Property and Equipment

9 Months Ended

Sep. 30, 2018

PROPERTY AND EQUIPMENT

Net investment in property and equipment as of September 30, 2018 and December 31, 2017, consists of the following (in thousands):



	September 30, 2018			December 31, 2017
Hotel properties:
Land and site improvements	$	1,229,442		$	1,286,784
Building and improvements	2,709,416			2,934,048
Furniture, fixtures and equipment	639,225			649,487
Total hotel properties	4,578,083			4,870,319
Development in process	31,730			2,453
Corporate furniture, fixtures, equipment and other	22,006			21,486
Undeveloped land parcel	1,675			1,675
Total cost	4,633,494			4,895,933
Less accumulated depreciation:
Hotel properties	(1,148,789		)	(1,128,465		)
Corporate furniture, fixtures, equipment and other	(15,913		)	(14,334		)
Total accumulated depreciation	(1,164,702		)	(1,142,799		)
Property and equipment - net	$	3,468,792		$	3,753,134

As of September 30, 2018, development in process consists of nine land parcels which are in various phases of construction and/or development. Additionally, in September 2018, the Company acquired a hotel under construction from Legacy Greenville, LLC for cash consideration of approximately $12.3 million. Because the hotel had not opened at the date of acquisition, the transaction was accounted for as an acquisition of assets rather than a business combination under ASC 805, Business Combinations. The hotel is expected to open in the fourth quarter of 2018. As of September 30, 2018, these assets are included in development in process.

During the three and nine months ended September 30, 2018, the Company, using Level 3 unobservable inputs and, in certain instances, using Level 2 observable inputs recognized impairment charges of $0 and approximately $43.6 million, respectively. During the first quarter of 2018, the Company recognized impairment charges for 21 hotels, generally located in the Midwestern U.S., the majority of which were incurred in connection with evaluating the potential sale of certain non-core assets. During the three and nine months ended September 30, 2017, the Company recognized approximately $0 and $20.4 million, respectively, of impairment charges primarily related to its Canadian hotels.

Quantitative information with respect to observable inputs consists of non-binding bids or, in certain instances, binding agreements to sell a hotel or portfolio of hotels to one or more third parties. Quantitative information with respect to unobservable inputs consists of internally developed cash flow models that include the following assumptions, among others: projections of revenues, expenses and hotel-related cash flows based on assumed long-term growth rates, demand trends, expected future capital expenditures and estimated discount rates that range from 6% to 10% and terminal capitalization rates that range from 7% to 11%. These assumptions are based on the Company’s historical data and experience, the Company’s budgets, industry projections and micro and macro general economic condition projections.

The estimation and evaluation of future cash flows, in particular the holding period for real estate assets and asset composition and/or concentration within real estate portfolios, relies on judgments and assumptions regarding holding period, current and future operating and economic performance, and current and future market conditions. It is possible that such judgments and/or estimates will change; if this occurs, the Company may recognize additional impairment charges reflecting either changes in estimate, circumstance or the estimated market value of its assets.

ESH REIT

Entity Information [Line Items]

Property and Equipment

PROPERTY AND EQUIPMENT

Net investment in property and equipment as of September 30, 2018 and December 31, 2017, consists of the following (in thousands):



	September 30, 2018			December 31, 2017
Hotel properties:
Land and site improvements	$	1,232,336		$	1,289,152
Building and improvements	2,770,943			2,970,404
Furniture, fixtures and equipment	654,626			655,120
Total hotel properties	4,657,905			4,914,676
Development in process	31,730			2,453
Undeveloped land parcel	1,675			1,675
Total cost	4,691,310			4,918,804
Less accumulated depreciation	(1,192,039		)	(1,143,164		)
Property and equipment, net	$	3,499,271		$	3,775,640

As of September 30, 2018, development in process consists of nine land parcels which are in various phases of construction and/or development. Additionally, in September 2018, ESH REIT acquired a hotel under construction from Legacy Greenville, LLC for cash consideration of approximately $12.3 million. Because the hotel had not opened at the date of acquisition, the transaction was accounted for as an acquisition of assets rather than a business combination under ASC 805, Business Combinations. The hotel is expected to open in the fourth quarter of 2018. As of September 30, 2018, these assets are included in development in process.

No impairment charges were recognized during the three and nine months ended September 30, 2018, or during the three months ended September 30, 2017. During the nine months ended September 30, 2017, using Level 3 unobservable inputs and, in certain instances, using Level 2 observable inputs, ESH REIT recognized approximately $15.0 million of impairment charges related to its Canadian hotels.

Quantitative information with respect observable inputs consists of non-binding bids or, in certain instances, binding agreements to sell a hotel or portfolio of hotels to one or more third parties. Quantitative information with respect to unobservable inputs consists of internally developed cash flow models that include the following assumptions, among others: projections of revenues, expenses and hotel-related cash flows based on assumed long-term growth rates, demand trends, expected future capital expenditures and estimated discount rates. These assumptions are based on ESH REIT's historical data and experience, budgets, industry projections and micro and macro general economic condition projections.

The estimation and evaluation of future cash flows, in particular the holding period for real estate assets and asset composition and/or concentration within real estate portfolios, relies on judgments and assumptions regarding holding period, current and future operating and economic performance, and current and future market conditions. It is possible that such judgments and/or estimates will change; if this occurs, ESH REIT may recognize impairment charges or losses on sale of hotel properties in future periods reflecting either changes in estimate, circumstance or the estimated market value of its assets.