Table of Contents

Table of Contents

Table of Contents

~~Table~~UNITED ofSTATES ~~Contents~~

~~UNITED~~SECURITIES ~~STATES~~AND EXCHANGE COMMISSION

~~SECURITIES~~Washington, ~~AND~~D.C. ~~EXCHANGE~~20549 ~~COMMISSION~~

~~Washington,~~FORM ~~D.C. 20549~~ 10-K

~~FORM~~x ~~10-K~~ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

xFor ~~ANNUAL~~the ~~REPORT~~fiscal ~~PURSUANT~~year TOended ~~SECTION~~December 31, 132013 ~~OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For~~OR ~~the fiscal year ended December 31, 2014~~

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

¨Commission ~~TRANSITION~~file ~~REPORT~~number 001-12073 ~~PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~Commission~~W2007 ~~file~~GRACE ACQUISITION ~~number 001-12073~~I, INC.

~~W2007~~(Exact ~~GRACE ACQUISITION~~Name I,of ~~INC.~~Registrant as Specified in Its Charter)

(Exact Name of Registrant as Specified in Its Charter)


Tennessee		26-1187149
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

6011 Connection Drive Irving, TX		75039
(Address of Principal Executive Offices)		(Zip Code)

Tennessee		26-1187149
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
6011 Connection Drive Irving, TX		75039
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: 972-368-2200

~~Registrant’s~~Securities ~~telephone~~registered ~~number,~~pursuant ~~including~~to ~~area~~Section 12(b) ~~code~~of the Act: ~~972-368-2200~~None

Securities registered pursuant to Section 12(bg) of the Act: None

~~Securities~~Indicate ~~registered~~by ~~pursuant~~check tomark ~~Section~~if the registrant is a well-known seasoned issuer, as defined in Rule ~~12(g)~~405 of the Securities Act:. Yes ¨ No x ~~None~~

Indicate by check mark if the registrant is anot ~~well-known~~required ~~seasoned~~to ~~issuer,~~file asreports ~~defined~~pursuant into ~~Rule~~Section ~~405~~13 or Section 15(d) of the ~~Securities~~ Act. Yes ¨ No x

Indicate by check mark ifwhether the registrant is(1) has ~~not~~filed all reports required to ~~file~~be ~~reports~~filed ~~pursuant~~by to Section 13 or ~~Section~~ 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 x

Indicate by check mark whether the registrant ~~(1)~~ has ~~filed~~submitted ~~all~~electronically ~~reports~~and posted on its corporate Web site, if any, every Interactive Data File required to be ~~filed~~submitted ~~by Section 13~~and orposted ~~15(d)~~pursuant ofto ~~the~~Rule 405 ~~Securities~~of ~~Exchange~~Regulation S-T ~~Act~~(§232.405 of ~~1934~~this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to ~~file~~submit ~~such reports),~~ and ~~(2) has~~post ~~been subject to~~ such ~~filing requirements for the~~ ~~past 90 days~~files). Yes ¨ No x

Indicate by check mark ~~whether~~if ~~the~~disclosure ~~registrant~~of ~~has~~delinquent ~~submitted~~filers ~~electronically~~pursuant ~~and~~to ~~posted~~Item 405 onof ~~its~~Regulation S-K ~~corporate~~is ~~Web~~not ~~site,~~contained ~~if any~~herein, ~~every~~and ~~Interactive~~will ~~Data~~not ~~File~~be ~~required~~contained, to bethe ~~submitted~~best ~~and~~of ~~posted~~registrant’s ~~pursuant~~knowledge, toin ~~Rule 405~~definitive ofproxy ~~Regulation S-T~~or ~~(§232.405~~information ofstatements ~~this~~incorporated ~~chapter)~~by ~~during~~reference ~~the~~in ~~preceding 12~~Part ~~months~~III ~~(or~~of ~~for~~this ~~such~~Form 10-K ~~shorter~~or ~~period~~any ~~that~~amendment ~~the registrant was required~~ to ~~submit~~this ~~and post such files)~~Form 10-K. ~~Yes~~ ~~¨ No~~ x

Indicate by check mark ifwhether ~~disclosure~~the ofregistrant ~~delinquent~~is ~~filers~~a ~~pursuant~~large toaccelerated ~~Item 405~~filer, ofan ~~Regulation S-K~~accelerated filer, isa ~~not~~non-accelerated ~~contained herein~~filer, ~~and~~or ~~will not~~a besmaller ~~contained,~~reporting tocompany. ~~the~~See ~~best~~definition of ~~registrant’s~~“large ~~knowledge~~accelerated filer,” in“accelerated ~~definitive~~filer” ~~proxy~~and or“smaller ~~information~~reporting ~~statements~~company” ~~incorporated by reference~~ in ~~Part~~Rule ~~III~~12b-2 of ~~this~~the ~~Form 10-K~~Exchange orAct. ~~any~~(Check ~~amendment~~one): ~~to this Form 10-K. x~~

~~Indicate~~Large byAccelerated ~~check~~filer ~~mark~~¨ ~~whether~~Accelerated ~~the~~filer ~~registrant~~¨ isNon-Accelerated ~~a large accelerated~~ filer, anx ~~accelerated filer,~~(Do anot ~~non-accelerated~~check ~~filer,~~if or a smaller reporting company.) ~~See~~Smaller ~~definition of “large accelerated filer,” “accelerated filer” and “smaller~~ reporting company” ~~in Rule 12b-2 of the Exchange Act. (Check one):~~ ¨

~~Large~~Indicate ~~Accelerated~~by ~~filer~~check ¨mark ~~Accelerated~~whether ~~filer~~the ¨registrant ~~Non-Accelerated~~is ~~filer~~a xshell company (Doas ~~not~~defined ~~check~~by ifRule 12b-2 aof ~~smaller reporting company~~the Act.) ~~Smaller reporting company~~ Yes ¨ No x

~~Indicate~~As byof ~~check~~June 30, ~~mark~~2014, ~~whether~~ the ~~registrant~~aggregate ismarket avalue ~~shell~~of ~~company~~the ~~(as~~outstanding ~~defined~~common stock held by ~~Rule 12b~~non-2affiliates of the ~~Act~~ registrant, was $0.~~) Yes ¨ No x~~

As of ~~December~~June 3112, ~~2014~~2015, ~~the~~there ~~aggregate~~were ~~market~~100 ~~value~~shares of the ~~outstanding~~registrant’s common stock ~~held by non-affiliates of the registrant, was $0~~outstanding.

As of April 30, 2015, there were 100 shares of the registrant’s common stock outstanding.


PART I

ITEM 1.	BUSINESS	4

ITEM 1A.	RISK FACTORS	15

ITEM 1B.	UNRESOLVED STAFF COMMENTS	22

ITEM 2.	PROPERTIES	22

ITEM 3.	LEGAL PROCEEDINGS	25

ITEM 4.	MINE SAFETY DISCLOSURES	26

PART II

ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	26

ITEM 6.	SELECTED FINANCIAL DATA	26

ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	28

ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	38

ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	39

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	39

ITEM 9A.	CONTROLS AND PROCEDURES	39

ITEM 9B.	OTHER INFORMATION	40

PART III

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	40

ITEM 11.	EXECUTIVE COMPENSATION	41

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	42

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	42

ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	45

PART IV

ITEM 15.	FINANCIAL STATEMENT SCHEDULES AND EXHIBITS	47

SIGNATURES

~~Table~~-2- ~~of Contents~~

PART I
ITEM 1.	BUSINESS	4
ITEM 1A.	RISK FACTORS	23
ITEM 1B.	UNRESOLVED STAFF COMMENTS	33
ITEM 2.	PROPERTIES	34
ITEM 3.	LEGAL PROCEEDINGS	35
ITEM 4.	MINE SAFETY DISCLOSURES	37
PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	37
ITEM 6.	SELECTED FINANCIAL DATA	38
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	39
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	56
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	57
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	57
ITEM 9A.	CONTROLS AND PROCEDURES	57
ITEM 9B.	OTHER INFORMATION	58
PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	59
ITEM 11.	EXECUTIVE COMPENSATION	61
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	62
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	63
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	67
PART IV
ITEM 15.	FINANCIAL STATEMENT SCHEDULES AND EXHIBITS	69
SIGNATURES

EXPLANATORY NOTE

Throughout this Form 10-2-K, the words “Company,” “we,” “our” and “us” refer to W2007 Grace Acquisition I, Inc., a Tennessee corporation, and its consolidated subsidiaries, unless otherwise stated or the context requires otherwise. On February 27, 2015, consolidated subsidiaries of the Company sold all 20 of their hotels and subsidiaries of W2007 Equity Inns Senior Mezz, LLC (Senior Mezz), an entity in which the Company has a 3% equity interest, sold 96 of their 106 hotels to subsidiaries of American Realty Capital Hospitality Trust, Inc. (ARCH). Any references to our hotels or our business or operations for periods from and after February 27, 2015 refer to the 10 hotels that are currently held by Senior Mezz (the Remaining Hotels).

~~Table~~CAUTIONARY ofSTATEMENT ~~Contents~~ABOUT FORWARD-LOOKING STATEMENTS

~~EXPLANATORY~~Throughout ~~NOTE~~this Form 10-K and documents incorporated herein by reference, we make forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts, but instead represent only our beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside our control. Such statements are generally accompanied by words such as “may,” “believe,” “estimate,” “project,” “plan,” “intend,” “will,” “anticipate,” “expect” and words of similar import that convey uncertainty as to future events or outcomes. These forward-looking statements include information about possible or assumed future results of our business, financial condition and liquidity, results of operations, plans, and objectives. Statements regarding the following subjects are forward-looking by their nature:

~~Throughout~~• ~~this Form 10-K, the words “Company,” “we,” “~~our” and “us” refer to W2007 Grace Acquisition I, Inc., a Tennessee corporation, and its consolidated subsidiaries, unless otherwise stated or the context requires otherwise. On February 27, 2015, consolidated subsidiaries of the Company sold all 20 of their hotels and subsidiaries of W2007 Equity Inns Senior Mezz, LLC (Senior Mezz), an entity in which the Company has a 3% equity interest, sold 96 of their 106 hotels to subsidiaries of American Realty Capital Hospitality Trust, Inc. (ARCH). Any references to our hotels or our business ~~or operations for periods from~~ and ~~after~~investment ~~February 27, 2015 refer to the 10 hotels that are currently held by Senior Mezz (the Remaining Hotels).~~ strategy;

~~CAUTIONARY~~• ~~STATEMENT~~our ~~ABOUT~~projected ~~FORWARD-LOOKING~~operating ~~STATEMENTS~~ results;

~~Throughout~~• ~~this~~completion ~~Form 10-K and documents incorporated herein by reference, we make forward-looking statements within the meaning~~ of ~~the~~any ~~safe~~pending harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts, but instead represent only our beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside our control. Such statements are generally accompanied by words such as “may,” “believe,” “estimate,” “project,” “plan,” “intend,” “will,” “anticipate,” “expect” and words of similar import that convey uncertainty as to future events or outcomes. These forward-looking statements include information about possible or assumed future results of our business, financial condition and liquidity, results of operations, plans, and objectives. Statements regarding the following subjects are forward-looking by their nature: transactions;

• our ~~business~~ability ~~and~~to ~~investment~~obtain ~~strategy~~future financing arrangements;

• our ~~projected~~understanding ~~operating~~of ~~results~~our competition;

• ~~completion~~market ~~of any pending transactions~~trends; and

• ~~our~~projected ~~ability~~capital ~~to obtain future financing arrangements;~~expenditures.

•Such forward-looking statements are based on our ~~understanding~~beliefs, assumptions, and expectations of our ~~competition;~~future performance taking into account all information currently known to us. These beliefs, assumptions, and expectations can change as a result of many potential events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity, results of operations, plans and other objectives may vary materially from those expressed in our forward-looking statements. Additionally, the following factors could cause actual results to vary from our forward-looking statements:

• ~~market~~factors ~~trends;~~discussed in this Form 10-K, including those set forth under the sections titled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and “Properties;”

• ~~projected~~general volatility of the capital ~~expenditures.~~markets;

~~Such~~• ~~forward-looking~~changes ~~statements~~in ~~are based on~~ our ~~beliefs,~~business assumptions, and expectations of our future performance taking into account all information currently known to us. These beliefs, assumptions, and expectations can change as a result of many potential events or ~~factors,~~investment ~~not all of which are known to us. If a change occurs, our business, financial condition, liquidity, results of operations, plans and other objectives may vary materially from those expressed in our~~ strategy;

~~-3-~~• availability, terms and deployment of capital;

~~Table~~• availability of ~~Contents~~qualified personnel;

~~forward-looking~~• ~~statements.~~changes ~~Additionally,~~in ~~the~~our ~~following~~industry ~~factors~~and ~~could~~the ~~cause~~market ~~actual~~in ~~results~~which towe ~~vary~~operate, ~~from~~interest ~~our~~rates ~~forward-looking~~or ~~statements:~~the general economy; and

• ~~factors discussed in this Form 10-K, including those set forth under~~ the ~~sections~~degree ~~titled “Risk Factors,” “Management’s Discussion~~ and ~~Analysis~~nature of ~~Financial~~our ~~Condition and Results of Operations,” “Business” and “Properties;”~~competition.

•You ~~general~~should ~~volatility~~not place undue reliance on such forward-looking statements. We undertake no obligation and do not intend to publicly update or revise any forward-looking statements to reflect future events or developments, whether as a result of ~~the~~new ~~capital~~information, ~~markets;~~future events or otherwise.

•-3- ~~changes in our business or investment strategy;~~

•PART ~~availability,~~I ~~terms and deployment of capital;~~

•ITEM ~~availability~~1. ~~of qualified personnel;~~BUSINESS

•OUR ~~changes~~COMPANY ~~in our industry and the market in which we operate, interest rates or the general economy; and~~

•W2007 Grace Acquisition I, Inc., a Tennessee corporation (the ~~degree~~Company), was incorporated on June 20, 2007. All of the common stock of the Company is owned by W2007 Grace I, LLC, a Tennessee limited liability company (Grace I). Grace I is owned by W2007 Finance Sub, LLC, a Delaware limited liability company, and ~~nature~~Whitehall Parallel Global Real Estate Limited Partnership 2007, a Delaware limited partnership (collectively, Whitehall). The general partner of ~~our~~Whitehall ~~competition~~Parallel Global Real Estate Limited Partnership 2007 and the partnerships owning W2007 Finance Sub, LLC is a wholly-owned subsidiary of The Goldman Sachs Group, Inc. (GS Group) and, therefore, is an affiliate of GS Group. GS Group in turn also controls Goldman, Sachs & Co. (GS) and Goldman Sachs Mortgage Company (GSMC). Consequently, GS and GSMC are also affiliates of Whitehall.

~~You~~Grace ~~should~~I, ~~not~~the ~~place~~Company, ~~undue~~Equity ~~reliance~~Inns, onInc. ~~such~~(Equity ~~forward-looking statements~~Inns), Grace II, L.P. We(Grace ~~undertake~~II) noand ~~obligation~~Equity Inns Partnership, L.P. (Equity LP) entered into an agreement and plan doof ~~not~~merger ~~intend~~pursuant to ~~publicly~~which ~~update~~Equity orInns ~~revise~~merged ~~any~~with ~~forward-looking~~and ~~statements~~into tothe ~~reflect~~Company ~~future~~and ~~events~~Grace orII ~~developments~~merged with and into Equity LP (such transactions collectively, ~~whether~~the asMerger). aThe ~~result~~Merger ofwas ~~new~~completed ~~information~~on October 25, ~~future~~2007. ~~events~~Prior orto ~~otherwise~~the Merger, the Company had no operations other than its activities in anticipation of the Merger.

~~PART~~Prior Ito the Merger, Equity Inns was a public hotel company and had elected to be taxed as a real estate investment trust (REIT) for federal income tax purposes. Equity Inns, through its wholly owned subsidiary, Equity Inns Trust (Equity Trust), was the sole general partner of Equity LP. Prior to the Merger, Equity Inns, Equity Trust and Equity LP (and its wholly owned subsidiaries) collectively owned 137 limited-service hotels located throughout the United States.

~~ITEM~~Subsequent to the Merger, Grace II changed its name to W2007 Equity Inns Partnership, L.P. (W2007 Equity LP). Since the Merger, Grace I has owned all of the shares of common stock of the Company and the Company has owned a 1% general partnership interest in W2007 Equity LP (with Grace I, our parent, owning a 1% general partnership interest and a 98% limited partnership interest). ~~BUSINESS~~The Company also owns 100% of W2007 Equity Inns Trust, a Maryland trust (the Trust).

~~OUR~~A ~~COMPANY~~group of 106 hotels (the OP Hotels) were owned by a series of wholly owned subsidiaries of W2007 Equity LP that were created in connection with financing for the Merger. GSMC acquired an option to purchase (the Purchase Option) a 97% equity interest in one of the Company’s wholly owned subsidiaries that indirectly owns all of the OP Hotels, which Purchase Option has since been acquired by an affiliate of Whitehall. A group of 20 hotels (the Trust Hotels) are owned by various limited partnerships with various corporations as their sole general partners, which corporations were wholly-owned by the Trust. These general partners each own a 1% ownership interest in the respective limited partnerships and W2007 Equity LP owns the remaining 99% ownership interest in the respective limited partnerships.

~~W2007~~Following ~~Grace~~the ~~Acquisition I~~Merger, ~~Inc.,~~the aCompany ~~Tennessee~~and ~~corporation~~Grace ~~(the~~I ~~Company),~~entered ~~was~~into ~~incorporated~~a onKeepwell ~~June 20~~Agreement, ~~2007.~~effective ~~All~~as of the ~~common~~date ~~stock~~ of the ~~Company~~Merger is(the ~~owned by~~Keepwell ~~W2007~~Agreement), pursuant to which Grace I, ~~LLC,~~agreed ato ~~Tennessee~~make ~~limited~~such ~~liability~~cash ~~company~~payments ~~(Grace~~to ~~I).~~the ~~Grace~~Company Ias isare ~~owned~~necessary byto ~~W2007~~enable ~~Finance~~the ~~Sub,~~Company ~~LLC,~~to asatisfy ~~Delaware~~its ~~limited~~obligations ~~liability~~to ~~company,~~the ~~and~~holders ~~Whitehall~~of ~~Parallel~~the ~~Global~~Company’s ~~Real~~8.75% ~~Estate~~Series ~~Limited~~B ~~Partnership~~cumulative ~~2007,~~preferred astock ~~Delaware~~(the ~~limited~~Series B preferred stock) and 9.00% ~~partnership~~Series C cumulative preferred stock (~~collectively~~the Series C preferred stock, ~~Whitehall).~~and ~~The~~collectively ~~general~~with ~~partner~~the ofSeries ~~Whitehall~~B ~~Parallel~~preferred ~~Global~~stock, ~~Real~~the ~~Estate~~preferred ~~Limited~~stock) ~~Partnership~~in ~~2007~~accordance ~~and~~with the ~~partnerships~~Company’s ~~owning~~charter ~~W2007~~when ~~Finance~~the ~~Sub~~Company determines, ~~LLC~~or is alegally ~~wholly-owned~~compelled, ~~subsidiary~~to satisfy ofsuch ~~The~~obligations. ~~Goldman~~To ~~Sachs Group~~date, ~~Inc.~~no ~~(GS~~payments ~~Group)~~ have been made and, ~~therefore,~~none isare andue ~~affiliate~~under ofthe GSKeepwell ~~Group~~Agreement. GSThe ~~Group~~Keepwell inAgreement ~~turn~~may ~~also~~be ~~controls~~terminated ~~Goldman,~~by ~~Sachs &~~Grace ~~Co.~~I ~~(GS)~~at ~~and~~any ~~Goldman~~time ~~Sachs~~upon ~~Mortgage~~30 ~~Company~~days’ ~~(GSMC).~~prior ~~Consequently,~~written GSnotice. ~~and~~There ~~GSMC~~ are ~~also~~no ~~affiliates~~third-party beneficiaries of ~~Whitehall~~the Keepwell Agreement.

~~Grace~~On IMarch 31, 2008, the Company, ~~Equity~~pursuant ~~Inns,~~to ~~Inc.~~ Section 856(~~Equity Inns~~g),(2) ~~Grace~~of ~~II,~~the ~~L.P.~~Internal ~~(Grace~~Revenue ~~II)~~Code ~~and~~of ~~Equity Inns Partnership~~1986, ~~L.P.~~as amended (~~Equity~~the LPCode), ~~entered~~revoked ~~into~~its anelection ~~agreement~~under ~~and plan~~Section 856(c)(1) of ~~merger~~the ~~pursuant~~Code to ~~which~~be ~~Equity~~a ~~Inns~~REIT ~~merged~~for ~~with and into~~ the ~~Company~~taxable ~~and~~year ~~Grace~~ending IIon ~~merged with and into Equity LP (such transactions collectively~~December 31, ~~the Merger)~~2008. ~~The~~Consequently, ~~Merger~~subsequent ~~was~~to ~~completed on October~~December 2531, 2007~~. Prior to the Merger~~, the Company ~~had~~is nosubject ~~operations~~to ~~other~~income ~~than~~taxes ~~its~~at statutory ~~activities~~corporate ~~in anticipation of the Merger~~rates.

~~Prior~~On toApril 11, 2014, the ~~Merger,~~subsidiaries of W2007 Equity ~~Inns~~LP ~~was~~that aowned ~~public~~the ~~hotel~~OP ~~company~~Hotels repaid the Mortgage Loan and ~~had~~the First ~~elected~~Mezzanine toLoan be(each ~~taxed~~ as adefined ~~real~~in ~~estate~~“Item ~~investment~~13. ~~trust~~Certain ~~(REIT)~~Relationships ~~for~~and ~~federal~~Related ~~income~~Transactions ~~tax~~and ~~purposes.~~Director ~~Equity~~Independence ~~Inns,~~–Transactions ~~through~~with ~~its~~related ~~wholly~~persons ~~owned~~– ~~subsidiary,~~GE ~~Equity~~Mortgage ~~Inns~~loan ~~Trust~~agreement ~~(Equity~~and ~~Trust~~Purchase Option”), ~~was~~in ~~the~~full ~~sole~~with ~~general~~the ~~partner~~ proceeds of ~~Equity~~a ~~LP.~~$865 ~~Prior~~million tonon-recourse ~~the~~mortgage ~~Merger,~~loan ~~Equity Inns,~~(the ~~Equity~~New ~~Trust~~Mortgage Loan) and ~~Equity~~a LP$111 ~~(and~~million ~~its~~non-recourse ~~wholly~~mezzanine ~~owned~~loan ~~subsidiaries~~(the New Mezzanine Loan), ~~collectively~~each ~~owned~~obtained ~~137~~from ~~limited-service~~German ~~hotels~~American ~~located~~Capital ~~throughout~~Corporation ~~the~~(GACC) ~~United~~and ~~States~~secured, directly or indirectly, by the OP Hotels.

-4-

~~Table~~The New Mortgage Loan was componentized, while the New Mezzanine Loan was made pursuant to two separate, pari passu notes. Each of ~~Contents~~the loans is interest-only for the duration of its term, with a balloon payment of principal due upon maturity. The initial scheduled maturity date of each loan was May 1, 2016, with three one-year extension options available upon the satisfaction of certain conditions, the most restrictive of which is a debt yield test. The second and third extension options, but not the first, required the payment of an extension fee of 0.25% of the outstanding principal amount of the loans.

~~Subsequent~~Under to the ~~Merger~~loan agreements, ~~Grace~~the IIborrowers ~~changed~~were ~~its~~required ~~name~~ to ~~W2007~~fund ~~Equity~~and ~~Inns~~maintain ~~Partnership,~~certain ~~L.P.~~reserves ~~(W2007~~with ~~Equity LP). Since~~ the ~~Merger~~lender, ~~Grace~~including Ireserves ~~has~~for required ~~owned~~repairs, ~~all~~taxes, ofinsurance, the ~~shares~~completion of ~~common~~franchise ~~stock~~agreement ofcapital improvements, the ~~Company~~replacement ~~and~~of ~~the~~FF&E ~~Company~~and ~~has~~rent ~~owned~~payable aunder 1%ground ~~general~~leases. ~~partnership~~In ~~interest~~addition, inunder ~~W2007~~the ~~Equity~~loan LPagreements, ~~(with~~if ~~Grace~~the I,borrowers ~~our~~did ~~parent,~~not ~~owning~~maintain a 1%certain aggregate ~~general~~debt ~~partnership~~yield, ~~interest~~their ~~and~~net aoperating ~~98%~~cash ~~limited partnership~~flows ~~interest)~~would be “trapped.” The ~~Company~~loan agreements also ~~owns~~specified ~~100%~~certain oflimited ~~W2007~~uses ~~Equity~~for ~~Inns~~the ~~Trust,~~“trapped” acash ~~Maryland~~flows. ~~trust~~Similar (cash traps were required in an event of default under either of the ~~Trust)~~loan agreements.

AIn ~~group~~June of ~~106~~2014, ~~hotels~~GACC ~~(the~~exercised OPits ~~Hotels)~~right ~~were owned~~under bythe aloan ~~series~~agreements offor ~~wholly~~the ~~owned~~new ~~subsidiaries~~loans ofto ~~W2007~~modify ~~Equity~~their LPrelative ~~that~~principal ~~were~~balances and ~~created~~interest inrates, ~~connection~~for ~~with~~purposes ~~financing~~of ~~for~~marketing and selling the ~~Merger~~loans. ~~GSMC~~As ~~acquired~~a anresult ~~option~~of tothese ~~purchase~~modifications, (the ~~Purchase~~New ~~Option)~~Mortgage Loan had a ~~97%~~weighted ~~equity~~average interest inrate ~~one~~ of the ~~Company’s~~one-month ~~wholly owned~~LIBOR ~~subsidiaries~~rate, ~~that~~plus ~~indirectly~~3.1113%, ~~owns~~while ~~all of~~ the OPNew ~~Hotels,~~Mezzanine ~~which~~Loan ~~Purchase~~had ~~Option~~an interest ~~has~~rate ~~since~~of ~~been~~the ~~acquired~~one-month byLIBOR anrate, ~~affiliate~~plus ~~of Whitehall~~4.7705%. AThe ~~group~~weighted ofaverage 20spread ~~hotels~~over ~~(the~~LIBOR ~~Trust~~for ~~Hotels)~~the ~~are~~New ~~owned~~Mortgage byLoan ~~various~~was ~~limited~~based ~~partnerships~~on ~~with~~the ~~various~~principal ~~corporations~~balances ~~as their~~under ~~sole~~the ~~general~~New ~~partners,~~Mortgage ~~which~~Loan ~~corporations~~as ~~were~~of ~~wholly-owned~~December 31, ~~by the Trust~~2014. ~~These~~The ~~general~~principal ~~partners~~balance ~~each~~and ~~own~~spread over aLIBOR 1%for ~~ownership~~each ~~interest~~component inof the ~~respective~~New ~~limited~~Mortgage ~~partnerships~~Loan and ~~W2007~~each ~~Equity~~note LPof ~~owns~~ the ~~remaining~~New ~~99%~~Mezzanine ~~ownership~~Loan ~~interest~~is inset ~~the respective~~forth ~~limited~~below ~~partnerships~~(as of December 31, 2014).

Following the Merger, the Company and Grace I entered into a Keepwell Agreement, effective as of the date of the Merger (the Keepwell Agreement), pursuant to which Grace I agreed to make such cash payments to the Company as are necessary to enable the Company to satisfy its obligations to the holders of the Company’s 8.75% Series B cumulative preferred stock (the Series B preferred stock) and 9.00% Series C cumulative preferred stock (the Series C preferred stock, and collectively with the Series B preferred stock, the preferred stock) in accordance with the Company’s charter when the Company determines, or is legally compelled, to satisfy such obligations. To date, no payments have been made and none are due under the Keepwell Agreement. The Keepwell Agreement may be terminated by Grace I at any time upon 30 days’ prior written notice. There are no third-party beneficiaries of the Keepwell Agreement.


Component/Note	Principal Balance		Spread (Over LIBOR)
New Mortgage Loan
Component A	$	271,878,000		0.93270	%
Component B	$	101,421,000		1.28270	%
Component C	$	66,000,000		1.68270	%
Component D	$	120,769,000		4.22678	%
Component E	$	167,658,000		5.32678	%
Component F	$	137,274,000		5.77678	%
New Mezzanine Loan
Note A-1	$	66,600,000		4.7705	%
Note A-2	$	44,400,000		4.7705	%

OnAt ~~March 31,~~the ~~2008,~~closing of the ~~Company~~refinancing, ~~pursuant~~GSMC toacquired ~~Section 856(g)(2)~~a 40% participation interest in each component of the New Mortgage Loan and a ~~Internal~~100% ~~Revenue~~participation ~~Code~~interest ofin ~~1986,~~Note asA-2 ~~amended~~of (the ~~Code),~~New ~~revoked~~Mezzanine ~~its~~Loan. ~~election~~In ~~under~~connection ~~Section 856(c)(1)~~with the origination of the ~~Code~~New toMortgage beLoan aand ~~REIT~~the ~~for~~New Mezzanine Loan, the ~~taxable~~borrowers ~~year~~thereunder ~~ending~~were onrequired ~~December 31,~~to ~~2008.~~and ~~Consequently,~~did ~~subsequent~~pay certain underwriting fees totaling $9.76 million to ~~December 31~~GACC, ~~2007,~~40% ~~the~~of ~~Company is~~which ~~subject~~GACC paid to ~~income~~GSMC ~~taxes~~in atconnection ~~statutory~~with ~~corporate~~GSMC’s ~~rates~~acquisition of the participation interests in the loans.

On ~~April~~June 1118, 2014, ~~the~~GACC ~~subsidiaries~~securitized each of ~~W2007 Equity LP that owned~~ the OPNew ~~Hotels repaid the~~ Mortgage Loan and the ~~First~~New Mezzanine Loan, ~~(each as defined in “Item 13. Certain Relationships~~ and ~~Related~~they ~~Transactions~~are ~~and~~now ~~Director~~held, ~~Independence~~respectively, ~~–Transactions~~by ~~with~~EQTY ~~related persons – GE Mortgage loan agreement and Purchase Option”) in full with the proceeds of a $865 million non~~2014-~~recourse~~INNS ~~mortgage loan (the New~~ Mortgage ~~Loan)~~Trust and aEQTY ~~$111 million non~~2014-~~recourse~~MZ ~~mezzanine loan (the New~~ Mezzanine ~~Loan),~~Trust. ~~each~~GSMC ~~obtained~~no ~~from~~longer ~~German~~holds ~~American~~any ~~Capital~~interest ~~Corporation~~in ~~(GACC) and secured, directly or indirectly, by~~ the ~~OP Hotels~~loans.

~~The~~Concurrently ~~New~~with ~~Mortgage~~the ~~Loan~~refinancing ~~was~~of ~~componentized, while~~ the ~~New~~Mortgage ~~Mezzanine~~ Loan ~~was~~and ~~made~~the ~~pursuant~~First toMezzanine ~~two separate~~Loan, ~~pari~~the ~~passu~~Purchase ~~notes.~~Option ~~Each~~was ofexercised ~~the~~by ~~loans~~WNT isHoldings, ~~interest-only~~LLC ~~for~~(WNT), ~~the~~an affiliate ~~duration~~ of ~~its~~Whitehall. ~~term,~~As ~~with~~ a ~~balloon~~result, ~~payment~~WNT ofholds ~~principal~~a ~~due~~97% ~~upon~~equity ~~maturity.~~interest ~~The~~in ~~initial~~W2007 ~~scheduled~~Equity ~~maturity~~Inns ~~date~~Senior ~~of each loan was May 1~~Mezz, ~~2016,~~LLC ~~with~~(Senior ~~three~~Mezz) ~~one-year extension~~who ~~options~~in ~~available~~turn ~~upon~~owns ~~the~~a ~~satisfaction~~100% ofindirect ~~certain~~interest ~~conditions,~~in the ~~most~~borrower ~~restrictive~~under ofthe ~~which~~New isMezzanine aLoan ~~debt~~and ~~yield~~the ~~test.~~borrowers ~~The~~under ~~second~~the ~~and~~New ~~third~~Mortgage Loan ~~extension~~(the ~~options,~~owner ~~but~~of ~~not~~ the ~~first,~~OP ~~required~~Hotels). ~~the~~The ~~payment~~remaining of3% anequity ~~extension~~interest ~~fee~~in ofSenior ~~0.25%~~Mezz ofis ~~the outstanding~~owned ~~principal~~indirectly ~~amount~~by ofW2007 ~~the~~Equity ~~loans~~LP.

-5-

~~Table~~The diagram below reflects our organizational structure as of ~~Contents~~December 31, 2013 and prior to the exercise of the Purchase Option and refinancing of the Company’s debt on April 11, 2014. Subsidiary entities have been consolidated to simplify the diagram.

LOGO

~~Under~~-6- the loan agreements, the borrowers were required to fund and maintain certain reserves with the lender, including reserves for required repairs, taxes, insurance, the completion of franchise agreement capital improvements, the replacement of FF&E and rent payable under ground leases. In addition, under the loan agreements, if the borrowers did not maintain a certain aggregate debt yield, their net operating cash flows would be “trapped.” The loan agreements also specified certain limited uses for the “trapped” cash flows. Similar cash traps were required in an event of default under either of the loan agreements.

In June of 2014, GACC exercised its right under the loan agreements for the new loans to modify their relative principal balances and interest rates, for purposes of marketing and selling the loans. As a result of these modifications, the New Mortgage Loan had a weighted average interest rate of the one-month LIBOR rate, plus 3.1113%, while the New Mezzanine Loan had an interest rate of the one-month LIBOR rate, plus 4.7705%. The ~~weighted~~diagram ~~average~~below ~~spread~~reflects ~~over~~our ~~LIBOR~~organizational ~~for~~structure ~~the New Mortgage Loan was based on the principal balances under the New Mortgage Loan~~ as of December 31, 2014. ~~The principal~~in ~~balance~~light ~~and~~of ~~spread~~the ~~over~~exercise ~~LIBOR for each component~~ of the ~~New~~Purchase ~~Mortgage~~Option ~~Loan~~ and ~~each~~the ~~note~~refinancing of the ~~New~~Company’s ~~Mezzanine~~debt. ~~Loan~~Subsidiary isentities ~~set~~have ~~forth~~been ~~below~~consolidated ~~(as~~to ofsimplify ~~December 31,~~the ~~2014)~~diagram.

