| Management Agreements and Leases | Note 8. Management Agreements and Leases As of September 30, 2019 , we owned 328 hotels which were included in eight operating agreements and 946 service orientated retail properties net leased to 279 tenants. We do not operate any of our properties. Hotel agreements As of September 30, 2019 , 326 of our hotels were leased to our TRSs and managed by independent hotel operating companies and two hotels were leased to third parties. As of September 30, 2019 , our hotel properties were managed by or leased to separate subsidiaries of Marriott International, Inc., or Marriott, IHG, Sonesta International Hotels Corporation, or Sonesta, Wyndham Hotels & Resorts, Inc., or Wyndham, Hyatt Hotels Corporation, or Hyatt, and Radisson Hospitality, Inc., or Radisson, under eight agreements. These hotel agreements have initial terms expiring between 2019 and 2038. Each of these agreements is for between one and 102 of our hotels. In general, the agreements contain renewal options for all, but not less than all, of the affected properties included in each agreement, and the renewal terms range between 20 to 60 years. Most of these agreements require the third party manager or tenant to: (1) make payments to us of minimum returns or minimum rents; (2) deposit a percentage of total hotel sales into FF&E reserves; and (3) for our managed hotels, make payments to our TRSs of additional returns to the extent of available cash flows after payment of operating expenses, funding of the FF&E reserves, payment of our minimum returns, payment of certain management fees and replenishment of security deposits or guarantees. Some of our managers or tenants or their affiliates have provided deposits or guarantees to secure their obligations to pay us. Marriott No. 1 agreement . Our management agreement with Marriott for 53 hotels, or our Marriott No. 1 agreement, provides that, as of September 30, 2019 , we are to be paid an annual minimum return of $71,714 to the extent that gross revenues of the hotels, after payment of hotel operating expenses and funding of the FF&E reserve, are sufficient to do so. Marriott’s base and incentive management fees are only earned after we receive our minimum returns. We realized minimum returns of $17,908 and $17,335 during the three months ended September 30, 2019 and 2018 , respectively, and minimum returns of $53,467 and $51,954 during the nine months ended September 30, 2019 and 2018 , respectively, under this agreement. We also realized additional returns of $1,985 and $3,560 during the three and nine months ended September 30, 2019 , respectively, and $2,584 and $5,113 during the three and nine months ended September 30, 2018 , respectively, which represent our share of hotel cash flows in excess of the minimum returns due to us for these periods. We do not have any security deposits or guarantees for our minimum returns from the 53 hotels included in our Marriott No. 1 agreement. Accordingly, the minimum returns we receive from these hotels managed by Marriott are limited to the hotels’ available cash flows after payment of operating expenses and funding of the FF&E reserve. We funded $15,778 and $1,769 for capital improvements to certain of the hotels included in our Marriott No. 1 agreement during the nine months ended September 30, 2019 and 2018 , respectively, which resulted in increases in our contractual annual minimum returns of $1,578 and $177 , respectively. Marriott No. 234 agreement. Our management agreement with Marriott for 68 hotels, or our Marriott No. 234 agreement, provides that, as of September 30, 2019 , we are to be paid an annual minimum return of $109,024 . We realized minimum returns of $27,256 and $26,772 during the three months ended September 30, 2019 and 2018 , respectively, and $81,206 and $80,199 during the nine months ended September 30, 2019 and 2018 , respectively, under this agreement. Pursuant to our Marriott No. 234 agreement, Marriott has provided us with a security deposit to cover minimum return payment shortfalls, if any. Under this agreement, this security deposit may be replenished and increased up to $64,700 from a share of hotel cash flows in excess of the minimum returns due to us. Marriott’s base and incentive management fees are only earned after we receive our minimum returns. During the nine months ended September 30, 2019 , our available security deposit was replenished by $3,910 from a share of hotel cash flows in excess of the minimum returns due to us during the period. The available balance of this security deposit was $36,621 as of September 30, 2019 . Pursuant to our Marriott No. 234 agreement, Marriott has also provided us with a limited