INVESTMENT IN HOTEL PROPERTIES (Tables)

12 Months Ended

Dec. 31, 2017

Schedule of investment in hotel properties, net

Investment in hotel properties, net at December 31, 2017 and 2016 include (in thousands):



	2017			2016
Land	$	272,932		$	178,423
Hotel buildings and improvements	1,868,273			1,433,389
Intangible assets	22,764			6,602
Construction in progress	12,464			22,490
Furniture, fixtures and equipment	174,126			129,437
	2,350,559			1,770,341
Less - accumulated depreciation	(291,067		)	(225,219		)
	$	2,059,492		$	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 Consolidated Balance Sheets include the following (in thousands):



	2017			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	(1,001		)	(348		)
Intangible assets, net	$	21,763		$	6,254

Intangible liabilities:
Unfavorable leases ⁽²⁾	$	5,002		$	5,002
Less accumulated amortization	(285		)	(190		)
Intangible liabilities, net	$	4,717		$	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.

Schedule of intangible liabilities future amortization expense

Future amortization expense is expected to be as follows (in thousands):



	Finite-Lived Intangible Assets		Intangible Liabilities
2018	$	699	$	95
2019	499		95
2020	370		95
2021	360		95
2022	274		95
Thereafter	8,727		4,242
	$	10,929	$	4,717

Schedule of finite-lived intangible assets, future amortization expense

Future amortization expense is expected to be as follows (in thousands):



	Finite-Lived Intangible Assets		Intangible Liabilities
2018	$	699	$	95
2019	499		95
2020	370		95
2021	360		95
2022	274		95
Thereafter	8,727		4,242
	$	10,929	$	4,717

Disclosure of assets held for sale

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



	2017		2016
Land	$	1,193	$	10,907
Hotel building and improvements	—		44,718
Furniture, fixtures and equipment	—		6,649
Construction in progress	—		29
Franchise fees	—		392
	$	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
		651

Schedule of hotel property acquisitions

Hotel property acquisitions in 2017 and 2016 were as follows (in thousands):



Date Acquired	Franchise/Brand	Location	Guestrooms	Purchase Price
Year Ended December 31, 2017
March 1, 2017	Homewood Suites	Aliso Viejo (Laguna Beach), CA	129	$	38,000
March 30, 2017	Hyatt Place	Phoenix (Mesa), AZ	152	22,200
May 23, 2017	Courtyard by Marriott	Fort Lauderdale, FL	261	85,000
June 9, 2017	Courtyard by Marriott	Charlotte, NC	181	56,250
June 21, 2017	Courtyard by Marriott	Fort Worth, TX	203	40,000
June 21, 2017	Courtyard by Marriott	Kansas City, MO	123	24,500
June 21, 2017	Courtyard by Marriott	Pittsburgh, PA	182	42,000
June 21, 2017	Hampton Inn & Suites	Baltimore, MD	116	18,000
June 21, 2017	Residence Inn by Marriott	Baltimore, MD	188	38,500
July 13, 2017	AC Hotel by Marriott	Atlanta, GA	255	57,500
November 14, 2017	Courtyard by Marriott	New Haven, CT	207	63,400
November 14, 2017	Hilton Garden Inn	Waltham, MA	148	32,300
November 14, 2017	Homewood Suites	Tucson, AZ	122	25,300
November 14, 2017	Residence Inn by Marriott	Cleveland, OH	175	43,000
			2,442	$	585,950	⁽¹⁾
Year Ended December 31, 2016
January 19, 2016	Courtyard by Marriott	Nashville, TN	226	$	71,000
January 20, 2016	Residence Inn by Marriott	Atlanta, GA	160	38,000
August 9, 2016	Marriott	Boulder, CO	157	61,400
October 28, 2016	Hyatt Place	Chicago, IL	206	73,750
			749	$	244,150	⁽²⁾


(1)	The net assets acquired totaled $588.8 million due to the purchase at settlement of $0.2 million of net working capital assets and capitalized transaction costs of $2.6 million.


(2)	The net assets acquired totaled $244.7 million due to the purchase at settlement of $0.6 million of net working capital assets.

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

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):



	2017			2016
Land	$	98,639		$	28,683
Hotel buildings and improvements	447,477			207,433
Intangible assets	16,162			442
Furniture, fixtures and equipment	26,546			8,081
Other assets	2,738			798
Total assets acquired	591,562			245,437
Less other liabilities	(2,740		)	(723		)
Net assets acquired	$	588,822		$	244,714

Schedule of total revenues and net income for hotel properties acquired

Total revenues and net income for hotel properties acquired in 2017 and 2016, which are included in our Consolidated Statements of Operations for the years ended December 31, 2017 and 2016, are as follows (in thousands):



	2017 Acquisitions		2016 Acquisitions
	2017 ⁽¹⁾		2017		2016 ⁽¹⁾
Revenues	$	53,443	$	47,842	$	28,560
Net income	$	5,914	$	8,736	$	6,992


(1)	The results of operations of acquired hotel properties are included beginning on their respective acquisition dates; therefore, the results are for a partial period in the year acquired.

Schedule of unaudited condensed pro forma financial information

The unaudited condensed pro forma financial information for 2017 and 2016 is as follows (in thousands, except per share):



	2017		2016
	(unaudited)
Revenues	$	567,342	$	562,030
Income from hotel operations ⁽¹⁾	$	211,730	$	217,414
Net income ⁽²⁾	$	76,292	$	106,909
Net income attributable to common stockholders, net of amount allocated to participating securities ⁽²⁾	$	55,803	$	85,761
Basic net income per share attributable to common stockholders ⁽²⁾	$	0.56	$	0.99
Diluted net income per share attributable to common stockholders ⁽²⁾	$	0.56	$	0.98


(1)	Pro Forma amounts include real estate tax expense totaling $31.9 million and $27.5 million for the years ended December 31, 2017 and 2016, respectively.


(2)	Pro Forma amounts include depreciation expense, real estate tax expense, interest expense, income tax expense, and other corporate expenses totaling $166.8 million and $139.3 million for the years ended December 31, 2017 and 2016, respectively.