1、14BUILDING SHAREHOLDER VALUE THROUGH ALL PHASES OF THE LODGING CYCLE2014 ANNUAL REPORT14BUILDING SHAREHOLDER VALUE THROUGH ALL PHASES OF THE LODGING CYCLE2014 ANNUAL REPORT30 HotelsINSTITUTIONAL-QUALITY,UPPER-UPSCALEHilton San Diego BayfrontBuilding ExteriorDoubletree Guest Suites Times SquareRenova
2、ted Lobby/Bar14,306 RoomsWITH CONCENTRATIONS IN TOP LODGING MARKETS14,306 RoomsWITH CONCENTRATIONS IN TOP LODGING MARKETS$5 Billion ValueMarriott WaileaBuilding ExteriorEMPHASIZING LOW LEVERAGEAND HIGH FLEXIBILITY$1612108611/111/123/125/127/129/1211/121/133/1314A COMMITMENT TO OUR STATED PLAN:CAREFU
3、LLY BUILD SHAREHOLDER VALUE.6/4/12Acquired 419-room Hyatt Chicago Magnificent Mile9/14/12Sold 350-room Marriott Troy,257-room Hilton Del Mar,229-room DoubleTree Minneapolis 1/22/13Redeemed all$58 million outstanding 4.6%Senior Exchangeable Notes8/23/12Sold 284-room Marriott Del Mar2/1/13 and 2/15/13
4、Completion of follow-on equity offering with$295 million of net proceeds7/19/12Acquired 361-room Hilton Garden Inn Chicago Downtown/Magnificent Mile1/25/13Sold 1,222-room Rochester Portfolio3/1/13Redemption of all$176 million outstanding 8.00%Series A Preferred Stock$1612108611/111/123/125/127/129/1
5、211/121/133/13146/4/12Acquired 419-room Hyatt Chicago Magnificent Mile9/14/12Sold 350-room Marriott Troy,257-room Hilton Del Mar,229-room DoubleTree Minneapolis 1/22/13Redeemed all$58 million outstanding 4.6%Senior Exchangeable Notes8/23/12Sold 284-room Marriott Del Mar2/1/13 and 2/15/13Completion o
6、f follow-on equity offering with$295 million of net proceeds7/19/12Acquired 361-room Hilton Garden Inn Chicago Downtown/Magnificent Mile1/25/13Sold 1,222-room Rochester Portfolio3/1/13Redemption of all$176 million outstanding 8.00%Series A Preferred Stock5/137/139/1311/131/143/147/145/1411/149/14A C
7、OMMITMENT TO OUR STATED PLAN:CAREFULLY BUILD SHAREHOLDER VALUE.5/1/13Acquired 252-room Hilton New Orleans St.Charles5/31/13Redeemed all$100 million outstanding 6.45%Series C Preferred Stock7/2/13Acquired 1,054-room Boston Park Plaza11/1/13Completion of follow-on equity offering with$271 million of n
8、et proceeds12/2/13Acquired 803-room Hyatt Regency San Francisco6/19/14 and 7/17/14Completion of follow-on equity offering and direct placement with$322.5 million of net proceeds,announced acquisition of 541-room Marriott WaileaBackground PMS to be selected based off loose color5/137/139/1311/131/143
9、/147/145/1411/149/14A COMMITMENT TO OUR STATED PLAN:CAREFULLY BUILD SHAREHOLDER VALUE.5/1/13Acquired 252-room Hilton New Orleans St.Charles5/31/13Redeemed all$100 million outstanding 6.45%Series C Preferred Stock7/2/13Acquired 1,054-room Boston Park Plaza11/1/13Completion of follow-on equity offerin
10、g with$271 million of net proceeds12/2/13Acquired 804-room Hyatt Regency San Francisco6/19/14 and 7/17/14Completion of follow-on equity offering and direct placement with$322.5 million of net proceeds,announced acquisition of 541-room Marriott WaileaHAWAIIMaui:Marriott WaileaUTAHMarriott Park CityWe
11、st*2014 total EBITDA by region percentages reflect prior ownership for the Marriott Wailea acquired July 17,2014 and 100%ownership of the Hilton San Diego Bayfront40%*OREGONMarriott PortlandCALIFORNIACourtyard by Marriott Los AngelesEmbassy Suites La JollaFairmont Newport BeachHilton San Diego Bayfr
12、ontHyatt Regency Newport BeachHyatt Regency San FranciscoRenaissance Long BeachRenaissance Los Angeles AirportSheraton Cerritos THROUGH BROAD AND BALANCED GEOGRAPHIC DIVERSIFICATION.HAWAIIMaui:Marriott WaileaUTAHMarriott Park CityWest*2014 total EBITDA by region percentages reflect prior ownership f
13、or the Marriott Wailea acquired July 17,2014 and 100%ownership of the Hilton San Diego Bayfront40%*OREGONMarriott PortlandCALIFORNIACourtyard by Marriott Los Angeles AirportEmbassy Suites La JollaFairmont Newport BeachHilton San Diego BayfrontHyatt Regency Newport BeachHyatt Regency San FranciscoRen
14、aissance Long BeachRenaissance Los Angeles AirportSheraton CerritosTHROUGH BROAD AND BALANCED GEOGRAPHIC DIVERSIFICATION.TEXASHilton HoustonNorthMarriott HoustonILLINOISEmbassy Suites Hotel ChicagoHilton Garden Inn Chicago Downtown/Magnificent MileHyatt Chicago Magnificent MileMidwest South 14%*MASS
15、ACHUSETTSBoston Park Plaza Marriott Boston Long WharfMarriott QuincyPENNSYLVANIAMarriott PhiladelphiaFLORIDARenaissance Orlando at SeaWorldMD/DC/VAMarriott Tysons CornerRenaissance BaltimoreHarborplaceRenaissance Washington,DCNEW YORKDoubletree Guest Suites Times SquareHilton Times SquareRenaissance
16、 WestchesterNortheast39%*LOUISIANAJW Marriott New OrleansHilton New Orleans St.Charles7%*WE CONTINUE TO IMPROVE THE QUALITY AND SCALE OF OUR PORTFOLIO THROUGH ACQUISITIONS.Marriott WaileaBuilding ExteriorMarriott WaileaFront Lobby AreaTHE ACQUISITION OF THE 541-ROOM MARRIOTT WAILEA,LOCATED ON 22 OCE
17、ANFRONT ACRES,WAS HIGHLY CONSISTENT WITH OUR EXTERNAL GROWTH STRATEGY.THE ACQUISITION OF THE 541-ROOM MARRIOTT WAILEA,LOCATED ON 22 OCEANFRONT ACRES,WAS HIGHLY CONSISTENT WITH OUR EXTERNAL GROWTH STRATEGY.AND REFINEMENT OF OUR PORTFOLIO QUALITY AND SCALE.Marriott WaileaInfinity PoolWE ALSO REMAIN FO
18、CUSED ON MAXIMIZING OUR PORTFOLIO VALUE THROUGH WELL-TIMED,APPRO PRIATELY SCOPED RENOVATIONS LIKE THE LOBBY AT THE DOUBLETREE GUEST SUITES TIMES SQUARE.Doubletree Guest Suites Times SquareFront DeskBeforeDoubletree Guest Suites Times SquareRenovated Front DeskAfterAND OVER THE COMING YEAR,WE WILL UN
19、VEIL THE TRANSFORMATION OF THE BOSTON PARK PLAZA.WITH OUR NEW LOBBY BAR.HOTEL RESTAURANT.AND GUESTROOMS.S U N S T O N E H O T E L I N V E S T O R S,I N C.3 0I am happy to report that 2014 marked another productive year in our evolution here at Sunstone.In the past few years,we have taken an also-ran
20、 hotel owner haggard by over leverage and a poor investment track record and made it a formidable and highly profitable contender in the hotel ownership arena.Our evolutionwhich will never be completedhas materially reduced unnecessary risk that we were not being rewarded to take and has produced st
21、rong returns for our share-holders.Those are good things.At the core of our evolution is our basic long-term strategy to create shareholder value.After all,creating shareholder value is the reason we are in business.As we have shared with you in the past,our strategy is quite simple and has remained
22、 consistent.Our strategy is this.First,we invest in high-quality and relevant hotel real estate at an antici-pated return premium to our cost of capital.Second,we actively asset manage and methodically re-invest capital into our portfolio to drive internal profit growthsimply,we try to extract more
23、value from our existing assets.Third,we adhere to a low levered balance sheet that maximizes our financial flexibility and allows us to take advantage of attractive investment opportunities no matter the market conditionsthrough both thick and thinand thin is generally when the most profitable deals
24、 are made.Fourth,we believe in transparency and shareholder friendly corporate governanceafter all,we know who we work for.And finally,we believe in fair and mutually beneficial arrangements with our operating,brand and capital partnerswe cant do this alone,and life is more than just your next deal.
25、We believe this strategy is simple,produces attractive long-term results,forges lasting and meaningful relationships with our partners and minimizes unwarranted risks.THE YEAR AT SUNSTONETo that end,most things turned out well for us in 2014,and we have set the stage for growth in years to come.Here
26、 are a few highlights:Strong Internal Growth:In 2014,our portfolio of 30 hotels,in aggre-gate,generated a 14%increase in comparable portfolio EBITDA(Earnings Before Interest,Taxes,Depreciation and Amortization)as a result of a 6.8%increase in RevPAR(Revenue per Available Room)and various cost contro
27、l initiatives.Growth in revenues from group business has lagged revenue growth from individual corporate and leisure travelers this cycle,but we have recently witnessed an increase in group meeting activity and the amount of money these groups spend per event.This trend bodes well for our future gro
28、wth,as does the fact that our high occupancy level(82.4%in 2014)leaves us with strong pricing power and the ability to be more selective in the groups we take.Again,a good trend.Attractive Earnings Growth:The internal growth in our portfolio pro-duced a 29.9%increase in our corporate Adjusted EBITDA
29、 as well as a 25.8%increase in our Adjusted Funds From Operations(Adjusted FFO)per diluted sharea REIT measure of levered earnings.Both our Adjusted EBITDA and Adjusted FFO per diluted share exceeded our expectations for the year.Acquisition of a Diamond in the Rough:In July 2014,we continued to bui
30、ld on the quality and scale of our portfolio through the acquisition of the 541-room Marriott Waileain Maui,Hawaii.The acquisition was funded entirely with equity and generated a 2014 property-level Net Operating Income(NOI)yield of 5.4%.While the going-in yield for this phenomenally located hotel i
31、s attractive,we have great expectations for the property once the existing pedestrian-quality offerings are elevated to the higher caliber of similarly located,yet far more expensive,resorts in the same neighborhood.We have a track record of successfully repositioning hotels that have lost their edg
32、e,and we are excited about our repositioning plans and profit potential in Maui.M E S S AG E T OS H A R E H O L D E R S2 0 1 4 A N N U A L R E P O R T3 1Reinvesting in Our Portfolio and Our Future:We invested$126 million of capital back into our portfolio,not only to keep our hotels in great shape a
33、nd competitive,but also to reposition two of our recent value-add acquisitionsthe Boston Park Plaza and the Marriott Wailea.These renovations are expected to pay rewards in the future.We are particularly excited about the completion of the first phase of the Boston Park Plaza renovation,which includ
34、es a transformation of the lobby,meeting space,street-level retail and a new 20,000 square foot health club.While this work will be completed by the end of the first quarter 2015,we have already started to witness the benefits,as our group and catering bookings are up substantially as a result.When
35、we are done with the renovation in early-to-mid 2016,we will own a high quality,well-appointed,large hotel in a great location in Boston for an all-in cost of approximately$330,000 per guestroom.Our all-in cost basis is expected to be considerably less than the prices paid for recent hotel trades in
36、 the market.This provides us with a fairly sizable cush-ion for this investment to be successful.Improving Our Financial Flexibility While Reducing Our Cost of Capital:We continued to strengthen our balance sheet in 2014,proactively refinanced three loans,and have effectively raised all of the capit
37、al needed to fund all of our 2015 debt maturities.One of the primary leverage ratios to which we hold ourselves accountableconsolidated debt and preferred equity to total capitalizationended 2014 at 31.2%,down 710 basis points from 38.3%at year end 2013,and vastly lower than the dangerously high 66.
