Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  ☒    NO  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YES  ☒    NO    ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as described in Rule 12b-2 of the Exchange Act).YES ☐    NO ☒

As of October 30, 2015 there were 4,937,050 shares of common stock, par value $.01 per share, outstanding.

 

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CONDOR HOSPITALITY TRUST, INC. AND SUBSIDIARIES

 

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

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General

 

Condor Hospitality Trust, Inc., formerly Supertel Hospitality, Inc., was incorporated in Virginia on August 23, 1994.  We reincorporated in Maryland on November 19, 2014. We are a self-administered real estate investment trust (REIT) for federal income tax purposes. References to “Company” “we”, “our”, and “us”, herein refer to Condor Hospitality Trust, Inc., including as the context requires, its direct and indirect subsidiaries.

 

The Company, through its wholly owned subsidiaries, Supertel Hospitality REIT Trust and E&P REIT Trust owns a controlling interest in Supertel Limited Partnership (“SLP”) and E&P Financing Limited Partnership (“E&P LP”). The Company owns 45 properties as follows:

 

The Company, through Supertel Hospitality REIT Trust, is the sole general partner in SLP and at September 30, 2015, owned approximately 93% of the partnership interests in SLP.  SLP is the general partner in SBILP.  At September 30, 2015,  SLP and the Company owned 99% and 1% interests in SBILP, respectively, and the Company owned 100% of Supertel Hospitality Management, Inc, SPPR Holdings, Inc. (SPPRHI), and SPPR-Dowell Holdings, Inc. (SDHI). SLP and SPPRHI owned 99% and 1% of SHLLC, respectively, SLP owned 100% of SSBLLC and SLP and SDHI owned 99% and 1% of SDLLC, respectively. 

 

As of September 30, 2015, the Company owned 45 limited service hotels,  42 of which are included in continuing operations.  All of the hotels are leased to our wholly owned taxable REIT subsidiary, TRS Leasing, Inc. (“TRS”), and its wholly owned subsidiaries (collectively “TRS Lessee”), and are managed by eligible independent contractors: Hospitality Management Advisors, Inc. (“HMA”), Strand Development Company, LLC (“Strand”), Kinseth Hotel Corporation (“Kinseth”) and Cherry Cove Hospitality Management, LLC (“Cherry Cove”). 

 

HMA manages 11 Company hotels in Louisiana, Kentucky, Indiana, and Florida.  Strand manages the Company’s three economy extended-stay hotels in Georgia and South Carolina as well as 12 additional Company hotels located in Maryland, North Carolina, Pennsylvania, Tennessee, Virginia, and West Virginia.  Kinseth manages 18 Company hotels in seven states primarily in the Midwest. Cherry Cove manages one Company hotel in Maryland.  Each of the management agreements expired on June 30, 2015 and the new agreements were effective on July 1, 2015 under the new terms described below.  The management agreements renew for additional terms of one year unless either party to the agreement gives the other party written notice of termination at least 90 days before the end of a term. 

 

During the second quarter of 2015, the Company negotiated new agreements with the existing management companies. Beginning July 1, 2015, each of HMA, Strand, Kinseth, and Cherry Cove receives a monthly management fee, with respect to the hotels they manage, equal to 3.0% of gross hotel revenue. Incentive fees may be earned for performance above budgeted expectations up to a maximum payout of 2.0% of gross hotel revenue.

 

The monthly management fee under the prior agreements was 3.5% of gross hotel revenue and 2.25% of hotel net operating income (“NOI”). NOI is equal to gross hotel revenue less operating expenses (exclusive of management fees, certain insurance premiums and employee bonuses, and personal and real property taxes).

 

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The management agreements generally require TRS Lessee to fund debt service, working capital needs, capital expenditures and third-party operating expenses for the management companies excluding those expenses not related to the operation of the hotels. TRS Lessee is responsible for obtaining and maintaining insurance policies with respect to the hotels.

 

The hotel industry is seasonal in nature. Generally, occupancy rates, revenues and operating results for hotels operating in the geographic areas in which we operate are greater in the second and third quarters of the calendar year than in the first and fourth quarters, with the exception of our hotel located in Florida, which experiences peak demand in the first and fourth quarters of the year.

 

Consolidated Financial Statements

 

The Company has prepared the condensed consolidated balance sheet as of September 30, 2015, the condensed consolidated statements of operations for the three and nine months ended September 30, 2015 and 2014, and the condensed consolidated statements of cash flows for the nine months ended September 30,  2015 and 2014 without audit, in conformity with U. S. generally accepted accounting principles (GAAP).  In the opinion of management, all necessary adjustments (which include only normal recurring adjustments) have been made to present fairly the financial position as of September 30, 2015 and the results of operations and cash flows for all periods presented.  Balance sheet data as of December 31, 2014 has been derived from the audited consolidated financial statements as of that date. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period.  Actual results could differ from those estimates.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, although management believes that the disclosures are adequate to make the information presented not misleading.  These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.  The results of operations for the three and nine months ended September 30, 2015 are not necessarily indicative of the operating results for the full year.

 

Certain immaterial reclassifications have been made from prior year to conform to current presentation.

 

Recent Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective. The new standard is effective for the Company on January 1, 2018. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU No. 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

 

In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability. Currently, debt issuance costs are recorded as an asset and amortization of these deferred financing costs is recorded in interest expense. Under the new standard, debt issuance costs will continue to be amortized over the life of the debt instrument and amortization will continue to be recorded in interest expense. The new standard is effective for the Company on January 1, 2016 and will be applied on a retrospective basis. The Company is

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currently evaluating the effect that ASU 2015-03 will have on its consolidated financial statements and related disclosures.

 

Derivative Liabilities 

Series C Convertible Preferred Stock and Warrants

 

The conversion feature embedded in the Series C convertible preferred stock was evaluated, and it was determined that the conversion feature should be bifurcated from its host instrument and accounted for as a freestanding derivative. In addition the common stock warrants issued with the Series C convertible preferred stock were also determined to be freestanding derivatives.