LOGO

Component/Note	Principal Balance		Spread (Over LIBOR)
New Mortgage Loan
Component A	$	271,878,000		0.93270	%
Component B	$	101,421,000		1.28270	%
Component C	$	66,000,000		1.68270	%
Component D	$	120,769,000		4.22678	%
Component E	$	167,658,000		5.32678	%
Component F	$	137,274,000		5.77678	%
New Mezzanine Loan
Note A-1	$	66,600,000		4.7705	%
Note A-2	$	44,400,000		4.7705	%

-7-

AtSale ~~the closing~~ of ~~the~~Assets refinancing, GSMC acquired a 40% participation interest in each component of the New Mortgage Loan and a 100% participation interest in Note A-2 of the New Mezzanine Loan. In connection with the origination of

~~-6-~~On May 23, 2014, the Company’s subsidiaries owning the 20 Trust Hotels and WNT’s subsidiaries owning the 106 OP Hotels (the Sellers) entered into a real estate sale agreement (the Original Purchase Agreement), which was amended and restated on November 11, 2014 (the Agreement), with subsidiaries of ARCH as purchasers (the Purchasers), pursuant to which the Purchasers agreed to purchase the 116 hotels listed below (the Portfolio) instead of all 126 hotels. The portion of the purchase price allocated to the properties is also listed below.


Hotel Property	Location	Pool	Allocated Purchase Price
Courtyard	Asheville, NC	Pool I	$	17,374,707
Courtyard	Athens, GA	Pool I	$	12,520,081
Courtyard	Bowling Green, KY	Pool I	$	13,903,166
Courtyard	Carlsbad, CA	Pool II	$	22,686,825
Courtyard	Dallas, TX	Pool I	$	26,447,729
Courtyard	Dalton, GA	Pool II	$	10,241,716
Courtyard	Elmhurst, IL	Pool I	$	10,890,288
Courtyard	Gainesville, FL	Pool I	$	17,007,759
Courtyard	Houston, TX	Pool II	$	32,083,929
Courtyard	Jacksonville, FL	Pool I	$	6,606,165
Courtyard	Knoxville, TN	Pool I	$	12,580,307
Courtyard	Lexington, KY	Pool I	$	18,494,208
Courtyard	Louisville, KY	Pool I	$	39,005,197
Courtyard	Mobile, AL	Pool I	$	5,698,889
Courtyard	Orlando, FL	Pool I	$	16,204,908
Courtyard	Sarasota, FL	Pool I	$	11,537,396
Courtyard	Tallahassee, FL	Pool I	$	13,209,349
Embassy Suites	Orlando, FL	Pool I	$	23,802,848
Fairfield Inn & Suites	Atlanta, GA	Pool I	$	8,604,369
Fairfield Inn & Suites	Dallas, TX	Pool I	$	8,539,822
Hampton Inn	Addison, TX	Pool I	$	10,753,205
Hampton Inn	Albany, NY	Pool I	$	22,881,688
Hampton Inn	Alcoa, TN	Pool II	$	7,960,928
Hampton Inn	Austin, TX	Pool II	$	14,790,545
Hampton Inn	Beckley, WV	Pool I	$	19,447,700
Hampton Inn	Birmingham, AL	Pool I	$	9,284,784
Hampton Inn	Boca Raton, FL	Pool I	$	13,994,573
Hampton Inn	Charleston, SC	Pool I	$	8,205,785
Hampton Inn	Chattanooga, TN	Pool I	$	8,350,000
Hampton Inn	College Station, TX	Pool II	$	17,930,338
Hampton Inn	Colorado Springs, CO	Pool I	$	7,308,506
Hampton Inn	Columbus, GA	Pool I	$	5,900,000
Hampton Inn	Deerfield Beach, FL	Pool I	$	12,809,617
Hampton Inn	Dublin, OH	Pool I	$	12,621,596
Hampton Inn	East Lansing, MI	Pool II	$	14,252,046
Hampton Inn	Fayetteville, NC	Pool I	$	8,679,438
Hampton Inn	Gastonia, NC	Pool I	$	11,841,758
Hampton Inn	Glen Burnie, MD	Pool I	$	8,592,309
Hampton Inn	Grand Rapids, MI	Pool I	$	14,884,362
Hampton Inn	Gurnee, IL	Pool I	$	12,929,426
Hampton Inn	Indianapolis, IN	Pool II	$	10,499,736
Hampton Inn	Kansas City, MO	Pool I	$	9,271,676
Hampton Inn	Madison Heights, MI	Pool I	$	15,711,626
Hampton Inn	Maryland Heights, MO	Pool I	$	9,904,041
Hampton Inn	Memphis, TN	Pool I	$	15,347,648

~~the~~-8- New Mortgage Loan and the New Mezzanine Loan, the borrowers thereunder were required to and did pay certain underwriting fees totaling $9.76 million to GACC, 40% of which GACC paid to GSMC in connection with GSMC’s acquisition of the participation interests in the loans.

On June 18, 2014, GACC securitized each of the New Mortgage Loan and the New Mezzanine Loan, and they are now held, respectively, by EQTY 2014-INNS Mortgage Trust and EQTY 2014-MZ Mezzanine Trust. GSMC no longer holds any interest in the loans.


Hotel Property	Location	Pool	Allocated Purchase Price
Hampton Inn	Milford, CT	Pool II	$	7,400,000
Hampton Inn	Morgantown, WV	Pool I	$	17,681,700
Hampton Inn	Naperville, IL	Pool II	$	10,587,539
Hampton Inn	Norfolk, VA	Pool I	$	5,850,000
Hampton Inn	Northville , MI	Pool I	$	9,776,761
Hampton Inn	Orlando, FL	Pool II	$	13,886,925
Hampton Inn	Overland Park, KS	Pool I	$	10,842,223
Hampton Inn	Palm Beach Gardens, FL	Pool I	$	20,956,063
Hampton Inn	Peabody, MA	Pool I	$	13,059,655
Hampton Inn	Pickwick Dam, TN	Pool I	$	2,500,000
Hampton Inn	Scranton, PA	Pool I	$	13,865,600
Hampton Inn	State College, PA	Pool I	$	13,850,032
Hampton Inn	Urbana, IL	Pool II	$	24,279,177
Hampton Inn	West Columbia, SC	Pool I	$	6,000,000
Hampton Inn	West Palm Beach, FL	Pool I	$	15,115,059
Hampton Inn	Westlake, OH	Pool I	$	18,594,664
Hampton Inn & Suites	Boynton Beach, FL	Pool I	$	32,415,587
Hampton Inn & Suites	Franklin, TN	Pool I	$	21,016,491
Hilton Garden Inn	Louisville, KY	Pool II	$	19,185,347
Hilton Garden Inn	Rio Rancho, NM	Pool II	$	11,983,810
Hilton Garden Inn	Round Rock, TX	Pool I	$	16,424,572
Holiday Inn	Mt. Pleasant, SC	Pool I	$	7,900,000
Holiday Inn Express	Miami, FL	Pool I	$	8,511,530
Homewood Suites	Augusta, GA	Pool II	$	10,563,510
Homewood Suites	Chicago, IL	Pool I	$	73,288,289
Homewood Suites	Germantown, TN	Pool I	$	10,745,199
Homewood Suites	Orlando, FL	Pool II	$	31,582,545
Homewood Suites	Peabody, MA	Pool I	$	10,714,650
Homewood Suites	Phoenix , AZ	Pool I	$	24,809,678
Homewood Suites	San Antonio, TX	Pool I	$	17,635,891
Homewood Suites	Seattle, WA	Pool II	$	55,983,779
Homewood Suites	Windsor Locks, CT	Pool I	$	12,325,687
Hyatt Place	Albuquerque, NM	Pool I	$	21,994,086
Hyatt Place	Baton Rouge, LA	Pool I	$	13,075,389
Hyatt Place	Birmingham, AL	Pool I	$	10,225,494
Hyatt Place	Bloomington, MN	Pool I	$	14,667,789
Hyatt Place	Blue Ash, OH	Pool I	$	10,337,545
Hyatt Place	Columbus, OH	Pool I	$	13,352,636
Hyatt Place	Franklin, TN	Pool I	$	19,879,751
Hyatt Place	Glen Allen, VA	Pool I	$	9,128,843
Hyatt Place	Indianapolis, IN	Pool I	$	16,261,993
Hyatt Place	Las Vegas, NV	Pool I	$	19,906,596
Hyatt Place	Linthicum Heights, MD	Pool I	$	12,476,068
Hyatt Place	Memphis, TN	Pool I	$	15,767,331
Hyatt Place	Miami, FL	Pool I	$	19,884,261
Hyatt Place	Overland Park, KS	Pool I	$	9,949,330
Hyatt Place	Tampa, FL	Pool I	$	20,915,567
Residence Inn	Boise, ID	Pool I	$	12,668,682
Residence Inn	Chattanooga, TN	Pool I	$	13,499,683
Residence Inn	El Segundo, CA	Pool I	$	40,111,403
Residence Inn	Ft Myers, FL	Pool I	$	11,932,019
Residence Inn	Jacksonville, FL	Pool II	$	6,365,091

~~Concurrently~~-9- with the refinancing of the Mortgage Loan and the First Mezzanine Loan, the Purchase Option was exercised by WNT Holdings, LLC (WNT), an affiliate of Whitehall. As a result, WNT holds a 97% equity interest in W2007 Equity Inns Senior Mezz, LLC (Senior Mezz) who in turn owns a 100% indirect interest in the borrower under the New Mezzanine Loan and the borrowers under the New Mortgage Loan (the owner of the OP Hotels). The remaining 3% equity interest in Senior Mezz is owned indirectly by W2007 Equity LP.

The diagram below reflects our organizational structure prior to the exercise of the Purchase Option and refinancing of the Company’s debt on April 11, 2014. Subsidiary entities have been consolidated to simplify the diagram.


Hotel Property	Location	Pool	Allocated Purchase Price
Residence Inn	Knoxville, TN	Pool I	$	14,263,366
Residence Inn	Lexington, KY	Pool I	$	17,595,014
Residence Inn	Macon, GA	Pool I	$	4,907,309
Residence Inn	Mobile, AL	Pool I	$	9,523,623
Residence Inn	Portland, OR	Pool I	$	50,878,043
Residence Inn	San Diego, CA	Pool I	$	28,120,735
Residence Inn	Sarasota, FL	Pool I	$	13,964,493
Residence Inn	Savannah, GA	Pool I	$	11,231,254
Residence Inn	Tallahassee, FL	Pool I	$	12,114,907
Residence Inn	Tampa, FL	Pool I	$	10,709,571
Residence Inn	Tampa, FL	Pool I	$	17,062,551
SpringHill Suites	Asheville, NC	Pool II	$	14,796,371
SpringHill Suites	Grand Rapids, MI	Pool I	$	11,413,845
SpringHill Suites	Houston, TX	Pool I	$	13,200,866
SpringHill Suites	Lexington, KY	Pool I	$	18,243,803
SpringHill Suites	Round Rock, TX	Pool I	$	10,133,394
SpringHill Suites	San Antonio, TX	Pool I	$	5,661,802
SpringHill Suites	San Diego, CA	Pool I	$	21,190,695
TownePlace Suites	Savannah, GA	Pool II	$	9,777,538

~~-7-~~The Company closed the sale of the Portfolio on February 27, 2015. The aggregate purchase price for the Portfolio was approximately $1.808 billion, subject to certain adjustments and proration. The purchase price consisted of approximately $1.361 billion in cash and approximately $447 million in preferred equity interests (the Preferred Equity) to be issued by two subsidiaries of ARCH (Pool I Owner and Pool II Owner) that are now the indirect owners of the Portfolio. Pool I Owner indirectly owns the 96 OP Hotels that are part of the Portfolio (the Pool I Hotels) and Pool II Owner indirectly owns the 20 Trust Hotels (the Pool II Hotels).

~~Table~~A portion of ~~Contents~~the purchase price has been allocated to each of the individual hotels in the Portfolio (as indicated in the chart above). The consideration received at closing, net of transaction costs, proration and other purchase price adjustments, generally was allocated amongst the Sellers in accordance with the allocated purchase prices of the portions of the Portfolio owned by them unless such costs are clearly associated with a particular pool (for example, the defeasance costs associated with the 20 Trust Hotels’ mortgages).

At closing, the Preferred Equity in the Pool I Owner was issued to the Sellers of the Pool I Hotels and the Preferred Equity in the Pool II Owner was issued to the Sellers of the Pool II Hotels. In each case, for the 18-month period after the closing, the Preferred Equity will accrue an annual preferred return of 7.50%. Thereafter, the annual preferred return will increase to 8-.00%. The preferred return is payable in cash on a current basis each month. The Preferred Equity has a full liquidation preference to any other equity in the issuer.

~~Table~~The Preferred Equity is fully redeemable by the Pool I Owner or the Pool II Owner, as applicable, at any time at par plus any accrued and unpaid preferred return. In addition, there are certain mandatory redemption events, including a requirement that 50% of ~~Contents~~the Preferred Equity be redeemed by the third anniversary of the closing and 100% of the Preferred Equity be redeemed by the fourth anniversary of the closing.

The ~~diagram~~Sellers ~~below~~have ~~reflects~~the ~~our~~right ~~organizational~~to ~~structure~~replace asthe ofmanaging ~~December 31,~~member ~~2014~~and inassume ~~light~~full control of Pool I Owner or the ~~exercise~~Pool ofII Owner, respectively (including over any decision to refinance or sell Pool I Owner or the ~~Purchase~~Pool ~~Option~~II ~~and~~Owner, as applicable, or any properties) upon the ~~refinancing~~occurrence, subject to certain cure and grace periods, of ~~the~~any ~~Company’s~~“Changeover ~~debt~~Event” (as described below). ~~Subsidiary~~Changeover ~~entities~~Events ~~have~~consist ~~been~~of the ~~consolidated~~following types of events: failure to ~~simplify~~make ~~the~~payments ~~diagram~~when due; failure to contribute protective capital when required; breaches of representations, warranties and covenants; events of default under debt documents, lease agreements and franchise agreements; and insolvency events.

~~-9-~~Following a Changeover Event, in addition to a Seller’s mandatory redemption rights, each Seller has the right to exercise a buy/sell option pursuant to which an ARCH affiliate must propose a price to the respective Seller for Pool I Owner or Pool II Owner, as applicable, for which the ARCH affiliate would either (i) buy all of the applicable Seller’s interests in the respective holding company for the amount that such Seller would receive in distribution if such holding company were sold

~~Table~~-10- ~~of Contents~~

~~Sale~~ for such price, or (ii) sell to the applicable Seller all of ~~Assets~~the ARCH affiliate’s interest in such holding company for the amount that the ARCH affiliate would receive in distribution if such holding company were sold for such price. The applicable Seller would then have the right to elect to either sell its interests to the ARCH affiliate or to buy the ARCH affiliate’s interest at the applicable price.

OnThe ~~May 23,~~Purchasers ~~2014,~~assumed the ~~Company’s~~New ~~subsidiaries~~Mortgage ~~owning~~Loan ~~the 20 Trust Hotels~~ and ~~WNT’s subsidiaries owning~~ the ~~106~~New OPMezzanine ~~Hotels~~Loan ~~(the~~at Sellers) entered into a real estate sale agreement (the Original Purchase Agreement), which was amended and restated on November 11, 2014 (the Agreement), with subsidiaries of ARCH as purchasers (the Purchasers), pursuant to which the Purchasers agreed to purchase the 116 hotels listed below (the Portfolio) instead of all 126 hotelsclosing. ~~The portion of the purchase price allocated to the properties is also listed below.~~

Hotel Property	Location	Pool	Allocated PurchasePrice
Courtyard	Asheville, NC	Pool I	$	17,374,707
Courtyard	Athens, GA	Pool I	$	12,520,081
Courtyard	Bowling Green, KY	Pool I	$	13,903,166
Courtyard	Carlsbad, CA	Pool II	$	22,686,825
Courtyard	Dallas, TX	Pool I	$	26,447,729
Courtyard	Dalton, GA	Pool II	$	10,241,716
Courtyard	Elmhurst, IL	Pool I	$	10,890,288
Courtyard	Gainesville, FL	Pool I	$	17,007,759
Courtyard	Houston, TX	Pool II	$	32,083,929
Courtyard	Jacksonville, FL	Pool I	$	6,606,165
Courtyard	Knoxville, TN	Pool I	$	12,580,307
Courtyard	Lexington, KY	Pool I	$	18,494,208
Courtyard	Louisville, KY	Pool I	$	39,005,197
Courtyard	Mobile, AL	Pool I	$	5,698,889
Courtyard	Orlando, FL	Pool I	$	16,204,908
Courtyard	Sarasota, FL	Pool I	$	11,537,396
Courtyard	Tallahassee, FL	Pool I	$	13,209,349
Embassy Suites	Orlando, FL	Pool I	$	23,802,848

The Sellers were required to repay $72.1 million of the debt secured by the Remaining Hotels and obtained the release of the Remaining Hotels from the lien securing the debt. Following that repayment, the cash portion of the purchase price for the Pool I Hotels was reduced by the remaining outstanding principal amount of the assumed debt (approximately $903.9 million in the aggregate).

Whitehall and one of its affiliates provided customary non-10recourse carve-out guarantees and environmental indemnities in respect of the assumed debt (which they previously did). ARCH and certain of its affiliates guarantee the reimbursement of the Whitehall guarantors for any liabilities incurred under these guarantees and indemnities. In the event that the Whitehall guarantors have not been released from these guarantees and indemnities within the 18-month period following the closing, they will be entitled to receive an annual fee of $8 million.

~~Table~~The Pool II Hotels were delivered to the Purchasers free of ~~Contents~~any mortgages. Accordingly, at the closing, the Sellers defeased, or in the case of one mortgage prepaid, the debt that previously encumbered the Pool II Hotels. The Purchasers obtained new financing secured by those hotels to fund a portion of the purchase price.

Fairfield Inn & Suites	Atlanta, GA	Pool I	$	8,604,369
Fairfield Inn & Suites	Dallas, TX	Pool I	$	8,539,822
Hampton Inn	Addison, TX	Pool I	$	10,753,205
Hampton Inn	Albany, NY	Pool I	$	22,881,688
Hampton Inn	Alcoa, TN	Pool II	$	7,960,928
Hampton Inn	Austin, TX	Pool II	$	14,790,545
Hampton Inn	Beckley, WV	Pool I	$	19,447,700
Hampton Inn	Birmingham, AL	Pool I	$	9,284,784
Hampton Inn	Boca Raton, FL	Pool I	$	13,994,573
Hampton Inn	Charleston, SC	Pool I	$	8,205,785
Hampton Inn	Chattanooga, TN	Pool I	$	8,350,000
Hampton Inn	College Station, TX	Pool II	$	17,930,338
Hampton Inn	Colorado Springs, CO	Pool I	$	7,308,506
Hampton Inn	Columbus, GA	Pool I	$	5,900,000
Hampton Inn	Deerfield Beach, FL	Pool I	$	12,809,617
Hampton Inn	Dublin, OH	Pool I	$	12,621,596
Hampton Inn	East Lansing, MI	Pool II	$	14,252,046
Hampton Inn	Fayetteville, NC	Pool I	$	8,679,438
Hampton Inn	Gastonia, NC	Pool I	$	11,841,758
Hampton Inn	Glen Burnie, MD	Pool I	$	8,592,309
Hampton Inn	Grand Rapids, MI	Pool I	$	14,884,362
Hampton Inn	Gurnee, IL	Pool I	$	12,929,426
Hampton Inn	Indianapolis, IN	Pool II	$	10,499,736
Hampton Inn	Kansas City, MO	Pool I	$	9,271,676
Hampton Inn	Madison Heights, MI	Pool I	$	15,711,626
Hampton Inn	Maryland Heights, MO	Pool I	$	9,904,041
Hampton Inn	Memphis, TN	Pool I	$	15,347,648
Hampton Inn	Milford, CT	Pool II	$	7,400,000
Hampton Inn	Morgantown, WV	Pool I	$	17,681,700

W2007 Equity LP redeemed its junior subordinated debt in full at closing on February 27, 2015.

~~-11-~~W2007 Equity LP, WNT and Whitehall Street Global Real Estate Limited Partnership 2007, an affiliate of GS Group, GS and GSMC, engaged GS and Deutsche Bank Securities Inc. (DB) to provide advisory services in connection with a potential sale or other transaction relating to the 126 hotels. As a result of that engagement, upon consummation of the sale of the Portfolio in accordance with the Agreement, GS and DB were paid, in the aggregate, an advisory fee of 1.10% of the aggregate consideration paid to the Sellers. GS and DB split the advisory fee 60% and 40% respectively.

~~Table~~As of ~~Contents~~December 31, 2014 and 2013, we owned interests in 126 hotels located in 35 states comprising 14,934 rooms. As described above, the 20 Trust Hotels and 96 of the OP Hotels were sold on February 27, 2015.

Hampton Inn	Naperville, IL	Pool II	$	10,587,539
Hampton Inn	Norfolk, VA	Pool I	$	5,850,000
Hampton Inn	Northville , MI	Pool I	$	9,776,761
Hampton Inn	Orlando, FL	Pool II	$	13,886,925
Hampton Inn	Overland Park, KS	Pool I	$	10,842,223
Hampton Inn	Palm Beach Gardens, FL	Pool I	$	20,956,063
Hampton Inn	Peabody, MA	Pool I	$	13,059,655
Hampton Inn	Pickwick Dam, TN	Pool I	$	2,500,000
Hampton Inn	Scranton, PA	Pool I	$	13,865,600
Hampton Inn	State College, PA	Pool I	$	13,850,032
Hampton Inn	Urbana, IL	Pool II	$	24,279,177
Hampton Inn	West Columbia, SC	Pool I	$	6,000,000
Hampton Inn	West Palm Beach, FL	Pool I	$	15,115,059
Hampton Inn	Westlake, OH	Pool I	$	18,594,664
Hampton Inn & Suites	Boynton Beach, FL	Pool I	$	32,415,587
Hampton Inn & Suites	Franklin, TN	Pool I	$	21,016,491
Hilton Garden Inn	Louisville, KY	Pool II	$	19,185,347
Hilton Garden Inn	Rio Rancho, NM	Pool II	$	11,983,810
Hilton Garden Inn	Round Rock, TX	Pool I	$	16,424,572
Holiday Inn	Mt. Pleasant, SC	Pool I	$	7,900,000
Holiday Inn Express	Miami, FL	Pool I	$	8,511,530
Homewood Suites	Augusta, GA	Pool II	$	10,563,510
Homewood Suites	Chicago, IL	Pool I	$	73,288,289
Homewood Suites	Germantown, TN	Pool I	$	10,745,199
Homewood Suites	Orlando, FL	Pool II	$	31,582,545
Homewood Suites	Peabody, MA	Pool I	$	10,714,650
Homewood Suites	Phoenix , AZ	Pool I	$	24,809,678
Homewood Suites	San Antonio, TX	Pool I	$	17,635,891
Homewood Suites	Seattle, WA	Pool II	$	55,983,779

OUR HOTELS

~~-12-~~On February 27, 2015, the 20 Trust Hotels and 96 of the 106 OP Hotels were sold to affiliates of ARCH. The Remaining Hotels held by Senior Mezz were under contract to be sold for a combined purchase price of $100 million. The contract for the sale of the Remaining Hotels was terminated by the purchasers on May 6, 2015. On June 8, 2015, the Company entered into a reinstatement and amendment to the terminated contract, which among other things, reinstated the contract for nine of the Remaining Hotels, amended the purchase price to $85 million and scheduled closing for July 23, 2015. There can be no assurance as to whether or when the transaction will close, as to the actual proceeds that will be realized if it does close or as to what the assets might ultimately sell for in an alternate transaction if the pending transaction does not close. Even if the transaction does close, there can be no assurance as to when a distribution from such sale proceeds will be received by the Company. While the Company intends to sell the one Remaining Hotel not currently under contract to be sold, there can be no assurance as to whether or when that hotel will be sold, the form of consideration which may be received in respect of that hotel or whether the consideration which may be received in respect of that hotel will be greater or less than the purchase price allocated to that hotel in the terminated sale agreement. Even if a transaction for the one Remaining Hotel not currently under contract to be sold does occur, there can be no assurance as to when a distribution from such sale proceeds will be received by the Company.

~~Table~~Through our subsidiaries, we primarily owned premium-branded, limited-service hotels in the upscale and upper midscale segments of ~~Contents~~the lodging industry, as these segments are currently defined by Smith Travel Research (STR), a leading source of lodging industry data. Limited-service hotels typically generate most of their revenue from room rentals, have limited food and beverage outlets and meeting space and require fewer employees than traditional full-service hotels. We believe that premium-branded, limited-service hotels have the potential to generate attractive returns relative to other types of hotels due to their ability to achieve revenue per available room (RevPAR) levels at or close to those generated by traditional full-service hotels, while achieving higher profit margins due to their more efficient operating model and less volatile cash flows. See “Item 7. Management’s Discussion & Analysis” for additional information regarding RevPAR.

Homewood Suites	Windsor Locks, CT	Pool I	$	12,325,687
Hyatt Place	Albuquerque, NM	Pool I	$	21,994,086
Hyatt Place	Baton Rouge, LA	Pool I	$	13,075,389
Hyatt Place	Birmingham, AL	Pool I	$	10,225,494
Hyatt Place	Bloomington, MN	Pool I	$	14,667,789
Hyatt Place	Blue Ash, OH	Pool I	$	10,337,545
Hyatt Place	Columbus, OH	Pool I	$	13,352,636
Hyatt Place	Franklin, TN	Pool I	$	19,879,751
Hyatt Place	Glen Allen, VA	Pool I	$	9,128,843
Hyatt Place	Indianapolis, IN	Pool I	$	16,261,993
Hyatt Place	Las Vegas, NV	Pool I	$	19,906,596
Hyatt Place	Linthicum Heights, MD	Pool I	$	12,476,068
Hyatt Place	Memphis, TN	Pool I	$	15,767,331
Hyatt Place	Miami, FL	Pool I	$	19,884,261
Hyatt Place	Overland Park, KS	Pool I	$	9,949,330
Hyatt Place	Tampa, FL	Pool I	$	20,915,567
Residence Inn	Boise, ID	Pool I	$	12,668,682
Residence Inn	Chattanooga, TN	Pool I	$	13,499,683
Residence Inn	El Segundo, CA	Pool I	$	40,111,403
Residence Inn	Ft Myers, FL	Pool I	$	11,932,019
Residence Inn	Jacksonville, FL	Pool II	$	6,365,091
Residence Inn	Knoxville, TN	Pool I	$	14,263,366
Residence Inn	Lexington, KY	Pool I	$	17,595,014
Residence Inn	Macon, GA	Pool I	$	4,907,309
Residence Inn	Mobile, AL	Pool I	$	9,523,623
Residence Inn	Portland, OR	Pool I	$	50,878,043
Residence Inn	San Diego, CA	Pool I	$	28,120,735
Residence Inn	Sarasota, FL	Pool I	$	13,964,493
Residence Inn	Savannah, GA	Pool I	$	11,231,254

The diversity of our portfolio was such that, as of December 31, 2014 and 2013, no individual hotel exceeded 10% of the total rooms in the portfolio. Our brand and segment diversity of the Trust Hotels that were included in continuing operations as of December 31, 2014 and 2013 is illustrated by the following table:

-1311-

~~Table~~Brand ofand ~~Contents~~Segment (as defined by STR) Diversity

Residence Inn	Tallahassee, FL		Pool I	$	12,114,907
	Number of Hotels			Number of Rooms
Residence Inn	Tampa, FL		Pool I	$	10,709,571
Upscale hotels:
Residence Inn	Tampa, FL		Pool I	$	17,062,551
Homewood Suites (1)		3			478
SpringHill Suites	Asheville, NC		Pool II	$	14,796,371
Courtyard (2)		3			414
SpringHill Suites	Grand Rapids, MI		Pool I	$	11,413,845
Hilton Garden Inn (1)		2			241
SpringHill Suites	Houston, TX		Pool I	$	13,200,866
SpringHill Suites (2)		1			88
SpringHill Suites	Lexington, KY		Pool I	$	18,243,803
Residence Inn (2)		1			78
SpringHill Suites	Round Rock, TX		Pool I	$	10,133,394
		10			1,299
SpringHill Suites	San Antonio, TX		Pool I	$	5,661,802
Upper midscale hotels:
SpringHill Suites	San Diego, CA		Pool I	$	21,190,695
Hampton Inn (1)		9			1,163
TownePlace Suites	Savannah, GA		Pool II	$	9,777,538
TownePlace Suites (2)		1			95
		10			1,258
Total		20			2,557

~~The~~Franchise ~~Company~~affiliation closed the sale of the Portfolio on February 27, 2015. The aggregate purchase price for the Portfolio was approximately $1.808 billion, subject to certain adjustments and proration. The purchase price consisted of approximately $1.361 billion in cash and approximately $447 million in preferred equity interests (the Preferred Equity) to be issued by two subsidiaries of ARCH (Pool I Owner and Pool II Owner) that are now the indirect owners of the Portfolio. Pool I Owner indirectly owns the 96 OP Hotels that are part of the Portfolio (the Pool I Hotels) and Pool II Owner indirectly owns the 20 Trust Hotels (the Pool II Hotels).

~~A portion of the purchase price has been allocated to each of the individual hotels in the Portfolio~~ (~~as indicated in the chart above~~1). ~~The~~Hilton consideration received at closing, net of transaction costs, proration and other purchase price adjustments, generally was allocated amongst the Sellers in accordance with the allocated purchase prices of the portions of the Portfolio owned by them unless such costs are clearly associated with a particular pool (for example, the defeasance costs associated with the 20 Trust Hotels’ ~~mortgages).~~ Corporation

At(2) ~~closing,~~Marriott ~~the Preferred Equity in the Pool I Owner was issued to the Sellers of the Pool I Hotels and the Preferred Equity in the Pool II Owner was issued to the Sellers of the Pool II Hotels. In each case~~International, ~~for the 18-month period after the closing, the Preferred Equity will accrue an annual preferred return of 7~~Inc.50%. Thereafter, the annual preferred return will increase to 8.00%. The preferred return is payable in cash on a current basis each month. The Preferred Equity has a full liquidation preference to any other equity in the issuer.

The ~~Preferred Equity~~diversity isof ~~fully redeemable by~~ the ~~Pool~~OP IHotels ~~Owner~~was orsuch ~~the~~that, ~~Pool~~as IIof ~~Owner~~December 31, as2014 ~~applicable,~~and 2013 atno ~~any~~individual ~~time~~hotel atexceeded ~~par~~2% ~~plus~~of ~~any~~the ~~accrued~~total ~~and~~rooms ~~unpaid~~in ~~preferred~~the ~~return~~portfolio. InThe ~~addition,~~brand ~~there~~and ~~are~~segment ~~certain~~diversity ~~mandatory~~of ~~redemption~~the ~~events,~~OP ~~including~~Hotels ~~a requirement~~ that ~~50%~~are ofincluded ~~the Preferred~~in ~~Equity~~continuing beoperations ~~redeemed~~as ~~by the third anniversary~~ of ~~the~~December 31, ~~closing~~2014 and ~~100%~~2013 ofis ~~the~~illustrated ~~Preferred Equity be redeemed~~ by the ~~fourth~~following ~~anniversary~~table: ~~of the closing.~~

~~-14-~~Brand and Segment (as defined by STR) Diversity


	Number of Hotels		Number of Rooms
Upper upscale hotels:
Embassy Suites ⁽¹⁾		1		246
Upscale hotels:
Residence Inn ⁽²⁾		24		2,465
Hyatt Place ⁽³⁾		15		1,954
Courtyard ⁽²⁾		14		1,434
Homewood Suites ⁽¹⁾		7		900
SpringHill Suites ⁽²⁾		6		659
Hilton Garden Inn ⁽¹⁾		1		122

		67		7,534
Upper midscale hotels:
Hampton Inn ⁽¹⁾		34		4,114
Fairfield Inn ⁽²⁾		2		259
Holiday Inn ⁽⁴⁾		1		158
Holiday Inn Express ⁽⁴⁾		1		66

		38		4,597

Total		106		12,377

~~The~~Franchise ~~Sellers~~affiliation have the right to replace the managing member and assume full control of Pool I Owner or the Pool II Owner, respectively (including over any decision to refinance or sell Pool I Owner or the Pool II Owner, as applicable, or any properties) upon the occurrence, subject to certain cure and grace periods, of any “Changeover Event” (as described below). Changeover Events consist of the following types of events: failure to make payments when due; failure to contribute protective capital when required; breaches of representations, warranties and covenants; events of default under debt documents, lease agreements and franchise agreements; and insolvency events.

Following a Changeover Event, in addition to a Seller’s mandatory redemption rights, each Seller has the right to exercise a buy/sell option pursuant to which an ARCH affiliate must propose a price to the respective Seller for Pool I Owner or Pool II Owner, as applicable, for which the ARCH affiliate would either (i1) ~~buy~~ ~~all~~Hilton ofHotels the applicable Seller’s interests in the respective holding company for the amount that such Seller would receive in distribution if such holding company were sold for such price, or (ii) sell to the applicable Seller all of the ARCH affiliate’s interest in such holding company for the amount that the ARCH affiliate would receive in distribution if such holding company were sold for such price. The applicable Seller would then have the right to elect to either sell its interests to the ARCH affiliate or to buy the ARCH affiliate’s interest at the applicable price. Corporation

~~The~~(2) ~~Purchasers~~Marriott ~~assumed~~International, ~~the New Mortgage Loan and the New Mezzanine Loan at closing~~Inc.

~~Whitehall and one of its affiliates provided customary non-recourse carve-out guarantees and environmental indemnities in respect of the assumed debt~~ (~~which they previously did~~4). ~~ARCH~~Intercontinental ~~and~~Hotels certain of its affiliates guarantee the reimbursement of the Whitehall guarantors for any liabilities incurred under these guarantees and indemnities. In the event that the Whitehall guarantors have not been released from these guarantees and indemnities within the 18-month period following the closing, they will be entitled to receive an annual fee of $8 million. Group

~~The~~-12- Pool II Hotels were delivered to the Purchasers free of any mortgages. Accordingly, at the closing, the Sellers defeased, or in the case of one mortgage prepaid, the debt that previously encumbered the Pool II Hotels. The Purchasers obtained new financing secured by those hotels to fund a portion of the purchase price.

~~W2007~~Our ~~Equity~~hotel LPportfolio ~~redeemed~~included ~~its~~upper ~~junior~~upscale, ~~subordinated~~upscale ~~debt~~and inupper ~~full~~midscale athotels. ~~closing~~This onarray ~~February 27~~of product offerings coupled with a property mix that is spread between suburban and urban locations helped to insulate us from various economic climates, ~~2015~~including a depressed business travel climate.

~~-15-~~We believe the geographic diversity of our hotel portfolio helped to limit our exposure to any one market. The following table illustrates the geographic presence of the Trust Hotels that are included in continuing operations by the number of rooms as of December 31, 2014 and 2013:

~~Table~~Geographical ofDiversity ~~Contents~~

W2007 Equity LP, WNT and Whitehall Street Global Real Estate Limited Partnership 2007, an affiliate of GS Group, GS and GSMC, engaged GS and Deutsche Bank Securities Inc. (DB) to provide advisory services in connection with a potential sale or other transaction relating to the 126 hotels. As a result of that engagement, upon consummation of the sale of the Portfolio in accordance with the Agreement, GS and DB were paid, in the aggregate, an advisory fee of 1.10% of the aggregate consideration paid to the Sellers. GS and DB split the advisory fee 60% and 40% respectively.