guaranty which expires in 2019 for shortfalls up to 90% of our minimum returns, if and after the available security deposit has been depleted. The available balance of the guaranty was $30,672 as of September 30, 2019 . We funded $18,600 and $6,355 for capital improvements to certain of the hotels included in our Marriott No. 234 agreement during the nine months ended September 30, 2019 and 2018 , respectively, which resulted in increases in our contractual annual minimum returns of $1,674 and $572 , respectively. Marriott No. 5 agreement . We lease one hotel in Kauai, HI to Marriott which requires that, as of September 30, 2019 , we are paid annual minimum rents of $10,518 . This lease is guaranteed by Marriott and we realized $2,630 and $2,580 of rent for this hotel during the three months ended September 30, 2019 and 2018 , respectively, and $7,889 and $7,740 during the nine months ended September 30, 2019 and 2018 , respectively. The guaranty provided by Marriott with respect to this leased hotel is unlimited. Marriott has four renewal options for 15 years each. On August 31, 2016, Marriott notified us that it will not exercise its renewal option at the expiration of the current lease term ending on December 31, 2019. IHG agreement. Our IHG agreement provides that, as of September 30, 2019 , we are to be paid annual minimum returns and rents of $207,411 . We realized minimum returns and rents of $51,853 and $47,630 during the three months ended September 30, 2019 and 2018 , respectively, and $153,053 and $142,316 during the nine months ended September 30, 2019 and 2018 , respectively, under this agreement. We also realized additional returns under this agreement of $6,653 and $8,373 during the three and nine months ended September 30, 2018 from our share of hotel cash flows in excess of the minimum returns and rents due to us for that period. We did no t realize any additional returns during either the three or nine months ended September 30, 2019 . Pursuant to our IHG agreement, IHG has provided us with a security deposit to cover minimum payment shortfalls, if any. Under this agreement, IHG is required to maintain a minimum security deposit of $37,000 and this security deposit may be replenished and increased up to $100,000 from a share of future cash flows from the hotels in excess of our minimum returns and rents. During the nine months ended September 30, 2019 , we reduced the available security deposit by $14,259 to cover shortfalls in hotel cash flows available to pay the minimum returns and rents due to us for the period. The available balance of this security deposit was $85,741 as of September 30, 2019 . We did no t fund any capital improvements to our IHG hotels during each of the nine months ended September 30, 2019 and 2018 . Sonesta agreement. As of September 30, 2019 , Sonesta managed 12 of our full service hotels and 39 of our limited service hotels pursuant to management agreements for each of the hotels, which we refer to collectively as our Sonesta agreement, and a pooling agreement, which combines those management agreements for purposes of calculating gross revenues, payment of hotel operating expenses, payment of fees and distributions and minimum returns due to us. Our Sonesta agreement provides that we are paid a fixed annual minimum return equal to 8% of our invested capital, as defined therein, if gross revenues of the hotels, after payment of hotel operating expenses and management and related fees (other than Sonesta’s incentive fee, if applicable), are sufficient to do so. Our fixed annual minimum return under our Sonesta agreement was $131,229 as of September 30, 2019 . Our Sonesta agreement further provides that we are paid an additional return based upon operating profits, as defined therein, after payment of Sonesta’s incentive fee, if applicable. We realized returns of $15,629 and $21,732 during the three months ended September 30, 2019 and 2018 , respectively, and $57,794 and $61,606 during the nine months ended September 30, 2019 , and 2018 , respectively, under our Sonesta agreement. We do not have any security deposits or guarantees for our Sonesta hotels. Accordingly, the returns we receive from our Sonesta hotels are limited to the hotels’ available cash flows after payment of operating expenses, including management and related fees. Pursuant to our Sonesta agreement, we incurred management, reservation and system fees and reimbursement costs for certain guest loyalty, marketing program and third party reservation transmission fees of $9,313 and $9,437 for the three months ended September 30, 2019 and 2018 , respectively, and $28,016 and $26,245 for the nine months ended September 30, 2019 and 