Favorable Lease Assets

In connection with the acquisition of certain hotels, we have recognized intangible assets for favorable leases. Our favorable lease assets, net of accumulated amortization of $2.6 million and $2.3 million as of September 30, 2017 and December 31, 2016, respectively, consist of the following (in thousands):



	September 30, 2017		December 31, 2016
Westin Boston Waterfront Hotel Ground Lease	$	17,698	$	17,859
Orchards Inn Sedona Annex Sublease	8,967		—
Lexington Hotel New York Tenant Leases	130		154
	$	26,795	$	18,013

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. We recorded $0.1 million of amortization expense for each of the three months ended September 30, 2017 and 2016. We recorded $0.3 million and $0.2 million, respectively, of amortization expense for each of the nine months ended September 30, 2017 and 2016.

In connection with our acquisition of the Orchards Inn Sedona on February 28, 2017, we recorded a $9.1 million favorable lease asset. We determined the value using a discounted cash flow of the favorable difference between the contractual lease payments and estimated market rents. The market rents were estimated by a third-party valuation firm and the discount rate was estimated using a risk adjusted rate of return. See Note 9 for further discussion of this favorable lease asset.