NOTE 2 – INVESTMENT IN HOTEL PROPERTIES

Investment in hotel properties consists of the following at June 30, 2017 and December 31, 2016:



		June 30, 2017		December 31, 2016

Land	$	552,216	$	499,484
Buildings and Improvements		1,615,746		1,383,266
Furniture, Fixtures and Equipment		240,746		204,212
Construction in Progress		1,955		950
		2,410,663		2,087,912

Less Accumulated Depreciation		(358,913)		(320,342)

Total Investment in Hotel Properties	$	2,051,750	$	1,767,570

Acquisitions

We acquired the following properties during the six months ended June 30, 2017:



Hotel	Acquisition Date		Land		Buildings and Improvements		Furniture, Fixtures and Equipment		Other Intangibles			Total Purchase Price		Assumption of Debt
Mystic Marriott Hotel & Spa, Groton, CT (1)	1/3/2017	$	1,420	$	40,440	$	7,240	$	899	*	$	49,999	$	41,333
The Ritz-Carlton, Coconut Grove, FL	2/1/2017		5,185		30,742		1,064		(291)	**		36,700		3,150
The Pan Pacific Hotel, Seattle, WA	2/21/2017		13,079		59,256		6,665		-			79,000		-
The Westin, Philadelphia, PA	6/29/2017		33,048		91,462		10,490		-			135,000		-
TOTAL		$	52,732	$	221,900	$	25,459	$	608		$	300,699	$	44,483

(1) The Mystic Marriott Hotel & Spa was acquired as partial consideration within the transaction to redeem and transfer our joint venture interest in Mystic Partners, LLC. See Note 3 for further description of the transaction.

* Consists entirely of $899 of advanced bookings.

** Includes an intangible asset for a lease-in-place of $229, and a below market lease liability of $520.

The Company is currently finalizing our analysis of the fair value of assets acquired and liabilities incurred in connection with the purchase of the Ritz-Carlton, Coconut Grove and the Westin, Philadelphia. As such, the amounts reported in the table above are preliminary. We expect the amounts will be finalized within the one year remeasurement period as defined within ASC 805.

Acquisition-related costs, such as due diligence, legal and accounting fees, are not capitalized or applied in determining the fair value of the above acquired assets. During the three and six months ended June 30, 2017, we incurred $1,124 and $1,824 in costs related to acquired assets and terminated transactions.

NOTE 2 – INVESTMENT IN HOTEL PROPERTIES (CONTINUED)

The following table illustrates total revenues and total net income included in the consolidated statement of operations for the three and six months ended June 30, 2017 for the hotels we acquired or assumed ownership, including related acquisition costs, during the six months ended June 30, 2017 and consolidated since the date of acquisition of the hotels.



	Three Months Ended June 30, 2017				Six Months Ended June 30, 2017
Hotel		Revenue		Net Income (Loss)		Revenue		Net Income (Loss)
Mystic Marriott Hotel & Spa, Groton, CT	$	5,815	$	871	$	10,152	$	559
The Ritz-Carlton, Coconut Grove, FL		3,490		(159)		6,544		(79)
The Pan Pacific Hotel, Seattle, WA		3,968		313		5,310		(31)
The Westin, Philadelphia, PA		29		(1,012)		29		(1,012)

Total	$	13,302	$	13	$	22,035	$	(563)

Hotel Dispositions

In July 2016, we entered into purchase and sale agreements to sell the Residence Inn, Greenbelt, MD, Courtyard, Alexandria, VA, Hyatt House, Scottsdale, AZ, Hyatt House, Pleasant Hill, CA, and Hyatt House, Pleasanton, CA to an unaffiliated buyer for a sales price of $185,000. The purchase and sale agreements were amended subsequently to increase the total sales price by $7,500 in exchange for providing the buyer with an extension to close on three of the assets.

On January 5, 2017, the Company closed on the sales of the Residence Inn, Greenbelt, MD, and the Courtyard, Alexandria, VA to an unaffiliated buyer for a combined total sales price of $62,000 resulting in a gain on sale of approximately $18,731. The Residence Inn, Greenbelt, MD was acquired by the Company in July 2004 and the Courtyard, Alexandria, VA was acquired by the Company in September 2006. The operating results for these hotels are included in operating income as shown in the consolidated statements of operations for the period owned during the six months ended June 30, 2017 and 2016 as disposition of these hotels does not represent a strategic shift in our business.

On June 8, 2017, the Company closed on the sale of the Hyatt House, Scottsdale, AZ, Hyatt House, Pleasant Hill, CA, and Hyatt House, Pleasanton, CA to an unaffiliated buyer for a sales price of $130,500 resulting in a gain on sale of approximately $70,852. All three of the properties were acquired by the Company in December 2006. The operating results for these hotels are included in operating income as shown in the consolidated statements of operations for the period owned during the three and six months ended June 30, 2017 and 2016 as disposition of these hotels does not represent a strategic shift in our business.

NOTE 2 – INVESTMENT IN HOTEL PROPERTIES (CONTINUED)

Assets Held For Sale

The table below shows the balances classified as assets held for sale as of December 31, 2016:



	December 31, 2016

Land	$	22,208
Buildings and Improvements		105,663
Furniture, Fixtures and Equipment		24,187
		152,058

Less: Accumulated Depreciation & Amortization		(53,585)

Assets Held for Sale	$	98,473

Liabilities Related to Assets Held for Sale	$	51,428

NOTE 2 – INVESTMENT IN HOTEL PROPERTIES (CONTINUED)

Pro Forma Results (Unaudited)

The following condensed pro forma financial data for the three and six months ended June 30, 2017 and 2016 are presented as if the hotels acquired by the Company in 2017 and 2016 had been acquired as of January 1, 2017 and 2016, respectively. The condensed pro forma financial data are not necessarily indicative of what actual results of operations of the Company would have been for the periods presented assuming the acquisitions had been consummated on January 1, 2017 and 2016, nor do they purport to represent the results of operations for future periods.



	Three Months Ended June 30,					Six Months Ended June 30,
	2017		2016		2017		2016
Pro Forma Total Revenues	$	146,680		148,990	$	264,021	$	276,571

Pro Forma Net Income		89,029		116,167		116,549		109,759
Income Allocated to Noncontrolling Interest		(5,017)		(4,806)		(6,289)		(4,209)
Preferred Distributions		(6,042)		(4,000)		(12,084)		(7,589)
Extinguishment of Issuance Costs Upon Redemption of Series B Preferred Shares		-		(4,021)				(4,021)
Pro Forma Income Applicable to Common Shareholders	$	77,970	$	103,341	$	98,176	$	93,940

Pro Forma Income Applicable to Common Shareholders per Common Share
Basic	$	1.87	$	2.38	$	2.35	$	2.14
Diluted	$	1.85	$	2.36	$	2.33	$	2.12

Weighted Average Common Shares Outstanding
Basic		41,737,044		43,427,726		41,727,056		43,903,526
Diluted		42,207,841		43,863,577		42,201,126		44,384,969