2018 , respectively. In addition, we incurred procurement and construction supervision fees of $928 and $713 for the three months ended September 30, 2019 and 2018 , respectively, and $1,914 and $1,907 for the nine months ended September 30, 2019 and 2018 , respectively, pursuant to our Sonesta agreement. These amounts are included in hotel operating expenses or have been capitalized, as appropriate, in our condensed consolidated financial statements. Our Sonesta agreement does not require FF&E escrow deposits, but does require us to fund capital expenditures at our Sonesta hotels. We funded $67,495 and $64,032 for renovations and other capital improvements to certain hotels included in our Sonesta agreement during the nine months ended September 30, 2019 and 2018 , respectively, which resulted in increases in our contractual annual minimum returns of $4,140 and $3,948 , respectively. The annual minimum returns due to us under our Sonesta agreement increase by 8% of the capital expenditure amounts we fund in excess of threshold amounts, as defined therein. We owed Sonesta $14,879 and $6,735 for capital expenditure and other reimbursements at September 30, 2019 and 2018 , respectively. Amounts due from Sonesta are included in due from related persons and amounts owed to Sonesta are included in due to related persons in our condensed consolidated balance sheets. See Note 10 for further information regarding our relationship, agreements and transactions with Sonesta. Wyndham agreements . Our management agreement with Wyndham for 22 hotels, or our Wyndham agreement, provides that, as of September 30, 2019 , we are to be paid annual minimum returns of $27,973 . Pursuant to our Wyndham agreement, Wyndham has provided us with a guaranty, which was limited to $35,656 , subject to an annual payment limit of $17,828 , and expires on July 28, 2020. This guaranty was depleted during 2017 and remained depleted as of September 30, 2019 . This guaranty may be replenished from a share of future cash flows from these hotels in excess of our minimum returns. To avoid default, Wyndham was required to pay 85% of the minimum returns due to us. We realized returns of $5,944 and $5,869 during the three months ended September 30, 2019 and 2018 , respectively, and $17,780 and $17,588 during the nine months ended September 30, 2019 and 2018, respectively, which represents 85% of the minimum returns due for the period, under this agreement. Our Wyndham agreement requires FF&E escrow deposits equal to 5% of total hotel sales for all hotels included in the agreement subject to available cash flows after payment of our minimum return. No FF&E escrow deposits were made during the nine months ended September 30, 2019 . We funded $2,283 and $1,449 for capital improvements to certain of the hotels included in our Wyndham agreement during the nine months ended September 30, 2019 and 2018 , respectively, which resulted in increases in our contractual annual minimum returns of $183 and $116 , respectively. In October 2019, we amended our agreement with Wyndham whereby the term of the management agreement will expire on September 30, 2020 unless sooner terminated with respect to any hotels that are sold or rebranded. Under the amendment, Wyndham will pay us all cash flows of the hotels after payment of hotel operating costs. Wyndham will not be entitled to any base management fees for the remainder of the agreement term. We lease 48 vacation units in one of our hotels to a subsidiary of Wyndham Destinations, Inc. (NYSE: WYND), or Destinations, which requires that, as of September 30, 2019 , we are paid annual minimum rents of $1,493 . The guaranty provided by Destinations with respect to the Destinations lease for part of one hotel is unlimited. We recognized the contractual rents of $454 during both the three months ended September 30, 2019 and 2018 and $1,361 during each of the nine months ended September 30, 2019 and 2018 under our Destinations lease agreement. Rental income for the three months ended September 30, 2019 and 2018 for this lease includes $80 and $91 , respectively, and $241 and $273 for the nine months ended September 30, 2019 and 2018 , respectively, of adjustments necessary to record rent on a straight line basis. On November 1, 2019, we rebranded two full-service hotels previously managed by Wyndham (Chicago, IL and Irvine, CA) to the Sonesta brands under a short term agreement with Sonesta that expires on December 31, 2020. We have amended the lease of the 48 vacation units at the Chicago hotel to Destinations so the term of the lease expires on March 31, 2020, at which time Destinations will vacate the leased space. Hyatt agreement . Our management