 

The amendment to the Company’s articles of incorporation, setting forth the terms of the Series C convertible preferred stock, the host instrument, includes an antidilution provision that requires an adjustment in the common stock conversion ratio should subsequent issuances of the Company’s common stock be issued below the instruments’ original conversion price of $8.00 per share. Accordingly, we bifurcated the embedded conversion feature which is shown as a derivative liability recorded at fair value on the accompanying consolidated balance sheets as of September  30, 2015 and December 31, 2014. As a result of a subscription rights offering by the Company which concluded on June 6, 2014, the conversion price of the Series C convertible stock, pursuant to its terms, was adjusted to $1.60, the exercise price of the subscription rights for a share of common stock. The antidilution provision continues to be in effect, and treatment of the embedded conversion feature as a derivative liability remains unchanged.

 

The agreement setting forth the terms of the common stock warrants issued to the holders of the Series C convertible preferred stock also includes an antidilution provision that requires a reduction in the warrants’ exercise price of $9.60 should the conversion ratio of the Series C convertible preferred stock be adjusted due to antidilution provisions.    Accordingly, the warrants do not qualify for equity classification, and, as a result, the fair value of the derivative is shown as a derivative liability on the accompanying consolidated balance sheets as of September 30,  2015 and December 31, 2014. As a result of a subscription rights offering by the Company which concluded on June 6, 2014, the exercise price of the warrants for a share of common stock was adjusted to $1.92,  equal to 120% of the adjusted conversion price of the Series C convertible preferred stock. The antidilution provision remains in effect, and treatment of the warrants as a derivative liability remains unchanged.

 

Fair Value Measurements

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Fair value measurements are utilized to determine the value of certain liabilities, to perform impairment assessments, and for disclosure purposes.  In February 2012, the Company issued financial instruments with features that were determined to be derivative liabilities, and as a result must be measured at fair value on a recurring basis under Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 820-10 Fair Value Measurements and Disclosures – Overall.  In addition we apply the fair value provisions of ASC 820-10-35 Fair Value Measurements and Disclosures – Overall – Subsequent Measurement, for our nonfinancial assets, which include our held for sale hotels, and the disclosure of the fair value of our debt.

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Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

 

Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability. Level 2 inputs may include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, as well as inputs other than quoted prices that are observable for the asset or liability such as interest rates and yield curves that are observable at commonly quoted intervals.

 

Level 3 nonfinancial asset valuations use unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.  We develop these inputs based on the best information available, including our own data. Financial asset and liability valuation inputs include unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the liability; this includes pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

 

Nonfinancial assets

 

Nonfinancial asset fair value measurements are discussed below in the note “Impairment.”

 

Financial instruments

 

As of September 30, 2015 and December 31, 2014, the fair value of the derivative liabilities in connection with the February 2012 issuance was determined by the Monte Carlo simulation method.  The Monte Carlo simulation method is a generally accepted statistical method used to generate a defined number of stock price paths in order to develop a reasonable estimate of the range of future expected stock prices of the Company and its peer group and minimizes standard error.

 

The fair value of the Company’s financial liabilities carried at fair value and measured on a recurring basis as of September 30, 2015 and December 31, 2014 are as follows (in thousands):

 

 

There were no transfers between levels during the nine months ended September 30, 2015 and the twelve months ended December 31, 2014.

 

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The following tables present a reconciliation of the beginning and ending balances of items measured at fair value on a recurring basis in the table above that used significant unobservable inputs (Level 3), and the realized and unrealized (gains) losses recorded in the Consolidated Statement of Operations in unrealized derivative gain  (loss) for each of the three and nine months ending September 30, 2015 and 2014 (in thousands)

 

 

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The Company estimates the fair value of its fixed rate debt by discounting the future cash flows of each instrument at estimated market rates or credit spreads consistent with the maturity of the debt obligation with similar credit policies. Credit spreads take into consideration general market conditions and maturity. The inputs utilized in estimating the fair value of debt are classified in Level 2 of the hierarchy. The carrying value and estimated fair value of the Company’s debt as of September 30, 2015 and December 31, 2014 are presented in the table below (in thousands):

 

 

 

 

 

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Hotel Dispositions

 

Effective October 1, 2014, the Company adopted ASU Update No. 2014-08 concerning the classification and reporting of discontinued operations. This amendment defines discontinued operations as a component of an entity that represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. As a result of the adoption of ASU Update No. 2014-08, we anticipate that most of our hotel dispositions will not be classified as discontinued operations as most will not fit this description.

 

For hotel properties that have been classified as held for sale or as discontinued operations for periods prior to adoption of ASU 2014-08, the Company will continue to present the operating results as discontinued operations, and all other hotel properties will be included in continuing operations, in the statements of operations for all applicable periods presented.

 

At June 30, 2015, the Company had eighteen hotels identified as held for sale. During the three months ended September 30, 2015, four of those hotels were sold. Due to changes in market conditions, two hotels were reclassified from held for sale to held for use. A total of twelve hotels are held for sale as of September 30, 2015.

 

Sold Hotels - Continuing Operations

 

On March 19, 2015 the Company closed on the sale of a Sleep Inn in Omaha, Nebraska, to an unaffiliated buyer for a gross sales price of $2.9 million, with no gain on the sale and reduction of the Company’s mortgage debt of $2.5 million.

 

On July 1, 2015, the Company closed on the sale of a Days Inn in Ashland, Kentucky, to an unaffiliated buyer for a gross sales price of $2.2 million, with a gain of $0.7 million and reduction of the Company’s mortgage debt of $1.3 million.

 

On July 13, 2015, the Company closed on the sale of two hotels in Alexandria, Virginia, to an unaffiliated buyer for a combined gross sales price of $19.0 million. Partial net proceeds of $8.3 million were applied to the associated debt with Frontier Bank. These hotels represent a significant disposition; therefore, their operating results are disclosed.

