NOTE 4 – DEVELOPMENT LOANS RECEIVABLE

Development Loans

Historically, we provided first mortgage and mezzanine loans to hotel developers, including entities in which certain of our executive officers and non-independent trustees own an interest that enabled such entities to construct hotels and conduct related improvements on specific hotel projects. These loans were initially originated as part of our acquisition strategy. During the three and six months ended June 30, 2013, no such loans were originated by us. Interest income from development loans was $12 and $518 and $158 and $1,139 for the three and six months ended June 30, 2013 and 2012, respectively. Accrued interest on our development loans receivable was $0 as of June 30, 2013 and $348 as of December 31, 2012.

As of June 30, 2013 we had no development loans outstanding and as of December 31, 2012, our development loans receivable consisted of the following:


Hotel Property	Borrower		Principal Outstanding June 30, 2013		Principal Outstanding December 31, 2012	Interest Rate		Maturity Date
Operational Hotels
Hyatt 48Lex - New York, NY	44 Lexington Holding, LLC	$	-	$	15,122	9%	⁽¹⁾	N/A	*

Construction Hotels
Hyatt Union Square - New York, NY ⁽²⁾	Risingsam Union Square, LLC		-		13,303	10%		N/A

Total Development Loans Receivable		$	-	$	28,425

* Indicates borrower is a related party

(1) Prior to June 1, 2012, the development loan to 44 Lexington Holding LLC allowed the borrower to elect, quarterly, to pay accrued interest in-kind by adding the accrued interest to the principal balance of the loan. Effective June 1, 2012, we amended the development loan with 44 Lexington Holding LLC to cease the buyer’s election to pay accrued interest in-kind. Interest of $401 was added to principal during the three and six months ended June 30, 2012.

(2) On April 9, 2013, we completed the acquisition of the real property and improvements for Hyatt Union Square hotel in New York, NY from Risingsam Union Square LLC. Consideration given in exchange for the property including $36,000 paid in cash to the seller, the cancellation by the Company of a development loan in the original principal amount of $10,000 and $3,303 of accrued interest on the loan. In addition, the Company paid off the existing construction financing and entered into a new mortgage loan. See “Note 2 –Investment In Hotel Properties” for additional discussion of this transaction.