Portions of the registrant’s definitive proxy statement relating to its 2020 annual meeting of stockholders are incorporated by reference into Part III of this Form 10-K to the extent stated herein. The registrant intends to file such definitive proxy statement with the Securities and Exchange Commission no later than 120 days after the end of its fiscal year.

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•	Net loss of $212 million, or $3.71 per fully diluted share, including a non-cash impairment charge of $141 million for 2019 as compared to a net loss of $262 million, including a non-cash impairment charge of $154 million, for 2018.

•	Paid quarterly dividends at an annualized rate of $0.80 per share.

•	Sold 44 hotels for gross proceeds of $177 million, resulting in a gain on sales of $32 million.

•	Reduced outstanding debt by $114 million.

•	Settled a dispute with Wyndham Hotels & Resorts, Inc. (“Wyndham”) resulting in receipt of $28 million in 2019, with an additional $9 million to be paid by June 2021 (the “Wyndham Settlement”).

•	Completed the renovations of the hotels included in the 54-hotel strategic re-positioning program.

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Disciplined capital allocation.   We are a pure-play lodging REIT strategically focused on the midscale and upper midscale select-service lodging segments. The midscale and upper midscale segments are among the largest segments of the lodging industry by property count. These midscale hotels have historically generated higher margins than full-service and economy sectors. Midscale hotels have also performed better during economic downturns. We intend to focus on the top metropolitan statistical area (“MSA”) markets, as well as other markets with close proximity to multiple demand generators, such as medical facilities, corporate offices, airports, convention centers, universities, and leisure attractions, with a diverse source of potential guests, including corporate, government and leisure travelers. Using these criteria, we have identified 105 hotels which constitute our core hotels. In addition, the mid-scale and upper mid-scale select-service lodging segments are highly fragmented. We believe there are opportunities to acquire hotels from smaller owner operators, particularly owners with a higher cost of capital. Such a disciplined acquisition strategy would allow us to expand our presence in target markets and in properties meeting our core hotel criteria, which will also provide diversification over time, including through the acquisition of hotels that are affiliated with other respected hotel brands and operators.

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Portfolio transformation. We have identified non-core hotels which do not meet our growth and return objectives. These include hotels not in our identified key markets or lodging segment and that are older with higher maintenance capital needs. As of December 31, 2019, we have identified 166 hotels as non-core which we plan to dispose of generally over the next two years. We believe that the execution of this disposition strategy, along with our proactive asset management of our core hotels, will enable us to maintain a geographically diversified portfolio and increase our revenue per available room (“RevPAR”) and gross margins, while reducing the average age of the portfolio and recurring capital expenditures.

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Build and maintain a strong and flexible balance sheet. We seek to build and maintain a strong and flexible balance sheet that will provide us with liquidity to meet our operational and growth needs and support a well-covered dividend. As we execute our disposition strategy, we intend to use net proceeds to reduce our leverage over time to below 5.0x net debt (total debt less cash and cash equivalents) to Adjusted EBITDAre. (See “Part II-Item 7. Management’s Discussion and Analysis of Financial Condition - Non-GAAP Financial Measures” for definition and discussion of our non-GAAP measures.) During 2019, we used $114 million of our net hotel sales proceeds to reduce our outstanding debt. By initially reducing leverage, we believe we will have opportunities to further grow our portfolio, which could include revenue-enhancing improvements or acquisitions. We will also focus on preserving sufficient liquidity with minimal short-dated debt maturities and intend to refinance or extend our existing facilities.

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•	significant competition from other lodging businesses and hospitality providers in the markets in which our properties are located;

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•	changes in operating costs, including energy, food, compensation, benefits, insurance and unanticipated costs resulting from force majeure events;

•	increases in costs due to inflation or other factors that may not be fully offset by price or other revenue increases in our business;

•	changes in taxes and governmental regulations that influence or set wages, prices, interest rates or construction and maintenance procedures and costs;

•	the costs and administrative burdens associated with complying with applicable laws and regulations;

•	the costs or desirability of complying with local practices and customs;

•	significant increases in cost for health care coverage for employees, including employees of third-party hotel managers, and potential government regulation with respect to health coverage, such as costs associated with compliance with the requirements of the Patient Protection and Affordable Care Act;

•	shortages of labor or labor disruptions;

•	significant increases in insurance expenses, self-retained losses and loss mitigation capital expenditures;

•	the availability and cost of capital necessary to fund investments, capital expenditures and service debt obligations;

•	delays in, or cancellations of, planned or future development or renovation projects;

•	the quality of services provided by LQM or any other future third-party hotel managers;

•	the financial condition of LQM or any other future third-party hotel managers, developers and joint venture partners;

•	relationships with LQM or any other future third-party hotel managers, developers and joint venture partners, including the risk that LQM, LQ Franchising or any other third-party hotel managers or franchisors may terminate our management or franchise agreements and joint venture partners may terminate joint venture agreements;

•	changes in desirability of particular geographic locations;

•	changes in lodging preferences and travel patterns of potential guests of our properties and geographic concentration of our portfolio;

•	changes in the supply and demand for hotel services;

•	decreases in business travel that may result from improvements to the alternatives to in-person meetings, including virtual meetings hosted on-line or over private teleconferencing networks;

•	the ability of third-party internet and other travel intermediaries to attract and retain guests;

•	the availability of debt and equity capital on satisfactory terms; and

•	increased competition and changes in terms for the disposition and acquisition of hotel investments.

•	changes in general economic conditions, including the severity and duration of any downturn in the U.S. or global economy and financial markets;

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•	war, political conditions or civil unrest, violence or terrorist activities or threats and heightened travel security measures instituted in response to these events;

•	outbreaks of pandemic or contagious diseases, such as coronavirus disease (COVID-19), Zika virus, measles, Ebola, legionella bacteria, avian flu, severe acute respiratory syndrome (SARS) and H1N1 (swine flu);

•	natural or man-made disasters, such as hurricanes, fires, earthquakes, tsunamis, tornadoes, typhoons, floods, oil spills and nuclear incidents;

•	decreased corporate or government travel-related budgets and spending and cancellations, deferrals or renegotiations of group business;

•	low consumer confidence, high levels of unemployment or depressed real estate prices;

•	the financial condition and general business condition of the airline, automotive and other transportation-related industries and its impact on travel;

•	decreased airline capacities and routes;

•	travel-related accidents;

•	oil prices and travel costs;

•	statements, actions or interventions by governmental officials related to travel and corporate travel-related activities and the resulting negative public perception of such travel and activities;

•	governmental action and legislation, as well as political debate, conflicts and compromises related to such actions, to the extent that they negatively impact the financial markets and consumer confidence and spending or adversely impact the U.S. economy or international travel;

•	cyber-attacks;

•	climate change and resource scarcity, such as water and energy scarcity;

•	domestic and international political and geo-political conditions including tariffs, sanctions and boycotts; and

•	cyclical over-building in the hotel and lodging industries.

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•	the inability to obtain financing upon favorable terms or at all;

•	construction delays or cost overruns (including labor and materials) that may increase project costs;

•	lack of availability of rooms for revenue-generating activities during construction, modernization or renovation projects;

•	changes in economic conditions that may result in weakened or lack of demand for improvements that we make or negative project returns for improvements that we make;

•	obtaining zoning, occupancy, and other required permits or authorizations;

•	governmental restrictions on the size or kind of development;

•	volatility in the debt and capital markets that may limit our ability to raise capital for projects or improvements;

•	force majeure events, including earthquakes, tornadoes, hurricanes, floods or tsunamis, or acts of terrorism; and

•	design defects that could increase costs.

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•	governmental regulations relating to real estate ownership or operations, including tax, environmental, zoning and eminent domain laws;

•	loss in value or functionality, or unanticipated liabilities, due to environmental conditions, local market or neighborhood conditions, governmental takings, uninsured casualties or restrictive changes in zoning and similar land use laws and regulations or in health, safety and environmental laws, rules and regulations and other governmental and regulatory action;

•	changes in tax laws and property taxes, even if the hotel level cash flows remain the same or decrease;

•	increased potential civil liability for accidents or other occurrences in hotels;

•	the ongoing need for owner funded capital improvements and expenditures to maintain or upgrade hotels;

•	periodic total or partial closures due to renovations and hotel improvements;

•	risks associated with mortgage debt, including the possibility of default, fluctuating interest rate levels and uncertainties in the availability of replacement financing;

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•	risks associated with the possibility that cost increases will outpace revenue increases and that in the event of an economic slowdown, the high proportion of fixed costs will make it difficult to reduce costs to the extent required to offset declining revenues;

•	changes in customer demand due to local or national economic conditions, travel needs and alternatives, and social dislocations, including pandemics;

•	acts of God, including hurricanes, fires, earthquakes, floods, winter storms and other natural disasters, or outbreaks of pandemic or contagious diseases that may result in uninsured losses, including property value losses caused by nearby events even if our hotels are completely undamaged;

•	changes in terms of property insurance, including deductions, loss exclusions, regulatory and lender requirements and increased premium costs;

•	fluctuations in real estate values or potential impairments in the value of our assets;

•	maintaining tenants for leased properties; and

•	contingent liabilities that exist after we have exited a property.

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•	we may abandon such activities and may be unable to recover expenses already incurred in connection with exploring such opportunities;

•	management attention may be diverted by our disposition, acquisition, redevelopment, repositioning or re-branding activities, which in some cases may turn out to be less compatible with our strategy than originally anticipated;

•	acquired, redeveloped, renovated or re-branded hotels may not initially be accretive to our results, and we and the third-party hotel managers may not successfully manage newly acquired, renovated, redeveloped, repositioned or re-branded hotels to meet our expectations;

•	we may be unable to quickly, effectively and efficiently integrate new acquisitions, particularly acquisitions of portfolios of hotels, into our existing portfolio;

•	our redevelopment, repositioning, renovation or re-branding activities may not be completed on schedule, which could result in increased debt service and other costs and lower revenues, and defects in design or construction may result in delays and additional costs to remedy the defect or require a portion of a property to be closed during the period required to rectify the defect;

•	we may not be able to meet the loan covenants in any financing obtained to fund the new development, creating default risks;

•	we may issue shares of stock or other equity interests in connection with such acquisitions that could dilute the interests of our existing stockholders;

•	we may assume various contingent liabilities in connection with such transactions;

•	we may divest hotels which will impact our revenue and EBITDA and may yield lower than expected returns or otherwise fail to achieve the benefits we expect;

•	we may incur losses on sales or impairment on anticipated sales of properties; and

•	the Internal Revenue Service (“IRS”) may take the position that we are acting in the capacity of a “dealer” in hotel property which would subject us to a 100% tax on any resultant gain on the disposition of any such hotel properties.

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•	price volatility, dislocations and liquidity disruptions in the U.S. and global equity and credit markets;

•	changes in market perception of our growth potential, including pandemics or downgrades by rating agencies;

•	decreases in our current and estimated future earnings;

•	decreases or fluctuations in the market price of our common stock;

•	increases in interest rates; and

•	the terms of our existing indebtedness.

•	a need to seek alternative sources of capital with less attractive terms, such as more restrictive covenants and shorter maturity;

•	adverse effects on our financial condition and liquidity, and our ability to meet our anticipated requirements for working capital, debt service and capital expenditures;

•	higher costs of capital;

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•	an inability to enter into derivative contracts to hedge risks associated with changes in interest rates and foreign currency exchange rates; or

•	an inability to execute on acquisitions.

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•	requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund our operations, capital expenditures and distributions to stockholders and to pursue future business opportunities;

•	requiring compliance with leverage and interest coverage financial covenants which may affect our availability under our line of credit, access to cash on hand and cash proceeds from the sale of hotels;

•	increasing our vulnerability to adverse economic, industry or competitive developments;

•	exposing us to increased interest expense, as our degree of leverage may cause the interest rates of any future indebtedness (whether fixed or floating rate interest) to be higher than they would be otherwise;

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•	exposing us to the risk of increased interest rates because certain of our indebtedness is at variable rates of interest;

•	making it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants, could result in an event of default that accelerates our obligation to repay indebtedness;

•	restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;

•	limiting our ability to obtain additional financing for working capital, capital expenditures, hotel development, satisfaction of debt service requirements, acquisitions and general corporate or other purposes; and

•	limiting our flexibility in planning for, or reacting to, changes in our business or market conditions and placing us at a competitive disadvantage compared to our competitors who may be better positioned to take advantage of opportunities that our leverage prevents us from exploiting.

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•	prior to the Spin-Off, CorePoint’s business was operated by LQH as part of its broader corporate organization in combination with the management and franchise business held by La Quinta following the spin-off. We currently rely on La Quinta to provide certain corporate and administrative services such as information technology, financial and human resource services.

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•	prior to the Spin-Off, CorePoint’s historical financial statements, as represented by the financial statements of LQH, included the assets, liabilities, results of operations and cash flows attributable to LQH’s management and franchise business, which are currently held by La Quinta; and

•	Prior to the Spin-Off, CorePoint’s historical financial information does not reflect its obligations under the various transitional and other agreements it entered into with LQH in connection with the Spin-Off and the Merger.

•	we would be taxed as a C corporation, which under current laws, among other things, means being unable to deduct dividends paid to stockholders in computing taxable income and being subject to U.S. federal income tax on our taxable income at normal corporate income tax rates;

•	we could be subject to increased state and local taxes;

•	any resulting tax liability could be substantial and could have a material adverse effect on our book value and financial condition and reduce our cash available for distribution to stockholders; and

•	we generally would not be eligible to requalify as a REIT for the subsequent four full taxable years.

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acquire, hold and dispose of shares of our stock or other equity interests, including units of partnership interest in CorePoint Operating Partnership L.P. (“CorePoint OP”) a wholly owned subsidiary of CorePoint Parent, for his, her or its own account or for the account of others, and exercise all of the rights of a stockholder of us or a limited partner of CorePoint OP, to the same extent and in the same manner as if he, she or it were not our director or stockholder; and

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in his, her or its personal capacity or in his, her or its capacity, as applicable, as a director, officer, trustee, stockholder, partner, member, equity owner, manager, advisor or employee of any other person, have business interests and engage, directly or indirectly, in business activities that are similar to ours or compete with us, that involve a business opportunity that we could seize and develop or that include the acquisition, syndication, holding, management, development, operation or disposition of interests in mortgages, real property or persons engaged in the real estate business.

•	actual receipt of an improper benefit or profit in money, property or services; or

•	active and deliberate dishonesty by the director or officer that was established by a final judgment and is material to the cause of action adjudicated.

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•	the restrictions on ownership and transfer of our stock in our charter generally prevent any person from acquiring more than 9.8% (in value or by number of shares, whichever is more restrictive) of our outstanding common stock or more than 9.8% in value of our outstanding stock without the approval of our board of directors;

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although we do not have a stockholder rights plan, and would either submit any such plan to stockholders for ratification or cause such plan to expire within a year, these provisions would allow us to authorize the issuance, or increase the number of authorized shares, of common or preferred stock in connection with a stockholder rights plan or otherwise, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock;

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these provisions provide that our board of directors is expressly authorized to make, alter or repeal our bylaws (except for provisions related to the “business combination” and “control share” provisions of the MGCL, which, in each case, require the approval of the affirmative vote of a majority of the votes cast on the matter by stockholders entitled to vote generally in the election of directors) and that our stockholders may only amend our bylaws with the approval of 80% or more of all of the outstanding shares of our stock entitled to vote; and

•	these provisions establish advance notice requirements for nominations for elections to our board or for proposing matters that can be acted upon by stockholders at stockholder meetings.

