XML 49 R11.htm IDEA: XBRL DOCUMENT v3.2.0.727
Investment in Joint Venture
 6 Months Ended
Jun. 30, 2015
Equity Method Investments and Joint Ventures [Abstract]  
Investment in Joint Venture
Investment in Joint Venture
On July 29, 2011, the Company acquired a 49% interest in a joint venture (the “Manhattan Collection joint venture”), which owns six properties in New York, New York. The transaction valued the six hotels at approximately $908.0 million (subject to working capital and similar adjustments). The Company accounts for this investment using the equity method.
In conjunction with the joint venture's refinancing in 2012, the Company provided the joint venture a $50.0 million unsecured special loan which matures at the earlier of July 4, 2018, the closing of any refinancing of the secured loan or the closing date of a portfolio sale (as defined in the loan agreement). The unsecured special loan bears interest at an annual fixed rate of 9.75% and requires interest-only payments through maturity. The unsecured special loan is pre-payable by the joint venture at any time. The unsecured special loan to the joint venture is included in the investment in joint venture on the consolidated balance sheets. Interest income is recorded on the accrual basis and the Company's 49% pro-rata portion of the special loan and related interest income is eliminated.
As of June 30, 2015, the joint venture reported $451.9 million in total assets, which represents the basis of the hotels prior to the Company's investment. The joint venture's total liabilities and members' deficit include $460.0 million in existing first mortgage debt and a $50.0 million unsecured special loan. The Company is not a guarantor of any existing debt of the joint venture except for limited customary carve-outs related to fraud or misapplication of funds.
At the time of the Company’s investment, the estimated fair value of the hotel properties owned by the Manhattan Collection joint venture exceeded the carrying value. This basis difference between the Company’s investment in the joint venture and the Company’s proportionate 49% interest in these depreciable assets held by the joint venture is amortized over the estimated life of the underlying assets and recognized as a component of equity in earnings (loss) of joint venture (referred to as the basis adjustment in the table below).
The summarized results of operations of the Company’s investment in the Manhattan Collection joint venture for the three and six months ended June 30, 2015 and 2014 are presented below (in thousands):
 
For the three months ended June 30,
 
For the six months ended June 30,
 
2015
 
2014
 
2015
 
2014
Revenues
$
47,538

 
$
50,045

 
$
78,559

 
$
83,973

Total expenses
42,347

 
42,571

 
83,850

 
84,335

Net income (loss)
$
5,191

 
$
7,474

 
$
(5,291
)

$
(362
)
Company’s 49% interest of net income (loss)
2,543

 
3,662

 
(2,593
)
 
(177
)
Basis adjustment
181

 
6

 
280

 
13

Special loan interest income elimination
596

 
596

 
1,185

 
1,184

Equity in earnings (loss) in joint venture
$
3,320

 
$
4,264

 
$
(1,128
)
 
$
1,020


The Company classifies the distributions from its joint venture in the statements of cash flows based upon an evaluation of the specific facts and circumstances of each distribution. For example, distributions from cash generated by property operations are classified as cash flows from operating activities. However, distributions received as a result of property sales are classified as cash flows from investing activities.