Real Estate Properties

6 Months Ended

Jun. 30, 2020

Note 5. Real Estate Properties

At June 30, 2020, we owned 329 hotels with 51,404 rooms or suites and 809 service-oriented retail properties with approximately 13.7 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 $11,298,816, including $152,367 classified as held for sale as of June 30, 2020.

During the six months ended June 30, 2020, we funded $78,500 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 $5,657.

As of June 30, 2020, we substantially completed a comprehensive rebuilding project of our San Juan, PR hotel as a result of damage sustained during Hurricane Maria in 2017. We recorded a $62,386 gain on insurance settlement during the three months ended June 30, 2020 for insurance proceeds received for this damage. Under GAAP, we were required to increase the building basis of our San Juan hotel for the amount of the insurance proceeds.

See Note 6 for further information about our management and lease agreements and our fundings of improvements to certain of our properties.

Acquisitions

We acquired a portfolio of three net lease properties during the six months ended June 30, 2020. We accounted for this transaction as an acquisition of assets. Our allocation of the purchase price for this acquisition based on the estimated fair value of the acquired assets is presented in the table below.



Acquisition Date	Location	Purchase Price		Land		Building and Improvements		Furniture, Fixtures and Equipment		Intangible Assets / Liabilities, net
3/12/2020	Various ⁽¹⁾	$	7,071	$	880	$	5,363	$	—	$	828


(1)	On March 12, 2020, we acquired 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 purchase price of $7,071, including acquisition related costs.

Dispositions

We sold ten net lease properties with an aggregate of 1,101,996 rentable square feet for aggregate proceeds of $63,960, excluding closing costs, in ten separate transactions during the six months ended June 30, 2020. 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 condensed consolidated statements of income. As a result of these sales, we recorded a net loss on sale of real estate of $2,853 and $9,764 during the three and six months ended June 30, 2020, respectively.



Date of Sale	Number of Properties	Location	Tenant	Square Feet	Gross Sales Price
1/28/2020	1	Gothenburg, NE	Vacant	31,978	$	585
2/6/2020	1	Rochester, MN	Vacant	90,503	2,600
2/13/2020	1	Ainsworth, NE	Vacant	32,901	775
2/14/2020	1	Dekalb, IL	Vacant	5,052	1,050
3/2/2020	1	Eau Claire, MI	HOM Furniture, Inc.⁽¹⁾	98,824	2,600
3/28/2020	1	Stillwater, OK	Vacant	33,018	400
5/26/2020	1	Pawtucket, RI	Vacant	22,027	1,610
5/28/2020	1	Canton, MA	Destination XL Group, Inc. ⁽²⁾	755,992	51,000
5/28/2020	1	Phoenix, AZ	Vacant	29,434	2,900
6/25/2020	1	Bellefontaine, OH	Vacant	2,267	440
				1,101,996	$	63,960


(1)	The HOM Furniture, Inc. lease was scheduled to expire on April 30, 2020 and required annual minimum rent of $817.


(2)	The Destination XL Group, Inc. lease was scheduled to expire on January 31, 2026 and required an annual minimum rent of $5,221.

In July 2020, we sold one net lease property with 2,935 square feet with a carrying value of $657 requiring an annual minimum rent of $49 for a sale price of $700. We have entered into agreements to sell nine hotels with 1,178 rooms in five states with an aggregate carrying value of $38,321 for an aggregate sales price of $48,750. We currently expect the sales of these hotels to be completed in the fourth quarter of 2020. We have also entered into agreements to sell seven net lease properties with approximately 68,343 square feet in six states with an aggregate carrying value of $6,282 for an aggregate sales price of $6,875. The sales of these hotel and retail properties are subject to conditions, may not be completed, may be delayed or terms may change. We currently expect the sales of these net lease properties to be completed in the third quarter of 2020.

As of June 30, 2020,we had 25 hotels with 3,333 rooms requiring aggregate annual minimum returns of $32,628 and an aggregate carrying value of $144,119 classified as held for sale and nine net lease properties with 103,408 square feet with leases requiring aggregate annual minimum rent of $789 and an aggregate carrying value of $8,248 classified as held for sale. See Note 13 for further information on these properties.