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“business combination” provisions that, subject to certain exceptions and limitations, prohibit certain business combinations between a Maryland corporation and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our outstanding voting stock or an affiliate or associate of ours who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power of our then outstanding shares of stock) or an affiliate of any interested stockholder for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter imposes two super-majority stockholder voting requirements on these combinations, unless, among other conditions, our common stockholders receive a minimum price, as defined in the MGCL, for their shares and the consideration is received in cash or in the same form as previously paid by the interested stockholder for its shares of stock; and

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“control share” provisions that provide that, subject to certain exceptions, holders of “control shares” (defined as voting shares that, when aggregated with all other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) have no voting rights with respect to those shares except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding shares owned by the acquirer, by our officers or by our employees who are also directors of our company.

•	a shift in our investor base;

•	our quarterly or annual earnings, or those of comparable companies;

•	actual or anticipated fluctuations in our operating results;

•	our ability to obtain financing as needed;

•	changes in laws and regulations affecting our business;

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•	changes in accounting standards, policies, guidance, interpretations or principles;

•	announcements by us or our competitors of significant investments, acquisitions or dispositions;

•	the failure of securities analysts to cover our common stock;

•	changes in earnings estimates by securities analysts or our ability to meet those estimates;

•	the operating performance and stock price of comparable companies;

•	overall market fluctuations;

•	a decline in the real estate markets; and

•	general economic conditions and other external factors.

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(1)	Reflects shares purchased to satisfy tax withholding obligations incurred upon the vesting of restricted stock under our 2018 Omnibus Incentive Plan. There were no shares purchased under our share repurchase program during the quarter ended December 31, 2019.

(2)	The reported price includes per share commissions paid.

(3)

On March 21, 2019, our board of directors authorized a $50 million share repurchase program. We may purchase shares of common stock in the open market, in privately negotiated transactions or in such other manner as determined by us, including through repurchase plans complying with the rules and regulations of the SEC. The share repurchase program does not obligate us to repurchase any dollar amount or number of shares of common stock and the program may be suspended or discontinued at any time.

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•	transitioning to Wyndham’s distribution network, including Wyndham.com, contact centers and loyalty platform;

•	technology and system integrations for property management, reservation systems and revenue management; and

•	gross margin initiatives related to operating expenses and other service delivery management.

•	LQM agreed to develop, install and implement at its expense a fully functional enhanced dynamic best available rate-setting tool providing functionality at least reasonably equivalent to the legacy rate-setting tool used for the Company’s hotels (the “DBAR Replacement Tool”); the fully functional implementation is to be accomplished by December 31, 2020, subject to certain extensions;

•	LQM agreed to deploy at its expense an enhanced direct billing system for corporate group clients at least reasonably equivalent to the legacy direct billing system used for the Company’s hotels; the fully functional implementation of such direct billing system is to be made by June 30, 2020, subject to certain extensions; and

•	LQM agreed to deploy at its expense certain enhanced legacy booking tools used for the Company’s hotels.

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(1)

Hotel Adjusted EBITDAre and FFO are non-GAAP financial measures. See “Non-GAAP Financial Measures” below for definitions and limitations of these terms. The related “Sales Metrics,” which are common in the lodging industry in evaluating dispositions, as further defined below, are referred to as the revenue multiple, EBITDAre multiple and FFO yield. Amounts presented are the aggregated amounts and for Sales Metrics are based on a weighted average for each category using unrounded dollar amounts.

(2)	Revenues represent the revenues for the trailing twelve-month period from the calendar quarter end date preceding the particular hotel’s disposition. The Sales Metric referred to as the revenue multiple is calculated as the gross sales price divided by such revenues. Closing costs and other costs due from the sale have averaged approximately 10% of the gross sales price.

(3)	RevPAR represents the weighted average RevPAR for the trailing twelve-month period. Our weighted average Comparable Hotel RevPAR for the year ended December 31, 2019 is $58.75.

(4)	Hotel Adjusted EBITDAre represents Hotel Adjusted EBITDAre for the trailing twelve-month period from the calendar quarter end date preceding the particular hotel’s disposition. The Sales Metric referred to as the Hotel Adjusted EBITDAre multiple is calculated as gross sales price divided by such calculated Hotel Adjusted EBITDAre.

(5)

FFO represents the FFO for the trailing twelve-month period from the calendar quarter end date preceding the particular hotel’s disposition. The FFO amount includes the related annualized interest expense based on the actual debt principal paid down for each hotel sale using the December 31, 2019 interest rate of 4.51%. The FFO amount includes only directly associated hotel expenses and does not include any allocated general and administrative or other corporate expenses. The Sales Metric referred to as FFO yield is calculated as such calculated FFO divided by the gross sales price less the actual debt principal paid down.

(6)	Capital expenditures represent capital expenditures for the trailing twelve-month period from the calendar quarter end date preceding the particular hotel’s disposition.

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•	do not reflect changes in, or cash requirements for, our working capital needs;

•	do not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on its indebtedness;

•	do not reflect our tax expense or the cash requirements to pay its taxes;

•	do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;

•	EBITDAre, Adjusted EBITDAre and Hotel Adjusted EBITDAre do not include gains or losses on the disposition of properties which may be material to our operating performance and cash flow;

•	Adjusted EBITDAre and Hotel Adjusted EBITDAre do not reflect the impact on earnings or changes resulting from matters that we consider not to be indicative of our future operations, including but not limited to impairment, acquisition and disposition activities and restructuring expenses;

•	although depreciation, amortization and impairment are non-cash charges, the assets being depreciated, amortized or impaired will often have to be replaced, upgraded or repositioned in the future, and EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel Adjusted EBITDAre do not reflect any cash requirements for such replacements; and

•	other companies in our industry may calculate EBITDA, EBITDAre, Adjusted EBITDAre, and Hotel Adjusted EBITDAre differently, limiting their usefulness as comparative measures.

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During the year ended December 31, 2019 we recorded $20 million in other income as part of the Wyndham Settlement to offset declines incurred due to the disruptions related to changes in revenue management and other booking tools and processes by our manager in 2019. We have collected $11 million of this amount as of December 31, 2019. The Wyndham Settlement amount shown above is net of associated legal costs.

•	We also collected $17 million as part of the Wyndham Settlement related to final settlement of income tax matters, which was adjusted to retained earnings and is not reflected above.

•	Other, net for the years ended December 31, 2019 and 2018 includes adjustments to exclude business interruption insurance proceeds collected of $11 million and $12 million, respectively. These proceeds are offset by $7 million and $4 million, respectively, for other expenses that are not representative of our current or future operating performance.

•	Corporate general and administrative expenses includes the additional corporate-level expenses not already adjusted in calculating Adjusted EBITDAre.

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Significant drivers for the decline in Hotel Adjusted EBITDAre from 2018 to 2019 are increases in management and royalty fees and the effects of hotel sales. Effective with the Spin-Off closing in May 2018, we began incurring management and royalty fees. Accordingly, our results in 2019 include a full year of management and royalty fees, while 2018 results only include expenses for a partial year. Our hotel sales also resulted in a decrease in Hotel Adjusted EBITDAre.

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•	During the year ended December 31, 2019, we recorded $20 million in other income as part of the Wyndham Settlement to offset declines incurred due to the disruptions related to changes in revenue management and other

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•	We also collected $17 million as part of the Wyndham Settlement related to final settlement of income tax matters, which was adjusted to retained earnings and is not reflected above.

•	Other, net for the years ended December 31, 2019 and 2018 includes adjustments to exclude business interruption insurance proceeds collected of $11 million and $12 million, respectively. These proceeds are offset by $7 million and $4 million, respectively, for other expenses that are not representative of our current or future operating performance.

•	The income tax effect of adjustments is primarily related to the Wyndham Settlement deduction.

•	Weighted average number of shares outstanding, diluted presented above may differ from weighted average number of shares outstanding, diluted presented for GAAP purposes when there is a net loss and all potentially dilutive securities are anti-dilutive.

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Significant drivers for the decline in Adjusted FFO attributable to stockholders from 2018 to 2019 are increases in management and royalty fees and the effects of hotel sales. Effective with the Spin-Off closing in May 2018, we began incurring management and royalty fees. Accordingly, our results in 2019 include a full year of management and royalty fees, while 2018 results only include expenses for a partial year. Our hotel sales also resulted in a decrease in Adjusted FFO attributable to stockholders.

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(1)

Non-comparable hotels includes sold hotels and hotels that were not operational due to substantial property damage or other business interruption due to hurricane, fire or other natural disasters. Of the 271 hotels in our portfolio as of December 31, 2019, 257 have been classified as Comparable Hotels. We sold 42 operating hotels and two non-operating hotels during in 2019. As of December 31, 2019, 14 of our hotels were classified as non-operational.

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(1)	Debt obligations exclude the deduction of debt issuance costs of $6 million and are included in the table based on contractual maturities, before extension options. We intend to extend the maturity date or refinance the obligations prior to the maturity date.

(2)

Includes interest on debt outstanding as of December 31, 2019, all of which is floating rate debt. For presentation purposes, amounts included in the table are interest rates effective at December 31, 2019, which is 4.51% for the CMBS Facility, our only outstanding debt. Interest payments are presented in the table consistent with note (1) above, which includes interest payments through the contractual maturity date, with no extension of the maturity assumed.

(3)	Purchase commitments include outstanding commitments under contracts for capital expenditures at our hotels and for information technology enhancements.

(4)

These amounts do not include capital expenditures which our franchisor may require to meet brand standards. The initial period during which the franchisor can notify us that we must make these capital expenditures is through 2028. As of December 31, 2019, no such notices have been received. The franchisor would be eligible to provide notices for approximately $70 million in both 2020 and 2021 and approximately an additional $70 million thereafter to 2028. We generally have two to eleven years from the notice to meet the capital expenditure requirements, which may be offset to various degrees by prior year capital expenditures. Accordingly, actual amounts and the timing of such amounts may differ from those described. We expect to generally meet these requirements from our ordinary capital expenditure programs, funded from cash flow from operating activities or the other sources described herein.

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Organization and Business

CorePoint Lodging Inc., a Maryland corporation (“we,” “us,” “our,” “CorePoint” or the “Company”) is a lodging real estate company formed in May 2017, primarily serving the upper midscale and midscale segments, with a portfolio of select-service hotels located in the United States (“U.S.”).

The following table sets forth the number of owned and joint venture hotels and approximate number of rooms as of December 31, 2019, 2018 and 2017, respectively:

	2019				2018				2017
	Hotels		Rooms		Hotels		Rooms		Hotels		Rooms
Owned (1)	270		34,800		314		40,200		316		40,400
Joint Venture	1		200		1		200		1		200
Totals	271		35,000		315		40,400		317		40,600

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(1)	As of December 31, 2019, we had no hotels designated as assets held for sale. As of December 31, 2018 and 2017, owned hotels includes one and three hotels, respectively, designated as assets held for sale.

 

For U.S. federal income tax purposes, we elected to be taxed as a real estate investment trust (“REIT”), effective May 31, 2018, with the filing of our U.S. federal income tax return for the year ended December 31, 2018. We believe that we are organized and operate in a REIT-qualified manner and we intend to continue to operate as such. As a REIT, we are generally not subject to federal corporate income tax on the portion of our net income that is currently distributed to our stockholders. To maintain our REIT status, we are required to meet several requirements as provided by the Internal Revenue Code of 1986, as amended (the “Code”). These include that the Company cannot operate or manage our hotels. Therefore, we lease our hotel properties to CorePoint TRS L.L.C., our wholly owned taxable REIT subsidiary (“CorePoint TRS”), which engages third-party eligible independent contractors to manage the hotels. CorePoint TRS is subject to federal, state and local income taxes. To maintain REIT status, we must distribute annually at least 90% of our “REIT taxable income,” as defined by the Code, to our stockholders. We intend to continue to meet our distribution and other requirements as required by the Code.

 

Spin-Off from La Quinta Holdings Inc.

On May 30, 2018, La Quinta Holdings Inc. (“LQH Parent,” and together with its consolidated subsidiaries, “LQH”) completed the separation of its hotel ownership business from its hotel franchise and hotel management business. The separation (“Spin-Off”) was made as part of a plan to spin off LQH’s hotel ownership business into a stand-alone, publicly traded company, CorePoint, prior to the merger (“Merger”) of LQH Parent with a wholly owned subsidiary of Wyndham Worldwide Corporation, a Delaware corporation (“Wyndham Worldwide” and including its subsidiaries and affiliates, “Wyndham”). As part of the Spin-Off and Merger, Wyndham became franchisor and manager of our hotel operations. In accordance with accounting principles generally accepted in the United States of America (“GAAP”), the results of operations related to the hotel franchise and hotel management business are reported as discontinued operations for all periods presented.

Notwithstanding the legal form of the Spin-Off, for accounting and financial reporting purposes, LQH Parent is presented as being spun-off from CorePoint (a “Reverse Spin”). This presentation is in accordance with GAAP and is primarily a result of the relative significance of CorePoint’s business to LQH’s business, as measured in terms of revenues, profits, and assets. Therefore, CorePoint is considered the divesting entity and treated as the “accounting successor,” and LQH Parent is the “accounting spinnee” and “accounting predecessor” for consolidated financial reporting purposes.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with GAAP. These consolidated financial statements present the consolidated financial position as of December 31, 2019 and 2018 and results of operations of CorePoint for the three years ended December 31, 2019, giving effect to the Spin-Off, with the historical financial results of LQH Parent reflected as discontinued operations. These consolidated financial statements represent the financial position and results of operations of entities that have historically been under common control of the accounting predecessor, LQH Parent.

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The accompanying consolidated financial statements include our accounts, as well as our wholly owned subsidiaries and any consolidated variable interest entities (“VIEs”). We recognize noncontrolling interests for the proportionate share of operations for ownership interests not held by our stockholders. All intercompany transactions have been eliminated.

Use of Estimates

    

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. These estimates include such items as: income taxes; impairment of long-lived assets; casualty losses; fair value evaluations; depreciation and amortization; and equity-based compensation measurements.  Actual results could differ from those estimates.

 Investment in Real Estate

Property and equipment and other investments in real estate are stated at cost less accumulated depreciation computed using a straight-line method. Buildings and improvements have an estimated useful life of 5 to 40 years and furniture, fixtures and other equipment have an estimated useful life of 2 to 10 years. Leasehold improvements are depreciated over the shorter of the underlying lease term or the useful lives of the related assets, generally ranging from one to 25 years.

 

We capitalize expenditures that increase the overall value of an asset or extend an asset’s life, typically associated with hotel refurbishment, renovation, and major repairs. Such costs primarily include third-party contract labor, materials, professional design and other direct costs, and during the redevelopment and renovation period interest, real estate taxes and insurance costs. The interest, real estate taxes and insurance capitalization period begins when the activities related to the development have begun and ceases when the project is substantially complete and the assets are held available for use or occupancy. Once such a project is substantially complete and the associated assets are ready for intended use, interest, real estate taxes and insurance costs are no longer capitalized. Normal maintenance and repair costs are expensed as incurred.

Impairment of Real Estate Related Assets

For our investments in real estate, we monitor events and changes in circumstances indicating that the carrying amounts of the real estate assets may not be recoverable. When such events or changes are present, we make an assessment of the property’s recoverability by comparing the carrying amount of the asset to our estimate of the aggregate undiscounted future operating cash flows expected to be generated over the holding period of the asset including its eventual disposition.  If the carrying amount exceeds the aggregate undiscounted future operating cash flows, we recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property.  Any such impairment is treated for accounting purposes similar to an asset acquisition at the estimated fair value, which includes establishing a new cost basis and the elimination of the asset’s accumulated depreciation and amortization.

In evaluating our investments for impairment, we undergo continuous evaluations of property level performance and real estate trends, and management makes several estimates and assumptions, including, but not limited to, the projected date of disposition, estimated sales price and future cash flows of each property during our estimated holding period. If our analysis or assumptions regarding the projected cash flows expected to result from the use and eventual disposition of our properties change, we incur additional costs and expenses during the holding period, or our expected hold periods decrease, we may incur future impairment losses.

