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 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, 2023, 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, 2023, we leased from SVC a total of 177 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. We recognized total real estate rent expense under the SVC Leases of $63,601 and $63,907 for the three months ended March 31, 2023 and 2022, respectively. Included in these rent expense amounts are percentage rent payable of $2,385 and $2,499 respectively, which are based on a percentage of the increases in total nonfuel revenues at each leased property over base year levels, net adjustments to record minimum annual rent on a straight line basis over the terms of the leases, the estimated future payments by us for the cost of removing underground storage tanks on a straight line basis and the benefit of other lease incentives. As of March 31, 2023, the present value of the estimated future payments related to these underground storage tanks were $27,775 and are recorded in other noncurrent liabilities on our consolidated balance sheets. As of December 31, 2022, the remaining balance of our deferred rent obligations was $4,404 and we paid that amount in January 2023. As of March 31, 2023, 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, 2023 and 2022. 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 $576 and $423 for the three months ended March 31, 2023 and 2022, respectively. Lease Costs Our lease costs are included in various balances in our consolidated statements of operations and comprehensive (loss) income, as shown in the following table. For the three months ended March 31, 2023 and 2022, our lease costs consisted of the following: Classification in our Consolidated Three Months Ended 2023 2022 Operating lease costs: SVC Leases Real estate rent expense $ 60,738 $ 60,964 Operating lease costs: other Real estate rent expense 906 552 Variable lease costs: SVC Leases Real estate rent expense 2,863 2,943 Variable lease costs: other Real estate rent expense 194 187 Total real estate rent expense 64,701 64,646 Operating lease costs: equipment and other Site level operating expense and selling, general and administrative expense 832 942 Financing lease costs: equipment and other Site level operating expense 60 155 Short-term lease costs Site level operating expense and selling, general and administrative expense 216 105 Amortization of finance lease assets: Depreciation and amortization expense 553 553 Amortization of finance lease assets: other Depreciation and amortization expense 983 757 Interest on finance lease liabilities: Interest expense, net 282 298 Interest on finance lease liabilities: other Interest expense, net 167 164 Sublease income Nonfuel revenues (576) (423) Net lease costs $ 67,218 $ 67,197 Lease Assets and Liabilities As of March 31, 2023 and December 31, 2022, our operating lease assets and liabilities consisted of the following, and for SVC leases shown below, include amounts for properties we sublease from SVC: March 31, December 31, Operating lease assets: SVC Leases $ 1,531,944 $ 1,560,616 Other 25,745 15,922 Total operating lease assets $ 1,557,689 $ 1,576,538 Current operating lease liabilities: SVC Leases $ 107,984 $ 110,521 Other 3,797 3,419 Total current operating lease liabilities $ 111,781 $ 113,940 Noncurrent operating lease liabilities: SVC Leases $ 1,505,574 $ 1,538,031 Other 22,451 12,996 Total noncurrent operating lease liabilities $ 1,528,025 $ 1,551,027 As of March 31, 2023 and December 31, 2022, our finance lease assets and liabilities consisted of the following, and for SVC leases shown below, include amounts for properties we sublease from SVC: March 31, December 31, Finance lease assets: SVC Leases $ 23,777 $ 24,330 Other 15,513 16,205 Total finance lease assets $ 39,290 $ 40,535 Current finance lease liabilities: SVC Leases $ 1,586 $ 1,552 Other 3,756 3,690 Total current finance lease liabilities $ 5,342 $ 5,242 Noncurrent finance lease liabilities: SVC Leases $ 24,106 $ 24,517 Other 12,327 13,934 Total noncurrent finance lease liabilities $ 36,433 $ 38,451 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, 2023, were as follows: SVC Leases (1) Other Total Years ended December 31: 2023 $ 187,645 $ 3,942 $ 191,587 2024 250,388 4,922 255,310 2025 250,375 4,848 255,223 2026 250,371 4,335 254,706 2027 250,392 3,464 253,856 Thereafter 1,285,536 11,541 1,297,077 Total operating lease payments 2,474,707 33,052 