Real Estate Properties

12 Months Ended

Dec. 31, 2020

Note 4. Real Estate Properties

As of December 31, 2020, we owned 310 hotels with 49,014 rooms or suites and 799 service-oriented retail properties with 13,455,405 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 $11,175,815, including $13,543 classified as held for sale as of December 31, 2020.

Our real estate properties, at cost after impairments, consisted of land of $2,030,440, buildings and improvements of $8,600,239 and furniture, fixtures and equipment of $531,593, as of December 31, 2020; and 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. During 2020, 2019 and 2018, we funded $136,155, $242,571 and $200,044, respectively, for improvements to certain of our properties.

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 year ended December 31, 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.

At December 31, 2020, 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 36 years (range of 14 to 67 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 30 years with rents averaging $485 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. We accounted for these transactions as acquisitions of assets.


Acquisition Date	Location	Type	Rooms or Square feet	Purchase Price (1)		Land		Land Improvements		Building and Improvements		Furniture, Fixtures and Equipment		Held For Sale		Intangible Assets
Properties acquired during the year ended December 31, 2020
3/12/2020	Two states	Net Lease	6,696	$	7,071	$	880	$	—	$	5,363	$	—	$	—	$	828
Properties acquired during the year ended December 31, 2019
2/22/2019	Washington, D.C.	Hotel	335	$	143,742	$	44,972	$	151	$	93,412	$	5,207	$	—	$	—
5/7/2019	Milwaukee, WI	Hotel	198	30,235		3,442		1,053		25,132		608		—		—
8/1/2019	Southington, CT	Land	N.A.	66		66		—		—		—		—		—
9/20/2019	Various (2)	Net Lease	12,372,762	2,482,382		388,057		—		1,201,922		—		604,989		287,414
10/9/2019	Chicago, IL	Hotel	261	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
6/15/2018	Minneapolis, MN	Hotel	360	$	75,576	$	2,196	$	—	$	68,388	$	4,992	$	—	$	—
6/15/2018	Baton Rouge, LA	Hotel	117	16,022		2,242		173		12,842		765		—		—
10/30/2018	Scottsdale, AZ	Hotel	164	35,999		6,450		833		25,898		2,818		—		—
				$	127,597	$	10,888	$	1,006	$	107,128	$	8,575	$	—	$	—

(1)Includes acquisition related costs.

(2)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, grocery, 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, 2020, we had $4,399 of unspent leasing related obligations assumed as a part of the SMTA Transaction.

In January 2021, we entered into an agreement to acquire a property adjacent to one of our travel centers in Nashville, TN for $7,600, excluding closing costs. We expect to complete this transaction in the first quarter of 2021.

Dispositions

During the years ended December 31, 2020 and 2019, we sold 39 and 150 properties, respectively, for an aggregate sales price of $174,172 and $821,212, respectively, excluding closing costs, as presented in the table below. The sales of these properties do not represent significant dispositions individually or in the aggregate nor do they represent a strategic shift. As a result, the results of the operations of these properties are included in continuing operations through the date of sale in our consolidated statements of comprehensive income (loss).


Date of Sale	Number of Properties	Location	Tenant/Operator	Rooms or Suites/Square Feet	Gross Sales Price		Gain/ (Loss) on Sale
Properties sold during the year ended December 31, 2020
01/28/2020	1	Gothenburg, NE	Vacant	31,978	$	585	$	7
02/06/2020	1	Rochester, MN	Vacant	90,503	2,600		(68)
02/13/2020	1	Ainsworth, NE	Vacant	32,901	775		7
02/14/2020	1	Dekalb, IL	Vacant	5,052	1,050		21
03/02/2020	1	Eau Claire, MI	HOM Furniture, Inc.	98,824	2,600		(6,947)
03/28/2020	1	Stillwater, OK	Vacant	33,018	400		70
05/26/2020	1	Pawtucket, RI	Vacant	22,027	1,610		(1,751)
05/28/2020	1	Canton, MA	Destination XL Group, Inc.	755,992	51,000		(1,049)
05/28/2020	1	Phoenix, AZ	Vacant	29,434	2,900		(81)
06/25/2020	1	Bellefontaine, OH	Vacant	2,267	440		20
07/17/2020	1	Clinton, MD	ADF Midatlantic LLC	2,935	700		(5)
08/20/2020	1	Lancaster, PA	Chaac Pizza Northeast, LLC	3,014	775		74
08/26/2020	1	Baton Rouge, LA	Vacant	2,334	750		39
08/26/2020	1	Winston-Salem, NC	Vacant	32,816	1,300		23
09/17/2020	1	Hillard, OH	Vacant	5,316	2,350		5
10/6/2020	1	Cabot, AR	Vacant	18,165	550		25
10/8/2020	1	Lander, WY	The Forge Bar and Grill	8,900	350		2
11/2/2020	1	Raleigh, NC	Vacant	55,558	3,900		41
11/18/2020	8	8 states	Marriott	834	44,800		8,375
12/15/2020	1	Fredrick, MD	Chaac Pizza	3,000	800		18
12/22/2020	1	O'Neill, NE	Vacant	31,374	850		(136)
12/29/2020	10	10 states	Wyndham	1,212	40,987		9,175
12/30/2020	1	Morrisville, PA	Vacant	110,075	12,100		(5,604)
	39			2,046 /1,375,483	$	174,172	$	2,261

Properties sold during the year ended December 31, 2019
01/16/2019	20	15 states (1)	TravelCenters of America, Inc.	541,483	$	308,200	$	159,535
10/22/2019	1	Hermantown, MN (2)	HOM Furniture, Inc.	103,631	6,250		—
10/29/2019	1	Las Vegas, NV (2)	Station Casino	138,558	57,000		—
11/14/2019	1	Colby, KS (2)	Vacant	6,900	590		—
11/25/2019	123	Various (2)	Various	2,429,333	435,104		—
12/16/2019	1	Naples, FL (2)	Rick Johnson Auto & Tire	4,480	1,112		—
12/16/2019	1	Naples, FL (2)	Rick Johnson Auto & Tire	4,500	706		—
12/30/2019	2	Dallas, TX (2)	Pine Creek Medical Center	85,839	12,250		—
	150			3,314,724	$	821,212	$	159,535

(1)See Note 5 to these consolidated financial statements for further information on this transaction.

(2)In the fourth quarter of 2019, we sold 130 net lease properties with an aggregate of approximately $2.8 million square feet in 28 states for an aggregate sales price of $513,012, excluding closing costs.

We have entered into an agreement to sell five hotels with 430 rooms in four states with an aggregate carrying value of $10,699 for an aggregate sales price of $22,263, excluding closing costs. We currently expect the sales of these hotels to be completed in the first quarter of 2021. We have also entered into agreements to sell three net lease properties with approximately 38,942 square feet with a carrying value of $1,746 for an aggregate sales price of $2,050, excluding closing costs. We currently expect the sale of these net lease properties to be completed by the end of the second quarter of 2021.The sales of these properties are subject to conditions and may be delayed, may not occur, or their terms may change.

In January 2021, the landlord for a hotel subject to a ground lease exercised its purchase option to acquire our leasehold interest for our net book value, which was $9,753 as of December 31, 2020. We expect this transaction to close in April 2021.

As of December 31, 2020, we had five hotels with 430 rooms with an aggregate carrying value of $10,699 classified as held for sale and six net lease properties with 46,799 square feet with leases requiring aggregate annual minimum rent of $121 and an aggregate carrying value of $2,844 classified as held for sale. See Notes 5 and 13 for further information on these properties.