INVESTMENT IN HOTEL PROPERTIES, NET (Tables)

9 Months Ended

Sep. 30, 2017

Business Combinations [Abstract]

Schedule of investment in hotel properties, net

Investment in hotel properties, net at September 30, 2017 and December 31, 2016 is as follows (in thousands):

	September 30, 2017			December 31, 2016
Land	$	237,652		$	178,423
Hotel buildings and improvements	1,745,059			1,433,389
Intangible assets	22,764			6,602
Construction in progress	13,602			22,490
Furniture, fixtures and equipment	152,562			129,437
	2,171,639			1,770,341
Less - accumulated depreciation and amortization	(268,690		)	(225,219		)
	$	1,902,949		$	1,545,122

Schedule of intangible assets and intangible liabilities

Intangible assets included in Investment in hotel properties, net and intangible liabilities included in Accrued expenses and other in our Condensed Consolidated Balance Sheets include the following (in thousands):

	September 30, 2017			December 31, 2016
Intangible assets:
Air rights (1)	$	10,754		$	—
Favorable leases (2)	10,569			6,032
In-place lease agreements	1,361			570
Other	80			—
	22,764			6,602
Less accumulated amortization	(796		)	(348		)
Intangible assets, net	$	21,968		$	6,254
Intangible liabilities:
Unfavorable leases (2)	$	5,002		$	5,002
Less accumulated amortization	(261		)	(190		)
Intangible liabilities, net	$	4,741		$	4,812

(1) In conjunction with the acquisition of the Courtyard by Marriott - Charlotte, NC, the Company acquired certain air rights related to the hotel property.

(2) Intangible assets and liabilities are recorded on contracts assumed as part of the acquisition of certain hotels. Above-market and below-market contract values are based on the present value of the difference between contractual amounts to be paid pursuant to the contracts assumed and our estimate of the fair market contract rates for corresponding contracts measured over a period equal to the remaining non-cancelable term of the contracts assumed. Intangible assets and liabilities are amortized over the remaining non-cancelable term of the related contracts.

Disclosure of assets held for sale

Assets held for sale at September 30, 2017 and December 31, 2016 include the following (in thousands):

	September 30, 2017		December 31, 2016
Land	$	1,193	$	10,907
Hotel buildings and improvements	—		44,718
Furniture, fixtures and equipment	—		6,649
Franchise fees and other	—		421
	$	1,193	$	62,695

Schedule of sale of hotels

The seven hotels sold were as follows:

Hotel	Location	Guestrooms
Courtyard by Marriott	Jackson, MS	117
Courtyard by Marriott	Germantown, TN	93
Fairfield Inn & Suites	Germantown, TN	80
Homewood Suites	Ridgeland, MS	91
Residence Inn	Jackson, MS	100
Residence Inn	Germantown, TN	78
Staybridge Suites	Ridgeland, MS	92
Total		651

Schedule of hotel property acquisitions

A summary of the hotel properties acquired during the nine months ended September 30, 2017 and 2016 is as follows (in thousands):

Date Acquired	Franchise/Brand	Location	Purchase Price
For the nine months ended September 30, 2017
March 1, 2017	Homewood Suites	Aliso Viejo (Laguna Beach), CA	$	38,000
March 30, 2017	Hyatt Place	Phoenix (Mesa), AZ	22,200
May 23, 2017	Courtyard by Marriott	Fort Lauderdale, FL	85,000
June 9, 2017	Courtyard by Marriott	Charlotte, NC	56,250
June 21, 2017	Courtyard by Marriott	Fort Worth, TX	40,000
June 21, 2017	Courtyard by Marriott	Kansas City, MO	24,500
June 21, 2017	Courtyard by Marriott	Pittsburgh, PA	42,000
June 21, 2017	Hampton Inn & Suites	Baltimore, MD	18,000
June 21, 2017	Residence Inn by Marriott	Baltimore, MD	38,500
July 13, 2017	AC Hotel by Marriott	Atlanta, GA	57,500
			$	421,950	(1)
For the nine months ended September 30, 2016
January 19, 2016	Courtyard by Marriott	Nashville, TN	$	71,000
January 20, 2016	Residence Inn by Marriott	Atlanta, GA	38,000
August 9, 2016	Marriott	Boulder, CO	61,400
			$	170,400	(2)

(1) The net assets acquired totaled $424.8 million due to the purchase at settlement of $0.6 million of net working capital and other assets and capitalized transaction costs of $2.2 million.

