Acquisition of Hotel Properties

12 Months Ended

Dec. 31, 2011

Acquisition of Hotel Properties [Abstract]

ACQUISITION OF HOTEL PROPERTIES

NOTE 3. ACQUISITION OF HOTEL PROPERTIES

On February 16, 2011, the Company acquired the 252-room Argonaut Hotel located in San Francisco, California for $84.0 million. The acquisition was funded with $42.0 million of available cash and the assumption of a $42.0 million first mortgage loan. The hotel is subject to a long-term ground lease agreement with the United States Department of the Interior that expires in 2059. The hotel is required to pay the greater of a base rent of $1.2 million, as adjusted for consumer price index "CPI" increases, or a percentage of rooms revenues, food and beverage revenues, and other department revenues in excess of certain thresholds, as defined in the agreement. The fee, as a percentage of rooms revenues, ranges from 8% to 12% in the initial years and 12% to 14% in the later years. The fee as a percentage of food and beverage and other department revenues is 4% over the term of the lease. The terms of the ground lease were evaluated and they were determined to approximate current market terms. The Company retained Kimpton Hotels and Restaurants to manage the hotel.

On April 6, 2011, the Company acquired the 450-room Westin Gaslamp Quarter located in San Diego, California for $110.0 million. Prior to the acquisition, the hotel was undergoing a $25.0 million renovation project and, in addition to the purchase price, the Company reimbursed the seller approximately $8.6 million for the renovation costs incurred and paid by the seller through the date of closing. The remaining renovation costs were paid by the Company. The Company retained Starwood Hotels and Resorts to manage the hotel.

On April 7, 2011, the Company acquired the 189-room Hotel Monaco Seattle located in Seattle, Washington for $51.2 million. The Company retained Kimpton Hotels and Restaurants to manage the hotel.

On May 3, 2011, the Company acquired the 237-room Mondrian Los Angeles located in West Hollywood, California for $137.0 million. The Company retained the Morgans Hotel Group to manage the hotel.

On May 26, 2011, the Company acquired the 148-room Viceroy Miami located in Miami, Florida for $36.5 million. The Company retained the Viceroy Hotel Group to manage the hotel and PHL received $3.0 million in key money from Viceroy Hotel Group to enter into the management agreement with Viceroy Hotel Group. The key money liability is amortized as a reduction of management fee expense over the ten-year term of the management agreement.

On June 8, 2011, the Company acquired the 235-room W Boston located in Boston, Massachusetts for $89.5 million. The Company retained Starwood Hotels and Resorts to manage the hotel.

The allocation of purchase price to the fair value of the acquired assets and liabilities is as follows (in thousands):

	Argonaut Hotel		Westin Gaslamp Quarter			Hotel Monaco Seattle			Mondrian Los Angeles		Viceroy Miami			W Boston			Total
Land	$	—	$	25,537		$	10,105		$	20,306	$	8,368		$	19,453		$	83,769
Buildings and improvements		79,492		86,113			38,888			110,283		24,246			63,893			402,915
Furniture, fixtures and equipment		4,247		6,826			2,073			6,091		3,723			5,887			28,847
In place lease assets		190		—			—			—		—			—			190
Inventory		71		78			84			75		163			267			738
Net working capital		193		(931	)		(251	)		74		(146	)		(1,263	)		(2,324	)
Net assets acquired	$	84,193	$	117,623		$	50,899		$	136,829	$	36,354		$	88,237		$	514,135

The results of operations of the Argonaut Hotel, Westin Gaslamp Quarter, Hotel Monaco Seattle, Mondrian Los Angeles, Viceroy Miami, W Boston and the Manhattan Collection joint venture (defined in Note 5 below) are included in the consolidated statements of operations beginning on their acquisition dates. The following unaudited pro forma financial information presents the results of operations of the Company for the years ended December 31, 2011 and 2010 as if the hotels and joint venture interests acquired in 2011 and 2010 were acquired on January 1, 2010. The pro forma results below excluded acquisition costs of $3.4 million and $6.6 million for the years ended December 31, 2011 and 2010, respectively. The unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of either the results of operations that would have actually occurred had these transactions occurred on January 1, 2010 or the future results of operations (in thousands, except per-share data).

	For the Year Ended December 31,
	2011		2010
	(Unaudited)		(Unaudited)
Total revenues	$	330,215	$	306,354
Operating income		30,873		21,441
Net income attributable to common shareholders		6,230		16,074
Net income per share available to common shareholders—basic and diluted	$	0.12	$	0.34