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COVID-19
 9 Months Ended
Sep. 30, 2020
Unusual or Infrequent Items, or Both [Abstract]  
COVID-19
18. COVID-19
In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. COVID-19 has spread worldwide, causing significant disruptions to the U.S. and world economies. On March 4, 2020 and March 13, 2020, a state of emergency was declared for the state of California and for the United States, respectively. In response to the issuance of U.S. federal guidelines to contain the spread of COVID-19, U.S. state and local jurisdictions, including those in which the Company operates, implemented various containment and or mitigation measures, including shelter-in-place orders and the temporary closure of non-essential businesses. COVID-19 has triggered a period of significant global economic slowdown, and the impact of COVID-19 on the U.S. economy will continue through the remainder of 2020 and into 2021.
The information provided in the two tables below provides insight into the effects of COVID-19 on our rent collections for the three months ended September 30, 2020 and for the month of October 2020. While we provided similar information for the previous two quarters, we undertake no obligation to provide updated rent collection, concession or allowance information in the future. The following information is for the three months ended September 30, 2020, is presented based on collections and agreements with tenants reached as of September 30, 2020, and is preliminary and unaudited:     
Tenant TypeRental and Other Property Income Billed to Tenants% Collected% Collected by Applying the Security Deposit% Deferred% Recorded as Bad Debt% Abated
Office and Retail (1)$14,250,689 95.5 %0.1 %0.2 %1.5 %— %
Parking$1,157,579 34.9 %— %— %62.6 %— %
(1)As of November 4, 2020, the Company collected an additional 1.4% of the $14,250,689 rental and other property income billed to its office and retail tenants for the three months ended September 30, 2020.
The following information is for the month of October 2020, is presented based on collections and agreements with tenants reached as of October 31, 2020, and is preliminary and unaudited:
Tenant TypeRental and Other Property Income Billed to Tenants% Collected% Collected by Applying the Security Deposit% Deferred% Recorded as Bad Debt (2)% Abated
Office and Retail (1)$4,333,864 92.8 %— %— %— %— %
Parking$351,202 19.2 %— %— %— %— %
(1)As of November 4, 2020, the Company collected an additional 0.2% of the $4,333,864 rental and other property income billed to its office and retail tenants for the month of October 2020.
(2)As of November 4, 2020, the estimate for the percentage recorded as bad debt has not yet been determined.
For the three and nine months ended September 30, 2020, we recorded bad debt expense related to COVID-19 of $1,361,000 and $1,856,000, respectively. Of the $1,361,000 of bad debt expense related to COVID-19 for the three months ended September 30, 2020, $422,000 was related to rental and other property income billed to tenants in prior quarters.
Additionally, the spread of COVID-19 in the United States and the resulting restrictions on travel, meetings and social gatherings that have been implemented from time to time have impacted, and are expected to continue to materially impact so long as they persist, the operations of our hotel in Sacramento, California. For the fourth quarter of 2019, the net operating income of our hotel constituted approximately 22% of our total segment net operating income. The following table sets forth the occupancy, average daily rate (“ADR”) and revenue per available room (“RevPAR”) for our hotel in Sacramento, California for the specified periods:
Three Months Ended June 30,Three Months Ended September 30,October,
202020192020201920202019
Occupancy12.5 %81.7 %24.1 %77.2 %29.4 %86.3 %
ADR$124.49$173.08$120.97$148.06$121.48$162.39
RevPAR$15.61$141.42$29.16$114.33$35.67$140.07
Our lending division has also been adversely impacted by COVID-19. Loans originated and serviced under the SBA 7(a) Small Business Loan Program through September 30, 2020 consist primarily of loans to borrowers in the limited service hospitality sector. Currently, our borrowers are experiencing significant reductions in cash flow as the travel and leisure industry decline caused by COVID-19 has severely impacted limited service hospitality properties. The overwhelming majority of our borrowers received relief under the CARES Act through September 30, 2020. However, if no further relief is provided by Congress, we expect that borrowers under our SBA 7(a) Small Business Loan Program will continue to be materially and adversely affected by the economic impact of COVID-19, potentially leading to substantially higher delinquencies on our loans. As such, during the third quarter of 2020, we increased our loan loss reserves. Depending upon the length of continuation of market disruptions for the limited service hospitality industry, we may have additional increases in our loan loss reserves and ultimately an increase in loan losses, and such losses may be material.
We have taken steps to adapt to the difficult business environment in which we operate and to strengthen our business to position our business to thrive post COVID-19. These steps include (i) reducing our corporate overhead expenses by realigning certain support functions and reducing employee compensation at our Operator, including not appointing a replacement for our President who retired during the third quarter, (ii) focusing on appropriate cost-reduction measures at our properties, (iii) temporarily suspending the vast majority of activities related to the repositioning of our office building at 4750 Wilshire Boulevard in Los Angeles, California, and renovations at the Sheraton Grand Hotel in Sacramento, California, (iv) increasing liquidity by entering into the new 2020 unsecured revolving credit facility in May, accessing the PPPLF in June and entering into the 2018 Credit Facility Modification in September, and (v) amending our Master Services Agreement to eliminate the Base Service Fee as described in Note 13.
The extent to which COVID-19 will continue to impact the Company’s operations and those of its tenants and business partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the COVID-19 pandemic and actions taken to contain the pandemic or mitigate its impact and the extent to which federal, state and local governments provide relief or assistance to those affected by COVID-19 (including extending the CARES Act). The Company cannot predict the significance, extent or duration of any adverse impact of COVID-19 on its business, financial condition, results of operations, cash flow or its ability to satisfy its debt service obligations or to maintain its level of distributions on its Common Stock or Preferred Stock. However, the Company’s business, financial condition, results of operations, and liquidity have been adversely affected and will likely continue to be adversely affected for the remainder of 2020 and at least through the first half of 2021.