Acquisitions

On August 15, 2014, we acquired the 106-room Inn at Key West located in Key West, Florida for a contractual purchase price of $47.5 million. The acquisition was funded with corporate cash on hand. We retained the existing hotel operator, Remington Management, LP, under an interim 90-day management agreement. We expect to finalize a longer term management agreement with Remington during the fourth quarter of 2014.

On August 29, 2014, we completed the acquisition of the newly constructed, 282-room Hilton Garden Inn Times Square Central in New York City. We had entered into the purchase and sale agreement to acquire this hotel upon its completion for a fixed purchase price of $127.2 million in early 2011. We had previously funded total purchase deposits of $26.9 million. The balance of the purchase price was funded with corporate cash on hand. The hotel opened on September 1, 2014 and is operated by Highgate Hotels, LP, subject to a franchise license agreement with Hilton Garden Inns Franchise LLC. The hotel meets the definition of a business and the acquisition was accounted for as a business combination. As such, the assets acquired were recorded at their fair values, which exceeded our contractual cost. During the three years between the date of the purchase and sale agreement and the date of acquisition, the real estate market for hotels located in Manhattan experienced an increase in valuations due to improved economic conditions in the market and the overall economy. This resulted in an increase in the fair value the hotel at the time of acquisition compared with our contractual purchase price, which resulted in a gain of approximately $23.9 million upon acquisition.

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



	Inn at Key West		Hilton Garden Inn Times Square Central
Land	$	33,618	$	60,300
Building	11,586		88,896
Building improvements	1,027		—
Furnitures, fixtures and equipment	1,269		6,204
Total fixed assets	47,500		155,400
Other assets and liabilities, net	326		370
Total	$	47,826	$	155,770

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 and liabilities assumed.

The acquired properties are included in our results of operations from the date of acquisition. The following unaudited pro forma results of operations (in thousands, except per share data) reflect the acquisition of the Inn at Key West as if it had occurred on January 1, 2013. The following pro forma results of operations do not include adjustments reflecting the acquisition of the Hilton Garden Inn Times Square Central, since the hotel opened on September 1, 2014. The pro forma information is not necessarily indicative of the results that actually would have occurred nor does it indicate future operating results.



	Three Months Ending September 30,				Nine Months Ending September 30,
	2014		2013		2014		2013
Revenues	$	230,122	$	205,705	$	654,608	$	603,501
Income from continuing operations	44,089		8,042		102,335		19,198
Net income	44,089		8,927		102,335		21,708
Basic earnings per share:
Continuing operations	$	0.23	$	0.04	$	0.52	$	0.10
Net income	$	0.23	$	0.05	$	0.52	$	0.11
Diluted earnings per share:
Continuing operations	$	0.22	$	0.04	$	0.52	$	0.10
Net income	$	0.22	$	0.05	$	0.52	$	0.11

For the three and nine months ended September 30, 2014, our condensed consolidated statements of operations include $2.5 million of revenues and less than $0.1 million of net income related to the operations of the Inn at Key West and the Hilton Garden Inn Times Square Central.