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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to           

Commission File Number 001-37795

 

Park Hotels & Resorts Inc.

(Exact name of Registrant as specified in its Charter)

 

 Delaware

 

36-2058176

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S Employer

Identification No.)

 

1775 Tysons Boulevard., 7th Floor, Tysons, VA

 

22102

(Address of principal executive offices)

 

(Zip Code)

(Registrant’s telephone number, including area code): (571) 302-5757

 

 

Securities registered pursuant to Section 12(b) of the Act.

 

Title of each class

Trading Symbol

Name of exchange on which registered

Common Stock, $0.01 par value per share

PK

New York Stock Exchange

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

 

The number of shares of common stock outstanding on July 30, 2021 was 236,492,895.

 

 

 

 


 

Table of Contents

 

PART I. FINANCIAL INFORMATION

 

Page

 

 

 

 

Item 1.

Financial Statements (unaudited)

 

3

 

Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020

 

3

 

Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2021 and 2020

 

4

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020

 

5

 

Condensed Consolidated Statements of Equity for the Three and Six Months Ended June 30, 2021 and 2020

 

6

 

Notes to Condensed Consolidated Financial Statements

 

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

28

Item 4.

Controls and Procedures

 

28

 

 

 

 

PART II. OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

 

29

Item 1A.

Risk Factors

 

29

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

29

Item 3.

Defaults Upon Senior Securities

 

29

Item 4.

Mine Safety Disclosures

 

30

Item 5.

Other Information

 

30

Item 6.

Exhibits

 

31

 

Signatures

 

32

 

 

2


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

PARK HOTELS & RESORTS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data)

 

 

 

June 30, 2021

 

 

December 31, 2020

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

Property and equipment, net

 

$

8,820

 

 

 

9,193

 

Assets held for sale

 

 

77

 

 

 

 

Investments in affiliates

 

 

13

 

 

 

14

 

Intangibles, net

 

 

44

 

 

 

45

 

Cash and cash equivalents

 

 

909

 

 

 

951

 

Restricted cash

 

 

35

 

 

 

30

 

Accounts receivable, net of allowance for doubtful accounts of $2 and $3

 

 

63

 

 

 

26

 

Prepaid expenses

 

 

35

 

 

 

39

 

Other assets

 

 

50

 

 

 

60

 

Operating lease right-of-use assets

 

 

220

 

 

 

229

 

TOTAL ASSETS (variable interest entities - $235 and $229)

 

$

10,266

 

 

$

10,587

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Debt

 

$

5,100

 

 

 

5,121

 

Accounts payable and accrued expenses

 

 

178

 

 

 

147

 

Due to hotel managers

 

 

90

 

 

 

88

 

Deferred income tax liabilities

 

 

10

 

 

 

10

 

Other liabilities

 

 

107

 

 

 

134

 

Operating lease liabilities

 

 

236

 

 

 

244

 

Total liabilities (variable interest entities - $217 and $213)

 

 

5,721

 

 

 

5,744

 

Commitments and contingencies - refer to Note 13

 

 

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

Common stock, par value $0.01 per share, 6,000,000,000 shares
   authorized,
236,891,740 shares issued and 236,493,847 shares outstanding
   as of June 30, 2021 and
236,217,344 shares issued and 235,915,749
   shares outstanding as of December 31, 2020

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

4,525

 

 

 

4,519

 

Retained earnings

 

 

70

 

 

 

376

 

Accumulated other comprehensive loss

 

 

(3

)

 

 

(4

)

Total stockholders' equity

 

 

4,594

 

 

 

4,893

 

Noncontrolling interests

 

 

(49

)

 

 

(50

)

Total equity

 

 

4,545

 

 

 

4,843

 

TOTAL LIABILITIES AND EQUITY

 

$

10,266

 

 

$

10,587

 

 

Refer to the notes to the unaudited condensed consolidated financial statements.

