Real Estate Properties

9 Months Ended

Sep. 30, 2020

Note 5. Real Estate Properties

At September 30, 2020, we owned 329 hotels with 51,404 rooms or suites and 804 service-oriented retail properties with approximately 13,682,478 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 $11,267,175, including $191,202 classified as held for sale as of September 30, 2020.

During the nine months ended September 30, 2020, we funded $108,392 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 $8,047.

During 2020, we 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 nine months ended September 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 nine months ended September 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 fifteen net lease properties with an aggregate of 1,148,411 rentable square feet for aggregate proceeds of $69,835, excluding closing costs, in 15 separate transactions during the nine months ended September 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 gain on sale of real estate of $109 and a loss on sale of real estate of $9,655 during the three and nine months ended September 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.	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.	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
7/17/2020	1	Clinton, MD	ADF Midatlantic LLC	2,935	700
8/20/2020	1	Lancaster, PA	Chaac Pizza Northeast, LLC	3,014	775
8/26/2020	1	Baton Rouge, LA	Vacant	2,334	750
8/26/2020	1	Winston Salem, NC	Vacant	32,816	1,300
9/17/2020	1	Hillard, OH	Vacant	5,316	2,350
				1,148,411	$	69,835

In October and November 2020, we sold three net lease properties with an aggregate of 82,623 square feet with an aggregate carrying value of $4,518 for a sale price of $4,900. We have entered into agreements to sell 39 hotels with 4,631 rooms in 18 states with an aggregate carrying value of $181,317 for an aggregate sales price of $218,000. We currently expect the sales of these hotels to be completed in the fourth quarter of 2020. We have also entered into an agreement to sell one net lease property with approximately 3,000 square feet with a carrying value of $778 for a sale price of $800. We currently expect the sale of this net lease property to be completed in the fourth quarter of 2020. The sales of these hotel and retail properties are subject to conditions, may not be completed, may be delayed or terms may change.

As of September 30, 2020, we had 40 hotels with 4,794 rooms requiring aggregate annual minimum returns of $38,901 and an aggregate carrying value of $184,467 classified as held for sale and six net lease properties with 121,451 square feet with leases requiring aggregate annual minimum rent of $536 and an aggregate carrying value of $6,735 classified as held for sale. See Note 13 for further information on these properties.