Investment in Hotel Properties (Tables)

12 Months Ended

Dec. 31, 2014

Schedule of investment in hotel properties

Investment in hotel properties, net consisted of the following (in thousands):


	December 31,
	2014		2013
Land	$	570,011	$	439,304
Buildings and improvements		3,237,596		2,977,458
Furniture, fixtures and equipment		450,057		414,192
Intangibles		147,947		171,889
Franchise fees		1,167		1,346
Construction in process		68,275		34,643
		4,475,053		4,038,832
Accumulated depreciation and amortization		(936,924)		(807,450)
	$	3,538,129	$	3,231,382

Schedule of fair values of assets acquired, liabilities assumed and equity issued in hotel acquisition

The following table summarizes the fair values of assets acquired, liabilities assumed and equity issued in this acquisition (in thousands):


Assets:
Investment in hotel properties	$	327,035
Accounts receivable		3,122
Inventory		75
Prepaid expenses		238
Other assets		150
Total assets acquired		330,620

Liabilities:
Accounts payable		3,534
Accrued payroll and employee benefits		142
Other current liabilities		1,371
Other liabilities		15
Total liabilities assumed		5,062

Total equity issued directly to seller		60,000

Total cash paid for acquisition	$	265,558

Schedule of acquired finite lived intangible assets

Details of the intangibles acquired are as follows (in thousands):


	Value at		Weighted Average
	Acquisition		Expected Life
Advanced bookings	$	4,207	41 months
Above/(Below) market lease agreements, net		15	1 month
In-place lease agreements		686	3 to 14 months
Total intangibles related to the 2014 acquisition		4,908	44 to 55 months
Accumulated amortization		(533)
Net book value of intangibles related to 2014 acquisition	$	4,375

Schedule of amortization expense related to acquisitions

During the year ended December 31, 2014, the Company recorded amortization expense related to its Marriott Wailea intangibles as follows (in thousands):


	2014
Advanced bookings	$	481
Above/(Below) market lease agreements, net		(21)
In-place lease agreements		73
Total amortization expense on intangibles related to the 2014 acquisition	$	533

Effects of acquisitions on results of operations

In the Company’s opinion, all significant adjustments necessary to reflect the effects of the acquisitions have been made (in thousands, except per share data):


	2014		2013		2012
Revenues	$	1,175,367	$	1,100,354	$	1,063,094

Income available (loss attributable) to common stockholders from continuing operations	$	74,811	$	19,931	$	(9,742)

Income (loss) per diluted share available (attributable) to common stockholders from continuing operations	$	0.39	$	0.12	$	(0.08)

Schedule Of Finite And Indefinite Lived Intangible Assets Included in Investment in Hotel Properties

As of December 31, 2014 and 2013, intangible assets included in the Company’s investment in hotel properties, net consisted of the following (in thousands):


	2014		2013
Advanced bookings (1)	$	10,621	$	35,154
Easement agreement (2)		9,727		9,727
Ground/air lease agreements (3)		121,850		121,850
In-place lease agreements (4)		6,795		6,223
Above/(below) market lease agreements, net (5)		(3,896)		(3,915)
Below market management agreement (6)		2,850		2,850
		147,947		171,889
Accumulated amortization		(22,453)		(44,426)
	$	125,494	$	127,463

Schedule of amortization expense on intangible assets included in investment in hotel properties

Amortization expense on these intangible assets for the years ended December 31, 2014, 2013 and 2012 consisted of the following (in thousands):


	2014		2013		2012
Advanced bookings (1)	$	1,769	$	4,560	$	14,824
Ground/air lease agreements (3)		4,113		4,113		4,113
In-place lease agreements (4)		830		454		348
Above/(below) market lease agreements, net (5)		(304)		(148)		(6)
Below market management agreement (6)		469		469		212
	$	6,877	$	9,448	$	19,491

(1)

Advanced bookings consist of advance deposits related to the purchases of the Boston Park Plaza, the Hyatt Regency San Francisco, and the Marriott Wailea. The contractual advanced hotel bookings were recorded at a discounted present value based on estimated collectability, and are amortized using the straight-line method based over the periods the amounts are expected to be collected. The amortization expense for contractual advanced hotel bookings is included in depreciation and amortization expense in the Company’s consolidated statements of operations. The amounts will be fully amortized for the Boston Park Plaza, the Hyatt Regency San Francisco and the Marriott Wailea by June 2018, December 2017 and July 2018, respectively.

(2)

The Easement agreement at the Hilton Times Square was valued at fair value at the date of acquisition. The Hilton Times Square easement agreement has an indefinite useful life, and, therefore, is not amortized. This non-amortizable intangible asset is reviewed annually for impairment and more frequently if events or circumstances indicate that the asset may be impaired. If a non-amortizable intangible asset is subsequently determined to have a finite useful life, the intangible asset will be written down to the lower of its fair value or carrying amount and then amortized prospectively, based on the remaining useful life of the intangible asset.

(3)

Ground/air lease agreements at the Doubletree Guest Suites Times Square, the Hilton Times Square and the JW Marriott New Orleans were valued at fair value at the dates of acquisition. The agreements are amortized using the straight-line method over the remaining non-cancelable terms of the related agreements, which range from between approximately 22 and 76 years as of December 31, 2014. The amortization expense for the agreements is included in property tax, ground lease and insurance expense in the Company’s consolidated statements of operations.

(4)

In-place lease agreements at the Boston Park Plaza, the Doubletree Guest Suites Times Square, the Hilton New Orleans St. Charles, the Hilton San Diego Bayfront, the Hyatt Regency San Francisco and the Marriott Wailea, were valued at fair value at the dates of acquisition. The agreements are amortized using the straight-line method over the remaining non-cancelable terms of the related agreements, which range from between approximately two months and 13 years as of December 31, 2014. The amortization expense for the agreements is included in depreciation and amortization expense in the Company’s consolidated statements of operations.

(5)

The above/(below) market lease agreements, net consist of unfavorable tenant lease liabilities at the Boston Park Plaza, the Hilton Garden Inn Chicago Downtown/Magnificent Mile, the Hyatt Regency San Francisco and the Marriott Wailea, and favorable tenant lease assets at the Hilton New Orleans St. Charles, the Hyatt Regency San Francisco and the Marriott Wailea. These agreements were valued at fair value at the dates of acquisition, and are amortized using the straight-line method over the remaining non-cancelable terms of the related agreements, which range from between approximately two months and 17 years as of December 31, 2014. The amortization expense for the agreements is included in other operating revenue in the Company’s consolidated statements of operations.

(6)

The below market management agreement at the Hilton Garden Inn Chicago Downtown/Magnificent Mile was valued at fair value at the acquisition date. The agreement is comprised of two components, one for the management of the Hilton Garden Inn Chicago Downtown/Magnificent Mile, and the other for the potential management of a future hotel. The agreement is amortized using the straight-line method over the remaining non-cancelable terms of the two components, approximately 3 and 8 years each as of December 31, 2014. The amortization expense for the agreement is included in property general and administrative expense in the Company’s consolidated statements of operations.

Schedule of amortization expense for next five years

For the next five years, amortization expense for the intangible assets noted above is expected to be as follows (in thousands):


2015	$	7,334
2016	$	7,239
2017	$	7,206
2018	$	5,673
2019	$	4,341