NOTE 5 - ASSETS HELD FOR SALE

Assets held for sale at September 30, 2015 and December 31, 2014 include (in thousands):

	September 30,		December 31,
	2015		2014
Land	$	35,146	$	300
Hotel buildings and improvements	159,073		—
Furniture, fixtures and equipment	20,774		—
Construction in progress	54		—
Franchise fees	1,288		—

Total	$	216,335	$	300

On June 2, 2015, the Operating Partnership and certain affiliated entities entered into two separate agreements, as amended on July 15, 2015, to sell a portfolio of 26 hotels containing an aggregate of 2,793 guestrooms to ARCH for an aggregate cash purchase price of approximately $347.4 million. The hotels are being sold in three separate closings. The first closing of 10 hotels containing 1,090 guestrooms was completed on October 15, 2015 for an aggregate cash payment of $150.1 million (the “First Closing”). The First Closing resulted in a gain on the sale of assets of approximately $65.0 million that will be recorded in the fourth quarter of 2015.

The second closing of 10 hotels containing 996 guestrooms is expected to occur before December 31, 2015 for an aggregate sale price of $89.1 million and the third closing of six hotels containing 707 guestrooms is expected to occur in the first quarter of 2016 for an aggregate sale price of $108.2 million. Each remaining closing is subject to the satisfaction of customary closing conditions. None of the closings is conditioned on the sale of the other hotels at that closing or any other closing. If any of the hotels are not sold, then the cash purchase price will be adjusted by the parties in accordance with the applicable agreement. However, we believe that it is probable that all of the closings will occur.

We anticipate executing reverse and forward 1031 Exchanges for a substantial portion of the ARCH Sale to defer taxable gains that are expected to result from the sale. As such, certain hotels that we may purchase before the final closing of the ARCH Sale have been or will be consummated in a manner such that legal title is or will be held by a qualified intermediary engaged to execute the 1031 Exchanges until the ARCH Sale is consummated and the 1031 Exchanges are completed. We retain or will retain essentially all of the legal and economic benefits and obligations related to the Parked Assets. As such, the Parked Assets are or will be included in our consolidated financial position and consolidated results of operations as VIE’s until legal title is transferred to us upon completion of the 1031 Exchanges. We completed 1031 Exchanges for four Parked Assets simultaneously with the First Closing.

In addition to the assets of the 26 hotels noted above, assets held for sale at September 30, 2015 include land parcels in Spokane, WA, Fort Myers, FL and Flagstaff, AZ, which are being actively marketed for sale. At December 31, 2014, assets held for sale was comprised of a land parcel in Spokane, WA.

At September 30, 2015, we have notes receivable totaling $2.7 million included in Other Assets on our Condensed Consolidated Balance Sheet related to seller-financing for the sale in a prior year of two hotel properties in Emporia, KS. The loans have matured and the buyer is currently in payment default under the terms of the loans. We have initiated proceedings to foreclose on the properties and we have received a judgment of foreclosure on one of the properties. We expect to reacquire the properties unless the buyer is able to repay the principal and interest, including default interest and fees, on the notes receivable in full prior to the completion of the foreclosure process. We believe the collateral value is sufficient to recover the carrying amounts of the notes receivable. If we reacquire the properties as a result of a foreclosure, then we will classify the properties as held for sale and market them for re-sale to recover the carrying amounts of our notes receivable.