Region (as defined by STR):
East North Central	18.5	%
East South Central	9.0	%
Mountain	5.0	%
New England	5.8	%
Pacific	12.0	%
South Atlantic	32.9	%
West South Central	16.8	%

AsThe offollowing ~~December 31,~~table ~~2014,~~illustrates wethe ~~owned~~geographical ~~interests~~presence inof ~~126~~the ~~hotels~~OP ~~located~~Hotels inthat 35are ~~states~~included ~~comprising~~in ~~14,934~~continuing ~~rooms.~~operations Asby ~~described above,~~ the number 20of ~~Trust~~rooms ~~Hotels~~as ~~and 96~~ of ~~the~~ ~~OP Hotels were sold on February~~December 2731, ~~2015.~~2014 and 2013:

~~OUR~~Geographical ~~HOTELS~~Diversity

On February 27, 2015, the 20 Trust Hotels and 96 of the 106 OP Hotels were sold to affiliates of ARCH. The Remaining Hotels held by Senior Mezz are under contract to be sold for a combined purchase price of $100 million. The contract has customary closing conditions and closing is currently scheduled for June 8, 2015. There can be no assurance as to whether or when the transaction will close, as to the actual proceeds that will be realized if it does close, or as to what the assets might ultimately sell for in an alternate transaction if the pending transaction does not close. Even if the transaction does close, there can be no assurance as to when a distribution from such sale proceeds will be received by the Company.


Region (as defined by STR):
East North Central	13.3	%
East South Central	15.9	%
Middle Atlantic	6.7	%
Mountain	7.3	%
New England	3.5	%
Pacific	4.4	%
South Atlantic	31.7	%
West North Central	6.7	%
West South Central	10.5	%

~~Through~~We ~~our~~believe ~~subsidiaries,~~that wemultiple ~~primarily~~brands ~~owned~~at ~~premium-branded, limited-service hotels in~~ the upscale and upper midscale ~~segments~~levels ofhelped ~~the~~to ~~lodging~~insulate ~~industry,~~our asasset ~~these~~portfolio ~~segments~~against ~~are currently defined by Smith Travel Research (STR), a leading source of lodging industry data. Limited-service hotels typically generate~~the ~~most~~volatility of ~~their~~individual ~~revenue~~brand ~~from~~results room rentals, have limited food and beverage outlets and meeting space and require fewer employees than traditional full-service hotels. We believe that premium-branded, limited-service hotels have the potential to generate attractive returns relative to ~~other~~industry ~~types of hotels due to their ability to achieve revenue per available room (~~RevPAR) ~~levels~~performance. atThe orfollowing ~~close~~table tosummarizes ~~those~~key ~~generated~~performance indicators, by ~~traditional full-service hotels~~brand, ~~while~~of ~~achieving~~the ~~higher~~Trust ~~profit~~Hotels ~~margins~~that ~~due~~are ~~to their~~included ~~more~~in ~~efficient~~continuing ~~operating~~operations ~~model and less volatile cash flows. See “Item 7. Management’s Discussion & Analysis”~~ for ~~additional~~the ~~information~~periods ~~regarding~~below: ~~RevPAR.~~

The diversity of our portfolio was such that, as of December 31, 2014, no individual hotel exceeded 10% of the total rooms in the


					Year Ended December 31, 2014							Year Ended December 31, 2013
Brand	Number of Hotels		Number of Rooms		% Occupancy			Average Daily Rate (ADR)		RevPAR		% Occupancy			Average Daily Rate (ADR)		RevPAR
Hampton Inn		9		1,163		74.4	%	$	100.91	$	75.10		71.1	%	$	97.81	$	69.54
Residence Inn		1		78		81.7	%	$	94.61	$	77.26		78.5	%	$	87.42	$	68.58
Courtyard		3		414		67.4	%	$	120.64	$	81.26		65.7	%	$	117.86	$	77.41
Homewood Suites		3		478		78.6	%	$	133.87	$	105.23		81.1	%	$	121.53	$	98.62
SpringHill Suites		1		88		74.5	%	$	120.06	$	89.42		75.0	%	$	112.58	$	84.42
Hilton Garden Inn		2		241		70.8	%	$	102.58	$	72.60		67.6	%	$	98.71	$	66.71
TownePlace Suites		1		95		83.2	%	$	79.16	$	65.87		72.0	%	$	76.11	$	54.81

		20		2,557		74.3	%	$	110.05	$	81.72		72.2	%	$	105.23	$	75.94

-1613-

~~Table~~The following table summarizes key performance indicators, by brand, of ~~Contents~~the OP Hotels that are included in continuing operations for the periods below:

portfolio. Our brand and segment diversity of the Trust Hotels that were included in continuing operations as of December 31, 2014 is illustrated by the following table:


					Year Ended December 31, 2014							Year Ended December 31, 2013
Brand	Number of Hotels		Number of Rooms		% Occupancy			Average Daily Rate (ADR)		RevPAR		% Occupancy			Average Daily Rate (ADR)		RevPAR
Hampton Inn		34		4,114		71.3	%	$	104.20	$	74.34		69.8	%	$	99.42	$	69.41
Residence Inn		24		2,465		77.7	%	$	115.63	$	89.86		76.5	%	$	111.60	$	85.43
Hyatt Place		15		1,954		75.2	%	$	101.19	$	76.12		72.6	%	$	96.60	$	70.15
Courtyard		14		1,434		72.6	%	$	112.99	$	82.04		70.8	%	$	107.85	$	76.35
Homewood Suites		7		900		79.7	%	$	133.80	$	106.59		77.8	%	$	128.65	$	100.15
SpringHill Suites		6		659		74.5	%	$	106.65	$	79.49		71.7	%	$	100.95	$	72.41
Hilton Garden Inn		1		122		72.0	%	$	102.86	$	74.02		70.1	%	$	100.10	$	70.19
Fairfield Inn & Suites		2		259		67.8	%	$	87.44	$	59.30		59.1	%	$	86.09	$	50.92
Embassy Suites		1		246		75.4	%	$	118.84	$	89.61		79.6	%	$	110.19	$	87.68
Holiday Inn		1		158		53.8	%	$	109.38	$	58.80		59.3	%	$	99.26	$	58.84
Holiday Inn Express		1		66		83.4	%	$	123.33	$	102.92		80.5	%	$	118.20	$	95.16

		106		12,377		74.0	%	$	109.68	$	81.17		72.3	%	$	104.99	$	75.90

~~Brand~~STRATEGY ~~and Segment (as defined by STR) Diversity~~

	Number of Hotels		Number of Rooms
Upscale hotels:
Homewood Suites (1)		3		478
Courtyard (2)		3		414
Hilton Garden Inn (1)		2		241
SpringHill Suites (2)		1		88
Residence Inn (2)		1		78
		10		1,299
Upper midscale hotels:
Hampton Inn (1)		9		1,163
TownePlace Suites (2)		1		95
		10		1,258
Total		20		2,557

On February 27, 2015, the 20 Trust Hotels and 96 of the 106 OP Hotels were sold to affiliates of ARCH.

~~Franchise~~The ~~affiliation~~Remaining Hotels held by Senior Mezz were under contract to be sold for a combined purchase price of $100 million. The contract for the sale of the Remaining Hotels was terminated by the purchasers on May 6, 2015. On June 8, 2015, the Company entered into a reinstatement and amendment to the terminated contract, which among other things, reinstated the contract for nine of the Remaining Hotels, amended the purchase price to $85 million and scheduled closing for July 23, 2015. There can be no assurance as to whether or when the transaction will close, as to the actual proceeds that will be realized if it does close or as to what the assets might ultimately sell for in an alternate transaction if the pending transaction does not close. Even if the transaction does close, there can be no assurance as to when a distribution from such sale proceeds will be received by the Company. While the Company intends to sell the one Remaining Hotel not currently under contract to be sold, there can be no assurance as to whether or when that hotel will be sold, the form of consideration which may be received in respect of that hotel or whether the consideration which may be received in respect of that hotel will be greater or less than the purchase price allocated to that hotel in the terminated sale agreement. Even if a transaction for the one Remaining Hotel not currently under contract to be sold does occur, there can be no assurance as to when a distribution from such sale proceeds will be received by the Company.

~~(1)~~We ~~Hilton~~do not have any current plans to acquire any additional hotels, although if a Changeover Event occurs, we and Senior Mezz may take control over the Portfolio. In addition, our ability to generate returns on the Remaining Hotels ~~Corporation~~may be limited to the extent of the proceeds in the proposed sale.

~~(2)~~SEGMENT ~~Marriott~~REPORTING ~~International, Inc.~~

The ~~diversity~~Company has considered each of ~~the~~its hotels OPto ~~Hotels~~be ~~was~~an ~~such~~operating ~~that~~segment, asnone of ~~December 31,~~which ~~2014~~meets nothe threshold for a reportable segment as prescribed by accounting principles generally accepted in the United States (GAAP). The Company allocates resources and assesses operating performance based on each individual hotel. ~~exceeded~~Additionally, 2%the Company aggregates these individually immaterial operating segments into one reporting segment using the criteria established by the authoritative accounting guidance, including the similarities of its product offering, types of customers and method of providing service. Additional segment information may be found in the ~~total~~footnotes to our consolidated financial statements located in “Item 8. Financial Statements and Supplementary Data.”

~~-17-~~EMPLOYEES

~~Table~~The Company has no employees. During 2014 and 2013, all persons involved in the day-to-day operation of ~~Contents~~the Company’s hotels were employed by third party management companies engaged pursuant to hotel management agreements. In addition, all persons supporting the Company through asset management and various other activities were employed by a related party engaged pursuant to an asset management agreement.

~~rooms~~-14- ~~in the portfolio. The brand and segment diversity of the OP Hotels that are included in continuing operations as of December 31, 2014 is illustrated by the following table:~~

~~Brand~~COMPETITION ~~and Segment (as defined by STR) Diversity~~

	Number of Hotels		Number of Rooms
Upper upscale hotels:
Embassy Suites (1)		1		246
Upscale hotels:
Residence Inn (2)		24		2,465
Hyatt Place (3)		15		1,954
Courtyard (2)		14		1,434
Homewood Suites (1)		7		900
SpringHill Suites (2)		6		659
Hilton Garden Inn (1)		1		122
		67		7,534
Upper midscale hotels:
Hampton Inn (1)		34		4,114
Fairfield Inn (2)		2		259
Holiday Inn (4)		1		158
Holiday Inn Express (4)		1		66
		38		4,597
Total		106		12,377

The hotel industry is highly competitive with various participants competing on the basis of price, level of service and geographic location. Each of our hotels is located in a developed area that includes other hotel properties. Many of our management agreements have not had restrictions on the ability of the companies that manage our hotels to convert, franchise or develop other hotel properties in our markets. As a result, our hotels in a given market may compete with other hotels that our managers may own, invest in, manage or franchise. The number of competitive hotel properties in a particular area could have a material adverse effect on the occupancy, average daily rate (ADR) and RevPAR of our hotels. We believe that brand recognition, location, the quality of the hotel, consistency of services provided, supply of rooms in the market and price are and have been the principal competitive factors affecting our hotels.

~~Franchise~~FRANCHISE ~~affiliation~~AGREEMENTS

~~(1)~~A ~~Hilton~~part ~~Hotels~~of ~~Corporation~~our asset management program is the licensing of our hotels under nationally franchised brands. We believe that the public’s perception of quality associated with a franchisor is an important feature in the operation of a hotel. We also believe that franchised properties generally have higher levels of RevPAR than unfranchised properties due to access to national reservation systems and national advertising and marketing programs provided by franchisors. Our franchise agreements generally have initial terms ranging from five to 21 years and expire between 2015 and 2028.

We typically have had commitments to franchisors to make certain capital improvements to our hotels (2)prior ~~Marriott~~to ~~International~~April 11, ~~Inc~~2014, this included all 126 hotels; after April 11, 2014, this included only the 20 Trust Hotels), which will be funded primarily through our operating cash flows. We made capital improvements of approximately $12 million and $24 million to our hotels in 2014 and 2013, respectively.

~~(3)~~INFLATION ~~Hyatt Corporation~~

~~(4)~~Operators ~~Intercontinental~~of ~~Hotels~~hotels, ~~Group~~in general, possess the ability to adjust room rates daily to reflect the effects of inflation. However, competitive pressures may limit the ability of the companies that manage and operate our hotels to raise room rates.

~~-18-~~SEASONALITY

~~Table~~Our ofoperations ~~Contents~~historically have been seasonal in nature, generally reflecting higher RevPAR during the second and third quarters. This seasonality can be expected to cause fluctuations in our quarterly operating results.

~~Our~~ENVIRONMENTAL ~~hotel~~MATTERS portfolio included upper upscale, upscale and upper midscale hotels. This array of product offerings coupled with a property mix that is spread between suburban and urban locations helped to insulate us from various economic climates, including a depressed business travel climate.

WeUnder ~~believe~~various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the ~~geographic~~costs ~~diversity~~of removal or remediation of ~~our~~hazardous ~~hotel~~or ~~portfolio~~toxic ~~helped~~substances on, under or in such property. These laws may impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. In addition, certain environmental laws and common law principles could be used to ~~limit~~impose ~~our~~liability for release of asbestos-containing materials, and third parties may seek recovery from owners or operators of real properties for personal injury associated with exposure to ~~any~~released ~~one~~asbestos-containing ~~market~~materials. ~~The~~Environmental ~~following~~laws ~~table~~also ~~illustrates~~may ~~the geographic~~impose ~~presence~~restrictions ofon the ~~Trust~~manner ~~Hotels~~in ~~that~~which ~~are~~property ~~included~~may inbe ~~continuing~~used ~~operations~~or bybusinesses ~~the~~may ~~number~~be operated, and these restrictions may require corrective or other expenditures. In connection with our current or prior ownership or operation of ~~rooms~~hotels, aswe may be potentially liable for various environmental costs or liabilities. Although we are currently not aware of ~~December 31~~any material environmental claims pending or threatened against us, ~~2014:~~we can offer no assurance that a material environmental claim will not be asserted against us in the future.

~~Geographical~~In ~~Diversity~~connection with the Merger, Phase I environmental site assessments were obtained for our hotels. These assessments included historical reviews of the hotels, reviews of certain public records, preliminary investigations of the sites and surrounding properties, screenings for hazardous and toxic substances and underground storage tanks, and the preparation and issuance of a written report. These assessments did not include invasive procedures to detect contaminants from former operations of our hotels or those migrating from neighbors or caused by third parties. These assessments have not revealed any environmental liability that we believe would have a material adverse effect on our business, assets, results of operations or liquidity, nor are we aware of any such liability or material environmental issues.

Region (as defined by STR):
East North Central	18.5	%
East South Central	9.0	%
Mountain	5.0	%
New England	5.8	%
Pacific	12.0	%
South Atlantic	32.9	%
West South Central	16.8	%

ITEM 1A.

RISK FACTORS

The risks described below could materially and adversely affect our business, financial condition, cash flow and ability to make distributions to our shareholders. The following ~~table~~risk ~~illustrates~~factors ~~the~~are ~~geographical~~not ~~presence~~necessarily ofexhaustive, ~~the~~particularly OPas ~~Hotels~~to possible future events, and new risk factors may arise from time to time. Many things can happen that ~~are~~can ~~included~~cause inour ~~continuing~~actual ~~operations~~financial and operating results to be different than those described or anticipated by ~~the number~~us ofin ~~rooms~~our asSecurities ofand ~~December 31,~~Exchange ~~2014:~~Commission

~~Geographical~~-15- ~~Diversity~~

Region (as defined by STR):
East North Central	13.3	%
East South Central	15.9	%
Middle Atlantic	6.7	%
Mountain	7.3	%
New England	3.5	%
Pacific	4.4	%
South Atlantic	31.7	%
West North Central	6.7	%
West South Central	10.5	%

(SEC) filings. As noted above, references to “our hotel properties” and similar references herein for periods from and after February 27, 2015 refer to the Remaining Hotels, which are owned by Senior Mezz in which we own a 3% equity interest. See “Item 1. Business” for additional information.

~~-19-~~Risks related to our business

~~Table~~As a result of ~~Contents~~the sale of the Portfolio, we are at risk of not collecting the preferred return and the initial capital contribution of the Preferred Equity either through the interest held by us or our 3% equity interest in Senior Mezz.

WeAt ~~believe~~the ~~that~~closing ~~multiple~~of ~~brands~~the atsale of the ~~upscale~~Portfolio, ~~and~~the Preferred ~~upper~~Equity ~~midscale~~in ~~levels~~the ~~helped~~Pool toI ~~insulate~~Owner ~~our~~was ~~asset~~issued ~~portfolio against~~to the ~~volatility~~Sellers of ~~individual~~the ~~brand~~Pool ~~results~~I ~~relative~~Hotels and the Preferred Equity in the Pool II Owner was issued to ~~industry~~the ~~RevPAR~~Sellers ~~performance~~of the Pool II Hotels. The ~~following~~Preferred ~~table~~Equity ~~summarizes~~is ~~key~~our ~~performance~~most ~~indicators~~significant asset as of March 31, 2015 through both the Preferred Equity owned directly by ~~brand,~~us ofand the ~~Trust~~Preferred ~~Hotels~~Equity ~~that~~owned ~~are~~indirectly ~~included~~through our 3% equity interest in ~~continuing~~Senior ~~operations~~Mezz. In each case, for the ~~periods~~18-month ~~below:~~period after the closing, the Preferred Equity will accrue an annual preferred return of 7.50%. Thereafter, the annual preferred return will increase to 8.00%. The preferred return is payable in cash on a current basis each month. The Preferred Equity has a full liquidation preference prior to any other equity in the issuer.

					Year Ended December 31, 2014							Year Ended December 31, 2013
Brand	NumberofHotels		NumberofRooms		%Occupancy			AverageDaily Rate(ADR)		RevPAR		%Occupancy			AverageDaily Rate(ADR)		RevPAR
Hampton Inn		9		1,163		74.4	%	$	100.91	$	75.10		71.1	%	$	97.81	$	69.54
Residence Inn		1		78		81.7	%	$	94.61	$	77.26		78.5	%	$	87.42	$	68.58
Courtyard		3		414		67.4	%	$	120.64	$	81.26		65.7	%	$	117.86	$	77.41
Homewood Suites		3		478		78.6	%	$	133.87	$	105.23		81.1	%	$	121.53	$	98.62
SpringHill Suites		1		88		74.5	%	$	120.06	$	89.42		75.0	%	$	112.58	$	84.42
Hilton Garden Inn		2		241		70.8	%	$	102.58	$	72.60		67.6	%	$	98.71	$	66.71
TownePlace Suites		1		95		83.2	%	$	79.16	$	65.87		72.0	%	$	76.11	$	54.81
		20		2,557		74.3	%	$	110.05	$	81.72		72.2	%	$	105.23	$	75.94

The Preferred Equity is fully redeemable at any time at par plus any accrued and unpaid preferred return. In addition, there are certain mandatory redemption events, including a requirement that 50% of the Preferred Equity be redeemed by the third anniversary of the closing and 100% of the Preferred Equity be redeemed by the fourth anniversary of the closing.

~~-20-~~The ability of the Pool I Owner and the Pool II Owner to make the payments described above will depend upon the performance of the Portfolio. Generally, the risks to our business relating to hotels apply to the Portfolio and also to the ability of the Pool I Owner and the Pool II Owner to make payments to the Sellers in respect of the Preferred Equity. There can be no assurance as to whether or when the Sellers will receive payment of its initial capital contribution in respect of the Preferred Equity.

~~Table~~In addition, in the event that a Changeover Event occurs, we and Senior Mezz may assume control of ~~Contents~~the Portfolio, which would be subject to the risks inherent in owning a portfolio of hotel assets.

~~The~~Our ~~following~~business ~~table~~depends ~~summarizes~~upon ~~key~~demand ~~performance~~for ~~indicators,~~hotel byrooms. ~~brand,~~Any ofsetback in the OPeconomic ~~Hotels~~recovery ~~that~~will ~~are~~adversely ~~included~~affect ~~in continuing~~our ~~operations~~future ~~for~~financial ~~the~~condition ~~periods~~and ~~below:~~cash flow.

					Year Ended December 31, 2014							Year Ended December 31, 2013
Brand	NumberofHotels		NumberofRooms		%Occupancy			AverageDaily Rate(ADR)		RevPAR		%Occupancy			AverageDaily Rate(ADR)		RevPAR
Hampton Inn		34		4,114		71.3	%	$	104.20	$	74.34		69.8	%	$	99.42	$	69.41
Residence Inn		24		2,465		77.7	%	$	115.63	$	89.86		76.5	%	$	111.60	$	85.43
Hyatt Place		15		1,954		75.2	%	$	101.19	$	76.12		72.6	%	$	96.60	$	70.15
Courtyard		14		1,434		72.6	%	$	112.99	$	82.04		70.8	%	$	107.85	$	76.35
Homewood Suites		7		900		79.7	%	$	133.80	$	106.59		77.8	%	$	128.65	$	100.15
SpringHill Suites		6		659		74.5	%	$	106.65	$	79.49		71.7	%	$	100.95	$	72.41
Hilton Garden Inn		1		122		72.0	%	$	102.86	$	74.02		70.1	%	$	100.10	$	70.19
Fairfield Inn & Suites		2		259		67.8	%	$	87.44	$	59.30		59.1	%	$	86.09	$	50.92
Embassy Suites		1		246		75.4	%	$	118.84	$	89.61		79.6	%	$	110.19	$	87.68
Holiday Inn		1		158		53.8	%	$	109.38	$	58.80		59.3	%	$	99.26	$	58.84
Holiday Inn Express		1		66		83.4	%	$	123.33	$	102.92		80.5	%	$	118.20	$	95.16
		106		12,377		74.0	%	$	109.68	$	81.17		72.3	%	$	104.99	$	75.90

Our hotel properties experienced declining operating performance across various U.S. markets during the recent economic recession. Our business prospects depend upon continued revenue and net income growth from anticipated improvement in demand for hotel rooms as the economic recovery continues, both in respect of the Preferred Equity and in the Remaining Hotels. We, however, cannot provide any assurances that demand for hotel rooms will increase from current levels, or the time or extent of any such demand growth. If demand does not continue to increase as the economy recovers, or if there is a setback in the economic recovery resulting in weakening demand, our operating results could be adversely affected. As a result, any delay in the continued economic recovery or a new economic downturn will adversely affect our future cash flow.

~~STRATEGY~~Our returns depend on management of our hotels by third parties, and ineffective or poor management could result in losses to our shareholders.

~~On February 27,~~Although ~~2015~~we and WNT own the Remaining Hotels, third party operators operating under management agreements control the 20daily ~~Trust~~operations ~~Hotels~~of ~~and~~these 96hotels. Under the terms of the ~~106~~management OPagreements, ~~Hotels~~our ~~were~~and ~~sold~~WNT’s ability to ~~affiliates~~participate ofin ~~ARCH.~~operating ~~The~~decisions regarding the Remaining Hotels ~~are~~is ~~under~~limited. ~~contract~~We toand beWNT ~~sold~~depend ~~for~~on athese ~~combined~~third ~~purchase~~party ~~price~~management ofcompanies ~~$100~~to ~~million.~~adequately ~~The~~operate ~~contract~~the ~~has~~hotels ~~customary~~as provided ~~closing~~in ~~conditions and~~the ~~closing~~management isagreements. ~~currently~~Neither ~~scheduled~~we ~~for~~nor ~~June 8,~~WNT ~~2015.~~have ~~There~~the ~~can~~authority beto norequire ~~assurance~~any ashotel to ~~whether~~be operated in a particular manner or ~~when~~to govern any particular aspect of the ~~transaction~~daily ~~will~~operations ~~close~~of any hotel (for instance, assetting toroom rates). Thus, even if we or WNT believe the ~~actual~~hotels ~~proceeds~~are ~~that~~being ~~will~~operated beinefficiently ~~realized~~or ifin ita manner that does ~~close~~not result in satisfactory occupancy rates, orRevPAR asand ADR, we may not be able to ~~what~~cause the ~~assets~~management ~~might~~company ~~ultimately~~to ~~sell~~change its method of operation of our ~~for~~hotels. inWe anand ~~alternate~~WNT ~~transaction~~can only seek redress if a management company violates the ~~pending~~terms ~~transaction~~of ~~does~~the ~~not~~applicable ~~close.~~management ~~Even~~agreement, ifand then only to the ~~transaction~~extent ~~does~~of ~~close~~the remedies provided for under the terms of the management agreement. Additionally, ~~there~~in ~~can~~the event bethat noany ~~assurance~~of asthe management companies that manage our hotels need to ~~when~~be areplaced, ~~distribution~~we ~~from~~and ~~such~~WNT ~~sale~~may ~~proceeds~~experience ~~will~~significant bedisruptions ~~received~~at bythe hotels and in the ~~Company~~operations generally.

We-16- do not have any current plans to acquire any additional hotels, although if a Changeover Event occurs, we and Senior Mezz may take control over the Portfolio. In addition, our ability to generate returns on the Remaining Hotels may be limited to the extent of the proceeds in the proposed sale.

~~SEGMENT~~The ~~REPORTING~~terms of our franchise agreements and the risk of loss of a franchise could adversely affect our business.

The ~~Company~~Remaining ~~has~~Hotels ~~considered~~operate ~~each~~under offranchise ~~its hotels to be an operating segment~~agreements, ~~none~~and ofwe ~~which~~are ~~meets~~subject to the ~~threshold~~risks ~~for~~that aare ~~reportable~~found ~~segment as prescribed by accounting principles generally accepted~~ in ~~the~~concentrating ~~United~~our ~~States~~hotel ~~(GAAP).~~investments ~~The Company allocates resources and assesses operating performance~~in ~~based~~several onfranchise ~~each individual hotel~~brands. ~~Additionally,~~These ~~the~~risks ~~Company~~include ~~aggregates~~reductions ~~these~~in ~~individually~~business ~~immaterial~~following ~~operating~~negative ~~segments~~publicity ~~into~~related to one ~~reporting segment using the criteria established by the authoritative accounting guidance, including the similarities~~ of ~~its~~ ~~product offering, types of customers and method of providing service. Additional segment information may be found in the footnotes to~~ our ~~consolidated financial statements located in “Item 8~~brands. ~~Financial Statements and Supplementary Data.”~~

~~-21-~~The maintenance of the franchise licenses for the hotels is subject to the franchisors’ operating standards and other terms and conditions. The franchisors periodically inspect the hotels to ensure that the owners and the companies that manage our hotels follow their standards. Failure by us, WNT or one of the companies which manage our hotels to maintain these standards or other terms and conditions could result in a franchise license being canceled. If a franchise license terminates due to a failure to make required improvements or to otherwise comply with its terms, there may be liability to the franchisor for a termination payment, which varies by franchisor and by hotel. As a condition of the continued holding of a franchise license, a franchisor could also possibly require capital expenditures to be made, even if we or WNT do not believe the capital improvements are necessary or desirable or will result in an acceptable return on our investment. Accordingly, there is a risk of losing a franchise license if franchisor required capital expenditures are not made.

~~Table~~If a franchisor terminates the franchise license, we and WNT may try either to obtain a suitable replacement franchise or to operate the hotel without a franchise license. The loss of ~~Contents~~a franchise license could materially and adversely affect the operations or the underlying value of the hotel because of the loss of associated name recognition, marketing support and centralized reservation systems provided by the franchisor and could materially and adversely affect our revenues.

~~EMPLOYEES~~We may not be able to sell our hotels on favorable terms or at all

On February 27, 2015, we and the other Sellers sold the Portfolio, resulting in Senior Mezz continuing to own the Remaining Hotels. On March 25, 2015, subsidiaries of Senior Mezz entered into an agreement to sell the Remaining Hotels for $100 million. The contract for the sale of the Remaining Hotels was terminated by the purchasers on May 6, 2015. On June 8, 2015, the Company ~~has~~entered into noa ~~employees~~reinstatement and amendment to the terminated contract, which among other things, reinstated the contract for nine of the Remaining Hotels, amended the purchase price to $85 million and scheduled closing for July 23, 2015. ~~During~~There ~~2014~~can be no assurance as to whether or when the transaction will close, ~~all~~as ~~persons~~to ~~involved~~the actual proceeds that will be realized if it does close, or as to what the assets might ultimately sell for in an alternate transaction if the ~~day-~~pending transaction does not close. Even if the transaction does close, there can be no assurance as to~~-day~~ ~~operation~~when ofa distribution from such sale proceeds will be received by the Company’s. ~~hotels~~While ~~were~~the ~~employed~~Company byintends ~~third~~to ~~party~~sell the one Remaining Hotel not currently under contract to be sold, there ~~management~~can ~~companies~~be ~~engaged~~no ~~pursuant~~assurance as to ~~hotel~~whether ~~management~~or ~~agreements.~~when Inthat ~~addition~~hotel will be sold, ~~all~~the ~~persons~~form ~~supporting~~of consideration which may be received in respect of that hotel or whether the ~~Company~~consideration ~~through~~which ~~asset~~may ~~management~~be ~~and~~received ~~various~~in ~~other~~respect ~~activities~~of ~~were~~that ~~employed~~hotel bywill be greater or less than the purchase price allocated to that hotel in the terminated sale agreement. Even if a ~~related~~transaction ~~party~~for ~~engaged~~the ~~pursuant~~one Remaining Hotel not currently under contract to anbe ~~asset~~sold ~~management~~does occur, there can be no assurance as to when a distribution from such sale ~~agreement~~proceeds will be received by the Company.

~~COMPETITION~~We cannot assure you that the market value of the Remaining Hotels will not decrease in the future. If the sale of the Remaining Hotels does not occur and/or a Changeover Event occurs and we and Senior Mezz assume control over the Portfolio, we may not be able to sell the hotels on favorable terms, and such hotels may be sold at a loss. We face competition for buyers of our hotel properties. Other sellers of hotels may have the financial resources to dispose of their hotels on unfavorable terms that we would be unable to accept.

~~The~~Risks ~~hotel~~related industry is highly competitive with various participants competing on the basis of price, level of service and geographic location. Each of our hotels is located in a developed area that includes other hotel properties. Many of our management agreements have not had restrictions on the ability of the companies that manage our hotels to convert, franchise or develop other hotel properties in our markets. As a result, our hotels in a given market may compete with other hotels that our managers may own, invest in, manage or franchise. The number of competitive hotel properties in a particular area could have a material adverse effect on the ~~occupancy,~~real ~~average~~estate ~~daily rate (ADR)~~ and ~~RevPAR~~lodging ofindustries our hotels. We believe that brand recognition, location, the quality of the hotel, consistency of services provided, supply of rooms in the market and price are and have been the principal competitive factors affecting our hotels.

~~FRANCHISE~~Investing ~~AGREEMENTS~~in hotel assets involves unique risks.

AWe ~~part of our asset management~~have ~~program~~invested isin ~~the licensing of our~~ hotels, ~~under~~which ~~nationally~~are ~~franchised~~subject ~~brands.~~to Weall ~~believe that~~ the ~~public’s~~risks ~~perception~~common ofto ~~quality~~the ~~associated~~hotel ~~with~~industry. aThese ~~franchisor~~risks iscould anadversely ~~important~~affect ~~feature in the operation of a~~ hotel. Weoccupancy ~~also~~and ~~believe~~rates that ~~franchised properties~~can ~~generally~~be ~~have~~charged ~~higher~~for ~~levels~~hotel ofrooms, ~~RevPAR than unfranchised properties due to access to national reservation systems~~ and ~~national advertising and marketing programs provided by franchisors. Our franchise agreements~~ generally ~~have~~include: ~~initial terms ranging from five to 21 years and expire between 2015 and 2028.~~

We• ~~typically~~competition ~~have~~from ~~had~~other ~~commitments~~hotel toproperties ~~franchisors~~in ~~to make certain capital improvements to~~ our ~~hotels (prior to April 11, 2014, this included all 126 hotels~~markets; after April 11, 2014, this included only the 20 Trust Hotels), which will be funded primarily through our operating cash flows. We made capital improvements of approximately $12 million and $24 million to our hotels in 2014 and 2013, respectively.

~~INFLATION~~• over-building of hotels in our markets, which results in increased supply and could adversely affect occupancy and revenues at our hotels;

~~Operators~~• ofdependence ~~hotels,~~on inbusiness ~~general,~~and ~~possess~~commercial ~~the~~travelers ~~ability to adjust room rates daily to reflect the effects of inflation. However, competitive pressures may limit the ability of the companies that manage~~ and ~~operate our hotels to raise room rates.~~ tourism;

~~-22-~~• increases in operating costs due to inflation, increased energy costs and other factors that may not be offset by increased room rates;

~~Table~~• changes in interest rates and in the availability, cost and terms of ~~Contents~~debt financing;

~~SEASONALITY~~• increases in assessed property taxes from changes in valuation or real estate tax rates;

~~Our~~• ~~operations~~increases ~~historically have been seasonal~~ in ~~nature, generally reflecting higher RevPAR during~~ the ~~second~~cost ~~and~~of ~~third~~property ~~quarters. This seasonality can be expected to cause fluctuations in our quarterly operating results.~~ insurance;

~~ENVIRONMENTAL~~-17- ~~MATTERS~~

~~Under~~• ~~various~~changes ~~federal,~~in ~~state~~governmental ~~and local environmental~~ laws, ~~ordinances~~ and regulations, afiscal ~~current~~policies or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in such property. These laws may impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. In addition, certain environmental laws and ~~common~~zoning ~~law~~ordinances ~~principles could be used to impose liability for release of asbestos-containing materials,~~ and ~~third~~the ~~parties~~related ~~may~~costs ~~seek recovery from owners or operators~~ of ~~real~~compliance ~~properties for personal injury associated~~ with ~~exposure to released asbestos-containing materials. Environmental~~ laws ~~also may impose restrictions on the manner in which property may be used or businesses may be operated,~~ and ~~these restrictions may require corrective or other expenditures. In connection with our current or prior ownership or operation of hotels~~regulations, wefiscal ~~may~~policies beand potentially liable for various environmental costs or liabilities. Although we are currently not aware of any material environmental claims pending or threatened against us, we can offer no assurance that a material environmental claim will not be asserted against us in the future. ordinances;

In• ~~connection~~unforeseen ~~with~~events ~~the~~beyond ~~Merger, Phase I environmental site assessments were obtained for~~ our ~~hotels. These assessments included historical reviews of the hotels~~control, ~~reviews~~such ofas ~~certain~~terrorist ~~public records~~attacks, ~~preliminary~~travel ~~investigations~~related ofhealth ~~the~~concerns ~~sites~~which ~~and~~could ~~surrounding~~reduce ~~properties~~travel, ~~screenings~~including ~~for~~pandemics ~~hazardous~~ and ~~toxic~~epidemics ~~substances~~such ~~and~~as ~~underground~~H1N1 ~~storage~~influenza ~~tanks~~(swine flu), ~~and~~avian ~~the~~bird ~~preparation~~flu and ~~issuance~~SARS, ofimposition ~~a written report. These assessments did not include invasive procedures to detect contaminants from former operations~~ of ~~our~~taxes ~~hotels~~ or ~~those~~surcharges ~~migrating from neighbors or caused~~ by ~~third~~regulatory ~~parties.~~authorities, ~~These~~travel-related ~~assessments~~accidents, ~~have~~travel ~~not~~infrastructure ~~revealed~~interruptions ~~any~~and ~~environmental~~unusual ~~liability~~weather ~~that we believe would have a material adverse effect on our business~~patterns, ~~assets,~~including ~~results~~natural ofdisasters ~~operations~~such oras ~~liquidity~~hurricanes, ~~nor~~tsunamis ~~are~~and ~~we aware of any such liability or material environmental issues.~~ earthquakes;

~~ITEM~~• ~~1A.~~adverse ~~RISK~~effects ~~FACTORS~~of national, regional, and local economic and market conditions and increases in energy costs or labor costs and other expenses affecting travel, which may affect travel patterns and reduce the number of business and commercial travelers and tourists;

~~The~~• ~~risks~~adverse ~~described~~effects ~~below~~of ~~could~~a ~~materially~~downturn and adversely affect our business, financial condition, cash flow and ability to make distributions to our shareholders. The following risk factors are not necessarily exhaustive, particularly as to possible future events, and new risk factors may arise from time to time. Many things can happen that can cause our actual financial and operating results to be different than those described or anticipated by us in ~~our SEC filings. As noted above, references to “our hotel properties” and similar references herein for periods from and after February 27, 2015 refer to~~ the ~~Remaining~~lodging ~~Hotels,~~industry; ~~which are owned by Senior Mezz~~ and ~~are currently under contract for sale and in which we own a 3% equity interest. See “Item 1. Business” for additional information.~~

~~-23-~~• risks generally associated with the ownership of hotel properties and real estate, as we discuss in more detail below.

