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Favorable Lease Assets
 6 Months Ended
Jun. 15, 2012
Goodwill and Intangible Assets Disclosure [Abstract]  
Favorable Lease Assets
Favorable Lease Assets

In connection with the acquisition of certain hotels, we have recognized intangible assets for favorable ground leases and tenant leases. Our favorable lease assets, net of accumulated amortization, as of June 15, 2012 (unaudited) and December 31, 2011 consist of the following (in thousands):
 
June 15, 2012
 
December 31, 2011
Boston Westin Waterfront Ground Lease
$
18,842

 
$
18,941

Boston Westin Waterfront Lease Right
9,045

 
9,513

Minneapolis Hilton Ground Lease
5,950

 
5,985

Oak Brook Hills Marriott Resort Ground Lease
7,102

 
7,352

Lexington Hotel New York Restaurant Leases
1,416

 
1,494

 
$
42,355

 
$
43,285



The favorable lease assets are recorded at the acquisition date and are generally amortized using the straight-line method over the remaining non-cancelable term of the lease agreement. Amortization expense for the period from January 1, 2012 to June 15, 2012 was approximately $0.5 million.

We own a favorable lease asset related to the right to acquire a leasehold interest in a parcel of land adjacent to the Westin Boston Waterfront Hotel for the development of a 320 to 350 room hotel (the “lease right”). The option expires in 2016. We do not amortize the lease right but review the asset for impairment annually or at interim periods if events or circumstances indicate that the asset may be impaired. An impairment loss of $0.5 million was recorded during the fiscal quarter ended June 15, 2012. No impairment loss was recorded during 2011.

The fair value of the lease right is a Level 3 measurement under the fair value hierarchy (see Note 2) and is derived from a discounted cash flow model using the favorable difference between the estimated participating rents in accordance with the lease terms and the estimated market rents. The discount rate was estimated using a risk adjusted rate of return, the estimated participating rents were estimated based on a hypothetical completed 327-room hotel comparable to our Westin Boston Waterfront Hotel, and market rents were based on comparable long-term ground leases in the City of Boston. The methodology used to determine the fair value of the lease right is consistent with the methodology used since acquisition of the lease right.