Sales of Real Estate

We classify hotels as held for sale when the criteria are met, in accordance with GAAP.  At that time, we present the assets and obligations associated with the real estate held for sale separately in our consolidated balance sheet, and we cease recording depreciation and amortization expense related to that asset.  Real estate held for sale is reported at the lower of its carrying amount or its estimated fair value less estimated costs to sell.

Upon the disposition of a property, we recognize a gain or loss at a point in time when we determine control of the underlying asset has been transferred to the buyer. Our performance obligation is generally satisfied at the closing of the transaction. Any continuing involvement is analyzed as a separate performance obligation in the contract, and a portion of the sales price is allocated to each performance obligation. When the performance obligation related to the continuing involvement is satisfied, the sales price allocated to it is recognized. There is significant judgment applied to estimate the amount of any variable consideration identified within the sales price and assess its probability of occurrence based on current market information, historical transactions, and forecasted information that is reasonably available.

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For sales of real estate (or assets classified as held for sale), we evaluate whether the disposition is a strategic shift that will have a major effect on our operations and financial results. When a disposition represents a strategic shift that will have a major effect on our operations and financial results, it will be classified as discontinued operations in our consolidated financial statements for all periods presented.  

    

Cash and Cash Equivalents

 

We classify all cash on hand, demand deposits with financial institutions, and short-term highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents are stated at cost, which approximates fair market value.

We classify cash and cash equivalents as restricted cash when contractual agreements or arrangements impose restrictions on our ability to freely access and utilize the cash and cash equivalent amounts.

 

Accounts Receivable

 

Accounts receivable primarily consists of receivables due from insurance settlements, our hotel manager, hotel guests, and credit card companies and are carried at estimated collectable amounts. We periodically evaluate our receivables for collectability based on historical experience, the length of time receivables are past due and the financial condition of the debtor. Accounts receivable are written off when collection is not probable. We record uncollectible operating lease receipts as a direct offset to room revenues. Our insurance settlement receivables are recorded based upon the terms of our insurance policies and our estimates of insurance losses.  We recognize business interruption claims as revenue when collected and accordingly our accounts receivable do not include any amounts related to estimated business interruption claim recoveries.  As of December 31, 2019 and 2018, we had $12 million and $13 million of insurance settlement receivables, respectively. As of December 31, 2019, we had a $9 million receivable from our hotel manager related to the Wyndham Settlement (as defined in Note 8 “Commitments and Contingencies – Hotel Management and Franchise Agreements”). Remaining payments on the Wyndham Settlement are required to be paid no later than June 2021.

Debt and Deferred Debt Issuance Costs

 

Deferred debt issuance costs include costs incurred in connection with issuance of debt, including costs associated with the entry into our loan agreements and revolving credit facility, and are presented as a direct reduction from the carrying amount of debt. These debt issuance costs are deferred and amortized to expense on a straight-line basis over the term of the debt, which approximates the effective interest amortization method. This amortization expense is included as a component of interest expense. When debt is paid prior to its scheduled maturity date and the underlying terms are materially modified, the remaining carrying value of deferred debt issuance costs, along with certain other payments to lenders, is included in loss on extinguishment of debt.

Lessee Accounting

We adopted Accounting Standards Codification (“ASC”) Topic 842, Leases, effective January 1, 2019. We determine if an arrangement is a lease at inception. Our operating lease agreements are primarily for ground leases and our corporate office lease, where the asset is classified within “right of use assets” and the operating lease liability is classified within “other liabilities” in our consolidated balance sheets. We elected the practical expedient to combine our lease and related non-lease components by class of asset and made the election for our ground leases and our corporate office lease.

Right of use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right of use assets and operating lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Our variable lease payments consist of payments based on a rate or index established subsequent to the lease commencement date and non-lease services related to the ground lease, primarily real estate taxes. Variable lease payments are excluded from the right of use assets and operating lease liabilities and are recognized in the period in which the obligation for those payments is incurred. As our leases do not provide an implicit rate, we use our incremental borrowing rate. Our incremental borrowing rate is based on information available at the commencement date using our actual borrowing rates commensurate with the lease terms and a fully levered borrowing. Extension options on our leases are included in our minimum lease terms when they are reasonably certain to be exercised. In our evaluation of the lease term, we consider other arrangements, primarily our debt and franchise agreements, which may have economic consequences related to failure to renew certain ground leases. For accounting purposes, such lease terms are not adjusted unless the contractual terms are modified. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term.

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Fair Value Measurement

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. In evaluating the fair value of both financial and non-financial assets and liabilities, GAAP establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels, which are as follows:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Valuations in this category are inherently less reliable than actively quoted market prices due to the degree of subjectivity involved in determining appropriate methodologies and the applicable underlying observable market assumptions.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. These inputs cannot be validated by readily determinable market data and generally involve considerable judgment by management.

We use the highest level of observable market data if such data is available without undue cost and effort. 

Derivative Instruments

We use derivative instruments as part of our overall strategy to manage our exposure to market risks associated with fluctuations in interest rates. We regularly monitor the financial stability and credit standing of the counterparties to our derivative instruments. We do not enter into derivative financial instruments for trading or speculative purposes.

We record all derivatives at fair value. On the date the derivative contract is entered into, we designate the derivative as one of the following: a hedge of a forecasted transaction or the variability of cash flows to be paid (“Cash Flow Hedge”), a hedge of the fair value of a recognized asset or liability (“Fair Value Hedge”), or an undesignated hedge instrument. Changes in the fair value of a derivative that is qualified, designated and highly effective as a Cash Flow Hedge are recorded in the consolidated statements of comprehensive income (loss) until they are reclassified into earnings when the hedged transaction affects earnings. Changes in the fair value of a derivative that is qualified, designated and highly effective as a Fair Value Hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk, are recorded in current period earnings. Cash flows from designated derivative financial instruments are classified within the same category as the item being hedged in the consolidated statements of cash flows. Changes in fair value of undesignated hedge instruments are recorded in current period earnings. As of December 31, 2019 and 2018, our only derivative, an interest rate cap, is an undesignated hedge instrument.

Revenue Recognition

We adopted ASC Topic 606, Revenue from Contracts with Customers, effective January 1, 2018, using the modified retrospective transition method. We also adopted ASC Topic 842, Leases, effective January 1, 2019, using the modified retrospective transition method. There was no material impact to revenues or continuing operations in our financial statements due to the change in either of these accounting policies. The information in this section describes our current revenue recognition policies.

Our revenues primarily consist of operating lease revenues from room rentals, which are accounted for under GAAP in accordance with lease accounting standards. Room revenue is recognized as earned on a daily basis, net of customer incentive discounts, cash rebates, and refunds. Other lease revenues primarily include lease revenue from restaurants, billboards and cell towers, all of which are operating leases. Such leases are recognized on a straight-line basis over the term of the lease when collections are considered probable and as earned and collected when collections are not considered probable. Uncollectible lease amounts are recorded as a direct offset to revenues. As a lessor, our operating leases do not contain purchase options or require significant assumptions or judgments. Some of our operating leases contain extension options. For those with extension options we assess the likelihood such options will be exercised in determining the lease term.

Customer revenues include other hotel guest revenues generated by the incidental support of hotel operations and are recognized under the revenue accounting standard as the service obligation is completed.

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Purchase of Common Stock

Purchases of common stock are recorded on the trade date at cost, including commissions and other costs, through a removal of the stated par value with the excess recorded as additional paid-in-capital.

Equity-Based Compensation

We have a stock-based incentive award plan for our employees and directors, which primarily includes time-based and performance-based awards. We recognize the cost of services received in an equity-based payment transaction with an employee or director as services are received and record either a corresponding increase in equity or a liability, depending on whether the instruments granted satisfy the equity or liability classification criteria. Measurement for these equity awards is the estimated fair value at the grant date of the equity instruments.

The equity-based compensation expense is recognized for awards earned or expected to be earned. Accordingly, the compensation expense for all equity awards is recognized straight-line over the vesting period of the last separately identified vesting portion of the award. Forfeitures for time-based and market-based performance awards are recognized as they occur. Performance awards with targets other than market-based are assessed at each balance sheet date with respect to the expected achievement of the target. Equity-based compensation expense is classified in corporate general and administrative expenses. Dividend equivalent cash payments related to unvested employee and director awards are charged to corporate general and administrative expenses. Dividends awarded as additional stock grants are included in equity-based compensation expense.

Earnings Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of our common stock outstanding plus other potentially dilutive securities, except when the effect would be anti-dilutive. Dilutive securities include equity-based awards issued under long-term incentive plans, as discussed in Note 11 “Equity-Based Compensation.”  Dilutive securities are excluded from the calculation of earnings per share for all periods presented because the effect would be anti-dilutive. The earnings per share amounts are calculated using unrounded amounts and shares which may result in differences in rounding of the presented per share amounts.

Income Taxes

 

We are organized in conformity with and operate in a manner that allows us to be taxed as a REIT for U.S. federal income tax purposes. To the extent we continue to qualify as a REIT, we generally will not be subject to U.S. federal income tax on taxable income generated by our REIT activities that we distribute to our stockholders. Accordingly, no provision for U.S. federal income tax expense has been included in our consolidated financial statements for the years ended December 31, 2019 or 2018 related to our REIT operations; however, CorePoint TRS, our wholly owned taxable REIT subsidiary, is subject to U.S. federal, state and local income taxes and we may be subject to state and local taxes. We were subject to U.S. federal, state and local taxes prior to the Spin-Off and our REIT election.

We use the asset and liability method of accounting for income taxes. Under this method, current income tax expense represents the amounts expected to be reported on our income tax returns, and deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. The deferred tax assets and liabilities are measured using the enacted tax rates that are expected to be applied to taxable income in the years in which those temporary differences are expected to reverse.

In determining our tax expense for financial statement reporting purposes, we must evaluate our compliance with the Code, including the transfer pricing determinations used in establishing rental payments between the REIT and CorePoint TRS. Accounting for income taxes requires, among others, interpretation of the Code, estimated tax effects of transactions, and evaluation of probabilities of sustaining tax positions, including realization of tax benefits. We recognize tax positions only after determining that the relevant tax authority would more likely than not sustain the position following the audit.  The final resolution of those assessments may subject us to additional taxes. In addition, we may incur expenses defending our positions during IRS tax examinations, even if we are able to eventually sustain our position with the tax authorities.

We are subject to or are contractually responsible for audits by federal and state tax authorities related to prior periods, which may result in additional tax liabilities. We have concluded that the positions reported on our tax returns under audit by the IRS are, based on their technical merits, more-likely-than-not to be sustained upon conclusion of the examination. Accordingly, as of December 31, 2019, we have not established any reserves related to this proposed adjustment or any other issues reflected on the returns under examination. If, however, we are unsuccessful in challenging the IRS, an excise tax would be imposed on the REIT

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related to the excess rent and we would be responsible for additional income taxes, interest and penalties, which could adversely affect our financial condition, results of operations and cash flow and the trading price of our common stock. Such adjustments could also give rise to additional state income taxes.

Concentrations of Credit Risk and Business Risk

We have cash and cash equivalents deposited in certain financial institutions in excess of federally insured levels. We utilize financial institutions that we consider to be of high credit quality and consider the risk of default to be minimal. We also monitor the creditworthiness of our customers and financial institutions before extending credit or making investments.  

Substantially all of our revenues are derived from our lodging operations at our hotels. Lodging operations are particularly sensitive to adverse economic, social and competitive conditions and trends, which could adversely affect our business, financial condition and results of operations. We have a concentration of hotels operating in Texas, Florida and California.

The number of hotels, percentages of total hotels and the percentages of our total revenues from these states as of and for the year ended December 31, 2019 is as follows: 

	Number of Hotels		Percentage of Total Hotels			Percentage of Total Revenue
Texas	58		21	%		21	%
Florida	45		17	%		16	%
California	21		8	%		12	%
Total	124		46	%		49	%

 

Our geographic concentration has not significantly changed during the last three years ended December 31, 2019.

 

Segment Reporting

 

Our hotel investments have similar economic characteristics and our service offerings and delivery of services are provided in a similar manner, using the same types of facilities and similar technologies. Our chief operating decision maker reviews our financial information on an aggregated basis.  As a result, we have concluded that we have one reportable business segment.

 

Principal Components of Expenses

As more fully explained in Note 8 “Commitments and Contingencies – Hotel Management and Franchise Agreements,” our management company is responsible for the day to day operations of our hotels.  For many expenses, the manager directly contracts for the services in the capacity as a principal, and we reimburse our manager in accordance with the agreements.  We present the following expense components and only classify the fee portion of expense as management and royalty fees.  We classify all amounts owed to our manager and franchisor in accounts payable and accrued expenses.

Rooms — These expenses include hotel operating expenses of housekeeping, reservation systems (per our franchise agreements), room and breakfast supplies and front desk costs.

Other departmental and support — These expenses include expenses that constitute non-room operating expenses, including parking, telecommunications, on-site administrative labor, sales and marketing, loyalty program, recurring repairs and maintenance and utility expenses.

Property tax, insurance and other — These expenses consist primarily of real and personal property taxes, other local taxes, ground rent, equipment rent and insurance.

Newly Issued Accounting Standards

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which modifies disclosure requirements for fair value measurements. While some disclosures have been removed or modified, new disclosures have been added. We adopted this guidance on January 1, 2020, and it did not have a material impact on our consolidated financial position and results of operations.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes the methodology for measuring credit losses on financial instruments and the timing

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of when such losses are recorded. The guidance primarily affects financial assets and net investment in leases that are not accounted for at fair value through net income but excludes operating lease receivables. The guidance is currently expected to primarily apply to our non-lease trade receivables, casualty insurance claim receivables, Wyndham Settlement receivable and any future financial assets that have the contractual right to receive cash that we may acquire in the future. We adopted this guidance on January 1, 2020, and it did not have a material impact on our consolidated financial position and results of operations.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The guidance enhances and simplifies various aspects of the current income tax guidance and reduces complexity by removing certain exceptions to the general framework. The guidance is effective for us January 1, 2021. We do not expect the adoption of this guidance to have a material impact on our consolidated financial position and results of operations.

Recently Adopted Accounting Standards

In July 2019, the FASB issued ASU 2019-07, Codification Updates to SEC Sections. This update clarifies or improves the disclosure and presentation requirements of a variety of codification topics by aligning them with the Securities and Exchange Commission’s (“SEC”) regulations, thereby eliminating redundancies and making the codification easier to apply. We adopted this guidance upon issuance, as required. The adoption of this guidance did not have a material effect on our consolidated financial position and results of operations.

Effective January 1, 2019, we adopted ASC Topic 842, Leases, which established new lease accounting standards for lessees and lessors. For lessees, the new standard requires balance sheet recognition of a right of use asset and lease liability for virtually all leases. At adoption, this primarily related to our ground leases. The amount recognized is generally equal to the present value of the lease payments, based on our incremental borrowing rate. In determining our incremental borrowing rate, we considered fully leveraged secured real estate borrowings. For lessors, the new standard requires leases to be classified as operating or sales-type. All of our leases are, and are anticipated to be, operating leases. Operating leases under the new standard are generally accounted for consistently with the prior lease accounting standards.

We adopted the new standard using the following practical expedients and policy adoptions:

•	Modified retrospective transition method, where lease balances as of the adoption date are based on the remaining lease payments as previously accounted for.

•	Periods prior to the period of adoption are not restated, including disclosures.

•	The lease classification and direct costs for leases in place as of the date of adoption are not reassessed, including land easements.

•	Lease term at the date of adoption is based on all known facts as of the adoption date.

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For leases where we are the lessor, no separation of a lease into a lease and non-lease component, as provided in the practical expedient. Amounts related to sales taxes collected by us and remitted to the taxing authorities are not included in room revenues or expense. Insurance and real estate taxes where the lessee is directly responsible for the payment to the vendor or taxing authority are also not included in revenue or expense.

