Acquisition of Hotel Properties

12 Months Ended

Dec. 31, 2015

Business Combinations [Abstract]

Acquisition of Hotel Properties

Acquisition of Hotel Properties

Hotel Purchase Price Allocation

The allocation of the purchase price of each of the hotels acquired by the Company in 2015 and 2014, based on the fair value on the date of its acquisition, was (in thousands):

	Silicon Valley Hotels			Cherry Creek Hotels			Inland 4 Pack Hotels			Gaslamp			Dedham			Ft. Lauderdale			Marina del Rey			Total
Acquisition date	6/914			8/29/2014			11/17/2014			2/25/2015			7/17/2015			8/17/2015			9/17/2015
Number of rooms (unaudited)	751			194			575			240			81			104			134			2,079
Land	$	149,565		$	3,700		$	12,923		$	—		$	4,230		$	9,200		$	—		$	179,618
Building and improvements	159,391			26,300			92,414			89,040			17,304			24,048			43,210			451,707
Furniture, fixtures and equipment	14,897			2,000			1,404			960			466			252			1,340			21,319
Cash	25			1			11			3			2			2			6			50
Restricted cash	—			—			—			—			—			—			1,755			1,755
Accounts receivable	959			56			374			81			47			32			30			1,579
Deferred costs, net	—			—						—			—			—			43			43
Prepaid expenses and other assets	289			17			56			278			3			40			217			900
Mortgage debt	—			—			—			—			—			—			(22,569		)	(22,569		)
Accounts payable and accrued expenses	—			(62		)	(686		)	(204		)	(10		)	(279		)	(67		)	(1,308		)
Net assets acquired	$	325,126		$	32,012		$	106,496		$	90,158		$	22,042		$	33,295		$	23,965		$	633,094
Less: Fair value of interest in the Silicon Valley Hotels and NewINK JV	(58,860		)	—			—			—			—			—			—			(58,860		)
Net assets acquired, net of cash	$	266,241		$	32,011		$	106,485		$	90,155		$	22,040		$	33,293		$	23,959		$	574,184

The value of the assets acquired was primarily based on a sales comparison approach (for land) and a depreciated replacement cost approach (for building and improvements and furniture, fixtures and equipment). The sales comparison approach uses inputs of recent land sales in the respective hotel markets.  The depreciated replacement cost approach uses inputs of both direct and indirect replacement costs using a nationally recognized authority on replacement cost information as well as the age, square footage and number of rooms of the respective assets. The Company incurred acquisition costs of $1,451, $10,381 and $3,341, respectively, during the years ended December 31, 2015, 2014 and 2013.

The amount of revenue and operating income from the hotels acquired in 2015 from their respective date of acquisition through December 31, 2015 is as follows (in thousands):

	Revenue		Operating Income
Residence Inn San Diego Gaslamp	$	12,670	$	6,850
Residence Inn Dedham, MA	1,995		1,043
Residence Inn Ft. Lauderdale, FL	2,132		863
Hilton Garden Inn Marina del Rey, CA	2,500		1,200
Total	$	19,297	$	9,956

Pro Forma Financial Information (unaudited)

The following condensed pro forma financial information presents the unaudited results of operations as if the acquisition of the hotels acquired during the years ended December 31, 2015, 2014 or 2013 had taken place on January 1, 2014, 2013 and 2012, respectively. Since the acquisition of the Cherry Creek hotel was not material, the pro forma numbers presented below do not include the operating results of the Cherry Creek hotel prior to the acquisition date. Supplemental pro forma earnings were adjusted to exclude $704, $7,234 and $1,667, respectively, of acquisition-related costs incurred in the years ended December 31, 2015, 2014 and 2013. Supplemental pro forma earnings for the years ended December 2014 and 2013, respectively, were adjusted to include these charges from 2015 and 2014. The unaudited 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 acquisitions taken place on January 1, 2014, 2013 or 2012, respectively, nor do they purport to represent the results of operations for future periods (in thousands, except share and per share data).

	For the year ended
	December 31,
	2015		2014		2013
Pro forma total revenue	$	292,908	$	271,321	$	216,239
Pro forma net income	$	32,137	$	22,013	$	72,477
Pro forma income per share:
Basic	$	0.85	$	0.58	$	1.91
Diluted	$	0.84	$	0.57	$	1.89
Weighted average common shares outstanding
Basic	37,917,871		37,917,871		37,917,871
Diluted	38,322,285		38,322,285		38,322,285

As a result of the properties being treated as acquired as of January 1, 2013 and 2014, the Company assumed approximately 38,308,937 shares were issued as of January 1, 2013 to fund the acquisition of the properties. Consequently, the weighted average shares outstanding was adjusted to reflect the treatment of these assumed additional shares as issued outstanding as of the beginning of the periods presented.