~~Table~~These offactors ~~Contents~~could adversely affect hotel revenues and expenses in properties in which we hold interests, which in turn could adversely affect our financial condition, net income and cash flows.

~~Risks~~Failure ~~related~~of the hotel industry to continue to improve or remain stable may adversely affect our ~~business~~financial condition, net income and cash flows.

AsOur abusiness ~~result~~is offocused on the ~~sale~~hotel ofindustry, ~~the~~and ~~Portfolio~~we cannot assure you that hotel industry fundamentals will continue to improve or remain stable. Economic slowdown and world events outside our control, wesuch ~~are~~as atterrorism, ~~risk~~have ofadversely ~~not~~affected ~~collecting~~the hotel industry in the ~~preferred~~recent ~~return~~past and ~~the~~if ~~initial~~these ~~capital~~events ~~contribution~~reoccur, ofmay adversely affect the ~~Preferred~~industry ~~Equity~~in the ~~either~~future. ~~through~~In the ~~interest~~event ~~held~~conditions byin usthe hotel industry do not continue to improve or remain stable, our 3%financial ~~equity~~condition, ~~interest~~net inincome ~~Senior~~and ~~Mezz~~cash flows will be adversely affected.

AtIlliquidity ~~the closing~~ of ~~the~~real ~~sale~~estate ofinvestments ~~the~~could ~~Portfolio,~~significantly ~~the~~impede ~~Preferred~~our ~~Equity~~ability ~~in the~~to ~~Pool~~respond ~~I Owner was issued~~ to ~~the~~adverse ~~Sellers~~changes ~~of the Pool I Hotels and the Preferred Equity~~ in the ~~Pool~~performance ~~II Owner was issued to the Sellers~~ of ~~the Pool II Hotels. The Preferred Equity is~~ our ~~most~~properties ~~significant asset as of March 31, 2015 through both the Preferred Equity owned directly by us~~ and ~~the Preferred Equity owned indirectly through~~ harm our 3%financial ~~equity interest in Senior Mezz~~condition. In each case, for the 18-month period after the closing, the Preferred Equity will accrue an annual preferred return of 7.50%. Thereafter, the annual preferred return will increase to 8.00%. The preferred return is payable in cash on a current basis each month. The Preferred Equity has a full liquidation preference prior to any other equity in the issuer.

~~The~~While ~~Preferred~~the ~~Equity~~Company isexpects ~~fully~~to ~~redeemable~~sell atthe ~~any~~Remaining ~~time~~Hotels, atthere ~~par~~can ~~plus~~be ~~any~~no ~~accrued~~assurance ~~and~~that ~~unpaid~~a ~~preferred~~sale ~~return~~of the Remaining Hotels will occur. InWe ~~addition,~~cannot ~~there~~predict ~~are~~whether ~~certain~~we ~~mandatory~~will ~~redemption events,~~be ~~including~~able ato ~~requirement~~sell ~~that~~any ~~50%~~property offor the ~~Preferred~~price ~~Equity~~or beon ~~redeemed~~the terms set by ~~the~~us, ~~third~~or ~~anniversary~~whether ofany ~~the~~price ~~closing~~or ~~and~~other ~~100%~~terms ofoffered ~~the~~by ~~Preferred~~a ~~Equity~~prospective purchaser would be ~~redeemed~~acceptable byto ~~the~~us. ~~fourth~~We ~~anniversary~~also cannot predict the length of time needed to find a willing purchaser and to close the ~~closing~~sale of a property.

~~The~~Because ~~ability~~real ofestate ~~the~~investments ~~Pool~~are Irelatively ~~Owner~~illiquid, ~~and~~our ~~the~~ability ~~Pool II Owner~~ to promptly ~~make~~sell ~~the~~one ~~payments~~or ~~described~~more ~~above~~properties ~~will~~in ~~depend upon the performance of the Portfolio. Generally, the risks to~~ our ~~business~~portfolio ~~relating~~in toresponse ~~hotels apply~~ to ~~the~~changing ~~Portfolio~~economic, ~~and~~financial ~~also to the ability of the Pool I Owner~~ and ~~the~~investment ~~Pool~~conditions IIis ~~Owner to make payments to the Sellers in respect of the Preferred Equity~~limited. ~~There~~The ~~can~~real beestate nomarket ~~assurance~~is asaffected toby ~~whether~~many orfactors ~~when~~that ~~the Sellers~~are ~~will~~beyond ~~receive~~our ~~payment~~control, ofincluding: ~~its initial capital contribution in respect of the Preferred Equity.~~

In• ~~addition,~~adverse changes in ~~the~~national ~~event~~and ~~that~~local aeconomic ~~Changeover Event occurs, we~~ and ~~Senior~~market ~~Mezz may assume control of the Portfolio, which would be subject to the risks inherent in owning a portfolio of hotel assets.~~ conditions;

~~Our~~• ~~business~~changes ~~depends~~in ~~upon~~interest ~~demand~~rates ~~for~~and ~~hotel rooms. Any setback~~ in the ~~economic~~availability, ~~recovery~~cost ~~will~~and ~~adversely~~terms ~~affect~~of ~~our~~debt ~~future financial condition and cash flow.~~ financing;

~~Our~~• ~~hotel~~changes ~~properties~~in ~~experienced~~costs ~~declining~~of ~~operating~~compliance ~~performance~~with ~~across~~governmental ~~various~~laws ~~U.S. markets during the recent economic recession. Our business prospects depend upon continued revenue~~ and ~~net~~regulations, ~~income~~fiscal ~~growth from anticipated improvement in demand for hotel rooms as the economic recovery continues~~policies, ~~both~~zoning inand ~~respect~~other ~~of the Preferred Equity~~ ordinances;

~~-24-~~• the ongoing need for capital improvements, particularly in older structures;

~~Table~~• ofchanges ~~Contents~~in operating expenses; and

~~and~~• incivil ~~the Remaining Hotels. We~~unrest, ~~however,~~acts ~~cannot provide any assurances that demand for hotel rooms will increase from current levels, or the time or extent~~ of ~~any~~war ~~such~~and ~~demand~~natural ~~growth. If demand does not continue to increase as the economy recovers~~disasters, orincluding ifearthquakes ~~there~~and ~~is a setback in the economic recovery resulting in weakening demand~~floods, ~~our~~which ~~operating~~may ~~results could be adversely affected. As a~~ result, ~~any delay~~ in ~~the~~uninsured ~~continued~~and ~~economic~~underinsured ~~recovery or a new economic downturn will adversely affect our future cash flow~~losses.

~~Our~~We ~~returns~~may ~~depend~~be onrequired ~~management~~to ofexpend ~~our~~funds ~~hotels~~to bycorrect ~~third~~defects ~~parties,~~or ~~and~~to ~~ineffective~~make orimprovements before a property can be sold. We cannot assure you that we will have funds ~~poor~~available ~~management~~to ~~could~~correct ~~result~~those indefects ~~losses~~or to make those improvements. These factors and any others that would impede our ~~shareholders~~ability to respond to adverse changes in the performance of our properties could have a material adverse effect on our financial condition, net income and cash flow.

~~Although~~-18- we and WNT own the Remaining Hotels, third party operators operating under management agreements control the daily operations of these hotels. Under the terms of the management agreements, our and WNT’s ability to participate in operating decisions regarding the Remaining Hotels is limited. We and WNT depend on these third party management companies to adequately operate the hotels as provided in the management agreements. Neither we nor WNT have the authority to require any hotel to be operated in a particular manner or to govern any particular aspect of the daily operations of any hotel (for instance, setting room rates). Thus, even if we or WNT believe the hotels are being operated inefficiently or in a manner that does not result in satisfactory occupancy rates, RevPAR and ADR, we may not be able to cause the management company to change its method of operation of our hotels. We and WNT can only seek redress if a management company violates the terms of the applicable management agreement, and then only to the extent of the remedies provided for under the terms of the management agreement. Additionally, in the event that any of the management companies that manage our hotels need to be replaced, we and WNT may experience significant disruptions at the hotels and in the operations generally.

~~The~~Significant ~~terms~~capital ofexpenditures ~~our~~may ~~franchise~~be ~~agreements~~required ~~and~~to ~~the~~maintain ~~risk of loss of a franchise could adversely affect~~ our ~~business~~hotels.

~~The~~Our ~~Remaining~~hotels ~~Hotels~~have ~~operate~~an ~~under~~ongoing ~~franchise~~need ~~agreements,~~for renovations and weother ~~are~~capital ~~subject~~improvements, toincluding replacements of furniture, fixtures and equipment. Franchisors of the hotels ~~risks~~may ~~that~~also ~~are~~require ~~found~~periodic incapital ~~concentrating~~improvements ~~our~~as ~~hotel~~a ~~investments~~condition inof ~~several~~ maintaining franchise ~~brands~~licenses. ~~These~~Generally, ~~risks~~owners ~~include~~of ~~reductions~~hotels inare ~~business~~responsible ~~following~~for ~~negative~~the ~~publicity~~cost ~~related~~of tothese ~~one~~capital ofimprovements, ~~our~~which ~~brands.~~gives rise to the following risks:

~~The~~• ~~maintenance~~cost ofoverruns ~~the franchise licenses for the hotels is subject to the franchisors’ operating standards~~ and other terms and conditions. The franchisors periodically inspect the hotels to ensure that the owners and the companies that manage our hotels follow their standards. Failure by us, WNT or one of the companies which manage our hotels to maintain these standards or other terms and conditions could result in a franchise license being canceled. If a franchise license terminates due to a failure to make required improvements or to otherwise comply with its terms, there may be liability to the franchisor for a termination payment, which varies by franchisor and by hotel. As a condition of the continued holding of a franchise license, a franchisor could also possibly require capital expenditures to be made, even if we or WNT do not believe the capital improvements are necessary or desirable or will result in an acceptable return on our investment. Accordingly, there is a risk of losing a franchise license if franchisor required capital expenditures are not made. delays;

If• arenovations ~~franchisor~~can ~~terminates~~be ~~the~~disruptive ~~franchise license, we and WNT may try either~~ to ~~obtain~~operations ~~a suitable replacement franchise or to operate the hotel without a franchise license. The loss of a franchise license could materially~~ and ~~adversely~~can ~~affect~~displace ~~the~~revenue ~~operations~~at or the ~~underlying value of the hotel because of the loss of associated name recognition~~hotels, ~~marketing~~including ~~support~~revenue ~~and~~lost ~~centralized~~while ~~reservation~~rooms ~~systems~~under ~~provided~~renovation byare ~~the~~out ~~franchisor~~of ~~and could materially and adversely affect our revenues.~~ service;

~~-25-~~• the cost of funding renovations and the possibility that financing for these renovations may not be available on attractive terms; and

~~Table~~• ofthe ~~Contents~~risk that the return on our investment in these capital improvements will not be what we expect.

WeIf ~~may~~we have ~~not~~insufficient becash ~~able~~flow to ~~sell~~fund ~~our~~needed ~~hotels~~capital onexpenditures, ~~favorable~~then ~~terms~~borrowing or atliquidation ~~all~~of hotels or other assets may be required to fund future capital improvements.

OnOur ~~February 27,~~hotels ~~2015,~~could we and the other Sellers sold the Portfolio, resulting in Senior Mezz continuing to own the Remaining Hotels. On March 25, 2015, subsidiaries of Senior Mezz entered into an agreement to sell the Remaining Hotels for $100 million. The agreement has customary closing conditions and closing is currently scheduled for June 8, 2015. There can be nosubject ~~assurance as~~ to ~~whether~~ orenvironmental when the sale will close, as to the actual proceeds that will be realized if it does close or as to what the assets might ultimately sell for in an alternate transaction if the pending transaction does not closerisks. ~~Even if the transaction does close, there can be no assurance as to when a distribution from such sale proceeds will be received by the Company.~~

WeOur past ~~cannot~~and ~~assure~~present ~~you~~hotel ~~that~~properties ~~the market~~are ~~value~~subject ofto ~~the~~various ~~Remaining~~federal, ~~Hotels~~state ~~will~~and ~~not~~local ~~decrease~~environmental inlaws. Under these laws, courts and government agencies have the ~~future.~~authority Ifto require the ~~sale~~owner of a contaminated property to clean up the ~~Remaining~~property, ~~Hotels~~even if ~~described~~the ~~above~~owner ~~does~~did not ~~occur~~know ~~and/~~of or was not responsible for the contamination. These laws also apply to persons who owned a ~~Changeover~~property ~~Event~~at ~~occurs~~the ~~and~~time weit ~~and~~became ~~Senior~~contaminated. ~~Mezz~~In ~~assume~~addition ~~control~~to ~~over~~the costs of cleanup, environmental contamination can affect the value ~~Portfolio~~of a property and, wetherefore, ~~may~~an ~~not~~owner’s beability ~~able~~to borrow funds using the property as collateral or to sell the ~~hotels~~property. onUnder ~~favorable~~the ~~terms~~environmental laws, courts and ~~such~~government ~~hotels~~agencies ~~may~~also behave ~~sold~~the atauthority to require that a ~~loss.~~person Wewho sent ~~face~~waste ~~competition~~to a waste disposal facility, like a landfill or an incinerator, to pay for ~~buyers~~the clean-up of ~~our~~that ~~hotel~~facility ~~properties.~~if ~~Other~~it ~~sellers~~becomes ofcontaminated ~~hotels~~and ~~may~~threatens ~~have~~human health or the ~~financial~~environment. ~~resources~~Various tocourt ~~dispose~~decisions ofhave ~~their~~established ~~hotels~~that onthird parties ~~unfavorable~~may ~~terms~~recover ~~that~~damages wefor ~~would be~~injury ~~unable~~caused toby ~~accept~~property contamination, such as asbestos.

~~Risks~~In ~~related~~addition, when excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Concern about indoor exposure to mold has been increasing as exposure to mold may cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the ~~real~~presence ~~estate~~of significant mold at any of our hotels could require us to undertake a costly remediation program to contain or remove the mold from the affected hotel. In addition, the presence of significant mold could expose us to liability from guests, employees and ~~lodging~~others ~~industries~~if property damage or health concerns arise.

~~Investing~~Our inhotels ~~hotel~~may ~~assets~~not ~~involves~~comply ~~unique~~with ~~risks~~the Americans with Disabilities Act and other government regulations.

WeUnder ~~have invested~~the inAmericans ~~hotels,~~with ~~which~~Disabilities ~~are~~Act ~~subject~~of to1990 (the ADA), all ~~the~~public ~~risks~~accommodations ~~common~~must meet various federal requirements related to ~~the~~access ~~hotel~~and ~~industry~~use by disabled persons. ~~These~~Compliance ~~risks~~with the ADA’s requirements could ~~adversely~~require ~~affect~~costly ~~hotel~~removal ~~occupancy~~of access barriers, and ~~rates~~non-compliance ~~that~~could ~~can~~result bein ~~charged~~the ~~for~~U.S. ~~hotel~~government ~~rooms~~imposing fines or in private litigants winning damages. If we and/or Senior Mezz are required to make substantial modifications to our hotels, whether to comply with the ADA or other changes in governmental rules and ~~generally~~regulations, ~~include:~~our financial condition, net income and cash flows could be adversely impacted.

•The ~~competition~~insurance ~~from~~maintained ~~other~~for ~~hotel~~our ~~properties~~hotels inmay ~~our~~be ~~markets;~~inadequate.

•Senior ~~over-building~~Mezz ofmaintains ~~hotels~~comprehensive ininsurance on each of our ~~markets~~hotels, ~~which~~including ~~results~~liability inand ~~increased~~property ~~supply~~coverage, of the type and ~~could~~amount ~~adversely~~we ~~affect~~believe ~~occupancy~~are customarily ~~and~~obtained ~~revenues~~for ator ~~our~~by ~~hotels;~~hotel owners.

•There ~~dependence~~are oncertain ~~business~~types of losses, generally of a catastrophic nature, such as earthquakes, floods, hurricanes and ~~commercial~~acts ~~travelers~~of terrorism, for which our insurance coverage may not be sufficient to cover the full current market value or replacement cost of our damaged or destroyed asset. Inflation, increases in insurance premiums, changes in building codes and ~~tourism;~~ordinances, environmental considerations and other factors could also keep us from using insurance proceeds to fully replace or renovate a hotel after it has been damaged or destroyed. In those circumstances, the insurance proceeds that we receive could be inadequate to restore our economic position on the damaged or destroyed hotel.

•-19- ~~increases in operating costs due to inflation, increased energy costs and other factors that may not be offset by increased room rates;~~

•We ~~changes~~could inbe ~~interest~~responsible ~~rates~~for the costs discussed above if an environmental condition existed or was alleged to exist at one of our properties. The costs to clean up a contaminated property, to defend against a claim, or to comply with environmental laws could be substantial and could adversely affect our net income and cash flow. Even though we have not encountered a substantial environmental claim to date, we may have material environmental liabilities of which we are unaware. We can make no assurances that future laws or regulations will not impose material environmental liabilities or the current environmental condition of our hotels will not be affected by the condition of the properties in the ~~availability,~~vicinity ~~cost~~of ~~and~~our ~~terms~~hotels (such as the presence of ~~debt~~leaking ~~financing;~~underground storage tanks) or by third parties unrelated to us.

•The ~~increases~~hotel inbusiness ~~assessed~~is ~~property~~seasonal, ~~taxes~~which ~~from~~affects ~~changes~~our incash ~~valuation~~flow orfrom ~~real~~quarter ~~estate~~to ~~tax~~quarter. ~~rates;~~

•The ~~increases~~hotel industry is seasonal in ~~the~~nature. ~~cost~~This seasonality can cause quarterly fluctuations in our financial condition, net income and cash flow. Our quarterly operating results may be adversely affected by factors outside our control, including weather conditions and poor economic factors in certain markets in which our hotels operate. We can provide no assurances that our cash flows will be sufficient to offset any shortfalls that occur as a result of ~~property~~these ~~insurance;~~fluctuations.

•Many ~~changes~~real inestate ~~governmental~~costs ~~laws~~are ~~and regulations~~fixed, ~~fiscal~~even ~~policies~~if ~~and~~revenue ~~zoning~~from ~~ordinances~~our ~~and~~hotels ~~the related costs of compliance with laws and regulations, fiscal policies and ordinances;~~decreases.

~~-26-~~Many costs, such as real estate taxes, insurance premiums and maintenance costs, generally are not reduced even when a hotel is not fully occupied, room rates decrease or other circumstances cause a reduction in revenues. In addition, newly renovated hotels may not produce the revenues we anticipate immediately, or at all, and the hotel’s operating cash flow may be insufficient to pay the operating expenses and debt service associated with these hotels. If our hotels are unable to offset real estate costs with sufficient revenues, we may be adversely affected.

~~Table~~The increasing use of ~~Contents~~Internet travel intermediaries by consumers may materially and adversely affect our profitability.

•Although ~~unforeseen~~a ~~events~~majority ~~beyond~~of ~~our~~rooms ~~control~~sold on the Internet are sold through websites maintained by the hotel franchisors and managers, ~~such~~some asof ~~terrorist~~our ~~attacks~~hotel rooms will be booked through Internet travel intermediaries. Typically, these Internet travel ~~related~~intermediaries ~~health~~purchase ~~concerns~~rooms at a negotiated discount from participating hotels, which could ~~reduce~~result ~~travel~~in lower room rates than the franchisor or manager otherwise could have obtained. As these Internet bookings increase, ~~including~~these ~~pandemics~~intermediaries may be able to obtain higher commissions, reduced room rates or other significant contract concessions from us and ~~epidemics~~any ~~such~~hotel asmanagement ~~H1N1~~companies ~~influenza~~that ~~(swine~~we ~~flu)~~engage. Moreover, ~~avian~~some of ~~bird~~these ~~flu~~Internet ~~and~~travel ~~SARS~~intermediaries are attempting to offer hotel rooms as a commodity, ~~imposition~~by increasing the importance of ~~taxes~~price orand ~~surcharges~~general byindicators ~~regulatory~~of ~~authorities~~quality, ~~travel~~such as “three-~~related~~star ~~accidents~~downtown hotel,” ~~travel~~at ~~infrastructure~~the ~~interruptions~~expense of brand identification or quality of product or service. If consumers develop brand loyalties to Internet reservations systems rather than to the brands under which our hotels are franchised, the value of our hotels could deteriorate and ~~unusual~~our ~~weather~~business ~~patterns~~could be materially and adversely affected. Although most of the business for our hotels is expected to be derived from traditional channels, ~~including~~if ~~natural~~the ~~disasters~~amount ~~such~~of assales ~~hurricanes~~made through Internet intermediaries increases significantly, ~~tsunamis~~room revenues may flatten or decrease and ~~earthquakes;~~our profitability may be materially and adversely affected.

•Risks ~~adverse~~related ~~effects~~to ofour ~~national,~~organization ~~regional,~~ and ~~local~~structure economic and market conditions and increases in energy costs or labor costs and other expenses affecting travel, which may affect travel patterns and reduce the number of business and commercial travelers and tourists;

•We ~~adverse~~are ~~effects~~subject to the risk of apossibly ~~downturn~~being inrequired ~~the~~to ~~lodging~~register ~~industry;~~as ~~and~~an investment company.

•On ~~risks~~February 27, ~~generally~~2015, ~~associated~~we ~~with~~completed the ~~ownership~~sale of ~~hotel~~the ~~properties~~Portfolio to ARCH and ~~real~~in ~~estate~~return acquired the Preferred Equity, which currently represents more than 40% of our total assets (exclusive of cash and certain cash equivalents). Although our board of directors believes that we are not engaged primarily in the business of investing, reinvesting, or trading in securities, and we do not hold ourselves out as being primarily engaged in those activities, we ~~discuss~~appear to fall within the scope of section 3(a)(1)(C) of the Investment Company Act of 1940, as amended (the Investment Company Act), because the value of our investment securities (as defined in the Investment Company Act) is more ~~detail~~than ~~below~~40% of our total assets (exclusive of cash and certain cash equivalents).

~~These~~A ~~factors~~company ~~could~~that ~~adversely~~falls ~~affect~~within ~~hotel~~the ~~revenues~~scope of ~~and~~section ~~expenses~~3(a)(1)(C) inof ~~properties~~the inInvestment ~~which~~Company weAct ~~hold~~can ~~interests~~avoid being regulated as an investment company if it can rely on certain of the exclusions from being deemed to be an “investment company” under the Investment Company Act. One such exclusion that management believes applies is Rule 3a-2 under the Investment Company Act, which inallows ~~turn~~a ~~could~~3(a)(1)(C) ~~adversely~~investment ~~affect~~company ~~our~~(as ~~financial~~a “transient investment company”) a grace period of one year from the date of classification (in our ~~condition~~case, ~~net~~the ~~income~~date ~~and~~of ~~cash~~the ~~flows~~sale of the Portfolio), to avoid registration under the Investment Company Act so long as it does not intend to engage primarily in the business of investing, reinvesting, owning, holding or trading in securities.

~~Failure~~-20- ~~of the hotel industry to continue to improve or remain stable may adversely affect our financial condition, net income and cash flows.~~

~~Our~~Rule ~~business~~3a-2 isunder ~~focused on~~ the ~~hotel~~Investment ~~industry,~~Company ~~and~~Act weprovides ~~cannot assure you~~ that ~~hotel~~a ~~industry~~company ~~fundamentals~~is ~~will continue~~deemed not to ~~improve~~be oran ~~remain~~investment ~~stable.~~company during ~~Economic~~a ~~slowdown~~period ~~and~~of ~~world~~time ~~events~~not ~~outside~~to ~~our~~exceed ~~control,~~one ~~such~~year asprovided ~~terrorism,~~that ~~have adversely affected~~ the ~~hotel~~company ~~industry~~has ina ~~the~~bona ~~recent~~fide ~~past~~intent ~~and~~to ifbe ~~these~~engaged ~~events reoccur~~primarily, ~~may~~as ~~adversely~~soon ~~affect~~as ~~the~~is ~~industry~~reasonably possible (in ~~the future.~~any ~~In the~~ event ~~conditions~~by in the ~~hotel~~termination ~~industry~~of dosuch ~~not~~period ~~continue~~of ~~to improve or remain stable~~time), ~~our~~in ~~financial~~a ~~condition,~~business ~~net~~other ~~income~~than ~~and~~that ~~cash~~of ~~flows~~an investment ~~will be adversely affected~~company.

~~Illiquidity~~Accordingly, ofthe ~~real~~Board ~~estate~~will ~~investments~~explore ~~could~~transactions ~~significantly~~pursuant ~~impede~~to ~~our~~which ~~ability~~we may cease to ~~respond~~be deemed to ~~adverse~~be ~~changes~~an investment company, such as the merger contemplated by the stipulation described in “Item 3. Legal Proceedings”, or the ~~performance~~disposition of our ~~properties~~investment ~~and~~securities, ~~harm~~including through liquidation, or the acquisition of sufficient assets that are not investment securities in order for us not to be deemed an investment company under the Investment Company Act. There can be no assurance that we will be able to complete such actions by the applicable deadline, or at all. If we were required to register as an “investment company” under the Investment Company Act, applicable restrictions could make it impractical for us to continue our ~~financial~~business ~~condition~~as currently conducted and could have a material adverse effect on us.

~~Although~~Our ~~Senior~~officers ~~Mezz’s~~and ~~subsidiaries~~directors ~~are~~face ~~under~~conflicts ~~contract~~of tointerest ~~sell~~related ~~the Remaining Hotels, there can be no assurance that such sale will close. If it does not close, we cannot predict whether we will be able~~ to ~~sell any property for~~ the ~~price~~positions orthey onhold ~~the~~with ~~terms~~affiliated ~~set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us~~entities. ~~We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a property.~~

~~Because~~All ~~real~~of ~~estate~~our ~~investments~~executive ~~are relatively~~officers ~~illiquid,~~and ~~our~~directors ~~ability~~are toemployed ~~promptly~~by ~~sell~~our ~~one~~asset ormanager. ~~more~~As ~~properties~~a inresult, ~~our~~these ~~portfolio~~individuals inmay ~~response~~owe duties to ~~changing~~other ~~economic~~entities, ~~financial~~which ~~and~~duties may ~~investment~~conflict ~~conditions~~with isour ~~limited~~interests. ~~The~~Their ~~real~~loyalties ~~estate~~to ~~market~~these isother ~~affected~~entities bycould ~~many~~result ~~factors~~in actions or inactions that are ~~beyond~~detrimental to our business. Conflicts with our business and interests are most likely to arise from involvement in activities ~~control,~~related ~~including:~~to management time and services between us and the other entities and transactions with the asset manager’s affiliates.

•Risks ~~adverse~~related ~~changes~~to the inpreferred ~~national~~stock ~~and local economic and market conditions;~~

•There ~~changes~~is inonly ~~interest~~a ~~rates~~limited ~~and~~trading inmarket for the ~~availability,~~Series ~~cost~~B preferred stock and ~~terms~~the ofSeries ~~debt~~C ~~financing;~~preferred stock.

•There ~~changes~~is inonly ~~costs~~a oflimited ~~compliance~~trading ~~with~~market ~~governmental~~for ~~laws~~the Series B preferred stock and ~~regulations~~Series C preferred stock. The Series B preferred stock and Series C preferred stock trade on the OTC under the stock symbols “WGCBP” and “WGCCP,” ~~fiscal~~respectively. ~~policies~~Therefore, ~~zoning~~there ~~and~~can ~~other~~be ~~ordinances;~~no assurance as to the liquidity of any markets that may develop for the preferred stock, the ability of holders of the preferred stock to sell their shares, or the prices at which holders may be able to sell shares of the preferred stock. Holders of shares of the preferred stock who desire to liquidate substantial holdings at a single point in time may find that they are unable to dispose of their shares in the market without causing a substantial decline in the market value of such shares.

•Whitehall, ~~the~~through ~~ongoing~~Grace ~~need~~I, could ~~for~~exercise ~~capital~~its ~~improvements,~~vote ~~particularly~~over our common stock in ~~older~~a ~~structures;~~manner that would benefit Whitehall and its affiliates to the detriment of holders of the preferred stock.

~~-27-~~Grace I, a subsidiary of Whitehall, owns all of our common stock and generally has control over decisions requiring shareholder approval, including the election of our directors (other than the two directors which may be elected by the holders of the Series B preferred stock and Series C preferred stock voting together as a single class while dividends of the preferred stock are in arrears). In circumstances involving a conflict of interest between Whitehall and holders of the preferred stock, Grace I could exercise its vote over our common stock in a manner that would benefit Whitehall and its affiliates to the detriment of holders of the preferred stock.

~~Table~~Whitehall, through PFD Holdings, LLC (PFD Holdings), could exercise its vote over the preferred stock in a manner that would benefit Whitehall and its affiliates to the detriment of ~~Contents~~other holders of the preferred stock.

•PFD ~~changes~~Holdings, a subsidiary of Whitehall, owns a majority of the preferred stock. In circumstances involving a conflict of interest between Whitehall and holders of the preferred stock, PFD Holdings could exercise its vote, or fail to exercise its vote, with respect to the shares of preferred stock owned by it in a ~~operating~~manner ~~expenses;~~that would benefit Whitehall and its affiliates to the detriment of other holders of the preferred stock (including with respect to the two directors which may be elected by the holders of the Series B preferred stock and Series C preferred stock voting together as a single class while dividends of the preferred stock are in arrears).

•Our ~~civil~~assets ~~unrest,~~are ~~acts~~insufficient ofto ~~war~~satisfy ~~and~~the ~~natural~~liquidation preference ~~disasters, including earthquakes~~ and ~~floods,~~accrued ~~which may result in uninsured~~ and ~~underinsured~~unpaid ~~losses~~dividends.

WeBased ~~may~~on bethe ~~required~~5.85 million toshares ~~expend~~of ~~funds~~Series toB ~~correct~~preferred ~~defects~~stock orand toSeries ~~make~~C ~~improvements~~preferred ~~before~~stock outstanding, athe ~~property~~total ~~can~~amount beavailable ~~sold.~~to Webe ~~cannot~~distributed ~~assure~~from ~~you~~the ~~that~~sale weof ~~will~~the ~~have~~Portfolio ~~funds available~~is tonot ~~correct~~expected ~~those defects or~~ to ~~make~~exceed ~~those~~approximately ~~improvements~~$22.96 ~~These~~per ~~factors~~share ~~and~~of ~~any~~Series ~~others~~B ~~that~~preferred ~~would~~stock ~~impede~~and ~~our~~Series ~~ability~~C topreferred ~~respond~~stock towhich ~~adverse~~assumes ~~changes~~that in (a) the ~~performance~~disposition fees ofpayable ~~our~~to ~~properties~~RMD ~~could~~are ~~have~~fully ~~a material adverse effect on our financial condition~~paid, ~~net income and cash flow.~~ (b)

~~Significant~~-21- ~~capital expenditures may be required to maintain our hotels.~~

~~Our~~ the ~~hotels~~real ~~have~~estate antax ~~ongoing~~make-whole ~~need~~under the Agreement is fully paid to ARCH and (c) the Company receives its 3% equity interest from the sale of the Remaining Hotels for ~~renovations~~$100 million (which has since been terminated, restated and ~~other~~amended, ~~capital~~as ~~improvements~~described herein), ~~including~~net ~~replacements~~of costs to sell and does not take into account (i) the monthly preferred return, any present value discount of ~~furniture~~the Preferred Equity, ~~fixtures~~or any risk that the Preferred Equity is not collectible, or (ii) any cash or other working capital assets and ~~equipment~~liabilities of the Company or Senior Mezz. ~~Franchisors~~While the Company currently has a stipulation of settlement pending court approval as described in “Item 3. Legal Proceedings”, which stipulation contemplates the ~~hotels~~payment ~~may~~of ~~also~~$26.00 ~~require~~per ~~periodic~~share ~~capital~~of ~~improvements~~the asSeries B preferred stock and the Series C preferred stock in a ~~condition~~going-private ofmerger, ~~maintaining~~there ~~franchise~~can ~~licenses~~be no assurance when such a transaction will occur or that such a transaction will occur at all. ~~Generally~~In the event that such a settlement is not approved or does not otherwise occur, ~~owners~~we may engage in another transaction which would likely result in payment by us of ~~hotels~~less ~~are~~than ~~responsible~~$26.00 ~~for~~per share of the ~~cost~~Series B preferred stock and the Series C preferred stock in extinguishment of ~~these~~such ~~capital~~shares. ~~improvements~~Such a transaction may be considered prior to any redemption of the Preferred Equity in order to avoid registration as an investment company under the Investment Company Act as described above. Any such transaction would likely result in the Company monetizing the Preferred Equity. Solely for the purposes of this paragraph, we have assumed we own 100% of W2007 Equity LP (which ~~gives~~in ~~rise~~turn owns 3% of the equity interests of Senior Mezz), even though we actually own a 1% ownership interest in W2007 Equity LP. Nothing in this paragraph is an admission or assurance that we have the right to or will acquire the ~~following~~other ~~risks:~~99% interest in W2007 Equity LP.