•	For leases where we are the lessee, the short-term lease exception for leases with a remaining term of less than one year.

As a lessor, our recognition of lease revenue was substantively consistent with previous guidance and, accordingly, the adoption of the lessor portion of the new standard did not have a material effect on our financial statements. As a lessee, the adoption of the new lease standard resulted in the recognition of right of use assets and lease liabilities, primarily related to our ground leases. As of January 1, 2019, right of use assets and lease liabilities of $27 million and an increase of $1 million to retained earnings were recognized.

Effective January 1, 2019, we adopted ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under this standard, most of the guidance on such payments to nonemployees is aligned with the requirements for share-based payments granted to employees. We account for our share-based payments to members of our board of directors in the same manner as share-based payments to our employees. Other than to members of our board of directors, we do not award share-based payments to any nonemployees. The adoption of this guidance did not have a material effect on our consolidated financial position and results of operations.

From time to time, new accounting standards are issued by the FASB or other standards-setting bodies, which we adopt as of the specified effective date. Unless otherwise discussed, we believe the impact of recently adopted or recently issued standards that are not yet effective have not or will not have a material impact on our consolidated financial position and results of operations.

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During 2019, 42 operating hotels were sold for gross proceeds of $173 million resulting in gain on sales of $32 million. During 2018, two hotels were sold for gross proceeds of $7 million resulting in no gain on sale.

We recorded non-cash impairment losses of $141 million and $154 million, during 2019 and 2018, respectively, due to shortened holding periods for many of our hotels and assumptions related to future operations.

We have experienced hurricane and fire related damages to certain of our hotels. We carry comprehensive property, casualty, flood and business interruption insurance that we anticipate will cover our losses at these hotels, subject to a deductible. For the year ended December 30, 2019 and 2018, we recognized $7 million and $10 million, respectively, for the involuntary conversion write-off of net book value of damaged assets. Certain of our hotels had closures and disruptions to business primarily due to hurricanes and fires in 2019, 2018 and 2017. For the years ended December 31, 2019, 2018 and 2017, we received business interruption insurance proceeds of $11 million, $12 million and $1 million, respectively, which are included in “other income, net” on our consolidated statements of operations.

Construction in progress includes capitalized costs for ongoing projects that have not yet been put into service.

We have pledged substantially all of our hotels as collateral for the CMBS Loan Agreement (as defined in Note 5, “Debt”).

The following table presents other assets as of December 31, 2019 and 2018 (in millions):

 

	2019				2018
Lender and other escrows	$	20			$	20
Prepaid expenses	10				6
Intangible assets, net	4				5
Federal and state tax receivables	—				4
Assets held for sale	—				3
Other assets, primarily hotel supplies	9				16
Total other assets	$	43			$	54

 

The following table presents the carrying amount of our debt as of December 31, 2019 and 2018 (in millions):

	2019				2018				Interest Rate (1)		Maturity Date
CMBS Facility	$	921			$	1,035			One-month LIBOR + 2.75%		2020 (2)
Revolving Facility	—				—				One-month LIBOR + 4.50%		2020 (3)
	921				1,035
Less deferred debt issuance costs	(6		)		(21		)
Total debt, net	$	915			$	1,014

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(1)	London Interbank Offering Rate (“LIBOR”) at December 31, 2019 and 2018 was 1.76% and 2.52% respectively. The interest rate margins were unchanged in 2019 and 2018.

(2)	After maturity in June 2020, includes five one-year extension options at our option, provided there is no event of default existing as of the commencement of the applicable extension period and the CorePoint CMBS Borrower either extends the current interest rate cap or purchases a new interest rate cap covering the extension period at a strike price as set forth in the CMBS Loan Agreement.

(3)	After maturity in May 2020, includes a one-year extension option at our option, subject to certain conditions, including that the maturity of the CMBS Facility be extended to a date no earlier than the maturity of the Revolving Facility.

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CMBS Facility

On May 30, 2018, certain indirect wholly owned subsidiaries of CorePoint (collectively, the “CorePoint CMBS Borrower”), CorePoint TRS and CorePoint Operating Partnership L.P. (“CorePoint OP”) entered into a loan agreement (the “CMBS Loan Agreement”), pursuant to which the CorePoint CMBS Borrower borrowed an aggregate principal amount of $1.035 billion under a secured mortgage loan secured primarily by mortgages for substantially all of our wholly owned hotels, an excess cash flow pledge for seven owned and ground leased hotels and other collateral customary for mortgage loans of this type (the “CMBS Facility”).  

The CMBS Facility bears interest at a rate equal to the sum of (i) one-month LIBOR and (ii) 2.75% per annum for the first five years of the term, 2.90% for the sixth year of the term and 3.00% for the seventh year of the term.  Interest is generally payable monthly.  

The CMBS Facility matures on June 9, 2020, with five one-year extension options, exercisable at the CorePoint CMBS Borrower’s election, provided there is no event of default existing as of the commencement of the applicable extension period and the CorePoint CMBS Borrower either extends the current interest rate cap or purchases a new interest rate cap covering the extension period at a strike price as set forth in the CMBS Loan Agreement.  We are currently evaluating plans to extend or refinance the CMBS Facility. No principal payments are due prior to the scheduled or extended maturity date.  The CMBS Facility is pre-payable in whole or in part subject to payment of all accrued interest through the end of the applicable accrual period.

We may obtain the release of individual properties from the CMBS Facility provided that certain conditions of the CMBS Loan Agreement are satisfied. The most restrictive of these conditions provide that after giving effect to such release the debt yield for the CMBS Facility (generally defined as hotel property operating net income before interest, depreciation and a fixed amount of corporate general and administrative expenses divided by the outstanding principal balance of the CMBS Facility, “Debt Yield”) is not less than the greater of (x) 16.44% and (y) the lessor of (i) the Debt Yield in effect immediately prior to such release and (ii) 16.94% (such result the “Release Debt Yield”). However, if such release is in connection with the sale of a property to an unrelated third party, such sold property may be released if the CorePoint CMBS Borrower prepays an amount equal to the greater of (x) the allocated portion of the outstanding CMBS Facility plus a premium ranging from 5% to 10%, as defined in the CMBS Loan Agreement and (y) the lesser of (i) the full net proceeds from the sale of the property received by us and (ii) the amount necessary to satisfy the Release Debt Yield. Accordingly, such CMBS Loan Agreement release provisions could affect our ability to sell properties or restrict the use of sale proceeds only to (or substantially to) the required partial prepayment of the CMBS Facility. During the year ended December 31, 2019, primarily in connection with the sale of 42 secured hotel properties, $114 million of the net proceeds were used to pay down the principal of the CMBS Facility. During the year ended December 31, 2019, we recorded substantially no loss on extinguishment of debt related to these principal pay downs.

The CMBS Facility includes customary non-recourse carve-out guarantees, affirmative and negative covenants and events of default, including, among other things, guarantees for certain losses arising out of customary “bad-boy” acts of CorePoint OP and its affiliates and environmental matters (which will be recourse for environmental matters only to the CorePoint CMBS Borrower provided that the required environmental insurance is delivered to the lender), a full recourse guaranty with respect to certain bankruptcy events, restrictions on the ability of the CorePoint CMBS Borrower to incur additional debt and transfer, pledge or assign certain equity interests or its assets, and covenants requiring the CorePoint CMBS Borrower to exist as “special purpose entities,” maintain certain ongoing reserve funds and comply with other customary obligations for commercial mortgage-backed securities loan financings.  As of December 31, 2019, we believe we were in compliance with these covenants.

At the origination of the CMBS Facility, the CorePoint CMBS Borrower deposited in the loan servicer’s account $15 million in upfront reserves for property improvement and environmental remediation, which funds may be periodically disbursed to the CorePoint CMBS Borrower throughout the term of the loan to cover such costs.  In addition, the CMBS Facility lender has the right to control the disbursement of hotel operating cash receipts during the continuation of an event of default under the loan or if and while the Debt Yield falls below 12.33% through May 30, 2023 and 12.83% thereafter, in each case, for two consecutive quarters.  During such an event, the lender will use the funds to pay all monthly amounts due under the CMBS Facility loan documents including, but not limited to, required ongoing reserves, debt service and fees for the CMBS Facility and Revolving Facility and property operating expenses.  Any remaining funds after the payment of such expenses will be held under the control of the Lender in an excess cash flow account and such amounts will not be available to the CorePoint CMBS Borrower until such events are cured, except that, if no event of default is continuing and there is no bankruptcy event with respect to the CorePoint CMBS Borrower, the Lender will make such funds available to the CorePoint CMBS Borrower for the payment of certain expenses, including, among other things, various operating expenses and dividends, and redemptions sufficient to maintain certain tax-preferential treatment for the CorePoint CMBS Borrower.  As of December 31, 2019, we believe we were in compliance with these covenants.

Revolving Facility

On May 30, 2018, CorePoint Borrower L.L.C. (the “CorePoint Revolver Borrower”), our indirect wholly owned subsidiary and the direct wholly owned subsidiary of CorePoint OP, and CorePoint OP entered into a credit agreement providing for the $150 million Revolving Facility (“Revolving Facility”).  In November 2019, CorePoint Revolver Borrower amended the Revolving Facility, modifying certain availability thresholds. The Revolving Facility will mature on May 30, 2020. At our election, we may extend the maturity for one additional year subject to certain conditions, including that the maturity of the CMBS Facility will be extended to a

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date no earlier than the maturity of the Revolving Facility.   We are currently evaluating plans to extend or refinance the Revolving Facility. As of December 31, 2019, no amounts were outstanding under the Revolving Facility and $100 million of the $150 million was available to be drawn by us.

Interest under the Revolving Facility will be, at the option of the CorePoint Revolver Borrower, either at a base rate plus a margin of 3.5% or a LIBOR rate plus a margin of 4.5%.  With respect to base rate loans, interest will be payable at the end of each quarter.  With respect to LIBOR loans, interest will be payable at the end of the selected interest period but no less frequently than quarterly.  Additionally, there is a commitment fee payable at the end of each quarter equal to 0.5% of unused commitments under the Revolving Facility and customary letter of credit fees.

The Revolving Facility contains customary representations and warranties, affirmative and negative covenants and defaults.  The most restrictive of these are a maximum total net leverage ratio financial covenant and minimum interest coverage ratio financial covenant, in each case, as defined, and tested as of the last day of any fiscal quarter in which borrowings under the Revolving Facility and outstanding letters of credit exceed 10% of the aggregate commitments of the Revolving Facility.  In November 2019, the CorePoint Revolver Borrower amended the Revolving Facility, modifying certain availability thresholds. Availability is still subject to meeting certain financial thresholds, including debt yield, leverage ratio, and minimum interest coverage, which have been adversely affected by our decline in operations and only partially offset by pay downs in our debt from hotel sales. There were no other significant changes in the financial terms as a part of the amendment. As of December 31, 2019, we believe we were in compliance with these covenants.

We have outstanding 15,000 shares of Cumulative Redeemable Series A Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), held by an unrelated third-party. The Series A Preferred Stock has an aggregate liquidation preference of $15 million, plus any accrued and unpaid dividends thereon.  The Series A Preferred Stock is senior to our common stock with respect to dividends and with respect to dissolution, liquidation or winding up of the Company. For all periods the Series A Preferred Stock has been outstanding, we have paid a cash dividend on the Series A Preferred Stock equal to 13% per annum, payable quarterly.  If either our leverage ratio, as defined, exceeds 7.5 to 1.0 as of the last day of any fiscal quarter, or if an event of default occurs (or has occurred and not been cured) with respect to the Series A Preferred Stock, we will be required to pay a cash dividend on the Series A Preferred Stock equal to 15% per annum.  Our dividend rate on the Series A Preferred Stock will increase to 16.5% per annum if, at any time, (1) we are in breach of the leverage ratio covenant and (2) an event of default occurs (or has occurred and has not been cured) with respect to the Series A Preferred Stock.  As of December 31, 2019, none of these ratios have been exceeded, and we have not triggered any of the events that would result in an increased dividend rate.

The Series A Preferred Stock is mandatorily redeemable by us in 2028, upon the tenth anniversary of the date of issuance. Beginning in 2025, upon the seventh anniversary of the issuance of the Series A Preferred Stock, we may redeem the outstanding Series A Preferred Stock for an amount equal to its aggregate liquidation preference, plus any accrued but unpaid dividends. The holders of the Series A Preferred Stock may also require us to redeem the Series A Preferred Stock upon a change of control of the Company for an amount equal to its aggregate liquidation preference plus any accrued and unpaid dividends thereon (and a premium if the change of control occurs prior to the seventh anniversary of the issuance of the Series A Preferred Stock). Due to the fact that the Series A Preferred Stock is mandatorily redeemable, the preferred shares are classified as a liability on the accompanying consolidated balance sheet, and dividends on these preferred shares are classified as interest expense in the accompanying consolidated statements of operations.

Holders of Series A Preferred Stock generally have no voting rights. However, without the prior consent of the holders of a majority of the outstanding shares of Series A Preferred Stock, we are prohibited from (i) authorizing or issuing any additional shares of Series A Preferred Stock, or (ii) amending our charter or entering into, amending or altering any other agreement in any manner that would adversely affect the Series A Preferred Stock. Holders of shares of the Series A Preferred Stock have certain preemptive rights over issuances by us of any class or series of our stock ranking on parity with the Series A Preferred Stock. If we are either (a) in arrears on the payment of dividends that were due on the Series A Preferred Stock on six or more quarterly dividend payment dates, whether or not such dates are consecutive, or (b) in default of our obligations to redeem the Series A Preferred Stock or following a change of control, the preferred stockholders may designate a representative to attend meetings of our board of directors as a non-voting observer until all unpaid Series A Preferred Stock dividends have either been paid or declared with an amount sufficient for payment set aside for payment, or the shares required to be redeemed have been redeemed, as applicable.

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Accounts payable and accrued expenses and other liabilities include the following as of December 31, 2019 and 2018 (in millions): 

	2019				2018
Due to hotel manager	$	26			$	44
Real estate taxes	22				23
Sales and occupancy taxes	7				8
Interest	2				3
Other accounts payable and accrued expenses	25				21
Total accounts payable and accrued expenses	$	82			$	99
Operating lease liabilities	$	25			$	—
Below market leases, net	5				6
Property insurance financing	2				—
Other liabilities	11				5
Total other liabilities	$	43			$	11

 

Hotel Management and Franchising Agreements

 

Management Fees

 

On May 30, 2018, we entered into separate hotel management agreements with LQ Management L.L.C. (“LQM”), whereby we pay a fee equal to 5% of total gross revenues, as defined. The term of the management agreements is 20 years, subject to two renewals of five years each, at LQM’s option.  There are penalties for early termination, including a termination upon the sale of a hotel.

 

LQM generally has sole responsibility for all activities necessary for the operation of our hotels, including establishing room rates, processing reservations and promoting and publicizing the hotels. LQM also provides all employees for the hotels, prepares reports, budgets and projections, and provides other administrative and accounting support services to the hotels. We have consultative and specified approval rights with respect to certain actions of LQM, including entering into long-term or high value contracts, engaging in certain actions relating to legal proceedings, approving the operating budget, making certain capital expenditures and the hiring of certain management personnel. We are also responsible for reimbursing LQM for certain costs incurred by LQM during the fulfillment of their duties, such as payroll costs for certain employees, general liability insurance and other costs that the manager incurs to operate the hotels. In connection with those reimbursement requirements, we are required to maintain certain minimum cash operating balances at our hotels.

 

For the year ended December 31, 2019, our management fee expense was $40 million. For the period from May 30, 2018 to December 31, 2018, our management fee expense was $26 million.