38、9%at year end 2011.More specifically,in August,we refinanced the$229 million loan on our Hilton San Diego Bayfront,reducing the interest rate by 100 basis points and extending the maturity date by three years to 2019.Then in December,we refinanced the existing$39 million mortgage on our JW Marriott
39、New Orleans with a new$90 million,ten-year loan.The extra proceeds from this loan will help us retire the remaining$99 million of loans that mature in June 2015 and provide us with an additional four unsecured hotels.And finally,in December,we repaid,for a premium,the loan on our Embassy Suites La J
40、olla in north San Diego.The loan repayment,which was funded with a smaller loan on the same hotel,not only reduced our annual interest cost by approxi-mately$1.6 million,but also provided us with a material return on the prepayment premium and allowed us to extend the maturity date of the loan by si
41、x years to 2025.Our balance sheet is in great shape,provides us with significant flexibility to opportunistically pursue our long-term business strategy,reduces the risk of“going on defense”in a downturn,and increases our“offensive capabilities”when such a downturn happens.Material Increase in Our C
42、ommon Dividend:Our total 2014 dividend of$0.51 per share represents a material increase over the$0.10 per share paid in 2013.Through mid-2013,we used tax losses to defer our dividend payments to common shareholders and used all of our retained cash to pay down debta strategy that has left us in cons
43、id-erably better condition.We paid a small$0.05 per share quarterly dividend in the first three quarters of 2014,and then paid a far more significant$0.36 per share“catch-up”dividend in the fourth quarter,comprised of both cash and stock,in order to meet the distribution guidelines set by Uncle Sam.
44、Our dividend policy does not conform to industry normsas is the case with a few of the things we do here at Sunstonebut we believe it is the right dividend policy for the Company and our shareholders.That is,paying a small quarterly div-idend and a large catch-up dividend made up of cash and stock r
45、educes the risk that we will over distribute our earnings in any given year,and it allows us to retain incremental cash to further reduce debt,fund value-add hotel repositionings and fund attractive investment oppor-tunities.We are likely to maintain this somewhat unorthodox dividend policy until we
46、 run out of attractive investment alternatives,at which time,we would expect to return our incremental retained earnings to our shareholders.S U N S T O N E H O T E L I N V E S T O R S,I N C.3 2Attractive Shareholder Returns:We generated a total shareholder return of 27.1%in 2014.This return was on
47、pace with the 27.1%return of the NAREIT All REIT Index,yet in all candor,fell at the lower end of the range of 22%to 36%of a few of our most comparable lodging REIT peers.We are not happy with this result.We believe the modest underperformance was largely the result of investor concerns that we woul
48、d experience short-term profit disruption at properties undergo-ing renovationBoston Park Plaza,Hyatt Regency San Francisco and the Marriott Wailea.We believe that these concerns will prove to be short lived as renovation disruption has proven to be modest,and as investors come to appreciate that th
49、e long-term benefits of these value-add activities far outweigh the short-term cost of bringing them to fruition.WHATS NEXTThe hotel operating environment remains positive for most of our hotels and for our portfolio in general.At current high occupancy levels,we expect to work with our operating pa
50、rtners to push room rates higher;be more selective on the timing,quality and profitability of the group business we attract;and continue to control expenses where we can.Not all expenses are controllable,as costs such as property taxes continue to increase at a meaningful rate.However,our asset mana
51、ge-ment team and operating partners continue to focus on bringing a good portion of our increased revenues to the bottom line.On the investment front,we need to remain selective in the current environment.That is,the low-return world we find ourselves in has increased the value of the hotels we ownw
52、hich is goodbut has made it more difficult to compete for attractively priced acquisitions.In this competitive investment environment,we will refrain from the mistakes witnessed in previous cycles when so many companies indiscriminately acquired hotels with unsustainable levels of debt.Combining hig
53、h levels of debt with the high levels of cyclicality inherent in our business is a dangerous combination that has proven time and time again to result in bad outcomes.Rather,we expect to continue to methodically invest in quality hotel real estatehotels we believe are well positioned for the long te
54、rmwhen we are comfort-able that our anticipated returns are expected to exceed our cost of capital.Furthermore,we would expect to fund any such investments largely with equity,or with proceeds from the sale of some of our existing hotels.While it may be a more difficult time to buy hotels,it is a fa
55、irly easy time to sell hotels.So we probably will do just that with a few of the hotels that dont fit our portfolio strategy going forward.In closing,I would like to thank Sunstones Board of Directors and our 49 employees for their tireless efforts to build shareholder value through the mindful exec
56、ution of their daily duties.I would also like to thank our brand,operating and capital partners for their ongoing support and collaborationwe could not be successful without them.And finally,I wish to thank our shareholdersthe owners of our companyfor investing with us and giving us the opportunity
57、to run this great business.Warmest Regards,J O H N V.A R A B I AP R E S I D E N T A N D C H I E F E X E C U T I V E O F F I C E R3 3SELECTED Financial DataThe following table sets forth selected financial information for the Company that has been derived from the consolidated financial statements an
58、d notes.This information should be read together with“Managements Discussion and Analysis of Financial Condition and Results of Operations”and our consolidated financial statements and related notes included elsewhere in this Annual Report.Year EndedYear EndedYear EndedYear EndedYear EndedDecember 3
59、1,December 31,December 31,December 31,December 31,20142013201220112010($in thousands)OPERATING DATAREVENUESRoom$811,709$653,955$576,146$501,183$351,039Food and beverage259,358213,346200,810175,103138,188Other operating70,93156,52352,12845,50826,373Total revenues1,141,998923,824829,084721,794515,600O
60、PERATING EXPENSESRoom214,899170,361147,932128,22592,101Food and beverage180,053147,713139,106126,13998,889Other operating21,01216,81916,16214,00411,535Advertising and promotion54,99247,30642,47437,22627,326Repairs and maintenance45,90135,88432,04229,06722,608Utilities34,14127,00625,59625,53719,117Fr
61、anchise costs38,27132,93230,06725,59518,032Property tax,ground lease and insurance84,66579,00466,83058,01035,280Property general and administrative126,737103,45494,64285,29361,753Corporate overhead28,73926,67124,31625,45321,751Depreciation and amortization155,845137,476130,907113,70879,633Impairment
62、 loss10,862Total operating expenses985,255824,626750,074679,119488,025Operating income156,74399,19879,01042,67527,575Equity in net earnings of unconsolidated joint ventures21555Interest and other income3,4792,8212973,115112Interest expense(72,315)(72,239)(76,821)(74,195)(58,931)Loss on extinguishmen
63、t of debt(4,638)(44)(191)Gain on remeasurement of equity interests69,230Income(loss)before income taxes and discontinued operations83,26929,7362,29540,846(30,689)Income tax provision(179)(8,145)(1,148)Income(loss)from continuing operations83,09021,5911,14740,846(30,689)Income from discontinued opera
64、tions4,84948,41048,41040,45369,231Net income87,93970,00149,55781,29938,542Income from consolidated joint venture attributable to non-controlling interest(6,676)(4,013)(1,761)(312)Distributions to non-controlling interest(32)(32)(31)(30)Preferred stock dividends,redemption charges and accretion(9,200
65、)(19,013)(29,748)(27,321)(20,652)Income available to common stockholders$72,031$46,943$18,017$53,636$17,890Income(loss)from continuing operations available(attributable)to common stockholders per diluted common share$0.34$(0.01)$(0.24)$0.11$(0.52)Dividends declared per common share$0.51$0.10$BALANCE
66、 SHEET DATAInvestment in hotel properties,net(1)$3,538,129$3,231,382$2,681,877$2,532,232$1,666,180Total assets$3,924,965$3,508,798$3,136,675$3,101,240$2,436,106Total debt(1)$1,429,292$1,404,075$1,363,389$1,416,890$973,810Total liabilities$1,656,131$1,556,399$1,517,362$1,675,946$1,236,807Equity$2,268
67、,834$1,952,399$1,519,313$1,325,294$1,099,299(1)Does not include hotels or debt which have been reclassified to discontinued operations,or which have been classified as held for sale.3 4MANAGEMENTS DISCUSSION AND ANALYSISof Financial Condition and Results of OperationsThe following discussion should
68、be read together with the consolidated financial statements and related notes included elsewhere in this report.OVERVIEWSunstone Hotel Investors,Inc.is a Maryland corporation.We operate as a self-managed and self-administered real estate investment trust,or REIT.A REIT is a legal entity that directl
69、y or indirectly owns real estate assets.REITs generally are not subject to federal income taxes at the corporate level as long as they pay stockholder dividends equivalent to 100%of their taxable income.REITs are required to distribute to stockholders at least 90%of their taxable income.We own,direc
70、tly or indirectly,100%of the interests of Sunstone Hotel Partnership,LLC(the“Operating Partnership”),which is the entity that directly or indirectly owns our hotel properties.We also own 100%of the interests of our taxable REIT subsidiary,Sunstone Hotel TRS Lessee,Inc.,which leases all of our hotels
71、 from the Operating Partnership,and engages independent third-parties to manage our hotels.In addition,we own BuyEfficient,LLC(“BuyEfficient”),an electronic purchasing platform that allows members to procure food,operating supplies,furniture,fixtures and equipment.We own primarily upper upscale hote
72、ls in the United States.As of December 31,2014,we had interests in 30 hotels,which are currently held for investment(the“30 hotels”).Of the 30 hotels,we classify 27 as upper upscale,two as luxury and one as upscale as defined by Smith Travel Research,Inc.All but one(the Boston Park Plaza)of our 30 h
73、otels are operated under nationally recognized brands such as Marriott,Hilton,Hyatt,Fairmont and Sheraton,which are among the most respected and widely recognized brands in the lodging industry.While independent hotels may do well in strong market locations,we believe the largest and most stable seg
74、ment of travelers prefer the consistent service and quality associated with nationally recognized brands.We seek to own hotels primarily in urban locations that benefit from significant barriers to entry by competitors and diverse economic drivers.As of December 31,2014,all but one(the Marriott Wail
75、ea)of our 30 hotels are considered business,convention,or airport hotels,as opposed to resort or leisure hotels.The hotels comprising our 30 hotel portfolio average 477 rooms in size.Since the end of 2009,demand for lodging in the U.S.has increased,which has resulted in improved hotel revenues and p
76、rofits.In light of increasing demand for lodging and generally muted supply of new hotel development,we believe we are currently in the middle phase of a cyclical lodging recovery.Accordingly,during the past four years,we selectively acquired interests in nine hotels:the Doubletree Guest Suites Time
77、s Square in January 2011;the JW Marriott New Orleans in February 2011;the Hilton San Diego Bayfront in April 2011;the Hyatt Chicago Magnificent Mile in June 2012;the Hilton Garden Inn Chicago Downtown/Magnificent Mile in July 2012;the Hilton New Orleans St.Charles in May 2013;the Boston Park Plaza i
78、n July 2013;the Hyatt Regency San Francisco in December 2013;and the Marriott Wailea in July 2014.Based on our purchase prices,the combined asset value of these nine hotels totals$1.8 billion,or$329,000 per key.In addition,we purchased the outside 50.0%equity interest in our BuyEfficient joint ventu
79、re in January 2011.Our acquisition program is aimed at generating attractive risk-adjusted returns on our investment dollars.We,therefore,may target lodging assets outside of the typical branded,urban,upper upscale profile represented by our existing portfolio in order to capitalize on opportunities
