DISCONTINUED OPERATIONS.

On February 28, 2017, we sold the 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). The Company was not actively seeking to dispose of these assets and this sale resulted from an unsolicited offer we received from DiamondRock. 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 has remained active in the hospitality industry through the active pursuit of hospitality acquisition and management opportunities, the Company determined that the disposal of the Sedona hotels is required to be treated as discontinued operations accounting presentation under GAAP.

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 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 December 31, 2016:



	December 31, 2016
Assets
Cash and cash equivalents	$	1,747
Funds held by lender and restricted cash	2,063
Operating properties, net	88,734
Other receivables	831
Other assets	737
Total assets	$	94,112

Liabilities
Accounts payable and accrued expenses	$	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	$	55,184

Results of Operations

The following table summarizes the results of operations classified as discontinued operations, net of tax, for the years ended December 31, 2017 and 2016. The table below for the years ended December 31, 2017 reflects the financial results for Sedona assets operations from January 1, 2017 through February 28, 2017.



	Years Ended December 31,
	2017			2016

Revenue	$	3,425		$	28,248

Expenses:
Operating property direct expenses (exclusive of interest and depreciation)	4,034			22,084
Interest expense	1,075			4,227
Depreciation and amortization expense	278			3,281
Settlement and related costs	(159		)	—
Total operating expenses	5,228			29,592

Gain on disposal of assets	(6,837		)	—
Provision for income taxes	(1,963		)	—
Income (Loss) from discontinued operations, net of tax	$	3,071		$	(1,344	)

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 years ended December 31, 2017 and 2016 is as follows:



	Years Ended December 31,
	2017		2016
Interest expense	$	628	$	3,806
Amortization of deferred financing fees	447		421
Total	$	1,075	$	4,227

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 years ended December 31, 2017 and 2016:



	Years Ended December 31,
	2017		2016

Cash flows from discontinued operating activities:	$	278	$	3,282
Depreciation	274		3,237
Amortization	4		45

Cash flows from discontinued investing activities:	$	649	$	5,588
Investment in real estate owned	649		5,588

Non-cash investing and financing transactions:
Capital expenditures in accounts payable and accrued expenses	$	—	$	6
Liabilities assumed in sale of property	$	—	$	—