Real Estate Properties

12 Months Ended

Dec. 31, 2019

Note 4. Real Estate Properties

As of December 31, 2019, we owned 329 hotels with 51,349 rooms or suites and 816 service-oriented retail properties with approximately 14.9 million square feet that are primarily subject to “triple net” leases, or net leases where the tenant is generally responsible for payment of operating expenses and capital expenditures of the property during the lease term. Our properties had an aggregate undepreciated carrying value of $11,472,529, including $87,493 classified as held for sale as of December 31, 2019.

Our real estate properties, at cost after impairments, consisted of land of $2,066,602, buildings and improvements of $8,731,002 and furniture, fixtures and equipment of $587,432, as of December 31, 2019; and land of $1,626,239, buildings and improvements of $7,194,758 and furniture, fixtures and equipment of $701,976, as of December 31, 2018.

During 2019, 2018 and 2017, we funded $242,571, $200,044 and $162,482, respectively, for improvements to certain of our properties, which, pursuant to the terms of our management and lease agreements with our managers and tenants, resulted in increases in our contractual annual minimum returns and rents of $18,432, $14,888 and $10,274 in 2019, 2018 and 2017, respectively. See Note 5 for further information about our management and lease agreements and our fundings of improvements to certain of our properties.

At December 31, 2019, 14 of our hotels were on land we leased partially or entirely from unrelated third parties. The average remaining term of the ground leases (including renewal options) is approximately 37 years (range of 15 to 68 years). Ground rent payable under nine of the ground leases is generally calculated as a percentage of hotel revenues. Twelve (12) of the 14 ground leases require annual minimum rents averaging $260 per year; future rents under two ground leases have been prepaid. Seventeen (17) of our net lease properties are on land we leased partially or entirely from unrelated third parties. The remaining terms on the leases range from one year to 31 years with rents averaging $508 per year. Generally, payments of ground lease obligations are made by our managers or tenants. However, if a manager or tenant does not perform obligations under a ground lease or does 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. Any pledge, sale or transfer of our interests in a ground lease may require the consent of the applicable ground lessor and its lenders.

Acquisitions

Our allocation of the purchase price of each of our acquisitions based on the estimated fair value of the acquired assets and assumed liabilities is presented in the table below.



Properties acquired during the year ended December 31, 2019 ⁽¹⁾
Acquisition Date	Location	Type	Purchase Price		Land		Land Improvements		Building and Improvements		Furniture, Fixtures and Equipment		Held For Sale		Intangible Assets
2/22/2019	Washington, D.C. ⁽²⁾	Hotel	$	143,742	$	44,972	$	151	$	93,412	$	5,207	$	—	$	—
5/7/2019	Milwaukee, WI ⁽³⁾	Hotel	30,235		3,442		1,053		25,132		608		—		—
8/1/2019	Southington, CT ⁽⁴⁾	Land	66		66		—		—		—		—		—
9/20/2019	Various ⁽⁵⁾	Net Lease	2,482,382		388,057		—		1,201,922		—		604,989		287,414
10/9/2019	Chicago, IL ⁽⁶⁾	Hotel	55,560		7,723		—		45,059		2,778		—		—
			$	2,711,985	$	444,260	$	1,204	$	1,365,525	$	8,593	$	604,989	$	287,414
Properties acquired during the year ended December 31, 2018 ⁽¹⁾
6/15/2018	Minneapolis, MN ⁽⁷⁾	Hotel	$	75,576	$	2,196	$	—	$	68,388	$	4,992	$	—	$	—
6/15/2018	Baton Rouge, LA ⁽⁸⁾	Hotel	16,022		2,242		173		12,842		765		—		—
10/30/2018	Scottsdale, AZ ⁽⁹⁾	Hotel	35,999		6,450		833		25,898		2,818		—		—
			$	127,597	$	10,888	$	1,006	$	107,128	$	8,575	$	—	$	—
Properties acquired during the year ended December 31, 2017 ⁽¹⁾
2/1/2017	Chicago, IL ⁽¹⁰⁾	Hotel	$	86,201	$	13,609	$	40	$	58,929	$	11,926	$	—	$	1,697
3/31/2017	Seattle, WA ⁽¹¹⁾	Hotel	73,041		24,562		30		47,103		898		—		448
5/3/2017	Columbia, SC ⁽¹²⁾	Net Lease	27,604		4,040		7,172		16,392		—		—		—
6/2/2017	St. Louis, MO ⁽¹³⁾	Hotel	88,080		4,250		161		79,737		3,394		—		538
6/29/2017	Atlanta, GA ⁽¹⁴⁾	Hotel	88,748		16,612		483		68,864		2,789		—		—
8/1/2017	Columbus, OH ⁽¹⁵⁾	Hotel	49,188		6,100		49		40,678		2,361		—		—
8/23/2017	Charlotte, NC ⁽¹⁶⁾	Hotel	44,000		2,684		1,012		35,288		5,016		—		—
9/8/2017	Atlanta, GA ⁽¹⁷⁾	Land	940		940		—		—		—		—		—
9/26/2017	Various ⁽¹⁸⁾	Hotels	139,923		30,720		6,392		93,899		8,912		—		—
9/28/2017	Sayre, OK ⁽¹⁹⁾	Net Lease	8,672		1,031		—		7,641		—		—		—
			$	606,397	$	104,548	$	15,339	$	448,531	$	35,296	$	—	$	2,683


(1)	We accounted for these transactions as acquisitions of assets.


