased two travel centers to franchisees as of March 31, 2022 and 2021. Rent revenues from these operating leases totaled $595 and $584 for the three months ended March 31, 2022 and 2021, respectively. Future minimum lease payments due to us for the two leased sites under these operating leases as of March 31, 2022, were $595 for the remainder of 2022. See above for information regarding certain travel centers that we lease from SVC in which we sublease a portion of the travel centers to third parties to operate other retail operations. We also lease portions of owned properties to third parties to operate other retail operations. |
Leasing Transactions | Leasing Transactions As a Lessee We have lease agreements covering many of our properties, as well as various equipment, with the most significant leases being our five leases with Service Properties Trust, or SVC, which are further described below. Certain of our leases include renewal options, and certain leases include escalation clauses and purchase options. Renewal periods are included in calculating our operating lease assets and liabilities when they are reasonably certain. Leases with an initial term of 12 months or less are not recognized in our consolidated balance sheets. As of March 31, 2022, most of our SVC Leases (as defined below), the leases covering our other properties and most of our equipment leases were classified as operating leases and certain of our other equipment leases and one ground lease pursuant to one SVC Lease were classified as finance leases. Finance lease assets were included in other noncurrent assets other current liabilities other noncurrent liabilities Leasing Agreements with SVC As of March 31, 2022, we leased from SVC a total of 179 properties under five leases. We refer to these five leases collectively as the SVC Leases. The SVC Leases expire between 2029 and 2035, subject to our right to extend those leases. We have two renewal options of 15 years under each of the SVC Leases. On March 9, 2021, we and SVC amended one of the SVC Leases to reflect the renewal of a third party ground lease at one of the 179 travel center properties that we lease from SVC. This ground lease, which was previously accounted for as an operating lease, is now accounted for as a finance lease. As a result of this ground lease modification, we recorded $28,201 in other noncurrent assets, $1,158 in other current liabilities and $27,046 in other noncurrent liabilities on our consolidated balance sheets in the first quarter of 2021. We recognized total real estate rent expense under the SVC Leases of $63,907 and $61,003 for the three months ended March 31, 2022 and 2021, respectively. Included in these rent expense amounts are percentage rent payable of $2,499 and $1,386 respectively, which are based on a percentage of the increases in total nonfuel revenues at each leased property over base year levels, deferred rent of $4,404 for each of the three months ended March 31, 2022 and 2021, and adjustments to record minimum annual rent on a straight line basis over the terms of the leases and estimated future payments by us for the cost of removing underground storage tanks on a straight line basis of $444 and $480 for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, the estimated future payments related to these underground storage tanks were $25,943 and are recorded in other noncurrent liabilities on our consolidated balance sheets. The remaining balance of our deferred rent obligations was $17,615 as of March 31, 2022 and is scheduled to be fully paid by January 31, 2023. As of March 31, 2022, our aggregate annual minimum rent payable to SVC under the SVC Leases was $243,914. Pursuant to the SVC Leases, we may request that SVC purchase qualifying capital improvements we make at the leased travel centers in return for increased annual minimum rent. We did not sell to SVC any improvements we made to properties leased from SVC for the three months ended March 31, 2022 and 2021. As permitted by the SVC Leases, we sublease a portion of certain travel centers to third parties to operate other retail operations. These subleases are classified as operating leases. We recognized sublease rental income of $423 and $487 for the three months ended March 31, 2022 and 2021, respectively. Lease Costs Our lease costs are included in various balances in our consolidated statements of operations and comprehensive income (loss), as shown in the following table. For the three months ended March 31, 2022 and 2021, our lease costs consisted of the following: Classification in our Consolidated Three Months Ended 2022 2021 Operating lease costs: SVC Leases Real estate rent expense $ 60,964 $ 59,137 Operating lease costs: other Real estate rent expense 552 2,684 Variable lease costs: SVC Leases Real estate rent expense 2,943 1,866 Variable