Dispositions

Effective January 1, 2014, we adopted ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which amends U.S. GAAP to require reporting of discontinued operations only if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. As a result, the operations of hotels sold subsequent to December 31, 2013 are expected to be reported in continuing operations.

On April 14, 2014, we sold the 386-room Oak Brook Hills Resort to an unaffiliated third party for $30.1 million, including $4.0 million of seller financing. The sale meets the requirements for accounting under the full accrual method. We recorded a gain on sale of the hotel of approximately $1.3 million, net of a valuation allowance on the loan receivable. The loan provided to the buyer is unsecured and has a one year interest-only period after which the loan will amortize based on a twenty-five year schedule. The loan is included within prepaid and other assets on the accompanying condensed consolidated balance sheet as of June 30, 2014. The loan accrues interest at a floating rate rate of LIBOR plus 650 basis points for the first year. The interest rate margin increases by 100 basis points annually for the remainder of the loan term. The loan is subordinate to the buyer's senior mortgage loan. The loan agreement provides repayment options, which include: (1) the hotel achieving a certain operating profit threshold by mid-2016, (2) refinancing proceeds in excess of the outstanding balance of the senior mortgage loan, or (3) proceeds in excess of the outstanding balance of the senior mortgage loan from the sale of the hotel.

In November 2013, we sold the 487-room Torrance Marriott South Bay to an unaffiliated third party. The operating results are reported in discontinued operations on the accompanying condensed consolidated statement of operations for the three months ended June 30, 2013.

The following table summarizes the components of discontinued operations in the condensed consolidated statement of operations for the three and six months ended June 30, 2013 (unaudited; in thousands, except per share data):



	Three Months Ended			Six Months Ended
	June 30, 2013			June 30, 2013
Hotel revenues	$	6,170		$	11,611
Hotel operating expenses	(4,477		)	(8,660		)
Operating income	1,693			2,951
Depreciation and amortization	(586		)	(1,168		)
Income tax expense	(155		)	(158		)
Income from discontinued operations	$	952		$	1,625
Basic and diluted income from discontinued operations per share	$	0.01		$	0.01