 

3


 

PARK HOTELS & RESORTS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited, in millions, except per share data)

 

 

 

Three Months Ended June 30,

 

 

 Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Rooms

 

$

207

 

 

$

21

 

 

$

313

 

 

$

383

 

Food and beverage

 

 

54

 

 

 

3

 

 

 

76

 

 

 

164

 

Ancillary hotel

 

 

50

 

 

 

15

 

 

 

79

 

 

 

72

 

Other

 

 

12

 

 

 

3

 

 

 

20

 

 

 

22

 

Total revenues

 

 

323

 

 

 

42

 

 

 

488

 

 

 

641

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

Rooms

 

 

59

 

 

 

20

 

 

 

94

 

 

 

132

 

Food and beverage

 

 

42

 

 

 

14

 

 

 

63

 

 

 

137

 

Other departmental and support

 

 

101

 

 

 

60

 

 

 

179

 

 

 

232

 

Other property-level

 

 

52

 

 

 

56

 

 

 

100

 

 

 

116

 

Management fees

 

 

14

 

 

 

 

 

 

21

 

 

 

25

 

Impairment loss and casualty gain, net

 

 

5

 

 

 

 

 

 

5

 

 

 

694

 

Depreciation and amortization

 

 

71

 

 

 

75

 

 

 

145

 

 

 

150

 

Corporate general and administrative

 

 

16

 

 

 

14

 

 

 

34

 

 

 

30

 

Other

 

 

13

 

 

 

4

 

 

 

20

 

 

 

25

 

Total expenses

 

 

373

 

 

 

243

 

 

 

661

 

 

 

1,541

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sales of assets, net

 

 

6

 

 

 

1

 

 

 

6

 

 

 

63

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

(44

)

 

 

(200

)

 

 

(167

)

 

 

(837

)

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

1

 

 

 

 

 

 

2

 

Interest expense

 

 

(66

)

 

 

(50

)

 

 

(129

)

 

 

(90

)

Equity in losses from investments in affiliates

 

 

(2

)

 

 

(8

)

 

 

(6

)

 

 

(9

)

Other loss, net

 

 

(2

)

 

 

(1

)

 

 

(2

)

 

 

(3

)

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(114

)

 

 

(258

)

 

 

(304

)

 

 

(937

)

Income tax expense

 

 

 

 

 

(3

)

 

 

(1

)

 

 

(13

)

Net loss

 

 

(114

)

 

 

(261

)

 

 

(305

)

 

 

(950

)

Net (income) loss attributable to noncontrolling interests

 

 

(2

)

 

 

2

 

 

 

(1

)

 

 

3

 

Net loss attributable to stockholders

 

$

(116

)

 

$

(259

)

 

$

(306

)

 

$

(947

)

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss) income, net of tax expense:

 

 

 

 

 

 

 

 

 

 

 

Currency translation adjustment, net of tax expense of $0

 

 

 

 

 

 

 

 

 

 

 

4

 

Change in fair value of interest rate swap, net of tax expense
    of $
0

 

 

 

 

 

(1

)

 

 

1

 

 

 

(7

)

Total other comprehensive (loss) income

 

 

 

 

 

(1

)

 

 

1

 

 

 

(3

)

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

 

(114

)

 

 

(262

)

 

 

(304

)

 

 

(953

)

Comprehensive (income) loss attributable to noncontrolling
   interests

 

 

(2

)

 

 

2

 

 

 

(1

)

 

 

3

 

Comprehensive loss attributable to stockholders

 

$

(116

)

 

$

(260

)

 

$

(305

)

 

$

(950

)

 

 

 

 

 

 

 

 

 

 

 

 

Loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

Loss per share - Basic

 

$

(0.49

)

 

$

(1.10

)

 

$

(1.30

)

 

$

(4.01

)

Loss per share - Diluted

 

$

(0.49

)

 

$

(1.10

)

 

$

(1.30

)

 

$

(4.01

)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - Basic

 

 

236

 

 

 

235

 

 

 

235

 

 

 

236

 

Weighted average shares outstanding - Diluted

 

 

236

 

 

 

235

 

 

 

236

 

 

 

236

 

 

Refer to the notes to the unaudited condensed consolidated financial statements.

4


 

PARK HOTELS & RESORTS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in millions)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2021

 

 

2020

 

Operating Activities:

 

 

 

 

 

 

Net loss

 

$

(305

)

 

$

(950

)

Adjustments to reconcile net loss to net cash used in operating
   activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

145

 

 

 

150

 

Gain on sales of assets, net

 

 

(6

)

 

 

(63

)

Impairment loss and casualty gain, net

 

 

5

 

 

 

694

 

Equity in losses from investments in affiliates

 

 

6

 

 

 

9

 

Other loss, net

 

 

2

 

 

 

3

 

Share-based compensation expense

 

 

10

 

 

 

6

 

Amortization of deferred financing costs

 

 

5

 

 

 

3

 

