Subsequent Events

6 Months Ended

Jun. 30, 2011

16. Subsequent Events

As noted above, on May 3, 2011, the JV was selected as the winning bidder in a bankruptcy court auction related to 64 hotels described above under Note 7, Investment in Joint Venture. The Company paid a $2.4 million deposit into escrow upon the JV being named the winning bidder. The deposit is included in restricted cash on the Consolidated Balance Sheet at June 30, 2011. Under the terms of the winning bid, subject to the terms and conditions of the bid, the JV will acquire the hotels for a total purchase price of approximately $1.125 billion, including the assumption of approximately $725 million of mortgage debt secured by 45 of the hotels, through a plan of reorganization. The Company’s expected investment of $37.0 million will at closing represent a 10% interest in the JV and will be funded through available cash and borrowings under its secured revolving credit facility.

Also, on May 3, 2011, the Company was selected as the winning bidder in a bankruptcy court auction related to five additional hotels owned by affiliates of the Sellers. The Company has executed a purchase agreement with the Sellers to acquire the five hotels, (“the five sisters”) comprising 764 rooms in the aggregate, for $195 million:


Hotel	Rooms
Residence Inn Anaheim Garden Grove, CA		200
Residence Inn San Diego Mission Valley, CA		192
Residence Inn Tysons Corner, VA		121
Doubletree Guest Suites Washington D.C.		105
Homewood Suites San Antonio Riverwalk, TX		146

		764

The five-hotel acquisition was funded through the assumption of five individual loans aggregating $134.2 million at a weighted average interest rate of 6 percent and with maturity dates in 2016 with the remainder funded from available cash and borrowings under the Company’s secured revolving credit facility. The five loans will amortize based on a 30-year amortization period, other than the loan related to the hotel in Garden Grove which will be interest only for the first two years after closing. The Company closed on the acquisition of the five sisters on July 14, 2011.

All of the 5 hotels acquired by the Company from the Sellers will continue to be managed by IHM, a hotel management company 90 percent-owned by Jeff Fisher.

The Company borrowed $57.0 million under the senior secured credit facility on July 15, 2011 to partially fund the acquisition of the 5 sister hotels.

The allocation of the purchase price of the hotels acquired after June 30, 2011 is based on preliminary estimates of fair value as follows (in thousands), unaudited:


	5 Sisters
	Acquisition
Acquistion date		07/14/11

Land	$	27,075
Building and improvements		162,451
Furniture, fixtures and equipment		3,868
Cash		26
Restricted cash		1,460
Accounts receivable, net		144
Deferred costs, net		1,389
Prepaid expenses and other assets		134
Debt		(134,160	)
Accounts payable and accrued expenses		(630	)

Net assets acquired	$	61,757

Net assets acquired, net of cash	$	61,731

The following condensed pro forma financial information presents the Company’s results of operations as if the five sisters acquisitions were acquired on January 1, 2010. The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of what actual results of operations would have been had the acquisition taken place on January 1, 2010, nor do they purport to represent the results of operations for future periods (in thousands, except share and per share data):


	For the six months ended			For the six months ended
	June 30, 2011			June 30, 2010
	(unaudited)			(unaudited)
Pro forma total revenue	$	44,190		$	21,432
Pro forma total hotel expense		25,359			11,317
Pro forma total operating expenses		41,112			19,187

Pro forma operating income		3,078			2,245

Pro forma net loss	$	(3,858	)	$	(1,975	)


Pro forma loss per share:
Basic and diluted	$	(0.30	)	$	(0.38	)

Weighted average Common Shares Outstanding
Basic and diluted		12,784,515			5,217,599

- Definition

Tabular disclosure of significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, losses resulting from fire or flood, losses on receivables, significant realized and unrealized gains and losses that result from changes in quoted market prices of securities, declines in market prices of inventory, changes in authorized or issued debt (SEC), significant foreign exchange rate changes, substantial loans to insiders or affiliates, significant long-term investments, and substantial dividends not in the ordinary course of business.

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