80、 which may arise.We intend to select the brands and operators for our hotels that we believe will lead to the highest returns.We have from time to time divested of assets that no longer fit our target profile,will not offer long-term returns in excess of our cost of capital,or that have high risk re
81、lative to their anticipated return expectations.In connection with this strategy,during the past four years,we sold 10 hotels:the Royal Palm Miami Beach in April 2011;the Valley River Inn located in Eugene,Oregon in October 2011;the Marriott Del Mar in August 2012;the Doubletree Guest Suites Minneap
82、olis,the Hilton Del Mar,and the Marriott Troy in September 2012;and the Kahler Grand,the Kahler Inn&Suites,the Marriott Rochester and the Residence Inn by Marriott Rochester(the“Rochester Hotels”)in January 2013.Based on our sales prices,the combined asset value of these 10 hotels totals$547.2 milli
83、on,or$182,000 per key.In addition,during the past four years,we sold the following non-hotel assets:a commercial laundry facility located in Salt Lake City,Utah in July 2011;an office building adjacent to the Marriott Troy in September 2012;and a commercial laundry facility located in Rochester,Minn
84、esota in January 2013(together with the Rochester Hotels,the“Rochester Portfolio”).2014 HIGHLIGHTSIn February 2014,we entered into separate Equity Distribution Agreements with Wells Fargo Securities LLC and Merrill Lynch,Pierce Fenner&Smith Incorporated(the“Managers”).Under the terms of the agreemen
85、ts,we may issue and sell from time to time through or to the Managers,as sales agents and/or principals,shares of our common stock having an aggregate offering amount of up to$150.0 million.During 2014,we received$21.0 million in net proceeds from the issuance of 1,352,703 shares of our common stock
86、 pursuant to the agreements.3 5In June 2014,we acquired approximately seven acres of land underlying the Fairmont Newport Beach for$11.0 million.Prior to our acqui-sition,the land was leased to us by a third party.Also in June 2014,we issued 18,000,000 shares of our common stock in an underwritten p
87、ublic offering for net proceeds of approximately$262.5 million,which were used to acquire the Marriott Wailea in July 2014.In July 2014,we purchased the 544-room Marriott Wailea for a net purchase price of$325.6 million,which was comprised of$265.6 million in cash,including$4.4 million of proration
88、credits and unrestricted and restricted cash received from the seller,and$60.0 million of our common stock issued directly to the seller.The acquisition was funded with proceeds received from our June 2014 common stock offering,and 4,034,970 shares of our common stock valued at$60.0 million($14.87 p
89、er share).Subsequent to our acquisition,three rooms were temporarily taken out of service,leaving 541 rooms available to sell.In August 2014,we amended the non-recourse mortgage secured by the Hilton San Diego Bayfront.The loan amendment extends the maturity date from April 2016 to August 2019,and r
90、educes the interest rate from three-month LIBOR plus 325 basis points to one-month LIBOR plus 225 basis points.The loan originally included a syndication of four lenders.One of the four lenders elected not to proceed with the amended loan,causing us to expense$0.5 million of the unamortized balance
91、of the applicable deferred financing fees to loss on extinguishment of debt.In conjunction with the amendment,we paid additional deferred financing fees of$1.3 million to the three remaining lenders,which we are amortizing over the term of the refinanced debt.We also paid$0.1 million in loan fees to
92、 third parties,which we recorded as a component of interest expense.In December 2014,we repaid the$38.9 million mortgage secured by the JW Marriott New Orleans,using proceeds received from a new$90.0 million mortgage secured by the JW Marriott New Orleans.The new loan extends the maturity date from
93、September 2015 to December 2024.The new loan is subject to a 30-year amortization schedule,and reduces the interest rate from 5.45%under a related interest rate swap agreement to a fixed rate of 4.15%.In conjunction with our repayment of the original mortgage,we wrote off$39,000 of unamortized defer
94、red financing fees,which are included in loss on extinguishment of debt in our consolidated statements of operations,and we paid$0.6 million to terminate the related interest rate swap agreement.In addition,we paid deferred financing fees of$0.6 million related to the new loan,which we are amortizin
95、g over the term of the new loan.Also in December 2014,we extinguished the$67.1 million mortgage secured by the Embassy Suites La Jolla for a total cost of$71.1 million,and recorded a loss on extinguishment of debt of$4.0 million.The extinguishment was funded using proceeds received from a new$65.0 m
96、illion mortgage secured by the Embassy Suites La Jolla,along with cash on hand.The new loan is subject to a 30-year amortization schedule,reduces the interest rate from a fixed rate of 6.6%to a fixed rate of 4.12%,and extends the maturity date from June 2019 to January 2025.In conjunction with our r
97、epayment of the original mortgage,we wrote off$43,000 of unamortized deferred financing fees,which are included in loss on extinguishment of debt in our consolidated statements of operations.In addition,we paid deferred financing fees of$0.4 million related to the new loan,which we are amortizing ov
98、er the term of the new loan.As of December 31,2014,the weighted average term to maturity of our debt is approximately four years,and 71.6%of our debt is fixed rate with a weighted average interest rate of 5.2%.The weighted average interest rate on all of our debt,which includes our variable-rate deb
99、t obligations based on variable rates at December 31,2014,is 4.5%.OPERATING ACTIVITIESOperating Performance Indicators.The following performance indicators are commonly used in the hotel industry:Occupancy,which is the quotient of total rooms sold divided by total rooms available;Average daily room
100、rate,or ADR,which is the quotient of room revenue divided by total rooms sold;Revenue per available room,or RevPAR,which is the product of occupancy and ADR,and does not include food and beverage revenue,or other operating revenue;Comparable RevPAR,which we define as the RevPAR generated by hotels w
101、e owned as of the end of the reporting period,but excluding those hotels that we classified as held for sale,those hotels that are undergoing a material repositioning and those hotels whose room counts have materially changed during either the current or prior year.For hotels that were not owned for
102、 the entirety of the comparison periods,comparable RevPAR is calculated using RevPAR generated during periods of prior ownership.We refer to this subset of our hotels used to calculate comparable RevPAR as our“Comparable Portfolio.”Currently our Comparable Portfolio includes all 30 hotels in which w
103、e have interests as of December 31,2014.In addition,our Comparable Portfolio includes prior ownership results for the Hyatt Chicago Magnificent Mile,the Hilton Garden Inn Chicago Downtown/Magnificent Mile,the Hilton New Orleans St.Charles,the Boston Park Plaza,the Hyatt Regency San Francisco and the
104、 Marriott Wailea;3 6 RevPAR index,which is the quotient of a hotels RevPAR divided by the average RevPAR of its competitors,multiplied by 100.A RevPAR index in excess of 100 indicates a hotel is achieving higher RevPAR than the average of its competitors.In addition to absolute RevPAR index,we monit
105、or changes in RevPAR index;EBITDA,which is net income(loss)excluding:non-controlling interests;interest expense;provision for income taxes,including income taxes applicable to sale of assets;and depreciation and amortization;Adjusted EBITDA,which includes EBITDA but excludes:amortization of deferred
106、 stock compensation;the impact of any gain or loss from asset sales;impairment charges;prior year property tax assessments or credits;and any other identified adjustments;Funds from operations,or FFO,which includes net income(loss),excluding non-controlling interests,gains and losses from sales of p
107、roperty,plus real estate-related depreciation and amortization(excluding amortization of deferred financing costs)and real estate-related impairment losses,and after adjustment for unconsolidated partnerships and joint ventures;and Adjusted FFO available to common stockholders,which includes FFO but
108、 excludes preferred stock dividends and redemption charges,penalties,written-off deferred financing costs,non-real estate-related impairment losses,income tax benefits or(provisions)associated with the application of net operating loss carryforwards,and any other identified adjustments.Revenues.Subs
109、tantially all of our revenues are derived from the operation of our hotels.Specifically,our revenues consist of the following:Room revenue,which is the product of the number of rooms sold and the ADR;Food and beverage revenue,which is comprised of revenue realized in the hotel food and beverage outl
110、ets as well as banquet and catering events;and Other operating revenue,which includes ancillary hotel revenue and other items primarily driven by occupancy such as telephone/internet,parking,spa,resort and other facility fees,entertainment and other guest services.Additionally,this category includes
111、,among other things,operating revenue from BuyEfficient,and hotel space leased by third parties.Expenses.Our expenses consist of the following:Room expense,which is primarily driven by occupancy and,therefore,has a significant correlation with room revenue;Food and beverage expense,which is primaril
112、y driven by food and beverage sales and banquet and catering bookings and,therefore,has a significant correlation with food and beverage revenue;Other operating expense,which includes the corresponding expense of other operating revenue,advertising and promotion,repairs and maintenance,utilities,and
113、 franchise costs;Property tax,ground lease and insurance expense,which includes the expenses associated with property tax,ground lease and insurance payments,each of which is primarily a fixed expense,however property tax is subject to regular revaluations based on the specific tax regulations and p
114、ractices of each municipality;Property general and administrative expense,which includes our property-level general and administrative expenses,such as payroll and related costs,contract and professional fees,credit and collection expenses,employee recruitment,relocation and training expenses,travel
115、 expenses,management fees and other costs.Additionally,this category includes general and administrative expenses from BuyEfficient;Corporate overhead expense,which includes our corporate-level expenses,such as payroll and related costs,amortization of deferred stock compensation,acquisition and due
116、 diligence costs,legal expenses,contract and professional fees,relocation,entity-level state franchise and minimum taxes,travel expenses,office rent and other costs;and Depreciation and amortization expense,which includes depreciation on our hotel buildings,improvements,furniture,fixtures and equipm
117、ent,along with amortization on our franchise fees and certain intangibles.Additionally,this category includes depreciation and amortization related to both our corporate office and BuyEfficients furniture,fixtures,equipment and intangibles.Other Revenue and Expense.Other revenue and expense consists
118、 of the following:Interest and other income,which includes interest we have earned on our restricted and unrestricted cash accounts and the Preferred Equity Investment,as well as any energy rebates we have received or any gains or losses we have recognized on sales of assets other than real estate i
119、nvestments;Interest expense,which includes interest expense incurred on our outstanding fixed and variable-rate debt and capital lease obligation,accretion of our Operating Partnerships 4.6%exchangeable senior notes(the“Senior Notes”)that were repurchased in 2013,amortization of deferred financing f
120、ees,gains or losses on derivatives and any loan penalties and fees incurred on our debt;Loss on extinguishment of debt,which includes losses we recognized on amendments or early repayments of mortgages or other debt obligations;Income tax provision,which includes federal and state income taxes charg
121、ed to the Company net of any refunds received,and any adjustments to unrecognized tax positions,along with any related interest and penalties incurred;3 7 Income from discontinued operations,which includes the results of operations for any hotels or other real estate investments sold during the repo
122、rting period,along with the gain or loss realized on the sale of these assets and any extinguishments of related debt;Income from consolidated joint venture attributable to non-controlling interest,which includes net income attributable to the outside 25.0%interest in the joint venture that owns the