 

The Alexandria Comfort Inn and Days Inn hotels had net earnings of $0.8 million and $(0.8) million for the three months ended September 30, 2015 and $(0.2) million and $(0.1) million for the three months ended September 30, 2014. For the nine months ended September 30, 2015, net earnings for the Comfort Inn and Days Inn were $1.1 million and $(2.0) million, respectively. For the same period of 2014, the Comfort Inn and Days Inn had net earnings of $(0.3) million and $(0.2) million, respectively.  The Days Inn net earnings for the nine months ended September 30, 2015 include impairment expense of $1.0 million, of which $0.9 million was recognized as of March 31, 2015 upon the hotel’s classification as held for sale. Earnings attributable to noncontrolling interest from the two hotels for the three months ended September 30, 2015 and 2014 were approximately $(5,000) and $0, respectively. Earnings attributable to noncontrolling interest for the nine months ending September 30, 2015 and 2014 were approximately $100,000 and $1,000, respectively.

 

On August 28, 2015, the Company sold a Super 8 in Manhattan, Kansas, to an unaffiliated buyer for gross sale proceeds of $3.2 million. Partial proceeds of $2.4 million were applied to the revolving credit facility with Great Western Bank, reducing the outstanding revolver balance by $2.4 million, and the revolver limit from $11.2 million to $8.8 million.

 

 

 

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Sold Hotels - Discontinued Operations

 

On January 15, 2015 the Company closed on the sale of a Super 8 in West Plains, Missouri to an unaffiliated buyer for a gross sales price of $1.5 million, with a gain on sale of $0.9 million and reduction of the Company’s mortgage debt of $1.4 million.

 

On January 29, 2015 the Company closed on the sale of a Super 8 in Green Bay, Wisconsin, to an unaffiliated buyer for a gross sales price of $2.2 million, with no gain on the sale and reduction of the Company’s mortgage debt of $1.5 million.

 

On March 16, 2015 the Company closed on the sale of a Super 8 in Columbus, Georgia, to an unaffiliated buyer for a gross sales price of $0.9 million, with no gain on the sale and reduction of the Company’s mortgage debt of $0.9 million.

 

On April 1, 2015, the Company closed on the sale of two Savannah Suites hotels to an unaffiliated buyer. The hotel in Chamblee, Georgia sold for $4.4 million, and the hotel in Augusta, Georgia sold for $3.4 million, with no gain on either sale. Partial proceeds of $4.1 million were applied to the associated debt with GE.

 

On April 30, 2015, the Company closed on the sale of a Super 8 in Batesville, Arkansas, to an unaffiliated buyer for a gross sales price of $1.5 million, with a gain on sale of $0.7 million. Partial proceeds of $1.3 million were applied to the revolving credit facility with Great Western Bank, reducing the outstanding revolver balance by $1.3 million and the revolver limit from $12.5 million to $11.2 million.

 

Hotels Held For Sale

 

A REIT will incur a 100% tax on the net gain derived from any sale or other disposition of property that the REIT holds primarily for sale to customers in the ordinary course of a trade or business. We do not believe any of our hotels were held primarily for sale in the ordinary course of our trade or business. However, if the Internal Revenue Service would successfully assert that we held such hotels primarily for sale in the ordinary course of our business, the gain from such sales could be subject to a 100% prohibited transaction tax.

 

Assets held for sale consisted of the following as of September 30, 2015 and December 31, 2014:

 

 

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The following table sets forth the components of discontinued operations for the three and nine months ended September 30, 2015 and 2014. The table includes the results of operations for hotels sold and classified in discontinued operations in 2014 and the first three quarters of 2015 (which were classified as held for sale prior to September 30, 2015).

 

 

 

Earnings Per Share

 

Basic earnings per share (“EPS”) is computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding. Diluted EPS is computed after adjusting the numerator and denominator of the basic EPS computation for the effects of dilutive potential common shares outstanding during the period, if any. The effects include adjustments to the numerator for any change in fair market value of 

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derivative liabilities (related to the Series C convertible preferred stock and warrants, and the convertible loan) during the period the convertible securities are dilutive. The computation of basic and diluted earnings per common share is presented below:

 

 

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* The loss (earnings) attributable to noncontrolling interest is allocated between continuing and discontinued operations for the purpose of the EPS calculation.

 

Potentially dilutive common shares, if any, have been excluded from the denominator if they are antidilutive to net earnings (loss) attributable to common shareholders. The number of weighted average shares of common stock for the three and nine months ended September 30, 2015 is significantly higher than the outstanding shares at September 30, 2014 due to the issuance of common stock from the rights offering during the last month of the second quarter of 2014.

 

The following table summarizes the weighted average of potentially dilutive securities that have been excluded from the denominator for the purpose of computing diluted earnings per share:

 

 

 

 

* Long Term Incentive Plan (LTIP) and common operating units of SLP have been omitted from the denominator for the purpose of computing diluted earnings per share since the effect of including these amounts in the numerator and denominator would have no impact.

 

Debt Financing

 

A summary of the Company’s long term debt as of September 30, 2015 is as follows (dollars in thousands):

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On January 15, 2015, the Company sold a Super 8 in West Plains, Missouri (49 rooms) for gross sale proceeds of $1.5 million. Net proceeds were used to pay off the associated loan with Great Western Bank.

On January 29, 2015, the Company sold a Super 8 in Green Bay, Wisconsin (83 rooms) for gross sale proceeds of $2.2 million. Net proceeds were used to pay off the associated debt with GE.

On February 17, 2015, the maturity date of the Company’s $7.8 million GE loan was extended to December 15, 2015. A required principal payment of $0.3 million was paid on the loan in February 2015.

On March 16, 2015, the Company sold a Super 8 in Columbus, Georgia (74 rooms) for gross sale proceeds of $0.9 million. Net proceeds were used to pay off the associated loan with GE.

On March 19, 2015, the Company sold a Sleep Inn in Omaha, Nebraska (90 rooms) for gross sale proceeds of $2.9 million. Net proceeds were used to pay off the associated loan with Elkhorn Valley Bank.