•ITEM ~~cost~~1B. ~~overruns~~UNRESOLVED ~~and~~STAFF ~~delays;~~COMMENTS

•Not ~~renovations~~applicable. ~~can be disruptive to operations and can displace revenue at the hotels, including revenue lost while rooms under renovation are out of service;~~

•ITEM ~~the~~2. ~~cost of funding renovations and the possibility that financing for these renovations may not be available on attractive terms; and~~PROPERTIES

•As ~~the~~of ~~risk~~December 31, ~~that~~2013, we owned interests in 126 hotels located in 35 states comprising 14,934 rooms. The following table presents certain information related to the ~~return~~20 onTrust Hotels owned by our ~~investment~~subsidiaries inand ~~these~~the ~~capital~~106 ~~improvements~~OP ~~will~~Hotels ~~not~~owned beby ~~what~~Senior Mezz (in which we ~~expect.~~had a 3% equity interest):

If we have insufficient cash flow to fund needed capital expenditures, then borrowing or liquidation of hotels or other assets may be required to fund future capital improvements.


		Service			Year Ended December 31, 2013
Hotel Property	Location	Type	Rooms		Occupancy			ADR		RevPar
Hampton Inn	Alcoa, TN	Limited		118		81.1	%	$	72.54	$	58.84
SpringHill Suites	Asheville, NC	Limited		88		75.0	%	$	112.58	$	84.42
Homewood Suites	Augusta, GA	Limited		65		78.2	%	$	116.45	$	91.01
Hampton Inn	Austin, TX	Limited		121		70.8	%	$	106.38	$	75.29
Courtyard	Carlsbad, CA	Limited		145		68.4	%	$	120.61	$	82.56
Hampton Inn	College Station, TX	Limited		133		70.0	%	$	110.03	$	77.03
Courtyard	Dalton, GA	Limited		93		66.6	%	$	90.05	$	60.01
Hampton Inn	East Lansing, MI	Limited		86		78.4	%	$	120.79	$	94.71
Courtyard	Houston, TX	Limited		176		62.9	%	$	130.97	$	82.37
Hampton Inn	Indianapolis, IN	Limited		128		66.7	%	$	89.69	$	59.80
Residence Inn	Jacksonville, FL	Limited		78		78.5	%	$	87.42	$	68.58
Hilton Garden Inn	Louisville, KY	Limited		112		69.8	%	$	111.34	$	77.71
Hampton Inn	Milford, CT	Limited		148		65.3	%	$	83.86	$	54.79
Hampton Inn	Naperville, IL	Limited		129		64.0	%	$	98.42	$	62.99
Hampton Inn	Orlando, FL	Limited		170		79.3	%	$	82.89	$	65.72
Homewood Suites	Orlando, FL	Limited		252		79.9	%	$	101.22	$	80.88
Hilton Garden Inn	Rio Rancho, NM	Limited		129		65.7	%	$	87.06	$	57.17
TownePlace Suites	Savannah, GA	Limited		95		72.0	%	$	76.11	$	54.81
Homewood Suites	Seattle, WA	Limited		161		84.3	%	$	153.56	$	129.45
Hampton Inn	Urbana, IL	Limited		130		65.9	%	$	132.80	$	87.47

Subtotal Trust Hotels				2,557		72.2	%	$	105.23	$	75.94

Hampton Inn	Addison, TX	Limited		158		68.6	%	$	79.97	$	54.90
Hampton Inn	Albany, NY	Limited		153		76.5	%	$	111.13	$	84.99
Hyatt Place	Albuquerque, NM	Limited		126		78.1	%	$	100.00	$	78.10
Courtyard	Asheville, NC	Limited		78		76.0	%	$	117.88	$	89.59
Courtyard	Athens, GA	Limited		105		60.0	%	$	101.28	$	60.76
Fairfield Inn & Suites	Atlanta, GA	Limited		143		56.5	%	$	78.71	$	44.44

~~Our~~-22- ~~hotels could be subject to environmental risks.~~

Our past and present hotel properties are subject to various federal, state and local environmental laws. Under these laws, courts and government agencies have the authority to require the owner of a contaminated property to clean up the property, even if the owner did not know of or was not responsible for the contamination. These laws also apply to persons who owned a property at the time it became contaminated. In addition to the costs of cleanup, environmental contamination can affect the value of a property and, therefore, an owner’s ability to borrow funds using the property as collateral or to sell the property. Under the environmental laws, courts and government agencies also have the authority to require that a person who sent waste to a waste disposal facility, like a landfill or an incinerator, to pay for the clean-up of that facility if it becomes contaminated and threatens human health or the environment. Various court decisions have established that third parties may recover damages for injury caused by property contamination, such as asbestos.


		Service			Year Ended December 31, 2013
Hotel Property	Location	Type	Rooms		Occupancy			ADR		RevPar
Hyatt Place	Baton Rouge, LA	Limited		126		66.2	%	$	95.81	$	63.42
Hampton Inn	Beckley, WV	Limited		108		82.4	%	$	116.67	$	96.12
Hampton Inn	Birmingham, AL	Limited		129		71.9	%	$	101.51	$	72.95
Hyatt Place	Birmingham, AL	Limited		126		64.7	%	$	86.87	$	56.23
Hyatt Place	Bloomington, MN	Limited		126		79.2	%	$	101.00	$	80.00
Hyatt Place	Blue Ash, OH	Limited		125		62.5	%	$	90.00	$	56.21
Hampton Inn	Boca Raton, FL	Limited		94		75.5	%	$	114.48	$	86.48
Residence Inn	Boise, ID	Limited		104		81.6	%	$	94.93	$	77.45
Courtyard	Bowling Green, KY	Limited		93		75.8	%	$	97.76	$	74.13
Hampton Inn & Suites	Boynton Beach, FL	Limited		164		82.4	%	$	109.52	$	90.20
Hampton Inn	Charleston, SC	Limited		124		73.4	%	$	83.16	$	61.05
Hampton Inn	Chattanooga, TN	Limited		167		51.3	%	$	78.05	$	40.06
Residence Inn	Chattanooga, TN	Limited		76		72.7	%	$	123.77	$	90.02
Homewood Suites	Chicago, IL	Limited		233		83.1	%	$	177.79	$	147.80
Hampton Inn	Colorado Springs, CO	Limited		125		47.5	%	$	87.64	$	41.62
Residence Inn	Colorado Springs, CO	Limited		96		67.0	%	$	100.03	$	67.06
Hampton Inn	Columbus, GA	Limited		118		59.5	%	$	65.82	$	39.17
Hyatt Place	Columbus, OH	Limited		124		69.7	%	$	96.31	$	67.15
Courtyard	Dallas, TX	Limited		184		68.7	%	$	109.66	$	75.39
Fairfield Inn & Suites	Dallas, TX	Limited		116		62.5	%	$	94.30	$	58.91
Hampton Inn	Deerfield Beach, FL	Limited		106		79.7	%	$	101.63	$	80.98
Hampton Inn	Dublin, OH	Limited		123		69.5	%	$	98.65	$	68.58
Residence Inn	Eagan, MN	Limited		120		78.1	%	$	98.51	$	76.94
Residence Inn	El Segundo, CA	Limited		150		88.6	%	$	143.18	$	126.84
Courtyard	Elmhurst, IL	Limited		140		66.1	%	$	94.18	$	62.24
Hampton Inn	Fayetteville, NC	Limited		121		81.3	%	$	75.36	$	61.24
Hampton Inn & Suites	Franklin, TN	Limited		127		75.2	%	$	118.60	$	89.21
Hyatt Place	Franklin, TN	Limited		126		72.8	%	$	105.70	$	76.94
Residence Inn	Ft Myers, FL	Limited		78		70.4	%	$	106.35	$	74.90
Courtyard	Gainesville, FL	Limited		81		80.1	%	$	112.53	$	90.18
Hampton Inn	Gastonia, NC	Limited		107		72.1	%	$	90.87	$	65.54
Homewood Suites	Germantown, TN	Limited		92		79.9	%	$	101.34	$	80.92
Hyatt Place	Glen Allen, VA	Limited		124		64.2	%	$	89.35	$	57.41
Hampton Inn	Glen Burnie, MD	Limited		116		69.1	%	$	99.80	$	69.01
Hampton Inn	Grand Rapids, MI	Limited		84		74.9	%	$	122.47	$	91.77
SpringHill Suites	Grand Rapids, MI	Limited		76		72.8	%	$	118.21	$	86.07
Hampton Inn	Gurnee, IL	Limited		134		70.7	%	$	90.46	$	63.92
SpringHill Suites	Houston, TX	Limited		122		73.0	%	$	92.45	$	67.45
Hyatt Place	Indianapolis, IN	Limited		124		67.8	%	$	107.38	$	72.83
Courtyard	Jacksonville, FL	Limited		81		77.5	%	$	88.59	$	68.62
Hampton Inn	Kansas City, MO	Limited		120		62.1	%	$	102.66	$	63.72
Courtyard	Knoxville, TN	Limited		78		65.4	%	$	122.99	$	80.48
Residence Inn	Knoxville, TN	Limited		78		77.2	%	$	105.22	$	81.26
Hyatt Place	Las Vegas, NV	Limited		202		76.6	%	$	85.37	$	65.42
Courtyard	Lexington, KY	Limited		90		81.0	%	$	109.66	$	88.79
Residence Inn	Lexington, KY	Limited		91		79.2	%	$	104.63	$	82.84
SpringHill Suites	Lexington, KY	Limited		108		77.5	%	$	100.24	$	77.65
Hyatt Place	Linthicum Heights, MD	Limited		127		76.7	%	$	96.39	$	73.96
Courtyard	Louisville, KY	Limited		140		74.8	%	$	134.81	$	100.81
Residence Inn	Macon, GA	Limited		78		67.8	%	$	90.17	$	61.11
Hampton Inn	Madison Heights, MI	Limited		123		79.1	%	$	95.04	$	75.19
Hampton Inn	Maryland Heights, MO	Limited		122		63.0	%	$	95.97	$	60.42

-2823-


		Service			Year Ended December 31, 2013
Hotel Property	Location	Type	Rooms		Occupancy			ADR		RevPar
Hampton Inn	Memphis, TN	Limited		124		76.8	%	$	100.76	$	77.37
Hyatt Place	Memphis, TN	Limited		126		70.6	%	$	95.63	$	67.48
Holiday Inn Express	Miami, FL	Limited		66		80.5	%	$	118.20	$	95.16
Hyatt Place	Miami, FL	Limited		124		85.9	%	$	110.56	$	94.92
Courtyard	Mobile, AL	Limited		78		63.0	%	$	95.98	$	60.45
Residence Inn	Mobile, AL	Limited		66		77.6	%	$	107.00	$	83.07
Residence Inn	Monmouth Junction, NJ	Limited		208		57.7	%	$	114.00	$	65.76
Hampton Inn	Morgantown, WV	Limited		107		72.1	%	$	114.62	$	82.64
Holiday Inn	Mt. Pleasant, SC	Full		158		59.3	%	$	99.26	$	58.84
Hampton Inn	Norfolk, VA	Limited		117		60.5	%	$	87.09	$	52.72
Hampton Inn	Northville , MI	Limited		124		63.1	%	$	97.56	$	61.53
Residence Inn	Oklahoma City, OK	Limited		136		77.3	%	$	96.32	$	74.45
Residence Inn	Omaha, NE	Limited		80		80.3	%	$	107.56	$	86.40
Courtyard	Orlando, FL	Limited		112		70.3	%	$	100.69	$	70.83
Embassy Suites	Orlando, FL	Full		246		79.6	%	$	110.19	$	87.68
Hampton Inn	Overland Park, KS	Limited		133		59.4	%	$	96.96	$	57.57
Hyatt Place	Overland Park, KS	Limited		124		65.1	%	$	91.38	$	59.46
Hampton Inn	Palm Beach Gardens, FL	Limited		116		81.1	%	$	108.91	$	88.34
Homewood Suites	Peabody, MA	Limited		85		75.9	%	$	121.21	$	91.99
Hampton Inn	Peabody, MA	Limited		120		68.1	%	$	113.34	$	77.14
Homewood Suites	Phoenix , AZ	Limited		124		77.2	%	$	113.46	$	87.57
Hampton Inn	Pickwick Dam, TN	Limited		50		61.6	%	$	99.63	$	61.33
Residence Inn	Portland, OR	Limited		168		87.5	%	$	134.85	$	117.94
Hilton Garden Inn	Round Rock, TX	Limited		122		70.1	%	$	100.10	$	70.19
SpringHill Suites	Round Rock, TX	Limited		104		63.9	%	$	91.68	$	58.59
Homewood Suites	San Antonio, TX	Limited		123		81.1	%	$	107.58	$	87.29
SpringHill Suites	San Antonio, TX	Limited		112		65.6	%	$	84.04	$	55.12
Residence Inn	San Diego, CA	Limited		95		87.1	%	$	145.04	$	126.35
SpringHill Suites	San Diego, CA	Limited		137		76.5	%	$	117.35	$	89.74
Courtyard	Sarasota, FL	Limited		81		71.0	%	$	101.17	$	71.84
Residence Inn	Sarasota, FL	Limited		78		80.2	%	$	107.78	$	86.48
Residence Inn	Savannah, GA	Limited		66		85.8	%	$	107.51	$	92.24
Hampton Inn	Scranton, PA	Limited		129		70.9	%	$	109.54	$	77.62
Homewood Suites	Sharonville, OH	Limited		111		71.8	%	$	101.79	$	73.05
Residence Inn	Somers Point, NJ	Limited		119		67.6	%	$	118.03	$	79.75
Hampton Inn	State College, PA	Limited		119		60.5	%	$	112.89	$	68.33
Courtyard	Tallahassee, FL	Limited		93		66.3	%	$	112.23	$	74.45
Residence Inn	Tallahassee, FL	Limited		78		76.8	%	$	107.01	$	82.15
Hyatt Place	Tampa, FL	Limited		124		86.7	%	$	98.84	$	85.65
Residence Inn	Tampa, FL	Limited		78		82.0	%	$	97.90	$	80.27
Residence Inn	Tampa, FL	Limited		102		78.2	%	$	98.26	$	76.81
Residence Inn	Tinton Falls, NJ	Limited		96		94.2	%	$	107.86	$	101.56
Residence Inn	Tucson, AZ	Limited		128		59.2	%	$	101.37	$	60.01
Hampton Inn	West Columbia, SC	Limited		120		65.6	%	$	81.66	$	53.61
Hampton Inn	West Palm Beach, FL	Limited		110		78.2	%	$	109.09	$	85.31
Hampton Inn	Westlake, OH	Limited		122		73.9	%	$	103.73	$	76.67
Residence Inn	Williston, VT	Limited		96		79.3	%	$	108.19	$	85.80
Homewood Suites	Windsor Locks, CT	Limited		132		71.0	%	$	114.42	$	81.29

Subtotal OP Hotels				12,377		72.3	%	$	104.99	$	75.90

				14,934		72.3	%	$	105.03	$	75.91

In-24- addition, when excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Concern about indoor exposure to mold has been increasing as exposure to mold may cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of significant mold at any of our hotels could require us to undertake a costly remediation program to contain or remove the mold from the affected hotel. In addition, the presence of significant mold could expose us to liability from guests, employees and others if property damage or health concerns arise.

~~Our~~ITEM ~~hotels may not comply with the Americans with Disabilities Act and other government regulations~~3. LEGAL PROCEEDINGS

~~Under~~The ~~the~~Company ~~Americans~~is ~~with~~involved ~~Disabilities~~in ~~Act of 1990 (the ADA), all public accommodations must meet~~ various ~~federal~~legal ~~requirements~~proceedings ~~related to access~~ and ~~use by~~ ~~disabled~~disputes ~~persons.~~arising ~~Compliance~~in ~~with~~ the ~~ADA’s~~ordinary ~~requirements~~course ~~could require costly removal~~ of ~~access~~business. ~~barriers,~~The ~~and~~Company ~~non-compliance~~does ~~could~~not ~~result~~believe inthat the ~~U.S.~~disposition ~~government~~of ~~imposing~~such ~~fines~~legal orproceedings ~~in private litigants winning damages. If we~~ and~~/or~~ ~~Senior~~disputes ~~Mezz are~~will ~~required~~have toa ~~make~~material ~~substantial~~adverse ~~modifications~~effect toon our ~~hotels~~business, ~~whether to comply with~~ the ~~ADA or other changes in governmental rules and regulations, our~~ financial ~~condition~~position, ~~net~~continuing ~~income~~operations ~~and~~or cash flows ~~could~~except beas ~~adversely~~described ~~impacted~~below.

In September 2013, a putative class action lawsuit (the Johnson Lawsuit) was filed in the Tennessee Chancery Court, Shelby County, Tennessee (the Chancery Court) by several current and former holders of the preferred stock. Plaintiffs allege that, since October 2007, the defendants named in the complaint have engaged in a scheme to oppress and then squeeze-out the holders of the preferred stock, including by allegedly suppressing the marketability of the shares, causing the Company to cease paying dividends, and purchasing 58.8% of the shares in a series of alleged “creeping” tender offers beginning in 2012. The ~~insurance~~complaint ~~maintained~~names ~~for~~as defendants the Company, the members of our ~~hotels~~board ~~may~~of bedirectors, ~~inadequate~~the majority shareholders of the Company (Grace I, Whitehall and PFD Holdings), the GS Group and Goldman Sachs Realty Management L.P. (RMD). The complaint asserts claims for breach of contract, breach of fiduciary duty, aiding and abetting, and for violations of the Tennessee Blue Sky laws and the Tennessee Business Corporations Act. On October 4, 2013, defendants removed the action to the United States District Court for the Western District of Tennessee (the Federal Court). On November 6, 2013, plaintiffs filed a motion to remand the case to Chancery Court. The defendants filed their opposition on December 6, 2013. The remand motion was fully briefed on December 20, 2013. On July 28, 2014, the Federal Court denied the remand motion. The defendants also moved to dismiss the Johnson Lawsuit on January 23, 2014. The Federal Court entered a scheduling order governing further proceedings in the litigation on February 14, 2014, as amended on June 19, 2014 and July 28, 2014, and the parties engaged in merits and class certification discovery. Also, pursuant to the schedule, plaintiffs filed their opposition to defendants’ dismissal motion on March 21, 2014, and defendants filed their reply papers in further support of their motion on April 25, 2014. Plaintiffs moved for class certification on May 16, 2014.

~~Senior~~After ~~Mezz~~the ~~maintains~~Company ~~comprehensive~~announced ~~insurance~~the Original Purchase Agreement with ARCH on ~~each~~June 2, of2014, ~~our~~defendants ~~hotels~~and plaintiffs engaged in settlement negotiations. Thereafter, ~~including~~plaintiffs ~~liability~~made requests for, and ~~property~~defendants ~~coverage~~provided to plaintiffs, information regarding the transaction contemplated by the Original Purchase Agreement (the ARCH Transaction). Among other information provided, the Company estimated a reasonable fair present value of the ~~type~~proceeds that could be distributed to holders of the preferred stock as a result of the ARCH Transaction, as announced, to be approximately $18.50 per share of preferred stock. Plaintiffs retained and ~~amount~~consulted with wetwo ~~believe~~financial ~~are~~advisors with regard to the ARCH Transaction. During this period, the parties to the Johnson Lawsuit continued to engage in both merits and class certification discovery. On August 20, 2014, the parties entered into a ~~customarily~~Memorandum ~~obtained~~of ~~for~~Understanding or(MOU) bycontaining ~~hotel~~the ~~owners~~key terms of a proposed settlement. On August 22, 2014, the parties held a telephone conference with the Federal Court, in which the Federal Court agreed that, in light of the MOU, the parties would no longer be subject to the pending deadlines in the then current scheduling order. For the Federal Court’s convenience in managing its docket, the defendants agreed to withdraw their pending motion to dismiss without prejudice. On September 2, 2014, the Federal Court granted the defendants’ motion to withdraw its motion to dismiss without prejudice to renew. The defendants may renew their motion to dismiss in the event that the proposed settlement of the Johnson Lawsuit does not become final.

~~There~~The ~~are~~stipulation, ~~certain~~which ~~types~~was ofsubmitted ~~losses,~~to ~~generally~~the ofFederal aCourt ~~catastrophic~~on ~~nature~~October 9, ~~such~~2014 asand ~~earthquakes~~amended on December 4, ~~floods~~2014, ~~hurricanes~~would settle claims with respect to two classes described in the Johnson Lawsuit: (1) the “Holder Class” consisting of any and ~~acts~~all persons who, as of ~~terrorism~~August 22, ~~for~~2014 ~~which~~and ~~our~~through ~~insurance~~the ~~coverage~~effective ~~may~~time ~~not~~of bethe ~~sufficient~~merger tocontemplated ~~cover~~by the stipulation, hold the ~~full~~preferred ~~current~~stock, ~~market~~excluding ~~value~~defendants orand ~~replacement~~their ~~cost~~affiliates, persons who opt out of ~~our~~the ~~damaged~~Holder orClass ~~destroyed~~and ~~asset.~~holders ~~Inflation,~~of ~~increases~~dissenting inshares ~~insurance~~and ~~premiums,~~(2) the ~~changes~~“Seller inClass” ~~building~~consisting of all persons who sold some or all ~~codes~~of their shares of preferred stock between October 25, 2007 and ~~ordinances~~October 8, ~~environmental~~2014, ~~considerations~~inclusive, and ~~other~~suffered ~~factors~~a ~~could~~loss, ~~also~~excluding ~~keep~~the usdefendants, ~~from~~their ~~using~~affiliates ~~insurance~~and ~~proceeds~~persons towho ~~fully~~sold ~~replace~~shares orto ~~renovate~~PFD aHoldings, ~~hotel~~and ~~after~~persons itwho ~~has~~opt ~~been~~out ~~damaged~~of orthe ~~destroyed~~Seller Class. InThe ~~those~~stipulation ~~circumstances,~~was preliminarily approved by the ~~insurance~~Federal ~~proceeds~~Court ~~that~~on ~~we receive~~April 30, ~~could~~2015 beand ~~inadequate~~remains subject to ~~restore~~final ~~our~~approval ~~economic~~by ~~position~~the Federal Court. A hearing on ~~the~~final ~~damaged~~approval oris ~~destroyed~~scheduled ~~hotel~~for September 11, 2015.

WeIn ~~could~~October be2013, ~~responsible~~a ~~for~~similar ~~the~~lawsuit ~~costs~~was ~~discussed~~filed ~~above~~by ~~if an~~another ~~environmental~~plaintiff ~~condition~~in ~~existed~~the orsame ~~was~~Chancery ~~alleged~~Court to(the ~~exist~~Dent atLawsuit), ~~one~~alleging ofsimilar ~~our~~breaches ~~properties.~~against ~~The~~several ~~costs~~of the tosame ~~clean~~defendants upnamed ain ~~contaminated~~the ~~property~~Johnson Lawsuit, toin ~~defend~~addition ~~against~~to a ~~claim,~~former ormember toof ~~comply~~the ~~with~~Company’s ~~environmental~~board ~~laws~~of ~~could~~directors. beThe ~~substantial~~plaintiffs and ~~could~~defendants ~~adversely~~in ~~affect~~the ~~our net~~Dent ~~income~~Lawsuit ~~and~~agreed ~~cash~~to ~~flow.~~stay ~~Even~~this ~~though~~case weuntil ~~have~~the ~~not~~motion ~~encountered~~to aremand ~~substantial~~in ~~environmental~~the ~~claim~~Johnson tolawsuit was ~~date,~~decided. weAs ~~may~~stipulated ~~have~~by ~~material~~the ~~environmental~~parties, ~~liabilities~~plaintiff ofmust ~~which~~file weany ~~are~~response ~~unaware.~~to Wedefendants’ ~~can~~motion ~~make~~to nostay ~~assurances~~within ~~that~~ten ~~future~~business ~~laws~~days orafter ~~regulations~~notice ~~will~~of ~~not impose~~the ~~material~~Federal ~~environmental~~Court ~~liabilities~~decision ordenying the ~~current~~remand ~~environmental~~motion. ~~condition~~Defendants ofnotified ~~our~~plaintiff ~~hotels~~of ~~will~~the resolution ~~not~~of bethe ~~affected~~remand bymotion in the ~~condition~~Johnson ofLawsuit, ~~the~~and ~~properties~~plaintiff inhas not filed a response to the ~~vicinity~~motion ofto ~~our~~stay. ~~hotels~~The ~~(such~~proposed assettlement in the ~~presence~~Johnson ofLawsuit ~~leaking~~purports ~~underground~~to ~~storage~~encompass ~~tanks)~~the orclaims ~~by third~~asserted ~~parties~~in ~~unrelated~~the toDent usLawsuit.

-2925-

~~Table~~ITEM of4. ~~Contents~~MINE SAFETY DISCLOSURES

~~The~~Not ~~hotel business is seasonal, which affects our cash flow from quarter to quarter~~applicable.

~~The~~PART ~~hotel~~II industry is seasonal in nature. This seasonality can cause quarterly fluctuations in our financial condition, net income and cash flow. Our quarterly operating results may be adversely affected by factors outside our control, including weather conditions and poor economic factors in certain markets in which our hotels operate. We can provide no assurances that our cash flows will be sufficient to offset any shortfalls that occur as a result of these fluctuations.

~~Many~~ITEM ~~real~~5. ~~estate~~MARKET ~~costs~~FOR ~~are~~REGISTRANT’S ~~fixed~~COMMON EQUITY, ~~even~~RELATED ifSTOCKHOLDER ~~revenue~~MATTERS, ~~from~~AND ~~our~~ISSUER ~~hotels decreases.~~PURCHASES OF EQUITY SECURITIES

~~Many~~Since ~~costs~~the Merger, ~~such~~all asof ~~real~~our ~~estate~~100 ~~taxes,~~issued ~~insurance premiums~~ and ~~maintenance~~outstanding ~~costs,~~shares ~~generally~~of ~~are~~common ~~not~~stock ~~reduced~~have ~~even~~been ~~when~~held aby ~~hotel~~Grace ~~is not fully occupied, room rates decrease or other circumstances cause a reduction in revenues~~I. ~~In addition~~Therefore, ~~newly~~there ~~renovated~~is ~~hotels~~currently ~~may~~no ~~not~~public ~~produce the revenues we anticipate immediately, or at all, and the hotel’s operating cash flow may be insufficient~~trading tomarket ~~pay~~for ~~the operating expenses and debt service associated with these hotels. If~~ our ~~hotels~~common ~~are unable to offset real estate costs with sufficient revenues, we may be adversely affected~~stock.

~~The~~We ~~increasing~~have ~~use~~not paid any cash dividends on our common stock in the past two years. Payment of ~~Internet~~any ~~travel~~future ~~intermediaries~~dividends bywill ~~consumers~~depend upon ~~may~~our ~~materially~~earnings and ~~adversely~~capital ~~affect~~requirements, contractual restrictions, and other factors our ~~profitability~~board of directors considers appropriate. Our ability to declare common dividends is affected by covenants under the Company’s debt agreements and limitations under the Company’s charter. See Note 7 of the consolidated financial statements located in “Item 8. Financial Statements and Supplementary Data” for further information.

~~Although~~ITEM ~~a majority of rooms sold on the Internet are sold through websites maintained by the hotel franchisors and managers, some of our hotel rooms will be booked through Internet travel intermediaries~~6. ~~Typically,~~SELECTED ~~these~~FINANCIAL Internet travel intermediaries purchase rooms at a negotiated discount from participating hotels, which could result in lower room rates than the franchisor or manager otherwise could have obtained. As these Internet bookings increase, these intermediaries may be able to obtain higher commissions, reduced room rates or other significant contract concessions from us and any hotel management companies that we engage. Moreover, some of these Internet travel intermediaries are attempting to offer hotel rooms as a commodity, by increasing the importance of price and general indicators of quality, such as “three-star downtown hotel,” at the expense of brand identification or quality of product or service. If consumers develop brand loyalties to Internet reservations systems rather than to the brands under which our hotels are franchised, the value of our hotels could deteriorate and our business could be materially and adversely affected. Although most of the business for our hotels is expected to be derived from traditional channels, if the amount of sales made through Internet intermediaries increases significantly, room revenues may flatten or decrease and our profitability may be materially and adversely affected. DATA

~~Risks~~The following selected historical financial information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical consolidated financial statements as of December 31, 2014, 2013 and 2012 and for the four years ended December 31, 2014, 2013, 2012 and 2011, and the related tonotes ~~our~~included ~~organization~~in “Item 8. Financial Statements and ~~structure~~Supplementary Data.”

We-26- ~~are subject to the risk of possibly being required to register as an investment company.~~

On February 27, 2015, we completed the sale of the Portfolio to ARCH and in return acquired the Preferred Equity, which currently represents more than 40% of our total assets (exclusive of cash and certain cash equivalents). Although


	Year Ended December 31,
	2014			2013			2012			2011			2010			2009
	(in thousands)
Operating Data ^{(1), (2)}:
Total hotel revenues	$	179,627		$	428,551		$	409,847		$	388,299		$	365,150		$	343,393
Total operating expenses		167,895			409,468			459,860			357,725			432,668			683,749
Operating income (loss)		11,732			19,083			(50,013	)		30,574			(67,518	)		(340,356	)
Loss from continuing operations		(31,664	)		(63,532	)		(134,359	)		(54,220	)		(113,072	)		(418,303	)
Income (loss) from discontinued operations		—			(8,081	)		(1,876	)		4,720			(16,035	)		(9,536	)
Net loss		(31,664	)		(71,613	)		(136,235	)		(49,500	)		(129,107	)		(427,839	)
Net loss attributable to the Company		(27,280	)		(1,802	)		(1,835	)		(576	)		(1,739	)		(5,092	)
Net loss attributable to common shareholders		(27,280	)		(1,802	)		(1,835	)		(576	)		(1,739	)		(5,092	)
Balance Sheet Data:
Investments in real estate, net	$	240,830		$	1,392,097		$	1,562,422		$	1,697,963		$	1,754,844		$	1,883,441
Cash and cash equivalents		12,444			12,404			13,051			11,782			10,825			15,745
Restricted cash		2,809			46,849			35,341			41,980			45,185			58,194
Total assets		265,020			1,470,450			1,630,362			1,772,894			1,833,291			1,978,152
Total debt		203,126			1,161,725			1,245,557			1,261,040			1,284,075			1,297,207
Total other liabilities		41,220			58,515			62,966			53,767			41,552			53,745
Total shareholders’ equity		36,421			63,917			65,719			66,486			67,063			68,707
Non-controlling equity purchase option		—			175,000			175,000			281,811			281,811			281,811
Non-controlling interest		(15,747	)		11,293			81,120			109,790			158,790			276,682
Cash Flow Data:
Cash flows from operating activities	$	22,038		$	62,451		$	63,662		$	56,281		$	53,868		$	37,434
Cash flows from (used in) investing activities		20,150			35,815			(36,729	)		(39,162	)		(50,856	)		(69,056	)
Cash flows from (used in) financing activities		(42,148	)		(98,913	)		(25,664	)		(16,162	)		(7,931	)		35,828
Other Data:
Cash dividends declared per common share	$	—		$	—		$	—		$	—		$	—		$	—
EBITDA (unaudited) ⁽³⁾		32,893			99,243			39,437			120,837			(461	)		(266,126	)
Adjusted EBITDA (unaudited) ⁽³⁾		54,188			135,436			125,898			118,189			101,164			100,314

~~-30-~~(1) All years presented have been adjusted to reflect hotels no longer owned as of December 31, 2014 and 2013 (no hotels were sold during the year ended December 31, 2014) as discontinued operations.

~~Table~~(2) The Company has not disclosed earnings per share data as this information is not meaningful as there are only 100 shares of ~~Contents~~common stock issued and outstanding, all of which are wholly owned by Grace I.

~~our~~(3) ~~Board~~A ofmore ~~Directors~~detailed ~~believes~~description ~~that~~and wecomputation ~~are not engaged primarily in the business~~ of ~~investing,~~EBITDA ~~reinvesting,~~is orcontained ~~trading~~ in ~~securities, and we do not hold ourselves out as being primarily engaged in those activities, we appear to fall within~~ the ~~scope~~“Non-GAAP ofFinancial Measures” section ~~3(a)(1)(C)~~ of ~~the~~“Item ~~Investment~~7. ~~Company~~Management’s ~~Act~~Discussion ofand ~~1940,~~Analysis ~~as amended (the Investment Company Act) because the value~~ of ~~our~~Financial ~~investment~~Condition ~~securities~~and ~~(as~~Results ~~defined in the Investment Company Act) is more than 40%~~ of ~~our total assets (exclusive of cash and certain cash equivalents)~~Operations. ”

A company that falls within the scope of section 3(a)(1)(C) of the Investment Company Act can avoid being regulated as an investment company if it can rely on certain of the exclusions from being deemed to be an “investment company” under the Investment Company Act. One such exclusion that management believes applies is Rule 3a-227- under the Investment Company Act, which allows a 3(a)(1)(C) investment company (as a “transient investment company”) a grace period of one year from the date of classification (in our case, the date of the sale of the Portfolio), to avoid registration under the Investment Company Act so long as it does not intend to engage primarily in the business of investing, reinvesting, owning, holding or trading in securities.

~~Rule~~ITEM ~~3a-2~~7. ~~under~~MANAGEMENT’S ~~the~~DISCUSSION ~~Investment~~AND ~~Company~~ANALYSIS ~~Act~~OF ~~provides~~FINANCIAL ~~that~~CONDITION aAND ~~company~~RESULTS isOF deemed not to be an investment company during a period of time not to exceed one year provided that the company has a bona fide intent to be engaged primarily, as soon as is reasonably possible (in any event by the termination of such period of time), in a business other than that of an investment company. OPERATIONS

~~Accordingly,~~The ~~the~~following ~~Board~~discussion ~~will~~should ~~explore transactions pursuant to which we may cease to~~ be ~~deemed~~read toin beconjunction anwith ~~investment~~the ~~company,~~consolidated ~~such~~financial asstatements ~~the~~and ~~merger~~related ~~contemplated~~notes ~~by the~~included ~~stipulation~~elsewhere ~~described~~ in ~~“Item~~this 3report. ~~Legal~~This discussion ~~Proceedings”,~~contains orforward-looking ~~the~~statements ~~disposition~~about of our ~~investment~~business. ~~securities,~~These ~~including~~statements ~~through~~are ~~liquidation,~~based oron ~~the~~current ~~acquisition~~expectations ofand ~~sufficient~~assumptions ~~assets~~ that are ~~not~~subject ~~investment securities in order for us not~~ to ~~be deemed~~risks anand ~~investment company under the Investment Company Act~~uncertainties. ~~There~~Actual ~~can~~results becould nodiffer ~~assurance~~materially ~~that~~because weof ~~will~~factors bediscussed ~~able~~in “Cautionary toStatement ~~complete~~About ~~such~~Forward-Looking ~~actions~~Statements” byand ~~the applicable deadline, or at all. If we were required to register as an~~ “~~investment~~Risk ~~company~~Factors” ~~under the~~contained ~~Investment~~elsewhere ~~Company~~in ~~Act,~~this ~~applicable restrictions could make it impractical for us to continue our business as currently conducted and could have a material adverse effect on us~~report.

