LONG BEACH HOTEL PROPERTIES, LLC

CONSOLIDATED BALANCE SHEETS

	December 31,
	2012		2011
ASSETS
Investments in hotels, net	$	60,680,200	$	62,754,900
Cash	1,272,100		2,903,900
Restricted cash	754,400		428,900
Accounts receivable, net	867,000		858,700
Notes receivable	1,390,800		1,469,400
Prepaid expenses and other assets	388,200		385,800
Prepaid ground leases	6,514,300		6,623,700
Deferred franchise fees, net	28,600		32,300
Deferred loan costs, net	191,700		293,000
TOTAL ASSETS	$	72,087,300	$	75,750,600

LIABILITIES AND CAPITAL
Debt	$	46,148,100	$	46,282,500
Accounts payable	371,600		573,800
Advance deposits	352,300		359,200
Accrued expenses and other payables	1,738,100		1,403,300
TOTAL LIABILITIES	48,610,100		48,618,800

Commitments and contingencies (Note 13)	-		-

CAPITAL	23,477,200		27,131,800

TOTAL LIABILITIES AND CAPITAL	$	72,087,300	$	75,750,600

See Notes to Consolidated Financial Statements.

Exhibit 99.2 — 3

LONG BEACH HOTEL PROPERTIES, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS

				Period from May 5,
				2011 (Acquisition)
	Year Ended			through
	December 31, 2012			December 31, 2011
REVENUES
Rooms	$	14,726,800		$	9,021,500
Food and beverage	6,655,200			4,239,000
Other income	1,045,500			618,500
TOTAL REVENUES	22,427,500			13,879,000

OPERATING EXPENSES
Rooms	4,257,300			2,557,500
Food and beverage	5,251,700			3,200,700
Other operating expenses	179,600			82,400
General & administrative	1,746,700			1,069,900
Repairs & maintenance	1,046,400			595,200
Utilities	589,100			468,200
Marketing	1,876,400			1,170,600
Management fees	950,000			324,000
Property taxes & insurance	1,436,600			719,100
Depreciation	3,081,700			2,100,300
	20,415,500			12,287,900

OTHER OPERATING EXPENSES
Professional fees & other expenses	56,300			1,231,700
Property expenses	193,500			128,900
TOTAL OTHER OPERATING EXPENSES	249,800			1,360,600
OPERATING INCOME	1,762,200			230,500

OTHER INCOME AND (EXPENSES)
Interest income	80,300			67,000
Interest and loan cost expenses	(3,194,100		)	(2,272,700		)
Loss on extinguishment of debt	(235,600		)	-
	(3,349,400		)	(2,205,700		)

LOSS FROM OPERATIONS BEFORE INCOME TAXES	(1,587,200		)	(1,975,200		)
Benefit (provision) for income taxes	42,400			(4,900		)
NET LOSS	$	(1,544,800	)	$	(1,980,100	)

See Notes to Consolidated Financial Statements.

Exhibit 99.2 — 4

LONG BEACH HOTEL PROPERTIES, LLC

CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE LOSS

				Period from May 5,
				2011 (Acquisition)
	Year Ended			through
	December 31, 2012			December 31, 2011
Net Loss	$	(1,544,800	)	$	(1,980,100	)
Other Comprehensive Loss:
Unrealized loss on derivative instruments	(33,900		)	-
Comprehensive Loss	$	(1,578,700	)	$	(1,980,100	)

See Notes to Consolidated Financial Statements.

Exhibit 99.2 — 5

LONG BEACH HOTEL PROPERTIES, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL

For the year ended December 31, 2012 and for the period from acquisition (May 5, 2011) to December 31, 2011

							Accumulated
							Other
	Contributed				Accumulated		Comprehensive
	Capital		Distributions		Deficit		Loss		Total
Balance at May 5, 2011 (Acquisition)	$	56,680,600	$	(19,589,800)	$	(7,243,900)	$	-	$	29,846,900

Net loss	-		-		(1,980,100)		-		(1,980,100)

Distributions	-		(735,000)		-		-		(735,000)

Balance at December 31, 2011	56,680,600		(20,324,800)		(9,224,000)		-		27,131,800

Net loss	-		-		(1,544,800)		-		(1,544,800)

Distributions	-		(2,075,900)		-		-		(2,075,900)

Other Comprehensive Loss:
Change in unrealized loss on derivative instruments	-		-		-		(33,900)		(33,900)

Balance at December 31, 2012	$	56,680,600	$	(22,400,700)	$	(10,768,800)	$	(33,900)	$	23,477,200

See Notes to Consolidated Financial Statements.