2,507,759 Less: present value discount (1) (861,149) (6,799) (867,948) Present value of operating lease liabilities $ 1,613,558 $ 26,253 $ 1,639,811 (1) Includes rent for properties we sublease from SVC. (2) 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, 2023, was approximately 10 years. Our weighted average discount rate for our operating leases as of March 31, 2023, was approximately 9.1%. During the three months ended March 31, 2023 and 2022, we paid real estate rent payments of $70,693 and $70,371, 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, 2023, were as follows: SVC Leases (1) Other Total Years ended December 31: 2023 $ 1,996 $ 3,297 $ 5,293 2024 2,722 3,954 6,676 2025 2,790 3,349 6,139 2026 2,860 2,982 5,842 2027 2,932 2,685 5,617 Thereafter 19,194 1,416 20,610 Total finance lease payments 32,494 17,683 50,177 Less: present value discount (1) (6,802) (1,600) (8,402) Present value of finance lease liabilities $ 25,692 $ 16,083 $ 41,775 (1) Includes rent for properties we sublease from SVC. (2) 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, 2023, was approximately 8 years. Our weighted average discount rate for our finance leases as of March 31, 2023, was approximately 4.3%. During the three months ended March 31, 2023 and 2022, we paid $1,818 and $1,035, respectively, for amounts that had been included in the measurement of our finance lease liabilities. In connection with entering into the Merger Agreement, we and our wholly-owned subsidiary, TA Operating LLC, or together the TCA Parties, entered into the SVC Consent Agreement with SVC pursuant to which, among other things, SVC consented to our entering into the Merger Agreement and the consummation of the Merger and agreed to enter into amended and restated lease and guarantee agreements with the applicable TCA Parties, which would be entered into at the effective time of the Merger. For more information about the Merger and the SVC Consent Agreement, see Notes 1 and 6 of this Quarterly Report. As a Lessor During 2022, we acquired the operating assets related to two travel centers we previously leased to franchisees. Rent revenues from these operating leases totaled $595 for the three months ended March 31, 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 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, 2023, 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, 2023, we leased from SVC a total of 177 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. We recognized total real estate rent expense under the SVC Leases of $63,601 and $63,907 for the three months ended March 31, 2023 and 2022, respectively. Included in these rent expense amounts are percentage rent payable of $2,385 and $2,499 respectively, which are based on a percentage of the increases in total nonfuel revenues at each leased property over base year levels, net adjustments to record minimum annual rent on a straight line basis over the terms of the leases, the estimated future payments by us for the cost of removing underground storage tanks on a straight line basis and the benefit of other lease incentives. As of March 31, 2023, the present value of the estimated future payments related to these underground storage tanks were $27,775 and are recorded in other noncurrent liabilities on our consolidated balance sheets. As of December 31, 2022, the remaining balance of our deferred rent obligations was $4,404 and we paid that amount in January 2023. As of March 31, 2023, 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, 2023 and 2022. 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 $576 and $423 for the three months ended March 31, 2023 and 2022, respectively. Lease Costs Our lease costs are included in various balances in our consolidated statements of operations and comprehensive (loss) income, as shown in the following table. For the three months ended March 31, 2023 and 2022, our lease costs consisted of the following: Classification in our Consolidated Three Months Ended 2023 2022 Operating lease costs: SVC Leases Real estate rent expense $ 60,738 $ 60,964 Operating lease costs: other Real estate rent expense 906 552 Variable lease costs: SVC Leases Real estate rent expense 2,863 2,943 Variable lease costs: other Real estate rent expense 194 187 Total real estate rent expense 64,701 64,646 Operating lease costs: equipment and other Site level operating expense and selling, general and administrative expense 832 942 Financing lease costs: equipment and