Beginning on July 30, 2019, we gave notice to LQM of several events of default under the management agreements relating to all of our wholly owned properties. On October 18, 2019, we entered into a settlement agreement related to our default claims (the “Wyndham Settlement”). As part of the Wyndham Settlement, we recognized $20 million of income, included in “other income, net” related to our claim of lost revenues and $17 million in retained earnings related to final resolution of Spin-Off related tax matters.

    

Royalty Fees

 

On May 30, 2018, we entered into separate hotel franchise agreements with La Quinta Franchising LLC (“LQ Franchising”). Pursuant to the franchise agreements, we were granted a limited, non-exclusive license to use our franchisor’s brand names, marks and system in the operation of our hotels. The franchisor also may provide us with a variety of services and benefits, including centralized reservation systems, participation in customer loyalty programs, national advertising, marketing programs and publicity designed to increase brand awareness, as well as training of personnel. In return, we are required to operate franchised hotels consistent with the applicable brand standards.

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Our franchise agreements require that we pay a 5% royalty fee on gross room revenues.  The term of the franchise agreements is through 2038, subject to one renewal of 10 years, at the franchisor’s option.  There are penalties for early termination, including a termination upon the sale of a hotel. For the year ended December 31, 2019, our royalty fee expense was $40 million. For the period from May 30, 2018 to December 31, 2018, our royalty fee expense was $26 million.

 

In addition to the royalty fee, the franchise agreements include a reservation fee of 2% of gross room revenues, a marketing fee of 2.5% of gross room revenues, a loyalty program fee of 5% of eligible room night revenues, and other miscellaneous ancillary fees.  Reservation fees are included within room expense and the marketing fee and loyalty program fees are included within other departmental and support in the accompanying consolidated statements of operations.

    

Our requirement to meet certain brand standards imposed by our franchisor includes requirements that we incur certain capital expenditures, generally ranging from $1,500 to $7,500 per hotel room (with various specific amounts within this range being applicable to different groups of our hotels) during a prescribed period generally ranging from two to eleven years. These amounts are over and above the capital expenditures we are required to make each year for recurring furniture, fixtures and equipment maintenance.  However, these amounts that we are required to spend are subject to reduction, in varying degrees, by the amount of capital expenditures made for hotels in the applicable group over and above the capital expenditures required for the recurring maintenance in one or more years before receipt of the franchisor’s notice. The initial period during which the franchisor can notify us that we must make these capital expenditures is through 2028. At the franchisor’s discretion, subject to the franchise agreement provisions governing when such requirements may be imposed, the franchisor may provide a notice obligating us to meet those capital expenditure requirements generally within two to nine years of the notice. As of December 31, 2019, no such notices have been received; however, approximately 62% of our hotels are potentially eligible for such capital expenditure requirements. Through 2028, our remaining hotels will become eligible for such notices and capital expenditure requirements. We expect to meet these requirements primarily through our recurring capital expenditure program.  As of December 31, 2019, $15 million was held in lender escrows that can be used to finance these requirements.

Litigation

 

We are a party to a number of pending claims and lawsuits arising in the normal course of business. We do not consider our ultimate liability with respect to any such claims or lawsuits, or the aggregate of such claims and lawsuits, to be material in relation to our consolidated financial condition, results of operations or our cash flows taken as a whole.

We maintain general and other liability insurance; however, certain losses or defense costs are within the retention or insurance deductible amount and are not covered by or are only partially covered by insurance policies. We regularly evaluate our ultimate liability costs with respect to such claims and lawsuits. We accrue costs from litigation as they become probable and estimable.

Tax Contingencies

We are subject to regular audits by federal and state tax authorities, which may result in additional tax liabilities related to prior periods. Entities in existence prior to the Spin-Off and transferred to Wyndham as a part of the Spin-Off are currently under audit by the Internal Revenue Service (the “IRS”) for tax years ended December 31, 2010 to 2013. As a part of the Spin-Off, we agreed to indemnify Wyndham for any obligations and expenses arising from these IRS audits, including the legal and accounting defense expenses.

In 2014, the IRS commenced a tax audit, primarily related to transfer pricing for internal rents charged by our prior REIT. Subsequently, we have supplied information to the IRS supporting our position. In November 2019, the IRS issued notices of proposed adjustments (“NOPA”, also known as a 30 Day Letter) proposing a redetermined rent adjustment totaling $138 million, attributable to tax years 2010 and 2011, exclusive of penalties and interest. Additionally, the November 2019 NOPA proposed an adjustment resulting in the loss of tax operating loss carryforwards generated in tax years 2006 through 2009. The adjustment to the tax operating loss carryforwards, measured at the tax rates enacted during the year of utilization and exclusive of penalties and interest, is $31 million.

We have responded to the IRS in disagreement with their NOPA and expect the matter to be transferred to an IRS Appeals office in 2020. We believe the IRS transfer pricing methodologies applied in the audits contain flaws and that the IRS proposed tax and adjustments are inconsistent with the U.S. federal tax laws. We have concluded that the positions reported on our tax returns under audit by the IRS are, based on their technical merits, more-likely-than-not to be sustained upon conclusion of the examination. Accordingly, as of December 31, 2019, we have not established any reserves related to this proposed adjustment or any other issues reflected on the returns under examination. If, however, we are unsuccessful in challenging the IRS, an excise tax would be imposed on the REIT related to the excess rent and we would be responsible for additional income taxes, interest and penalties, which could adversely affect our financial condition, results of operations and cash flow and the trading price of our common stock. Such adjustments could also give rise to additional state income taxes.

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Purchase Commitments

As of December 31, 2019, we have approximately $29 million of purchase commitments primarily related to improvement projects at our hotel properties.

Lessee Commitments

 

Our lessee arrangements are primarily for ground leases at certain of our hotels. These ground leases generally include base rents, which may be reset based on inflation indexes or pre-established increases, contingent rents based upon the respective hotel’s revenues, and reimbursement or primary responsibility for related real estate taxes and insurance expenses. The initial base terms for the leases are generally in excess of 25 years, with initial term maturities occurring between 2020 and 2096. Many of these arrangements also contain renewal options at the conclusion of the initial lease term, generally at fair value or pre-set amounts.  Our other leases primarily relate to our corporate office, all of which are operating leases.

 

After the adoption of new accounting guidance related to leasing, the contractual payments of our operating lease liabilities on an undiscounted basis in effect as of December 31, 2019, are as follows (in millions):

Year	Amount
2020	$	3
2021	3
2022	3
2023	3
2024	3
Thereafter	60
Total	$	75

The difference between the undiscounted contractual payments of $75 million above and the December 31, 2019 operating lease liabilities of $25 million (included in our “other liabilities”) is the present value of imputed interest. Contractual payments include base rents that have been contractually reset based on inflation indexes as of December 31, 2019.

Prior to adoption of new accounting guidance related to leasing, future minimum base rental payments payable by us under these non-cancelable operating leases in effect as of December 31, 2018, were as follows (in millions):

Year	Amount
2019	$	3
2020	3
2021	3
2022	2
2023	2
Thereafter	98
Total	$	111

For each of the years ended December 31, 2019, 2018, and 2017 total rent expense for ground leases included in property tax, insurance and other expenses in our consolidated statement of operations was $5 million. For each of these years, $1 million of the rent expense was related to contingent rents.

Post-employment Benefits

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Share Repurchase Program

On March 21, 2019, our board of directors authorized a $50 million share repurchase program. Under the share repurchase program, we may purchase common stock in the open market, in privately negotiated transactions or in such other manner as determined by us, including through repurchase plans complying with the rules and regulations of the SEC. The share repurchase program does not obligate us to repurchase any dollar amount or number of shares of common stock and the program may be suspended or discontinued at any time. Through December 31, 2019, we have acquired 2.6 million shares at a weighted average cost per share of $11.34 under the share repurchase program.

Spin-Off from La Quinta Holdings Inc.

LQH Parent completed the Spin-Off on May 30, 2018. As part of the Spin-Off closing, LQH Parent distributed to its stockholders all the outstanding shares of CorePoint common stock. Each holder of LQH Parent common stock received one share of CorePoint common stock for each share of LQH Parent common stock held by such holder on the record date whereby each share of the common stock of LQH Parent (par value $0.01) was reclassified and combined into one half of a share of the common stock of LQH Parent (par value $0.02). Immediately following the Spin-Off, pursuant to the terms of the merger agreement, LQH Parent became a wholly owned subsidiary of Wyndham Worldwide and each share of LQH Parent common stock was converted into the right to receive $16.80 per share in cash, without interest. Immediately following the Spin-Off, LQH Parent did not own any shares of any class of CorePoint outstanding common stock.

Because the separation was a spin-off among stockholders, for financial statement presentation, there is no gain or loss on the separation of the disposed net assets and liabilities.  Rather, the carrying amounts of the net assets and liabilities of our former hotel franchise and hotel management accounts were removed at their historical cost with an offsetting amount of $752 million to our retained earnings in 2018.  In 2019, we recorded an additional $18 million adjustment to retained earnings primarily as a result of the final determination and settlement of the tax liabilities associated with the transaction.

Revenues for the years ended December 31, 2019, 2018 and 2017 are comprised of the following components (in millions):

	For the Year Ended December 31,
	2019				2018				2017
Operating lease revenues:
Rooms	$	795			$	845			$	820
Other	6				4				4
Total lease revenues	801				849				824
Customer revenues	11				13				12
Total revenues	$	812			$	862			$	836

 

Other operating lease revenues primarily include lease arrangements for restaurants, billboards and cell towers. Customer revenues, which are classified within other revenues, generally relate to amounts generated by the incidental support of the hotel operations, including service fees, parking and food. For each of the years ended December 31, 2019, 2018 and 2017 we had less than $1 million of variable lease revenue.

    

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As of December 31, 2019, future minimum rental income to be received under non-cancelable operating leases, in excess of one-year, is as follows (in millions):

Year ending December 31,	Operating lease income
2020	$	3
2021	2
2022	1
2023	1
2024	1
Thereafter	2
	$	10

Our 2018 Omnibus Incentive Plan (the “Plan”), authorizes the grant of restricted stock awards (“RSAs”), restricted stock units (“RSUs”), Performance Stock Units (“PSUs”), non-qualified and incentive stock options, dividend equivalents, and other stock-based awards.  A total of eight million shares of common stock has been authorized for issuance under the Plan and six million shares of common stock are available for issuance as of December 31, 2019.  

The RSAs and RSUs are time-based, where the awards vest over time, generally three to four years, and are not subject to future performance targets. RSAs and RSUs are initially recorded at the market price of our common stock at the time of the grant. The PSUs are subject to performance-based vesting, where the ultimate award is based on the achievement of established performance targets, generally over two to three years. As of December 31, 2019, these performance targets relate to relative and absolute total shareholder returns, as defined, which are treated as market-based conditions. Accordingly, these market-based PSUs are recorded at the fair value of the award using a Monte Carlo simulation valuation model. The currently outstanding PSUs vest over two to three years. RSAs, RSUs and PSUs are subject to accelerated vesting in the event of certain defined events.

In 2018, we entered into an agreement with LQH Parent to modify all outstanding awards granted to the employees of LQH Parent. The agreement generally provided that, as of the separation, holders of such awards were entitled to receive CorePoint equity-based, time-vesting, compensation awards. Generally, all such CorePoint equity-based compensation awards retained the same terms and vesting conditions as the original LQH Parent equity-based compensation awards to which such awards relate (except for the LQH Parent PSUs, as described below). Under the agreement, holders of LQH Parent RSAs and LQH Parent RSUs received RSAs and RSUs, respectively. Holders of LQH Parent PSUs received RSAs. The number of shares subject to such converted awards were calculated based on adjustments to LQH Parent’s equity-based awards using the distribution ratio in the agreement and assumed a majority of the performance-vesting awards vest at target performance levels.  Performance-based vesting with respect to the converted LQH Parent PSUs was removed, and instead the CorePoint converted equity-based awards vested, subject to the holder’s continued employment with Wyndham or CorePoint, as applicable, through the last date of the original performance period (as defined in the applicable LQH Parent PSU grant notice) to which such awards related, effectively transforming the PSU awards into time-vesting equity awards. The compensation expense related to these replacement equity-based compensation awards for the employees of Wyndham is incurred by Wyndham. The compensation expense related to these replacement equity-based compensation awards for the employees of CorePoint is incurred by CorePoint.

For the years ended December 31, 2019, 2018, and 2017, we recognized $11 million, $7 million and $7 million, respectively, of equity-based compensation expense in continuing operations.  For the years ended December 31, 2018 and 2017, we also recognized $4 million and $9 million, respectively, of equity-based compensation expense in discontinued operations.

    

    

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The following table summarizes the activity of our RSAs, RSUs and PSUs during December 31, 2019 and 2018 which represent our equity-based compensation activity inclusive of and post completion of our Spin-Off:

	RSAs							PSUs							RSUs
	Number of Shares			Weighted-Average Grant Date Fair Value				Number of Shares			Weighted-Average Grant Date Fair Value				Number of Shares			Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2018	512,117			$	11.02			—			$	—			47,898			$	5.57
Granted	722,881			27.22				—			—				242			17.80
Conversion of the performance units upon completion of the Spin-Off	423,510			27.92				—			—				—			—
Vested	(769,044	)		24.54				—			—				(12,249	)		6.18
Forfeited	(5,396	)		27.03				—			—				(21,267	)		5.22
Outstanding at January 1, 2019	884,068			20.50				—			—				14,624			5.77
Granted	453,451			11.02				447,527			6.99				689			11.97
Vested	(616,912	)		14.32				—			—				(10,241	)		6.05
Forfeited	(66,817	)		15.20				(78,558	)		6.99				—			—
Outstanding at December 31, 2019	653,790			$	20.30			368,969			$	6.99			5,072			$	6.05

RSAs are included in amounts for issued and outstanding common stock but are excluded in the computation of basic earnings per share.

 

In order to continue to qualify as a REIT, we must meet a number of organizational, operational and distribution requirements.  As a REIT, we are generally not subject to federal corporate income taxes on the portion of net income that is currently distributed to our stockholders.  To the extent we do not distribute 100% of our taxable income for any year in which we have elected REIT status, we will be subject to income tax on the undistributed taxable income.  It is our current intention to adhere to these and all other applicable requirements and maintain our qualification for taxation as a REIT, including the requirement to distribute our taxable income.  If we fail to qualify for taxation as a REIT in any taxable year, we will be subject to federal income taxes at regular corporate rates and may not be able to qualify as a REIT for the four taxable years subsequent to the year of an uncured REIT qualification failure.  Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property, and to federal income and excise taxes on our undistributed taxable income.  In addition, taxable income from non-REIT activities, related to our TRS, is subject to federal, state and local income taxes at normal corporate rates.

 

For financial reporting purposes, the consolidated income tax expense is based on consolidated income or loss before income taxes. The components of our income tax expense (benefit) from continuing operations for the years ended December 31, 2019, 2018 and 2017 are as follows (in millions):

 

	For the Year Ended December 31,
	2019				2018				2017
Current expense:
Federal	$	3			$	181			$	3
State	2				46				3
Total current expense	5				227				6
Deferred benefit:
Federal	(1		)		(168		)		(115		)
State	—				(38		)		—
Total deferred benefit	(1		)		(206		)		(115		)
Income tax expense (benefit)	$	4			$	21			$	(109	)

  

From January 1, 2018 to May 30, 2018 (the date of the Spin-Off) all of the taxable income from operations (both continuing and discontinued operations) and the tax gain from the Spin-Off are included in the consolidated U.S. federal and state income tax returns of LQH, and LQH is responsible for their payment. However, in accordance with GAAP, our 2018 current portion of income

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tax expense from continuing operations includes the income tax expense related to the taxable nature of the Spin-Off, which represents substantially all of our current portion tax expense from continuing operations. Our 2018 deferred tax benefit is primarily associated with the reversal of the net deferred tax liabilities resulting from the taxable gain associated with the Spin-Off transaction. Our 2017 deferred tax benefit is primarily related to the effects of the 2017 Tax Cuts and Jobs Act.

