NOTE 3. ACQUISITION OF HOTEL PROPERTIES

During the nine months ended September 30, 2017, the Company acquired seven wholly owned hotel properties. The allocation of the purchase price based on fair value, which was determined using Level 3 fair value inputs, was as included in the table below.


	Date of acquisition	Land		Buildings, improvements, and vehicle		Furniture and equipment		Intangible asset		Estimated earn out		Total purchase price		Debt at acquisition (2)		Issuance of CHLP partnership units		Net cash
Home2 Suites	03/24/2017	$	905	$	14,204	$	1,351	$	40	$	-	$	16,500	$	16,455	$	45	$	-
Lexington, KY
Home2 Suites	03/24/2017		1,087		14,345		1,285		33		-		16,750		16,705		45		-
Round Rock, TX
Home2 Suites	03/24/2017		1,519		18,229		1,727		25		-		21,500		21,442		58		-
Tallahassee, FL
Home 2 Suites	04/14/2017		1,311		16,792		897		-		-		19,000		9,096		52		9,852
Southaven, MS
Hampton Inn & Suites	06/19/2017		1,200		16,432		1,773		-		(155) (1)		19,250		19,165		85		-
Lake Mary, FL
Fairfield Inn & Suites	08/31/2017		1,014		14,297		1,089		-		-		16,400		16,336		64		-
EL Paso, TX
Residence Inn	08/31/2017		1,495		19,630		1,275		-		-		22,400		22,314		86		-
Austin, TX
Total		$	8,531	$	113,929	$	9,397	$	98	$	(155)	$	131,800	$	121,513	$	435 (3)	$	9,852

(1)

The Lake Mary purchase price is subject to a post-closing adjustment of up to $250 to be paid to the seller if the hotel achieves a stipulated hotel net operating income level in 2017. This contingent consideration is included in the purchase price allocation at its estimated fair value on the date of the acquisition.

(2)

Debt of $9,096 was assumed related to the Home2 Suites Southaven, MS acquisition. The assumed loan bears interest at a fixed rate of 4.54%, requires monthly principal and interest payments of $48, and matures on August 1, 2024. All other debt was drawn from the credit facility at acquisition.

(3)

Total issuance of 1,940,451 partnership units in CHLP.

During the three and nine months ended September 30, 2017, included in the consolidated statements of operations from the hotels we acquired during the nine months ended September 30, 2017 is revenue totaling $5,723 and $10,352, respectively, and net earnings, excluding the consideration of acquisition costs, totaling $843 and $1,917, respectively.

On July 17, 2017, the Company entered into a hotel purchase agreement to purchase the TownePlace Suites Austin North Tech Ridge, after subsequent amendments, for $19,750. The closing of this acquisition is subject to customary closing conditions including accuracy of representations and warranties and compliance with covenants and obligations and is expected to occur in the first quarter of 2018. However, there can be no guarantee that this transaction will close.

The Company had no acquisitions of wholly owned properties during the nine months ended September 30, 2016.

Pro Forma Results

In addition to the seven properties acquired in 2017, the Company also entered into the Atlanta JV which then acquired one hotel in August of 2016 (see Note 4) and the Company acquired one wholly owned property, the Aloft Leawood / Overland Park (Kansas City), for a purchase price of $22,500 on December 14, 2016. The following condensed pro forma financial data is presented as if all acquisitions completed in 2017 were completed on January 1, 2016 and all acquisitions completed in 2016, including that completed by the Atlanta JV, had been completed on January 1, 2015. Supplemental pro forma earnings were adjusted to exclude all acquisition expenses recognized in the periods presented as if these acquisition costs had been incurred in prior periods but were not adjusted to remove the results of hotels sold during and between the periods. Results for periods prior to the Company’s ownership are based on information provided by the prior owners, adjusted for differences in interest expense, depreciation expense, and management fees following the Company’s ownership and have not been audited or reviewed by our independent auditors. All hotels were in operation for all periods presented with the exception of the Residence Inn Austin which opened on August 3, 2016. The condensed pro forma financial data is not necessarily indicative of what the actual results of operations of the Company would have been assuming the acquisitions had been consummated on January 1, 2016 or 2015, nor do they purport to represent the results of operations for future periods.


	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
Total revenue	$	16,813	$	21,292	$	51,616	$	62,627
Operating income	$	1,667	$	2,826	$	6,198	$	7,939
Net earnings (loss) attributable to common shareholders	$	(1,071)	$	2,350	$	(8,580)	$	105
Net earnings (loss) per share - Basic	$	(0.09)	$	3.09	$	(0.99)	$	0.14
Net earnings (loss) per share - Diluted	$	(0.09)	$	0.49	$	(0.99)	$	0.08