agreement with Hyatt for 22 hotels, or our Hyatt agreement, provides that, as of September 30, 2019 , we are to be paid an annual minimum return of $22,037 . We realized minimum returns of $5,509 during each of the three months ended September 30, 2019 and 2018 and minimum returns of $16,528 during each of the nine months ended September 30, 2019 and 2018 under this agreement. Pursuant to our Hyatt agreement, Hyatt has provided us with a guaranty, which is limited to $50,000 . During the nine months ended September 30, 2019 , the hotels under this agreement generated cash flows that were less than the minimum returns due to us for the period, and Hyatt made $569 of guaranty payments to cover the shortfall. The available balance of the guaranty was $21,346 as of September 30, 2019 . Radisson agreement. Our management agreement with Radisson for nine hotels, or our Radisson agreement, provides that, as of September 30, 2019 , we are to be paid an annual minimum return of $20,442 . We realized minimum returns of $5,099 and $4,730 during the three months ended September 30, 2019 and 2018 , respectively, and $14,945 and $11,453 during the nine months ended September 30, 2019 and 2018 , respectively, under this agreement. Pursuant to our Radisson agreement, Radisson has provided us with a limited guaranty which, as a result of capital improvement amounts funded by us during the nine months ended September 30, 2019 , as described below, was increased $1,523 to a total of $47,523 . During the nine months ended September 30, 2019 , the hotels under this agreement generated cash flows that were less than the minimum returns due to us for the period, and Radisson made $93 of guaranty payments to cover the shortfall. The available balance of the guaranty was $42,466 as of September 30, 2019 . We funded $19,034 for capital improvements at certain of the hotels included in our Radisson agreement during the nine months ended September 30, 2019 , which resulted in increases in our contractual annual minimum returns of $1,523 . We did no t fund any capital improvements to the hotels included in our Radisson agreement during the nine months ended September 30, 2018 . Net lease portfolio As of September 30, 2019 , we owned 946 net lease service-oriented retail properties with 17.6 million square feet with annual minimum rent of $418,635 with a weighted (by annual minimum rents) average lease term of 11.3 years. The portfolio was 98% leased by 279 tenants operating under 163 brands in 23 distinct industries. As of September 30, 2019 , 148 properties we acquired in the SMTA Transaction with 3.2 million square feet with annual minimum rent of $43,081 and a carrying value of $604,989 were classified as held for sale. TA Leases In January 2019 , we entered agreements with TA, pursuant to which: • In January 2019 , we sold to TA 20 travel center properties, which TA previously leased from us, for a total purchase price of $308,200 . • Upon completing these sales, these travel center properties were removed from the TA leases and TA’s annual minimum rent payable to us decreased by $43,148 . • Commencing on April 1, 2019 , TA paid us the first of 16 quarterly installments of approximately $4,400 each (an aggregate of $70,458 ) to fully satisfy and discharge its $150,000 deferred rent obligation to us that otherwise would have become due in five installments between 2024 and 2030 . TA paid to us $ 4,400 and $ 8,800 in respect of such obligation for the three and nine months ended September 30, 2019 , respectively. • Commencing with the year ending December 31, 2020 , TA will be obligated to pay to us an additional amount of percentage rent equal to one-half percent ( 0.5% ) of the excess of its annual non-fuel revenues at leased sites over the non-fuel revenues for each respective site for the year ending December 31, 2019 . • The term of each TA lease was extended by three years . • Certain of the travel center properties that we did not sell to TA and that TA continued to lease from us were reallocated among the TA leases. See Note 7 for further information regarding the effects of certain of our property dispositions on our leases with TA. TA is our largest tenant. As of September 30, 2019 , we leased to TA a total of 179 travel centers under five leases that expire between 2029 and 2035 and require annual minimum returns of $246,088 which represents approximately 24.1% of our total annual minimum rents as of September 30, 2019 . We recognized rental income from TA of $62,537 and $74,797 for the three months ended September 30, 2019 and 2018 , respectively, and $188,227 and $223,458 for the nine months ended September 30, 2019 and 2018 , respectively. We reduced rental