BUSINESS COMBINATION

In October 2017, the Company acquired MacArthur Place for a purchase price of $36.0 million. This acquisition was funded through a combination of Company equity and a loan from MidFirst Bank. Simultaneously with the acquisition of MacArthur Place, a hotel management subsidiary of the Company entered into a five year management agreement to provide hotel and resort management services in exchange for monthly and annual management fees at commercially standard terms. The purchase price was allocated to the identifiable tangible and intangible assets acquired and liabilities assumed based on their fair values. The goodwill of $15.4 million arising from the acquisition resulted largely from expected synergies from combining operations of MacArthur Place and the Company’s hotel management experience, the value of the historic and demographic attributes of MacArthur Place and intangible assets that do not qualify for separate recognition. The goodwill balance was assigned to the Company’s Hospitality and Entertainment segment. Goodwill recognized is expected to be deductible for income tax purposes.

The following table summarizes the consideration paid for MacArthur Place and the fair value of the assets acquired and liabilities assumed as of the acquisition date (in thousands):



Consideration:
Cash	$	16,794
Loan proceeds, net	18,920
Total sources	$	35,714

Fair value of identifiable assets acquired and liabilities assumed:
Land and improvements	$	4,920
Building and improvements	13,650
Property and equipment	1,060
Trade name, customer relationships, and liquor license	990
Cash, receivables, inventory, and other assets	775
Accounts payable and accrued expenses	(217		)
Customer deposit liability	(821		)
Total identifiable net assets	20,357
Goodwill	15,357
Total uses	$	35,714

Acquisition-related costs (included in professional fees, and general & administrative expenses in the consolidated statement of operations for the year ended December 31, 2017)	$	656

The Company acquired tangible assets of land, building, related site improvements, and furniture, fixtures, and equipment. We estimated the fair value of the land using a market comparison approach, adjusted for qualitative and quantitative factors unique to MacArthur Place. We estimated the fair value of the building, related site improvements, and furniture, fixtures, and equipment using the cost approach which utilizes estimated replacement and market costs to estimate fair value. The Company also acquired intangible assets consisting of trade name, customer relationships and goodwill. The estimated fair value of the trade name and customer relationships were valued using the income approach, discounted to present value, on an after-tax basis.

The actual amount of MacArthur Place’s revenue and earnings (losses) included in the Company’s consolidated statement of operations for the year ended December 31, 2017, and the unaudited pro forma revenue and earnings (losses) of the combined entity assuming the acquisition had occurred on January 1, 2017 are as follows (in thousands):



	Revenue		Loss
MacArthur Place from October 2, 2017 - December 31, 2017	$	1,939	$	(1,381	)
Supplemental pro forma for 1/1/2017 - 12/31/2017 (unaudited)	$	12,982	$	(4,318	)

The 2017 supplemental pro forma loss was adjusted to exclude $0.7 million of acquisition-related costs incurred during the year ended December 31, 2017. Revenues and expenses related to property operations classified as discontinued operations have been excluded.