~~Our~~In ~~officers~~2014, there were very significant changes regarding the Company, including (i) the refinancing of certain of the Company’s indebtedness on April 11, 2014, (ii) the exercise of the Purchase Option on April 11, 2014, and ~~directors~~(iii) the ~~face~~entry into ~~conflicts~~a non-binding memorandum of ~~interest~~understanding ~~related~~with respect to certain litigation involving the ~~positions~~preferred ~~they~~stock ~~hold~~of ~~with~~the ~~affiliated~~Company ~~entities~~on August 20, 2014 as described in “Item 3. Legal Proceedings.” These changes have had a substantial impact on the Company.

~~All~~As described in “Item 1. Business” of ~~our~~this ~~executive~~Form ~~officers~~10-K, on February 27, 2015, consolidated subsidiaries of the Company sold all 20 of the Trust Hotels, and ~~directors~~subsidiaries ~~are~~of ~~employed~~Senior byMezz, ~~our~~an ~~asset~~entity ~~manager.~~in Aswhich the Company has a ~~result~~3% equity interest, ~~these~~sold ~~individuals~~96 ~~may~~of ~~owe~~the ~~duties~~106 OP hotels to ~~other~~subsidiaries ~~entities~~of ARCH. On March 25, ~~which~~2015, ~~duties~~subsidiaries of Senior Mezz entered into an agreement ~~may~~to ~~conflict~~sell ~~with~~the ~~our~~Remaining ~~interests~~Hotels for $100 million. ~~Their~~The ~~loyalties~~agreement to ~~these~~sell ~~other~~the ~~entities~~Remaining ~~could~~Hotels ~~result~~was interminated ~~actions~~on orMay ~~inactions~~6, ~~that~~2015 ~~are~~and ~~detrimental~~reinstated and amended on June 8, 2015 to ~~our~~reinstate ~~business~~the contract and provide for the sale of nine of the Remaining Hotels for a purchase price of $85 million. ~~Conflicts~~If ~~with~~the ~~our~~sale ~~business~~of ~~and~~nine ~~interests~~of ~~are~~the ~~most~~Remaining ~~likely~~Hotels tocloses, ~~arise~~subsidiaries ~~from~~of ~~involvement~~Senior Mezz will own one Remaining Hotel. As such, as of the date of this Form 10-K, the Company owns interests in ~~activities~~several companies, but no longer ~~related~~operates toany ~~management~~assets. ~~time~~Furthermore, ~~and~~the ~~services~~discussions ~~between~~herein usof ~~and~~our ~~the~~historical ~~other~~financial ~~entities~~condition, results of operations and ~~transactions~~cash ~~with~~flow ~~the~~are ~~asset~~not ~~manager’s~~expected ~~affiliates~~to be indicative of our future financial condition, results of operations or cash flow.

~~-31-~~EXECUTIVE OVERVIEW

~~Table~~Following the recession that commenced in 2008, the lodging industry has experienced improvement in fundamentals, which continued in 2013 and 2014. ADR, which typically lags occupancy growth in the early stage of ~~Contents~~a recovery, has shown upward growth. We believe improvements in the economy will continue to positively impact the lodging and hotel operating results for the near future.

~~Risks~~As mentioned above, the U.S. lodging industry continued to exhibit positive fundamentals during 2013 and 2014. While there continued to be concerns about a slow-moving national economy and decreased spending, as well as the increased global volatility and risk related to the ~~preferred~~European ~~stock~~debt crisis, corporate profits and employment continued to improve in the United States during the periods covered by this Form 10-K.

~~There~~The strength in corporate transient, group and leisure travel, specifically in the major urban markets, has continued to drive increases in occupancy and ADR. New hotel supply remains at historically low levels and is ~~only~~expected ato ~~limited~~remain ~~trading~~relatively ~~market~~low ~~for~~given the lack ~~Series~~of Bavailable ~~preferred~~financing ~~stock~~for new hotel construction. There can be no assurance that this low level of new supply will continue and, in fact, supply levels have increased from their historic lows during 2014 and early 2015. We continue to believe that we will see a long and healthy recovery in the ~~Series~~lodging Cindustry ~~preferred~~and ~~stock~~believe our properties have significant opportunities to achieve significant growth in their operating cash flows and long-term economic values.

~~There~~RESULTS isOF ~~only~~OPERATIONS a limited trading market for the Series B preferred stock and Series C preferred stock. The Series B preferred stock and Series C preferred stock trade on the OTC under the stock symbols “WGCBP” and “WGCCP,” respectively. Therefore, there can be no assurance as to the liquidity of any markets that may develop for the preferred stock, the ability of holders of the preferred stock to sell their shares, or the prices at which holders may be able to sell shares of the preferred stock. Holders of shares of the preferred stock who desire to liquidate substantial holdings at a single point in time may find that they are unable to dispose of their shares in the market without causing a substantial decline in the market value of such shares.

~~Whitehall~~RevPAR is a commonly used measure within the hotel industry to evaluate hotel operations. RevPAR is defined as the product of the ADR charged and the average daily occupancy achieved. RevPAR does not include revenues from food and beverage or parking, ~~through~~telephone or other guest ~~Grace~~services Igenerated by the property. Although RevPAR does not include these ancillary revenues, ~~could~~it ~~exercise~~is ~~its~~generally ~~vote~~considered ~~over~~the leading indicator of core revenues for many hotels. We also use RevPAR to compare the results of our ~~common~~hotels ~~stock~~between inperiods and ato ~~manner~~analyze ~~that~~results ~~would~~of ~~benefit~~our ~~Whitehall~~comparable hotels (hotels we have owned for the entire years ended December 31, 2014, 2013, 2012 and ~~its~~2011). ~~affiliates~~RevPAR improvements attributable to ~~the~~increases ~~detriment~~in occupancy are generally accompanied by increases in most categories of ~~holders~~variable operating costs. RevPAR improvements attributable to increases in ADR are generally accompanied by increases in limited categories of ~~the~~operating ~~preferred~~costs, ~~stock~~such as management fees and franchise fees.

~~Grace~~We I,present aour ~~subsidiary~~results of ~~Whitehall,~~operations ~~owns~~on ~~all~~a ofconsolidated ~~our~~basis ~~common~~in ~~stock~~accordance ~~and~~with ~~generally has control over decisions requiring shareholder approval~~GAAP, ~~including~~consistent with the ~~election~~ preparation of our ~~directors~~consolidated ~~(other~~financial statements. ~~than~~GAAP ~~the~~requires ~~two~~us ~~directors~~to ~~which~~consolidate ~~may~~all beof ~~elected by~~ the ~~holders~~operations of ~~the~~those ~~Series~~hotels Bthat ~~preferred~~we ~~stock~~control, ~~and~~including ~~Series~~through Csubsidiaries. ~~preferred~~As ~~stock voting together as~~ a ~~single~~result ~~class~~for ~~while dividends of~~ the ~~preferred~~year ~~stock~~ended ~~are~~December 31, ~~in arrears). In circumstances involving a conflict of interest between Whitehall and holders of the preferred stock~~2014, ~~Grace I could exercise its vote over~~ our ~~common~~results ~~stock~~of inoperations areflect ~~manner~~100% ~~that would benefit Whitehall and its affiliates to the detriment~~ of ~~holders of the~~ ~~preferred stock.~~

~~Whitehall,~~-28- through PFD Holdings, LLC (PFD Holdings), could exercise its vote over the preferred stock in a manner that would benefit Whitehall and its affiliates to the detriment of other holders of the preferred stock.

~~PFD~~ the ~~Holdings,~~revenues aand ~~subsidiary~~expenses of ~~Whitehall,~~the ~~owns~~Trust aHotels ~~majority~~and the OP Hotels until the exercise of the ~~preferred~~Purchase ~~stock~~Option on April 11, 2014. InAfter ~~circumstances~~April 11, ~~involving~~2014, aour ~~conflict~~results of ~~interest~~operations ~~between~~reflect ~~Whitehall~~100% of the revenues and ~~holders~~expenses of only the ~~preferred~~Trust ~~stock,~~Hotels ~~PFD~~and ~~Holdings~~we ~~could~~recognize ~~exercise~~our ~~its~~3% ~~vote,~~of the net income or ~~fail~~loss toof ~~exercise~~Senior ~~its~~Mezz ~~vote,~~(which ~~with~~indirectly ~~respect~~owns tothe OP Hotels) in a single line item. For the ~~shares~~years ofended ~~preferred~~December 31, ~~stock~~2013, ~~owned~~2012 byand 2011, our itresults inof aoperations ~~manner~~reflect ~~that~~100% ~~would~~of ~~benefit~~the ~~Whitehall~~revenues and ~~its~~expenses ~~affiliates~~of tothe Trust Hotels and the ~~detriment~~OP ofHotels. ~~other~~However, ~~holders~~because ofwe own only a 1% ownership interest in W2007 Equity LP, the ~~preferred~~subsidiary ~~stock~~through ~~(including~~which ~~with~~we ~~respect~~indirectly toown and control the ~~two~~OP ~~directors~~Hotels and which ~~may~~has bea ~~elected~~99% byownership interest in the ~~holders~~Trust Hotels, Grace I, rather than us, participates more significantly in the results of the ~~Series~~hotels. BWe ~~preferred~~refer ~~stock~~to ~~and~~the ~~Series~~interest ~~C preferred~~held ~~stock~~by ~~voting~~Grace ~~together~~I as the “non-controlling interest.” In reviewing our results of operations it is important to bear in mind that only a ~~single~~small ~~class~~portion ~~while~~of ~~dividends~~the results of our hotels ultimately redound to our benefit, in the ~~preferred~~case ~~stock~~of ~~are~~a profit, or detriment, in ~~arrears)~~the case of a loss. Also, certain expenses, including the litigation settlement described under “Item 3. Legal Proceedings,” relate directly to the Company and, therefore, these expenses are or will be borne entirely by the Company.

~~Our~~The ~~assets~~following ~~are~~tables ~~insufficient~~summarize tothe ~~satisfy~~change ~~the liquidation~~in ~~preference~~key ~~and~~line ~~accrued~~items from our consolidated statements of operations and ~~unpaid~~comprehensive ~~dividends.~~loss for the indicated dates below (in thousands):

Based on the 5.85 million shares of Series B preferred stock and Series C preferred stock outstanding, the total amount available to be distributed from the sale of the Portfolio is not expected to exceed approximately $23.04 per share of Series B preferred stock and Series C preferred stock which assumes that (a) the disposition fees payable to RMD are fully paid, (b) the real estate tax make-whole under the Agreement is fully paid to ARCH and (c) the Company receives its 3% equity interest in the proposed sale of the Remaining Hotels for $100 million, net of costs to sell and does not take into account (i) the monthly preferred return, any present value discount of the Preferred Equity, or any risk that the Preferred Equity is not collectible, or (ii) any cash or other working capital assets and liabilities of the Company or Senior Mezz. While the Company currently has a stipulation of settlement pending court approval as described in “Item 3. Legal Proceedings,” which stipulation contemplates the payment of $26.00 per share of the Series B preferred stock and the Series C preferred stock in a going-private merger, there can be no assurance when such a transaction will occur or that such a transaction will occur at all. In the event that such a settlement is not approved or does not otherwise occur, we may


	Year Ended December 31,												Change
	2014			2013			2012			2011			2014 to 2013			2013 to 2012			2012 to 2011
Total hotel revenues	$	179,627		$	428,551		$	409,847		$	388,299		$	(248,924	)	$	18,704		$	21,548
Direct hotel expenses		103,447			253,347			244,728			233,437			(149,900	)		8,619			11,291
Property tax, ground lease, insurance and property management fees		13,064			31,656			31,020			29,440			(18,592	)		636			1,580
Corporate overhead		5,967			6,454			6,482			5,245			(487	)		(28	)		1,237
Asset management fees		3,073			7,063			6,648			6,137			(3,990	)		415			511
Depreciation and amortization		33,308			83,292			85,298			78,983			(49,984	)		(2,006	)		6,315
Impairment charges		9,036			27,656			85,684			4,483			(18,620	)		(58,028	)		81,201

Operating income (loss)		11,732			19,083			(50,013	)		30,574			(7,351	)		69,096			(80,587	)
Equity in loss from Senior Mezz		(1,429	)		—			—			—			(1,429	)		—			—
Interest income		76			82			87			101			(6	)		(5	)		(14	)
Interest expense		(31,325	)		(82,856	)		(84,433	)		(84,512	)		51,531			1,577			79
Other income		112			216			35			18			(104	)		181			17
Unrealized loss on derivatives		—			(57	)		(35	)		(401	)		57			(22	)		366
Contingent loss on litigation settlement		(24,250	)		—			—			—			(24,250	)		—			—
Gain on sale of investment of real estate		221			—			—			—			221			—			—
Gain on extinguishment of debt		13,199			—			—			—			13,199			—			—

Loss from continuing operations		(31,664	)		(63,532	)		(134,359	)		(54,220	)		31,868			70,827			(80,139	)
Income (loss) from discontinued operations		—			(8,081	)		(1,876	)		4,720			8,081			(6,205	)		(6,596	)

Net loss		(31,664	)		(71,613	)		(136,235	)		(49,500	)		39,949			64,622			(86,735	)
Net loss attributable to non-controlling interest		4,384			69,811			134,400			48,924			(65,427	)		(64,589	)		85,476

Net loss attributable to the Company	$	(27,280	)	$	(1,802	)	$	(1,835	)	$	(576	)	$	(25,478	)	$	33		$	(1,259	)

-3229-

~~Table~~Comparison of ~~Contents~~the year ended December 31, 2014 to the year ended December 31, 2013

~~engage~~The inkey ~~another~~performance ~~transaction~~indicators ~~which would likely result in payment by us~~ of ~~less than $26.00 per share of~~ the ~~Series~~hotels Bthat ~~preferred~~are ~~stock~~included ~~and the Series C preferred stock~~ in ~~extinguishment~~continuing ofoperations ~~such shares. Such a transaction may be considered prior to any redemption of the Preferred Equity in order to avoid registration~~ as ~~an investment company under the Investment Company Act as described above. Any such transaction would likely result in the Company monetizing the Preferred Equity. Solely for the purposes~~ of ~~this paragraph~~December 31, we2014 ~~have~~are ~~assumed~~illustrated weby ~~own 100% of W2007 Equity LP (which in turn owns 3% of~~ the ~~equity~~following ~~interests of Senior Mezz), even though we actually own a 1% ownership interest in~~table: ~~W2007 Equity LP. Nothing in this paragraph is an admission or assurance that we have the right to or will acquire the other 99% interest in W2007 Equity LP.~~

ITEM 1B. UNRESOLVED STAFF COMMENTS


	Year Ended December 31,
	2014			2013
Total hotel revenues (in thousands)	$	179,627		$	428,551
Rooms revenue (in thousands)	$	173,222		$	413,732
Occupancy		74.3	%		72.3	%
ADR	$	110.05		$	105.03
RevPAR	$	81.72		$	75.91

~~Not~~Total ~~applicable.~~hotel revenues

Rooms revenue for the year ended December 31, 2014 decreased $240.5 million, or 58.1%, to $173.2 million from $413.7 million for the year ended December 31, 2013. The decrease in rooms revenue was primarily due to the deconsolidation of the 106 OP Hotels on April 11, 2014. During 2014, we experienced a 4.8% increase in ADR as the economy continued to improve. Food and beverage revenue experienced a similar decrease of $4.6 million, or 56.9%, primarily due to the deconsolidation of the 106 OP Hotels on April 11, 2014. Other revenue, which consists mainly of guest telephone charges, equipment rentals, vending income, in-~~33-~~room movie sales, parking and business centers, experienced a decrease of $3.8 million, 56.7%, also primarily due to the deconsolidation of the 106 OP Hotels on April 11, 2014.

~~Table~~Direct ofhotel ~~Contents~~expenses

~~ITEM~~Direct 2hotel expenses consist of direct expenses from departments associated with revenue streams (departmental expenses) and non-departmental expenses associated with operating our hotels. ~~PROPERTIES~~We experienced decreases of $70.5 million in departmental expenses and $79.4 million in non-departmental expenses during 2014, primarily due to the deconsolidation of the 106 OP Hotels on April 11, 2014. The decrease in these expenses is consistent with the decrease in total hotel revenues over the same period. Direct hotel expenses were 57.6% and 59.1% of total hotel revenues for 2014 and 2013, respectively, and this change was due primarily to the change in the mix of hotel brands that remain after the deconsolidation of the OP Hotels.

AsProperty ~~of December 31~~tax, ~~2014,~~ground ~~we owned interests in 126 hotels located in 35 states comprising 14~~lease,~~934~~ ~~rooms.~~insurance ~~The following table presents certain information related to the 20 Trust Hotels owned by our subsidiaries~~ and ~~the~~property ~~106~~management OPfees ~~Hotels owned by Senior Mezz (in which we had a 3% equity interest):~~

		Service			Year Ended December 31, 2014
Hotel Property	Location	Type	Rooms		Occupancy			ADR		RevPar
Hampton Inn	Alcoa, TN	Limited		118		81.1	%	$	72.25	$	58.60
SpringHill Suites	Asheville, NC	Limited		88		74.5	%	$	120.06	$	89.42
Homewood Suites	Augusta, GA	Limited		65		82.2	%	$	121.93	$	100.25
Hampton Inn	Austin, TX	Limited		121		71.8	%	$	111.24	$	79.84
Courtyard	Carlsbad, CA	Limited		145		71.9	%	$	125.31	$	90.09
Hampton Inn	College Station, TX	Limited		133		75.9	%	$	118.06	$	89.60
Courtyard	Dalton, GA	Limited		93		70.7	%	$	89.57	$	63.31
Hampton Inn	East Lansing, MI	Limited		86		80.0	%	$	122.06	$	97.71
Courtyard	Houston, TX	Limited		176		61.9	%	$	134.94	$	83.47
Hampton Inn	Indianapolis, IN	Limited		128		74.3	%	$	95.99	$	71.32
Residence Inn	Jacksonville, FL	Limited		78		81.7	%	$	94.61	$	77.26
Hilton Garden Inn	Louisville, KY	Limited		112		74.1	%	$	118.29	$	87.61
Hampton Inn	Milford, CT	Limited		148		67.8	%	$	81.96	$	55.57
Hampton Inn	Naperville, IL	Limited		129		66.3	%	$	101.96	$	67.58
Hampton Inn	Orlando, FL	Limited		170		82.3	%	$	90.14	$	74.19
Homewood Suites	Orlando, FL	Limited		252		72.5	%	$	107.63	$	77.99
Hilton Garden Inn	Rio Rancho, NM	Limited		129		67.9	%	$	87.70	$	59.56
TownePlace Suites	Savannah, GA	Limited		95		83.2	%	$	79.16	$	65.87
Homewood Suites	Seattle, WA	Limited		161		86.8	%	$	172.74	$	149.87
Hampton Inn	Urbana, IL	Limited		130		71.0	%	$	127.43	$	90.47
Subtotal Trust Hotels				2,557		74.3	%	$	110.05	$	81.72
Hampton Inn	Addison, TX	Limited		158		74.2	%	$	79.80	$	59.17
Hampton Inn	Albany, NY	Limited		153		77.2	%	$	120.23	$	92.82
Hyatt Place	Albuquerque, NM	Limited		126		80.6	%	$	102.77	$	82.81
Courtyard	Asheville, NC	Limited		78		77.2	%	$	126.77	$	97.81
Courtyard	Athens, GA	Limited		105		67.2	%	$	108.37	$	72.87
Fairfield Inn & Suites	Atlanta, GA	Limited		143		65.9	%	$	80.35	$	52.93
Hyatt Place	Baton Rouge, LA	Limited		126		74.7	%	$	91.38	$	68.29
Hampton Inn	Beckley, WV	Limited		108		78.9	%	$	115.09	$	90.78
Hampton Inn	Birmingham, AL	Limited		129		72.1	%	$	106.22	$	76.53
Hyatt Place	Birmingham, AL	Limited		126		67.0	%	$	88.76	$	59.44
Hyatt Place	Bloomington, MN	Limited		126		82.5	%	$	107.49	$	88.69
Hyatt Place	Blue Ash, OH	Limited		125		64.9	%	$	92.42	$	59.96
Hampton Inn	Boca Raton, FL	Limited		94		76.1	%	$	125.69	$	95.67
Residence Inn	Boise, ID	Limited		104		82.2	%	$	104.38	$	85.75
Courtyard	Bowling Green, KY	Limited		93		75.3	%	$	98.19	$	73.90
Hampton Inn & Suites	Boynton Beach, FL	Limited		164		86.8	%	$	115.59	$	100.39
Hampton Inn	Charleston, SC	Limited		124		75.1	%	$	90.42	$	67.91
Hampton Inn	Chattanooga, TN	Limited		167		50.7	%	$	75.42	$	38.23
Residence Inn	Chattanooga, TN	Limited		76		78.0	%	$	119.31	$	93.08
Homewood Suites	Chicago, IL	Limited		233		83.9	%	$	185.11	$	155.35
Hampton Inn	Colorado Springs, CO	Limited		125		53.1	%	$	90.19	$	47.90
Residence Inn	Colorado Springs, CO	Limited		96		68.1	%	$	102.18	$	69.56
Hampton Inn	Columbus, GA	Limited		118		55.1	%	$	61.25	$	33.76
Hyatt Place	Columbus, OH	Limited		124		66.0	%	$	105.47	$	69.57
Courtyard	Dallas, TX	Limited		184		67.7	%	$	114.15	$	77.29
Fairfield Inn & Suites	Dallas, TX	Limited		116		70.2	%	$	95.58	$	67.09
Hampton Inn	Deerfield Beach, FL	Limited		106		73.7	%	$	111.29	$	81.97
Hampton Inn	Dublin, OH	Limited		123		72.7	%	$	100.19	$	72.84
Residence Inn	Eagan, MN	Limited		120		79.4	%	$	106.33	$	84.48
Residence Inn	El Segundo, CA	Limited		150		88.5	%	$	152.35	$	134.88
Courtyard	Elmhurst, IL	Limited		140		68.2	%	$	95.61	$	65.20
Hampton Inn	Fayetteville, NC	Limited		121		82.6	%	$	74.93	$	61.87
Hampton Inn & Suites	Franklin, TN	Limited		127		77.6	%	$	126.59	$	98.22
Hyatt Place	Franklin, TN	Limited		126		79.5	%	$	110.06	$	87.50
Residence Inn	Ft Myers, FL	Limited		78		74.5	%	$	115.50	$	86.00
Courtyard	Gainesville, FL	Limited		81		77.5	%	$	121.70	$	94.28
Hampton Inn	Gastonia, NC	Limited		107		75.5	%	$	97.95	$	73.97
Homewood Suites	Germantown, TN	Limited		92		86.4	%	$	107.12	$	92.54
Hyatt Place	Glen Allen, VA	Limited		124		66.2	%	$	94.37	$	62.49
Hampton Inn	Glen Burnie, MD	Limited		116		73.0	%	$	104.19	$	76.07
Hampton Inn	Grand Rapids, MI	Limited		84		78.5	%	$	128.60	$	101.01
SpringHill Suites	Grand Rapids, MI	Limited		76		74.4	%	$	123.80	$	92.10
Hampton Inn	Gurnee, IL	Limited		134		73.8	%	$	92.71	$	68.40
SpringHill Suites	Houston, TX	Limited		122		74.1	%	$	99.68	$	73.90
Hyatt Place	Indianapolis, IN	Limited		124		69.7	%	$	114.26	$	79.59
Courtyard	Jacksonville, FL	Limited		81		84.0	%	$	94.56	$	79.42
Hampton Inn	Kansas City, MO	Limited		120		65.0	%	$	109.99	$	71.45
Courtyard	Knoxville, TN	Limited		78		62.6	%	$	115.19	$	72.12
Residence Inn	Knoxville, TN	Limited		78		81.6	%	$	102.17	$	83.32
Hyatt Place	Las Vegas, NV	Limited		202		81.2	%	$	88.66	$	72.03
Courtyard	Lexington, KY	Limited		90		84.0	%	$	115.71	$	97.25
Residence Inn	Lexington, KY	Limited		91		83.1	%	$	107.75	$	89.56
SpringHill Suites	Lexington, KY	Limited		108		81.7	%	$	109.62	$	89.52
Hyatt Place	Linthicum Heights, MD	Limited		127		78.2	%	$	101.14	$	79.08
Courtyard	Louisville, KY	Limited		140		76.7	%	$	148.83	$	114.12
Residence Inn	Macon, GA	Limited		78		70.7	%	$	92.65	$	65.53
Hampton Inn	Madison Heights, MI	Limited		123		81.1	%	$	99.98	$	81.06
Hampton Inn	Maryland Heights, MO	Limited		122		63.5	%	$	104.84	$	66.54
Hampton Inn	Memphis, TN	Limited		124		77.4	%	$	109.97	$	85.17
Hyatt Place	Memphis, TN	Limited		126		77.2	%	$	98.85	$	76.33
Holiday Inn Express	Miami, FL	Limited		66		83.4	%	$	123.33	$	102.92
Hyatt Place	Miami, FL	Limited		124		83.4	%	$	118.39	$	98.78
Courtyard	Mobile, AL	Limited		78		61.4	%	$	94.67	$	58.12
Residence Inn	Mobile, AL	Limited		66		79.8	%	$	103.86	$	82.86
Residence Inn	Monmouth Junction, NJ	Limited		208		63.5	%	$	109.54	$	69.54
Hampton Inn	Morgantown, WV	Limited		107		76.1	%	$	120.55	$	91.71
Holiday Inn	Mt. Pleasant, SC	Full		158		53.8	%	$	109.38	$	58.80
Hampton Inn	Norfolk, VA	Limited		117		58.9	%	$	92.02	$	54.16
Hampton Inn	Northville , MI	Limited		124		62.7	%	$	102.51	$	64.28
Residence Inn	Oklahoma City, OK	Limited		136		81.2	%	$	96.88	$	78.65
Residence Inn	Omaha, NE	Limited		80		68.5	%	$	109.74	$	75.16
Courtyard	Orlando, FL	Limited		112		72.9	%	$	103.79	$	75.61
Embassy Suites	Orlando, FL	Full		246		75.4	%	$	118.84	$	89.61
Hampton Inn	Overland Park, KS	Limited		133		70.1	%	$	101.23	$	70.94
Hyatt Place	Overland Park, KS	Limited		124		68.3	%	$	95.97	$	65.52
Hampton Inn	Palm Beach Gardens, FL	Limited		116		81.2	%	$	119.74	$	97.19
Homewood Suites	Peabody, MA	Limited		85		76.1	%	$	129.36	$	98.39
Hampton Inn	Peabody, MA	Limited		120		68.4	%	$	124.77	$	85.39
Homewood Suites	Phoenix , AZ	Limited		124		78.7	%	$	123.44	$	97.12
Hampton Inn	Pickwick Dam, TN	Limited		50		58.6	%	$	105.27	$	61.68
Residence Inn	Portland, OR	Limited		168		87.3	%	$	146.12	$	127.60
Hilton Garden Inn	Round Rock, TX	Limited		122		72.0	%	$	102.86	$	74.02
SpringHill Suites	Round Rock, TX	Limited		104		65.1	%	$	99.22	$	64.59
Homewood Suites	San Antonio, TX	Limited		123		80.4	%	$	110.71	$	89.02
SpringHill Suites	San Antonio, TX	Limited		112		69.7	%	$	88.22	$	61.47
Residence Inn	San Diego, CA	Limited		95		86.3	%	$	151.12	$	130.48
SpringHill Suites	San Diego, CA	Limited		137		80.5	%	$	118.80	$	95.60
Courtyard	Sarasota, FL	Limited		81		75.0	%	$	112.59	$	84.45
Residence Inn	Sarasota, FL	Limited		78		86.0	%	$	118.29	$	101.69
Residence Inn	Savannah, GA	Limited		66		87.7	%	$	110.24	$	96.63
Hampton Inn	Scranton, PA	Limited		129		69.2	%	$	110.71	$	76.59
Homewood Suites	Sharonville, OH	Limited		111		72.6	%	$	104.44	$	75.83
Residence Inn	Somers Point, NJ	Limited		119		61.7	%	$	123.91	$	76.40
Hampton Inn	State College, PA	Limited		119		66.4	%	$	112.78	$	74.88
Courtyard	Tallahassee, FL	Limited		93		72.5	%	$	116.70	$	84.65
Residence Inn	Tallahassee, FL	Limited		78		76.1	%	$	119.98	$	91.29
Hyatt Place	Tampa, FL	Limited		124		85.1	%	$	110.75	$	94.28
Residence Inn	Tampa, FL	Limited		78		87.4	%	$	100.88	$	88.13
Residence Inn	Tampa, FL	Limited		102		81.0	%	$	104.88	$	84.97
Residence Inn	Tinton Falls, NJ	Limited		96		91.4	%	$	108.38	$	99.11
Residence Inn	Tucson, AZ	Limited		128		60.3	%	$	96.57	$	58.21
Hampton Inn	West Columbia, SC	Limited		120		69.1	%	$	80.66	$	55.72
Hampton Inn	West Palm Beach, FL	Limited		110		73.8	%	$	118.41	$	87.36
Hampton Inn	Westlake, OH	Limited		122		75.5	%	$	107.76	$	81.31
Residence Inn	Williston, VT	Limited		96		76.2	%	$	116.45	$	88.75
Homewood Suites	Windsor Locks, CT	Limited		132		75.9	%	$	114.20	$	86.70
Subtotal OP Hotels				12,377		74.0	%	$	109.68	$	81.17
				14,934		74.0	%	$	109.75	$	81.26

Property tax, ground lease, insurance and property management fees decreased $18.6 million to $13.1 million for 2014 compared to $31.7 million for 2013. This decrease is primarily related to the deconsolidation of the 106 OP Hotels on April 11, 2014 partially offset by increased real estate taxes and to a lesser extent higher base management fees and insurance.

~~-34-~~Corporate overhead

~~Table~~Corporate overhead expenses decreased slightly for 2014 compared to 2013, $6.0 million and $6.5 million, respectively. This decrease was primarily attributable to the decrease in corporate overhead related to the deconsolidation of ~~Contents~~the 106 OP Hotels on April 11, 2014 and the resultant decrease in overhead related to our hotels.

~~ITEM~~Asset 3.management ~~LEGAL~~fees ~~PROCEEDINGS~~

WeAsset ~~are~~management ~~involved~~fees indecreased ~~various~~$4.0 ~~legal~~million ~~proceedings~~to ~~and~~$3.1 ~~disputes~~million ~~arising~~for in2014 ~~the~~compared ~~ordinary course~~to ~~of business~~$7.1 ~~Management~~million ~~does~~for ~~not~~2013. ~~believe~~This ~~that~~decrease ~~any~~is ofprimarily ~~the~~due ~~pending~~to ~~actions~~the ~~will~~deconsolidation of ~~have~~the a106 ~~material~~OP ~~adverse~~Hotels ~~effect~~ on ~~our business~~April 11, ~~financial~~2014 ~~condition~~and orthe ~~cash~~resultant ~~flow,~~decrease ~~other~~in ~~than~~asset ~~the~~management ~~actions~~fees ~~described~~related ~~below~~to our hotels.

InDepreciation ~~September 2013, a putative class action lawsuit (the Johnson Lawsuit) was filed in the Tennessee Chancery Court, Shelby County, Tennessee by several current~~ and former holders of the preferred stock. Plaintiffs allege that, since October 2007, the defendants named in the complaint have engaged in a scheme to oppress and then squeeze-out the holders of the preferred stock, including by allegedlyamortization suppressing the marketability of the shares, causing the Company to cease paying dividends, and purchasing 58.8% of the shares in a series of alleged “creeping” tender offers beginning in 2012. The complaint names as defendants the Company, the members of our board of directors, the majority shareholders of the Company (Grace I, Whitehall and PFD Holdings), the GS Group and Goldman Sachs Realty Management L.P. (RMD). The complaint asserts claims for breach of contract, breach of fiduciary duty, aiding and abetting, and for violations of the Tennessee Blue Sky laws and the Tennessee Business Corporations Act. On October 4, 2013, defendants removed the action to the United States District Court for the Western District of Tennessee. On

~~-35-~~Depreciation and amortization decreased $50.0 million to $33.3 million for 2014 compared to $83.3 million for 2013. This decrease is primarily attributable to the deconsolidation of the 106 OP Hotels on April 11, 2014 and the resultant decrease in depreciation on our hotels.

~~Table~~-30- ~~of Contents~~

~~November 6,~~Impairment ~~2013,~~charges plaintiffs filed a motion to remand the case to state court. The defendants filed their opposition on December 6, 2013. The remand motion was fully briefed on December 20, 2013. On July 28, 2014, the court denied the remand motion. The defendants also moved to dismiss the Johnson Lawsuit on January 23, 2014. The court entered a scheduling order governing further proceedings in the litigation on February 14, 2014, as amended on June 19, 2014 and July 28, 2014, and the parties engaged in merits and class certification discovery. Also, pursuant to the schedule, plaintiffs filed their opposition to defendants’ dismissal motion on March 21, 2014, and defendants filed their reply papers in further support of their motion on April 25, 2014. Plaintiffs moved for class certification on May 16, 2014.

~~After~~Impairment ~~the~~charges ~~Company~~decreased ~~announced the Original Purchase Agreement with ARCH on June 2, 2014, defendants and plaintiffs engaged in settlement negotiations~~$18. ~~Thereafter,~~6 ~~plaintiffs~~million ~~made requests for, and defendants provided~~ to ~~plaintiffs, information regarding the transaction contemplated by the Original Purchase Agreement (the ARCH Transaction)~~$9.0 ~~Among~~million ~~other~~for ~~information~~2014 ~~provided,~~compared ~~the Company estimated a reasonable fair present value of the proceeds that could be distributed~~ to ~~holders of the preferred stock as a result of the ARCH Transaction, as announced, to be approximately~~ $1827.507 ~~per~~million ~~share~~for ~~of preferred stock~~2013. ~~Plaintiffs~~This ~~retained~~decrease ~~and~~is ~~consulted with~~attributable ~~two financial advisors with regard~~ to ~~the~~a ~~ARCH~~decrease ~~Transaction. During this period, the parties to the Johnson Lawsuit continued to engage~~ in ~~both merits and class certification discovery. On August 20, 2014,~~ the ~~parties entered into a~~ ~~Memorandum~~number of ~~Understanding~~hotels ~~(MOU)~~impaired ~~containing~~in ~~the key terms of a proposed settlement. On August 22,~~ 2014, ~~the~~compared ~~parties held a telephone conference with the court, in which the court agreed that, in light of the MOU, the parties would no longer be subject~~ to ~~the pending deadlines in the then current scheduling order~~2013. ~~For~~The ~~the~~decrease ~~court’s convenience~~ in ~~managing its docket,~~ the ~~defendants~~number ~~agreed~~of toimpaired ~~withdraw~~hotels ~~their~~is ~~pending~~primarily ~~motion~~due to ~~dismiss without prejudice. On September 2, 2014,~~ the ~~court granted~~continued ~~the~~improved ~~defendants’~~operating ~~motion~~performance toat ~~withdraw its motion to dismiss without prejudice to renew. The defendants may renew their motion to dismiss in~~ the ~~event that the proposed settlement of the Johnson Lawsuit does not become final~~hotels.

