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	Marriott	5/2004	20 years	Four ten-year periods
Chicago Marriott Downtown	Marriott	3/2006	32 years	Two ten-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	HEI Hotels & Resorts (1)	8/2017	10 years	None
Frenchman's Reef & Morning Star Marriott Beach Resort	Marriott (2)	9/2000	30 years	Two ten-year periods
The Gwen Chicago	HEI Hotels & Resorts	6/2016	10 years	None
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 New York City/Times Square Central	Highgate Hotels	1/2011	10 years	One five-year period
Hotel Rex	Viceroy Hotels & Resorts (3)	10/2017	10 years	One five-year period
Inn at Key West	Ocean Properties	12/2016	10 years	Two five-year periods
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
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
L'Auberge de Sedona	Two Roads Hospitality (4)	12/2017	5 years	One five-year period
Orchards Inn Sedona	Two Roads Hospitality (4)	12/2017	5 years	One five-year period
Sheraton Suites Key West	Ocean Properties	6/2015	12 years	None
Shorebreak Hotel	Kimpton Hotel & Restaurant Group	2/2015	10 years	None
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	HEI Hotels & Resorts	4/2015	10 years	None

______________


(1)	HEI Hotels & Resorts assumed management of the hotel in August 2017. The hotel was previously managed by Marriott.


(2)	We terminated the management agreement with Marriott, effective February 20, 2018. The hotel is currently closed as a result of the physical damage incurred from Hurricanes Irma and Maria.


(3)	Viceroy Hotels & Resorts assumed management of the hotel in October 2017. The hotel was previously managed by Joie de Vivre Hotels.


(4)	Two Roads Hospitality assumed management of the hotels in December 2017. The hotels were previously managed by IMH Financial Corporation.

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	%	(3)	25	%		5	%
Bethesda Marriott Suites	3	%		50	%	(4)	5	%	(5)
Boston Westin Waterfront	2.5	%		20	%		4	%
Chicago Marriott Downtown	2	%	(6)	18	%	(7)	5	%
Courtyard Denver Downtown	1.5	%	(8)	10	%		4	%
Courtyard Manhattan/Fifth Avenue	6	%		25	%		4	%
Courtyard Manhattan/Midtown East	1.5	%	(9)	15	%		4	%
Frenchman's Reef & Morning Star Marriott Beach Resort (10)	3	%		15	%		5.5	%
The Gwen Chicago	2	%	(11)	15	%		4	%
Hilton Boston Downtown	2	%		10	%		4	%
Hilton Burlington	1.5	%	(12)	10	%		—
Hilton Garden Inn New York City/Times Square Central	3	%		20	%		4	%
Hotel Rex	2.75	%	(13)	15	%		4	%
Inn at Key West	3	%		10	%		4	%
JW Marriott Denver at Cherry Creek	2.5	%		10	%		4	%
Lexington Hotel New York	3	%	(14)	20	%		5	%
Renaissance Charleston	3.5	%	(15)	20	%		5	%
Renaissance Worthington	3	%		25	%		5	%
Salt Lake City Marriott Downtown	1.5	%	(16)	20	%		5	%
L'Auberge de Sedona	0.5	%	(17)	10	%		4	%
Orchards Inn Sedona	0.5	%	(17)	10	%		4	%
Sheraton Suites Key West	3	%		10	%		4	%
Shorebreak Hotel	2.5	%		15	%		4	%
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	%		15	%		4	%
Westin San Diego	1.5	%	(12)	10	%		4	%
Westin Washington D.C. City Center	2	%		15	%		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 base management fee decreases to 2% of gross revenues between February 2018 and January 2021.


(4)	The owner's priority expires in 2028, after which the manager will receive 50% of the hotel's operating profits.


(5)	The contribution is reduced to 1% until operating profits exceed an owner's priority of $4.4 million.


(6)	The base management fee decreased from 3.0% to 2.0% for October 2017 through September 2021 and will then revert back to 3% for the remainder of the term.


(7)	Calculated as 18% of net operating income. There is no owner's priority; however, the Company's contribution to the hotel's multi-year guest room renovation is treated as a deduction in calculating net operating income.


(8)	The base management fee is a sum of 1.5% of gross revenues and 1.5% of gross operating profit.


(9)	Prior to August 2017, the base management fee was 5% of gross revenues under the previous hotel manager. The base management fee was 1.5% of gross revenues between August 2017 and December 2017 and increases to 1.75% of gross revenues for 2018 through the remainder of the term.


