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Favorable Lease Assets
 9 Months Ended
Sep. 07, 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 September 7, 2012 (unaudited) and December 31, 2011 consist of the following (in thousands):
 
September 7, 2012
 
December 31, 2011
Boston Westin Waterfront Ground Lease
$
18,792

 
$
18,941

Boston Westin Waterfront Lease Right
9,045

 
9,513

Minneapolis Hilton Ground Lease
5,933

 
5,985

Oak Brook Hills Marriott Resort Ground Lease
5,600

 
7,352

Lexington Hotel New York Tenant Leases
1,376

 
1,494

 
$
40,746

 
$
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 September 7, 2012 was approximately $0.7 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 period from January 1, 2012 to September 7, 2012 due to lower comparable market rents in the City of Boston. No impairment loss was recorded during 2011.

In conjunction with our impairment analysis of the Oak Brook Hills Marriott Resort (see Note 4), we evaluated the hotel's favorable ground lease asset for recoverability of the carrying value as of September 7, 2012. We concluded that the fair value of the ground lease was $5.6 million resulting in an impairment loss of $1.4 million. The impairment of the favorable ground lease asset is included in the $30.4 million impairment loss on the condensed consolidated statements of operations. The new carrying value of the favorable ground lease asset will be amortized over the remaining non-cancelable term of the ground lease.

The fair value of both the lease right and favorable ground lease asset are Level 3 measurements under the fair value hierarchy (see Note 2) and are derived from a discounted cash flow model using the favorable difference between the estimated participating rents or actual rents in accordance with the lease terms and the estimated market rents. For the lease right, the discount rate was estimated using a risk adjusted rate of return, the estimated participating rents were estimated based on a hypothetical hotel comparable to our Westin Boston Waterfront Hotel, and market rents were based on comparable long-term ground leases in the City of Boston. For the Oak Brook Hills Marriott Resort's favorable ground lease asset, the discount rate was estimated using a risk adjusted rate of return and market rents were based on comparable golf course leases across the United States.