Acquisitions

On July 12, 2012, we acquired a portfolio of four hotels for a contractual purchase price of $495 million from affiliates of Blackstone Real Estate Partners VI. The portfolio consists of the Hilton Boston Downtown, Westin Washington D.C. City Center, Westin San Diego and Hilton Burlington. We funded the Portfolio Acquisition with a combination of approximately $120 million in borrowings under our senior unsecured credit facility, $100 million of corporate cash, net proceeds from our recent follow-on public offering of common stock and the issuance of 7,211,538 shares of common stock to an affiliate of the Sellers in a private placement.

Hilton Boston Downtown

The Hilton Boston Downtown is a 362-room full-service hotel located in the Financial District of downtown Boston. We believe the Hilton Boston is well located for business transient customers. In addition, the Hilton Boston’s location is proximate to the waterfront and the Boston Convention and Exhibition Center. The historic Art Deco building was converted to a hotel in 1999 after undergoing a major renovation. The hotel is currently operated by WHM LLC under a short-term management agreement.

Westin Washington D.C. City Center

The Westin Washington D.C. City Center is a 406-room full-service hotel located in downtown Washington, D.C. The hotel opened in 1982 and converted to the Westin brand in 2006 after undergoing a major renovation. The hotel is centrally located to appeal to business and leisure guests visiting the K Street business corridor, White House, Washington Convention Center, National Mall and U.S. Capitol. The hotel is operated by Interstate Hotels & Resorts.

Westin San Diego

The Westin San Diego is a 436-room full-service hotel located in downtown San Diego. The hotel opened in 1991 as part of a San Diego mixed-use facility and was converted to the Westin brand in 2007 after undergoing a major renovation. The hotel is within walking distance of several major group and leisure demand generators, including the San Diego Convention Center, Seaport Village, Little Italy, Gaslamp Quarter and is across the street from the new Federal Courthouse (expected to open in late 2012). The hotel is operated by Interstate Hotels & Resorts.

Hilton Burlington

The Hilton Burlington is a 258-room full-service hotel located in downtown Burlington, Vermont. The hotel was constructed in 1976 and converted to the Hilton brand in 2007 after undergoing a major renovation in 2007. The hotel is the only full-service hotel in downtown Burlington. The hotel, which overlooks Lake Champlain, is a summertime destination resort and attracts state and regional association groups year round. The hotel is operated by Interstate Hotels & Resorts.

The following table sets forth the management agreement terms for each of the four hotels acquired.



Property	Expiration		Base Management Fee(1)			Incentive Management Fee
Hilton Boston Downtown	12/31/2012	(2)	2	%		None
Westin Washington D.C. City Center	12/3/2015	(3)	1	%	(4)	10	%	(5)
Westin San Diego	12/3/2015	(3)	1	%	(4)	10	%	(5)
Hilton Burlington	12/3/2015	(3)	1	%	(4)	10	%	(5)

____________________


(1)	As a percentage of gross revenues.


(2)	May be terminated at any time prior to the expiration date with 30 days written notice.


(3)	Term may be extended on a month-to-month basis following the expiration date.


(4)	The base management fee will increase to 1.5% of gross revenues beginning on July 12, 2014. Total management fees are capped at 3.5% of gross revenues.


(5)	Calculated as a percentage of operating profits in excess of 8% of our invested capital until July 12, 2014 and 10% of our invested capital thereafter.

The following table sets forth the franchise agreement terms for each of the four hotels acquired.



Property	Expiration	Franchise Fee
Hilton Boston Downtown	7/31/2022	5% of gross room sales and 3% of gross food and beverage sales; program fee of 4% of gross room sales
Westin Washington D.C. City Center	12/22/2030	7% of gross room sales and 3% of gross food and beverage sales
Westin San Diego	12/22/2030	7% of gross room sales and 3% of gross food and beverage sales
Hilton Burlington	7/31/2022	5% of gross room sales and 3% of gross food and beverage sales; program fee of 4% of gross room sales

The following table summarizes the preliminary estimated fair value of the assets acquired and liabilities assumed in our acquisitions (in thousands):



	Hilton Boston Downtown			Westin Washington D.C. City Center			Westin San Diego			Hilton Burlington
Land	$	22,000		$	19,800		$	17,700		$	7,100
Building	133,975			132,505			103,721			46,182
Furnitures, fixtures and equipment	2,700			2,000			2,200			1,600
Total fixed assets	158,675			154,305			123,621			54,882
Net other assets and liabilities	(288		)	(725		)	(62		)	(220		)
Total	$	158,387		$	153,580		$	123,559		$	54,662

The acquired properties are included in our results of operations based on their date of acquisition. The following unaudited pro forma results of operations (in thousands, except per share data) reflect these transactions as if each had occurred on January 1, 2011. We believe all material adjustments necessary to reflect the effects of acquisitions have been made; however, the amounts recorded are based on a preliminary estimate of the fair value of the assets acquired and the liabilities assumed. We will finalize the recorded amounts upon the completion of our valuation analysis of the assets acquired, liabilities assumed and the share consideration paid. The pro forma information is not necessarily indicative of the results that actually would have occurred nor does it indicate future operating results.



	Fiscal Quarter Ended					Period from
	September 7, 2012			September 9, 2011		January 1, 2012 to September 7, 2012			January 1, 2011 to September 9, 2011
Revenues	$	195,496		$	183,882	$	530,595		$	493,992

(Loss) income from continuing operations	(27,996		)	4,740		(24,806		)	(3,286		)

Net (loss) income	(42,086		)	4,492		(25,711		)	(3,485		)

Basic and diluted (loss) earnings per share:
Continuing operations	$	(0.14	)	$	0.02	$	(0.13	)	$	(0.02	)
Net (loss) income	$	(0.22	)	$	0.02	$	(0.13	)	$	(0.02	)

For the fiscal quarter ended September 7, 2012 and the period from January 1, 2012 to September 7, 2012, our condensed consolidated statements of operations include $14.2 million of revenues and $2.8 million of net income related to the operations of the four hotels acquired in 2012.