 

The significant components of our deferred tax assets and liabilities as of December 31, 2019 and 2018 are as follows (in millions): 

	2019				2018
Deferred Tax Assets
Insurance loss claim accruals	$	3			$	1
Allowance for doubtful accounts	1				—
Total deferred tax assets	4				1
Deferred Tax Liabilities
Real estate, net	(7		)		(4		)
Linens, uniforms and supplies	(2		)		(4		)
Prepaid expenses	(1		)		—
Deferred tax liabilities	(10		)		(8		)
Net deferred tax liabilities	$	(6	)		$	(7	)

 

As of December 31, 2019, we do not have any material federal or state income tax credits or net operating loss carryforwards.

        

Our income tax expense (benefit) differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pretax income from continuing operations as a result of the following items for the years ended December 31, 2019, 2018 and 2017 (in millions):

	For the Year Ended December 31,
	2019				2018				2017
Statutory U.S. federal income tax provision (benefit)	$	(44	)		$	(45	)		$	15
State income tax, net of U.S. federal tax benefit	1				2				3
REIT operations not subject to tax	47				43				—
Impact of Spin-Off	—				15				—
Write-off of tax net operating loss carryforwards	—				5				—
Nondeductible restructuring costs	—				7				5
Tax credits	—				—				(1		)
Effects of the Tax Cuts and Jobs Acts	—				1				(128		)
Change in valuation allowance	—				(5		)		(4		)
Other	—				(2		)		1
Income tax expense (benefit)	$	4			$	21			$	(109	)

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We had no discontinued operations for the year ended December 31, 2019. In accordance with GAAP, the results of operations related to our former hotel franchise and hotel management business are reported as discontinued operations for the years ended December 31, 2018 and 2017 and are summarized in the table below (in millions):

	For the Year Ended December 31,
	2018				2017
Franchise, Management and Other Fee Based Revenue	$	58			$	145
Operating Expenses:
Corporate, general, administrative and marketing	64				108
Depreciation and amortization	4				8
Total Operating Expenses	68				116
Operating Income (Loss)	(10		)		29
Other Expenses:
Interest expense	(15		)		(34		)
Loss on extinguishment of debt	(7		)		1
Total Other Expenses	(22		)		(33		)
Loss Before Income Taxes	(32		)		(4		)
Income tax benefit, primarily current	7				3
Loss from Discontinued Operations, net of tax	$	(25	)		$	(1	)

As permitted under GAAP, we elected not to adjust the consolidated statements of cash flows for the years ended December 31, 2018 and 2017 to exclude cash flows attributable to discontinued operations. As such, the following table presents selected financial information of the former hotel franchise and hotel management business included in the consolidated statements of cash flows (in millions): 

	For the Year Ended December 31,
	2018				2017
Non-cash items included in net income (loss):
Depreciation and amortization	$	4			$	8
Amortization of deferred costs	$	1			$	3
Loss on extinguishment of debt	$	7			$	—
Equity based compensation expense	$	4			$	9
Investing activities:
Capital expenditures	$	11			$	22

Fair value, as defined by GAAP, is a market-based measurement, not an entity-specific measurement.  Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing an asset or liability.  As a basis for considering market participant assumptions in fair value measurements, a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy) has been established.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

We use interest rate cap arrangements with financial institutions to manage our exposure to interest rate changes for our loans that utilize floating interest rates. We have an interest rate cap we entered into in 2018, which is classified within other assets. As of December 31, 2019, the fair value was zero and as of December 31, 2018 the fair value was $0.2 million. The fair value was determined as Level 2 under the fair value hierarchy. During 2019 and 2018 we recorded interest expense of $0.2 million and $1 million, respectively, related to the change in fair value of the interest rate cap.

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Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

 

We have recorded non-cash impairment losses related to the reduction in the fair value of certain of our real estate investment and long-lived assets. The real estate impairment losses related to changes in management’s estimate of the intended holding periods for certain of our hotels. Our process to estimate the fair value of an asset involves using the sales price of an executed sales agreement, which would be considered Level 2 assumptions within the fair value hierarchy. To the extent that this type of third-party information is unavailable, we estimated revenue multiples that we believe would be used by a third-party market participant in estimating the fair value of an asset. This is considered a Level 3 assumption within the fair value hierarchy.

    

The following table summarizes the assets which were measured at fair value and impaired during 2019 and 2018 (in millions): 

						Basis of Fair Value Measurements
		Fair Value of Assets at Impairment				Quoted Prices in Active Market for Identical Items (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3) (1)				Total Losses
For the year ended December 31, 2019
Real estate		$	299			$	—			$	31			$	268			$	138
Right of use assets		$	22			$	—			$	—			$	22			$	3
For the year ended December 31, 2018
Real estate		$	161			$	—			$	—			$	161			$	154

 ____________________

(1)

The Level 3 unobservable inputs consist of internally developed cash flow models and fair value estimates that included projections of revenues, expenses and capital expenditures and market valuations based on multiples of revenue generally ranging from 2.0x to 3.0x for 2019 and from 1.3x to 2.8x for 2018. These assumptions were based on trends and comparable transactions in the lodging industry; our historical data and experience; our budgets, including those prepared by our third-party hotel manager; lodging industry valuation trends; and micro- and macro-economic trends and projections. Our estimated fair values also considered factors related to our franchise and management agreements, requirements to meet certain brand standards and other potential costs to be incurred during our projected holding period.

Financial Instruments Not Reported at Fair Value    

For those financial instruments not carried at fair value, the carrying amount and estimated fair values of our financial assets and liabilities were as follows as of December 31, 2019 and 2018 (in millions): 

	December 31, 2019								December 31, 2018
	Carrying Amount				Fair Value				Carrying Amount				Fair Value
Debt - CMBS Facility (1)(2)	$	921			$	921			$	1,035			$	1,035
Mandatorily redeemable preferred shares (1)	$	15			$	15			$	15			$	15

 ____________________

(1)	Classified as Level 3 under the fair value hierarchy.

(2)	Carrying amount excludes deferred debt issuance costs of $6 million and $21 million as of December 31, 2019 and 2018, respectively.

We estimate the fair value of our debt and mandatorily redeemable preferred stock by using discounted cash flow analysis based on current market inputs for similar types of arrangements. As these instruments predominantly have interest rates set by floating rates or due to the recent issuance of the instruments and short remaining life, we have estimated that the contractual interest rates approximate their market rate.  Fluctuations in these assumptions will result in different estimates of fair value.

We believe the carrying amounts of our cash and cash equivalents, accounts receivable and lender and other escrows approximate fair value as of December 31, 2019 and 2018, due to their short-term nature.

 

As of December 31, 2019 and 2018, The Blackstone Group, Inc. (“Blackstone”) beneficially owned approximately 30% of our outstanding shares of common stock and is a participating lender under our CMBS Facility. As of December 31, 2019 and 2018, the portion of our CMBS Facility outstanding balance due to Blackstone was $88 million and $99 million, respectively. Total interest payments made to Blackstone for each of the years ended December 31, 2019 and 2018 were $6 million.      

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Prior to the Spin-Off in 2018, we purchased products and services from entities affiliated with or owned by Blackstone in the ordinary course of operating our business. We paid $1 million and $3 million, respectively, for these products and services during the years ended December 31, 2018 and 2017. Subsequent to the Spin-Off, these products and services are contracted independently by our hotel manager.   

 

The following table presents the supplemental cash flow information for the years ended December 31, 2019, 2018 and 2017 (in millions): 

	For the Year Ended December 31,
	2019				2018				2017
Supplemental cash flow information:
Interest paid during the period	$	52			$	81			$	77
Income taxes paid during the period, net of refunds	$	1			$	7			$	22
Non-cash investing and financing activities:
Capital expenditures included in accounts payable	$	1			$	9			$	14
Cash flow hedge adjustment, net of tax	$	—			$	1			$	5
Casualty receivable related to real estate	$	7			$	10			$	23
Dividends payable on common stock	$	11			$	12			$	—
Recognition of right of use operating lease assets and operating lease liabilities	$	28			$	—			$	—
Financing of property insurance prepaids	$	14			$	—			$	—

 

See Note 13 “Discontinued Operations” for additional information on supplemental disclosures of cash flow information related to discontinued operations.

Presented below is a summary of the unaudited quarterly consolidated financial information for the years ended December 31, 2019 and 2018 (in millions, except per share data):

 

	2019 Quarters Ended
	March 31				June 30				September 30				December 31
Total Revenues	$	208			$	219			$	215			$	170
Operating loss	$	(6	)		$	(5	)		$	—			$	(161	)
Net loss	$	(27	)		$	(19	)		$	(12	)		$	(154	)
Basic loss per share	$	(0.47	)		$	(0.32	)		$	(0.22	)		$	(2.73	)
Diluted loss per share	$	(0.47	)		$	(0.32	)		$	(0.22	)		$	(2.73	)
Common stock dividend declared per share	$	0.20			$	0.20			$	0.20			$	0.20

 

---

	2018 Quarters Ended
	March 31				June 30				September 30				December 31
Total Revenues	$	196			$	233			$	234			$	199
Operating income (loss)	$	2			$	(2	)		$	7			$	(164	)
Loss from Continuing Operations, net of tax	(10		)		(28		)		(13		)		(186		)
Loss from Discontinued Operations, net of tax	(5		)		(20		)		—				—
Net loss	$	(15	)		$	(48	)		$	(13	)		$	(186	)
Basic loss per share:
Continuing operations	$	(0.17	)		$	(0.48	)		$	(0.22	)		$	(3.17	)
Discontinued operations	(0.09		)		(0.34		)		—				—
Basic loss per share	$	(0.26	)		$	(0.82	)		$	(0.22	)		$	(3.17	)
Diluted loss per share:
Continuing operations	$	(0.17	)		$	(0.48	)		$	(0.22	)		$	(3.17	)
Discontinued operations	(0.09		)		(0.34		)		—				—
Diluted loss per share	$	(0.26	)		$	(0.82	)		$	(0.22	)		$	(3.17	)
Common stock dividend declared per share	$	—			$	—			$	0.267			$	0.20

 

On November 13, 2019, our board of directors authorized and we declared a cash dividend of $0.20 per share of common stock with respect to the fourth quarter of 2019.  The fourth quarter dividend was paid on January 15, 2020 to stockholders of record as of December 30, 2019.

 

On March 12, 2020, our board of directors authorized and we declared a cash dividend of $0.20 per share of common stock with respect to the first quarter of 2020.  The first quarter dividend will be paid on April 15, 2020 to stockholders of record as of March 31, 2020.  All future dividends will be at the sole discretion of CorePoint’s board of directors.

On March 12, 2020, we provided notice to the lenders to borrow substantially all of our current availability under the Revolving Facility.

Subsequent to December 31, 2019, we sold, in separate transactions, 17 operating hotels for gross sales price of $74 million, recognizing an estimated gain on sales of approximately $18 million. As of December 31, 2019, none of these hotels were classified as assets held for sale because they did not meet the accounting criteria established for such classification. We used $41 million of the net sales proceeds to pay down the principal of the CMBS Facility.

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								Initial Cost
Property Name		State		Encumbrances (1)				Land				Buildings and improvements and FF&E				Costs capitalized subsequent to acquisition (2)				Gross amount carried at close of period (3)				Accumulated depreciation				Year Built		Date of Acquisition
El Paso - Cielo Vista		TX		$	1.0			$	2.3			$	4.7			$	(1.1	)		$	5.9			$	(3.1	)		1988		2006
Charlotte - Airport South		NC		3.8				0.7				6.0				2.3				9.0				(4.3		)		1998		2006
Atlanta - Perimeter / Medical Center		GA		4.8				4.6				9.2				6.6				20.4				(6.6		)		1998		2006
Fremont / Silicon Valley		CA		11.9				3.3				2.4				2.7				8.4				(3.0		)		1999		2006
Ontario - Airport		CA		7.4				9.0				13.9				3.7				26.6				(7.6		)		1998		2006
Orlando - Airport North		FL		7.2				6.5				11.4				4.5				22.4				(6.9		)		1998		2006
Greenville - Haywood Road		SC		6.9				1.0				7.5				3.1				11.6				(4.9		)		1999		2006
Las Vegas - Summerlin Tech Center		NV		7.1				5.3				10.3				4.9				20.5				(6.2		)		1999		2006
Atlanta Ballpark / Galleria		GA		6.5				3.6				8.8				3.2				15.6				(5.7		)		1997		2006
Austin - Southwest		TX		6.8				13.5				4.8				2.3				20.6				(3.6		)		1997		2006
Houston - Bush IAH South		TX		1.6				2.8				9.2				(5.5		)		6.5				(1.4		)		1999		2006
Oklahoma City - Northwest Expressway		OK		2.4				2.0				8.7				(5.4		)		5.3				(0.8		)		1999		2006
Orlando - University of Central Florida		FL		3.3				5.5				10.0				6.0				21.5				(5.3		)		1999		2006
Winston - Salem		NC		3.7				5.8				9.4				(7.4		)		7.8				(1.1		)		1999		2006
Orlando I-Drive / Convention Center		FL		2.9				6.3				13.5				4.3				24.1				(6.6		)		1999		2006
University Area Chapel Hill		NC		4.0				3.1				10.4				3.3				16.8				(6.3		)		1999		2006
Raleigh / Durham Southpoint		NC		2.7				0.9				7.1				3.5				11.5				(5.9		)		1999		2006
Austin - Airport		TX		6.0				2.5				9.7				7.2				19.4				(6.6		)		1999		2006
Greensboro		NC		3.9				4.0				9.2				(4.4		)		8.8				(1.0		)		1999		2006
El Paso - East Lomaland		TX		1.5				1.1				6.4				1.6				9.1				(6.9		)		1980		2006
Odessa		TX		4.5				0.7				6.3				2.8				9.8				(7.3		)		1981		2006
Amarillo - Airport		TX		1.2				1.2				6.3				(4.4		)		3.1				(1.1		)		1983		2006
Midland - Wall Street		TX		4.9				0.4				7.1				2.9				10.4				(6.5		)		1983		2006
Farmington		NM		1.6				1.0				5.9				1.0				7.9				(4.8		)		1983		2006
Austin South /  I-35		TX		2.2				1.9				6.3				1.5				9.7				(5.4		)		1983		2006
San Antonio - Riverwalk		TX		21.5				14.2				17.9				7.8				39.9				(10.9		)		2005		2006
Laredo - I-35		TX		3.2				1.8				4.6				3.0				9.4				(6.6		)		1969		2006
El Paso - Airport		TX		2.1				3.3				5.2				2.2				10.7				(6.6		)		1969		2006
San Antonio - South		TX		1.2				1.9				4.4				2.6				8.9				(6.0		)		1970		2006
Dallas - Uptown		TX		2.2				5.4				1.5				2.7				9.6				(3.1		)		1971		2006
Wichita Falls Event Center North		TX		1.6				1.9				5.9				2.4				10.2				(7.5		)		1973		2006
Denver - Cherry Creek		CO		4.3				4.4				4.0				3.4				11.8				(5.9		)		1974		2006