Exhibit 99.2 — 6

LONG BEACH HOTEL PROPERTIES, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

			Period from May 5,
	Year Ended		2011 (Acquisition) to
	December 31, 2012		December 31, 2011
Cash Flows from Operating Activities
Net loss	$	(1,544,800)	$	(1,980,100)
Adjustments to net loss:
Depreciation	3,081,700		2,100,300
Amortization of deferred loan costs	99,700		86,400
Amortization of prepaid ground leases	109,400		72,900
Amortization of deferred franchise fees	3,700		2,500
Loss on extinguishment of debt	235,600		-
Changes in assets and liabilities:
Due to affiliate	-		-
Accounts receivable	(8,300)		(101,100)
Prepaid expenses and other assets	3,200		747,200
Accounts payable	(202,200)		(170,600)
Accrued expenses and other payables	334,800		155,800
Advance deposits	(6,900)		14,400
Net Cash Provided by Operating Activities	2,105,900		927,700

Cash Flows from Investing Activities
Improvements and additions to investments in hotels	(1,007,000)		(327,100)
Principal payments received from notes receivable	105,100		65,700
Interest payments received from notes receivable	53,500		102,400
Accrued interest on notes receivable	(80,000)		(66,600)
Funds placed in escrow	(325,500)		(179,600)
Net Cash Used in Investing Activities	(1,253,900)		(405,200)

Cash Flows from Financing Activities
Prepayment of mortgage principal	(14,670,900)		-
Proceeds from mortgage financing	15,000,000		-
Payment of financing costs	(234,000)		-
Purchase of interest rate cap	(39,500)		-
Scheduled payments of mortgage principal	(463,500)		(356,600)
Cash distributions to members	(2,075,900)		(735,000)
Net Cash Used in Financing Activities	(2,483,800)		(1,091,600)

Decrease in cash and cash equivalents	(1,631,800)		(569,100)
Cash and cash equivalents, beginning of year	2,903,900		3,473,000

Cash and Cash Equivalents, End of Year	$	1,272,100	$	2,903,900

Supplemental Disclosure of Cash Flow Information
Interest paid	$	2,906,300	$	2,110,600
Income taxes paid	$	800	$	800

See Notes to Consolidated Financial Statements.

Exhibit 99.2 — 7

LONG BEACH HOTEL PROPERTIES, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1. Nature of Operations and Principles of Consolidated Financial Statements

Long Beach Hotel Properties, LLC (the “Company”) was incorporated on June 26, 2007 under the laws of the State of California and shall continue until terminated or by operation of law.

The Company owns two hotels in Long Beach, California, through its wholly-owned subsidiaries, Queensbay Hotel, LLC (“Queensbay”) operating as The Hotel Maya, a Doubletree by Hilton (“The Hotel Maya”), and Portside Partners, LLC (“Portside”) operating as Residence Inn by Marriott (“Residence Inn”). The Company’s managing member is Ensemble Hotel Partners, LLC (“EHP”). Profit and loss allocations for the Company are based on the terms of the operating agreement.

CWI Contribution Agreement

On May 5, 2011, the Company entered into a contribution agreement with CWI Long Beach Hotels, LLC (“CWI”). In exchange for approximately $19,699,000, CWI received a 49% interest in the Company. The original membership interests in the Company were distributed to the original members who, in turn, formed LBHP-Ensemble Partners, LLC (“LEP”) and LEP was then admitted as a 51% member of the Company. CWI’s investment was made in the form of preferred equity interest that carries a cumulative preferred dividend of 9.5% per year and is senior to EHP’s equity interest. CWI has the option to acquire an additional 1% interest in the Company for $402,000 upon meeting the requirements of a qualified real estate investor and receiving written confirmation of such from the residence mortgage lender. Management has determined there was not a change in control of the Company as a result of CWI’s investment and that the transaction did not constitute a business combination. Accordingly the Company’s consolidated financial statements were not subject to a step-up in basis at the time of CWI’s investment.

