Acquisition of Hotel Properties

12 Months Ended

Dec. 31, 2016

Business Combinations [Abstract]

Acquisition of Hotel Properties

Acquisition of Hotel Properties

Hotel Purchase Price Allocation

No acquisitions were completed in 2016. The allocation of the purchase price of each of the hotels acquired by the Company in 2015, based on the fair value on the date of its acquisition, was (in thousands):

	Gaslamp			Dedham			Ft. Lauderdale			Marina del Rey			Total
Acquisition date	2/25/2015			7/17/2015			8/17/2015			9/17/2015
Number of rooms (unaudited)	240			81			104			134			559
Land	$	—		$	4,230		$	9,200		$	—		$	13,430
Building and improvements	89,040			17,304			24,048			43,210			173,602
Furniture, fixtures and equipment	960			466			252			1,340			3,018
Cash	3			2			2			6			13
Restricted cash	—			—			—			1,755			1,755
Accounts receivable	81			47			32			30			190
Deferred costs, net	—			—			—			43			43
Prepaid expenses and other assets	278			3			40			217			538
Mortgage debt	—			—			—			(22,569		)	(22,569		)
Accounts payable and accrued expenses	(204		)	(10		)	(279		)	(67		)	(560		)
Net assets acquired, net of cash	$	90,155		$	22,040		$	33,293		$	23,959		$	169,447

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 $0.5 million, $1.5 million and $10.4 million, respectively, during the years ended December 31, 2016, 2015 and 2014. Property acquisition costs incurred during 2016 related to prior acquisitions for which final amounts were more than previously accrued.

The amount of revenue and operating income from the hotels acquired in 2015 from their respective date of acquisition through December 31, 2016 is as follows (in thousands):

	December 31, 2016				December 31, 2015
	Revenue		Operating Income		Revenue		Operating Income
Residence Inn San Diego Gaslamp	$	15,018	$	7,616	$	12,670	$	6,850
Residence Inn Dedham, MA	4,026		1,909		1,995		1,043
Residence Inn Ft. Lauderdale, FL	6,564		2,984		2,132		863
Hilton Garden Inn Marina del Rey, CA	10,523		5,216		2,500		1,200
Total	$	36,131	$	17,725	$	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 or 2014 had taken place on January 1, 2014 and 2013, respectively. There were no hotels acquired in 2016. 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 $0.7 million and $7.2 million, respectively, of acquisition-related costs incurred in the years ended December 31, 2015 and 2014. Supplemental pro forma earnings for the year ended December 2014 were adjusted to include these charges from 2015. 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, 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
Pro forma total revenue	$	292,908	$	271,321
Pro forma net income	$	32,137	$	22,013
Pro forma income per share:
Basic	$	0.85	$	0.58
Diluted	$	0.84	$	0.57
Weighted average common shares outstanding
Basic	37,917,871		37,917,871
Diluted	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, 2014 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.