DISCONTINUED OPERATIONS (Notes)

6 Months Ended

Jun. 30, 2017

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS

On February 28, 2017, we sold our two Sedona hotels in a combined cash transaction to DiamondRock Hospitality Company (“DiamondRock”) for $97.0 million resulting in a gain on sale of $6.8 million (net of selling costs). While the Company was not actively seeking to dispose of these assets, this sale resulted from an unsolicited offer received from a third party. In considering the offer, the Company determined that the price point was favorable to the Company based on review of available market data and elected to proceed with the transaction. In accordance with ASC 205-20, Presentation of Financial Statements-Discontinued Operations, a component of an entity is reported in discontinued operations after meeting the criteria for held for sale classification if the disposition represents a strategic shift that has (or will have) a major effect on the entity's operations and financial results. While the Company intends to continue to remain active in the hospitality industry through continued management of the two hotels located in Sedona, Arizona (“Sedona hotels”), the pursuit of additional hotels to manage, and the active pursuit of hospitality acquisition opportunities, the Company determined that the disposal of the Sedona hotels is required to be treated as discontinued operations accounting presentation under GAAP.

Simultaneous with the sale, DiamondRock engaged the Company to serve as property manager of the hotels for an initial term of five years, subject to standard industry terms. Other than carrying out our responsibilities under the terms of the management agreement, and our obligation to fund certain deferred maintenance items identified at closing for which an accrual has been made, the Company has no continuing involvement in major decisions as it relates to the hotels’ continuing operations. In connection with the sale, the buyer assumed certain related capital lease obligations. The Sedona hotels were reclassified to REO held for sale from operating properties in February 2017.

As such, the historical financial results of the Sedona hotels and the related income tax effects have been presented as discontinued operations for all periods presented of the disposal group and is reported in the balance sheet as assets of discontinued operations, liabilities of discontinued operations and net income (loss) of discontinued operations in the condensed consolidated statements of operations through the date of sale (February 28, 2017).

Balance Sheet

The following table summarizes the carrying amounts of the major classes of assets and liabilities for discontinued operations in the consolidated balance sheets as of June 30, 2017 and December 31, 2016:

	June 30, 2017		December 31, 2016
Assets
Cash and Cash Equivalents	$	425	$	1,747
Funds Held by Lender and Restricted Cash	—		2,063
Operating Properties, net	—		88,734
Other Receivables	153		831
Other Assets	96		737
Total Assets	$	674	$	94,112
Liabilities
Accounts Payable and Accrued Expenses	$	554	$	2,304
Customer Deposits and Funds Held for Others	—		2,170
Notes Payable, Net of Discount	—		49,553
Capital Lease Obligations	—		1,157
Total Liabilities	$	554	$	55,184

Results of Operations

The following table summarizes the results of operations classified as discontinued operations, net of tax, for the three and six months ended June 30, 2017 and 2016. The table below for the three and six months ended June 30, 2017 reflects the financial results for Sedona assets operations from January 1, 2017 through February 28, 2017.

	Three months ended June 30,					Six months ended June 30,
	2017			2016		2017			2016
Revenue	$	3		$	7,866	$	3,425		$	13,231
Expenses:
Operating Property Direct Expenses (exclusive of Interest and Depreciation)	282			5,965		3,998			10,712
Interest Expense	—			1,048		1,075			2,096
Depreciation and Amortization Expense	—			813		278			1,580
Settlement and Related Costs	(56		)	—		129			—
Gain on Disposal of Assets	17			—		(6,791		)	—
Provision for Income Taxes	—			—		—			—
Income (Loss) from Discontinued Operations, Net of Tax	$	(240	)	$	40	$	4,736		$	(1,157	)

Interest expense

The Company allocated interest expense, including amortization of deferred financing fees, to discontinued operations based on the senior mortgage debt that was paid with the proceeds from the sale of the Sedona hotels. The total allocated interest expense for the three and six months ended June 30, 2017 and 2016 is as follows:

	Three months ended June 30,				Six months ended June 30,
	2017		2016		2017		2016
Interest Expense	$	—	$	943	$	628	$	1,885
Amortization of Deferred Financing Fees	—		105		447		211
Total	$	—	$	1,048	$	1,075	$	2,096

Cash Flow Information

The following table presents the total operating and investing cash flows and depreciation, amortization, capital expenditures, and significant operating and investing non-cash items of the discontinued operations for the three and six months ended June 30, 2017 and 2016:

	Three Months ended June 30,				Six Months ended June 30,
	2017		2016		2017		2016
Cash flows from discontinued operating activities:	$	—	$	813	$	278	$	1,580
Depreciation	—		802		274		1,558
Amortization	—		11		4		22
Cash flows from discontinued investing activities:	$	—	$	1,056	$	659	$	4,840
Investment in Real Estate Owned	—		1,056		659		4,840
Non-Cash Investing and Financing Transactions:
Capital Expenditures in Accounts Payable and Accrued Expenses	$	439	$	303	$	461	$	512
Liabilities Assumed in Sale of property	$	—	$	—	$	4,132	$	—