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 $3.4 million and $2.7 million as of December 31, 2018 and 2017, respectively, consist of the following (in thousands):



	2018			2017
Cavallo Point Ground Lease	$	17,908		$	—
Hotel Palomar Phoenix Ground Lease	19,763		—	—
Westin Boston Waterfront Hotel Ground Lease	17,426			17,643
Orchards Inn Sedona Annex Sublease	8,757			8,925
Lexington Hotel Tenant Leases	91			122
	$	63,945		$	26,690

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, 2018, 2017, and 2016, was $0.7 million, $0.4 million, and $0.3 million, respectively. Amortization expense is expected to total $1.1 million annually 2019 through 2023.

In connection with our acquisition of the Orchards Inn Sedona on February 28, 2017, we recorded a $9.1 million favorable lease asset. In connection with our acquisition of the Hotel Palomar Phoenix on March 1, 2018, we recorded a $20.0 million favorable lease asset. In connection with our acquisition of Cavallo Point on December 12, 2018, we recorded a $17.9 million favorable lease asset. We determined the value of these favorable lease assets using a discounted cash flow of the favorable difference between the contractual lease payments and estimated market rents. The market rents were estimated by applying a land capitalization rate to the estimated fee-simple value of the underlying land. The discount rate was estimated using a risk adjusted rate of return.