~~The~~Equity ~~stipulation, which was submitted to the court on October 9, 2014 and amended on December 4, 2014, would settle claims with respect to two classes described~~ in the Johnson Lawsuit: (1) the “Holder Class” consisting of any and all persons who, as of August 22, 2014 and through the effective time of the merger contemplated by the stipulation, hold the preferred stock, excluding defendants and their affiliates, persons who opt out of the Holder Class and holders of dissenting shares and (2) the “Seller Class” consisting of all persons who sold some or all of their shares of preferred stock between October 25, 2007 and October 8, 2014, inclusive, and suffered a loss, ~~excluding~~from ~~the~~Senior ~~defendants,~~Mezz their affiliates and persons who sold shares to PFD Holdings, and persons who opt out of the Seller Class. The stipulation was preliminarily approved by the court on April 30, 2015 and remains subject to final approval by the court. A hearing on final approval is scheduled for September 11, 2015.

InFor ~~October 2013~~2014, ~~a similar lawsuit was filed by another plaintiff in~~ the ~~same~~equity ~~Circuit Court (the Dent Lawsuit), alleging similar breaches against several of~~in ~~the~~loss ~~same~~from ~~defendants~~Senior ~~named~~Mezz inwas ~~the Johnson Lawsuit, in addition to a former member of the Company’s board of directors~~$1.4 ~~The~~million ~~plaintiffs~~ and ~~defendants~~relates ~~in the Dent Lawsuit agreed~~ to ~~stay~~our ~~this~~3% ~~case~~equity ~~until~~interest ~~the motion to remand~~ in ~~the~~Senior ~~Johnson lawsuit was decided~~Mezz. AsPrior ~~stipulated~~to ~~by the parties~~April 11, plaintiff must file any response to defendants’ motion to stay within ten business days after notice of the federal court decision denying the remand motion. Defendants notified plaintiff of the resolution of the remand motion in the Johnson Lawsuit2014, ~~and plaintiff has not filed a response to~~ the ~~motion~~Company toconsolidated ~~stay.~~Senior ~~The proposed settlement in the Johnson Lawsuit purports to encompass the claims asserted in the Dent Lawsuit~~Mezz.

~~-36-~~Interest expense

~~Table~~Interest expense decreased $51.5 million to $31.3 million for 2014 compared to $82.9 million for 2013. This decrease is primarily attributable to principal repayments under the Company’s various notes payable and the refinancing of ~~Contents~~the GE Mortgage (as defined in Note 7 to the consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data”) and the subsequent exercise of the Purchase Option.

~~ITEM~~Contingent 4.loss ~~MINE~~on ~~SAFETY~~litigation ~~DISCLOSURES~~settlement

~~Not~~As ~~applicable~~discussed more fully in the notes to the consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data,” in August 2014, the Company and certain other defendants entered into a non-binding memorandum of understanding with respect to a settlement of the claims raised in the Johnson Lawsuit. The agreement generally provides for the following: (1) the effectuation of a merger that will result in exchange of $26.00 in cash for each share of Series B preferred stock and Series C preferred stock outstanding; (2) the establishment of a $6 million fund to be distributed pursuant to a plan of allocation to sellers of the Series B preferred stock and Series C preferred stock; and (3) the payment of reasonable counsel fees, as awarded by the Court. Therefore during 2014, the Company accrued $24.25 million related to the agreement which is included in contingent loss on litigation settlement. The Company anticipates funding the settlement with cash on hand or, if necessary, funding from Whitehall. Ongoing defense costs will be expensed as incurred and could be significant.

~~PART~~Gain IIon extinguishment of debt

~~ITEM~~The 5Company recognized interest on the GE Mortgage under the effective interest method. ~~MARKET~~In ~~FOR~~conjunction ~~REGISTRANT’S~~with ~~COMMON~~the ~~EQUITY~~repayment of the GE Mortgage on April 11, ~~RELATED~~2014, ~~STOCKHOLDER~~the ~~MATTERS~~Company wrote-off the interest accrued under the effective interest method, ~~AND~~but ~~ISSUER~~which ~~PURCHASES~~was OFnot ~~EQUITY~~due ~~SECURITIES~~or payable to the lender. This write-off resulted in a gain of $13,199,329 during 2014 which is included in gain on extinguishment of debt.

~~Since~~Loss ~~the Merger, all of our 100 issued and outstanding shares of common stock have been held by Grace I. Therefore, there is currently no public trading~~from ~~market~~discontinued ~~for~~operations ~~our common stock.~~

WeFor ~~have~~2014, ~~not~~the ~~paid~~Company ~~any~~had ~~cash~~no ~~dividends~~discontinued onoperations. ~~our~~For ~~common~~2013, ~~stock~~loss infrom ~~the~~discontinued ~~past~~operations ~~two~~was ~~years~~$8.1 ~~Payment~~million, ~~of any future dividends will depend~~related ~~upon~~primarily ~~our~~to ~~earnings~~$2.0 ~~and~~million ~~capital~~of ~~requirements,~~operating ~~contractual~~income ~~restrictions,~~offset ~~and~~by ~~other~~$1.6 ~~factors~~million ~~our~~in ~~board~~interest ofexpense ~~directors~~and ~~considers appropriate~~$8.5 ~~Our~~million ~~ability~~in tocombined ~~declare~~loss ~~common~~on ~~dividends is affected by covenants under~~ the ~~Company’s~~extinguishment of debt ~~agreements~~ and ~~limitations~~ ~~under~~loss ~~the~~on ~~Company’s~~sale ~~charter. See Note 7~~ of ~~the~~investments ~~consolidated financial statements located~~ in ~~“Item~~real 8estate. ~~Financial Statements and Supplementary Data” for further information.~~

~~-37-~~Net loss

~~Table~~As a result of ~~Contents~~the foregoing, for 2014 we recorded a net loss of $31.7 million compared to a net loss of $71.6 million for 2013.

~~ITEM~~Net 6.loss ~~SELECTED~~attributable ~~FINANCIAL~~to ~~DATA~~non-controlling interest

~~The~~Non-controlling ~~following~~interest ~~selected~~represents ~~historical~~the ~~financial~~interest ~~information~~not ~~should~~owned beby ~~read~~us in ~~conjunction~~ ~~with~~our ~~“Management’s~~subsidiary ~~Discussion~~ and, ~~Analysis~~indirectly, ofour ~~Financial~~hotels. ~~Condition~~As ~~and~~a ~~Results~~result of ~~Operations”~~the ~~and~~decrease ~~the~~in ~~historical~~our ~~consolidated~~net ~~financial~~loss during ~~statements~~2014 ascompared ofto ~~December 31~~2013, ~~2014,~~the ~~2013~~net ~~and~~loss ~~2012~~attributable ~~and~~to ~~for~~non-controlling ~~the~~interest ~~four~~decreased ~~years~~to ~~ended December 31,~~$4.4 million in 2014, ~~2013,~~from ~~2012~~$69.8 ~~and~~million ~~2011,~~in ~~and~~2013. In addition, the ~~related~~contingent ~~notes~~loss ~~included~~on inlitigation ~~“Item~~settlement 8of $24.3 ~~Financial~~million ~~Statements~~was ~~and~~attributable ~~Supplementary~~solely ~~Data~~to Grace Acquisition I.”

	Year Ended December 31,
	2014			2013			2012			2011			2010			2009
	(in thousands)
Operating Data (1), (2):
Total hotel revenues	$	179,627		$	428,551		$	409,847		$	388,299		$	365,150		$	343,393
Total operating expenses		167,895			409,468			459,860			357,725			432,668			683,749
Operating income (loss)		11,732			19,083			(50,013	)		30,574			(67,518	)		(340,356	)
Loss from continuing operations		(31,664	)		(63,532	)		(134,359	)		(54,220	)		(113,072	)		(418,303	)
Income (loss) from discontinued operations		—			(8,081	)		(1,876	)		4,720			(16,035	)		(9,536	)
Net loss		(31,664	)		(71,613	)		(136,235	)		(49,500	)		(129,107	)		(427,839	)
Net loss attributable to the Company		(27,280	)		(1,802	)		(1,835	)		(576	)		(1,739	)		(5,092	)
Net loss attributable to common shareholders		(27,280	)		(1,802	)		(1,835	)		(576	)		(1,739	)		(5,092	)
Balance Sheet Data:
Investments in real estate, net	$	240,830		$	1,392,097		$	1,562,422		$	1,697,963		$	1,754,844		$	1,883,441
Cash and cash equivalents		12,444			12,404			13,051			11,782			10,825			15,745
Restricted cash		2,809			46,849			35,341			41,980			45,185			58,194
Total assets		265,020			1,470,450			1,630,362			1,772,894			1,833,291			1,978,152
Total debt		203,126			1,161,725			1,245,557			1,261,040			1,284,075			1,297,207
Total other liabilities		41,220			58,515			62,966			53,767			41,552			53,745
Total shareholders’ equity		36,421			63,917			65,719			66,486			67,063			68,707
Non-controlling equity purchase option		—			175,000			175,000			281,811			281,811			281,811
Non-controlling interest		(15,747	)		11,293			81,120			109,790			158,790			276,682
Cash Flow Data:
Cash flows from operating activities	$	22,038		$	62,451		$	63,662		$	56,281		$	53,868		$	37,434
Cash flows from (used in) investing activities		20,150			35,815			(36,729	)		(39,162	)		(50,856	)		(69,056	)
Cash flows from (used in) financing activities		(42,148	)		(98,913	)		(25,664	)		(16,162	)		(7,931	)		35,828
Other Data:
Cash dividends declared per common share	$	—		$	—		$	—		$	—		$	—		$	—
EBITDA (unaudited) (3)		32,893			99,243			39,437			120,837			(461	)		(266,126	)
Adjusted EBITDA (unaudited) (3)		54,188			135,436			125,898			118,189			101,164			100,314

-31-

~~(1)~~Net ~~All~~loss ~~years~~attributable ~~presented have been adjusted~~ to ~~reflect~~the ~~hotels~~Company ~~no longer owned as of December 31, 2014 as discontinued operations.~~

Net loss attributable to the Company represents the net loss not attributable to non-~~38-~~controlling interests. The net loss attributable to the Company was increased to $27.3 million in 2014 from $1.8 million in 2013. The increased loss is primarily due to the contingent loss on litigation settlement of $24.3 million which was attributable solely to Grace Acquisition I.

~~Table~~Comparison of ~~Contents~~the year ended December 31, 2013 to the year ended December 31, 2012

~~(2)~~ The ~~Company~~key ~~has~~performance ~~not~~indicators ~~disclosed~~of ~~earnings~~the ~~per~~hotels ~~share~~that ~~data~~are asincluded ~~this~~in ~~information~~continuing isoperations ~~not meaningful~~ as ~~there are only 100 shares~~ of ~~common stock issued and outstanding~~December 31, ~~all~~2013 ~~of which~~ are ~~wholly~~illustrated ~~owned~~ by ~~Grace~~the I.following table:

(3) A more detailed description and computation of EBITDA is contained in the “Non-GAAP Financial Measures” section of “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”


	Year Ended December 31,
	2013			2012
Total hotel revenues (in thousands)	$	428,551		$	409,847
Rooms revenue (in thousands)	$	413,732		$	395,697
Occupancy		72.3	%		70.9	%
ADR	$	105.03		$	102.16
RevPAR	$	75.91		$	72.39

~~ITEM~~Total 7.hotel ~~MANAGEMENT’S~~revenues ~~DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~The following~~Rooms ~~discussion~~revenue ~~should~~for bethe ~~read~~year inended ~~conjunction~~December 31, ~~with~~2013 increased $18.0 million, or 4.6%, to $413.7 million from $395.7 million for the ~~consolidated~~year ~~financial~~ended December 31, ~~statements~~2012. ~~and~~The ~~related~~increase ~~notes~~in ~~included~~rooms ~~elsewhere~~revenue was partially due to the continued improvements in ~~this~~occupancy ~~report.~~coupled ~~This~~with ~~discussion~~an ~~contains~~increase ~~forward-looking~~in ~~statements~~ADR ~~about~~at our ~~business~~comparable hotels. ~~These~~During ~~statements~~2013, ~~are~~we ~~based~~experienced ona 2.8% increase in ADR as the economy continued ~~current~~to ~~expectations~~improve. Food and ~~assumptions~~beverage ~~that~~revenue ~~are~~experienced ~~subject~~a similar increase of $0.4 million, or 5.2%, due to ~~risks~~improved occupancy and ~~uncertainties.~~increased ~~Actual~~food ~~results~~and ~~could~~beverage ~~differ~~offerings ~~materially~~through ~~because~~the addition of ~~factors~~the ~~discussed~~Bistro inconcept ~~“Cautionary~~at ~~Statement~~many ~~About~~of ~~Forward~~our Courtyard properties during 2013. Other revenue, which consists mainly of guest telephone charges, equipment rentals, vending income, in-~~Looking~~room ~~Statements”~~movie sales, parking and ~~“Risk~~business ~~Factors” contained~~centers, ~~elsewhere~~experienced ina ~~this~~slight ~~report~~increase of $0.3 million.

InDirect ~~2014,~~hotel ~~there~~expenses were very significant changes regarding the Company, including (i) the refinancing of certain of the Company’s indebtedness on April 11, 2014, (ii) the exercise of the Purchase Option on April 11, 2014, and (iii) the entry into a non-binding memorandum of understanding with respect to certain litigation involving the preferred stock of the Company on August 20, 2014 as described in “Item 3. Legal Proceedings.” These changes have had a substantial impact on the Company.

Direct hotel expenses consist of direct expenses from departments associated with revenue streams (departmental expenses) and non-39departmental expenses associated with operating our hotels. We experienced increases of $2.4 million in departmental expenses and $6.3 million in non-departmental expenses during 2013. The increase in these expenses is consistent with the increase in total hotel revenues over the same period. Direct hotel expenses were relatively consistent at 59.1% and 59.7% of total hotel revenues for 2013 and 2012, respectively.

~~Table~~Property oftax, ~~Contents~~ground lease, insurance and property management fees

AsProperty ~~described in “Item 1. Business” of this Form 10-K~~tax, onground ~~February 27~~lease, ~~2015,~~insurance ~~consolidated subsidiaries of the Company sold all 20 of the Trust Hotels,~~ and ~~subsidiaries~~property ofmanagement ~~Senior~~fees ~~Mezz,~~increased an$0.6 ~~entity~~million ~~in which the Company has a 3% equity interest, sold 96 of the 106 OP hotels~~ to ~~subsidiaries of ARCH~~$31.7 Onmillion ~~March 25,~~for ~~2015,~~2013 ~~subsidiaries~~compared ~~of Senior Mezz entered into an agreement~~ to ~~sell~~$31.0 ~~the~~million ~~Remaining Hotels~~ for ~~$100 million~~2012. AsThis increase ~~such,~~is asprimarily ofrelated ~~the~~to ~~date~~increased ofproperty ~~this~~tax ~~Form 10-K~~assessments, ~~the~~higher ~~Company~~premiums ~~owns~~for ~~interests~~insurance inpolicies ~~several companies, but no longer operates any assets. Furthermore, the discussions herein of our historical financial condition, results of operations~~ and ~~cash~~increased ~~flow~~management ~~are~~fees ~~not~~due ~~expected~~ to bethe ~~indicative~~increased ofrevenues ~~our~~at ~~future~~the ~~financial condition, results of operations or cash flow~~hotels.

~~EXECUTIVE~~Corporate ~~OVERVIEW~~overhead

~~Following~~Corporate ~~the~~overhead ~~recession~~expenses ~~that~~were ~~commenced~~essentially inunchanged ~~2008,~~for ~~the~~2013 ~~lodging~~compared ~~industry~~to ~~has experienced improvement in fundamentals~~2012, ~~which continued in 2014~~$6.5 ~~ADR,~~million ~~which typically lags occupancy growth~~ in ~~the~~each ~~early stage of a recovery, has shown upward growth~~year. ~~We believe improvements in the economy will continue to positively impact the lodging and hotel operating results for the near future.~~

AsAsset ~~mentioned~~management ~~above,~~fees the U.S. lodging industry continued to exhibit positive fundamentals during 2014. While there continued to be concerns about a slow-moving national economy and decreased spending, as well as the increased global volatility and risk related to the European debt crisis, corporate profits and employment continued to improve in the United States during the periods covered by this Form 10-K.

~~The~~Asset ~~strength~~management infees ~~corporate transient,~~increased ~~group~~$0.4 ~~and~~million ~~leisure~~to ~~travel,~~$7.1 ~~specifically~~million infor ~~the~~2013 ~~major~~compared ~~urban markets, has continued~~ to ~~drive~~$6.7 ~~increases~~million infor ~~occupancy and ADR~~2012. ~~New~~This ~~hotel~~increase ~~supply remains at historically low levels and~~ is ~~expected~~consistent towith ~~remain relatively low given~~ the ~~lack of~~contractual ~~available~~increase ~~financing~~provided for ~~new hotel construction. There can be no assurance that this low level of new supply will continue and,~~ in ~~fact,~~the ~~supply~~GSMC ~~levels~~Mortgage ~~have~~described ~~increased from their historic lows during 2014 and early 2015. We continue to believe that we will see a long and healthy recovery~~ in ~~the~~Note ~~lodging~~7 ~~industry and believe our properties have significant opportunities~~ to ~~achieve~~“Item ~~significant~~8. ~~growth~~Financial inStatements ~~their operating cash flows~~ and ~~long-term~~Supplementary ~~economic values~~Data”.

~~RESULTS~~-32- ~~OF OPERATIONS~~

~~RevPAR~~Depreciation ~~is a commonly used measure within the hotel industry to evaluate hotel operations. RevPAR is defined as the product of the ADR charged~~ and ~~the~~amortization average daily occupancy achieved. RevPAR does not include revenues from food and beverage or parking, telephone or other guest services generated by the property. Although RevPAR does not include these ancillary revenues, it is generally considered the leading indicator of core revenues for many hotels. We also use RevPAR to compare the results of our hotels between periods and to analyze results of our comparable hotels (hotels we have owned for the entire years ended December 31, 2014, 2013, 2012 and 2011). RevPAR improvements attributable to increases in occupancy are generally accompanied by increases in most categories of variable operating costs. RevPAR improvements attributable to increases in ADR are generally accompanied by increases in limited categories of operating costs, such as management fees and franchise fees.

~~-40-~~Depreciation and amortization decreased $2.0 million to $83.3 million for 2013 compared to $85.3 million for 2012. This decrease is primarily attributable to certain assets becoming fully depreciated in 2013 partially offset by depreciation on capital improvements made at certain hotels since December 31, 2012.

~~Table~~Impairment ofcharges ~~Contents~~

WeImpairment ~~present~~charges ~~our~~decreased ~~results of operations on a consolidated basis in accordance with GAAP, consistent with the~~$58.0 ~~preparation~~million ~~of our consolidated financial statements. GAAP requires us~~ to ~~consolidate all of the operations of those hotels that we control, including through subsidiaries~~$27.7 Asmillion ~~a result~~ for ~~the~~2013 ~~year~~compared ~~ended~~to ~~December 31, 2014, our results of operations reflect 100% of the revenues and expenses of the Trust Hotels and the OP Hotels until the exercise of the Purchase Option on April 11, 2014~~$85.7 ~~After~~million ~~April 11,~~for 2014, our results of operations reflect 100% of the revenues and expenses of only the Trust Hotels and we recognize our 3% of the net income or loss of Senior Mezz (which indirectly owns the OP Hotels) in a single line item. For the years ended December 31, 2013, 2012 ~~and 2011, our results of operations reflect 100% of the revenues and expenses of the Trust Hotels and the OP Hotels~~. ~~However,~~This ~~because~~decrease weis ~~own~~attributable ~~only~~to a 1%decrease ~~ownership interest~~ in ~~W2007 Equity LP,~~ the ~~subsidiary~~number ~~through~~of ~~which~~hotels weimpaired ~~indirectly own and control the OP Hotels and which has a 99% ownership interest~~ in ~~the~~2013 ~~Trust~~compared ~~Hotels, Grace I, rather than us, participates more significantly in the results of the hotels. We refer~~ to ~~the interest held by Grace I as the “non-controlling interest~~2012.” InThe ~~reviewing~~decrease ~~our results of operations it is important to bear~~ in ~~mind that only a small portion of~~ the ~~results~~number of ~~our~~impaired hotels ~~ultimately~~is ~~redound~~primarily due to ~~our benefit, in~~ the ~~case of a profit, or detriment, in the case of a loss. Also, certain expenses, including the litigation~~ ~~settlement~~continued ~~described~~improved ~~under~~operating ~~Item 3.~~performance ~~Legal~~at ~~Proceeding, relate directly to~~ the ~~Company and, therefore, these expenses are or will be borne entirely by the Company~~hotels.

~~-41-~~Interest expense

~~Table~~Interest ofexpense ~~Contents~~decreased $1.6 million to $82.9 million for 2013 compared to $84.4 million for 2012. This decrease is primarily attributable to principal repayments under the Company’s various notes payable.

~~The~~Income ~~following~~(loss) ~~tables summarize the change in key line items~~ from ~~our~~discontinued ~~consolidated statements of~~ operations ~~and comprehensive loss for the indicated dates below (in thousands):~~

	Year Ended December 31,												Change
	2014			2013			2012			2011			2014 to2013			2013 to2012			2012 to2011
Total hotel revenues	$	179,627		$	428,551		$	409,847		$	388,299		$	(248,924	)	$	18,704		$	21,548
Direct hotel expenses		103,447			253,347			244,728			233,437			(149,900	)		8,619			11,291
Property tax, ground lease, insurance and property management fees		13,064			31,656			31,020			29,440			(18,592	)		636			1,580
Corporate overhead		5,967			6,454			6,482			5,245			(487	)		(28	)		1,237
Asset management fees		3,073			7,063			6,648			6,137			(3,990	)		415			511
Depreciation and amortization		33,308			83,292			85,298			78,983			(49,984	)		(2,006	)		6,315
Impairment charges		9,036			27,656			85,684			4,483			(18,620	)		(58,028	)		81,201
Operating income (loss)		11,732			19,083			(50,013	)		30,574			(7,351	)		69,096			(80,587	)
Equity in loss from Senior Mezz		(1,429	)		—			—			—			(1,429	)		—			—
Interest income		76			82			87			101			(6	)		(5	)		(14	)
Interest expense		(31,325	)		(82,856	)		(84,433	)		(84,512	)		51,531			1,577			79
Other income		112			216			35			18			(104	)		181			17
Unrealized loss on derivatives		—			(57	)		(35	)		(401	)		57			(22	)		366
Contingent loss on litigation settlement		(24,250	)		—			—			—			(24,250	)		—			—
Gain on sale of investment of real estate		221			—			—			—			221			—			—
Gain on extinguishment of debt		13,199			—			—			—			13,199			—			—
Loss from continuing operations		(31,664	)		(63,532	)		(134,359	)		(54,220	)		31,868			70,827			(80,139	)
Income (loss) from discontinued operations		—			(8,081	)		(1,876	)		4,720			8,081			(6,205	)		(6,596	)
Net loss		(31,664	)		(71,613	)		(136,235	)		(49,500	)		39,949			64,622			(86,735	)
Net loss attributable to non-controlling interest		4,384			69,811			134,400			48,924			(65,427	)		(64,589	)		85,476
Net loss attributable to the Company	$	(27,280	)	$	(1,802	)	$	(1,835	)	$	(576	)	$	(25,478	)	$	33		$	(1,259	)

For 2013, loss from discontinued operations was $8.1 million, related primarily to $2.0 million of operating income offset by $1.6 million in interest expense and $8.5 million in combined loss on the extinguishment of debt and loss on sale of investments in real estate. For 2012, loss from discontinued operations was $1.9 million, related primarily to $0.2 million of operating income and $0.3 million in net gain on sale of investments in real estate offset by a $1.0 million impairment charge and $1.5 million in interest expense.

~~-42-~~Net loss

~~Table~~As a result of ~~Contents~~the foregoing, for 2013 we recorded a net loss of $71.6 million compared to a net loss of $136.2 million for 2012.

~~Comparison~~Net ofloss ~~the~~attributable ~~year ended December 31, 2014~~ to ~~the~~non-controlling ~~year~~interest ~~ended December 31, 2013~~

~~The~~Non-controlling ~~key~~interest ~~performance~~represents ~~indicators~~the ofinterest ~~the~~not owned by us in our subsidiary and, indirectly, our hotels. ~~that~~As ~~are~~a ~~included~~result of the decrease in ~~continuing~~our ~~operations~~net asloss during of2013 ~~December 31~~compared to 2012, ~~2014~~the ~~are~~net ~~illustrated~~loss byattributable ~~the~~to ~~following~~non-controlling ~~table:~~ interest decreased to $69.8 million in 2013 from $134.4 million in 2012.

	Year Ended December 31,
	2014			2013
Total hotel revenues (in thousands)	$	179,627		$	428,551
Rooms revenue (in thousands)	$	173,222		$	413,732
Occupancy		74.3	%		72.3	%
ADR	$	110.05		$	105.03
RevPAR	$	81.72		$	75.91

Net loss available to the Company

~~Total~~Net ~~hotel~~loss ~~revenues~~available to the Company represents the net loss not attributable to non-controlling interests. The net loss available to the Company was essentially unchanged at $1.8 million in 2013.

~~Rooms~~Comparison ~~revenue~~of ~~for~~ the year ended December 31, ~~2014~~2012 ~~decreased $240.5 million, or 58.1%,~~ to ~~$173.2 million from $413.7 million for~~ the year ended December 31, ~~2013.~~2011 The decrease in rooms revenue was primarily due to the deconsolidation of the 106 OP Hotels on April 11, 2014. During 2014, we experienced a 4.8% increase in ADR as the economy continued to improve. Food and beverage revenue experienced a similar decrease of $4.6 million, or 56.9%, primarily due to the deconsolidation of the 106 OP Hotels on April 11, 2014. Other revenue, which consists mainly of guest telephone charges, equipment rentals, vending income, in-room movie sales, parking and business centers, experienced a decrease of $3.8 million, 56.7%, also primarily due to the deconsolidation of the 106 OP Hotels on April 11, 2014.

~~Direct~~The ~~hotel~~key ~~expenses~~performance indicators of the hotels that are included in continuing operations as of December 31, 2012 are illustrated by the following table:

Direct hotel expenses consist of direct expenses from departments associated with revenue streams (departmental expenses) and non-departmental expenses associated with operating our hotels. We experienced decreases of $70.5 million in departmental expenses and $79.4 million in non-departmental expenses during 2014, primarily due to the deconsolidation of the 106 OP Hotels on April 11, 2014. The decrease in these expenses is consistent with the decrease in total hotel revenues over the same period. Direct hotel expenses were 57.6% and 59.1% of total hotel revenues for 2014 and 2013, respectively, and this change was due primarily to the change in the mix of hotel brands that remain after the deconsolidation of the OP Hotels.


	Year Ended December 31,
	2012			2011
Total hotel revenues (in thousands)	$	409,847		$	388,299
Rooms revenue (in thousands)	$	395,697		$	374,706
Occupancy		70.9	%		69.4	%
ADR	$	102.16		$	99.00
RevPAR	$	72.39		$	68.74

~~Property~~Total ~~tax,~~hotel ~~ground~~revenues ~~lease, insurance and property management fees~~

~~Property~~Rooms ~~tax,~~revenue ~~ground~~for ~~lease,~~the ~~insurance~~year ~~and~~ended ~~property~~December 31, ~~management~~2012 ~~fees~~increased ~~decreased~~ $1821.60 million, or 5.6%, to $13395.17 million ~~for~~from ~~2014 compared to~~ $31374.7 million for ~~2013.~~the ~~This~~year ended ~~decrease~~December 31, is2011. ~~primarily~~The ~~related~~increase toin ~~the~~rooms ~~deconsolidation~~revenue ofwas ~~the~~partially ~~106~~due OPto ~~Hotels~~the oncontinued ~~April 11,~~improvements ~~2014~~in ~~partially~~occupancy ~~offset~~coupled bywith ~~increased~~an ~~real~~increase ~~estate~~in ~~taxes~~ADR ~~and~~at toour acomparable ~~lesser~~hotels. ~~extent~~During ~~higher~~2012, ~~base~~we ~~management~~experienced ~~fees~~a ~~and insurance~~3. 2%

-4333-

~~Table~~ increase in ADR as the economy continued to improve. Food and beverage revenue experienced a similar increase of ~~Contents~~$0.5 million, or 7.4%, due to improved occupancy and increased food and beverage offerings through the addition of the Bistro concept at many of our Courtyard properties during 2012. Other revenue, which consists mainly of guest telephone charges, equipment rentals, vending income, in-room movie sales, parking and business centers, was essentially unchanged at $6.4 million.

~~Corporate~~Direct ~~overhead~~hotel expenses

~~Corporate~~Direct ~~overhead~~hotel expenses ~~decreased~~consist ~~slightly~~of ~~for~~direct ~~2014~~expenses ~~compared~~from todepartments ~~2013,~~associated with revenue streams (departmental expenses) and non-departmental expenses associated with operating our hotels. We experienced increases of $6.06 million in departmental expenses and $64.57 million, ~~respectively.~~in ~~This~~non-departmental ~~decrease~~expenses ~~was~~during ~~primarily~~2012. ~~attributable to~~The ~~the~~increase ~~decrease~~ in ~~corporate~~these ~~overhead~~expenses ~~related~~is toconsistent with the ~~deconsolidation~~increase ofin total hotel revenues over the ~~106~~same OPperiod. ~~Hotels~~Direct onhotel ~~April 11,~~expenses ~~2014~~were 59.7% and ~~the~~60.1% ~~resultant~~of ~~decrease~~total inhotel ~~overhead~~revenues ~~related~~for to2012 ~~our~~and ~~hotels~~2011, respectively.

~~Asset~~Property tax, ground lease, insurance and property management fees

~~Asset~~Property tax, ground lease, insurance and property management fees ~~decreased~~ increased $41.06 million to $331.10 million for 2012 ~~2014~~ compared to $729.14 million for ~~2013~~2011. This ~~decrease~~increase is primarily ~~due~~related to ~~the~~increased ~~deconsolidation~~property oftax ~~the~~assessments ~~106~~and, OPto ~~Hotels~~a onlesser ~~April 11~~extent, ~~2014~~higher ~~and~~premiums ~~the~~for ~~resultant~~insurance ~~decrease in asset management fees related to our hotels~~policies.

~~Depreciation~~Corporate ~~and~~overhead ~~amortization~~

~~Depreciation~~Corporate ~~and amortization~~overhead ~~decreased~~expenses increased $501.02 million to $336.35 million for ~~2014~~2012 compared to $835.3 million for ~~2013~~2011. This ~~decrease~~increase is primarily attributable to ~~the~~a ~~deconsolidation~~$1.2 ofmillion ~~the~~increase ~~106~~in OPenvironmental ~~Hotels~~remediation expenses and a $1.3 million increase in unreimbursed deductibles on ~~April 11~~insurance claims relating to property damage at our hotels, ~~2014~~partially ~~and~~offset ~~the~~by ~~resultant~~a $0.7 million decrease in ~~depreciation on~~legal ~~our~~fees ~~hotels~~and a $0.6 million decrease in other expenses.

~~Impairment~~Asset ~~charges~~management fees

~~Impairment charges~~Asset ~~decreased~~management fees increased $180.65 million to $96.06 million for ~~2014~~2012 compared to $276.71 million for ~~2013~~2011. This ~~decrease~~increase is ~~attributable~~consistent towith ~~a decrease in~~ the ~~number~~contractual ofincrease ~~hotels~~provided ~~impaired~~for in ~~2014~~the ~~compared~~GSMC toMortgage ~~2013.~~described ~~The decrease~~ in ~~the~~Note ~~number~~7 ~~of impaired hotels is primarily due~~ to ~~the~~“Item ~~continued~~8. ~~improved~~Financial ~~operating~~Statements ~~performance~~and ~~at the hotels~~Supplementary Data.”

~~Equity~~Depreciation inand ~~loss~~amortization ~~from Senior Mezz~~

~~For~~Depreciation ~~2014,~~and ~~the~~amortization ~~equity~~increased in$6.3 ~~loss~~million ~~from~~to ~~Senior Mezz was~~ $185.43 million ~~and~~for ~~relates~~2012 compared to ~~our~~$79.0 3%million ~~equity~~for ~~interest~~2011. inThis ~~Senior~~increase ~~Mezz.~~is ~~Prior~~primarily attributable to capital ~~April 11,~~improvements ~~2014,~~made ~~the~~at ~~Company consolidated~~certain ~~Senior~~hotels ~~Mezz~~since December 31, 2011.

~~Interest~~Impairment ~~expense~~charges

~~Interest expense~~Impairment ~~decreased~~charges increased $5181.52 million to $3185.37 million for ~~2014~~2012 compared to $824.95 million for ~~2013~~2011. This ~~decrease~~increase is ~~primarily~~ attributable to ~~principal~~the ~~repayments~~impairment ~~under~~of ~~the~~13 of ~~Company’s~~our ~~various~~hotels ~~notes~~for ~~payable~~2012 ~~and~~compared to the ~~refinancing~~impairment of ~~the~~one GEhotel ~~Mortgage~~for ~~and the~~2011. ~~subsequent~~The ~~exercise~~increase in the number of impaired hotels is primarily due to the ~~Purchase~~realization ~~Option~~that based on recent discussions with franchisors, certain franchise agreements will not be renewed upon expiration.

~~Contingent~~Interest ~~loss~~expense ~~on litigation settlement~~

AsInterest expense ~~discussed~~decreased ~~more~~$0.1 ~~fully~~million into ~~the~~$84.4 ~~notes~~million for 2012 compared to $84.5 million for 2011. This decrease is primarily attributable to principal repayments under the ~~consolidated~~Company’s ~~financial~~various ~~statements~~notes ~~included~~payable inpartially ~~“Item~~offset 8.by ~~Financial~~increases ~~Statements~~in the interest due under our variable rate debt.