Distributions from unconsolidated affiliates

 

 

 

 

 

5

 

Deferred income taxes

 

 

 

 

 

2

 

Changes in operating assets and liabilities

 

 

(23

)

 

 

(17

)

Net cash used in operating activities

 

 

(161

)

 

 

(158

)

Investing Activities:

 

 

 

 

 

 

Capital expenditures for property and equipment

 

 

(13

)

 

 

(56

)

Proceeds from asset dispositions, net

 

 

168

 

 

 

207

 

Contributions to unconsolidated affiliates

 

 

(5

)

 

 

(2

)

Insurance proceeds for property damage claims

 

 

4

 

 

 

1

 

Net cash provided by investing activities

 

 

154

 

 

 

150

 

Financing Activities:

 

 

 

 

 

 

Borrowings from credit facilities

 

 

 

 

 

1,000

 

Repayments of credit facilities

 

 

(761

)

 

 

(388

)

Proceeds from issuance of Senior Secured Notes

 

 

750

 

 

 

652

 

Proceeds from issuance of mortgage debt

 

 

14

 

 

 

 

Repayments of mortgage debt

 

 

(14

)

 

 

(4

)

Debt issuance costs

 

 

(15

)

 

 

(15

)

Dividends paid

 

 

 

 

 

(241

)

Distributions to noncontrolling interests, net

 

 

 

 

 

(1

)

Tax withholdings on share-based compensation

 

 

(4

)

 

 

(6

)

Repurchase of common stock

 

 

 

 

 

(66

)

Net cash (used in) provided by financing activities

 

 

(30

)

 

 

931

 

Net (decrease) increase in cash and cash equivalents and restricted cash

 

 

(37

)

 

 

923

 

Cash and cash equivalents and restricted cash, beginning of period

 

 

981

 

 

 

386

 

Cash and cash equivalents and restricted cash, end of period

 

$

944

 

 

$

1,309

 

 

 

 

 

 

 

 

 

Refer to the notes to the unaudited condensed consolidated financial statements.

5


 

PARK HOTELS & RESORTS INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(unaudited, in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Non-

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

controlling

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Interests

 

 

Total

 

Balance as of December 31, 2020

 

 

236

 

 

$

2

 

 

$

4,519

 

 

$

376

 

 

$

(4

)

 

$

(50

)

 

$

4,843

 

Share-based compensation, net

 

 

 

 

 

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(190

)

 

 

 

 

 

(1

)

 

 

(191

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Balance as of March 31, 2021

 

 

236

 

 

$

2

 

 

$

4,520

 

 

$

185

 

 

$

(3

)

 

$

(51

)

 

$

4,653

 

Share-based compensation, net

 

 

 

 

 

 

 

 

5

 

 

 

1

 

 

 

 

 

 

 

 

 

6

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(116

)

 

 

 

 

 

2

 

 

 

(114

)

Balance as of June 30, 2021

 

 

236

 

 

$

2

 

 

$

4,525

 

 

$

70

 

 

$

(3

)

 

$

(49

)

 

$

4,545

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Non-

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

controlling

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Interests

 

 

Total

 

Balance as of December 31, 2019

 

 

239

 

 

$

2

 

 

$

4,575

 

 

$

1,922

 

 

$

(3

)

 

$

(45

)

 

$

6,451

 

Share-based compensation, net

 

 

 

 

 

 

 

 

(5

)

 

 

1

 

 

 

 

 

 

 

 

 

(4

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(688

)

 

 

 

 

 

(1

)

 

 

(689

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

(2

)

Dividends and dividend equivalents(1)

 

 

 

 

 

 

 

 

 

 

 

(106

)

 

 

 

 

 

 

 

 

(106

)

Distributions to noncontrolling
    interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

(1

)

Repurchase of common stock

 

 

(4

)

 

 

 

 

 

(66

)

 

 

 

 

 

 

 

 

 

 

 

(66

)

Balance as of March 31, 2020

 

 

235

 

 

$

2

 

 

$

4,504

 

 

$

1,129

 

 

$

(5

)

 

$

(47

)

 

$

5,583

 

Share-based compensation, net

 

 

1

 

 

 

 

 

 

4

 

 

 

1

 

 

 

 

 

 

 

 

 

5

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(259

)

 

 

 

 

 

(2

)

 

 

(261

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Balance as of June 30, 2020

 

 

236

 

 

 

2

 

 

 

4,508

 

 

 

871

 

 

 

(6

)

 

 

(49

)

 

 

5,326

 

 

(1)        Dividends declared per common share were $0.45 for the three months ended March 31, 2020.