In connection with CWI’s investment, the Company elected to treat a corporate subsidiary, Long Beach Hotel Operator, Inc. (the “Operator”) which engages in hotel operations as a taxable REIT subsidiary (“TRS”). A TRS is subject to corporate federal income taxes. The TRS provides for income taxes in accordance with Accounting Standards Codification (“ASC”) Topic 740 Income Taxes.

The Hotel Maya

The Hotel Maya was purchased for approximately $11,531,300 in March 2005 and has 199 guest rooms. The hotel operates under a franchise agreement from Doubletree Franchise, LLC (Note 7). The Hotel Maya operates as a full service hotel with indoor and outdoor meeting and banquet space. There is also a water parcel with an operating marina. The primary customers include leisure transient guests, business travelers and group and wedding attendees.

Residence Inn

The Residence Inn was developed collaboratively by EHP and Ensemble Real Estate Services, LLC, an affiliate of EHP. The Residence Inn, placed in service in May 2009, has 178 suites and is a limited service, extended stay hotel operating under a franchise agreement from Residence Inn by Marriott, LLC (“Marriott”) (Note 6). The Residence Inn customer base includes primarily business travelers, extended stay guests and some leisure guests.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

In accordance with Rule 3-09 of Regulation S-X, full financial statements of significant equity investments are required to be presented in the annual report of the investor. For purposes of S-X 3-09, the investee’s separate annual financial statements should only depict the period of the fiscal year in which it was accounted for by the equity method by the investor. Accordingly, the accompanying consolidated financial statements have been prepared for the period from May 5, 2011 (date of CWI’s acquisition) to December 31, 2011 and for the year ended December 31, 2012.

Principles of Consolidation

The accompanying consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts have been eliminated in consolidation.

Reclassification

Certain prior year assets and expenses have been reclassified to conform to the current year presentation. These reclassifications had no impact on net loss for the periods presented.

Exhibit 99.2 — 8

LONG BEACH HOTEL PROPERTIES, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less, at the time of purchase, to be cash equivalents. Cash and cash equivalents include amounts in non-interest bearing checking accounts and an interest-bearing money market account.

Accounts Receivable, Net

Accounts receivable is primarily comprised of receivables related to hotel guests and is presented net of an allowance for doubtful accounts. The Company provides for a reserve at the time collectability is considered doubtful. As of December 31, 2012 and 2011, allowance for doubtful accounts was $0 and $2,900, respectively. As of December 31, 2012 and 2011, accounts receivable also includes amounts due from Marriott totaling $343,800 and $358,100, respectively.

Prepaid Expenses and Other Assets

Prepaid expenses include prepaid insurance, prepaid property taxes and other prepaid expenses. As of December 31, 2012 and 2011, prepaid expenses totaled $170,000 and $247,500, respectively. As of both December 31, 2012 and 2011, other assets include due from affiliates totaling $61,000, inventories totaling $77,200 and $77,300, respectively, and derivative instruments of $5,600 and $0, respectively. Inventories consist of food, beverage and supplies and are stated at lower of cost (first-in, first-out) or market.

Restricted Cash

Restricted cash represents monthly deposits to cover costs of replacements, renewals and additions to furniture, fixtures, and equipment and routine capital expenditures (“FF&E Reserve”) as required by the management agreement with Marriott (Note 6).

Notes Receivable

Notes receivable includes accrued interest. Interest is recognized as earned (Note 3).

Investments in Hotels

The investments in hotels are stated at cost less accumulated depreciation. The book value of property and equipment, acquired through a purchase, are based upon the allocation of the purchase price at the time of acquisition. All other additions are stated at cost. Property, plant and equipment are depreciated on the straight-line method over the following estimated useful lives:

Buildings and improvements		10 to 39 years
Furniture, fixtures and equipment		3 to 7 years

Expenditures for maintenance and repairs are expensed as incurred. Upon sale, retirement or other disposal, the asset cost and related accumulated depreciation are removed from the accounts, and the net amount less any proceeds is charged or credited to income.

