v3.26.1
Leases
 12 Months Ended
Dec. 31, 2025
Leases [Abstract]  
Leases Leases
The majority of our leases, as lessee, are operating ground leases. We also have operating equipment leases, such as copier and vehicle leases, at our hotel properties. Some leases include one or more options to renew, with renewal terms that can extend the lease term from one year to 99 years. The exercise of lease renewal options is at our sole discretion. Some leases have variable payments, however, if variable payments are contingent, they are not included in the ROU assets and liabilities. Our lease of a single hotel property in Marietta, Georgia, is considered a finance lease.
The discount rate used to calculate the lease liability and ROU asset related to our ground leases is based on our incremental borrowing rate (“IBR”), as the rate implicit in each lease is not readily determinable. The IBR is determined at commencement of the lease, or upon modification of the lease, as the interest rate a lessee would have to pay to borrow on a fully collateralized basis over a similar term and at an amount equal to the lease payments in a similar economic environment.
As of December 31, 2025 and 2024, our leased assets and liabilities consisted of the following (in thousands):
Lease ClassificationDecember 31, 2025December 31, 2024
Assets
Operating lease right-of-use assetsOperating lease right-of-use assets$43,582 $43,780 
Finance lease asset
Investments in hotel properties, net
15,627 16,167 
Total leased assets$59,209 $59,947 
Liabilities
Operating lease liabilitiesOperating lease liabilities$44,045 $44,369 
Finance lease liability
Finance lease liability
17,536 17,992 
Total leased liabilities$61,581 $62,361 
We incurred the following lease costs related to our leases (in thousands):
Year Ended December 31,
Lease costClassification202520242023
Operating lease cost
Rent expense
Hotel operating expenses - other (1)
$3,260 $4,084 $4,351 
Finance lease cost
Amortization of lease assetsDepreciation and amortization$540 $540 $537 
_______________________________________
(1)    For the years ended December 31, 2025, 2024, and 2023, operating lease cost includes approximately $1.5 million, $1.0 million and $1.1 million, respectively, of variable lease cost associated primarily with the ground leases and $(122,000), $(122,000) and $(15,000), respectively of net amortization costs related to the intangible assets and liabilities that were reclassified to “operating lease right-of-use assets” upon adoption of ASC 842. Short-term lease costs in aggregate are immaterial.
Other information related to leases is as follows:
Year Ended December 31,
Supplemental Cash Flows Information202520242023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases (in thousands)$2,706 $2,707 $2,647 
Weighted Average Remaining Lease Term
Operating leases (1)
66 years66 years67 years
Finance lease (2)
29 years30 years31 years
Weighted Average Discount Rate
Operating leases (1)
5.27 %5.27 %5.26 %
Finance lease10.68 %10.68 %10.68 %
_______________________________________
(1)     Calculated using the lease term, excluding extension options, and our calculated discount rates of the ground leases and owner managed leases.
(2)     Represents our finance lease with the city of Marietta, Georgia, which terminates December 31, 2054.
Future minimum lease payments due under non-cancellable leases as of December 31, 2025 were as follows (in thousands):
Operating LeasesFinance Lease
2026$3,455 $2,284 
20273,417 1,904 
20283,403 1,904 
20293,282 1,904 
20303,208 1,904 
Thereafter189,644 48,110 
Total future minimum lease payments (1)
206,409 58,010 
Less: interest162,364 40,474 
Present value of lease liabilities$44,045 $17,536 
________
(1)     Based on payment amounts as of December 31, 2025.
Other Finance Liability
On November 10, 2021, 815 Commerce LLC, a subsidiary of 815 Commerce MM, entered into a purchase and sale agreement. Pursuant to the purchase and sale agreement, 815 Commerce LLC sold its land and building in Fort Worth, Texas (the “Property”) for $30.4 million. Concurrent with the sale of the Property, 815 Commerce LLC entered into a 99-year lease agreement (the “Lease Agreement”), whereby 815 Commerce LLC will lease back the Property at an annual rental rate of approximately $1.5 million, subject to annual rent increases of 2.0%. Under the Lease Agreement, 815 Commerce LLC has a purchase option between 90-180 days prior to the commencement of the 36th lease year.
In accordance with ASC 842, Leases, this transaction was recorded as a failed sale and leaseback as there are not alternative assets, substantially the same as the transferred asset, readily available in the marketplace for the repurchase option to qualify as a sale leaseback. Upon consolidation of 815 Commerce LLC in May 2023, the Company utilized a discount rate of 8.2% to determine the fair value of the finance liability. The finance liability of $27.2 million is included in “other liabilities” on the Company’s consolidated balance sheet as of December 31, 2025.