 

 

Refer to the notes to the unaudited condensed consolidated financial statements.

6


 

PARK HOTELS & RESORTS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

Note 1: Organization and Recent Events

Organization

Park Hotels & Resorts Inc. (“we,” “us,” “our” or the “Company”) is a Delaware corporation that owns a portfolio of premium-branded hotels and resorts primarily located in prime city center and resort locations. On January 3, 2017, Hilton Worldwide Holdings Inc. (“Hilton”) completed the spin-off of a portfolio of hotels and resorts that established Park Hotels & Resorts Inc. as an independent, publicly traded company.

On May 5, 2019, the Company, PK Domestic Property LLC, an indirect subsidiary of the Company (“PK Domestic”), and PK Domestic Sub LLC, a wholly-owned subsidiary of PK Domestic (“Merger Sub”) entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) with Chesapeake Lodging Trust (“Chesapeake”). On September 18, 2019, pursuant to the terms and subject to the conditions set forth in the Merger Agreement, Chesapeake merged with and into Merger Sub (the “Merger”) and each of Chesapeake’s common shares of beneficial interest, $0.01 par value per share, was converted into $11.00 in cash and 0.628 of a share of our common stock. No fractional shares of our common stock were issued in the Merger. The value of any fractional interests to which a Chesapeake shareholder would otherwise have been entitled was paid in cash.

We are a real estate investment trust (“REIT”) for United States (“U.S.”) federal income tax purposes. We have been organized and operated, and we expect to continue to be organized and operate, in a manner to qualify as a REIT. From the date of our spin-off from Hilton, Park Intermediate Holdings LLC (our “Operating Company”), directly or indirectly, has held all our assets and has conducted all of our operations. We own 100% of the interests in our Operating Company.

COVID-19 Update

The novel strain of coronavirus and the disease it causes (“COVID-19”) have had and continue to have a significant effect on the hospitality industry and our business. The effects of COVID-19, including government restrictions such as mandated closings of non-essential businesses and travel restrictions, have severely reduced overall lodging demand. Since the beginning of March 2020, we have experienced a significant decline in occupancy and Revenue per Available Room (“RevPAR”) associated with COVID-19 throughout our portfolio, which resulted in a decline in our operating cash flow. As vaccination rates increased across the country, government restrictions, quarantining and “social distancing” mandates have been and are being removed, resulting in increased travel and hospitality spending during the second quarter of 2021.

We and our hotel managers have taken various actions to mitigate the effects of COVID-19, including temporarily suspending operations at certain of our hotels beginning in March 2020, limiting capacity at our open hotels, deferring approximately $150 million of capital expenditures planned for 2020, reducing budgeted capital expenditures for maintenance projects to approximately $40 million for 2021, suspending our dividend after the first quarter of 2020, and, as a precautionary measure to increase liquidity and preserve financial flexibility, drawing on our revolving credit facility (“Revolver”) and completing three corporate bond offerings totaling $2.1 billion in 2020 and 2021. We have since commenced a phased reopening of all except three of our hotels as restrictions are removed and demand returns. The timing of fully reopening our remaining suspended hotels will depend primarily on government restrictions imposed or re-imposed, recommendations of health officials and market demand.

We are committed to using our liquidity to support our hotels’ operations during the COVID-19 pandemic and subsequent recovery, while being focused on continuing to maintain and enhance our stockholders’ value.

Note 2: Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

Principles of Consolidation

The unaudited condensed consolidated financial statements reflect our financial position, results of operations and cash flows, in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with U.S. GAAP. In our opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, including normal recurring items, considered necessary for a fair presentation of the interim periods. All significant intercompany transactions and balances within the financial statements have been eliminated.

These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2020 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on February 26, 2021.

7


 

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Interim results are not necessarily indicative of full year performance.

 

Reclassifications

Certain line items on the condensed consolidated statements of comprehensive loss and the condensed consolidated statements of cash flows for the six months ended June 30, 2020 have been reclassified to conform to the current period presentation.

Summary of Significant Accounting Policies

 

Our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 26, 2021, contains a discussion of the significant accounting policies. There have been no significant changes to our significant accounting policies since December 31, 2020.

