Relationships with Managers

We are party to hotel management agreements for each of our hotels owned. The following table sets forth the agreement date, initial term and number of renewal terms under the respective hotel management agreements for each of our hotels. Generally, the term of the hotel management agreements renew automatically for a negotiated number of consecutive periods upon the expiration of the initial term unless the property manager gives notice to us of its election not to renew the hotel management agreement.



Property	Manager	Date of Agreement	Initial Term	Number of Renewal Terms
Atlanta Alpharetta Marriott	Marriott	9/2000	30 years	Two ten-year periods
Bethesda Marriott Suites	Marriott	12/2004	21 years	Two ten-year periods
Boston Westin Waterfront	Starwood	5/2004	20 years	Four ten-year periods
Chicago Marriott Downtown	Marriott	3/2006	32 years	Two ten-year periods
Conrad Chicago	Hilton	11/2005	10 years	Two five-year periods
Courtyard Denver Downtown	Sage Hospitality	7/2011	5 years	One five-year period
Courtyard Manhattan/Fifth Avenue	Marriott	12/2004	30 years	None
Courtyard Manhattan/Midtown East	Marriott	11/2004	30 years	Two ten-year periods
Frenchman's Reef & Morning Star Marriott Beach Resort	Marriott	9/2000	30 years	Two ten-year periods
Hilton Boston Downtown	Davidson Hotels & Resorts	11/2012	7 years	Two five-year periods
Hilton Burlington	Interstate Hotels & Resorts	12/2010	5 years	Month-to-month
Hilton Garden Inn Chelsea/New York City	Alliance Hospitality Management	9/2010	10 years	None
Hilton Garden Inn New York City/Times Square Central	Highgate Hotels	1/2011	10 years	One five-year period
Hilton Minneapolis	Hilton	3/2006	20 ¾ years	None
Hotel Rex	Joie de Vivre Hotels	9/2005	5 years	Month-to-month
Inn at Key West	Remington Hotels	12/2014	10 years	None
JW Marriott Denver at Cherry Creek	Sage Hospitality	5/2011	5 years	One five-year period
Lexington Hotel New York	Highgate Hotels	6/2011	10 years	One five-year period
Orlando Airport Marriott	Marriott	11/2005	30 years	None
Renaissance Charleston	Marriott	1/2000	21 years	Two five-year periods
Renaissance Worthington	Marriott	9/2000	30 years	Two ten-year periods
Salt Lake City Marriott Downtown	Marriott	12/2001	30 years	Three fifteen-year periods
The Lodge at Sonoma, a Renaissance Resort & Spa	Marriott	10/2004	20 years	One ten-year period
Vail Marriott Mountain Resort & Spa	Vail Resorts	6/2005	15½ years	None
Westin Fort Lauderdale Beach Resort	HEI Hotels & Resorts	12/2014	10 years	None
Westin San Diego	Interstate Hotels & Resorts	12/2010	5 years	Month-to-month
Westin Washington D.C. City Center	Interstate Hotels & Resorts	12/2010	5 years	Month-to-month

Under our hotel management agreements, the hotel manager receives a base management fee and, if certain financial thresholds are met or exceeded, an incentive management fee. The base management fee is generally payable as a percentage of gross hotel revenues for each fiscal year. The incentive management fee is generally based on hotel operating profits, but the fee only applies to that portion of hotel operating profits above a negotiated return on our invested capital, which we refer to as the owner's priority. We refer to this excess of operating profits over the owner's priority as “available cash flow.”

The following table sets forth the base management fee, incentive management fee and FF&E reserve contribution, generally due and payable each fiscal year, for each of our properties:



Property	Base Management Fee(1)			Incentive Management Fee(2)			FF&E Reserve Contribution(1)
Atlanta Alpharetta Marriott	3	%		25	%		5	%
Bethesda Marriott Suites	3	%		50	%	(3)	5	%	(4)
Boston Westin Waterfront	2.5	%		20	%		4	%
Chicago Marriott Downtown	3	%		20	%	(5)	5	%
Conrad Chicago	3	%	(6)	15	%		4	%
Courtyard Denver Downtown	2	%	(7)	10	%		4	%
Courtyard Manhattan/Fifth Avenue	5.5	%	(8)	25	%		4	%
Courtyard Manhattan/Midtown East	5	%		25	%		4	%
Frenchman's Reef & Morning Star Marriott Beach Resort	3	%		15	%		5.5	%
Hilton Boston Downtown	2	%		10	%		4	%
Hilton Burlington	1.5	%	(9)	10	%		—
Hilton Garden Inn Chelsea/New York City	2	%	(14)	10	%		—
Hilton Garden Inn New York City/Times Square Central	2.5	%	(10)	20	%		4	%
Hilton Minneapolis	3	%		15	%		4	%
Hotel Rex	3	%		10	%		4	%
Inn at Key West	3	%		15	%		4	%
JW Marriott Denver at Cherry Creek	2.25	%	(11)	10	%		4	%
Lexington Hotel New York	3	%		20	%		4	%
Orlando Airport Marriott	3	%		25	%		5	%
Renaissance Charleston	3.5	%		20	%		5	%
Renaissance Worthington	3	%		25	%		5	%
Salt Lake City Marriott Downtown	3	%		20	%		5	%
The Lodge at Sonoma, a Renaissance Resort & Spa	3	%		20	%		5	%
Vail Marriott Mountain Resort & Spa	3	%		20	%		4	%
Westin Fort Lauderdale Beach Resort	2.25	%	(12)	15	%		4	%
Westin San Diego	1.5	%	(9)	10	%		4	%
Westin Washington D.C. City Center	0.75	%	(13)	10	%		4	%

______________


(1)	As a percentage of gross revenues.


