Other Investments

6 Months Ended

Jun. 30, 2022

Equity Method Investments and Joint Ventures [Abstract]

Other Investments

Note 6. Other Investments

Equity method investment

As of June 30, 2022, we owned approximately 34% of Sonesta’s outstanding common stock. We account for our 34% non-controlling interest in Sonesta under the equity method of accounting.

As of June 30, 2022 and December 31, 2021, our investment in Sonesta had a carrying value of $109,682 and $62,687, respectively. The cost basis of our investment in Sonesta exceeded our proportionate share of Sonesta’s total stockholders’ equity book value on the date of acquisition of our initial equity interest in Sonesta, February 27, 2020, by an aggregate of $8,000. As required under GAAP, we are amortizing this difference to equity in earnings of an investee over 31 years, the weighted average remaining useful life of the real estate assets and intangible assets and liabilities owned by Sonesta as of the date of our acquisition. We recorded amortization of the basis difference of $65 in each of the three months ended June 30, 2022 and 2021 and $130 in each of the six months ended June 30, 2022 and 2021. We recognized income of $2,258 and $800 related to our investment in Sonesta for the three months ended June 30, 2022 and 2021, respectively, and income of $1,606 and losses of $1,978 for the six months ended June 30, 2022 and 2021, respectively. These amounts are included in equity in earnings (losses) of an investee in our condensed consolidated statements of comprehensive income (loss).

We recorded a liability for the fair value of our initial investment in Sonesta, as no cash consideration was exchanged related to the modification of our management agreement with, and investment in, Sonesta. This liability for our investment in Sonesta is included in accounts payable and other liabilities in our condensed consolidated balance sheet and is being amortized on a straight-line basis through January 31, 2037, as a reduction to hotel operating expenses in our condensed consolidated statements of comprehensive income (loss). We reduced hotel operating expenses by $621 for each of the three months ended June 30, 2022 and 2021, respectively, and $1,242 for each of the six months ended June 30, 2022 and 2021, respectively, for amortization of this liability. As of June 30, 2022 and December 31, 2021, the unamortized balance of this liability was $36,205 and $37,447, respectively.

In March 2021, we funded a $25,443 capital contribution to Sonesta related to its acquisition of Red Lion Hotels Corporation. In April 2022 and June 2022, we funded $25,000 and $20,470, respectively, of capital contributions to Sonesta related to Sonesta’s acquisition of a portfolio of four hotels located in New York, NY using cash on hand. We continue to maintain our 34% ownership in Sonesta after giving effect to these fundings.

Investment in equity securities.

As of both June 30, 2022 and December 31, 2021, we owned approximately 8.0% of TA’s outstanding shares of common stock, and reported this investment at fair value based on quoted market prices (Level 1 inputs). Our TA shares had a carrying value of $40,840 and $61,159 as of June 30, 2022 and December 31, 2021, respectively. Our historical cost basis for these shares was $24,418 as of both June 30, 2022 and December 31, 2021. We recorded an unrealized loss of $10,059 and unrealized gain of $2,500 for the three months ended June 30, 2022 and 2021, respectively, and unrealized loss of $20,319 and $3,981, for the six months ended June 30, 2022 and 2021, respectively, to adjust the carrying value of our investment in shares of TA common stock to its fair value. See Notes 4, 5 and 10 for further information regarding our relationships, agreements and transactions with TA and Note 13 for further information regarding our investment in TA.