(2)	On February 22, 2019, we acquired the 335 room Hotel Palomar located in Washington, D.C. for a purchase price of $143,742, including capitalized acquisition costs of $2,292. We added this Kimpton^® branded hotel to our management agreement with IHG.


(3)	On May 7, 2019, we acquired the 198 room Crowne Plaza Milwaukee West hotel in Milwaukee, WI for a purchase price of $30,235, including capitalized acquisition costs of $235. We added this Crowne Plaza^®branded hotel to our management agreement with IHG.


(4)	On August 1, 2019, we acquired a land parcel adjacent to our travel center located in Southington, CT for a purchase price of $66, including capitalized acquisition costs of $6. This land parcel has been added to the TA lease for that travel center.


(5)	On September 20, 2019, we completed the SMTA Transaction for total consideration of $2,482,382. See below for further information regarding the SMTA Transaction.


(6)	On October 9, 2019, we acquired the 261-room Kimpton Palomar Hotel located in Chicago, IL for a purchase price of $55,560, including acquisition related costs of $560. We added this Kimpton® branded hotel to our management agreement with IHG.


(7)	On June 15, 2018, we acquired the 360 room Radisson Blu^® hotel in Minneapolis, MN for a purchase price of $75,576, including capitalized acquisition costs of $576. We added this hotel to our management agreement with Radisson.


(8)	On June 15, 2018, we acquired the 117 suite Staybridge Suites^® at Louisiana State University in Baton Rouge, LA for a purchase price of $16,022, including capitalized acquisition costs of $272. We added this hotel to our management agreement with IHG.


(9)	On October 30, 2018, we acquired a hotel with 164 suites in Scottsdale, AZ for a purchase price of $35,999, including capitalized acquisition costs of $114. We converted this hotel to the Sonesta Suites^® brand and entered into a management agreement for this hotel with Sonesta.


(10)	On February 1, 2017, we acquired the 483 room Hotel Allegro in Chicago, IL for a purchase price of $86,201, including capitalized acquisition costs of $707. We added this Kimpton^® branded hotel to our management agreement with IHG.


(11)	On March 31, 2017, we acquired the 121 room Hotel Alexis in Seattle, WA for a purchase price of $73,041, including capitalized acquisition costs of $1,416. We added this Kimpton^® branded hotel to our management agreement with IHG.


(12)	On May 3, 2017, we acquired a travel center from TA for $27,604 pursuant to a transaction agreement we entered with TA in 2015. Simultaneously with this acquisition, we leased the travel center back to TA.


(13)	On June 2, 2017, we acquired the 389 room Chase Park Plaza Hotel in St. Louis, MO for a purchase price of $88,080, including capitalized acquisition costs of $466. We converted this hotel to the Royal Sonesta^® hotel brand and entered into a management agreement for this hotel with Sonesta.


(14)	On June 29, 2017, we acquired the 495 room Crowne Plaza Ravinia hotel located in Atlanta, GA for a purchase price of $88,748, including capitalized acquisition costs of $144. We added this Crowne Plaza^® branded hotel to our management agreement with IHG.


(15)	On August 1, 2017, we acquired the 419 room Crowne Plaza & Lofts hotel in Columbus, OH for a purchase price of $49,188, including capitalized acquisition costs of $198. We added this Crowne Plaza^® branded hotel to our management agreement with IHG.


(16)	On August 23, 2017, we acquired the 300 room Crowne Plaza hotel in Charlotte, NC for a purchase price of $44,000, including capitalized acquisition costs of $143. We added this Crowne Plaza^® branded hotel to our management agreement with IHG.


(17)	On September 8, 2017, we acquired a land parcel adjacent to our Crowne Plaza hotel located in Atlanta, GA for a purchase price of $940, including capitalized acquisition costs of $40.


(18)	On September 26, 2017, we acquired 14 extended stay hotels with 1,653 suites located in 12 states for a purchase price of $139,923, including capitalized acquisition costs of $1,923. In connection with this acquisition, we converted these hotels to the Sonesta ES Suites^® brand and entered into management agreements for these hotels with Sonesta.


