Acquisitions

2012 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 "Sellers"). The portfolio consists of the Hilton Boston Downtown, Westin Washington D.C. City Center, Westin San Diego and Hilton Burlington. We funded the acquisition with a combination of approximately $120 million in borrowings under our senior unsecured credit facility, $100 million of corporate cash, net proceeds from a secondary public offering of our common stock and the issuance of 7,211,538 shares of common stock to an affiliate of the Sellers in a private placement. We recorded the acquisition at fair value using an independent valuation analysis, with the purchase price allocation to property and equipment, hotel working capital, favorable management contract assets and the Company's common stock.

On November 9, 2012, we acquired the Hotel Rex, a 94-room full-service boutique hotel located in the Union Square district of San Francisco, California, for a purchase price of approximately $29.5 million. We funded the acquisition with borrowings under our credit facility.

2011 Acquisitions

On January 18, 2011, we entered into a purchase and sale agreement to acquire, upon completion, a hotel property under development on West 42nd Street in Times Square, New York City. Upon completion by the third-party developer, the hotel is expected to contain approximately 282 guest rooms and the contractual purchase price is approximately $128 million, or approximately $450,000 per guest room. The purchase and sale agreement is for a fixed-price and we are not assuming any construction risk (including not assuming the risk of construction cost overruns). We currently expect the hotel to open in 2014. Upon entering into the purchase and sale agreement, we deposited $20.0 million with a third-party escrow agent. During the year ended December 31, 2012, we made $1.9 million of additional deposits. Upon the completion of certain construction milestones, we will be required to make an additional deposit of $5.0 million. All deposits are interest bearing. We will forfeit our deposits if we do not close on the acquisition of the hotel upon substantial completion of construction, unless the seller fails to meet certain conditions, including substantial completion of the hotel within a specified time frame and construction of the hotel within the contractual scope.

On May 19, 2011, we acquired the 196-room JW Marriott Denver at Cherry Creek located in Denver, Colorado for approximately $74 million. We funded the acquisition with corporate cash of $30.3 million and the assumption of a $42.4 million mortgage loan with a fair value of approximately $43.9 million. We reviewed the terms of the mortgage loan in conjunction with the hotel purchase accounting and concluded the interest rate of the loan to be above current market. Accordingly, we recorded a $1.5 million debt premium that will be amortized into interest expense over the remaining life of the loan. The hotel is operated by Sage Hospitality.

On June 1, 2011, we acquired the 712-room Lexington Hotel New York located in New York City for approximately $337 million. The acquisition was funded with corporate cash and a $115.0 million draw on our senior unsecured credit facility. The hotel is operated by Highgate Hotels.

Upon acquisition, we assumed the existing franchise agreement with Radisson Hotels International, Inc. On March 23, 2012, we executed a franchise agreement with Marriott to affiliate the Lexington Hotel New York with Marriott’s Autograph Collection upon the completion of a comprehensive capital improvement plan. Separately, we exercised our termination option under the hotel's existing franchise agreement with Radisson, for which we paid a $750,000 termination fee. The Radisson franchise agreement was terminated on September 15, 2012 and the hotel is operating as an independent hotel until the capital improvement plan is completed in 2013.

The majority of the hotel's food and beverage outlets are leased to third party tenants. We reviewed the terms of the tenant leases in conjunction with the hotel purchase accounting and concluded that the terms of three of the leases are more favorable to us than a current market tenant lease. Accordingly, we recorded a $1.6 million favorable lease asset that will be amortized over the remaining term of each lease. We concluded that the terms of two of the leases have terms that are unfavorable to us compared to a current market tenant lease and have recorded an unfavorable contract liability of $0.2 million that will be amortized over the remaining term of each lease.

On July 22, 2011, we acquired the 177-room Courtyard Denver Downtown located in Denver, Colorado for approximately $46 million. The acquisition was funded with corporate cash, a $15 million draw on our senior unsecured credit facility, and the assumption of a $27.2 million mortgage loan, which we repaid in full on February 7, 2012. The hotel is operated by Sage Hospitality.

The following table summarizes the 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		Hotel Rex			JW Marriott Denver		Lexington Hotel New York		Courtyard Denver
Land	$	23,262	$	24,579	$	22,902	$	9,197	$	7,856		$	9,200	$	92,000	$	9,400
Building	128,628		122,229		95,617		40,644		21,085			63,183		229,372		36,183
Furnitures, fixtures and equipment	3,675		3,499		2,734		3,469		601			1,600		13,400		750
Total fixed assets	155,565		150,307		121,253		53,310		29,542			73,983		334,772		46,333
Net other assets and liabilities	270		207		657		142		(21		)	217		1,993		(148		)
Total	$	155,835	$	150,514	$	121,910	$	53,452	$	29,521		$	74,200	$	336,765	$	46,185

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. The pro forma information is not necessarily indicative of the results that actually would have occurred nor does it indicate future operating results.



	Year Ended December 31,
	2012			2011
Revenues	$	802,006		$	748,127
(Loss) income from continuing operations	(5,127		)	527
Net (loss) income	(5,693		)	848
(Loss) earnings per share - Basic and Diluted	$	(0.03	)	$	0.00

For the years ended December 31, 2012 and 2011, our consolidated statements of operations include $127 million and $52 million of revenues, respectively, and $13 million and $11 million of net income, respectively, related to the operations of the hotels acquired in 2012 and 2011.