On April 1, 2015, the Company sold a Savannah Suites in Chamblee, Georgia (120 rooms) for gross sale proceeds of $4.4 million, and a Savannah Suites in Augusta, Georgia (172 rooms) for gross sale proceeds of $3.4 million. Partial proceeds of $4.1 million were applied to the associated debt with GE.

 

On April 30, 2015, the Company sold a Super 8 in Batesville, Arkansas (49 rooms) for gross sale proceeds of $1.5 million. Partial proceeds of $1.3 million were applied to the revolving credit facility with Great Western Bank, reducing the outstanding revolver balance by $1.3 million, and the revolver limit from $12.5 million to $11.2 million.

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On May 28, 2015, the $8.3 million mortgage loan previously held by Middle Patent Capital, LLC was, through the Company’s efforts, sold to Frontier Bank. The interest rate was reduced from 12.5 percent to 6.0 percent and the maturity date was extended from June 6, 2015 to May 1, 2016.

On June 5, 2015, the Company amended its revolving credit facility with Great Western Bank to, among other things, extend the maturity date to June 30, 2018, reduce the interest rate from 4.5 percent annually to the prime rate plus 1.0 percent annually (currently 4.25 percent annually) and remove the 2.0 percent prepayment penalty required with refinancing with another financial institution.

On July 1, 2015, the Company closed on the sale of a Days Inn in Ashland, Kentucky (63 rooms) for a gross sales price of $2.2 million. Partial proceeds of $1.3 million were applied to the associated debt with GE.

On July 13, 2015, the Company closed on the sale of two hotels in Alexandria, Virginia with a combined gross sales price of $19.0 million. Partial net proceeds of $8.3 million were applied to the associated debt with Frontier Bank.

 

On August 28, 2015, the Company sold a Super 8 in Manhattan, Kansas (85 rooms) for gross sale proceeds of $3.2 million. Partial proceeds of $2.4 million were applied to the revolving credit facility with Great Western Bank, reducing the outstanding revolver balance by $2.4 million and the revolver limit from $11.2 million to $8.8 million.

 

At September 30, 2015, the Company had long-term debt of $54.8 million associated with assets held for use, consisting of notes and mortgages payable, with a weighted average term to maturity of 1.6 years and a weighted average interest rate of 5.9%. The weighted average fixed rate was 6.0%.  The weighted average variable rate was 4.25%.  Debt is classified as held for use if the properties collateralizing it are not held for sale. Debt is classified as held for sale if the properties collateralizing it are held for sale. Debt associated with assets held for sale is classified in the table below as due within the next year irrespective of whether the notes and mortgages evidencing such debt mature within the next year. Aggregate annual principal payments on debt associated with assets held for use for the remainder of 2015 and thereafter, and debt associated with assets held for sale, are as follows (in thousands):

 

At September 30, 2015, the Company had $20.8 million of principal due in 2015. Of this amount, $14.1 million of principal is due in 2015 pursuant to the notes and mortgages evidencing such debt. The remaining $6.7 million is associated with loans on assets held for sale and is not contractually due in 2015 unless the related assets are sold. The maturities comprising the $14.1 million consist of:

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All of the GE loans are cross collateralized and the ten assets securing the loans outstanding at September 30, 2015 are treated as a pool.  As of September 30, 2015, the Company had five GE hotel assets classified as held for sale. The required principal payment upon the sale of these five hotels is approximately $8.3 million.  Upon sale the Company believes the net proceeds from the sale of these hotels will be sufficient to satisfy the debt with GE maturing in 2015.  In October of 2015, after the close of the third quarter of 2015, the Company sold one of the GE encumbered assets that was held for sale and $1.1 million of the sales proceeds were applied to the balance of the $2.2 million loan, reducing the loan to $1.1 million.  If the remaining hotels are not sold, the Company will attempt to refinance the debt with GE.

 

On October 26, 2015, the Company refinanced its mortgage loan with Citigroup Global Markets Realty Corp. with a new $10.0 million mortgage loan from The Huntington National Bank.  The new loan has a five year term, a 25 year amortization schedule and an interest rate fixed at 4.13%.  The new loan is non-recourse and secured by four hotels located in Indiana.

 

We are required to comply with certain financial covenants for some of our lenders.  As of September 30,  2015, we were in compliance with our financial covenants.  As a result, we are not in default of any of our loans.

 

Stock-Based Compensation

 

Non Vested Share Awards

 

On July 15, 2013, the Company granted share awards and stock options to an executive officer of the Company outside of the 2006 Stock Plan as an inducement material to the executive’s acceptance of employment. The share awards total 3,125 authorized but previously unissued shares of the Company’s common stock with a grant date price of $7.28. The shares vest based on continued employment of the executive, and the restrictions lapse in 33.3% increments on each of the first, second and third anniversaries of issuance. There were 1,041 and 2,084 unvested awards as of September 30, 2015 and 2014, respectively. The stock options entitle the executive to purchase 3,125 authorized but previously unissued shares of the Company’s common stock at an exercise price of $8.08 per share. The stock options have a four-year term and vest in equal one-third increments on each of the first, second and third anniversaries of issuance provided that the executive is employed by the Company on each such vesting date. The stock options and share awards will become fully vested in the event of a change of control of the company or upon the executive’s death or disability.

 

On March 2, 2015, the Company granted a warrant to an executive officer of the Company outside of the 2006 Stock Plan as an inducement material to the executive’s acceptance of employment. The warrant entitles the executive to purchase a total of 657,894 authorized but previously unissued shares of the Company’s common stock with a grant date price at (i) $1.52 per share (the adjusted closing bid price of the common stock on NASDAQ on March 2, 2015) if at least one-third but not more than one-half of the shares are purchased on or prior to March 17, 2015, and (ii) $1.92 per share for shares purchased after. The warrant has a three-year term. The executive officer exercised the warrant in part to purchase 227,894 shares on March 11, 2015 at the price of $1.52 per share. The warrant remains exercisable for 430,000 shares at an exercise price of $1.92 per share. As of September 30, 2015, the total unrecognized compensation cost related to the warrants awarded on March 2, 2015 was approximately $239,000, which is expected to be recognized over the next 29 months.

