Acquisition and Purchase Price Allocation - Hotel Freizeit Auefeld

12 Months Ended

Dec. 31, 2015

Hotel Freizeit Auefeld

Acquisition and Purchase Price Allocation

NOTE 14 — Acquisition and Purchase Price Allocation — Hotel Freizeit Auefeld

On June 16, 2015, TWHG, the wholly-owned, German subsidiary of TWC, which also owns the Hotel Columbus, acquired 100% of the partnership interests in the general partner and limited partner that owned the Hotel Freizeit Auefeld, a 93-room hotel with extensive meeting space and recreational amenities located in Hann. Münden, Germany, for a purchase price of €4,500, or approximately $4,950 at the acquisition date.  Although the transaction closed, and TWHG acquired the Hotel Freizeit Auefeld on June 16, 2015, the purchase agreement stipulated that the effective acquisition date was to be retroactive to June 1, 2015, which had no impact on the purchase price.  The assets acquired by TWHG included: the hotel building and its contents; three food and beverage outlets, ten meeting rooms; an adjoining 13,000 square foot event hall, an adjoining tennis complex with four indoor courts, several additional recreation areas, an independent townhouse comprised of one four-room and one six-room apartment, and the ground lease rights to the land upon which all of the hotel’s assets stand, the lease for which expires on March 1, 2084, but includes both a right of first refusal buyout and lease renewal option, in favor of TWHG, to year 2154.  Hotel Freizeit Auefeld was built in 1991 and expanded with new facilities in 2001.

Hotel Freizeit Auefeld, a full-service lodging property, caters to both business and leisure travelers.  The total acquisition cost was approximately €4,851, or approximately $5,288 at the acquisition date, including the 5.0% real estate transfer taxes of approximately €184, or approximately $200, on the estimated fair value of the buildings, applicable in the German State of Lower Saxony, and €167, or approximately $182, in closing costs and bank processing fees.  The acquisition was funded by a cash payment of €250, or approximately $273, and financed by a combination of TWC’s assumption of local bank loans from Bank Sparkasse Hann. Münden, the Sparkasse Hann. Münden Loan, which comprised of five loans aggregating €2,018, or approximately $2,200, with an average fixed interest rate of 4.94%, and by a seller-financed loan, the Seller Loan, of €2,232, or approximately $2,245.  The assumed bank debt was converted in November 2015 to a single loan with the same lender, at a mutually agreed-upon terms of 2.99% annual interest, fixed for 10 years, and repaid over 15 years, while the Seller Loan has terms of 3.0% annual fixed interest and will be amortize over 10 years, with a no-interest first two-month grace period.

As was done with the Hotel Columbus, the Company accounts for its Hotel Freizeit Auefeld acquisition under the acquisition method of accounting as indicated in ASC 805, which requires the acquiring entity in a business combination to recognize the fair value of all assets acquired, liabilities assumed, and establishes the acquisition date as the fair value measurement point. Accordingly, the Company identified and recorded assets acquired and liabilities assumed in this business combination, based on fair value estimates as of the date of acquisition.  The purchase price allocation process requires an analysis and valuation of acquired assets, which may include fixed assets, technologies, customer contracts and relationships, trade names and liabilities assumed, including contractual commitments and legal contingencies.

Therefore, the Company allocated the fair value of all acquired assets, which did not change from the estimated fair value at acquisition date, as follows:

Purchase Price Allocation	Final Fair Value at Acquisition Date		Final Fair Value at Acquisition Date
Cash	€	250	$	275
Sparkasse Hann. Münden Loan	2,018		2,220
Seller Loan	2,232		2,455
Total purchase price consideration	€	4,500	$	4,950
Fair value amounts assigned to assets acquired:
Buildings	€	3,680	$	4,048
Property & equipment	649		714
Intangibles	52		57
Goodwill	119		131
Final fair value of assets acquired	€	4,500	$	4,950

Prior to TWC’s purchase of the Hotel Freizeit Auefeld, the hotel property was leased to, and operated by, an independent, third-party hotel operator (lessee).  The owner of the hotel property was receiving only rent income from the lessee.  As such, the unaudited hotel operational and financial data was provided by the lessee to TWC for the purpose of evaluating the viability of TWC’s investment and partly due to the fact that the lessee wanted to terminate its hotel lease.  Prior to the acquisition, the hotel did not have practical US GAAP financial statements, therefore TWC did not included pro forma financial statements for this hotel acquisition.