Hotel Dispositions

6 Months Ended

Jun. 30, 2015

Discontinued Operations - Hotel Properties Held for Sale And Sold [Abstract]

Discontinued Operations - Hotel Properties Held for Sale And Sold

Hotel Dispositions

Effective October 1, 2014, the Company adopted ASU Update No. 2014-08 concerning the classification and reporting of discontinued operations. This amendment defines discontinued operations as a component of an entity that represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. As a result of the adoption of ASU Update No. 2014-08, we anticipate that most of our hotel dispositions will not be classified as discontinued operations as most will not fit this description.

For transactions that have been classified as held for sale or as discontinued operations for periods prior to adoption of ASU 2014-08, the Company will continue to present the operating results as discontinued operations in the statements of operations for all applicable periods presented.

At March 31, 2015, the Company had ten hotels identified as held for sale. During the three months ending June 30, 2015, three of those hotels were sold. The Company has made a decision to accelerate our disposition strategy, and as a result an additional eleven non-core hotels were reclassified as held for sale during the second quarter of 2015. A total of eighteen hotels are held for sale as of June 30, 2015.

Sold Hotels - Continuing Operations

On March 19, 2015 the Company closed on the sale of a Sleep Inn in Omaha, Nebraska, to an unaffiliated buyer for a gross sales price of $2.9 million, with no gain on the sale and reduction of the Company’s mortgage debt of $2.5 million. The operating results of this hotel are included in earnings from continuing operations.

Sold Hotels - Discontinued Operations

The operating results of the six hotels below which were sold are included in gain/loss from discontinued operations, net of tax as shown in the condensed consolidated statement of operations for the three and six months ended June 30, 2015 and 2014.

On January 15, 2015 the Company closed on the sale of a Super 8 in West Plains, Missouri to an unaffiliated buyer for a gross sales price of $1.5 million, with a gain on sale of $0.9 million and reduction of the Company’s mortgage debt of $1.4 million.

On January 29, 2015 the Company closed on the sale of a Super 8 in Green Bay, Wisconsin, to an unaffiliated buyer for a gross sales price of $2.2 million, with no gain on the sale and reduction of the Company’s mortgage debt of $1.5 million.

On March 16, 2015 the Company closed on the sale of a Super 8 in Columbus, Georgia, to an unaffiliated buyer for a gross sales price of $0.9 million, with no gain on the sale and reduction of the Company’s mortgage debt of $0.9 million.

On April 1, 2015, the Company closed on the sale of two Savannah Suites hotels to an unaffiliated buyer. The hotel in Chamblee, Georgia sold for $4.4 million, and the hotel in Augusta, Georgia sold for $3.4 million, with no gain on either sale. Partial proceeds of $4.1 million were applied to the associated debt with GE, with the remainder going to cash.

On April 30, 2015, the Company closed on the sale of a Super 8 in Batesville, Arkansas, to an unaffiliated buyer for a gross sales price of $1.5 million, with a gain on sale of $0.7 million. Partial proceeds of $1.3 million were applied to the revolving credit facility with Great Western Bank, reducing the outstanding revolver balance by $1.3 million and the revolver limit from $12.5 million to $11.2 million. The remainder of the proceeds went to cash.

Hotels Held For Sale

The two hotels classified as held for sale in the first quarter of 2015 are the Comfort Inn and the Days Inn in Alexandria, Virginia. These hotels represent a significant disposition; therefore, their operating results are included below.

The operating results of the Comfort Inn and Days Inn hotels are $0.3million and  $(0.3) million for the three months endedJune 30, 2015 and $0.1million and $0.1million for June 30, 2014. For the six months ending June 30, 2015, operating results for the Comfort Inn and Days Inn hotels are $0.2 million and $(1.2) million, respectively. For the same period of 2014, the Comfort Inn and Days Inn had operating results of $(0.1) million and $(0.1) million. The Days Inn operating results for the six months ending June 30, 2015 include an impairment expense of$1.3 million, of which$0.9 million was recognized as of March 31, 2015upon the hotel’s classification as held for sale. Earnings attributable to noncontrolling interest from the two hotels for the three months ended June 30, 2015 and 2014 were approximately $(3,000) and $0, respectively. Earnings attributable to noncontrolling interest for the six months ending June 30, 2015 and 2014 were approximately $1,000 and $0, respectively.

A REIT will incur a 100% tax on the net gain derived from any sale or other disposition of property that the REIT holds primarily for sale to customers in the ordinary course of a trade or business. We do not believe any of our hotels were held primarily for sale in the ordinary course of our trade or business. However, if the Internal Revenue Service would successfully assert that we held such hotels primarily for sale in the ordinary course of our business, the gain from such sales could be subject to a 100% prohibited transaction tax.

Assets held for sale consisted of the following as of June 30, 2015 and December 31, 2014:

	2015						2014
	Continuing Operations (15 hotels)		Discontinued Operations (3 hotels)		Total Held For Sale		Continuing Operations (16 hotels)		Discontinued Operations (9 hotels)		Total Held For Sale
Land	$	8,263	$	1,009	$	9,272	$	9,149	$	3,791	$	12,940
Acquired below market lease intangibles		0		883		883		0		883		883
Buildings, improvements, vehicles		48,311		5,327		53,638		53,536		15,918		69,454
Furniture and Equipment		10,651		1,095		11,746		11,183		3,182		14,365
Construction-in-progress		13		0		13		320		(1)		319
Assets Held For Sale	$	67,238	$	8,314	$	75,552	$	74,188	$	23,773	$	97,961
Accumulated depreciation		(23,391)		(1,133)		(24,524)		(23,239)		(5,087)		(28,326)
Investment in hotel properties, net	$	43,847	$	7,181	$	51,028	$	50,949	$	18,686	$	69,635

The following table sets forth the components of discontinued operations for the three and six months ended June 30, 2015 and 2014. The table includes the results of operations for hotels sold and classified in discontinued operations in 2014 and the first two quarters of 2015 (which were held for sale at December 31, 2014).

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Revenues	$	962	$	4,739	$	2,714	$	8,987
Hotel and property operations expenses		(656)		(3,484)		(1,907)		(7,104)
Interest expense		(54)		(348)		(200)		(799)
Depreciation expense		0		(38)		0		(112)
Net gain on disposition of assets		725		466		1,662		635
Impairment (loss) recovery		75		(506)		120		(596)
Gain from discontinued operations, net of tax	$	1,052	$	829	$	2,389	$	1,011
Loss attributable to noncontrolling interest		145		0		(2)		0
Net earnings attributable to controlling interests	$	1,197	$	829	$	2,387	$	1,011
Capital Expenditures	$	17	$	166	$	44	$	259