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								Initial Cost
Property Name		State		Encumbrances (1)				Land				Buildings and improvements and FF&E				Costs capitalized subsequent to acquisition (2)				Gross amount carried at close of period (3)				Accumulated depreciation				Year Built		Date of Acquisition
Dallas - DFW Airport South / Irving		TX		7.0				0.6				5.8				2.7				9.1				(4.1		)		2002		2006
Austin - Oltorf		TX		2.3				6.5				3.8				1.6				11.9				(5.3		)		1975		2006
San Antonio - Lackland		TX		2.7				0.7				6.0				3.1				9.8				(8.1		)		1975		2006
Killeen - Fort Hood		TX		1.8				1.4				6.1				2.4				9.9				(7.3		)		1976		2006
Clute - Lake Jackson		TX		2.4				0.4				5.2				(2.9		)		2.7				(1.0		)		1977		2006
Austin - University Area		TX		1.7				1.9				6.1				2.1				10.1				(6.8		)		1977		2006
Tallahassee - North		FL		2.7				3.0				9.1				2.7				14.8				(10.1		)		1979		2006
College Station		TX		3.3				1.0				9.9				2.9				13.8				(11.1		)		1980		2006
Costa Mesa Orange County		CA		4.4				7.5				6.2				2.4				16.1				(7.3		)		1980		2006
Reno		NV		4.0				1.4				7.3				1.6				10.3				(7.7		)		1981		2006
Champaign		IL		1.8				1.8				6.7				(3.7		)		4.8				(0.9		)		1982		2006
San Antonio - I-35 at Rittiman Road		TX		1.2				0.7				7.1				2.2				10.0				(8.0		)		1981		2006
Nashville - South		TN		3.9				0.8				5.9				2.5				9.2				(6.0		)		1982		2006
Lexington		KY		1.3				2.5				7.1				(5.7		)		3.9				(0.9		)		1982		2006
Phoenix - Sky Harbor Airport		AZ		2.8				3.8				7.0				1.9				12.7				(6.2		)		1982		2006
San Antonio - Market Square		TX		3.9				6.3				5.8				2.4				14.5				(5.6		)		1982		2006
Bossier City		LA		1.3				4.4				6.7				(7.6		)		3.5				(1.0		)		1982		2006
Eagle Pass		TX		1.1				0.9				6.7				1.3				8.9				(5.5		)		1982		2006
New Orleans West Bank / Gretna		LA		—				—				—				12.2				12.2				(7.7		)		1984		1984
New Orleans Veterans - Metairie		LA		—				—				0.6				(0.6		)		—				—				1984		2006
Lufkin		TX		1.3				1.3				5.3				(0.4		)		6.2				(4.2		)		1984		2006
Temple		TX		1.2				1.1				5.3				(2.6		)		3.8				(1.0		)		1984		2006
Norfolk - Virginia Beach		VA		2.3				5.1				6.9				(3.9		)		8.1				(4.5		)		1984		2006
San Antonio Sea World Ingram Park		TX		2.1				5.1				7.3				(5.8		)		6.6				(1.9		)		1984		2006
Augusta		GA		1.3				1.2				6.6				0.2				8.0				(5.5		)		1985		2006
El Paso - West		TX		1.1				1.6				6.3				1.3				9.2				(5.3		)		1984		2006
Tampa Bay Airport		FL		4.7				8.2				6.1				(2.0		)		12.3				(6.8		)		1978		2006
Pensacola		FL		1.7				3.2				7.4				(5.8		)		4.8				(1.3		)		1985		2006
Stockton		CA		6.5				1.1				10.3				1.4				12.8				(8.1		)		1984		2006
Pittsburgh Airport		PA		1.6				0.6				6.9				2.3				9.8				(6.3		)		1985		2006
Albuquerque - Northeast		NM		1.4				2.0				6.9				1.5				10.4				(5.8		)		1983		2006
Colorado Springs - Garden of the Gods		CO		3.3				0.7				5.2				1.8				7.7				(4.8		)		1985		2006
Sacramento - North		CA		1.9				—				8.3				(2.6		)		5.7				(4.7		)		1985		2006
Denver - Golden		CO		5.7				1.7				6.4				2.5				10.6				(6.1		)		1985		2006
Amarillo - Medical Center		TX		1.0				0.9				6.4				(4.2		)		3.1				(1.3		)		1986		2006
San Antonio - I-35 North at Toepperwein		TX		1.5				2.6				8.7				(5.1		)		6.2				(1.2		)		1986		2006
Orlando - Airport West		FL		3.3				1.1				7.3				2.4				10.8				(5.5		)		1987		2006

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								Initial Cost
Property Name		State		Encumbrances (1)				Land				Buildings and improvements and FF&E				Costs capitalized subsequent to acquisition (2)				Gross amount carried at close of period (3)				Accumulated depreciation				Year Built		Date of Acquisition
San Diego - Vista		CA		2.8				2.4				7.9				(0.9		)		9.4				(4.9		)		1987		2006
Denver - Northglenn		CO		2.2				2.4				4.5				1.9				8.8				(4.3		)		1986		2006
Bakersfield - South		CA		2.2				1.0				8.5				1.9				11.4				(6.9		)		1986		2006
San Diego - Chula Vista		CA		5.0				2.2				8.6				2.9				13.7				(7.5		)		1986		2006
Houston - Cyfair		TX		1.8				1.4				6.9				(5.7		)		2.6				(0.9		)		1986		2006
Fresno - Yosemite		CA		5.3				1.0				9.5				2.4				12.9				(7.9		)		1986		2006
Denver - Westminster		CO		4.0				0.9				5.9				2.0				8.8				(5.3		)		1986		2006
Ventura		CA		7.2				4.0				8.3				3.0				15.3				(6.4		)		1988		2006
San Diego - Miramar		CA		5.4				2.4				9.0				2.3				13.7				(6.7		)		1987		2006
Fort Lauderdale - I-95 at Hillsboro East		FL		3.4				2.0				11.0				3.3				16.3				(9.6		)		1986		2006
San Francisco Airport North		CA		13.9				3.8				3.1				14.7				21.6				(6.1		)		1987		2006
Santa Fe		NM		2.3				1.1				7.5				2.0				10.6				(6.6		)		1986		2006
Irvine Spectrum		CA		5.3				7.0				8.3				2.9				18.2				(7.7		)		1986		2006
Miami - Airport North		FL		3.7				6.3				7.2				6.9				20.4				(6.7		)		1986		2006
San Angelo - Inn and Conference Center		TX		1.5				2.0				6.2				3.0				11.2				(8.0		)		1974		2006
Moline - Airport		IL		1.1				0.6				5.9				1.4				7.9				(6.7		)		1975		2006
St. Louis - Westport		MO		3.4				1.0				7.0				(1.1		)		6.9				(0.9		)		1997		2006
Seattle - Sea-Tac Airport		WA		7.4				4.1				10.0				3.5				17.6				(7.6		)		1986		2006
Seattle - Bellevue / Kirkland		WA		8.1				7.2				8.3				3.9				19.4				(7.7		)		1986		2006
Tacoma - Seattle		WA		7.6				2.4				15.7				5.3				23.4				(11.1		)		1985		2006
Salt Lake City - Layton		UT		3.3				0.7				4.5				1.8				7.0				(3.9		)		1983		2006
Galveston East Beach		TX		3.4				3.5				5.5				4.7				13.7				(5.6		)		1978		2006
Clearwater Airport		FL		3.6				2.6				5.7				2.1				10.4				(4.5		)		1986		2006
Arlington - North / Dallas		TX		7.8				3.9				8.1				16.4				28.4				(9.4		)		2006		2006
Las Cruces - Mesilla Valley		NM		1.3				3.7				5.6				(5.4		)		3.9				(1.1		)		1980		2006
Houston - Stafford Sugarland		TX		1.3				3.5				6.2				(5.3		)		4.4				(1.0		)		1986		2006
Tucson - East		AZ		2.9				4.3				5.5				2.9				12.7				(4.9		)		1977		2006
Corpus Christi - North		TX		2.2				1.0				5.1				2.5				8.6				(6.2		)		1973		2006
Phoenix - Thomas Road		AZ		2.2				2.0				4.7				1.8				8.5				(5.7		)		1973		2006
Dallas - North Central		TX		2.2				2.9				8.0				2.4				13.3				(4.9		)		1974		2006
San Antonio - Vance Jackson		TX		0.7				0.8				4.6				2.0				7.4				(5.5		)		1974		2006
Huntsville - Research Park		AL		1.6				1.8				6.9				(1.8		)		6.9				(5.3		)		1985		2006
Kansas City - Lenexa		KS		1.0				1.0				5.0				2.3				8.3				(6.0		)		1978		2006
Salt Lake City - Midvale		UT		1.9				0.8				4.3				2.2				7.3				(5.5		)		1978		2006
Merrillville		IN		1.0				0.6				3.5				2.0				6.1				(4.4		)		1979		2006
Cheyenne		WY		1.9				0.5				6.1				1.7				8.3				(6.4		)		1981		2006
Omaha - Northwest		NE		1.1				0.6				6.8				(4.1		)		3.3				(1.4		)		1981		2006

---

								Initial Cost
Property Name		State		Encumbrances (1)				Land				Buildings and improvements and FF&E				Costs capitalized subsequent to acquisition (2)				Gross amount carried at close of period (3)				Accumulated depreciation				Year Built		Date of Acquisition
Albuquerque - Airport		NM		1.3				1.6				5.5				(3.4		)		3.7				(0.9		)		1982		2006
Fort Myers - Central		FL		1.6				3.4				7.3				(4.0		)		6.7				(1.0		)		1984		2006
Denver - Central		CO		3.2				0.8				5.9				2.0				8.7				(6.8		)		1980		2006
Round Rock North		TX		1.8				1.9				4.5				2.2				8.6				(4.1		)		1987		2006
Austin Capitol / Downtown		TX		7.1				4.5				9.2				5.3				19.0				(7.0		)		1965		2006
Phoenix - North		AZ		2.3				3.6				6.6				(1.5		)		8.7				(4.7		)		1979		2006
Redding		CA		3.8				1.2				12.6				2.1				15.9				(7.6		)		1965		2006
New Orleans - Airport		LA		7.3				4.8				4.9				6.3				16.0				(6.9		)		1973		2006
Sacramento - Downtown		CA		5.6				3.0				11.6				(2.8		)		11.8				(6.3		)		1970		2006
Nashville - Airport/Opryland		TN		3.9				1.1				5.6				2.8				9.5				(4.5		)		1986		2006
Buena Park		CA		9.6				4.7				10.4				3.2				18.3				(7.1		)		1987		2006
San Antonio - Airport		TX		8.2				3.7				18.2				3.9				25.8				(10.7		)		2002		2006
Lubbock - Medical Center		TX		1.8				0.5				10.6				(6.2		)		4.9				(1.2		)		1986		2006
Las Vegas Airport North Convention Center		NV		6.2				18.8				10.5				5.2				34.5				(8.3		)		1984		2006
Fort Stockton		TX		2.5				0.5				4.3				1.4				6.2				(3.0		)		1983		2006
San Marcos		TX		2.5				2.8				4.4				(1.8		)		5.4				(0.9		)		1993		2006
Kingsport Tri-Cities Airport		TN		2.2				0.5				6.6				2.1				9.2				(4.6		)		1991		2006
Austin at The Domain		TX		6.3				4.1				10.2				5.7				20.0				(6.7		)		1996		2006
Dallas - Addison Galleria		TX		2.9				2.6				5.6				2.6				10.8				(4.7		)		1996		2006
Flagstaff		AZ		6.6				4.9				8.9				5.8				19.6				(6.5		)		1996		2006
Macon		GA		2.4				2.6				11.1				(7.8		)		5.9				(1.1		)		1996		2006
Fort Lauderdale - Cypress Creek I-95		FL		4.7				4.2				10.8				(3.7		)		11.3				(1.7		)		1987		2006
Dallas - DFW Airport North / Irving		TX		3.7				2.4				5.6				5.7				13.7				(7.1		)		1996		2006
Raleigh-Durham Airport / Hospitality Court		NC		4.0				3.8				10.2				3.2				17.2				(7.2		)		1996		2006
Tucson - Airport		AZ		3.8				2.0				11.0				2.6				15.6				(7.1		)		1996		2006
Denver - Tech Center		CO		4.8				1.1				7.6				5.3				14.0				(5.4		)		1996		2006
Phoenix - Scottsdale		AZ		7.6				5.2				9.4				3.9				18.5				(6.3		)		1996		2006
Birmingham - Homewood		AL		2.8				5.1				10.0				(8.1		)		7.0				(1.1		)		1996		2006
Fort Worth - North		TX		3.7				2.9				8.7				(2.6		)		9.0				(0.8		)		1996		2006
Myrtle Beach - Broadway Area		SC		5.8				1.2				7.6				3.3				12.1				(4.6		)		1997		2006
Denver - Louisville / Boulder		CO		4.0				1.0				7.6				5.3				13.9				(5.3		)		1997		2006
Shreveport Airport		LA		3.8				1.7				8.2				5.1				15.0				(5.4		)		1997		2006
Fort Worth - City View		TX		3.1				6.3				8.0				(5.7		)		8.6				(0.8		)		1997		2006
Salt Lake City - Airport		UT		3.6				2.5				8.0				(2.4		)		8.1				(0.9		)		1997		2006
Raleigh - Crabtree		NC		4.0				3.6				9.8				3.9				17.3				(7.3		)		1998		2006
Arlington - South / Dallas		TX		3.3				7.4				7.5				3.2				18.1				(5.7		)		1997		2006
Alexandria Airport		LA		2.6				2.1				8.2				(6.6		)		3.7				(1.0		)		1997		2006

---

								Initial Cost
Property Name		State		Encumbrances (1)				Land				Buildings and improvements and FF&E				Costs capitalized subsequent to acquisition (2)				Gross amount carried at close of period (3)				Accumulated depreciation				Year Built		Date of Acquisition
Orem - University Parkway		UT		3.5				1.1				9.0				(3.0		)		7.1				(0.8		)		1997		2006
Houston - Galleria Area		TX		5.4				13.2				12.0				(10.3		)		14.9				(1.3		)		1998		2006
Atlanta - Alpharetta		GA		4.1				2.1				7.4				5.5				15.0				(5.3		)		1997		2006
Tampa - Brandon Regency Park		FL		4.4				10.6				9.6				4.5				24.7				(5.8		)		1997		2006
Raleigh - Cary		NC		2.6				1.5				7.7				3.5				12.7				(6.2		)		1998		2006
Oklahoma City - Norman		OK		2.7				2.6				8.1				4.7				15.4				(5.4		)		1997		2006
Dallas - Plano West		TX		3.5				1.9				7.9				(1.9		)		7.9				(0.8		)		1998		2006
Jacksonville - Butler Boulevard		FL		4.6				3.8				10.2				2.4				16.4				(6.1		)		1997		2006
Grand Junction - Airport		CO		4.0				1.1				8.8				4.2				14.1				(5.5		)		1998		2006
Atlanta - Conyers		GA		3.5				4.1				8.7				5.3				18.1				(6.1		)		1998		2006
Pueblo		CO		4.8				1.3				7.2				1.8				10.3				(4.5		)		1998		2006
Phoenix - Mesa West		AZ		4.5				3.3				10.5				3.1				16.9				(6.0		)		1998		2006
Lakeland - West		FL		3.4				5.7				9.0				(7.9		)		6.8				(0.9		)		1997		2006
Panama City		FL		4.1				4.5				9.9				1.1				15.5				(3.3		)		1998		2006
Mesa Superstition Springs		AZ		4.5				5.0				8.7				2.7				16.4				(5.6		)		1997		2006
University of South Florida - Busch Gardens		FL		4.6				6.9				7.8				(5.3		)		9.4				(0.9		)		1997		2006
Denver - Airport / DIA		CO		8.6				4.9				13.6				6.2				24.7				(8.0		)		1998		2006
Albuquerque - West		NM		4.1				1.1				6.7				2.2				10.0				(4.5		)		1998		2006
Miami - Airport West		FL		4.1				4.7				11.2				3.7				19.6				(5.9		)		1998		2006
Colorado Springs - South / Airport		CO		7.1				1.3				11.2				1.7				14.2				(6.2		)		1998		2006
Ft. Lauderdale - Plantation at Peters Road		FL		4.8				4.3				10.4				3.7				18.4				(6.2		)		1998		2006
New Orleans Downtown		LA		8.2				2.2				16.0				13.2				31.4				(11.1		)		1999		2006
Phoenix - West / Peoria		AZ		5.3				4.5				8.8				1.7				15.0				(4.4		)		1998		2006
Ft. Lauderdale - Airport		FL		4.3				2.5				10.7				5.7				18.9				(6.5		)		1998		2006
Denver - Southwest / Lakewood		CO		5.8				1.2				6.7				1.8				9.7				(4.3		)		1998		2006
Orlando - Lake Mary		FL		5.4				4.3				10.1				5.2				19.6				(6.8		)		1998		2006
Ocala		FL		3.8				2.3				9.7				(4.6		)		7.4				(0.9		)		1998		2006
Phoenix - Chandler		AZ		3.6				4.6				8.1				4.6				17.3				(4.9		)		1998		2006
Omaha - Southwest		NE		0.8				0.6				2.6				0.4				3.6				(2.7		)		1979		2006
Cleveland - Macedonia		OH		1.9				0.8				2.1				2.1				5.0				(2.4		)		1997		2006
Cleveland - Independence		OH		1.3				0.7				2.9				2.4				6.0				(3.5		)		1990		2006
Milwaukee - Delafield		WI		2.3				1.7				5.2				2.2				9.1				(3.7		)		1997		2006
Sheboygan		WI		1.6				0.3				4.4				1.7				6.4				(5.8		)		1975		2006
Kansas City - North		MO		1.8				1.1				3.6				2.2				6.9				(4.1		)		1991		2006
Springdale		AR		3.6				1.8				4.1				(0.4		)		5.5				(1.4		)		1994		2006
Hartford - Bradley International Airport		CT		3.7				1.3				6.0				7.4				14.7				(5.3		)		1991		2006
Jacksonville - Mandarin / San Jose		FL		4.0				0.9				4.2				3.5				8.6				(4.2		)		1989		2006

