Investments in Hotel Properties, net

Investments in hotel properties, net consisted of the following (in thousands):



	December 31,
	2018			2017
Land	$	428,567		$	344,937
Buildings and improvements	989,180			962,478
Furniture, fixtures and equipment	103,025			87,796
Construction in progress	42,034			7,899
Total cost	1,562,806			1,403,110
Accumulated depreciation	(262,905		)	(257,268		)
Investments in hotel properties, net	$	1,299,901		$	1,145,842

The cost of land and depreciable property, net of accumulated depreciation, for federal income tax purposes was approximately $1.3 billion and $1.2 billion as of December 31, 2018 and 2017, respectively.

For the years ended December 31, 2018, 2017 and 2016, depreciation expense was $56.8 million, $52.1 million and $45.7 million, respectively.

Ritz-Carlton, Sarasota

On April 4, 2018, the Company acquired a 100% interest in the 266-room Ritz-Carlton, Sarasota in Sarasota, Florida for $171.4 million and a 22-acre plot of vacant land for $9.7 million. Concurrent with the closing of the acquisition, we completed the financing of a $100.0 million mortgage loan. See note 9.

The acquisition of the Ritz-Carlton, Sarasota included the hotel, a golf club, a beach club and a plot of vacant land, which are considered to be a group of dissimilar assets per ASU 2017-01. As such, we have accounted for this acquisition as a business combination. We prepared the purchase price allocation of the assets acquired and liabilities assumed. The final purchase price allocation was completed with the assistance of a third party appraisal firm during the three months ended December 31, 2018. This valuation is considered a Level 3 valuation technique.

The following table summarizes the estimated fair value of the assets acquired in the acquisition (in thousands):



Land ⁽¹⁾	$	83,630
Buildings and improvements	86,042
Furniture, fixtures and equipment	13,740
Customer relationships	5,682
Refundable membership club deposits ⁽²⁾	(9,960		)
Income guarantee ⁽³⁾	2,000
	$	181,134
Net other assets (liabilities)	$	(3,189	)

________


⁽¹⁾	Amount includes the $9.7 million, 22-acre plot of vacant land.


⁽²⁾	Recorded within “other liabilities” on our consolidated balance sheet.


⁽³⁾	The income guarantee was originally recorded within “other assets” on our consolidated balance sheet. The income guarantee expired at the end of 2018 as a result of the hotel property’s 2018 gross operating profit exceeding the 2017 gross operating profit. As a result we recorded a $2.0 million expense in “property taxes, insurance and other” on our consolidated statement of operations.

The results of operations of the hotel property have been included in our results of operations as of the acquisition date. The table below summarizes the total revenue and net income (loss) in our consolidated statements of operations for the year ended December 31, 2018:



	Year Ended December 31, 2018
Total revenue	42,232
Net income (loss)	(4,619	)

The following table reflects the unaudited pro forma results of operations for the years ended December 31, 2018 and 2017 as if the acquisitions had occurred and the applicable indebtedness was incurred on January 1, 2017, and the removal of $949,000 of non-recurring transaction costs directly attributable to the acquisitions for the year ended December 31, 2018 (in thousands):



	Year Ended December 31,
	2018			2017
Total revenue	$	451,471		$	476,386
Net income (loss)	6,198			28,101
Net income (loss) attributable to common stockholders	(2,677		)	16,018
Pro Forma income (loss) per share:
Basic	$	(0.09	)	$	0.51
Diluted	$	(0.09	)	$	0.51
Weighted average common shares outstanding (in thousands):
Basic	31,944			30,473
Diluted	31,944			34,706

Impairment Charges and Insurance Recoveries

In September 2017, the Ritz-Carlton, St. Thomas located in St. Thomas, USVI, the Key West Pier House located in Key West, FL and the Tampa Renaissance located in Tampa, FL were impacted by the effects of Hurricanes Irma and Maria. The Company holds insurance policies that provide coverage for property damage and business interruption after meeting certain deductibles at all of its hotel properties. During the year ended December 31, 2017, the Company recognized impairment charges, net of anticipated insurance recoveries of $1.1 million. Additionally, the Company recognized remediation and other costs, net of anticipated insurance recoveries of $3.8 million, included primarily in other hotel operating expenses. As of December 31, 2017, the Company recorded an insurance receivable of $8.8 million, net of deductibles of $4.9 million, related to the anticipated insurance recoveries. During the year ended December 31, 2017, the Company received proceeds of $11.1 million for business interruption losses associated with lost profits, of which $4.1 million was recorded as “other” hotel revenue in our consolidated statement of operations, $3.3 million represented reimbursement of incurred expenses in excess of the deductible of $1.1 million and $3.7 million was recorded as a reduction to insurance receivable.

For the year ended December 31, 2018, the Company recorded revenue from business interruption losses associated with lost profits from the hurricanes of $13.9 million, which is included in “other” hotel revenue in our consolidated statements of operations. The Company received proceeds of $48.1 million from our insurance carriers for property damage and business interruption from the hurricanes during the year ended December 31, 2018. Additionally, during the year ended December 31, 2018, the Company recorded revenue of $1.9 million, net of deductibles of $500,000, for business interruption losses associated with lost profits at the Bardessono Hotel and Hotel Yountville as a result of the Napa wildfires, which is included in “other” hotel revenue in our consolidated statements of operations. During the year ended December 31, 2018, we recorded impairment charges of $71,000 as a result of a change in estimate of property damage as a result of the hurricanes. As of December 31, 2018, the Company had a net liability of $17.1 million, included in “other liabilities” on the consolidated balance sheet, as it has received insurance proceeds in excess of the sum of its impairment, remediation expenses and business interruption revenue recorded through December 31, 2018. The Company will not record revenue for business interruption losses associated with lost profits or gains from property damage recoveries until the amount for such recoveries is known and the amount is realizable.