other Site level operating expense 60 155 Short-term lease costs Site level operating expense and selling, general and administrative expense 216 105 Amortization of finance lease assets: Depreciation and amortization expense 553 553 Amortization of finance lease assets: other Depreciation and amortization expense 983 757 Interest on finance lease liabilities: Interest expense, net 282 298 Interest on finance lease liabilities: other Interest expense, net 167 164 Sublease income Nonfuel revenues (576) (423) Net lease costs $ 67,218 $ 67,197 Lease Assets and Liabilities As of March 31, 2023 and December 31, 2022, our operating lease assets and liabilities consisted of the following, and for SVC leases shown below, include amounts for properties we sublease from SVC: March 31, December 31, Operating lease assets: SVC Leases $ 1,531,944 $ 1,560,616 Other 25,745 15,922 Total operating lease assets $ 1,557,689 $ 1,576,538 Current operating lease liabilities: SVC Leases $ 107,984 $ 110,521 Other 3,797 3,419 Total current operating lease liabilities $ 111,781 $ 113,940 Noncurrent operating lease liabilities: SVC Leases $ 1,505,574 $ 1,538,031 Other 22,451 12,996 Total noncurrent operating lease liabilities $ 1,528,025 $ 1,551,027 As of March 31, 2023 and December 31, 2022, our finance lease assets and liabilities consisted of the following, and for SVC leases shown below, include amounts for properties we sublease from SVC: March 31, December 31, Finance lease assets: SVC Leases $ 23,777 $ 24,330 Other 15,513 16,205 Total finance lease assets $ 39,290 $ 40,535 Current finance lease liabilities: SVC Leases $ 1,586 $ 1,552 Other 3,756 3,690 Total current finance lease liabilities $ 5,342 $ 5,242 Noncurrent finance lease liabilities: SVC Leases $ 24,106 $ 24,517 Other 12,327 13,934 Total noncurrent finance lease liabilities $ 36,433 $ 38,451 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, 2023, were as follows: SVC Leases (1) Other Total Years ended December 31: 2023 $ 187,645 $ 3,942 $ 191,587 2024 250,388 4,922 255,310 2025 250,375 4,848 255,223 2026 250,371 4,335 254,706 2027 250,392 3,464 253,856 Thereafter 1,285,536 11,541 1,297,077 Total operating lease payments 2,474,707 33,052 2,507,759 Less: present value discount (1) (861,149) (6,799) (867,948) Present value of operating lease liabilities $ 1,613,558 $ 26,253 $ 1,639,811 (1) Includes rent for properties we sublease from SVC. (2) 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, 2023, was approximately 10 years. Our weighted average discount rate for our operating leases as of March 31, 2023, was approximately 9.1%. During the three months ended March 31, 2023 and 2022, we paid real estate rent payments of $70,693 and $70,371, 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, 2023, were as follows: SVC Leases (1) Other Total Years ended December 31: 2023 $ 1,996 $ 3,297 $ 5,293 2024 2,722 3,954 6,676 2025 2,790 3,349 6,139 2026 2,860 2,982 5,842 2027 2,932 2,685 5,617 Thereafter 19,194 1,416 20,610 Total finance lease payments 32,494 17,683 50,177 Less: present value discount (1) (6,802) (1,600) (8,402) Present value of finance lease liabilities $ 25,692 $ 16,083 $ 41,775 (1) Includes rent for properties we sublease from SVC. (2) 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, 2023, was approximately 8 years. Our weighted average discount rate for our finance leases as of March 31, 2023, was approximately 4.3%. During the three months ended March 31, 2023 and 2022, we paid $1,818 and $1,035, respectively, for amounts that had been included in the measurement of our finance lease liabilities. In connection with entering into the Merger Agreement, we and our wholly-owned subsidiary, TA Operating LLC, or together the TCA Parties, entered into the SVC Consent Agreement with SVC pursuant to which, among other things, SVC consented to our entering into the Merger Agreement and the consummation of the Merger and agreed to enter into amended and restated lease and guarantee agreements with the applicable TCA Parties, which would be entered into at the effective time of the Merger. For more information about the Merger and the SVC Consent Agreement, see Notes 1 and 6 of this Quarterly Report. As a Lessor During 2022, we acquired the operating assets related to two travel centers we previously leased to franchisees. Rent revenues from these operating leases totaled $595 for the three months ended March 31, 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. |