---

								Initial Cost
Property Name		State		Encumbrances (1)				Land				Buildings and improvements and FF&E				Costs capitalized subsequent to acquisition (2)				Gross amount carried at close of period (3)				Accumulated depreciation				Year Built		Date of Acquisition
Orlando - South		FL		1.7				3.4				4.7				(1.5		)		6.6				(1.3		)		1988		2006
Atlanta Midtown - Buckhead		GA		3.0				2.0				1.3				5.6				8.9				(2.1		)		1985		2006
Clive - West Des Moines		IA		1.9				1.4				5.2				(1.4		)		5.2				(0.8		)		1993		2006
Chicago - Tinley Park		IL		1.5				0.5				4.1				3.9				8.5				(4.5		)		1995		2006
Baton Rouge - Siegan Lane		LA		2.6				1.9				4.5				(3.0		)		3.4				(0.9		)		1985		2006
Auburn - Worcester		MA		1.5				—				1.8				2.6				4.4				(2.7		)		1985		2006
Detroit - Canton		MI		1.3				0.7				3.9				2.2				6.8				(3.5		)		1987		2006
Detroit - Southgate		MI		1.6				0.7				4.8				1.3				6.8				(3.6		)		1991		2006
Meridian		MS		1.8				1.3				3.3				2.0				6.6				(3.7		)		1985		2006
Plattsburgh		NY		1.3				1.6				4.5				(1.8		)		4.3				(1.1		)		1996		2006
Cleveland - Airport North		OH		1.6				—				3.1				2.4				5.5				(0.8		)		1992		2006
Mansfield		OH		1.7				1.5				3.7				(0.6		)		4.6				(0.9		)		1996		2006
Hershey - Harrisburg Airport		PA		3.3				3.1				5.8				(2.7		)		6.2				(0.9		)		1990		2006
Nashville - Franklin		TN		3.0				0.7				3.5				2.5				6.7				(3.2		)		1993		2006
Milwaukee - Airport / Oak Creek		WI		1.9				0.8				5.7				1.3				7.8				(4.1		)		1988		2006
Stevens Point		WI		0.8				0.2				3.4				1.0				4.6				(2.6		)		1989		2006
Tampa - Fairgrounds Casino		FL		3.2				0.9				3.0				2.0				5.9				(3.3		)		1988		2006
Toledo - Perrysburg		OH		1.7				1.6				1.8				2.0				5.4				(2.1		)		1996		2006
Columbia		MO		2.3				1.1				4.6				(1.3		)		4.4				(1.3		)		1988		2006
Melbourne Viera		FL		4.2				7.8				5.2				2.5				15.5				(3.9		)		1995		2006
Naples - East		FL		3.2				1.0				5.2				0.5				6.7				(0.9		)		1995		2006
Sunrise Sawgrass Mills		FL		3.4				3.8				5.2				5.3				14.3				(5.5		)		1995		2006
Detroit - Utica		MI		4.2				2.1				5.4				5.8				13.3				(4.6		)		1997		2006
Miami - Cutler Bay		FL		4.1				4.6				4.9				(0.3		)		9.2				(1.6		)		1996		2006
Chicago - Willowbrook		IL		2.8				2.3				6.3				(2.4		)		6.2				(1.0		)		1987		2006
Austin Round Rock		TX		2.5				1.2				1.6				3.2				6.0				(0.7		)		1998		2006
Milwaukee - West / New Berlin		WI		2.3				3.7				2.2				(0.6		)		5.3				(0.7		)		2001		2006
Boston - Somerville		MA		10.8				—				12.5				4.0				16.5				(8.2		)		2000		2006
Los Angeles - LAX Airport		CA		16.3				3.1				17.6				32.7				53.4				(15.4		)		1972		2006
Orange County Airport		CA		8.1				2.2				12.4				16.3				30.9				(9.7		)		1985		2006
Myrtle Beach- North Kings Highway		SC		3.9				1.2				5.7				6.5				13.4				(4.6		)		1986		2006
Islip - MacArthur Airport		NY		6.6				2.3				16.9				(6.6		)		12.6				(2.0		)		2006		2006
Anaheim		CA		5.6				—				7.3				5.1				12.4				(5.6		)		1992		2006
Minneapolis - Bloomington West		MN		4.3				2.1				12.2				11.7				26.0				(9.5		)		1980		2006
Chicago Downtown		IL		18.2				1.5				8.4				49.2				59.1				(17.7		)		2009		2009
Fort Lauderdale - Northeast		FL		—				—				9.2				(0.9		)		8.3				(2.4		)		1968		2006
West Palm Beach - Florida Turnpike		FL		3.3				1.1				6.4				4.4				11.9				(4.5		)		1988		2006

---

								Initial Cost
Property Name		State		Encumbrances (1)				Land				Buildings and improvements and FF&E				Costs capitalized subsequent to acquisition (2)				Gross amount carried at close of period (3)				Accumulated depreciation				Year Built		Date of Acquisition
South Burlington		VT		3.0				1.7				7.3				2.4				11.4				(4.0		)		1988		2007
St. Albans		VT		1.9				1.2				4.7				(1.1		)		4.8				(1.1		)		1996		2006
Fort Myers Beach / Sanibel Gateway		FL		4.8				1.7				9.8				9.7				21.2				(5.3		)		1986		2006
Charlotte - Airport North		NC		2.5				1.0				4.1				2.9				8.0				(3.6		)		1986		2006
Charleston - Riverview		SC		6.6				1.8				9.9				4.0				15.7				(5.5		)		1987		2006
Sacramento - Rancho Cordova		CA		5.1				2.6				9.3				8.8				20.7				(5.4		)		1985		2006
Thousand Oaks - Newbury Park		CA		3.2				2.0				11.5				0.6				14.1				(6.1		)		1987		2006
Baltimore - North		MD		3.6				2.2				12.3				(6.6		)		7.9				(1.1		)		1987		2007
Baltimore - BWI Airport		MD		3.6				3.2				18.3				(12.2		)		9.3				(1.3		)		1990		2007
Columbia / Fort Meade		MD		2.4				2.5				13.4				(11.9		)		4.0				(1.0		)		1989		2007
New Haven		CT		2.8				—				6.1				1.0				7.1				(2.0		)		1972		2007
Portland		ME		4.6				1.3				5.4				9.4				16.1				(4.5		)		1985		2007
Salem		NH		2.8				1.3				4.9				2.4				8.6				(0.9		)		1987		2007
Stamford / New York City		CT		2.9				5.6				16.8				(8.6		)		13.8				(7.1		)		1975		2007
Warwick Providence Airport		RI		2.9				2.9				10.3				(5.7		)		7.5				(1.0		)		1990		2007
Virginia Beach		VA		4.8				3.7				8.6				9.2				21.5				(5.4		)		1987		2007
Garden City		NY		4.3				7.6				14.8				(9.4		)		13.0				(1.8		)		1999		2007
Oshkosh		WI		1.4				1.0				2.7				2.1				5.8				(4.2		)		1973		2006
Fort Lauderdale - Tamarac East		FL		1.1				1.0				2.0				3.4				6.4				(1.3		)		1988		2006
Tampa - Brandon West		FL		2.5				6.7				3.0				(3.4		)		6.3				(1.3		)		1985		2006
Atlanta - Roswell		GA		1.7				1.2				2.3				2.5				6.0				(2.6		)		1990		2006
Indianapolis - East/Post Drive		IN		1.3				3.5				4.6				(4.5		)		3.6				(0.7		)		1993		2006
Kenosha - Pleasant Prairie		WI		0.9				0.9				3.0				1.3				5.2				(3.5		)		1979		2006
North Little Rock - McCain Mall		AR		2.5				0.9				4.2				2.0				7.1				(3.5		)		1990		2006
Savannah - Southside		GA		2.7				1.8				4.2				2.7				8.7				(4.8		)		1986		2006
Albuquerque - Northwest		NM		—				—				4.4				(2.1		)		2.3				(0.6		)		1990		2006
Houston - Baytown East		TX		2.9				0.4				1.4				2.9				4.7				(2.3		)		1994		2006
Nashville - Airport		TN		4.1				1.0				5.2				2.8				9.0				(5.2		)		1985		2006
Minneapolis Airport / Bloomington		MN		2.0				—				7.0				4.1				11.1				(10.0		)		1989		2006
Las Cruces - Organ Mountain		NM		1.2				2.6				1.6				(1.3		)		2.9				(0.7		)		1997		2006
El Paso - East		TX		1.5				1.3				4.9				1.8				8.0				(3.5		)		1996		2006
El Paso - West Bartlett		TX		0.9				1.0				4.3				(1.8		)		3.5				(0.8		)		1992		2006
Lakeland - East		FL		1.8				5.3				3.8				(3.0		)		6.1				(1.2		)		1996		2006
Miami - Airport East		FL		3.9				2.6				6.1				6.5				15.2				(6.8		)		1991		2006
Boston-Andover		MA		4.8				—				1.9				12.3				14.2				(4.4		)		1981		2006
Denver - Englewood/Tech Center		CO		4.5				1.4				4.1				2.6				8.1				(1.6		)		1972		2006
Bannockburn/Deerfield		IL		—				—				9.2				(4.0		)		5.2				(2.2		)		1999		2006

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								Initial Cost
Property Name		State		Encumbrances (1)				Land				Buildings and improvements and FF&E				Costs capitalized subsequent to acquisition (2)				Gross amount carried at close of period (3)				Accumulated depreciation				Year Built		Date of Acquisition
Cincinnati - Sharonville		OH		3.4				2.8				8.6				(1.8		)		9.6				(1.5		)		1997		2006
San Antonio - Downtown		TX		7.1				2.5				13.0				6.6				22.1				(7.1		)		1999		2006
Appleton - College Avenue		WI		1.6				1.6				5.1				2.2				8.9				(6.2		)		1988		2006
Milwaukee Bayshore Area		WI		2.8				0.4				11.2				(5.1		)		6.5				(1.6		)		1994		2006
Madison - American Center		WI		1.9				1.1				8.0				(2.0		)		7.1				(2.0		)		1997		2006
Clifton/Rutherford		NJ		—				—				24.6				8.3				32.9				(19.0		)		1973		2014
Fairfield		NJ		1.7				—				7.7				(6.1		)		1.6				(0.3		)		1974		2014
Armonk Westchester County Airport		NY		—				—				8.4				(8.4		)		—				—				1973		2014
Coral Springs South		FL		3.3				2.1				7.7				1.0				10.8				(2.2		)		1987		2014
Deerfield Beach I-95		FL		2.1				0.8				6.5				(1.2		)		6.1				(0.7		)		1986		2014
Sunrise		FL		3.9				3.0				9.3				0.7				13.0				(2.4		)		1994		2014
Miami Lakes		FL		4.5				3.7				8.0				1.7				13.4				(2.8		)		1989		2014
Naples - Downtown		FL		3.9				2.7				8.3				1.3				12.3				(2.3		)		1989		2014
Plantation - SW 6th Street		FL		4.0				2.2				9.1				2.4				13.7				(2.8		)		1990		2014
Sarasota Downtown		FL		5.0				2.1				9.5				(3.8		)		7.8				(0.9		)		1990		2014
West Palm Beach Airport		FL		4.1				2.0				7.5				0.5				10.0				(2.0		)		1989		2014
Fort Lauderdale - Tamarac		FL		2.2				2.0				6.7				(1.2		)		7.5				(0.8		)		1987		2014
Unallocated (1)				(50.2		)		—				—				—				—				—
				$	921.4			$	701.6			$	1,977.5			$	433.9			$	3,113.0			$	(1,216.0	)

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Each of our hotels and improvements have depreciable lives of 5 to 40 years. Furniture, fixtures and other equipment (“FF&E”) have depreciable lives ranging from 2 to 10 years.

Each of our hotels is under the La Quinta brand.

(1)	The amount of encumbrances represents the lender allocated amount of our CMBS Facility. The “Unallocated” line represents paydowns of our CMBS Facility that were not allocated to a specific property.

(2)	Includes adjustments to basis, such as impairment losses and casualty adjustments.

(3)	The aggregate cost of real property for federal income tax purposes is approximately $2.5 billion at December 31, 2019 (unaudited).

    

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A summary of activity for real estate and accumulated depreciation for the years ended December 31, 2019, 2018 and 2017 is as follows (in millions): 

	For the Year Ended December 31,
	2019				2018				2017
Real Estate:
Balance at the beginning of the year	$	3,643			$	3,808			$	3,697
Additions/improvements	95				188				186
Assets disposed/written-off/impaiments	(625		)		(353		)		(75		)
Balance at the end of the year	$	3,113			$	3,643			$	3,808
Accumulated Depreciation:
Balance at the beginning of the year	$	1,386			$	1,425			$	1,332
Depreciation expense	181				154				140
Deductions	(351		)		(193		)		(47		)
Balance at the end of the year	$	1,216			$	1,386			$	1,425

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i.	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

ii.	provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management and our board of directors; and

iii.	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

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(1)	Includes our 2018 Omnibus Incentive Plan.

(2)	Relates to restricted stock units granted to our non-employee directors under our 2018 Omnibus Incentive Plan.

(3)

Relates to additional shares reserved for future awards under our 2018 Omnibus Incentive Plan. Our 2018 Omnibus Incentive Plan provides that the total number of shares that may be issued under such plan is 8,000,000 (the “Plan Share Reserve”); provided, however, that the Plan Share Reserve shall automatically be increased on the first day of each fiscal year following the 2018 fiscal year by a number of shares equal to the lesser of (i) the difference between (x) 10% of the total number of shares of our common stock outstanding on the last day of the immediately preceding fiscal year, and (y) the number of shares of our common stock remaining in the Plan Share Reserve on the last day of the immediately preceding fiscal year, and (ii) a lower number of shares as may be determined by our board of directors.

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