(2) The net assets acquired totaled $169.7 million due to the purchase at settlement of $0.7 million of net liabilities.

Schedule of allocation of the aggregate purchase prices to the fair value of assets acquired and liabilities assumed

The allocation of the aggregate purchase prices to the fair value of assets and liabilities acquired for the above acquisitions is as follows (in thousands):

	For the Nine Months Ended September 30,
	2017				2016
Land	$	63,339			$	23,288
Hotel buildings and improvements	328,395				143,195
Intangible assets	16,162				442
Furniture, fixtures and equipment	16,294				2,948
Other assets	1,937				504
Total assets acquired	426,127				170,377
Less - other liabilities assumed	(1,354		)		(723		)
Net assets acquired	$	424,773		(1)	$	169,654		(2)

(1) The net assets acquired totaled $424.8 million due to the purchase at settlement of $0.6 million of net working capital and other assets and capitalized transaction costs of $2.2 million.

(2) The net assets acquired totaled $169.7 million due to the purchase at settlement of $0.7 million of net liabilities.

Schedule of total revenues and net income for hotel properties acquired

Total revenues and net income for hotel properties acquired in the nine months ended September 30, 2017 and 2016, which are included in our Condensed Consolidated Statements of Operations, are as follows (in thousands):

	2017 Acquisitions (1)		2016 Acquisitions(2)				2017 Acquisitions (1)		2016 Acquisitions(2)
	For the		For the				For the		For the
	Three Months Ended September 30,		Three Months Ended September 30,				Nine Months Ended September 30,		Nine Months Ended September 30,
	2017		2017		2016		2017		2017		2016
Revenues	$	20,913	$	9,233	$	8,071	$	28,283	$	25,929	$	18,582
Net income	$	1,960	$	1,734	$	2,568	$	3,816	$	4,965	$	5,284

(1) Net income for the 2017 Acquisitions includes depreciation expense, real estate tax expense, interest expense, and other corporate expenses totaling $7.0 million and $8.5 million for three and nine months ended September 30, 2017, respectively.

(2) Net income for the 2016 Acquisitions includes depreciation expense, real estate tax expense, interest expense, and other corporate expenses totaling $3.0 million and $1.9 million for three months ended September 30, 2017 and 2016, respectively, and $8.2 million and $4.6 million for the nine months ended September 30, 2017 and 2016, respectively.

Schedule of unaudited condensed pro forma financial information

The unaudited condensed pro forma financial information for the 79 hotel properties owned at September 30, 2017 for the three and nine months ended September 30, 2017 and 2016 is as follows (in thousands, except per share):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
Revenues	$	136,369	$	135,373	$	405,289	$	408,104
Income from hotel operations	$	50,458	$	52,250	$	152,282	$	160,450
Net income before taxes (1)	$	14,234	$	25,181	$	58,044	$	79,569
Net income (1)	$	14,465	$	26,426	$	57,431	$	76,108
Net income attributable to common stockholders, net of amount allocated to participating securities (1)	$	10,162	$	21,275	$	44,359	$	62,357
Basic and diluted net income per share attributable to common stockholders (1)	$	0.10	$	0.25	$	0.45	$	0.72
Diluted net income per share attributable to common stockholders(1)	$	0.10	$	0.24	$	0.45	$	0.71

(1) Pro Forma amounts include depreciation expense, real estate tax expense, interest expense, income tax expense, and other corporate expenses totaling $46.2 million and $34.3 million for three months ended September 30, 2017 and 2016, respectively, and $124.3 million and $110.9 million for the nine months ended September 30, 2017 and 2016, respectively.