 

The Company records compensation expense for warrants based on the estimated fair value of the warrants on the date of grant using the Black-Scholes option-pricing model.  The Company uses historical data among other factors to estimate the expected price volatility, the expected warrant life, the dividend rate and expected forfeiture rate. The risk-free rate is based on the U.S. Treasury yield in effect at the time of grant for the estimated life of the

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warrant.  The following table summarizes the estimates used in the Black-Scholes option-pricing model related to the warrant grant and exercise prices of $1.52 and $1.92 grants:

 

 

 

On March 2, 2015, the Company granted an equity award of 5,263,152 long-term incentive plan units (“LTIP Units”) to an executive officer, representing profit interests in the Company’s operating partnership.  The LTIP Units are earned on one-third increments upon the Company’s common stock achieving price per share milestones of $3.50,  $4.50 and $5.50 respectively.  Earned LTIP Units vest in March 2018, or earlier upon a change in control of the Company, and can be redeemed at the rate of one share of common stock for each eight earned LTIP Units for up to 657,894 of common shares.

 

As of September 30, 2015, the total unrecognized compensation cost related to the LTIP Units was $412,000, which is expected to be recognized over the next 29 months.

 

The Company records compensation expense for the LTIP based on the estimated fair value of the LTIP on the date of grant using the Monte Carlo simulation model. The Company uses historical data among other factors to estimate the expected price volatility, the expected LTIP life, volume weighted average price and expected forfeiture rate. The risk-free rate is based on the U.S. Treasury yield in effect at the time of grant for the estimated life of the LTIP. The following table summarizes the estimates used in the Monte Carlo option-pricing model related to the LTIP grant:

 

 

 

Investment Committee Share Compensation

 

The independent directors serving as members of the Investment Committee receive their monthly Investment Committee fees in the form of shares of the Company’s common stock issued quarterly under the 2006 Stock Plan, priced as the average of the closing price of the stock for the first 20 trading days for the calendar year.  The number of shares issued to the committee members for the three months ended September 30, 2015 and 2014 were 4,828 and 2,988, respectively, and 11,766 and 6,723 shares were issued for the nine months ended September 30, 2015 and 2014, respectively. 

 

Share-Based Compensation Expense

 

The expense recognized in the condensed consolidated financial statements for the three months ended September 30, 2015 and 2014 for share-based compensation related to employees and directors was approximately

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$80,000 and $6,000, respectively. The expense recognized for the nine months ended September 30, 2015 and 2014 was approximately $202,000 and $25,000, respectively.

 

Impairment

 

Held for use

 

In accordance with FASB ASC 360-10-35 Property Plant and Equipment – Overall – Subsequent Measurement, the Company analyzes its assets for impairment when events or circumstances occur that indicate the carrying amount may not be recoverable. As part of this process, the Company utilizes a two-step analysis to determine whether a trigger event (within the meaning of ASC 360-10-35) has occurred with respect to cash flow of, or a significant adverse change in business climate for, its hotel properties. Quarterly and annually the Company reviews all of its held for use hotels to determine any property whose cash flow or operating performance significantly underperformed from budget or prior year, which the Company has set as a shortfall against budget or prior year of 15% or greater.

 

Each quarter we apply a second analysis on those properties identified in the 15% change analysis or which have had a trigger event. The analysis estimates the expected future cash flows to identify any property whose carrying amount potentially exceeded the recoverable value. In performing this analysis, the Company makes the following assumptions:

 

 

During the three and nine months ended September 30, 2015 no trigger events as described in ASC 360-10-35 occurred for any of our held for use hotels. The Company did record $0.1 million of recovery of previously recorded impairment loss on one hotel that was moved from held for sale to held for use at the end of the first quarter of 2014. Additionally, negligible recovery of previously recorded impairment loss was recorded on one hotel reclassified as held for use at the end of the third quarter of 2015.

 

Held for sale

 

Level 3 inputs were used to determine impairment losses on properties held for sale. At September 30, 2015, there were 12 hotel properties that met the criteria for classification as held for sale. In accordance with ASU 2014-08 Presentation of Financial Statements and Property, Plant and Equipment Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity, in the Consolidated Statements of Operations, nine of the held for sale hotels are reflected in continuing operations and three of the hotels are reflected in discontinued operations. The amount of impairment and recovery of previously recorded impairment recorded in the quarters ended September 30, 2015 and 2014 on properties classified as held for sale and sold is shown in the table below (in thousands):  

 

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In accordance with ASC 360-10-35 Property Plant and Equipment-Overall-Subsequent Measurement, the Company determines the fair value of an asset held for sale based on the estimated selling price less estimated selling costs. We engage independent real estate brokers to assist us in determining the estimated selling price using a market approach. The estimated selling costs are based on our experience with similar asset sales.

Income Taxes

We have provided a full valuation allowance against our deferred tax asset at September  30, 2015 and 2014, that results in no net deferred tax asset at September 30, 2015 and 2014 due to the uncertainty of realization

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(because of historical operating losses). The TRS Lessee has estimated its income tax benefit using a combined federal and state rate of approximately 38%.  The TRS net operating loss carryforward from September 30, 2015 as determined for federal income tax purposes was approximately $18.0 million. The availability of such loss carryforward will expire in 2022 through 2034.

The Company is completing an evaluation of the impact of its subscription rights offering on its ability to fully utilize all of the net operating loss carryforwards. The Company believes the results of this analysis will likely indicate that a change in control event (as defined for tax purposes) occurred, and the Company will be limited in the use of its net operating loss carryforwards.

 

Noncontrolling Interest of Common Units in SLP

 

Noncontrolling interest in SLP represents the common units’ (“common units”) proportionate share of the equity in the operating partnership. The common units represent both the common operating units and the LTIP units. As of September 30, 2015 and 2014, the limited partners of SLP held 97,008 common operating units, representing approximately 0.1%  of the partnership interest in SLP. In March 2015, the Company issued 5,263,152 of LTIP Units, which represent approximately 7.0% of the partnership interest in SLP.