(19)	On September 28, 2017, we acquired land and certain improvements at a travel center located in Sayre, OK that we previously leased from a third party and subleased to TA for a purchase price of $8,672, including capitalized acquisition costs of $72. We now directly lease this land and these improvements to TA under our TA No. 4 lease.

See Note 5 for further information regarding our IHG and Radisson agreements. See Note 5 and 9 for further information regarding our relationship, agreements and transactions with Sonesta and TA.

SMTA Transaction

On September 20, 2019, we acquired a 767 property net lease portfolio with 12.4 million rentable square feet from Spirit MTA REIT, a Maryland REIT, (NYSE: SMTA), or SMTA, located in 45 states, or the SMTA Transaction. The aggregate transaction value of the SMTA Transaction was $2,482,382, including $2,384,577 in cash consideration, $82,069 of prepayment penalties related to SMTA’s extinguishment of the mortgage debt on the portfolio and $15,736 of other capitalized acquisition costs. The properties included in the portfolio were net leased to 279 tenants operating in 23 distinct industries and 163 brands that include quick service and casual dining restaurants, movie theaters, health and fitness, automotive parts and services and other service-oriented and necessity-based industries across 45 states. We financed the SMTA Transaction with borrowings under our revolving credit facility and with cash on hand, including net proceeds from our public offerings of senior unsecured notes, as described further in Note 6. As of December 31, 2019, we had $5,346 of unspent leasing related obligations assumed as a part of the SMTA Transaction.

Other Acquisition Agreements

In February 2020, we entered into an agreement to acquire three net lease properties with approximately 6,696 square feet in two states with leases requiring an aggregate of $387 of annual minimum rent for an aggregate sales price of $7,000, excluding closing costs.

Dispositions

During the year ended December 31, 2019, we sold 150 net lease properties with an aggregate of 3,314,724 rentable square feet for an aggregate purchase price of $821,212, excluding closing costs, in eight separate transactions. The sales of these properties, as presented in the table below, do not represent significant dispositions individually or in the aggregate nor do they represent a strategic shift. As a result, the results of operations of these properties are included in continuing operations through the date of sale in our consolidated statements of income.



Date of Sale	Number of Properties	Location	Tenant	Square Feet	Gross Sales Price
1/16/2019	20	Various ⁽¹⁾	TravelCenters	541,483	$	308,200
10/22/2019	1	4726 Mall Drive, Hermantown, MN ⁽²⁾	HOM Furniture	103,631	6,250
10/29/2019	1	1505 South Pavilion Center Drive Las Vegas, NV ⁽²⁾	Station Casino	138,558	57,000
11/14/2019	1	1855 S. Range Avenue, Colby, KS ⁽²⁾	Vacant	6,900	590
11/25/2019	123	Various ⁽²⁾	Various	2,429,333	435,104
12/16/2019	1	4740 Radio Road, Naples, FL 34110 ⁽²⁾	Rick Johnson Auto & Tire	4,480	1,112
12/16/2019	1	996 Central Avenue, Naples, FL 34102 ⁽²⁾	Rick Johnson Auto & Tire	4,500	706
12/30/2019	2	9032 & 9080 Harry Hines Boulevard, Dallas, TX ⁽²⁾	Pine Creek Medical Center	85,839	12,250
	150			3,314,724	$	821,212


(1)	In January 2019, in a series of transactions, we sold 20 travel centers in 15 states to TA for $308,200. We recorded a gain of $159,535 in 2019 as a result of these sales.


(2)	During 2019, we sold 130 net lease properties that we acquired in the SMTA Transaction in 28 states with 2,773,241 square feet and annual minimum rent of $43,180 for $513,012.

During the year ended December 31, 2017, we sold three of our Radisson branded hotels. On August 1, 2017, we sold our 159 room Radisson hotel located in Chandler, AZ for net proceeds of $9,085. On August 31, 2017, we sold our 143 room Country Inn & Suites hotel located in Naperville, IL for net proceeds of $6,313. On September 22, 2017, we sold our 209 room Park Plaza hotel located in Bloomington, MN for net proceeds of $8,030. As a result of these sales, we recorded a $9,348 gain on sale of real estate in the year ended December 31, 2017. Also in 2017, we received, net of expenses, $1,030 as the final payment with respect to a travel center we previously owned in Roanoke, VA that we leased to TA and which was taken by eminent domain proceedings brought by the Virginia Department of Transportation in 2014. This final payment was allocated to TA as set forth in the lease.

We are currently marketing for sale or rebranding 20 Wyndham-branded hotels with a net carrying value of $111,271, 33 Marriott hotels with a net carrying value of $224,895 and 19 net lease properties with a net carrying value of $87,493 we have classified as held for sale. See Notes 5 and 14 for further information on these disposition activities.

Since January 1, 2020, we have sold four vacant net lease properties with approximately 160,434 square feet in three states for an aggregate sales price of $5,010, excluding closing costs.