Discontinued Operations

3 Months Ended

Mar. 31, 2014

Discontinued Operations [Abstract]

Discontinued Operations

NOTE 11 – DISCONTINUED OPERATIONS

Effective January 1, 2014, we early adopted ASU Update No. 2014-08 concerning the classification and reporting of discontinued operations.  This amendment defines discontinued operations as a component of an entity that represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.  As a result of the early adoption of ASU Update No. 2014-08, we anticipate that most of our hotel dispositions will not be classified as discontinued operations as most will not fit this definition.

For transactions that have been classified as held for sale or as discontinued operations for periods prior to March 31, 2014, we will continue to present the operating results as discontinued operations in the statements of operations for all applicable periods presented. For the three months ended March 31, 2014, we had one hotel property which was held for sale but did not qualify for presentation as a discontinued operation.  See “Note 2 – Investment In Hotel Properties” for more information on this asset.

Disposed Assets

On September 20, 2013, the Company entered into a purchase and sale agreement to dispose of a portfolio of 16 non-core hotel properties, for an aggregate purchase price of approximately $217,000.  In September 2013, our Board of Trustees authorized management of the Company to sell this portfolio. The 16 non-core hotel properties in the portfolio were acquired by the Company between 1999 and 2010. On December 20, 2013, the Company closed on the sale of 12 of these non-core hotel properties and closed on the remaining four properties in February 2014. The operating results for the 16 assets were reclassified to discontinued operations in the statement of operations for three months ended March 31, 2014 and 2013.  The 16 assets were sold for a total sales price of $217,000 reduced the Company’s consolidated mortgage debt by $78,754 and generated a gain on sale of approximately $31,697, including $138 recorded during the three months ended March 31, 2014 from the closing of the remaining 4 properties.   We also recorded an impairment loss for this transaction of approximately $8,391 in 2013 and the first quarter of 2014, for which the net proceeds did not exceed the carrying value.

On September 17, 2013, the Company closed on the sale of the Holiday Inn Express Camp Springs, MD to an unaffiliated buyer for a total sale price of $8,500 with a gain on sale of approximately $120recognized in 2013. This hotel was acquired by the Company in June 2008. The operating results for this hotel were reclassified to discontinued operations in the statements of operations for the three months ended March 31, 2013. We previously recorded an impairment loss of approximately $3,723 during the second quarter of 2013 as the net proceeds were not expected to exceed the carrying value.

On June 12, 2013, the Company closed on the sale of the Comfort Inn Harrisburg, PA to an unaffiliated buyer for a total sale price of $3,700 with a gain on sale of approximately $442 recognized in 2013.  This hotel was acquired by the Company in September 1999. The operating results for this hotel were reclassified to discontinued operations in the statements of operations for the three months ended March 31, 2013.  

NOTE 11 – DISCONTINUED OPERATIONS (CONTINUED)

Assets held for sale or liabilities related to assets held for sale consisted of the following as of March 31, 2014 and December 31, 2013:

	March 31, 2014		December 31, 2013
Land	$	14,239	$	9,517
Buildings and Improvements		16,907		58,129
Furniture, Fixtures and Equipment		3,502		9,198
		34,648		76,844
Less Accumulated Depreciation & Amortization		(6,317)		(20,261)
Assets Held for Sale	$	28,331	$	56,583
Liabilities Related to Assets Held for Sale	$	18,387	$	45,835

The following table sets forth the components of discontinued operations for the three months ended March 31, 2014 and 2013:

	Three Months Ended March 31,
		2014		2013
Revenue:
Hotel Operating Revenues	$	1,937	$	11,548
Other Revenue		-		32
Total Revenues		1,937		11,580
Expenses:
Hotel Operating Expenses		1,154		8,189
Gain on Insurance Settlements		23		-
Real Estate and Personal Property Taxes and Property Insurance		90		850
General and Administrative		(15)		2
Depreciation and Amortization		-		2,398
Interest Expense		356		1,253
Other Expense		-		3
Total Expenses		1,608		12,695
Income (Loss) from Discontinued Operations	$	329	$	(1,115)

We allocate to income or loss from discontinued operations interest expense related to debt that is to be assumed or that is required to be repaid as a result of the disposal transaction.