123、 Hilton San Diego Bayfront;Distributions to non-controlling interest,which includes preferred dividends earned by investors from an entity that owns the Doubletree Guest Suites Times Square,including related administrative fees;and Preferred stock dividends and redemption charges,which includes divi
124、dends earned on our 8.0%Series A Cumulative Redeemable Preferred Stock(“Series A preferred stock”)until their redemption in March 2013,Series C Cumulative Convertible Redeemable Preferred Stock(“Series C preferred stock”)until their redemption in May 2013,and 8.0%Series D Cumulative Redeemable Prefe
125、rred Stock(“Series D preferred stock”),as well as redemption charges for preferred stock redemptions made in excess of net carrying values.Factors Affecting Our Operating Results.The primary factors affecting our operating results include overall demand for hotel rooms,the pace of new hotel developm
126、ent,or supply,and the relative performance of our operators in increasing revenue and controlling hotel operating expenses.Demand.The demand for lodging generally fluctuates with the overall economy.In aggregate,demand for our hotels has improved each year since 2010.In 2012,our Comparable Portfolio
127、 RevPAR increased 6.2%as compared to 2011,with a 260 basis point increase in portfolio occupancy.These improving demand trends continued in 2013 and 2014.As a result,our Comparable Portfolio RevPAR increased 3.3%in 2013 as compared to 2012,and 6.9%in 2014 as compared to 2013.Comparable Portfolio occ
128、upancy increased 40 basis points in 2013 as compared to 2012,and increased an additional 190 basis points in 2014 as compared to 2013.Our operating statistics improved in 2013 as compared to 2012,even as four of our hotels were under major renovations during the first half of 2013,causing limited oc
129、cupancy.These major renovations were substantially completed during the third quarter of 2013.While a portion of the improvement in our operating statistics in 2014 as compared to 2013 was due to occupancy improvements at the four hotels under renovation during 2013,this improvement was muted by the
130、 negative impact of renovations at four of our hotels during 2014.Consistent with prior trends,we anticipate that lodging demand will continue to improve as the U.S.economy continues to strengthen.Historically,cyclical troughs are followed by extended periods of relatively strong demand,resulting in
131、 a cyclical lodging growth phase.While growth is not expected to be uniform,we expect hotel demand to remain strong over the next several years if the U.S.economy continues to grow and employment levels continue to improve.Supply.The addition of new competitive hotels affects the ability of existing
132、 hotels to absorb demand for lodging and therefore drive RevPAR and profits.The development of new hotels is largely driven by construction costs and expected performance of existing hotels.The recession and financial crisis which occurred in 2008 and 2009,served to restrict credit and tighten lendi
133、ng standards,which resulted in a curtailment of funding for new hotel construction projects.In aggregate,we expect the U.S.hotel supply will remain slightly below historic levels over the next few years.On a market-by-market basis,some markets may experience new hotel room openings at or greater tha
134、n historic levels,including in New York City,Washington DC and Chicago where there are currently higher-than-average supplies of new hotel room openings.In addition,lenders are seeking higher yielding instruments,which may lead to riskier lending practices,including lending on new hotel construction
135、.Revenues and expenses.We believe that marginal improvements in RevPAR index,even in the face of declining revenues,are a good indicator of the relative quality and appeal of our hotels,and our operators effectiveness in maximizing revenues.Similarly,we also evaluate our operators effectiveness in m
136、inimizing incremental operating expenses in the context of increasing revenues or,conversely,in reducing operating expenses in the context of declining revenues.With respect to improving RevPAR index,we continue to work with our hotel operators to optimize revenue management initiatives while taking
137、 into consideration market demand trends and the pricing strategies of competitor hotels in our markets.We also develop capital investment programs designed to ensure each of our hotels is well renovated and positioned to appeal to groups and individual travelers fitting target guest profiles.Increa
138、sed capital investment in our properties may lead to short-term revenue disruption and negatively impact RevPAR index.Our revenue management initiatives are generally oriented towards maximizing ADR even if the result may be lower occu-pancy than may be achieved through lower ADR.Increases in RevPAR
139、 attributable to increases in ADR may be accompanied by minimal additional expenses,while increases in RevPAR attributable to higher occupancy may result in higher variable expenses such as housekeep-ing,labor and utilities expense.In 2013,our Comparable Portfolio RevPAR index decreased 60 basis poi
140、nts as compared to the same period in 2012 due to several capital investment programs at our hotels.In 2014,our Comparable Portfolio RevPAR index increased by 120 basis points as compared to the same period in 2013 due in part to a reduction in renovation displacement and the effect of newly-impleme
141、nted resort fees in 2014.3 8We continue to work with our operators to identify operational efficiencies designed to reduce expenses while maintaining guest experience and hotel employee satisfaction.Key asset management initiatives include optimizing hotel staffing levels,increasing the efficiency o
142、f the hotels,such as installing energy efficient management and inventory control systems,and selectively combining food and beverage outlets.Our operational efficiency initiatives may be difficult to implement,as most categories of variable operating expenses,such as utilities and housekeeping labo
143、r costs,fluctuate with changes in occupancy.Furthermore,our hotels operate with significant fixed costs,such as general and administrative expense,insurance,property taxes,and other expenses associated with owning hotels,over which our operators have little control.We have experienced either current
144、ly or in the past,increases in hourly wages,employee benefits(especially health insurance),utility costs and property insurance,which have negatively affected our operating margins.Moreover,there are limits to how far our operators can reduce expenses without affecting brand standards or the competi
145、tiveness of our hotels.Operating Results.The following table presents our operating results for our total portfolio for the years ended December 31,2014 and 2013,including the amount and percentage change in the results between the two periods.The table presents the results of operations included in
146、 the consolidated statements of operations,and includes the 30 hotels(14,303 rooms)as of December 31,2014 and 29 hotels(13,744 rooms)as of December 31,2013.No hotels were classified as discontinued operations during 2014,however,adjustments were recognized during 2014 related to hotels sold during 2
147、004 through 2013.Discontinued Operations for 2013 includes the Rochester Portfolio(1,222 rooms).20142013Change$Change%(dollars in thousands,except statistical data)REVENUESRoom$811,709$653,955$157,75424.1%Food and beverage259,358213,34646,01221.6%Other operating70,93156,52314,40825.5%Total revenues1
148、,141,998923,824218,17423.6%OPERATING EXPENSESHotel operating673,934557,025116,90921.0%Property general and administrative126,737103,45423,28322.5%Corporate overhead28,73926,6712,0687.8%Depreciation and amortization155,845137,47618,36913.4%Total operating expenses985,255824,626160,62919.5%OPERATING I
149、NCOME156,74399,19857,54558.0%Interest and other income3,4792,82165823.3%Interest expense(72,315)(72,239)(76)(0.1)%Loss on extinguishment of debt(4,638)(44)(4,594)(10,440.9)%Income before income taxes and discontinued operations83,26929,73653,533180.0%Income tax provision(179)(8,145)7,96697.8%INCOME
150、FROM CONTINUING OPERATIONS83,09021,59161,499284.8%Income from discontinued operations4,84948,410(43,561)(90.0)%NET INCOME87,93970,00117,93825.6%Income from consolidated joint venture attributable to non-controlling interest(6,676)(4,013)(2,663)(66.4)%Distributions to non-controlling interest(32)(32)
151、%Preferred stock dividends and redemption charges(9,200)(19,013)9,81351.6%INCOME AVAILABLE TO COMMON STOCKHOLDERS$72,031$46,943$25,08853.4%3 9The following table presents our operating results for our total portfolio for the years ended December 31,2013 and 2012,including the amount and percentage c
152、hange in the results between the two periods.The table presents the results of operations included in the consolidated statements of operations,and includes continuing operations for 29 hotels(13,744 rooms)as of December 31,2013 and 26 hotels(11,632 rooms)as of December 31,2012,as well as discontinu
153、ed operations for the Rochester portfolio(1,222 rooms)as of December 31,2013 and 8 hotels(2,342 rooms)as of December 31,2012.20132012Change$Change%(dollars in thousands,except statistical data)REVENUESRoom$653,955$576,146$77,80913.5%Food and beverage213,346200,81012,5366.2%Other operating56,52352,12
154、84,3958.4%Total revenues923,824829,08494,74011.4%OPERATING EXPENSESHotel operating557,025500,20956,81611.4%Property general and administrative103,45494,6428,8129.3%Corporate overhead26,67124,3162,3559.7%Depreciation and amortization137,476130,9076,5695.0%Total operating expenses824,626750,07474,5529
155、.9%OPERATING INCOME99,19879,01020,18825.6%Interest and other income2,8212972,524849.8%Interest expense(72,239)(76,821)4,5826.0%Loss on extinguishment of debt(44)(191)14777.0%Income before income taxes and discontinued operations29,7362,29527,4411,195.7%Income tax provision(8,145)(1,148)(6,997)(609.5
156、)%INCOME FROM CONTINUING OPERATIONS21,5911,14720,4441,782.4%Income from discontinued operations48,41048,410%NET INCOME70,00149,55720,44441.3%Income from consolidated joint venture attributable to non-controlling interest(4,013)(1,761)(2,252)(127.9)%Distributions to non-controlling interest(32)(31)(1
157、)(3.2)%Preferred stock dividends and redemption charges(19,013)(29,748)10,73536.1%INCOME AVAILABLE TO COMMON STOCKHOLDERS$46,943$18,017$28,926160.5%Operating Statistics.The following tables include comparisons of the key operating metrics for our Comparable Portfolio,including prior ownership result
158、s as applicable for the Hyatt Chicago Magnificent Mile,the Hilton Garden Inn Chicago Downtown/Magnificent Mile,the Hilton New Orleans St.Charles,the Boston Park Plaza,the Hyatt Regency San Francisco and the Marriott Wailea.20142013ChangeOcc%ADRRevPAROcc%ADRRevPAROcc%ADRRevPARComparable Portfolio82.4
159、%$194.31$160.1180.5%$186.11$149.82190 bps4.4%6.9%Marriott Adjusted Comparable Portfolio(1)82.4%$194.31$160.1180.5%$186.24$149.92190 bps4.3%6.8%20132012ChangeOcc%ADRRevPAROcc%ADRRevPAROcc%ADRRevPARComparable Portfolio80.5%$186.11$149.8280.1%$181.12$145.0840 bps2.8%3.3%Marriott Adjusted Comparable Por
160、tfolio(1)80.5%$186.24$149.9280.1%$181.02$145.0040 bps2.9%3.4%Marriott Adjusted Comparable Portfolio excluding Boston Park Plaza(2)80.2%$188.03$150.8079.8%$181.93$145.1840 bps3.4%3.9%(1)Includes the Comparable Portfolio adjusted for the effects of converting the operating statistics for ten of our Ma
161、rriott-managed hotels from a 13-period basis as reported in 2012 to a standard 12-month calendar basis.(2)Includes the Comparable Portfolio adjusted for the change in Marriotts calendar as noted in the above footnote,and adjusted to exclude the Boston Park Plaza due to the hotel adding 12 rooms in S
162、eptember 2012,and an additional 100 rooms in January 2013.4 0Non-GAAP Financial Measures.We use the following“non-GAAP financial measures”that we believe are useful to investors as key supplemental measures of our operating performance:EBITDA,Adjusted EBITDA,FFO and Adjusted FFO available to common
163、stockholders.These measures should not be considered in isolation or as a substitute for measures of performance in accordance with GAAP.EBITDA,Adjusted EBITDA,FFO and Adjusted FFO available to common stockholders,as calculated by us,may not be comparable to other companies that do not define such t
164、erms exactly as the Company.These non-GAAP measures are used in addition to and in conjunction with results presented in accordance with GAAP.They should not be considered as alternatives to operating profit,cash flow from operations,or any other operating performance measure prescribed by GAAP.Thes