 

Equity Reconciliation of Parent and Noncontrolling Interest

 

(dollars in thousands)

 

 

 

 

 

 

 

 

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Subscription Rights Offering

 

The Company concluded a subscription rights offering on June 6, 2014.  Each subscription right entitled its holder to purchase one share of common stock of the Company for $1.60 per share.  Subscription rights to purchase 1,787,204 shares of common stock were exercised for $2,859,526, of which $2,000,000 was paid by conversion of a loan owed by the Company to Real Estate Strategies, L.P. (“RES”).  The Company incurred issuance costs of $217,852.

 

Series B Redeemable Preferred Stock

 

At September 30, 2015 there were 332,500 shares of 10.0% Series B preferred stock outstanding. The shares were sold on June 3, 2008 for $25.00 per share and bear a liquidation preference of $25.00 per share. 

 

Dividends on the Series B preferred stock are cumulative and are payable quarterly in arrears on each March 31, June 30, September 30 and December 31, or, if not a business day, the next succeeding business day, at the annual rate of 10.0% of the $25.00 liquidation preference per share, equivalent to a fixed annual amount of $2.50 per share.  Dividends on the Series B preferred stock accrue whether or not the Company has earnings, whether or not there are funds legally available for the payment of such dividends, whether or not such dividends are declared and whether or not such dividends are prohibited by agreement. Commencing with dividends due on December 31, 2013, the Company suspended payment of dividends on its Series B preferred stock to preserve capital and improve liquidity. Accumulated but unpaid dividends on the Series B preferred stock will not bear interest. Accumulated but unpaid dividends are $1.7 million or  $5.00 per share as of September 30, 2015. These dividends are not reflected as an obligation on the balance sheet.  Holders of the Series B preferred stock generally have no voting rights. However, if the dividends on the Series B preferred stock are in arrears for six or more quarterly periods (whether or not consecutive), holders of the Series B preferred stock, voting together as a single class with all series of preferred stock for which like voting rights are exercisable, will be entitled to elect two directors. Until all such dividend arrearages and dividends for the then current period have been paid, at each annual meeting the holders of Series A preferred stock and Series B preferred stock, voting as one group, will be entitled to elect two directors to serve until the next annual meeting, The terms of the directors will earlier terminate within twelve months after all dividend arrearages have been paid. At the Company’s annual meeting on June 10, 2015, holders of Series A preferred stock and Series B preferred stock, voting as one class, elected two directors.

 

The Series B preferred stock will, with respect to dividend rights and rights upon the Company’s liquidation, dissolution or winding up, rank: (a) senior to the Company’s common stock, (b) senior to all classes or series of preferred stock issued by the Company and ranking junior to the Series B preferred stock with respect to dividend rights or rights upon the Company’s liquidation, dissolution or winding up, (c) on a parity with the Company’s Series A preferred stock and Series C convertible preferred stock and with all classes or series of preferred stock issued by the Company and ranking on a parity with the Series B preferred stock with respect to dividend rights or rights upon the Company’s liquidation, dissolution or winding up and (d)  junior to all of the Company’s existing and future indebtedness.

 

The Company will not pay any distributions, or set aside any funds for the payment of distributions, on its common shares, unless it has also paid (or set aside for payment) the full cumulative distributions on the preferred shares for the current and all past dividend periods. The Series B preferred stock has no stated maturity and is not subject to any sinking fund or mandatory redemption (except as described below).  

 

The Series B preferred stock was not redeemable prior to June 3, 2013, except in certain limited circumstances relating to the maintenance of the Company’s ability to qualify as a REIT as provided in the

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Company’s articles of incorporation or a change of control (as defined in the Company’s amendment to its articles of incorporation establishing the Series B preferred stock).  The Company may redeem the Series B preferred stock, in whole or in part, at any time or from time to time on or after June 3, 2013 for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends. Also, upon a change of control, each outstanding share of the Company’s Series B preferred stock will be redeemed for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends. At September 30,  2015, no events have occurred that would lead the Company to believe redemption of the preferred stock, due to a change of control or failure to maintain its REIT qualification, is probable. 

 

Series A Preferred Stock

 

On December 30, 2005,  the Company offered and sold 1,521,258 shares of 8% Series A preferred stock.  At September 30,  2015, 803,270 shares of Series A preferred stock remained outstanding.  Dividends on the Series A preferred stock are cumulative and are payable monthly in arrears on the last day of each month, at the annual rate of 8% of the $10.00 liquidation preference per share, equivalent to a fixed annual amount of $.80 per share. The Company may redeem the Series A preferred stock, in whole or in part, at any time or from time to time for cash at a redemption price of $10.00 per share, plus all accrued and unpaid dividends. Commencing with dividends due on December 31, 2013, the Company suspended payment of dividends on its Series A preferred stock to preserve capital and improve liquidity. Unpaid dividends will accumulate and bear additional dividends at 8%, compounded monthly. Accumulated but unpaid dividends are $1.3 million, or $1.57 per share, as of September 30, 2015. These dividends are not reflected as an obligation on the balance sheet. Holders of the Series A preferred stock generally have no voting rights. However, if dividends on the Series A preferred stock are in arrears for six consecutive months or nine months (whether or not consecutive) in any twelve-month period, holders of the Series A preferred stock, voting together as a single class with all series of preferred stock for which like voting rights are exercisable, will be entitled to elect two directors. Until all such dividend arrearages and dividends for the then current period have been paid, at each annual meeting the holders of Series A preferred stock and Series B preferred stock, voting as one group, will be entitled to elect two directors to serve until the next annual meeting, The terms of the directors will earlier terminate within twelve months after all dividend arrearages have been paid. At the Company’s annual meeting on June 10, 2015, holders of the Series A preferred stock and Series B preferred stock, voting as one class, elected two directors.  