The Company assesses the fair value of acquired real estate assets (including land, buildings, site improvements, above- and below-market leases, origination costs, acquired in-place leases, other identified intangible assets and assumed liabilities) in accordance with ASC 805, “Business Combinations,” and allocates the fair value to the acquired assets and assumed liabilities. The Company assesses and considers fair value based on estimated cash flow projections that utilize discount and/or capitalization rates that are deemed appropriate, as well as available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known and anticipated trends, and market and economic conditions.

Impairment

The carrying value of long-lived assets including hotels and capitalized development costs are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the individual investments may not be recoverable. An impairment charge is recognized when estimated future cash flows (undiscounted and without interest charges) are less than the carrying amount of the investments. The estimation of future cash flows is inherently uncertain and relies to a

Exhibit 99.2 — 9

LONG BEACH HOTEL PROPERTIES, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

considerable extent on assumptions regarding current and future economics and market conditions and the availability of capital. If, in future periods, there are changes in the estimates or assumptions incorporated into the impairment review analysis, the changes could result in an adjustment to the carrying amount of the Company’s long-lived assets. To the extent that an impairment has occurred, the excess of the carrying amount of the long-lived assets over its estimated fair value will be charged to income. During the year ended December 31, 2012 and for the period from acquisition through 2011, management believed there was no impairment of the carrying value of its long-lived assets.

Deferred Franchise Fees

Initial franchise fees are capitalized and amortized over the term of the agreement on a straight-line basis and are reflected as a component of other expenses. The initial franchise fee for the Doubletree by Hilton franchise, commencing November 1, 2010, was $37,500. The net carrying amount of deferred franchise fees was $28,600 and $32,300 at December 31, 2012 and 2011, respectively. Deferred franchise fees expense was $3,700 for the year ended December 31, 2012 and $2,500 for the period from May 5, 2011 through December 31, 2011 and is reflected as a component of Marketing in the accompanying consolidated statements of operations (Note 7).

Deferred Financing Costs

Financing costs are deferred and expensed over the term of the loan using the straight-line method which approximates the effective interest method. In June 2012, the Company refinanced the mortgage loan related to the Hotel Maya. At that time, the unamortized loan costs related to the retired loan, aggregating $235,600, were written off. Loan costs of $233,900 related to the new loan were recorded as deferred loan costs. The net carrying amount of deferred loan costs were $191,700 and $293,000 at December 31, 2012 and 2011, respectively. For the year ended December 31, 2012 and the period from May 5, 2011 through December 31, 2011, loan cost amortization expense amounted to $99,600 and $86,400, respectively, and is reflected as a component of Interest and loan cost expenses in the accompanying consolidated statements of operations.

Derivative Instruments

We measure derivative instruments at fair value and record them as assets or liabilities, depending on our rights or obligations under the applicable derivative contract. Derivatives that are not designated as hedges must be adjusted to fair value through earnings. For a derivative designated and that qualified as a cash flow hedge, the effective portion of the change in fair value of the derivative is recognized in Other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value is immediately recognized in earnings.

Prepaid Ground Leases

On December 31, 2010, the Company entered into a contribution agreement with QW Land Holding Company, LLC (“QWL”), to assign the Queensbay ground sublease and Portside ground sublease to Queensbay and Portside, respectively. The prepaid ground leases are expensed on a straight-line basis over the term of the lease (60 - 62 years). Ground lease amortization expense was $109,500 and $72,900 for the year ended December 31, 2012 and the period from May 5, 2011 through December 31, 2011, respectively, and is included in Property expenses in the accompanying consolidated statements of operations.

Advance Deposits

The Company defers advances received for group reservations, weddings and other events. Advance deposits for group reservations, weddings and other events was $352,300 and $359,200 at December 31, 2012 and 2011, respectively. The Company will recognize the related revenue when occupancy or the event occurs, or when an advance deposit is forfeited.

Income Taxes

For tax purposes, there are two separate filing entities – the Company and the Operator, a TRS. The Company has elected to be treated as a partnership for federal and state income tax purposes. Taxable income or loss will be allocated in accordance with the operating agreement to the individual members. The Company is subject to the applicable state limited liability company fee. Any penalties or interest incurred in relation to filing respective tax returns will be paid by the Company.