(2)	Based on a percentage of hotel operating profits above a specified return on our invested capital or specified operating profit thresholds.


(3)	The owner's priority expires in 2027.


(4)	The contribution is reduced to 1% until operating profits exceed an owner's priority of $3.8 million.


(5)	Calculated as 20% of net operating income before base management fees. There is no owner's priority.


(6)	The base management fee is reduced by the amount in which operating profits do not meet the performance guarantee. The performance guarantee was $8.8 million in 2014 and base management fees were reduced to zero.


(7)	The base management fee is 2.5% of gross revenues if the hotel achieves operating results in excess of 7% of our invested capital and 3% of gross revenues if the hotel achieves operating profits in excess of 8% of our invested capital.


(8)	The base management fee increases to 6% beginning in fiscal year 2015 for the remainder of the agreement.

(9) The base management fee increased from 1.0% to 1.5% of gross revenues on July 12, 2014. Total management fees are capped at 2.5% of gross revenues.

(10) The base management fee increases to 3% beginning September 1, 2015.


(11)	The base management fee is 2.75% of gross revenues if the hotel achieves operating profits in excess of 7% of our invested capital and 3.25% of gross revenues if the hotel achieves operating profits in excess of 8% of our invested capital.

(12) The base management fee decreases to 2% beginning January 1, 2017. The base fee may be reduced in 2015 if the hotel does not meet a specified operating profit threshold, subject to a floor of 1% of gross revenues.


(13)	The base management fee increased from 0.5% to 0.75% of gross revenues on July 1, 2014. The base management fee increases to 1% in 2015, 1.25% in 2016, and 1.5% in 2017 through the remainder of the agreement. An additional base management fee of 0.5% and 0.25% of gross revenues will be earned if the hotel exceeds specified operating profit thresholds during 2015 and 2016, respectively.

(14) The base management fee decreased to 1% for the period from January 1, 2014 through December 31, 2014.

The following is a summary of management fees from continuing operations for the years ended December 31, 2014, 2013 and 2012 (in thousands):



	Year Ended December 31,
	2014		2013		2012
Base management fees	$	21,473	$	19,324	$	18,757
Incentive management fees	8,554		6,222		5,550
Total management fees	$	30,027	$	25,546	$	24,307

Ten of our hotels earned incentive management fees for the year ended December 31, 2014. Eight of our hotels earned incentive management fees for the year ended December 31, 2013. Five of our hotels earned incentive management fees for the year ended December 31, 2012.

Performance Termination Provisions

Our management agreements provide us with termination rights upon a manager's failure to meet certain financial performance criteria and decision not to cure the failure by making a cure payment.

Key Money

Our managers have contributed to us certain amounts in exchange for the right to manage or franchise hotels we have acquired and in connection with the completion of certain brand enhancing capital projects. We refer to these amounts as “key money.” Key money is classified as deferred income in the accompanying consolidated balance sheets and amortized against management fees or franchise fees on the accompanying consolidated statements of operations.

We amortized $1.1 million of key money during the year ended December 31, 2014, $2.2 million during the year ended December 31, 2013, and $1.0 million during the year ended December 31, 2012. The amortization for the year ended December 31, 2013 includes $1.1 million of key money written off as a result of the change of hotel manager of the Oak Brook Hills Resort during 2013. This key money write-off is included within other hotel expenses on the accompanying consolidated statement of operations.

In connection with the sale of the Los Angeles Airport Marriott on December 18, 2014, we wrote of $1.1 million of unamortized key money. The key money write-off is included within the gain on sale of hotel properties, net on the accompanying consolidated statement of operations.

Franchise Agreements

The following table sets forth the terms of the hotel franchise agreements for our eleven franchised hotels:



	Date of Agreement	Term	Franchise Fee
Vail Marriott Mountain Resort & Spa	6/2005	16 years	6% of gross room sales plus 3% of gross food and beverage sales
Hilton Garden Inn Chelsea/New York City	9/2010	17 years	Royalty fee of 5% of gross room sales and program fee of 4.3% of gross room sales
JW Marriott Denver at Cherry Creek	5/2011	15 years	6% of gross room sales and 3% of gross food and beverage sales
Lexington Hotel New York (1)	3/2012	20 years	3% of gross room sales (2)
Courtyard Denver Downtown	7/2011	16 years	5.5% of gross room sales
Hilton Boston Downtown	7/2012	10 years	5% of gross room sales and 3% of gross food and beverage sales; program fee of 4% of gross room sales
Westin Washington D.C. City Center	12/2010	20 years	7% of gross room sales and 3% of gross food and beverage sales
Westin San Diego	12/2010	20 years	7% of gross room sales and 3% of gross food and beverage sales
Hilton Burlington	7/2012	10 years	5% of gross room sales and 3% of gross food and beverage sales; program fee of 4% of gross room sales
Hilton Garden Inn New York/Times Square Central	6/2011	22 years	3% of gross room sales (3); program fee of 4.3% of gross room sales
Westin Fort Lauderdale Beach Resort	12/2014	20 years	6% of gross room sales and 2% of gross food and beverage sales

___________


(1)	The agreement commenced on the date the hotel opened as a Autograph Collection hotel, which was August 19, 2013.


(2)	Increased to 4% on the first anniversary of the agreement. Increases to 5% on the second anniversary of the agreement.

(3) Increases to 4% on the first anniversary of the opening date, which was September 1, 2014, and 5% on the second anniversary of the opening date.

We recorded $15.3 million, $11.4 million and $8.4 million of franchise fees during the fiscal years ended December 31, 2014, 2013, and 2012, respectively, which are included in other hotel expenses on the accompanying consolidated statements of operations.