 

The Series A preferred stock with respect to dividend rights and rights upon the Company’s liquidation, dissolution or winding up, ranks senior to all classes or series of the Company’s common stock, senior or on parity with all other classes or series of preferred stock and junior to all of the Company’s existing and future indebtedness. Upon liquidation all Series A preferred stock will be entitled to $10.00 per share plus accumulated but undeclared dividends. The Company will not pay any distribution, or set aside any funds for the payment of distributions, on its common shares unless it has also paid (or set aside for payment) the full cumulative distributions on the preferred shares for the current and all past dividend periods. The outstanding preferred shares do not have any maturity date, and are not subject to mandatory redemption.

 

The Company will not pay any distributions, or set aside any funds for the payment of distributions, on its common shares, unless it has also paid (or set aside for payment) the full cumulative distributions on the preferred shares for the current and all past dividend periods. The Series A preferred stock has no stated maturity and is not subject to any sinking fund or mandatory redemption.

 

Series C Convertible Preferred Stock and Warrants

 

The Company entered into a Purchase Agreement dated November 16, 2011 for the issuance and sale of Series C convertible preferred stock and warrants under a private transaction to RES. On January 31, 2012 at a special meeting, the shareholders of the Company, by the requisite vote, approved the issuance and sale of up to

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3,000,000 shares of the Series C convertible preferred stock, shares of common stock which may be issued upon conversion of the Series C convertible preferred stock, and warrants to purchase additional shares of common stock, to RES pursuant to the Purchase Agreement. In two closings on February 1, 2012 and February 15, 2012, the Company completed the sale to RES of 3,000,000 shares of Series C convertible preferred stock and warrants to purchase shares of common stock. 

 

Each of the 3,000,000 shares of Series C convertible preferred stock is convertible, in whole or in part, at RES’s option, at any time, but subject to RES’s beneficial ownership limitation, into the number of shares of common stock equal to the $10.00 per share liquidation preference, divided by the conversion price then in effect.  As a result of the subscription rights offering concluded on June 6, 2014, the conversion price was adjusted downward from $8.00 to $1.60, equal to the public offering price of our common stock in the subscription rights offering. Pursuant to the terms of warrants held by RES to purchase up to 3,750,000 shares of common stock, the exercise price of the warrants was adjusted downward from $9.60 to $1.92 per share, equal to 120% of the adjusted conversion price of the Series C convertible preferred stock.

 

Each share of Series C convertible preferred stock is entitled to a dividend of $0.625 per year payable in equal quarterly dividends. Each share of Series C convertible preferred stock has a liquidation preference of $10.00 per share, in cash, plus an amount equal to any accrued and unpaid dividends.  With respect to dividend rights and rights upon the Company’s liquidation, dissolution or winding up, the Series C convertible preferred stock ranks: (a) on  a parity with the Series A preferred stock and Series B preferred stock and other future series of preferred stock designated to rank on  a parity, and (b) senior to the common stock and other future series of preferred stock designated to rank junior, and (c) junior to the Company’s existing and future indebtedness. Commencing with dividends due on December 31, 2013, the Company suspended payment of dividends on its Series C cumulative preferred stock to preserve capital and improve liquidity. Unpaid dividends will accumulate and bear additional dividends at 6.25%, compounded quarterly. Accumulated but unpaid dividends are $4.0 million, or $1.32 per share, as of September 30, 2015. These dividends are not reflected as an obligation on the balance sheet.

 

The Series C convertible preferred stock, at the option of the holder, is convertible at any time into common stock at a conversion price of $1.60 for each share of common stock, which is equal to the rate of 6.25 shares of common stock for each share of Series C convertible preferred stock. A holder of Series C convertible preferred stock will not have conversion rights to the extent the conversion would cause the holder and its affiliates to beneficially own more than 34% of voting stock (the “Beneficial Ownership Limitation”). “Voting stock” means capital stock having the power to vote generally for the election of directors of the Company. A holder of warrants would similarly not have exercise rights to the extent the exercise of a warrant would cause the holder and its affiliates to own capital stock in an amount exceeding the Beneficial Ownership Limitation.

 

The Series C convertible preferred stock will vote with the common stock as one class, subject to certain voting limitations. For any vote, the voting power of the Series C convertible preferred stock will be equal to the lesser of: (a) 0.78625 vote per share or (b) an amount of votes per share such that the vote of all shares of Series C convertible preferred stock in the aggregate equal 34% of the combined voting power of all the Company voting stock, minus an amount equal to the number of votes represented by the other shares of voting stock beneficially owned by RES and its affiliates. 

 

As long as RES has the right to designate two or more directors to the Company Board of Directors pursuant to the Directors Designation Agreement, the following requires the approval of RES and IRSA Inversiones y Representaciones Sociedad Anonima (“IRSA”):  

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Commitments and Contingencies

 

Various claims and legal proceedings arise in the ordinary course of business and may be pending against the Company and its properties. Based upon the information available, the Company believes that the resolution of any of these claims and legal proceedings should not have a material adverse effect on its consolidated financial position, results of operations or cash flows.

 

Liquidity

 

The following disclosure and analysis is pursuant to ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 requires the Company to evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date the financial statements are issued.  To satisfy the requirements of the new standard, the Company’s evaluation considered a 13 month period beginning September 30, 2015.

 

The Company performs a liquidity analysis to determine if expected hotel operating cash flow is sufficient to cover all of the Company’s obligations as they become due, in this case, beginning on September 30, 2015 and ending on October 31, 2016.  Our initial analysis considered only available cash and operating cash inflows without consideration of cash inflows from transactions that are in process as of the date of this filing, but were not yet finalized, such as proceeds on asset dispositions or proceeds from financing transactions that are not yet closed.

 

The Company believes the cash and available revolver of $14.9 million and $5.9 million, respectively, at September 30, 2015, cash generated from the operations of hotels, future sales of hotel properties held for sale, and proceeds from the refinancing of debt that occurred in October 2015 will be sufficient to cover corporate overhead, recurring monthly debt service, anticipated capital improvements, cash required in October 2015 to fund contracted acquisitions, and remaining loans maturing in 2015 (there are no loans maturing in 2016).

