PROPERTY AND EQUIPMENT - REIT

6 Months Ended

Jun. 30, 2019

Property, Plant and Equipment [Line Items]

Net investment in property and equipment as of June 30, 2019 and December 31, 2018, consists of the following (in thousands):



	June 30, 2019			December 31, 2018
Hotel properties:
Land and site improvements ⁽¹⁾	$	1,217,149		$	1,215,710
Building and improvements	2,747,230			2,729,661
Furniture, fixtures and equipment	717,774			674,545
Total hotel properties	4,682,153			4,619,916
Development in process ⁽²⁾	51,199			27,174
Corporate furniture, fixtures, equipment and other	23,729			22,972
Undeveloped land parcel	1,675			1,675
Total cost	4,758,756			4,671,737
Less accumulated depreciation:
Hotel properties	(1,281,821		)	(1,201,260		)
Corporate furniture, fixtures, equipment and other	(18,697		)	(16,845		)
Total accumulated depreciation	(1,300,518		)	(1,218,105		)
Property and equipment - net	$	3,458,238		$	3,453,632

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(1)	Includes finance lease asset of $3.2 million as of June 30, 2019 and December 31, 2018.


(2)	Includes finance lease asset of $0.8 million and $0.6 million as of June 30, 2019 and December 31, 2018, respectively.

As of June 30, 2019 and December 31, 2018, development in process consisted of 13 and 11 land parcels, respectively, which are in various phases of construction and/or development.

No impairment charges were recognized during the three and six months ended June 30, 2019 and the three months ended June 30, 2018. During the six months ended June 30, 2018, the Company recognized $43.6 million of 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.

The Company used Level 3 unobservable inputs and, in certain instances Level 2 observable inputs, to determine the impairment on its property and equipment. 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 overall micro and macro-economic 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 or losses on sale in future periods reflecting either changes in estimate, circumstance or the estimated market value of its assets.

ESH REIT

Property, Plant and Equipment [Line Items]

PROPERTY AND EQUIPMENT

Net investment in property and equipment as of June 30, 2019 and December 31, 2018, consists of the following (in thousands):



	June 30, 2019			December 31, 2018
Hotel properties:
Land and site improvements ⁽¹⁾	$	1,219,515		$	1,218,077
Building and improvements	2,774,244			2,756,674
Furniture, fixtures and equipment	718,991			679,944
Total hotel properties	4,712,750			4,654,695
Development in process ⁽²⁾	51,199			27,174
Undeveloped land parcel	1,675			1,675
Total cost	4,765,624			4,683,544
Less accumulated depreciation	(1,297,206		)	(1,215,899		)
Property and equipment - net	$	3,468,418		$	3,467,645

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(1)	Includes finance lease asset of $3.2 million as of June 30, 2019 and December 31, 2018.


(2)	Includes finance lease asset of $0.8 million and $0.6 million as of June 30, 2019 and December 31, 2018, respectively.

As of June 30, 2019 and December 31, 2018, development in process consisted of 13 and 11 land parcels, respectively, which are in various phases of construction and/or development.

ESH REIT uses Level 3 unobservable inputs and, in certain instances Level 2 observable inputs, to determine the impairment on its property and equipment. 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. These assumptions are based on ESH REIT’s historical data and experience, budgets, industry projections and overall micro and macro-economic 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 assets.