income by $3,390 and $7,880 for the three and nine months ended September 30, 2019 , respectively, and increased rental income by $3,037 and $9,066 for the three and nine months ended September 30, 2018 , respectively, to record the deferred rent obligations under our TA leases and the estimated future payments to us by TA for the cost of removing underground storage tanks on a straight line basis. As of September 30, 2019 and December 31, 2018 , we had receivables for current rent amounts owed to us by TA and straight line rent adjustments of $72,587 and $91,212 , respectively. These amounts are included in due from related persons in our condensed consolidated balance sheets. On October 14, 2019, we and TA amended the five TA Leases, pursuant to which, among other things, certain of the 179 travel center properties that we lease to TA were reallocated among the TA Leases. As part of these amendments, we removed TA’s outstanding deferred rent obligations from the lease we refer to as our TA Lease No. 5 agreement for 35 travel centers, which expires in June 2035, and reallocated that amount to our other four TA leases. These amendments were entered into as part of our exploration of possible secured debt and joint venture financing with respect to the 35 properties subject to this lease. Our TA leases do not require FF&E escrow deposits. However, TA is required to maintain the leased travel centers, including structural and non-structural components. Under our TA leases, TA may request that we fund capital improvements in return for increases in TA’s annual minimum rent equal to 8.5% of the amounts funded. We did no t fund any capital improvements to our properties that we leased to TA during the nine months ended September 30, 2019 . We funded $44,653 of capital improvements to our properties that we leased to TA for the nine months ended September 30, 2018 . As a result, TA’s annual minimum rent payable to us increased by $3,795 . In addition to the rental income that we recognized during the three months ended September 30, 2019 and 2018 as described above, our TA leases require TA to pay us percentage rent based upon increases in certain sales. We determine percentage rent due under our TA leases annually and recognize any resulting amount as rental income when all contingencies are met. We had aggregate deferred percentage rent under our TA leases of $1,020 and $934 for the three months ended September 30, 2019 and 2018 , respectively, and $3,047 and $2,630 for the nine months ended September 30, 2019 and 2018 , respectively. See Note 10 for further information regarding our relationship with TA. Other net lease agreements We recognized rental income from the net lease properties we acquired under the SMTA Transaction of $5,485 for both the three and nine months ended September 30, 2019 . We increased rental income by $258 for the three and nine months ended September 30, 2019 to record scheduled rent changes under certain of our leases on a straight line basis. Additional lease information (as lessor) . As of September 30, 2019 , our leases with parties other than our TRSs provide for contractual minimum rents to be paid to us during the remaining current terms as follows: 2019 $ 184,600 2020 440,093 2021 436,348 2022 428,645 2023 412,430 Thereafter 3,260,594 Total $ 5,162,710 Additional lease information (as lessee) . As of January 1, 2019, 14 of our hotels and one of our net lease portfolio locations were subject to ground leases where we are the lessee. In addition, our hotel operators enter various leases on our behalf in the normal course of business at our hotels, or our hotel operating leases. We calculated right of use assets and lease liabilities as the present value of the remaining lease payment obligations for our operating leases, which include the ground leases and hotel operating leases, over the remaining lease term using our estimated incremental borrowing rate. The right of use assets and related lease liabilities are included within other assets, net and accounts payable and other liabilities, respectively, in our condensed consolidated balance sheets. At September 30, 2019 , our right of use assets and related lease liabilities totaled $75,746 and $76,224 , respectively, which represented our future obligations under our operating lease agreements. Our operating leases require minimum fixed rent payments, percentage rent payments based on a percentage of hotel revenues in excess of certain thresholds, or rent payments equal to the greater of a minimum fixed rent or percentage rent. Rental expense related to our operating leases of $3,601 and $10,594 for the three and nine months ended September 30, 2019 , respectively, is included in hotel operating expenses within our condensed consolidated statements of comprehensive income. As of September 30, 2019 , our operating leases provide for contractual minimum rent payments to third parties during the remaining lease terms, as follows: 2019 $ 1,841 2020 6,910 2021 6,229 2022 5,691 2023 5,564 Thereafter 145,374 Total lease payments 171,609 Less: imputed interest (95,385 ) Present value of lease liabilities (1) $ 76,224 (1) The weighted average discount rate used to calculate the lease liability and the weighted average remaining term for our ground leases (assuming all extension options) and our hotel operating leases are approximately 5.45% and 31 years (range of 12 to 68 years ) and 5.47% and 30 years (range of 1 month to 54 years ), respectively. As of September 30, 2019 , 15 of our net lease properties are on land we leased partially or entirely from unrelated third parties. We are not required to record right of use assets and lease liabilities for these properties as we are not the primary obligor under the leases. The average remaining term of these 15 ground leases was 14 years (range of two to 31 years ) with rents averaging $419 per year. Generally, payments of ground lease obligations are made by our managers or tenants. However, if a manager or tenant did not perform obligations under a ground lease or did not renew any ground lease, we might have to perform obligations under the ground lease or renew the ground lease in order to protect our investment in the affected property. Guarantees and security deposits generally. When we reduce the amounts of the security deposits we hold for any of our operating agreements for payment deficiencies, it does not result in additional cash flows to us of the deficiency amounts, but reduces the refunds due to the respective tenants or managers who have provided us with these security deposits upon expiration of the applicable operating agreement. The security deposits are non-interest bearing and are not held in escrow. Under these agreements, any amount of the security deposits which are applied to payment deficits may be replenished from a share of future cash flows from the applicable hotel operations pursuant to the terms of the applicable agreements. Certain of our managed hotel portfolios had net operating results that were, in the aggregate, $19,631 and $9,216 less than the minimum returns due to us for the three months ended September 30, 2019 and 2018 , respectively, and $54,112 and $31,030 less than the minimum returns due to us for the nine months ended September 30, 2019 and 2018 , respectively. When managers of these hotels are required to fund the shortfalls under the terms of our management agreements or their guarantees, we reflect such fundings (including security deposit applications) in our condensed consolidated statements of comprehensive income as a reduction of hotel operating expenses. We reduced hotel operating expenses by $3,630 and $299 for the three months ended September 30, 2019 and 2018 , respectively, and $17,166 and $2,377 for the nine months ended September 30, 2019 and 2018 , respectively. We had shortfalls at certain of our managed hotel portfolios not funded by the managers of these hotels under the terms of our management agreements of $17,758 and $9,818 for the three months ended September 30, 2019 and 2018 , respectively, and $41,555 and $28,653 for the nine months ended September 30, 2019 and 2018 , respectively, which represent the unguaranteed portions of our minimum returns from our Sonesta and Wyndham agreements. Certain of our managed hotel portfolios had net operating results that were, in the aggregate, $9,076 and $21,321 more than the minimum returns due to us for the three months ended September 30, 2019 and 2018 , respectively, and $16,966 and $47,901 more than the minimum returns due to us for the nine months ended September 30, 2019 and 2018 , respectively. Certain of our guarantees and our security deposits may be replenished by a share of future cash flows from the applicable hotel operations in excess of the minimum returns due to us pursuant to the terms of the respective agreements. When our guarantees and security deposits are replenished by cash flows from hotel operations, we reflect such replenishments in our condensed consolidated statements of comprehensive income as an increase to hotel operating expenses. We had $3,631 and $5,204 of guaranty and security deposit replenishments for the three months ended September 30, 2019 and 2018 , respectively, and $3,910 and $14,299 of guaranty and security deposit replenishments for the nine months ended September 30, 2019 and 2018 , respectively. |