 

Although, as noted above, the funds are expected to be available to satisfy the maturing debt, management plans to use the available cash after operational needs to provide the equity to transition to upper midscale, upscale and upper upscale hotels and to satisfy the loan obligations through refinancing and the use of a portion of the excess proceeds from asset sales. The Company has entered into agreements to purchase three hotels for $42.5 million which closed in early October 2015 and plans to pursue other acquisitions funded with excess proceeds from future hotel sales and other funding sources. We are attempting to dispose of assets that are not generating yields consistent with our investment objectives or reinvestment alternatives and we are targeting acquisitions that we believe will be accretive.  The execution of the Company’s long term plan is dependent upon future hotel sales and the availability to refinance existing maturing debt which cannot be assured.

 

Maturing debt

 

At December 31, 2014 we had $42.1 million of debt with contractual maturities in 2015 (no debt matures in 2016). As of September 30, 2015, we had reduced that obligation to $14.1 million through refinancing, amortization and repayment using the proceeds from hotel sales. Since the end of the third quarter of 2015 through the date of our filing, the remaining 2015 obligation was further reduced to $1.3 million principally as a result of the following transactions: 

 

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Over the past two years the lending market has experienced increased liquidity and a relaxing of underwriting standards and as such, we believe we will be able to refinance on similar or perhaps more favorable terms. However, notwithstanding our perception that the lending market has improved somewhat, we may not be successful in our efforts to refinance or repay our maturing debt. As of September 30, 2015 we are not in default under the terms of any of our loans. The Company believes that we will be compliant under the terms of all of our loans in 2015.

 

Disposition plan

 

Our ability to dispose of assets is impacted by a number of factors. Many of these factors are beyond our control, including general economic conditions, availability of financing and interest rates.  At September 30, 2015, we have 12 hotels held for sale,  and in October and November to date we have sold five of these hotels generating an estimated $5.3 million of cash, leaving seven held for sale hotels, which, if sold, we believe will generate $6.3 million in net proceeds after debt repayment available for reinvestment. Over the last five years, as of September 30, 2015, we have sold 67 hotels.  However, with respect to future hotel sales, we cannot predict:

 

Other Obligations

 

The Company has an obligation to RES to use $25 million of the proceeds from its capital infusion in 2012 to pursue hotel acquisitions.  In February 2012, the Company issued 3.0 million shares of Series C convertible preferred stock to Real Estate Strategies, L.P. which provided $28.6 million of net proceeds. On October 2, 2015, following the completion of the acquisitions (discussed in Subsequent Events below), the company believes it has satisfied all but $1.4 million of this obligation. 

 

The Company did not declare a common stock dividend during the first three quarters of 2015 or the years 2014, 2013 or 2012.  In December 2013, the Company announced the suspension of the regular dividends on its outstanding preferred stock to preserve capital and improve liquidity.  The Company will monitor requirements to maintain its REIT status and will routinely evaluate the dividend policy.

 

Possible sources of liquidity to fund the longer-term liquidity needs and pay the preferred dividends include additional secured or unsecured debt financings, and /or proceeds from public or private issuances of debt or equity securities.

 

Historically, the Company has had recurring losses from operations and had a substantial amount of debt maturing for which the Company did not have committed funding sources. Significant progress has been made bringing the obligation for 2015 debt maturities down from $42.1 million of contractual maturities at December 31,

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2014 to $14.1 million as of September 30, 2015 to $1.3 million as of the date of this filing.  In addition, the Company’s liquidity has improved significantly.  The execution of the Company’s long term plan, as described above, is dependent upon future hotel sales and the ability to refinance existing maturing debt which cannot be assured. However, based on these improvements, there is no longer substantial doubt regarding the Company’s ability to continue as a going concern within one year after the date that the financial statements have been issued.

 

 

Subsequent Events

 

On October 1 and 2, 2015, the Company, through three single-purpose bankruptcy remote entities 100% owned by Supertel Limited Partnership, a limited partnership 93% owned by Condor Hospitality Trust, Inc., acquired three hotels from affiliates of Peachtree Hotel Group II, LLC. The purchases were as follows:

 

The $42.5 million purchase price was funded with the assumption of one loan with an aggregate outstanding principal balance of $11.2 million and two new GE loans totaling $15.1 million. The remaining $16.2 million was funded with $14.9 million in cash, approximately $1.25 million of borrowings from the Company’s existing credit facility with Great Western Bank, and the issuance of operating units from Supertel Limited Partnership. A total of 2,298,879 operating units were issued with a value of $450,000.  

 

On October 6, 2015, the Company closed on the sale of a Quality Inn in Sheboygan, Wisconsin (59 rooms) for a gross sales price of $2.3 million. Partial proceeds of $1.2 million were applied to the associated debt with Great Western Bank.

 

On October 14, 2015, the Company closed on the sale of a Super 8 in Hays, Kansas (76 rooms) for a gross sales price of $1.9 million. Partial proceeds of $1.1 million were applied to the associated debt with Great Western Bank.

 

On October 16, 2015, the Company closed on the sale of a Days Inn in Glasgow, Kentucky (58 rooms) for a gross sales price of $1.8 million. Partial proceeds of $1.1 million were applied to the associated debt with GE.

 

On October 21, 2015, the Company closed on the sale of a Super 8 in Tomah, Wisconsin (65 rooms) for a gross sales price of $1.4 million. Partial proceeds of $0.8 million were applied to the associated debt with Great Western.

 

On October 26, 2015, the Company closed a $10.0 million mortgage loan with The Huntington National Bank. The loan has a five year term, a 25 year amortization schedule, and a fixed rate of 4.13%.  The loan is non-recourse and secured by four hotels located in Indiana. Proceeds were used to refinance an existing loan with Citigroup Global Markets Realty Corp., which was set to mature in November, 2015.

 

On November 3, 2015, the Company closed on the sale of a Rodeway Inn in Fayetteville, North Carolina (120 rooms) for $2.6 million. There was no debt associated with the property subsequent to the Huntington National Bank refinancing.