Merger with RLJ

On August 31, 2017 (the "Acquisition Date"), RLJ Lodging Trust ("RLJ"), RLJ LP, Rangers, and Rangers Sub II, LP, a wholly-owned subsidiary of RLJ LP ("Partnership Merger Sub"), consummated the transactions contemplated by the definitive Agreement and Plan of Merger (the "Merger Agreement"), dated as of April 23, 2017, with FelCor and FelCor LP pursuant to which Partnership Merger Sub merged with and into FelCor LP, with FelCor LP surviving as a wholly-owned subsidiary of RLJ LP (the "Partnership Merger"), and, immediately thereafter, FelCor merged with and into Rangers, with Rangers surviving as a wholly-owned subsidiary of RLJ LP (the "REIT Merger" and, together with the Partnership Merger, the "Mergers").

RLJ accounted for the Mergers under the acquisition method of accounting in ASC 805, Business Combinations. In accordance with the guidance, RLJ elected to apply pushdown accounting to the Company's consolidated financial statements in order to reflect the new basis of accounting established by RLJ for the individual assets acquired and the liabilities assumed in the Mergers. Accordingly, the consolidated financial statements of the Company for the periods before and after the Acquisition Date reflect different bases of accounting, and the financial positions and the results of operations for those periods are not comparable. As a result, the consolidated financial statements and the notes to those financial statements are separated into two distinct periods; the periods prior to the Acquisition Date are identified as "Predecessor," and the period after the Acquisition Date is identified as "Successor". The new basis of accounting for the assets and liabilities that existed on the Acquisition Date will be used in the preparation of the Company's future financial statements and footnotes.

At the closing of the Mergers, FelCor LP had controlling financial interests in various hotel property-owning subsidiaries (the "Lessors"), and FelCor TRS Holdings, LLC (the "FelCor TRS") and its property-operating subsidiaries (the "Lessees"). The hotel properties were leased through intercompany lease agreements between the Lessors and the Lessees, resulting in the Lessees' lease payments being eliminated in consolidation. Immediately after the consummation of the Mergers and the push down of the allocation of the purchase price consideration, FelCor LP distributed its equity interests in FelCor TRS to RLJ LP. The Company accounted for the distribution as a transaction amongst entities under common control. As a result of the distribution of the equity interests in FelCor TRS, the Lessees' lease payments pursuant to the leases are no longer eliminated in consolidation.

The following table reflects the new basis of accounting for the assets and liabilities that existed on the Acquisition Date and the impact of the distribution of the equity interests in FelCor TRS to RLJ LP:



	August 31, 2017
	New Basis Before FelCor TRS Distribution			FelCor TRS Distribution			New Basis After FelCor TRS Distribution
Investment in hotel properties	$	2,661,114		$	(2,000	)	$	2,659,114
Investment in unconsolidated joint ventures	25,651			(7,900		)	17,751
Cash and cash equivalents	47,396			(40,878		)	6,518
Restricted cash reserves	17,038			(10,989		)	6,049
Hotel and other receivables	28,308			(28,308		)	—
Deferred income tax assets	58,170			(58,170		)	—
Intangible assets	139,673			(20,262		)	119,411
Prepaid expenses and other assets	23,811			(11,417		)	12,394
Debt	(1,305,337		)	—			(1,305,337		)
Accounts payable and other liabilities	(118,360		)	52,995			(65,365		)
Advance deposits and deferred revenue	(23,795		)	23,795			—
Accrued interest	(22,612		)	—			(22,612		)
Distributions payable	(4,312		)	—			(4,312		)
Total equity	$	1,526,745		$	(103,134	)	$	1,423,611

The Company recognized the following intangible assets in the Mergers (dollars in thousands):



			Weighted Average Amortization Period (in Years)
Below market ground leases	$	118,050	54
Advanced bookings	13,862		1
Other intangible assets	7,761		6
Total intangible assets	$	139,673	46

For the year ended December 31, 2018, the Company recognized approximately $2.0 million of integration costs. The Company recognized approximately $4.2 million of integration costs during the Successor period of September 1, 2017 through December 31, 2017. The Company recognized approximately $68.2 million of transaction costs during the Predecessor period of January 1, 2017 through August 31, 2017. The transaction costs primarily related to financial advisory, legal, accounting, severance, other professional service fees, and other transaction-related costs in connection with the Mergers. The integration costs primarily related to professional fees and employee-related costs, including compensation for transition employees. The merger-related transaction and integration costs were expensed to transaction costs in the accompanying consolidated statements of operations and comprehensive income (loss).