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 of $3.0 million and $6.8 million as of December 31, 2014 and 2013, respectively, consist of the following (in thousands):



	2014		2013
Westin Boston Waterfront Hotel Ground Lease	$	18,293	$	18,510
Westin Boston Waterfront Hotel Lease Right	9,045		9,045
Hilton Minneapolis Ground Lease	5,760		5,835
Oak Brook Hills Resort Ground Lease	—		5,058
Lexington Hotel New York Tenant Leases	1,031		1,176
Hilton Boston Downtown Tenant Leases	145		312
	$	34,274	$	39,936

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 was $0.7 million for the year ended December 31, 2014, $1.0 million for the year ended December 31, 2013 and $1.0 million for the year ended December 31, 2012. Amortization expense is expected to total $0.6 million for 2015, $0.5 million for 2016, and $0.4 million annually for 2017 through 2019.

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 in 2012 due to lower comparable market rents in the City of Boston. No impairment loss was recorded in 2013 or 2014.

During the year ended December 31, 2012, we evaluated the Oak Brook Hills Resort favorable ground lease asset for recoverability of the carrying value. We concluded that the fair value of the ground lease was $5.6 million, resulting in an impairment loss of $1.4 million for the year ended December 31, 2012. No impairment loss was recorded in 2013 or 2014. In connection with the sale of the Oak Brook Hills Resort on April 14, 2014, we wrote off the favorable ground lease asset, which is included in the gain on sale of hotel properties on the accompanying consolidated statement of operations.

The fair value of the lease right is a Level 3 measurement under the fair value hierarchy (see Note 2) and is 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 is estimated using a risk adjusted rate of return, the estimated participating rents are estimated based on a hypothetical hotel comparable to our Westin Boston Waterfront Hotel, and market rents are based on comparable long-term ground leases in the City of Boston. For the Oak Brook Hills Resort 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.