The Operator operates as a TRS, and it is, therefore, subject to corporate federal income tax.

Exhibit 99.2 — 10

LONG BEACH HOTEL PROPERTIES, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Management is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. For tax positions meeting the more likely than not threshold, the tax amount recognized in the financial statements is reduced by the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant taxing authority. Management has determined that no such reserves were required at December 31, 2012 and 2011.

Revenue Recognition

The Company recognizes room rental, food and beverage and other revenues as the related services are provided. Sales and occupancy taxes collected from customers submitted to taxing authorities are not recorded in revenue.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash deposited with financial institutions in excess of amounts insured by the Federal Deposit Insurance Corporation. The Company believes it places cash balances with quality financial institutions, which limits its credit risk.

Diversification Risk

The assets of the Company are concentrated in the real estate sector. Accordingly, the Company’s investments may be subject to more rapid change in value than would be the case if the Company were to maintain a wide diversification among investments or industrial sectors. Furthermore, even within the real estate sector, the investment portfolio is concentrated in terms of geography and type of real estate investment. This lack of geographic diversification may also subject the investments of the Company to more rapid change in value than would be the case if the assets of the Company were more widely diversified.

Note 3. Notes Receivable

Portside entered into a Transient Occupancy Tax (“TOT”) Reimbursement Agreement with the City of Long Beach (“the City”) on July 16, 2008. In connection with soil improvement work performed on the property subleased by Portside, the City executed an agreement for a refund of Portside’s TOT not to exceed $1,500,000. The agreement commenced October 1, 2009 and accrues interest at 7% per annum. On October 1, 2009, per the agreement, the City reimbursed an amount equal to 25% of the total TOT revenue paid to the City by Portside during the previous year. Annually, thereafter, the City must make principal payments of $150,000 and interest payments on all interest accrued to date, but not to exceed 25% of the annual TOT revenue paid by Portside to the City. The agreement terminates on October 1, 2018, at which time the remaining unpaid principal and interest must be paid in full or the terms of the agreement must be extended until all outstanding principal and interest is paid to Portside. The note is unsecured and Portside has the right to assign its interest in the agreement to any person or entity which legally succeeds to the interests of Portside under the sublease, in accordance with all transfer requirements contained in the sublease. The balance on the note, including interest, was $1,302,800 and $1,381,400 at December 31, 2012 and 2011, respectively.

Also included in notes receivable at both December 31, 2012 and 2011 is $88,000 in working capital advances made to Marriott as part of the Company’s management agreement (Note 6). The receivable is non-interest bearing and is due upon termination of the management agreement.

Exhibit 99.2 — 11

LONG BEACH HOTEL PROPERTIES, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 4. Investments in Hotels

Investments in hotels consist of the following:

	December 31, 2012			December 31, 2011
Buildings and improvements	$	63,821,900		$	63,052,600
Furniture, fixtures and equipment	10,036,100			9,798,400
	73,858,000			72,851,000
Less accumulated depreciation	(13,177,800		)	(10,096,100		)
Net investments in hotels	$	60,680,200		$	62,754,900

Depreciation expense for the year ended December 31, 2012 and for the period from May 5, 2011 through December 31, 2011 was $3,081,700 and $2,100,300, respectively.

Note 5. Rental Income

The Company subleased a portion of its land, the space commonly known as “Water Parcel IV,” a commercial water area located on Queensbay’s property, to Harbor Light Landing, LLC (“Subtenant”). The Subtenant pays rent based on 10% of gross mooring, slip rental revenue and other similar water parcel operations and 5% of gross charter, group, yacht club membership, corporate and other similar office operations. The sublease terminates March 31, 2020. Rental income related to the sublease for the year ended December 31, 2012 and for the period from May 5, 2011 through December 31, 2011 was $23,400 and $29,400, respectively, and is reflected in Food & beverage and other income in the accompanying consolidated statements of operations.

Note 6. Management Fees

The Hotel Maya

In May 2011, the Company entered into a management agreement with EHP to manage The Hotel Maya’s operations. The management agreement is for a seven-year term, with automatic one year renewal terms. The management fee is 3% of total revenues paid monthly in arrears. Management fees for the year ended December 31, 2012 were $437,000, and are reflected in Management fees in the accompanying consolidated statements of operations. No management fees were incurred for the period from May 5, 2011 through December 31, 2011 due to a negotiation with CWI to waive management fees through December 31, 2011.