Note 3: Dispositions and Assets Held for Sale

 

Dispositions

 

In April 2021, we sold the W New Orleans – French Quarter located in New Orleans, LA, for gross proceeds of approximately $24 million and recognized a loss of $1 million, from $1 million in selling costs, which is included in gain on sales of assets, net in our condensed consolidated statements of comprehensive loss. Net proceeds were used to repay $24 million of our outstanding balance under the Revolver. In June 2021, we also sold the Hotel Indigo San Diego Gaslamp Quarter in San Diego, California and the Courtyard Washington Capitol Hill Navy Yard in Washington, D.C. in the same transaction for total gross proceeds of $149 million and recognized a gain of $7 million, net of selling costs, on these hotels, which is included in gain on sales of assets, net in our condensed consolidated statements of comprehensive loss. Net proceeds were used in July 2021 to repay the remaining $13 million of our outstanding balance under the Revolver and $133 million of our term loan facility due in 2024 (“2019 Term Facility”).

In February 2020, we sold the Embassy Suites Washington DC Georgetown and our interests in the entity that owns the Hilton São Paulo Morumbi for total gross proceeds of $208 million and recognized a gain, net of selling costs, of $64 million on these hotels, which is included in gain on sales of assets, net in our condensed consolidated statements of comprehensive loss. Additionally, the net gain includes the reclassification of a currency translation adjustment of $7 million from accumulated other comprehensive loss into earnings concurrent with the sale of the Hilton São Paulo Morumbi.

 

Assets Held for Sale

 

In June 2021, we executed an agreement to sell the Hotel Adagio, Autograph Collection, and the hotel was designated as held for sale in June 2021 as it met all held for sale criteria. The hotel was sold in July 2021 for gross proceeds of $82 million, which was payable in cash at closing and is subject to customary pro rations and adjustments.

 

Assets held for sale related to the Hotel Adagio, Autograph Collection were as follows as of June 30, 2021:

 

 

 

(in millions)

 

Assets:

 

 

 

Property and equipment, net

 

$

77

 

Total Assets Held for Sale

 

$

77

 

 

 

 

 

 

8


 

Note 4: Property and Equipment

Property and equipment were:

 

 

 

June 30, 2021(1)

 

 

December 31, 2020

 

 

 

(in millions)

 

Land

 

$

3,381

 

 

$

3,429

 

Buildings and leasehold improvements

 

 

6,775

 

 

 

6,951

 

Furniture and equipment

 

 

1,025

 

 

 

1,042

 

Construction-in-progress

 

 

48

 

 

 

52

 

 

 

 

11,229

 

 

 

11,474

 

Accumulated depreciation and amortization

 

 

(2,409

)

 

 

(2,281

)

 

 

$

8,820

 

 

$

9,193

 

 

(1)       Excludes $77 million of property and equipment, net classified as held for sale as of June 30, 2021.

 

Depreciation of property and equipment was $71 million and $75 million during the three months ended June 30, 2021 and 2020, respectively, and $144 million and $149 million during the six months ended June 30, 2021 and 2020, respectively.

 

For the three and six months ended June 30, 2021, we recognized $5 million of impairment losses related to one of our hotels classified as held for sale as of June 30, 2021.

 

For the six months ended June 30, 2020, we recognized $88 million of impairment losses, primarily related to one of our hotels, and our inability to recover the carrying value of the asset because of COVID-19.

 

Note 5: Consolidated Variable Interest Entities ("VIEs") and Investments in Affiliates

Consolidated VIEs

We consolidate VIEs that own three hotels in the U.S. We are the primary beneficiary of these VIEs as we have the power to direct the activities that most significantly affect their economic performance. Additionally, we have the obligation to absorb their losses and the right to receive benefits that could be significant to them. The assets of our VIEs are only available to settle the obligations of these entities. Our condensed consolidated balance sheets include the following assets and liabilities of these entities:

 

 

 

June 30, 2021

 

 

December 31, 2020

 

 

 

(in millions)

 

Property and equipment, net

 

$

212

 

 

$

216

 

Cash and cash equivalents

 

 

13

 

 

 

8

 

Restricted cash

 

 

5

 

 

 

2

 

Accounts receivable, net

 

 

3

 

 

 

1

 

Prepaid expenses

 

 

1

 

 

 

1

 

Other assets

 

 

1

 

 

 

1

 

Debt

 

 

208

 

 

 

207

 

Accounts payable and accrued expenses

 

 

7

 

 

 

5