(10)	We terminated the management agreement with Marriott, effective February 20, 2018. The hotel is currently closed as a result of the physical damage incurred from Hurricanes Irma and Maria.


(11)	The base management fee increases to 2.25% for 2018 through the remainder of the term.

(12) Total management fees are capped at 2.5% of gross revenues.


(13)	Prior to September 2017, the base management fee was 3% of gross revenues under the previous hotel manager.


(14)	The base management fee decreased to 2% from January 2017 through June 2017, and reverted back to 3% for the remainder of the term.


(15)	The base management fee increased to 3.5% beginning September 2017 through the remainder of the term.


(16)	The base management fee decreased from 3% to 1.5% beginning May 2016 and will increase to 2.0% in May 2018 and to 3.0% in May 2021 through the remainder of the term.


(17)	Prior to December 2017, the base management fee was 2.45% of gross revenues under the previous hotel manager. The base management fee increases to 1.0% for 2019 and 1.5% for 2020 through the remainder of the term.

The following is a summary of management fees for the years ended December 31, 2017, 2016 and 2015 (in thousands):



	Year Ended December 31,
	2017			2016			2015
Base management fees	$	22,265		$	24,480		$	25,491
Incentive management fees	6,259			7,810			7,405
Amortization of deferred income related to key money	(4,840		)	(432		)	(548		)
Amortization of unfavorable contract liabilities	(1,715		)	(1,715		)	(1,715		)
Total management fees, net	$	21,969		$	30,143		$	30,633

Ten of our hotels earned incentive management fees for the year ended December 31, 2017. Nine of our hotels earned incentive management fees for the year ended December 31, 2016. Seven of our hotels earned incentive management fees for the year ended December 31, 2015.

Performance Termination Provisions

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

Key Money

Our managers and franchisors 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.

During 2015, Starwood provided us with $3.0 million of key money in connection with our renovation associated with the brand conversion of the hotel formerly known as the Conrad Chicago to The Gwen, a Luxury Collection Hotel. The key money was amortized against franchise fees over the period of the renovation—January 2016 through April 2017.

We amortized $5.8 million of key money during the year ended December 31, 2017, $2.9 million during the year ended December 31, 2016, and $1.0 million during the year ended December 31, 2015.

In connection with the change in hotel manager of the Courtyard Manhattan/Midtown East, we recognized $1.9 million of accelerated amortization of key money during the year ended December 31, 2017. In connection with the termination of the hotel manager of Frenchman's Reef & Morning Star Marriott Beach Resort, we accelerated the amortization of key money from the date of our notice of termination in 2017 through the effective termination date of February 20, 2018. We recognized an additional $2.6 million of amortization of key money during the year ended December 31, 2017 in connection with this acceleration. The remaining $2.2 million of unamortized key money related to Frenchman's Reef & Morning Star Marriott Beach Resort as of December 31, 2017 will be amortized during the first quarter of 2018.

Franchise Agreements

The following table sets forth the terms of the hotel franchise agreements for our 13 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
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	3/2012	20 years	5% of gross room sales
Courtyard Denver Downtown	7/2011	16 years	4.5% of gross room sales (1)
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	3% of gross room sales and 3% of gross food and beverage sales; program fee of 4% of gross room sales (2)
Hilton Garden Inn New York/Times Square Central	6/2011	22 years	5% of gross room sales; 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
The Gwen Chicago	5/2015	20 years	4.5% of gross room sales
Sheraton Suites Key West	2/2006	20 years	5% of gross room sales
Courtyard Manhattan/Midtown East	8/2017	25 years	6% of gross room sales

______________


(1)	Prior to October 2017, the franchise fee was 5.5% of gross room sales. The franchise fee reverts back to 5.5% of gross room sales beginning October 2019.


(2)	Prior to July 2017, the franchise fee was 5% of gross room sales. The franchise fee will increase to 4% of gross room sales beginning August 2019 and to 5% of gross room sales beginning August 2020 through the remainder of the term.

The following is a summary of franchise fees for the years ended December 31, 2017, 2016 and 2015 (in thousands):



	Year Ended December 31,
	2017			2016			2015
Franchise fees	$	24,890		$	24,237		$	22,192
Amortization of deferred income related to key money	(920		)	(2,420		)	(170		)
Total franchise fees, net	$	23,970		$	21,817		$	22,022

Total franchise fees are included in other hotel expenses on the accompanying consolidated statements of operations.