Leases Leases
The majority of our leases, as lessee, are operating ground leases. We also have operating equipment leases, such as copier and vehicle leases, at our hotel properties. Some leases include one or more options to renew, with renewal terms that can extend the lease term from one year to 99 years. The exercise of lease renewal options is at our sole discretion. Some leases have variable payments, however, if variable payments are contingent, they are not included in the ROU assets and liabilities. Our lease of a single hotel property in Marietta, Georgia, is considered a finance lease.
The discount rate used to calculate the lease liability and ROU asset related to our ground leases is based on our incremental borrowing rate (“IBR”), as the rate implicit in each lease is not readily determinable. The IBR is determined at commencement of the lease, or upon modification of the lease, as the interest rate a lessee would have to pay to borrow on a fully collateralized basis over a similar term and at an amount equal to the lease payments in a similar economic environment.
As of December 31, 2025 and 2024, our leased assets and liabilities consisted of the following (in thousands):
Lease ClassificationDecember 31, 2025December 31, 2024
Assets
Operating lease right-of-use assetsOperating lease right-of-use assets$43,582 $43,780 
Finance lease asset
Investments in hotel properties, net
15,627 16,167 
Total leased assets$59,209 $59,947 
Liabilities
Operating lease liabilitiesOperating lease liabilities$44,045 $44,369 
Finance lease liability
Finance lease liability
17,536 17,992 
Total leased liabilities$61,581 $62,361 
We incurred the following lease costs related to our leases (in thousands):
Year Ended December 31,
Lease costClassification202520242023
Operating lease cost
Rent expense
Hotel operating expenses - other (1)
$3,260 $4,084 $4,351 
Finance lease cost
Amortization of lease assetsDepreciation and amortization$540 $540 $537 
_______________________________________
(1)    For the years ended December 31, 2025, 2024, and 2023, operating lease cost includes approximately $1.5 million, $1.0 million and $1.1 million, respectively, of variable lease cost associated primarily with the ground leases and $(122,000), $(122,000) and $(15,000), respectively of net amortization costs related to the intangible assets and liabilities that were reclassified to “operating lease right-of-use assets” upon adoption of ASC 842. Short-term lease costs in aggregate are immaterial.
Other information related to leases is as follows:
Year Ended December 31,
Supplemental Cash Flows Information202520242023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases (in thousands)$2,706 $2,707 $2,647 
Weighted Average Remaining Lease Term
Operating leases (1)
66 years66 years67 years
Finance lease (2)
29 years30 years31 years
Weighted Average Discount Rate
Operating leases (1)
5.27 %5.27 %5.26 %
Finance lease10.68 %10.68 %10.68 %
_______________________________________
(1)     Calculated using the lease term, excluding extension options, and our calculated discount rates of the ground leases and owner managed leases.
(2)     Represents our finance lease with the city of Marietta, Georgia, which terminates December 31, 2054.
Future minimum lease payments due under non-cancellable leases as of December 31, 2025 were as follows (in thousands):
Operating LeasesFinance Lease
2026$3,455 $2,284 
20273,417 1,904 
20283,403 1,904 
20293,282 1,904 
20303,208 1,904 
Thereafter189,644 48,110 
Total future minimum lease payments (1)
206,409 58,010 
Less: interest162,364 40,474 
Present value of lease liabilities$44,045 $17,536 
________
(1)     Based on payment amounts as of December 31, 2025.
Other Finance Liability
On November 10, 2021, 815 Commerce LLC, a subsidiary of 815 Commerce MM, entered into a purchase and sale agreement. Pursuant to the purchase and sale agreement, 815 Commerce LLC sold its land and building in Fort Worth, Texas (the “Property”) for $30.4 million. Concurrent with the sale of the Property, 815 Commerce LLC entered into a 99-year lease agreement (the “Lease Agreement”), whereby 815 Commerce LLC will lease back the Property at an annual rental rate of approximately $1.5 million, subject to annual rent increases of 2.0%. Under the Lease Agreement, 815 Commerce LLC has a purchase option between 90-180 days prior to the commencement of the 36th lease year.
In accordance with ASC 842, Leases, this transaction was recorded as a failed sale and leaseback as there are not alternative assets, substantially the same as the transferred asset, readily available in the marketplace for the repurchase option to qualify as a sale leaseback. Upon consolidation of 815 Commerce LLC in May 2023, the Company utilized a discount rate of 8.2% to determine the fair value of the finance liability. The finance liability of $27.2 million is included in “other liabilities” on the Company’s consolidated balance sheet as of December 31, 2025.