Residence Inn

Marriott manages the Residence Inn property. Under the management agreement with Marriott, effective May 11, 2007 and amended March 23, 2009, the Company pays monthly management fees equal to the base management fee (6% of Residence Inn’s gross revenue from June 2009 through August 2011 and 7% from September 2011 onward) and an incentive management fee based on Residence Inn’s Available Cash Flow, as defined in the management agreement. Management fees were $513,000 and $324,000 for the year ended December 31, 2012 and for the period from May 5, 2011 through December 31, 2011, respectively, and are reflected in Management fees in the accompanying consolidated statements of operations. Additionally, pursuant to the management agreement, the Company must maintain an FF&E Reserve. The FF&E Reserve percentage, calculated as a percentage of gross revenue, ranges from 2% to 4% in 2011. During 2012, the FF&E Reserve percentage increased to 5% and shall remain at 5% until termination of the management agreement in 2032. The agreement shall automatically renew for two additional 10 year terms, unless written notice of election not to renew is given 365 days prior to expiration of the agreement. Additionally, under the management agreement with Marriott, the Company pays marketing fees, which are calculated as 2.5% of guest room revenues. Marketing fees paid to Marriott were $173,000 and $110,000 for the year ended December 31, 2012 and for the period from May 5, 2011 through December 31, 2011, respectively, and were reflected in Marketing in the accompanying consolidated statements of operations.

Exhibit 99.2 — 12

LONG BEACH HOTEL PROPERTIES, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 7. Franchise Fees

The Hotel Maya

Pursuant to Queensbay’s franchise agreement, effective November 1, 2010 and terminating August 31, 2020, with Doubletree Franchise, LLC, a subsidiary of Hilton Worldwide, the Company is obligated to pay a monthly program fee of 4% of The Hotel Maya’s gross room revenue plus monthly royalty fees based on the schedule below:

		Royalty Fee as a Percentage of Gross Rooms Revenue
11/2010 - 10/2012		2.5%
11/2012 - 10/2013		3.0%
11/2013 - 10/2014		3.5%
11/2014 - 10/2015		4.0%
11/2015 - 8/2020		5.0%

Franchise fees expense was $200,600 and $117,000 for the year ended December 31, 2012 and the period from May 5, 2011 through December 31, 2011, respectively, and is reflected in Marketing in the accompanying consolidated statements of operations.

Residence Inn

Pursuant to Portside’s management agreement with Marriott (Note 6), the Company does not pay any franchise fees for the Residence Inn.

Note 8. Fair Value Measurements

The fair value of an asset is defined as the exit price, which is the amount that would either be received when an asset is sold or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance establishes a three-tier fair value hierarchy based on the inputs used in measuring fair value. These tiers are: Level 1, for which quoted market prices for identical instruments are available in active markets, such as money market funds, equity securities and U.S. Treasury securities; Level 2, for which there are inputs other than quoted prices included within Level 1 that are observable for the instrument, such as certain derivative instruments including interest rate caps and swaps; and Level 3, for securities that do not fall into Level 1 or Level 2 and for which little or no market data exists, therefore requiring us to develop our own assumptions.

Derivative Asset — Our derivative asset is comprised of an interest rate cap. This derivative instrument was measured at fair value using readily observable market inputs, such as quotations on interest rates. This derivative instrument was classified as Level 2 as this instrument is a custom, over-the-counter contract with various bank counterparties that are not traded in an active market.

The following table sets forth our asset that was accounted for at fair value on a recurring basis:

Fair Value Measurements at December 31, 2012 Using:

Quoted Prices in

Active Markets for

Significant Other

Unobservable

Identical Assets

Observable Inputs

Inputs

Description

Balance Sheet location

Total

(Level 1)

(Level 2)

(Level 3)

Derivative asset

Prepaid expenses and other assets

5,600

We did not have any transfers into or out of Level 1, Level 2 and Level 3 measurements during the year ended December 31, 2012 and the period from acquisition through December 31, 2011. Gains and losses (realized and unrealized) included in earnings are reported in Other comprehensive loss in the consolidated statements of changes in members’ equity.