165、e non-GAAP financial measures reflect additional ways of viewing our operations that we believe,when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures,provide a more complete understanding of factors and trends affecting our business than could be obta
166、ined absent this disclosure.We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure.EBITDA is a commonly used measure of performance in many industries.We believe EBITDA is useful to investors in evaluating our operating perfo
167、rmance because this measure helps investors evaluate and compare the results of our operations from period to period by removing the impact of our capital structure(primarily interest expense)and our asset base(primarily depreciation and amortization)from our operating results.We also believe the us
168、e of EBITDA facilitates comparisons between us and other lodging REITs,hotel owners who are not REITs and other capital-intensive companies.In addition,certain covenants included in our indebtedness use EBITDA as a measure of financial compliance.We also use EBITDA as a measure in determining the va
169、lue of hotel acquisitions and dispositions.Historically,we have adjusted EBITDA when evaluating our performance because we believe that the exclusion of certain additional items described below provides useful information to investors regarding our operating performance and that the presentation of
170、Adjusted EBITDA,when combined with the primary GAAP presentation of net income,is beneficial to an investors complete understanding of our operating performance.We adjust EBITDA for the following items,which may occur in any period,and refer to this measure as Adjusted EBITDA:Amortization of deferre
171、d stock compensation:we exclude the non-cash expense incurred with the amortization of deferred stock compensation as this expense does not reflect the underlying performance of our hotels.Amortization of favorable and unfavorable contracts:we exclude the non-cash amortization of the favorable manag
172、ement contract asset recorded in conjunction with our acquisition of the Hilton Garden Inn Chicago Downtown/Magnificent Mile,along with the favorable and unfavorable tenant lease contracts,as applicable,recorded in conjunction with our acquisitions of the Boston Park Plaza,the Hilton Garden Inn Chic
173、ago Downtown/Magnificent Mile,the Hilton New Orleans St.Charles,the Hyatt Regency San Francisco and the Marriott Wailea.The amortization of favorable and unfavorable contracts does not reflect the underlying performance of our hotels.Ground rent adjustments:we exclude the non-cash expense incurred f
174、rom straightlining our ground lease obligations as this expense does not reflect the underlying performance of our hotels.We do however,include an adjustment for the cash ground lease expense recorded on the Hyatt Chicago Magnificent Miles building lease.Upon acquisition of this hotel,we determined
175、that the building lease was a capital lease,and,therefore,we include a portion of the capital lease payment each month in interest expense.We include an adjustment for ground lease expense on capital leases in order to more accurately reflect the operating performance of the Hyatt Chicago Magnificen
176、t Mile.Real estate transactions:we exclude the effect of gains and losses on the disposition of depreciable assets because we believe that including them in Adjusted EBITDA is not consistent with reflecting the ongoing performance of our assets.In addition,material gains or losses from the depreciat
177、ed value of the disposed assets could be less important to investors given that the depreciated asset value often does not reflect its market value.Gains or losses from debt transactions:we exclude the effect of finance charges and premiums associated with the extinguishment of debt,including the ac
178、celeration of deferred financing costs from the original issuance of the debt being redeemed or retired because,like interest expense,their removal helps investors evaluate and compare the results of our operations from period to period by removing the impact of our capital structure.Acquisition cos
179、ts:under GAAP,costs associated with completed acquisitions are expensed in the year incurred.We exclude the effect of these costs because we believe they are not reflective of the ongoing performance of the Company.Consolidated partnership adjustments:we deduct the non-controlling partners pro rata
180、share of any EBITDA adjustments related to our consolidated Hilton San Diego Bayfront partnership.Cumulative effect of a change in accounting principle:from time to time,the FASB promulgates new accounting standards that require the consolidated statement of operations to reflect the cumulative effe
181、ct of a change in accounting principle.We exclude these one-time adjustments because they do not reflect our actual performance for that period.4 1 Impairment losses:we exclude the effect of impairment losses because we believe that including them in Adjusted EBITDA is not consistent with reflecting
182、 the ongoing performance of our remaining assets.In addition,we believe that impairment charges,which are based off of historical cost account values,are similar to gains(losses)on dispositions and depreciation expense,both of which are also excluded from Adjusted EBITDA.Other adjustments:we exclude
183、 other adjustments such as lawsuit settlement costs,prior year property tax assessments and/or credits,management company transition costs,and departmental closing costs,including severance,because we do not believe these costs reflect our actual performance for that period and/or the ongoing operat
184、ions of our hotels.The following table reconciles our net income to EBITDA and Adjusted EBITDA for our hotel portfolio for the years ended December 31,2014,2013 and 2012(in thousands):201420132012Net income$87,939$70,001$49,557Operations held for investment:Depreciation and amortization155,845137,47
185、6130,907 Amortization of lease intangibles4,1134,1124,113 Interest expense72,31572,23976,821 Income tax provision1798,1451,148Non-controlling interests:Income from consolidated joint venture attributable to non-controlling interest(6,676)(4,013)(1,761)Depreciation and amortization(3,335)(3,956)(5,68
186、5)Interest expense(2,020)(2,341)(2,477)Discontinued operations:Depreciation and amortization13,164 Amortization of lease intangibles14 Interest expense996,490EBITDA308,360281,762272,291Operations held for investment:Amortization of deferred stock compensation6,2214,8583,466 Amortization of favorable
187、 and unfavorable contracts,net166320206 Non-cash straightline lease expense2,0212,0552,777 Capital lease obligation interestcash ground rent(1,404)(1,404)(819)(Gain)loss on sale of assets,net(93)(12)18 Loss on extinguishment of debt4,63844191 Closing costscompleted acquisitions5411,6781,965 Lawsuit
188、settlement costs,net358158 Prior year property tax and CAM adjustments,net(3,305)106621 Property-level restructuring costs675623Non-controlling interests:Non-cash straightline lease expense(450)(450)(450)Prior year property tax adjustments,net696(202)Loss on extinguishment of debt(133)Discontinued o
189、perations:Gain on sale of assets,net(5,199)(51,620)(38,292)Loss on extinguishment of debt3,115 Lawsuit reversal costs(48)4,374(40,952)(29,786)Adjusted EBITDA$312,734$240,810$242,5054 2Adjusted EBITDA was$312.7 million in 2014 as compared to$240.8 million in 2013 and$242.5 million in 2012.Adjusted EB
190、ITDA increased$71.9 million in 2014 as compared to 2013 in part due to additional earnings generated by the three hotels we acquired in 2013 and the one hotel we acquired in 2014(the Hilton New Orleans St.Charles in May 2013,the Boston Park Plaza in July 2013,the Hyatt Regency San Francisco in Decem
191、ber 2013 and the Marriott Wailea in July 2014,together the“four 20132014 acquired hotels”),combined with an increase in earnings at four of our hotels which were undergoing major renovations during the first half of 2013(the Hilton Times Square,the Hyatt Chicago Magnificent Mile,the Hyatt Regency Ne
192、wport Beach and the Renaissance Westchester,together the“four 2013 renovation hotels”).These increases were partially offset by a decrease in earnings at two of our hotels which were undergoing major renovations during the first quarter of 2014(the Hilton Garden Inn Chicago Downtown/Magnificent Mile
193、 and the Renaissance Long Beach,together the“two 2014 renovation hotels”),combined with decreases in earnings at the Hyatt Regency San Francisco and the Boston Park Plaza,which were undergoing major renovations during the first half and fourth quarter of 2014,respectively.Adjusted EBITDA decreased$1
194、.7 million in 2013 as compared to 2012 as additional earnings generated by the two hotels we acquired in 2012 and the three hotels we acquired in 2013(the Hyatt Chicago Magnificent Mile in June 2012,the Hilton Garden Inn Chicago Downtown/Magnificent Mile in July 2012,the Hilton New Orleans St.Charle
195、s in May 2013,the Boston Park Plaza in July 2013 and the Hyatt Regency San Francisco in December 2013,together the“five 20122013 acquired hotels”)were mostly offset by a decrease in earnings caused by major renovations at the four 2013 renovation hotels.These renovations were substantially completed
196、 by June 30,2013.We believe that the presentation of FFO provides useful information to investors regarding our operating performance because it is a measure of our operations without regard to specified non-cash items such as real estate depreciation and amortization,amortization of lease intangibl
197、es,any real estate impairment loss and any gain or loss on sale of real estate assets,all of which are based on historical cost accounting and may be of lesser significance in evaluating our current performance.Our presentation of FFO conforms to the National Association of Real Estate Investment Tr
198、usts(“NAREIT”)definition of FFO.This may not be comparable to FFO reported by other REITs that do not define the terms in accordance with the current NAREIT definition,or that interpret the current NAREIT definition differently than we do.We also present Adjusted FFO available to common stockholders
199、 when evaluating our operating performance because we believe that the exclusion of certain additional items described below provides useful supplemental information to investors regarding our ongoing operating performance,and may facilitate comparisons of operating performance between periods and o
200、ur peer companies.We adjust FFO for the following items,which may occur in any period,and refer to this measure as Adjusted FFO available to common stockholders:Preferred stock dividends and redemption charges:we deduct preferred stock dividends and exclude redemption charges in order to facilitate
201、comparisons between us and the majority of other lodging REITs who either have no preferred stock dividends or who also present Adjusted FFO available to common stockholders.Amortization of favorable and unfavorable contracts:we exclude the non-cash amortization of the favorable management contract
202、asset recorded in conjunction with our acquisition of the Hilton Garden Inn Chicago Downtown/Magnificent Mile,along with the favorable and unfavorable tenant lease contracts,as applicable,recorded in conjunction with our acquisitions of the Boston Park Plaza,the Hilton Garden Inn Chicago Downtown/Ma
203、gnificent Mile,the Hilton New Orleans St.Charles,the Hyatt Regency San Francisco and the Marriott Wailea.The amortization of favorable and unfavorable contracts does not reflect the underlying performance of our hotels.Non-cash ground rent adjustments:we exclude the non-cash expense incurred from st
204、raightlining our ground lease obligations as this expense does not reflect the underlying performance of our hotels.Gains or losses from debt transactions:we exclude the effect of finance charges and premiums associated with the extinguishment of debt,including the acceleration of deferred financing
205、 costs from the original issuance of the debt being redeemed or retired,as well as the non-cash gains or losses on our derivatives.We believe that these items are not reflective of our ongoing finance costs.Acquisition costs:under GAAP,costs associated with completed acquisitions are expensed in the
206、 year incurred.We exclude the effect of these costs because we believe they are not reflective of the ongoing performance of the Company.Impairment losses:we exclude the effect of non-real estate impairment losses because we believe that including them in Adjusted FFO available to common stockholder
207、s is not consistent with reflecting the ongoing performance of our remaining assets.Consolidated partnership adjustments:we deduct the non-controlling partners pro rata share of any FFO adjustments related to our consol-idated Hilton San Diego Bayfront partnership.Other adjustments:we exclude other
