Favorable Lease Assets

In connection with the acquisition of certain hotels, we have recognized intangible assets for favorable ground leases and tenant leases. Our favorable lease assets, net of accumulated amortization of $2.7 million and $3.0 million as of March 31, 2015 and December 31, 2014, respectively, consist of the following (in thousands):



	March 31, 2015		December 31, 2014
Westin Boston Waterfront Hotel Ground Lease	$	18,239	$	18,293
Westin Boston Waterfront Hotel Lease Right	9,045		9,045
Hilton Minneapolis Ground Lease	5,741		5,760
Lexington Hotel New York Tenant Leases	209		1,031
Hilton Boston Downtown Tenant Leases	104		145
	$	33,338	$	34,274

Favorable lease assets are recorded at the acquisition date and are generally amortized using the straight-line method over the remaining non-cancelable term of the lease agreement. Amortization expense for the three months ended March 31, 2015 was approximately $0.2 million.

We own a favorable lease asset related to the right to acquire a leasehold interest in a parcel of land adjacent to the Westin Boston Waterfront Hotel for the development of a 320 to 350 room hotel (the “lease right”). The option expires in 2016. We do not amortize the lease right but review the asset for impairment annually or at interim periods if events or circumstances indicate that the asset may be impaired. If we elect not to exercise the option at or before its expiration, the balance of the lease right will be written off in accordance with U.S. GAAP. No impairment loss was recorded for the three months ended March 31, 2015 or 2014. The fair value of the lease right is a Level 3 measurement under the fair value hierarchy (see Note 2) and is derived from a discounted cash flow model using the favorable difference between the estimated participating rents or actual rents in accordance with the lease terms and the estimated market rents. The discount rate is estimated using a risk adjusted rate of return, the estimated participating rents are estimated based on a hypothetical hotel comparable to our Westin Boston Waterfront Hotel, and market rents are based on comparable long-term ground leases in the City of Boston.

During the three months ended March 31, 2015, we evaluated the Lexington Hotel New York favorable tenant leases for recoverability of the carrying value. We expect the lease with one of the retail tenants at the Lexington Hotel New York to terminate during the second quarter of 2015, which is prior to the end of the lease term. We reviewed the favorable lease asset for impairment and concluded that the asset was not realizable and recorded an impairment loss of $0.8 million during the three months ended March 31, 2015.