Exhibit 99.2 — 13

LONG BEACH HOTEL PROPERTIES, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Our other financial instruments had the following carrying value and fair value:

		December 31, 2012				December 31, 2011
	Level	Carrying Value		Fair Value		Carrying Value		Fair Value
Debt	3	$	46,148,100	$	47,902,300	$	46,282,500	$	47,822,400

Note 9. Derivative Financial Instruments

Use of Derivative Financial Instruments

When we use derivative instruments, it is generally to reduce our exposure to fluctuations in interest rates. We have not entered, and do not plan to enter into, financial instruments for trading or speculative purposes. We have established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities.

Interest Rate Cap

We are exposed to the impact of interest rate changes primarily through our borrowing activities. To limit this exposure, we attempt to obtain mortgage financing on a long-term, fixed-rate basis. However, from time to time, we or our investment partners may obtain variable-rate non-recourse mortgage loans and, as a result, may enter into interest rate cap agreements with counterparties. An interest rate cap limits the effective borrowing rate of variable-rate debt obligations while allowing participants to share in downward shifts in interest rates. Our objective in using the interest rate cap is to limit our exposure to interest rate movements.

In June 2012, we refinanced the existing debt on the Hotel Maya for a three-year $15,000,000 mortgage that bears interest at LIBOR plus 2.5% per year and matures July 1, 2015. The interest rate is effectively capped at 4.5% through an interest rate cap.

The following table sets forth certain information regarding our derivative instrument:

The following tables present the impact of our derivative instrument on the consolidated financial statements:

	Amount of Loss Recognized in Other Comprehensive Loss on Derivatives (Effective Portion)
	Years Ended December 31,
Derivative in Cash Flow Hedging Relationships	2012		2011
Interest rate cap	$	(33,900)	$	-

Note 10. Debt

Debt is summarized as follows:

	December 31, 2012		December 31, 2011
Residence Inn loan (a)	$	31,148,100	$	31,485,800
Hotel Maya loan (b)	15,000,000		14,796,700
	$	46,148,100	$	46,282,500

Exhibit 99.2 — 14

LONG BEACH HOTEL PROPERTIES, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

_________

a) On August 10, 2007, Portside entered into a debt agreement with Connecticut General Life Insurance Company (“Connecticut General”) for $31,875,000 at a fixed rate of 7.25% per annum. The debt is secured by a Leasehold Deed of Trust, Security Agreement with Assignment of Rents and Fixture Filing, and a first priority security interest in personal property and assignment of rents and leases. During the first three years of the loan, Portside shall pay Connecticut General monthly interest only payments. At the commencement of the fourth year, Portside shall pay Connecticut General monthly principal and interest payments on the basis of a 30 year amortization until the loan matures on September 1, 2017, at which time the remaining unpaid principal and accrued and unpaid interest is due. As of December 31, 2012 and 2011, the fair value of the debt was estimated to be $32,902,300 and $32,729,900, respectively.

b) The debt on the Hotel Maya was refinanced in June 2012 and is a three-year $15,000,000 mortgage that bears interest at London inter-bank offered rate (“LIBOR”) plus 2.5% per year and matures July 1, 2015. The interest rate is effectively capped at 4.5% through an interest rate cap (Note 9). The loan is interest only for the first three years and has a 30-year amortization period thereafter. We are a guarantor of the mortgage financing on the Hotel Maya. This loan is considered limited recourse because Ensemble has agreed to be responsible for, and has indemnified us regarding, any and all amounts due under the guarantee. As of December 31, 2012 the fair value of the debt was estimated to be $15,000,000.

As of December 31, 2012, the Company was in compliance with all financial covenants related to these mortgage obligations.

Interest expense was $3,094,500 and $2,186,400 for the year ended December 31, 2012 and for the period from May 5, 2011 through December 31, 2011, respectively, and is a component of Interest and loan cost expenses in the accompanying consolidated statements of operations.