208、adjustments such as lawsuit settlement costs,prior year property tax assessments and/or credits,management company transition costs,departmental closing costs,including severance,and income tax benefits or provisions associated with the application of net operating loss carryforwards because we do n
209、ot believe these costs reflect our actual performance for that period and/or the ongoing operations of our hotels.4 3The following table reconciles our net income to FFO and Adjusted FFO available to common stockholders for our hotel portfolio for the years ended December 31,2014,2013 and 2012(in th
210、ousands):201420132012Net income$87,939$70,001$49,557Operations held for investment:Real estate depreciation and amortization154,253136,047129,668 Amortization of lease intangibles4,1134,1124,113(Gain)loss on sale of assets,net(93)(12)18Non-controlling interests:Income from consolidated joint venture
211、 attributable to non-controlling interest(6,676)(4,013)(1,761)Real estate depreciation and amortization(3,335)(3,956)(5,685)Discontinued operations:Real estate depreciation and amortization13,164 Amortization of lease intangibles14 Gain on sale of assets,net(5,199)(51,620)(38,292)FFO231,002150,55915
212、0,796Operations held for investment:Preferred stock dividends and redemption charges(9,200)(19,013)(29,748)Amortization of favorable and unfavorable contracts,net166320206 Non-cash straightline lease expense2,0212,0552,777 Write-off of deferred financing fees3 Non-cash interest related to(gain)loss
213、on derivatives,net(529)(525)406 Loss on extinguishment of debt4,63844191 Closing costscompleted acquisitions5411,6781,965 Lawsuit settlement costs,net358158 Prior year property tax and CAM adjustments,net(3,305)106621 Property-level restructuring costs675623 Income tax(benefit)provision related to p
214、rior years(762)8,1451,148 Preferred stock redemption charges4,770Non-controlling interests:Non-cash straightline lease expense(450)(450)(450)Non-cash interest related to loss on derivative(3)(1)Prior year property tax adjustments,net696(202)Loss on extinguishment of debt(133)Discontinued operations:
215、Loss on extinguishment of debt3,115 Write-off of deferred financing fees185 Lawsuit reversal costs(48)(5,642)600(22,166)Adjusted FFO available to common stockholders$225,360$151,159$128,630Adjusted FFO available to common stockholders was$225.4 million in 2014 as compared to$151.2 million in 2013 an
216、d$128.6 million in 2012.Adjusted FFO available to common stockholders increased$74.2 million in 2014 as compared to 2013 in part due to additional earnings generated by the four 20132014 acquired hotels,combined with an increase in earnings at the four 2013 renovation hotels.In addition,Adjusted FFO
217、 available to common stockholders increased during 2014 as compared to 2013 due to a decrease in preferred stock dividends and redemption charges.These increases were partially offset by a decrease in earnings at the two 2014 renovation hotels,combined with decreases in earnings at the Hyatt Regency
218、 San Francisco and the Boston Park Plaza,which were undergoing major renovations during the first half and fourth quarter of 2014,respectively.Adjusted FFO available to common stockholders increased$22.5 million in 2013 as compared to 2012 due to additional earnings generated by the five 20122013 ac
219、quired hotels,combined with a decrease in preferred stock dividends and interest expense.These increases to Adjusted FFO available to common stockholders were partially offset by a decrease in earnings caused by major renovations at the four 2013 renovation hotels.These renovations were substantiall
220、y completed by June 30,2013.4 4Room revenue.Room revenue increased$157.8 million,or 24.1%,in 2014 as compared to 2013.The four 20132014 acquired hotels contributed additional room revenue of$113.8 million during 2014.Room revenues at both the Boston Park Plaza and the Hyatt Regency San Francisco wer
221、e negatively impacted during 2014 by major renovations,which caused 9,080 room nights to be out of service,displacing approximately$2.6 million in room revenue based on the hotels achieving a combined potential 80.8%occupancy rate and RevPAR of$187.97 without the renovations.Room revenue generated b
222、y the 26 hotels we owned prior to January 1,2013(our“existing portfolio”)increased$45.5 million during 2014 as compared to 2013 due to increases in both occupancy($19.2 million)and ADR($26.3 million).The increases in occupancy and ADR were driven by an additional 68,236 group room nights,combined wi
223、th an additional 39,230 transient room nights.Room revenue in our existing portfolio was negatively impacted during 2014 by major renovations at the two 2014 renovation hotels.These major renovations caused a total of 5,141 room nights to be out of service during the first quarter of 2014,displacing
224、 approximately$0.5 million in room revenue based on the hotels achieving a combined potential 69.5%occupancy rate and RevPAR of$90.00 without the renovations.In comparison,the 2013 displacement experienced by the four 2013 renovation hotels caused a total of 40,287 room nights to be out of service d
225、uring 2013,displacing approximately$7.7 million in room revenue based on the hotels achieving a combined potential 79.9%occupancy rate and RevPAR of$159.02 without the renovations.Partially offsetting the increase in our existing portfolios room revenue during 2014 as compared to 2013,room revenue d
226、ecreased as a result of a change in the financial reporting calendar used by Marriott,one of our third-party managers.Beginning in 2013,Marriott switched from using a 13-fiscal period accounting calendar to a standard 12-month calendar.However,due to the timing of Marriotts fiscal 2012 year-end of D
227、ecember 28,2012,Marriotts fiscal 2013 includes three additional days,December 29,2012 through December 31,2012.These three additional days in fiscal 2013 generated approximately$1.6 million more in room revenue for ten of our Marriott-managed hotels during 2013 as compared to 2014.Room revenue incre
228、ased$77.8 million,or 13.5%,in 2013 as compared to 2012.The five 20122013 acquired hotels contributed additional room revenue of$54.3 million during 2013.Room revenue at the Hyatt Chicago Magnificent Mile was negatively impacted during 2013 by a major renovation,which caused 13,601 room nights to be
229、out of service,displacing approximately$2.4 million in room revenue based on the hotel achieving a potential 74.9%occupancy rate and RevPAR of$127.70 without the renovation.In addition,room revenue increased during 2013 as compared to the same period in 2012 due to a change in the financial reportin
230、g calendar used by Marriott.Beginning in 2013,Marriott switched from using a 13-fiscal period accounting calendar to a standard 12-month calendar,which caused there to be an additional three days and approximately$1.6 million more in room revenue for ten of our Marriott-managed hotels during 2013 as
231、 compared to 2012.Room revenue generated by the 24 hotels we owned prior to January 1,2012(our“prior year existing portfolio”)increased$21.9 million during 2013 as compared to 2012 due to increases in both occupancy($7.7 million)and ADR($14.2 million).The increases in occupancy and ADR were driven b
232、y an additional 58,248 transient room nights,partially offset by 14,435 fewer group room nights.Room revenue in our prior year existing portfolio was negatively impacted during 2013 by major renovations at three hotels in our prior year existing portfolio:the Hilton Times Square;the Hyatt Regency Ne
233、wport Beach;and the Renaissance Westchester.These major renovations caused a total of 26,686 room nights to be out of service during 2013,displacing approximately$5.2 million in room revenue based on these three hotels achieving a combined potential 81.6%occupancy rate and RevPAR of$169.76 without t
234、he renovations.This 2013 displacement compares to our 2012 displacement caused by major renovations at the Renaissance Washington DC and the Hyatt Regency Newport Beach.The major renovation at the Renaissance Washington DC caused 13,656 room nights to be out of service during the last six months of
235、2012,displacing approximately$2.9 million in room revenue based on the hotel achieving a potential 72.7%occupancy rate and RevPAR of$148.24 without the renovation.The major renovation at the Hyatt Regency Newport Beach caused 4,333 room nights to be out of service during the last two months of 2012,
236、displacing approximately$0.5 million in room revenue based on the hotel achieving a potential 85.0%occupancy rate and RevPAR of$110.96 without the renovation.Food and beverage revenue.Food and beverage revenue increased$46.0 million,or 21.6%,in 2014 as compared to 2013.Our four 20132014 acquired hot
237、els contributed an additional$29.0 million to food and beverage revenue during 2014.Food and beverage revenue in our existing portfolio increased$17.6 million in 2014 as compared to 2013,primarily due to increased banquet and outlet revenue at the majority of our hotels due to the increases in occup
238、ancy and group room nights.In addition,food and beverage revenue increased in our existing portfolio during 2014 as the negative impact from the two 2014 renovation hotels during 2014 was much less than the negative impact from the four 2013 renovation hotels during 2013.These increases in food and
239、beverage revenue during 2014 as compared to 2013 were partially offset by Marriotts additional three days in the first quarter 2013,which generated approximately$0.6 million in food and beverage revenue for ten of our Marriott-managed hotels during 2013 as compared to 2014.Food and beverage revenue
240、increased$12.5 million,or 6.2%,in 2013 as compared to 2012.The five 20122013 acquired hotels contributed an additional$11.3 million to food and beverage revenue during 2013,though food and beverage revenue generated by the Hyatt Chicago Magnificent Mile was negatively affected by the hotels major re
241、novation.Marriotts additional three days in 2013 generated approximately$0.6 million in food and beverage revenue for ten of our Marriott-managed hotels during 2013 as compared to 2012.Food and beverage revenue in our prior year existing portfolio increased$0.6 million during 2013 as compared to 201
242、2,due to increased outlet and room service revenue caused by the increase in occupancy,partially offset by decreased banquet revenue at several of our hotels caused by 14,435 4 5fewer group room nights,as well as the negative impact of the renovations at the Hilton Times Square,the Hyatt Regency New
243、port Beach and the Renaissance Westchester.The decrease in group room nights during 2013 as compared to 2012 was further exaggerated by the fact that the type of group shifted from corporate and citywide business with a higher number of banquet functions during the first few months of 2012 to associ
244、ations with fewer banquet functions during the first few months of 2013.The decrease in food and beverage revenue in our existing portfolio was partially offset by increased revenue generated during 2013 by the Renaissance Washington DC,which was under a major renovation during 2012,causing revenue
245、to decrease in outlets,banquets and room service during 2012.Other operating revenue.Other operating revenue increased$14.4 million,or 25.5%,in 2014 as compared to 2013.Our four 20132014 acquired hotels contributed an additional$9.3 million to other operating revenue during 2014.In addition,BuyEffic
246、ients revenue increased$0.4 million during 2014 as compared to 2013 due to increased transaction fees.Other operating revenue in our existing portfolio increased$4.7 million in 2014 as compared to 2013,primarily due to our resort fee charges beginning in 2014 at two of our existing hotels,which gene
247、rated$2.5 million during 2014.In addition,other operating revenue grew in our existing portfolio as increased parking,spa and third-party lease revenue was only partially offset by decreased telephone/internet revenue,cancellation and attrition revenue.Other operating revenue increased$4.4 million,o
248、r 8.4%,in 2013 as compared to 2012.Our five 20122013 acquired hotels contributed an additional$3.5 million to other operating revenue during 2013.In addition,BuyEfficients revenue increased$0.5 million during 2013 as compared to 2012 due to increased transaction and development fees.Other operating
249、revenue in our prior year existing portfolio increased$0.4 million during 2013 as compared to 2012,due to Marriotts three additional days during 2013,combined with increased parking and spa revenue.These increases were partially offset by decreased telephone/internet revenue,cancellation,attrition,a
