Acquisitions

12 Months Ended

Dec. 31, 2021

Business Combination and Asset Acquisition [Abstract]

Acquisitions

Acquisitions

2021 Asset Acquisition

In September 2021, the Company reached a settlement with a borrower holding a senior and mezzanine loan classified as collateral-dependent, collateralized by an operating hotel. As a collateral-dependent financial asset, the expected credit losses as of September 30, 2021 were determined based on the fair value of the operating hotel. As of September 30, 2021, the notes receivable, net of allowance for credit losses, balance was $21.1 million.

The key terms of the settlement resulted in a deed in lieu of foreclosure on the operating hotel in exchange for releasing obligations pursuant to the senior and mezzanine loans and the associated franchise agreement. The property was exchanged in full settlement of the senior and mezzanine loans and recorded at the fair value of $21.1 million as of the acquisition date of October 1, 2021. The fair value was estimated using an income approach valuation method based on discounted cash flows of the collateralized operating hotel utilizing historical operating performance, industry projections for the market, and comparable sales capitalization rates.

In accordance with the provisions of ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business ("ASU 2017-01"), the purchase represents an asset acquisition based on the concentration of value in the acquired land and building. The $21.1 million was re-characterized from Notes receivable, net of allowance for credit losses, and attributed to each asset class based on a relative fair value allocation to qualifying assets, resulting in $4.8 million to land, $14.2 million to building and improvements, $1.8 million to furniture, fixtures, and equipment, and $0.3 million to net assets assumed (inclusive of cash). The relative fair values for each asset class were estimated using a combination of income and market approach valuations methods.

2019 Asset Acquisition

Prior to July 23, 2019, the Company held a 40% ownership interest of an affiliate that owned five Cambria hotels recorded as an investment in unconsolidated entities. On July 23, 2019, the Company redeemed the remaining 60% ownership interest in four of the hotels for approximately $169.0 million cash paid (inclusive of $0.7 million in capitalized transaction costs), net of cash acquired. The transaction was funded with cash and borrowings under the Company's revolving credit facility.

In accordance with the provisions of ASU 2017-01, the purchase represents an asset acquisition based on the concentration of value in the acquired land and buildings. This assessment was performed on the four hotels as a group of similar identifiable assets based on the similar risk characteristics as operating Cambria Hotels. The $25.0 million previously in investments in unconsolidated entities is included in the total net asset basis of $194.0 million. The total net asset basis was attributed to each asset and asset class based on a relative fair value allocation to qualifying assets, resulting in $21.7 million to land, $148.4 million to building and improvements, $27.0 million to furniture, fixtures, and equipment, $0.8 million to an in-place lease intangible asset, and $3.9 million to net liabilities assumed.