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.

2014 Dispositions

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 $4.0 million valuation allowance on the loan receivable. The loan made to the buyer is unsecured and subordinate to the buyer's senior mortgage loan. The loan matures in August 2017 and has a one year interest-only period after which the loan will amortize based on a twenty-five year schedule. The interest rate on the loan for the first year is a floating rate of LIBOR plus 650 basis points. The interest rate margin increases by 100 basis points annually for the remainder of the loan term. The loan agreement provides for possible repayment options prior to the loan's maturity, including upon full repayment of the buyer's senior mortgage loan or the hotel achieving a certain operating profit threshold prior to loan maturity.

The loan receivable and the valuation allowance are included within prepaid and other assets on the accompanying consolidated balance sheet. Based on our estimates of the hotel’s future cash flows from operations and the fact that the note is unsecured and subordinate to the senior mortgage loan, we believe it is remote that we will collect all contractual amounts due under the loan. Accordingly, we recognized a full valuation allowance of $4.0 million. As of December 31, 2014, we have received interest payments of approximately $0.2 million, which are reflected in interest income on the accompanying consolidated statement of operations.

For the years ended December 31, 2014, 2013, and 2012, our consolidated statements of operations include $0.6 million pre-tax loss, $1.4 million pre-tax income, and $31.2 million pre-tax loss, respectively, related to the Oak Brook Hills Resort.

On December 18, 2014, we sold the 1,004-room Los Angeles Airport Marriott to an unaffiliated third party for a contractual purchase price of $147.5 million. We received net proceeds of approximately $158.6 million from the transaction, which included credit for the hotel's capital replacement reserve. We recognized a gain on sale of the hotel of approximately $49.7 million. In connection with the sale of the Los Angeles Airport Marriott, we executed a reverse 1031 exchange with the Westin Fort Lauderdale Beach Resort, which was purchased on December 3, 2014. The reverse 1031 exchange has no effect on our GAAP financial reporting and does not have a material impact on our tax positions and expected tax expense.

For the years ended December 31, 2014, 2013, and 2012, our consolidated statements of operations include $54.9 million, $1.8 million, and $0.2 million, respectively, of pre-tax income related to the Los Angeles Airport Marriott.

2013 and 2012 Dispositions

In November 2013, we sold the 487-room Torrance Marriott South Bay to an unaffiliated third party for a contractual sales price of $74 million, recognizing a gain of $22.7 million on the sale. The operating results, as well as the gain on sale, are reported in discontinued operations on the accompanying consolidated statements of operations.

We sold four hotels during 2012 in two separate transactions. In March 2012, we sold a three-hotel portfolio, which consisted of the Griffin Gate Marriott Resort and Spa, the Renaissance Waverly and the Renaissance Austin. In October 2012, we sold the Atlanta Westin North at Perimeter. The operating results of these hotels and the net gain on the sales are reported in discontinued operations on the accompanying consolidated statements of operations.

The following is a summary of the results of income from discontinued operations for the years ended December 31, 2013 and 2012 (in thousands, except per-share data):



	Years Ended December 31,
		2013			2012
Hotel revenues		$	21,336		$	55,654
Hotel operating expenses		(15,977		)	(41,424		)
Operating income		5,359			14,230
Depreciation and amortization		(1,759		)	(4,495		)
Interest income		1			3
Interest expense		—			(2,297		)
Impairment charge		—			(14,690		)
Gain on sale of hotel properties, net		22,733			9,479
Income tax expense		(1,097		)	(747		)
Income from discontinued operations		$	25,237		$	1,483
Basic and diluted income from discontinued operations per share		0.13			$	0.01