250、nd third-party lease revenue.Hotel operating expenses.Hotel operating expenses increased$116.9 million,or 21.0%,in 2014 as compared to 2013.The four 20132014 acquired hotels contributed an additional$96.7 million to hotel operating expenses during 2014.Hotel operating expenses in our existing portfo
251、lio increased$20.2 million during 2014 as compared to 2013,primarily due to the corresponding increases in room,food and beverage and parking revenue.In addition,hotel operating expenses in our existing portfolio increased in 2014 as compared to 2013 due to the following increased expenses:franchise
252、 costs due to the increase in revenues;advertising and promotion and repairs and maintenance due to increased payroll and related expenses;utility expense due to increased rates at several of our hotels,combined with increased usage due to the extremely cold winter in the Midwest and East;and ground
253、 lease expense due to higher percentage rent at several of our hotels caused by the increase in revenue.The increases in our existing portfolios hotel operating expenses during 2014 as compared to 2013 were slightly offset by lower property taxes,which decreased due to appeal refunds received at sev
254、eral of our hotels,as well as by the inclusion of three additional days of expense for ten of the Marriott-managed hotels during 2013 as compared to 2014.Hotel operating expenses increased$56.8 million,or 11.4%,in 2013 as compared to 2012.The five 20122013 acquired hotels contributed$46.3 million to
255、 hotel operating expenses during 2013.Hotel operating expenses in our prior year existing portfolio increased$10.5 million during 2013 as compared to 2012,primarily related to the corresponding increase in room revenue,combined with the Marriott-managed hotels three additional days in 2013 as compar
256、ed to 2012.In addition,hotel operating expenses in our prior year existing portfolio increased during 2013 as compared to 2012 due to increases in property taxes,property and liability insurance premiums and ground lease expense.Property general and administrative expense.Property general and admini
257、strative expense increased$23.3 million,or 22.5%in 2014 as compared to 2013.The four 20132014 acquired hotels contributed an additional$16.2 million to property general and administrative expense during 2014.Property general and administrative expense in our existing portfolio increased$7.1 million
258、during 2014 as compared to 2013,primarily due to increased management fees,credit and collection expenses,payroll and related expenses,contract and professional fees,and licenses and permits expenses due to the increase in revenue,partially offset by decreased security and sales tax audit expenses.I
259、n addition,property general and administrative expenses in our existing portfolio decreased during 2014 as compared to 2013 due to the Marriott-managed hotels three additional days in 2013 as compared to 2014.Property general and administrative expense increased$8.8 million,or 9.3%,in 2013 as compar
260、ed to 2012.The five 20122013 acquired hotels contributed$7.6 million to property general and administrative expense during 2013.In addition,BuyEfficient contributed an additional$0.2 million in property general and administrative expense during 2013 as compared to 2012 due to increases in payroll an
261、d related expenses,including deferred stock compensation expense.Property general and administrative expense in our prior year existing portfolio increased$1.0 million during 2013 as compared to 2012,primarily due to the Marriott-managed hotels three additional days in 2013 as compared to 2012,combi
262、ned with increased management fees,and credit and collection expenses due to the increase in revenue.Property general and administrative expenses also increased due to higher costs related to licenses and permits,and security expenses,partially offset by decreased payroll and related costs,contract
263、and professional fees,employee relations,recruitment,training,sales tax audit fees,operating supplies and travel.4 6Corporate overhead expense.Corporate overhead expense increased$2.1 million,or 7.8%,in 2014 as compared to 2013,primarily due to increased payroll and related expenses($1.8 million),de
264、ferred stock compensation expense($1.5 million),and legal,employee relations and donations expenses($0.4 million),partially offset by decreased due diligence expense($1.1 million),entity-level state franchise and minimum taxes($0.3 million)and contract and professional fees($0.2 million).Due diligen
265、ce expense decreased during 2014 versus 2013 as we recognized$0.6 million of due diligence costs related to our completed acquisitions and an additional$0.1 million related to in-process or abandoned projects during 2014,whereas during 2013 we recognized$1.7 million of due diligence costs related to
266、 our completed acquisitions,and an additional$0.1 million related to in-process or abandoned projects.Corporate overhead expense increased$2.4 million,or 9.7%,in 2013 as compared to 2012,primarily due to the following increases:payroll and related expenses($1.0 million);deferred stock compensation($
267、1.3 million);contract and professional fees($0.6 million);and legal,conferences,travel and entity-level state franchise and minimum taxes($0.7 million).These increases were partially offset by a$1.1 million decrease in acquisition and due diligence costs and a$0.1 million decrease in donations.Durin
268、g 2013,we incurred acquisition and due diligence costs of$1.7 million related to our completed acquisitions,and an additional$0.1 million related to in-process or abandoned projects.During 2012,we incurred acquisition and due diligence costs of$2.0 million related to our completed acquisitions,and a
269、n additional$0.9 million related to in-process or abandoned projects.Depreciation and amortization expense.Depreciation and amortization increased$18.4 million,or 13.4%,in 2014 as compared to 2013.The four 20132014 acquired hotels contributed an additional$21.7 million to depreciation and amortizati
270、on during 2014.Depreciation and amortization expense in our existing portfolio decreased$3.3 million during 2014 as compared to 2013 primarily due to advanced bookings recorded in conjunction with our purchases of the JW Marriott New Orleans,the Hilton San Diego Bayfront and the Hilton Garden Inn Ch
271、icago Downtown/Magnificent Mile that were fully amortized as of February 2013,April 2013 and December 2013,respectively.In addition the furniture,fixtures and equipment(“FF&E”)at some of our hotels was fully depreciated as of the end of 2013.These decreases in expense were partially offset by additi
272、onal depreciation recognized on hotel renovations and purchases of FF&E for our existing portfolio.Depreciation and amortization increased$6.6 million,or 5.0%,in 2013 as compared to 2012.The five 20122013 acquired hotels contrib-uted$11.3 million to depreciation and amortization during 2013.Deprecia
273、tion and amortization expense in our prior year existing portfo-lio decreased$4.7 million during 2013 as compared to 2012 primarily due to advanced bookings recorded in conjunction with our purchases of the JW Marriott New Orleans and the Hilton San Diego Bayfront that were fully amortized as of Feb
274、ruary 2013 and April 2013,respectively.This decrease in amortization was partially offset by additional depreciation recognized on hotel renovations and purchases of FF&E for our prior year existing portfolio.Interest and other income.Interest and other income totaled$3.5 million in 2014,$2.8 millio
275、n in 2013,and$0.3 million in 2012.In 2014,we recognized$2.8 million in interest income on the Preferred Equity Investment,$0.4 million in energy rebates due to energy efficient renovations at our hotels,and$0.3 million in other interest and miscellaneous income.In 2013,we recognized$2.8 million in i
276、nterest income,including$2.6 million on the Preferred Equity Investment.In 2012,we recognized$0.2 million in interest income,and$0.1 million in other miscellaneous income.Interest expense.Interest expense is as follows(in thousands):Year EndedYear EndedYear EndedDecember 31,December 31,December 31,2
277、01420132012Interest expense on debt and capital lease obligations$70,067$69,806$71,664(Gain)loss on derivatives,net(529)(525)406Accretion of Senior Notes31,058Amortization of deferred financing fees2,7772,9553,690Write-off of deferred financing fees3$72,315$72,239$76,8214 7Interest expense increased
278、$0.1 million,or 0.1%,in 2014 as compared to 2013.The increase in interest expense in 2014 as compared to 2013 is due to an increase in expense on our debt and capital lease obligations($0.3 million)primarily offset by a decrease in amortization of deferred financing fees($0.2 million).Interest expen
279、se on our debt and capital lease obligations increased as a result of our assumption of a$119.2 million loan in conjunction with our purchase of the Boston Park Plaza in July 2013.The increase in interest expense on our debt and capital lease obligations during 2014 as compared to 2013 due to the Bo
280、ston Park Plaza loan was partially offset by decreased interest on our other debt obligations due to lower balances as a result of scheduled amortization,as well as to decreased variable interest rates on our non-recourse loans secured by the Doubletree Guest Suites Times Square and the Hilton San D
281、iego Bayfront.The variable interest rate on our Hilton San Diego Bayfront mortgage was impacted during 2014 by our completion of an amendment to such mortgage in August 2014,which reduced the loans interest rate from three-month LIBOR plus 325 basis points to one-month LIBOR plus 225 basis points.In
282、 addition,our amortization of deferred financing fees decreased during 2014 as compared to 2013 due to our amendment of the Hilton San Diego Bayfront loan.Interest expense decreased$4.6 million,or 6.0%,in 2013 as compared to 2012.The decrease in interest expense in 2013 as compared to 2012 is compri
283、sed of the following:a decrease in expense on our debt and capital lease obligations($1.9 million);a decrease in expense related to our derivatives($0.9 million);a decrease in accretion of Senior Notes($1.1 million);and a decrease in amortization of deferred financing fees($0.7 million).Interest exp
284、ense on our debt and capital lease obligations decreased$1.9 million during 2013 as compared to 2012 due to reduced loan balances related to scheduled amortization,a repayment of debt in April 2012 and a repurchase of debt in January 2013.In April 2012,we repaid a$32.2 million loan secured by the Re
285、naissance Long Beach,and in January 2013,we repurchased$58.0 million of our Senior Notes.These decreases in our debt obligations and related decreases in interest expense were partially offset by an increase in capital lease obligations and related interest expense due to our acquisition of the Hyat
286、t Chicago Magnificent Mile in June 2012,which included the assumption of a building lease that we determined should be accounted for as a capital lease.Interest expense on our debt and capital lease obligations also increased during 2013 as compared to 2012 due to our assumption of a$119.2 million l
287、oan in conjunction with our purchase of the Boston Park Plaza in July 2013.Interest expense related to our derivatives decreased$0.9 million during 2013 as compared to 2012 due to our recording a net gain on our interest rate cap and swap agreements in 2013 as compared to a loss during 2012.Interest
288、 expense related to the accretion of our Senior Notes decreased$1.1 million during 2013 as compared to 2012 due to the fact that the Senior Notes were fully accreted to their face value as of the first put date in January 2013.Interest expense related to amortization of deferred financing fees decre
289、ased$0.7 million during 2013 as compared to 2012 due to the repayment of the loan secured by the Renaissance Long Beach in April 2012,combined with the fact that the deferred financing fees related to the Senior Notes were fully amortized as of the first put date in January 2013,partially offset by
290、an increase in deferred financing fees incurred to amend our line of credit in September 2012 and to assume the Boston Park Plaza debt.Our weighted average interest rate per annum on debt included in our continuing operations,including our variable-rate debt obligations,was approximately 4.5%at Dece
291、mber 31,2014,and 4.9%at both December 31,2013 and 2012.At December 31,2014,2013 and 2012,approximately 71.6%,70.7%and 69.6%,respectively,of the outstanding notes payable included in our continuing operations had fixed interest rates.Loss on extinguishment of debt.Loss on extinguishment of debt total