lease costs: other Real estate rent expense 187 182 Total real estate rent expense 64,646 63,869 Operating lease costs: equipment and other Site level operating expense and selling, general and administrative expense 942 846 Financing lease costs: equipment and other Site level operating expense 155 22 Short-term lease costs Site level operating expense and selling, general and administrative expense 105 167 Amortization of finance lease assets: Depreciation and amortization expense 553 184 Amortization of finance lease assets: other Depreciation and amortization expense 757 250 Interest on finance lease liabilities: Interest expense, net 298 103 Interest on finance lease liabilities: other Interest expense, net 164 82 Sublease income Nonfuel revenues (423) (487) Net lease costs $ 67,197 $ 65,036 Lease Assets and Liabilities As of March 31, 2022 and December 31, 2021, our operating lease assets and liabilities consisted of the following: March 31, December 31, Operating lease assets: SVC Leases $ 1,627,915 $ 1,649,142 Other 18,229 10,384 Total operating lease assets $ 1,646,144 $ 1,659,526 Current operating lease liabilities: SVC Leases $ 116,740 $ 114,372 Other 4,163 3,633 Total current operating lease liabilities $ 120,903 $ 118,005 Noncurrent operating lease liabilities: SVC Leases $ 1,618,200 $ 1,648,112 Other 14,553 7,247 Total noncurrent operating lease liabilities $ 1,632,753 $ 1,655,359 As of March 31, 2022 and December 31, 2021, our finance lease assets and liabilities consisted of the following: March 31, December 31, Finance lease assets: SVC Leases $ 25,989 $ 26,542 Other 15,905 15,781 Total finance lease assets $ 41,894 $ 42,323 Current finance lease liabilities: SVC Leases $ 1,547 $ 1,517 Other 2,956 2,814 Total current finance lease liabilities $ 4,503 $ 4,331 Noncurrent finance lease liabilities: SVC Leases $ 25,598 $ 25,974 Other 13,369 13,240 Total noncurrent finance lease liabilities $ 38,967 $ 39,214 Lease Maturities and Other Information Maturities of our operating lease liabilities that had remaining noncancelable lease terms in excess of one year as of March 31, 2022, were as follows: SVC Leases Other Total Years ended December 31: 2022 $ 201,761 $ 3,623 $ 205,384 2023 255,469 3,735 259,204 2024 251,295 2,650 253,945 2025 251,283 2,560 253,843 2026 251,278 2,262 253,540 Thereafter 1,538,649 6,434 1,545,083 Total operating lease payments 2,749,735 21,264 2,770,999 Less: present value discount (1) (1,014,795) (2,548) (1,017,343) Present value of operating lease liabilities $ 1,734,940 $ 18,716 $ 1,753,656 (1) The discount rate used to derive the present value of unpaid lease payments is based on the rates implicit in the SVC Leases and our incremental borrowing rate for all other leases. The weighted average remaining lease term for our operating leases as of March 31, 2022, was approximately 11 years. Our weighted average discount rate for our operating leases as of March 31, 2022, was approximately 9.1%. During the three months ended March 31, 2022 and 2021, we paid $70,371 and $70,161, respectively, for amounts that had been included in the measurement of our operating lease liabilities. Maturities of our finance lease liabilities that had remaining noncancelable lease terms in excess of one year as of March 31, 2022, were as follows: SVC Lease Other Total Years ended December 31: 2022 $ 1,947 $ 2,643 $ 4,590 2023 2,656 3,513 6,169 2024 2,722 3,071 5,793 2025 2,790 2,760 5,550 2026 2,860 2,760 5,620 Thereafter 22,126 3,548 25,674 Total finance lease payments 35,101 18,295 53,396 Less: present value discount (1) (7,956) (1,970) (9,926) Present value of finance lease liabilities $ 27,145 $ 16,325 $ 43,470 (1) The discount rate used to derive the present value of unpaid lease payments is based on our incremental borrowing rate. The weighted average remaining lease term for our finance leases as of March 31, 2022, was approximately 10 years. Our weighted average discount rate for our finance leases as of March 31, 2022, was approximately 4.3%. During the three months ended March 31, 2022 and 2021, we paid $1,035 and $396, respectively, for amounts that had been included in the measurement of our finance lease liabilities. As a Lessor We leased two travel centers to franchisees as of March 31, 2022 and 2021. Rent revenues from these operating leases totaled $595 and $584 for the three months ended March 31, 2022 and 2021, respectively. Future minimum lease payments due to us for the two leased sites under these operating leases as of March 31, 2022, were $595 for the remainder of 2022. See above for information regarding certain travel centers that we lease from SVC in which we sublease a portion of the travel centers to third parties to operate other retail operations. We also lease portions of owned properties to third parties to operate other retail operations. |