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 $2.7 million and $2.3 million as of December 31, 2017 and 2016, respectively, consist of the following (in thousands):



	December 31, 2017		December 31, 2016
Westin Boston Waterfront Hotel Ground Lease	$	17,643	$	17,859
Orchards Inn Sedona Annex Sublease	8,925		—
Lexington Hotel New York Tenant Leases	122		154
	$	26,690	$	18,013

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 for the years ended December 31, 2017, 2016, and 2015, was $0.4 million, $0.3 million, and $0.5 million, respectively. Amortization expense is expected to total $0.4 million annually for 2018 through 2022.

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 10 for further discussion of this favorable lease asset.

We owned 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”). During the second quarter of 2015, we decided not to exercise the option to acquire the leasehold interest and recorded an impairment loss of $9.6 million, which includes the write-off of $0.6 million of other assets related to the lease right included within prepaid and other assets on the accompanying consolidated balance sheets.

During 2015, we evaluated the Lexington Hotel New York favorable tenant leases for recoverability of the carrying value. The lease with one of the retail tenants at the Lexington Hotel New York was expected to terminate prior to the end of the lease term. We concluded that the asset was not realizable and recorded an impairment loss of $0.8 million during 2015.