292、ed$4.6 million in 2014,$44,000 in 2013 and$0.2 million in 2012.In conjunction with our financing transactions regarding the debt secured by the Hilton San Diego Bayfront,the JW Marriott New Orleans and the Embassy Suites La Jolla during 2014,we expensed the unamortized balances of the lenders deferr
293、ed financing fees in accordance with the Debt Topic of the FASB ASC,resulting in losses on the extinguishment of these debts totaling$0.6 million.In addition,we paid a premium of$4.0 million to extinguish the debt secured by the Embassy Suites La Jolla,which is also included in loss on extinguishmen
294、t of debt.During 2013,we recognized a loss of$44,000 due to the repurchase and redemption of the remaining$58.0 million aggregate principal amount of the Senior Notes.During 2012,we recognized a loss of$0.2 million due to the repurchase and cancellation of$4.5 million in aggregate principal amount o
295、f the Senior Notes.4 8Income tax provision.Income tax provision totaled$0.2 million in 2014,$8.1 million in 2013 and$1.1 million in 2012.We lease our hotels to the TRS Lessee and its subsidiaries,which are subject to federal and state income taxes.In addition,the REIT and Operating Partnership may a
296、lso be subject to various state and local income taxes.During 2014,we recognized a combined federal and state income tax provision of$0.2 million based on a 2013 actual tax benefit($0.6 million),partially offset by a 2014 projected tax provision net of operating loss carryforwards($0.8 million)for o
297、ur taxable entities.During 2013,we recognized income tax expense of$4.7 million as a result of Internal Revenue Service(“IRS”)audits of tax years 2008,2009 and 2010,including$0.6 million in accrued interest.We recorded additional income tax expense of$1.5 million during 2013 based on the ongoing eva
298、luations of our uncertain tax positions related to the year ended December 31,2012,and as a result of our recent resolution of outstanding issues with the IRS.During 2013,we recorded additional tax expense of$1.9 million related to estimated 2013 federal alternative minimum tax resulting from our us
299、e of net operating loss carryforwards,as well as state income tax where our use of net operating loss carryforwards was either limited or unavailable.During 2012,our federal alternative minimum tax resulting from our use of net operating loss carryforwards combined with our state income tax expense
300、where the use of net operating loss carryforwards was either limited or unavailable to total$1.1 million of income tax expense.Income from discontinued operations.As described under“Investing ActivitiesDispositions”and in accordance with the Property,Plant and Equipment Topic of the FASB ASC,income
301、from discontinued operations included the results of operations,along with any gains on extinguishment of debt,gains or losses on sales and impairments recognized for the following properties:Hotels and Other AssetsRoomsDisposition Date2014None2013Kahler Grand,Minnesota(1)660January 25,2013Kahler In
302、n&Suites,Minnesota271January 25,2013Marriott Rochester,Minnesota(1)202January 25,2013Residence Inn by Marriott Rochester,Minnesota89January 25,2013Textile Care Services Rochester,MinnesotaJanuary 25,20132012Marriott Del Mar,California284August 23,2012Doubletree Guest Suites Minneapolis,Minnesota229S
303、eptember 14,2012Hilton Del Mar,California257September 14,2012Marriott Troy,Michigan350September 14,2012Office building adjacent to the Marriott Troy,MichiganSeptember 14,2012Total rooms2,342(1)During 2012,the Company subtracted eight rooms from the Kahler Grand and one room from the Marriott Rochest
304、er,bringing the hotel room counts to 660 and 202,respectively.Income from discontinued operations for the years ended December 31,2014,2013 and 2012 is as follows(in thousands):Year EndedYear EndedYear EndedDecember 31,December 31,December 31,201420132012Operating revenues$3,690$100,861Operating exp
305、enses(350)(3,686)(71,089)Interest expense(99)(6,490)Depreciation and amortization expense(13,164)Loss on extinguishment of debt(3,115)Gain on sale of hotels and other assets,net5,19951,62038,292Income from discontinued operations$4,849$48,410$48,4104 9Income from discontinued operations for the year
306、 ended December 31,2014 includes two adjustments related to our 2013 sale of the Rochester Portfolio,as well as an adjustment related to six hotels sold during 2004 through 2013.The first Rochester Portfolio adjustment relates to our retention of a liability not to exceed$14.0 million related to the
307、 Rochester Portfolios pension plan,which could be triggered in certain circumstances,including termination of the pension plan.The recognition of the$14.0 million pension plan liability reduced the gain we recognized in 2013 on the sale of the Rochester Portfolio.In May 2014,we were released from$7.
308、0 million of our pension plan liability,causing us to recognize additional gain on the sale of the Rochester Portfolio of$7.0 million,which is included in discontinued operations for the year ended December 31,2014.The remaining$7.0 million gain will be recognized,if at all,when and to the extent we
309、 are released from any potential liability related to the Rochester Portfolios pension plan.The second Rochester Portfolio adjustment relates to potential future costs for certain capital expenditures at one of the hotels in the Rochester Portfolio.In accordance with the Contingencies Topic of the F
310、ASB ASC,which requires a liability be recorded based on our estimate of the probable cost of the resolution of a contingency,we accrued$0.3 million in 2013 when we sold the Rochester Portfolio related to these potential future costs.During 2014,we determined that our total costs for these capital ex
311、penditures may range from$2.0 million to$3.0 million.As such,we accrued an additional$1.8 million during 2014 in accordance with the Contingencies Topic of the FASB ASC,which is included in discontinued operations for the year ended December 31,2014.During 2014,we paid$1.3 million of the liability,b
312、ringing the accrued balance for this contingency to$0.8 million as of December 31,2014.Income from discontinued operations for the year ended December 31,2014 also includes additional expense of$0.4 million related to workers compensation claims which originated during our periods of ownership at si
313、x hotels.We sold these hotels during 2004,2005,2010 and 2013.Income from discontinued operations for the year ended December 31,2013 includes activity for the Rochester Portfolio sold in 2013.Income from discontinued operations for the year ended December 31,2012 includes activity for the Rochester
314、Portfolio sold in 2013,and the four hotels and one office building sold in 2012.Income from discontinued operations for 2012 also includes property tax refunds and reimbursements for certain transaction related invoices for the Royal Palm Miami Beach,which we sold in April 2011.Income from consolida
315、ted joint venture attributable to non-controlling interest.Income from consolidated joint venture attributable to non-controlling interest totaled$6.7 million in 2014,$4.0 million in 2013 and$1.8 million in 2012.Consistent with the Presentation Topic of the FASB ASC,our net income for the years ende
316、d December 31,2014,2013 and 2012 includes 100%of the net income generated during our ownership period by the entity that owns the Hilton San Diego Bayfront.The outside 25.0%interest in the entity that owns the Hilton San Diego Bayfront earned net income of$6.7 million,$4.0 million and$1.8 million fo
317、r the years ended December 31,2014,2013 and 2012,respectively.Distributions to non-controlling interest.Distributions to non-controlling interest totaled$32,000 in both 2014 and 2013,and$31,000 in 2012.We are the sole common stockholder of the captive REIT that owns the Doubletree Guest Suites Times
318、 Square.Preferred dividends earned by investors from the entity that owns the Doubletree Guest Suites Times Square,net of related administrative fees,totaled$32,000 for both 2014 and 2013,and$31,000 for 2012.Preferred stock dividends and redemption charges.Preferred stock dividends decreased$9.8 mil
319、lion,or 51.6%,during the year ended December 31,2014 as compared to the year ended December 31,2013.Pursuant to our strategy of gradually reducing our leverage,during 2013 we redeemed all 7,050,000 shares of our Series A preferred stock and all 4,102,564 shares of our Series C preferred stock in Mar
320、ch and May,respectively.As such,our total Series A and Series C preferred stock dividends decreased to zero in 2014 as compared to$5.1 million in 2013.In addition,preferred stock dividends and redemption charges decreased during 2014 as compared to 2013 due to our recognition of redemption charges i
321、n 2013 totaling$4.6 million and$0.1 million in conjunction with the redemptions of our Series A preferred stock and Series C preferred stock,respectively.These redemption charges related to the original issuance costs of these shares,which were previously included in additional paid in capital.Prefe
322、rred stock dividends decreased$10.7 million,or 36.1%,during the year ended December 31,2013 as compared to the year ended December 31,2012.Due to the redemptions of all of our Series A preferred stock in March 2013,and all of our Series C preferred stock in May 2013,our total Series A and Series C p
323、referred dividends decreased$15.5 million in 2013 as compared to 2012.This decrease in our Series A and Series C preferred stock dividends was partially offset by a$4.6 million redemption charge recognized on our Series A preferred stock and a$0.1 million redemption charge recognized on our Series C
324、 preferred stock related to the original issuance costs of these shares,which were previously included in additional paid in capital.5 0INVESTING ACTIVITIESAcquisitions.We believe we are in the middle phase of a potentially prolonged cyclical lodging industry recovery.Accordingly,we further believe
325、that hotels acquired over the next several quarters are likely to benefit from a multi-year recovery in hotel profitability,and may create long-term value in excess of our investment hurdles.During 2012,2013 and 2014,we made several hotel acquisitions as detailed below:HotelsRoomsAcquisition Date201
326、4:Marriott Wailea,Hawaii(1)544July 17,20142013:Hilton New Orleans St.Charles,Louisiana250May 1,2013Boston Park Plaza,Massachusetts(1)1,053July 2,2013Hyatt Regency San Francisco,California(1)802December 2,20132012:Hyatt Chicago Magnificent Mile,Illinois(1)417June 4,2012Hilton Garden Inn Chicago Downt
327、own/Magnificent Mile,Illinois357July 19,2012Total rooms3,423(1)Subsequent to these acquisitions,we temporarily removed three rooms from the Marriott Wailea,leaving 541 rooms available to sell.In addition,we added rooms as follows:one at the Boston Park Plaza,increasing the room count to 1,054;one at
328、 the Hyatt Regency San Francisco,increasing the room count to 803;and two at the Hyatt Chicago Magnificent Mile,increasing the room count to 419.The total cost for these six hotel acquisitions was approximately$1.1 billion,including shares of our common stock valued at$111.2 million for accounting p
329、urposes,or$314,000 per room.Each of these acquisitions is discussed below.In July 2014,we purchased the 544-room Marriott Wailea for a net purchase price of$325.6 million,which was comprised of$265.6 million in cash,including$4.4 million of proration credits and unrestricted and restricted cash rece
330、ived from the seller,and$60.0 million of our common stock issued directly to the seller.The acquisition was funded with proceeds received from our June 2014 common stock offering,and 4,034,970 shares of our common stock valued at$60.0 million($14.87 per share).Subsequent to our acquisition,three roo
331、ms were temporarily taken out of service,leaving 541 rooms available to sell.In May 2013,we purchased the 250-room Hilton New Orleans St.Charles for a net purchase price of$59.1 million,including$0.2 million of proration credits and unrestricted cash received from the seller.The acquisition was fund
332、ed with$53.2 million of proceeds generated by our January 2013 sale of the Rochester Portfolio,as well as with proceeds received from our February 2013 issuance of common stock.In July 2013,we purchased the 1,053-room Boston Park Plaza for a net purchase price of$248.0 million,including$2.0 million
333、of proration credits,unrestricted and restricted cash and other adjustments received from the seller.The acquisition was funded with$92.3 million of proceeds generated by our January 2013 sale of the Rochester Portfolio,the assumption of a$119.2 million non-recourse loan secured by the hotel,as well as with proceeds received from the Companys February 2013 issuance of common stock and with cash on
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