Real Estate Properties

12 Months Ended

Dec. 31, 2012

Real Estate Properties

Real Estate Properties

4. Real Estate Properties

        Our real estate properties, at cost after impairments, consisted of land of $1,453,399, buildings and improvements of $4,899,498 and furniture, fixtures and equipment of $546,212, as of December 31, 2012; and land of $1,360,773, buildings and improvements of $4,343,991 and furniture, fixtures and equipment of $431,332 as of December 31, 2011.

        During 2012, 2011 and 2010, we funded $357,084, $132,522 and $97,816, respectively, of improvements to certain of our properties which pursuant to the terms of our management agreements and leases with our hotel managers and tenants resulted in increases in our contractual annual minimum returns and rents of $27,813, $11,346 and $9,782 in 2012, 2011 and 2010, respectively.

        At December 31, 2012, 14 of our hotels were on leased land. In each case, the remaining term of the ground lease (including renewal options) is in excess of 25 years, and the ground lessors are unrelated to us. Ground rent payable under nine of the ground leases is generally calculated as a percentage of hotel revenues. Twelve (12) of the 14 ground leases require minimum annual rents averaging $239 per year; future rents under two ground leases have been pre-paid. Twenty (20) of our travel centers are on land leased partially or in its entirety. The remaining terms on the leases range from six to 38 years with rents averaging $447 per year. Generally payments of ground lease obligations are made by our managers or tenants. However, if a manager or tenant did not perform obligations under a ground lease or did not renew any ground lease, we might have to perform obligations under the ground lease or renew the ground lease in order to protect our investment in the affected property. Any pledge of our interests in a ground lease may require the consent of the applicable ground lessor and its lenders.

        On January 31, 2012, we completed an acquisition of the entities which own the Cambridge Hotel (400 rooms) and lease the New Orleans Hotel (483 rooms) for total cash consideration of $150,500, excluding related acquisition costs of $3,264. The following table summarizes our allocation of the acquisition cost to estimated fair value of the assets we acquired and the liabilities we assumed:

Land	$	32,436
Building		78,764
Furniture, fixtures and equipment		19,536
Intangible assets (including the leasehold value of the New Orleans Hotel)		22,326
Goodwill		7,658
Other, net		(2,562	)
Deferred tax liability		(7,658	)
Total	$	150,500

        Simultaneous with this acquisition, we entered into management agreements with Sonesta. See Notes 5 and 8 for further information about these transactions.

        On November 1, 2012, we acquired a full service hotel in Chicago, IL for $85,000, excluding related acquisition costs of $840. The following table summarizes our allocation of the acquisition cost to estimated fair value of the assets we acquired:

Land	$	12,766
Building		62,596
Furniture, fixtures and equipment		6,589
Intangible assets		3,049
Total	$	85,000

        See Note 5 for further information about this transaction.

        On December 19, 2012, we acquired a 372 room full service hotel located in San Francisco, CA for $120,000, excluding related acquisition costs of $1,709. The following table summarizes our preliminary allocation of the acquisition cost to estimated fair value of the assets we acquired:

Land	$	28,266
Building		80,170
Furniture, fixtures and equipment		15,592
Intangible liabilities		(4,028	)
Total	$	120,000

        See Note 5 for further information about this transaction.

        We have included the results of our 2012 hotel acquisitions in our consolidated financial statements from the date of acquisition. The pro forma impact of including the results of operations of the hotels from the beginning of the period is not material to our consolidated financial statements.

        In January 2013, we entered an agreement to acquire a 426 room full service Marriott branded hotel located in Duluth, GA for a contract purchase price of $31,000, excluding closing costs. We plan to convert this hotel to a Sonesta branded hotel and add it to our Sonesta No. 1 agreement. We currently expect to acquire this property during the first quarter of 2013; however, this acquisition is subject to customary closing conditions and we can provide no assurance that we will acquire this property in that time period or at all.

        On July 12, 2012, we sold our Marriott branded hotel in St. Louis, MO for net proceeds of $28,850. We recorded a gain on sale of $10,210 in the third quarter of 2012.

        On August 24, 2012, we sold our Staybridge Suites branded hotel in Schaumburg, IL for net proceeds of $1,872. We recorded a gain on sale of $329 in the third quarter of 2012.

        On August 29, 2012, we sold our Staybridge Suites branded hotel in Auburn Hills, MI for net proceeds of $3,482. We recorded a gain on sale of $63 in the third quarter of 2012.