Acquisition of Hotel Properties

Hotel Purchase Price Allocation

We acquired the Hilton Garden Inn Portsmouth ("Portsmouth") hotel in Portsmouth, NH for $43.4 million on September 20, 2017, the Courtyard Summerville ("Summerville") hotel in Summerville, SC for $20.2 million on November 15, 2017 and the Embassy Suites Springfield Embassy ("Springfield") hotel in Springfield, VA for $68.1 million on December 6, 2017. No acquisitions were completed in 2016. The allocation of the purchase price of each of the hotels acquired by the Company in 2017, based on the fair value on the date of its acquisition, was (in thousands):



	HGI Portsmouth			CY Summerville			ES Springfield			Total
Acquisition date	9/20/2017			11/15/2017			12/6/2017
Number of rooms (unaudited)	131			96			219			446
Land	$	3,600		$	2,500		$	7,700		$	13,800
Building and improvements	37,630			16,923			58,807			113,360
Furniture, fixtures and equipment	2,120			730			1,490			4,340
Cash	8			1			3			12
Accounts receivable	32			1			—			33
Prepaid expenses and other assets	12			28			129			169
Accounts payable and accrued expenses	(27		)	(1		)	(51		)	(79		)
Net assets acquired, net of cash	$	43,367		$	20,181		$	68,075		$	131,623

The value of the assets acquired was primarily based on a sales comparison approach (for land) and a depreciated replacement cost approach (for building and improvements and furniture, fixtures and equipment). The sales comparison approach uses inputs of recent land sales in the respective hotel markets. The depreciated replacement cost approach uses inputs of both direct and indirect replacement costs using a nationally recognized authority on replacement cost information as well as the age, square footage and number of rooms of the respective assets. The Company incurred acquisition costs of $0.5 million and $1.5 million, respectively, during the years ended December 31, 2016 and 2015 which are included in Other charges in the Consolidated Statement of Operations. Property acquisition costs incurred during 2016 related to prior acquisitions for which final amounts were more than previously accrued. Property acquisition costs of $0.7 million were capitalized in 2017.

The amount of revenue and operating income from the hotels acquired in 2017 from their respective date of acquisition through December 31, 2017 is as follows (in thousands):



	For the Year Ended December 31, 2017
	Revenue		Operating Income

Hilton Garden Inn Portsmouth, NH	$	2,453	$	1,116
Courtyard Summerville, SC	$	384	$	152
Embassy Suites Springfield, VA	$	674	$	161
Total	$	3,511	$	1,429

Pro Forma Financial Information (unaudited)

The following condensed pro forma financial information presents the unaudited results of operations as if the acquisition of the hotels acquired during the year ended December 31, 2015 had taken place on January 1, 2014. There were no hotels acquired in 2016. Supplemental pro forma earnings were adjusted to exclude $0.7 million of acquisition-related costs incurred in the year ended December 31, 2015. The unaudited pro forma results have been prepared for comparative purposes only and are not necessarily indicative of what actual results of operations would have been had the acquisitions taken place on January 1, 2014, nor do they purport to represent the results of operations for future periods (in thousands, except share and per share data).



	For the year ended
	December 31,
	2015
Pro forma total revenue	$	292,908
Pro forma net income	$	32,137
Pro forma income per share:
Basic	$	0.85
Diluted	$	0.84
Weighted average common shares outstanding
Basic	37,917,871
Diluted	38,322,285

As a result of the properties being treated as acquired as of January 1, 2014, the Company assumed approximately 38,308,937 shares were issued as of January 1, 2014 to fund the acquisition of the properties. Consequently, the weighted average shares outstanding was adjusted to reflect the treatment of these assumed additional shares as issued outstanding as of the beginning of the periods presented.

On August 29, 2017, the Company purchased a parcel of land in Los Angeles county for $6.5 million.

On October 18, 2017, the Company entered into an agreement to acquire a additional hotel located in Summerville, SC for $20.8 million. This transaction is expected to close in the second quarter of 2018, subject to satisfactory completion of due diligence and customary closing conditions. The Company intends to fund the purchase price with available cash and borrowings under the Company's unsecured revolving credit facility.