The following is a summary of principal payments and maturities of debt obligations:

Years Ending December 31,	Amount
2013	$	363,000
2014	390,200
2015	15,419,400
2016	450,900
2017	29,524,600
Thereafter	-
Total	$	46,148,100

Note 11. Related-Party Transactions

In May 2011, the Company entered into a management agreement with EHP to manage The Hotel Maya. The management agreement is for a seven-year term, with automatic one-year renewal terms. The management fee will total 3% of total monthly revenues and will be paid monthly in arrears. Management fees were $437,000 for the year ended December 31, 2012. No management fees were incurred for the year ended for the period from May 5, 2011 through December 31, 2011 due to a negotiation with CWI to waive management fees through December 31, 2011.

The Company pays operating and accounting fees to the manager, EHP, payable in equal monthly installments. The fees amounted to $84,000 and $56,000 for the year ended December 31, 2012 and for the period from May 5, 2011 through December 31, 2011, respectively.

Note 12. Income Taxes

We have elected to treat our wholly-owned corporate subsidiary, which engages in hotel operations, as a TRS, and it is, therefore, subject to taxation. State income tax expense of $2,634 and $800 was included for the year ended December 31, 2012 and for the period from May 5, 2011 through December 31, 2011, respectively, and its related payable was included in Accrued expenses and other payables as of December 31, 2012 and 2011. There was no federal income tax expense as a result of the loss of the TRS for the period for the period from May 5, 2011 through December 31, 2011. As a result, there was a net operating loss (NOL) carryforward to 2012 which offset the federal income tax expense and as a result, the federal income tax expense for the year ended December 31,

Exhibit 99.2 — 15

LONG BEACH HOTEL PROPERTIES, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2012 is $9,722. In addition, the Company had franchise tax expenses of $19,600 and $4,100 for the year ended December 31, 2012 and for the period from May 5, 2011 through December 31, 2011, respectively.

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. At December 31, 2012 and 2011, the TRS had a deferred tax asset of $74,355 and $45,600, respectively, resulting from accrued but unpaid vacation payable. The TRS has a full valuation allowance against its deferred income tax asset at December 31, 2012 and 2011 because it is not more likely than not to be realized in future periods. In evaluating the TRS’ ability to realize its deferred income tax assets, the TRS considers all available positive and negative evidence, including operating results, ongoing tax planning, and forecasts of future taxable income on a jurisdiction by jurisdiction basis.

Our tax returns are subject to audit by taxing authorities. Such audits can often take years to complete and settle. The tax years 2009 through 2012 remain open to examination by the major taxing jurisdictions to which we are subject.

Note 13. Commitments and Contingencies

Rent expense under non-cancellable ground leases, amounted to $109,500 and $72,900 for the year ended December 31, 2012 and for the period from May 5, 2011 through December 31, 2011, respectively, and is reflected in Property expenses in the accompanying consolidated statements of operations. The Company also leases office equipment under various lease agreements that amounted to $12,600 and $36,200 for the year ended December 31, 2012 and for the period from May 5, 2011 through December 31, 2011, respectively, and is reflected in various operating department expenses in the accompanying consolidated statements of operations.

Scheduled commitments and contingencies for each of the next five years and thereafter is as follows (in thousands):

Years Ending December 31,	Amount
2013	$	11,747
2014	11,747
2015	11,747
2016	4,157
2017	1,139
Thereafter	1,139
Total	$	41,676

From time to time, the Company is involved with legal proceedings and claims arising in the ordinary course of business. The Company maintains adequate liability insurance, and, in the opinion of the Company, any ultimate liability from such claims will not have a material effect on the financial position, results of operations or cash flows of the Company. There were no unresolved claims as of December 31, 2012.

Note 14. Subsequent Event

Management evaluated the activity of the Company through March 12, 2013, the date the financial statements were issued, and concluded that no subsequent events have occurred that would require disclosure in the Notes to the Consolidated Financial Statements.

Exhibit 99.2 — 16

	Page No.
Report of Independent Auditors	2
Consolidated Balance Sheets	3
Consolidated Statements of Operations	4
Consolidated Statements of Other Comprehensive Loss	5
Consolidated Statements of Changes in Capital	6
Consolidated Statements of Cash Flows	7
Notes to Consolidated Financial Statements	8-16

Asset Derivatives Fair
Value at

Derivative Instruments

Balance Sheet Location

December 31, 2012

Interest rate cap

Prepaid expenses and other assets