~~-44-~~Income (loss) from discontinued operations

~~Table~~For 2012, loss from discontinued operations was $1.9 million, related primarily to $0.2 million of ~~Contents~~operating income and $0.3 million in net gain on sale of investments in real estate offset by a $1.0 million impairment charge and $1.5 million in interest expense. For 2011, income from discontinued operations was $4.7 million, related primarily to a $7.5 million gain on extinguishment of debt on two hotels sold via foreclosure sale during 2011 and $0.5 million in operating income. This gain was offset by a $0.4 million loss on sale of investment in real estate and $2.9 million in interest expense related to the hotels disposed of during 2012 and 2011.

~~and Supplementary Data,” in August 2014, the Company and certain other defendants entered into a non~~-~~binding~~34- memorandum of understanding with respect to a settlement of the claims raised in the Johnson Lawsuit. The agreement generally provides for the following: (1) the effectuation of a merger that will result in exchange of $26.00 in cash for each share of Series B preferred stock and Series C preferred stock outstanding; (2) the establishment of a $6 million fund to be distributed pursuant to a plan of allocation to sellers of the Series B preferred stock and Series C preferred stock; and (3) the payment of reasonable counsel fees, as awarded by the Court. Therefore during 2014, the Company accrued $24.25 million related to the agreement which is included in contingent loss on litigation settlement. The Company anticipates funding the settlement with cash on hand or, if necessary, funding from Whitehall. Ongoing defense costs will be expensed as incurred and could be significant.

~~Gain~~Net onloss ~~extinguishment of debt~~

~~The~~As a ~~Company~~result ~~recognized interest on the GE Mortgage under the effective interest method. In conjunction with the repayment~~ of the ~~GE Mortgage on April 11~~foregoing, ~~2014,~~ ~~the~~for ~~Company~~2012 ~~wrote-off~~we ~~the~~recorded ~~interest~~a ~~accrued~~net ~~under~~loss ~~the~~of ~~effective~~$136.2 ~~interest~~million ~~method,~~compared ~~but which was not due or payable~~ to ~~the lender. This write-off resulted in~~ a ~~gain~~net loss of $~~13,199,329~~49.5 ~~during~~million ~~2014~~for ~~which is included in gain on extinguishment of debt~~2011.

~~Loss~~Net ~~from~~loss ~~discontinued~~attributable to ~~operations~~non-controlling interest

~~For~~Non-controlling ~~2014,~~interest represents the ~~Company~~ ~~had~~interest nonot ~~discontinued~~owned ~~operations.~~by ~~For~~us ~~2013,~~in ~~loss~~our ~~from~~subsidiary ~~discontinued~~and, ~~operations~~indirectly, ~~was~~our $8hotels.1 ~~million,~~As ~~related~~a result ~~primarily~~of tothe ~~$2.0~~increase ~~million~~in ofour ~~operating~~net ~~income~~loss ~~offset~~during by2012 ~~$1.6~~compared ~~million~~to in2011, ~~interest~~the ~~expense~~net ~~and~~loss ~~$8.5~~attributable ~~million~~to innon-controlling ~~combined~~interest ~~loss~~increased onto ~~the extinguishment~~$134.4 ofmillion ~~debt~~in ~~and~~2012 ~~loss~~from on$48.9 ~~sale~~million ~~of investments~~ in ~~real estate~~2011.

Net loss available to the Company

Net loss available to the Company represents the net loss not attributable to non-controlling interests. As a result of the ~~foregoing,~~increase ~~for~~in ~~2014~~our wenet ~~recorded~~loss aduring 2012 compared to 2011, the net loss ofavailable ~~$31.7~~to ~~million~~the ~~compared~~Company increased to a$1.8 ~~net~~million ~~loss~~in of2012 from $710.6 million ~~for 2013~~in 2011.

~~Net~~LIQUIDITY ~~loss~~AND ~~attributable~~CAPITAL toRESOURCES ~~non-controlling interest~~

~~Non-controlling~~The Company’s ~~interest~~principal ~~represents~~source ~~the~~of ~~interest~~cash ~~not~~to ~~owned~~meet byits usoperating inrequirements ~~our~~has ~~subsidiary~~been ~~and,~~from ~~indirectly,~~the ~~our~~results of operations from the Company’s hotels. AsAt aDecember 31, ~~result~~2014 ofand ~~the~~2013, ~~decrease~~we inexpected ~~our~~that ~~net~~the ~~loss during~~operating ~~2014~~cash ~~compared~~flows towould ~~2013,~~be sufficient to fund the ~~net~~continuing ~~loss~~operations ~~attributable~~of tothe ~~non-controlling~~Company, including required interest ~~decreased~~obligations toand ~~$4.4~~other ~~million~~reserves inrequired ~~2014~~by ~~from~~the ~~$69.8~~terms ~~million~~of inour ~~2013~~debt agreements. InAs ~~addition,~~a result of the ~~contingent~~sale ~~loss~~of onthe ~~litigation~~Portfolio ~~settlement~~and the receipt of ~~$24.3~~the ~~million~~Preferred ~~was~~Equity, ~~attributable~~the Company’s ~~solely~~principal source of cash flow is expected to ~~Grace~~ ~~Acquisition~~be Idistributions on the Preferred Equity.

~~Net~~As ~~loss~~discussed ~~attributable~~previously, toduring the year ended December 31, 2014, the Company accrued $24.25 million related to a legal settlement agreement. The Company anticipates funding the settlement with cash on hand or, if necessary, liquidity from Whitehall.

~~Net~~Periodically, ~~loss~~certain ~~attributable~~hotels tomay ~~the~~undergo ~~Company~~renovations ~~represents~~as ~~the~~a ~~net~~result ~~loss~~of ~~not~~decisions ~~attributable~~ to ~~non-controlling~~upgrade ~~interests.~~portions ~~The~~of ~~net~~the ~~loss~~hotels, ~~attributable~~such toas ~~the~~guestrooms, ~~Company~~meeting ~~was~~space and ~~increased~~restaurants, in order to ~~$27.3~~better ~~million~~compete with other hotels in ~~2014~~our ~~from~~markets ~~$1.8~~or ~~million~~to inmeet ~~2013.~~the ~~The~~franchisor’s ~~increased~~brand ~~loss~~standards. isThe ~~primarily~~Company ~~due~~anticipates tothat ~~the~~funding ~~contingent~~for ~~loss~~these onrenovations ~~litigation~~would ~~settlement~~be ofobtained ~~$24.3~~from ~~million~~cash ~~which~~on ~~was~~hand ~~attributable~~and/or ~~solely~~cash togenerated ~~Grace~~from operating ~~Acquisition~~the Ihotels.

~~-45-~~Operating activities

~~Table~~Net cash flows from operating activities were $22.0 million, $62.5 million, $63.7 million and $56.3 million for the years ended December 31, 2014, 2013, 2012 and 2011, respectively. The decrease in cash flows from operating activities in 2014 from 2013 was primarily due to the deconsolidation of ~~Contents~~the 106 Senior Mezz hotels and the payment of accrued interest on notes payable. The slight decrease in cash flows from operating activities in 2013 from 2012 was primarily due to an increase in the cash paid for interest under our notes payable during 2013. The increase in cash flows from operating activities in 2012 from 2011 was primarily due to increased operating performance at our hotels.

~~Comparison~~Investment ofactivities ~~the year ended December 31, 2013 to the year ended December 31, 2012~~

~~The~~Net ~~key~~cash ~~performance~~flow ~~indicators~~from ofinvesting activities was $20.2 million for the ~~hotels~~year ~~that~~ended ~~are~~December 31, ~~included~~2014, which consisted of a decrease in ~~continuing~~restricted ~~operations~~cash asof $30.1 million and proceeds from property casualty insurance of ~~December 31~~$1.4 million, ~~2013~~partially ~~are~~offset ~~illustrated~~ by ~~the~~$11.6 ~~following~~million ~~table:~~of capital additions to hotels.

	Year Ended December 31,
	2013			2012
Total hotel revenues (in thousands)	$	428,551		$	409,847
Rooms revenue (in thousands)	$	413,732		$	395,697
Occupancy		72.3	%		70.9	%
ADR	$	105.03		$	102.16
RevPAR	$	75.91		$	72.39

Net cash flow from investing activities was $35.8 million for the year ended December 31, 2013, which consisted of net proceeds of $70.1 million from the sale of four hotels and proceeds from property casualty insurance of $2.1 million, partially offset by $23.7 million of capital additions to hotels, an increase in restricted cash of $11.5 million and $1.1 million paid for initial franchise fees at certain hotels.

~~Total~~-35- ~~hotel revenues~~

~~Rooms~~Net ~~revenue~~cash ~~for~~flow ~~the~~used ~~year~~in ~~ended~~investing ~~December 31,~~activities ~~2013~~was ~~increased~~ $1836.~~0 million, or 4.6%, to $413.~~7 million ~~from $395.7 million~~ for the year ended December 31, 2012., which ~~The~~consisted ~~increase~~of in$46.4 million ~~rooms~~of ~~revenue~~capital ~~was~~additions ~~partially due~~ to ~~the continued improvements in occupancy coupled with an increase in ADR at our comparable~~ hotels~~. During 2013~~, wepartially ~~experienced~~offset by a ~~2.8%~~decrease ~~increase~~ in ~~ADR~~restricted ascash ~~the economy continued to improve. Food and beverage revenue experienced a similar increase~~ of $06.46 million, ornet ~~5.2%,~~proceeds ~~due to improved occupancy and increased food and beverage offerings through the addition~~ of ~~the Bistro concept at many of our Courtyard properties during 2013~~$2.3 ~~Other~~million ~~revenue,~~from ~~which~~the ~~consists~~sale ~~mainly~~ of ~~guest~~one ~~telephone~~hotel ~~charges, equipment rentals, vending income, in-room movie sales, parking~~ and ~~business~~proceeds ~~centers,~~from ~~experienced~~property acasualty ~~slight~~insurance ~~increase~~ of $0.3 7 million.

~~Direct~~Financing ~~hotel~~activities ~~expenses~~

~~Direct~~Net ~~hotel~~cash ~~expenses~~flow ~~consist~~used ofin ~~direct~~financing ~~expenses~~activities ~~from~~was ~~departments~~$42.1 million ~~associated~~for ~~with~~the ~~revenue~~year ~~streams~~ended ~~(departmental~~December 31, ~~expenses)~~2014, ~~and~~which ~~non-departmental~~primarily ~~expenses~~consisted ~~associated~~$959.6 million ~~with~~of ~~operating~~principal ~~our~~payments ~~hotels.~~on Wethe ~~experienced~~Company’s ~~increases~~notes ofpayable, ~~$2.4~~the ~~million~~payment inof ~~departmental~~deferred ~~expenses~~financing ~~and~~costs of $621.30 million in, ~~non-departmental~~cash ~~expenses~~received ~~during 2013. The increase~~ in ~~these~~connection ~~expenses~~of isthe ~~consistent~~exercise ~~with~~of the ~~increase~~Purchase inOption ~~total~~of ~~hotel revenues over the same period~~$38.9 ~~Direct~~million ~~hotel~~partially ~~expenses~~offset ~~were~~by ~~relatively~~an ~~consistent~~advance atfrom ~~59.1%~~affiliate ~~and~~of 59$1.7% million ofand ~~total~~the ~~hotel~~issuance ~~revenues~~of ~~for~~notes ~~2013 and~~payable ~~2012,~~of ~~respectively~~$976.0 million.

~~Property~~Net ~~tax,~~cash ~~ground~~flow ~~lease~~used in financing activities was $98.9 million for the year ended December 31, ~~insurance~~2013, which primarily consisted of $96.2 million of principal payments on the Company’s notes payable and ~~property~~defeasance ~~management~~premiums ~~fees~~of $2.6 million.

~~Property~~Net ~~tax,~~cash ~~ground~~flow ~~lease,~~used ~~insurance~~in ~~and~~financing ~~property~~activities ~~management fees increased~~ was $025.~~6 million to $31.~~7 million for ~~2013~~the ~~compared~~year toended $December 31.0, ~~million for~~ 2012., ~~This increase~~which is primarily ~~related~~consisted toof ~~increased~~$25.6 ~~property~~million ~~tax~~of ~~assessments,~~principal ~~higher~~payments ~~premiums~~on ~~for insurance policies and increased management fees due to~~ the ~~increased~~Company’s ~~revenues~~notes ~~at the hotels~~payable.

~~-46-~~CONTRACTUAL OBLIGATIONS AND OFF BALANCE SHEET ARRANGEMENTS

~~Table~~We historically have had obligations and commitments to make future payments under debt and operating lease contracts. The following table details these obligations as of ~~Contents~~December 31, 2014, assuming extension options will not be exercised (in thousands):

Corporate overhead


	Payments Due by Period
	< 1 Year		2-3 Years		4-5 Years		> 5 Years		Total
Long-term debt obligations	$	55,266	$	99,381	$	—	$	50,000	$	204,647
Estimated interest obligations ⁽¹⁾		10,076		8,663		3,110		31,878		53,727
Operating lease obligations		—		—		—		—		—

	$	65,342	$	108,044	$	3,110	$	81,878	$	258,374

~~Corporate~~(1) ~~overhead~~Respective ~~expenses~~LIBOR ~~were~~rate ~~essentially~~as ~~unchanged~~of ~~for~~December ~~2013~~31, ~~compared~~2014 towas ~~2012,~~used ~~$6.5~~in ~~million~~estimating infuture ~~each~~interest ~~year.~~obligations for floating rate debt.

~~Asset~~The ~~management~~following ~~fees~~table details these obligations as of December 31, 2013, assuming extension options will not be exercised (in thousands):

Asset management fees increased $0.4 million to $7.1 million for 2013 compared to $6.7 million for 2012. This increase is consistent with the contractual increase provided for in the GSMC Mortgage described in Note 7 to “Item 8. Financial Statements and Supplementary Data”.


	Payments Due by Period
	< 1 Year		2-3 Years		4-5 Years		> 5 Years		Total
Long-term debt obligations	$	959,605	$	154,647	$	—	$	50,000	$	1,164,252
Estimated interest obligations ⁽¹⁾		73,048		15,891		3,100		33,325		125,364
Operating lease obligations		843		1,748		1,820		7,899		12,310

	$	1,033,496	$	172,286	$	4,920	$	91,224	$	1,301,926

~~Depreciation~~(1) ~~and~~Respective ~~amortization~~LIBOR rate as of December 31, 2013 was used in estimating future interest obligations for floating rate debt.

~~Depreciation~~Historically, ~~and~~under ~~amortization~~our ~~decreased~~franchise ~~$2.0~~agreements, ~~million~~we were periodically required to ~~$83.3~~make ~~million~~capital ~~for~~improvements ~~2013~~in ~~compared~~order to ~~$85.3~~maintain ~~million~~the ~~for~~hotels ~~2012.~~in ~~This~~accordance ~~decrease~~with the isfranchisor’s ~~primarily~~brand ~~attributable~~standards. to Additionally, under certain ~~assets~~covenants ~~becoming~~under ~~fully~~agreements ~~depreciated~~governing inour ~~2013~~indebtedness, ~~partially~~we ~~offset~~are bygenerally ~~depreciation~~obligated onto ~~capital~~fund ~~improvements~~4% ~~made~~(5% atfor ~~certain~~our Marriott branded hotels) ~~since~~of ~~December 31~~total hotel revenues to a separate room renovation account for ongoing replacement or refurbishment of furniture, ~~2012~~fixtures and equipment at our hotels.

~~Impairment~~We ~~charges~~also maintained certain contractual agreements with property managers and franchisors that required us to pay fees in conjunction with operating our hotels. Generally, the amounts payable under these agreements were dependent upon the operating results of our hotels. Fees paid to property managers generally include base management fees, incentive management fees and accounting fees. Fees paid to franchisors generally include royalty fees, marketing fees, frequent guest program fees and reservation fees. The following table is a historic detail of these fees (in thousands):

Impairment charges decreased $58.0 million to $27.7 million for 2013 compared to $85.7 million for 2012. This decrease is attributable to a decrease in the number of hotels impaired in 2013 compared to 2012. The decrease in the number of impaired hotels is primarily due to the continued improved operating performance at the hotels.


	Year Ended December 31,
	2014		2013		2012		2011		2010
Management related fees	$	4,591	$	11,180	$	10,811	$	10,840	$	11,093
Franchisor related fees		18,023		44,089		39,640		37,886		35,152

	$	22,614	$	55,269	$	50,451	$	48,726	$	46,245

~~Interest~~During ~~expense~~2014 and 2013, we did not maintain any off-balance sheet arrangements and do not currently anticipate any such arrangements.

~~Interest~~-36- expense decreased $1.6 million to $82.9 million for 2013 compared to $84.4 million for 2012. This decrease is primarily attributable to principal repayments under the Company’s various notes payable.

~~Income~~INFLATION ~~(loss) from discontinued operations~~

~~For~~Operators ~~2013~~of hotels, ~~loss~~in ~~from discontinued operations was $8.1 million~~general, ~~related~~possess ~~primarily~~the ability to ~~$2.0~~adjust ~~million~~room ofrates ~~operating~~daily ~~income~~to ~~offset~~reflect ~~by $1.6 million in interest expense and $8.5 million in combined loss on~~ the ~~extinguishment~~effects of ~~debt and loss on sale of investments in real estate~~inflation. ~~For 2012~~However, ~~loss~~competitive ~~from~~pressures ~~discontinued~~may ~~operations was $1.9 million, related primarily to $0.2 million of~~limit ~~operating~~the ~~income~~ability ~~and $0.3 million in net gain on sale~~ of ~~investments~~the incompanies ~~real~~which ~~estate~~manage ~~offset~~our byhotels ato ~~$1.0~~raise ~~million~~room ~~impairment charge and $1~~rates.5 ~~million in interest expense.~~

~~Net~~SEASONALITY ~~loss~~

AsOur aoperations ~~result~~historically ofhave ~~the~~been ~~foregoing~~seasonal in nature, ~~for~~generally ~~2013~~reflecting ~~we recorded~~higher aRevPAR ~~net~~during ~~loss~~the ofsecond ~~$71~~and third quarters.6 ~~million~~This ~~compared~~seasonality tocan abe expected ~~net~~to ~~loss~~cause offluctuations ~~$136.2~~in ~~million~~our ~~for~~quarterly ~~2012~~operating results.

~~-47-~~CRITICAL ACCOUNTING POLICIES

~~Table~~Our accounting policies are fully described in Note 2 of ~~Contents~~the Notes to Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data”. We believe that the following discussion addresses our most critical accounting policies, representing those policies considered most vital to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments.

~~Net~~Investments ~~loss~~in ~~attributable~~real toestate ~~non-controlling interest~~

~~Non-controlling~~Real ~~interest~~estate ~~represents~~investments ~~the~~are ~~interest~~carried ~~not~~at ~~owned~~depreciated bycost usnet inof ~~our~~reduction ~~subsidiary~~for impairment. Expenditures for ordinary repairs and, ~~indirectly,~~maintenance ~~our~~are ~~hotels~~expensed as incurred. AsSignificant arenovations ~~result~~and ofimprovements, ~~the~~which ~~decrease~~improve inor ~~our~~extend ~~net~~the ~~loss during~~useful ~~2013~~life ~~compared~~of tothe ~~2012~~assets, ~~the~~are ~~net~~capitalized. ~~loss~~Full ~~attributable~~stock toreplacements ~~non-controlling~~of ~~interest~~china, ~~decreased~~glass, tosilver, ~~$69.8~~uniforms ~~million~~and inlinen ~~2013~~are ~~from~~capitalized ~~$134.4~~and ~~million~~incidental inpurchases ~~2012~~are expensed as incurred.

~~Net~~Depreciation ~~loss~~is ~~available~~calculated tousing the ~~Company~~straight-line method over the estimated useful lives of the respective assets as follows: buildings and improvements over 7.5 to 39 years; land improvements over 15 years; and furniture, fixtures and equipment, including china, glass, silver, uniforms and linen, over 3 to 7 years.

~~Net~~Assets ~~loss~~are ~~available~~classified as held for sale if a disposal plan is in place, actions to achieve the ~~Company~~sale ~~represents~~have ~~the~~been ~~net~~initiated, ~~loss~~a ~~not~~sale ~~attributable~~is probable and it is unlikely that significant changes to ~~non-controlling~~the ~~interests~~plan will be made or that the plan will be withdrawn. ~~The~~Sales ~~net~~of ~~loss~~the ~~available~~Company’s investments in real estate take a significant amount of time to consummate and many changes in the ~~Company~~terms ~~was~~and ~~essentially~~timing ~~unchanged~~are attypical $1in the process.8 ~~million~~Accordingly, management does not classify assets as held for sale until a contract is pending, closing is scheduled and the probability of significant changes in ~~2013~~terms or timing is insignificant. We evaluate assets held for sale for impairment each reporting period and record them at the lower of their carrying amounts or fair value less costs to sell.

~~Comparison~~Fair ofvalue ~~the year ended December 31, 2012 to the year ended December 31, 2011~~ measurements

~~The~~Fair ~~key~~value ~~performance~~measurements ~~indicators~~are market-based measurements, not entity-specific measurements. Fair value measurement assumptions are classified under a hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the ~~hotels~~reporting entity (observable inputs that are ~~included~~classified inwithin ~~continuing~~Levels ~~operations~~1 asand 2 of ~~December 31,~~the ~~2012~~hierarchy) ~~are~~and ~~illustrated~~management’s own byassumptions about market participant assumptions (unobservable inputs classified within Level 3 of the ~~following~~hierarchy). ~~table:~~

	Year Ended December 31,
	2012			2011
Total hotel revenues (in thousands)	$	409,847		$	388,299
Rooms revenue (in thousands)	$	395,697		$	374,706
Occupancy		70.9	%		69.4	%
ADR	$	102.16		$	99.00
RevPAR	$	72.39		$	68.74

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Management’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

~~Total~~Fair ~~hotel~~value ~~revenues~~measurements of financial and nonfinancial assets and liabilities are based on (1) the assumptions that market participants would use in pricing the asset or liability, if available, or (2) management’s assumptions of market participant assumptions.

~~Rooms~~Certain ~~revenue~~assets and ~~for~~liabilities ~~the~~are ~~year~~not ~~ended~~measured ~~December 31,~~at ~~2012~~fair ~~increased~~value ~~$21.0~~on ~~million,~~an orongoing ~~5.6%,~~basis tobut ~~$395.7~~are ~~million~~subject ~~from $374.7 million for the year ended December 31, 2011. The increase in rooms revenue was partially due~~ to ~~the~~fair ~~continued~~value ~~improvements~~adjustments inonly ~~occupancy coupled with an increase~~ in ~~ADR~~certain atcircumstances ~~our~~(for ~~comparable~~example, ~~hotels.~~when ~~During~~recording ~~2012,~~impairment weon ~~experienced~~long-lived ~~a 3~~assets).2% ~~increase~~Management inreviews ~~ADR~~its asinvestments ~~the~~for impairment ~~economy~~whenever ~~continued to~~events ~~improve.~~or ~~Food~~changes ~~and~~in ~~beverage~~circumstances ~~revenue~~indicate ~~experienced~~that athe ~~similar~~carrying ~~increase~~amount of ~~$0.5~~an ~~million,~~asset ormay ~~7.4%,~~not ~~due~~be torecoverable. ~~improved~~The ~~occupancy~~assumptions ~~and~~used ~~increased~~both ~~food~~in ~~and~~estimating ~~beverage~~fair ~~offerings~~value through ~~the~~a ~~addition~~discounted ofcash ~~the~~flow ~~Bistro~~model ~~concept~~and atthe ~~many~~undiscounted ofcash ~~our Courtyard properties during~~flow ~~2012.~~analysis ~~Other~~are ~~revenue,~~inherently ~~which~~judgmental ~~consists~~and ~~mainly~~reflect ofcurrent ~~guest~~and ~~telephone~~projected ~~charges,~~trends ~~equipment rentals, vending income,~~ in~~-room~~ ~~movie~~revenue ~~sales,~~per ~~parking~~available ~~and business centers, was essentially unchanged at $6.4 million.~~

-4837-

~~Table~~ room, operating expenses, capitalization rates, discount rates, and the estimated holding periods for the applicable hotels. If an indicator of ~~Contents~~potential impairment exists, the hotel is tested for impairment for financial accounting purposes by comparing its carrying value to the estimated future undiscounted cash flows. The amount of the impairment is calculated as the amount by which the carrying value of the hotel exceeds its fair value.

~~Direct~~NON-GAAP ~~hotel~~FINANCIAL ~~expenses~~MEASURES

~~Direct~~The ~~hotel expenses consist of direct expenses from departments associated with revenue streams (departmental expenses) and~~ following non-~~departmental~~GAAP ~~expenses associated~~presentations ~~with operating our hotels. We experienced increases~~ of ~~$6.6~~EBITDA ~~million in departmental expenses~~ and ~~$4.7~~Adjusted ~~million~~EBITDA inare ~~non-departmental~~made ~~expenses~~to ~~during~~help ~~2012. The increase~~ in ~~these~~evaluating ~~expenses is consistent with~~ the ~~increase~~Company’s inoperating ~~total hotel revenues over the same period~~performance. ~~Direct hotel expenses were 59.7% and 60.1% of total hotel revenues for 2012 and 2011, respectively.~~

~~Property~~EBITDA ~~tax~~is defined as net income (loss) before interest expense and interest income, ~~ground~~income ~~lease~~taxes, and depreciation and amortization. The Company adjusts EBITDA to exclude impairment charges, gains or losses on sales of investments in real estate and gains or losses on ~~insurance~~extinguishment of debt because the Company believes these charges are not indicative of the performance of the underlying investments in real estate. The Company presents EBITDA and ~~property~~Adjusted ~~management~~EBITDA ~~fees~~because it believes they provide an indicator of the Company’s ability to meet its future debt payments and working capital requirements, as well as an overall evaluation of the Company’s financial condition. EBITDA and Adjusted EBITDA, as calculated by the Company, may not be comparable to EBITDA and Adjusted EBITDA reported by other companies that do not define such terms exactly as the Company defines them. EBITDA and Adjusted EBITDA should not be considered as alternative measures of the Company’s net loss as an indicator of operating performance or GAAP cash flows from operating activities as a measure of liquidity.

~~Property~~The ~~tax,~~following ~~ground~~table ~~lease,~~reconciles ~~insurance~~net ~~and~~loss ~~property management fees increased $1.6 million~~ to ~~$31.0~~EBITDA ~~million for~~and ~~2012~~Adjusted ~~compared~~EBITDA to(in ~~$29.4~~thousands) ~~million~~(unaudited): ~~for 2011. This increase is primarily related to increased property tax assessments and, to a lesser extent, higher premiums for insurance policies.~~

Corporate overhead


	Year Ended December 31,
	2014			2013			2012			2011
Net loss	$	(31,664	)	$	(71,613	)	$	(136,235	)	$	(49,500	)
Interest income		(76	)		(82	)		(87	)		(101	)
Interest expense		31,325			82,856			84,435			84,512
Interest expense, discontinued operations		—			1,578			1,508			2,949
Depreciation and amortization		33,308			83,292			85,298			78,983
Depreciation and amortization, discontinued operations		—			3,212			4,520			3,994

EBITDA		32,893			99,243			39,439			120,837
Equity in loss from Senior Mezz		1,429			—			—			—
Contingent loss on litigation settlement		24,250			—			—			—
Net gain on extinguishment of debt		(13,199	)		—			—			—
Net (gain) loss on extinguishment of debt, discontinued operations		—			2,647			—			(7,488	)
Impairment charges		9,036			27,656			85,684			4,483
Impairment charges, discontinued operations		—			—			1,031			—
Net gain on sale of real estate		(221	)		—			—			—
Net (gain) loss on sale of real estate, discontinued operations		—			5,890			(254	)		357

Adjusted EBITDA	$	54,188		$	135,436		$	125,900		$	118,189

~~Corporate~~ITEM ~~overhead expenses increased $1~~7A.2 ~~million~~QUANTITATIVE toAND ~~$6.5~~QUALITATIVE ~~million~~DISCLOSURE ~~for~~ABOUT ~~2012~~MARKET compared to $5.3 million for 2011. This increase is primarily attributable to a $1.2 million increase in environmental remediation expenses and a $1.3 million increase in unreimbursed deductibles on insurance claims relating to property damage at our hotels, partially offset by a $0.7 million decrease in legal fees and a $0.6 million decrease in other expenses. RISK

~~Asset~~Market ~~management~~risk ~~fees~~includes risks that arise from changes in interest rates, equity prices and other market changes that affect market sensitive instruments. Our primary market risk exposure was to changes in interest rates on our variable rate debt. As of December 31, 2013, we had approximately $1.0 billion of total variable rate debt outstanding (or 86% of total indebtedness). If market rates of interest on our variable rate debt outstanding as of December 31, 2013 were to increase by 1.00%, or 100 basis points, interest expense would decrease future earnings and cash flows by approximately $2.9 million annually. As a result of the sale of the Portfolio and the associated defeasing and repayment of debt, we no longer have any variable rate debt outstanding.

~~Asset~~-38- management fees increased $0.5 million to $6.6 million for 2012 compared to $6.1 million for 2011. This increase is consistent with the contractual increase provided for in the GSMC Mortgage described in Note 7 to “Item 8. Financial Statements and Supplementary Data.”

~~Depreciation~~Our interest rate risk objectives are to limit the impact of interest rate fluctuations on earnings and ~~amortization~~cash flows and to lower our overall borrowing costs. To achieve these objectives, we have historically managed our exposure to fluctuations in market interest rates through the use of fixed rate debt instruments to the extent that reasonably favorable rates are obtainable. Historically, we entered into interest rate caps to mitigate our interest rate risk on a portion of our variable rate debt. We do not enter into derivative or interest rate transactions for speculative purposes.

~~Depreciation~~ITEM ~~and amortization increased $6~~8.3 ~~million~~FINANCIAL toSTATEMENTS ~~$85.3~~AND ~~million~~SUPPLEMENTARY ~~for 2012 compared to $79.0 million for 2011. This increase is primarily attributable to capital improvements made at certain hotels since December 31, 2011.~~ DATA

~~Impairment~~See ~~charges~~our Consolidated Financial Statements and the Notes thereto beginning at page F-1 included in Item 15, which is incorporated herein by reference.

~~Impairment~~ITEM ~~charges increased $81~~9.2 ~~million~~CHANGES toIN ~~$85.7~~AND ~~million~~DISAGREEMENTS ~~for~~WITH ~~2012~~ACCOUNTANTS ~~compared~~ON toACCOUNTING ~~$4.5~~AND ~~million~~FINANCIAL for 2011. This increase is attributable to the impairment of 13 of our hotels for 2012 compared to the impairment of one hotel for 2011. The increase in the number of impaired hotels is primarily due to the realization that based on recent discussions with franchisors, certain franchise agreements will not be renewed upon expiration. DISCLOSURES

~~Interest~~None. ~~expense~~

~~Interest expense~~ITEM ~~decreased $0~~9A.1 ~~million~~CONTROLS toAND $84.4 million for 2012 compared to $84.5 million for 2011. This decrease is primarily attributable to principal repayments under the Company’s various notes payable partially offset by increases in the interest due under our variable rate debt. PROCEDURES

~~-49-~~Evaluation of disclosure controls and procedures

~~Table~~The Company carried out an evaluation with the participation of ~~Contents~~the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15(d)-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, these disclosure controls and procedures were not effective because the Company did not file its periodic reports within the time periods specified in the SEC rules and forms as a result of the SEC’s determination that the Company’s reporting obligation under Section 15(d) of the Exchange Act resumed January 1, 2014. The Company is in the process of preparing and filing its past due periodic reports and intends to become current as soon as practicable.

~~Income~~Management’s ~~(loss)~~report ~~from~~on ~~discontinued~~internal ~~operations~~control over financial reporting

~~For~~Management ~~2012,~~is ~~loss~~responsible ~~from~~for ~~discontinued~~establishing ~~operations~~and ~~was~~maintaining ~~$1.9~~adequate ~~million,~~internal ~~related~~control ~~primarily~~over tofinancial ~~$0.2~~reporting ~~million~~as ofdefined ~~operating income and $0.3 million~~ in ~~net~~Rule ~~gain~~15d-15(f) onunder ~~sale~~the ofExchange ~~investments in real estate offset by a $1~~Act.0 ~~million~~The ~~impairment~~Company’s ~~charge~~internal ~~and~~control ~~$1.5~~over ~~million~~financial inreporting ~~interest~~is ~~expense.~~designed ~~For~~to ~~2011,~~provide ~~income~~reasonable ~~from~~assurance ~~discontinued~~as ~~operations was $4.7 million, related primarily~~ to athe ~~$7.5~~reliability ~~million gain on extinguishment~~ of ~~debt~~the onCompany’s ~~two hotels~~financial ~~sold~~reporting ~~via foreclosure sale during 2011~~ and ~~$0.5~~the ~~million~~preparation ~~in operating income. This gain was offset by a $0.4 million loss on sale~~ of ~~investment~~financial statements in ~~real~~accordance ~~estate~~with ~~and $2~~GAAP.9 ~~million~~Our internal incontrol ~~interest~~over ~~expense~~financial ~~related~~reporting toincludes ~~the~~those ~~hotels~~policies ~~disposed of during 2012~~ and ~~2011.~~procedures that:

~~Net~~• ~~loss~~Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

As• aProvide ~~result~~reasonable assurance that transactions are recorded as necessary to permit preparation of ~~the~~financial ~~foregoing, for~~statements ~~2012~~in weaccordance ~~recorded~~with aGAAP, ~~net~~and ~~loss~~that receipts and expenditures of ~~$136.2~~the ~~million~~Company ~~compared~~are tobeing amade ~~net~~only ~~loss~~in accordance with authorizations of ~~$49.5~~management ~~million~~and ~~for~~directors ~~2011.~~of the Company; and

~~Net~~• ~~loss~~Provide ~~attributable~~reasonable toassurance ~~non-controlling~~regarding ~~interest~~ prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s consolidated financial statements.

~~Non-controlling~~Because ~~interest~~of ~~represents~~its ~~the~~inherent ~~interest~~limitations, ~~not~~internal ~~owned~~control byover usfinancial inreporting ~~our~~may ~~subsidiary~~not ~~and,~~prevent ~~indirectly,~~or ~~our hotels~~detect misstatements. AsAlso, aprojections ~~result~~ of ~~the~~any ~~increase~~evaluation inof ~~our~~effectiveness ~~net loss~~to ~~during~~future ~~2012~~periods ~~compared~~are subject to ~~2011,~~ the ~~net~~risk ~~loss~~that ~~attributable~~controls tomay ~~non-controlling~~become ~~interest~~inadequate ~~increased~~because toof ~~$134.4~~changes ~~million~~ in ~~2012~~conditions, ~~from~~or ~~$48.9~~that ~~million~~the indegree ~~2011~~of compliance with the policies or procedures may deteriorate.

~~Net~~Management ~~loss~~has ~~available~~assessed tothe effectiveness of the Company’s internal control over financial reporting as of December 31, 2013. In making this assessment, management used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control — Integrated Framework (1992).” Based on its assessment, management has concluded that, as of December 31, 2013, the Company’s internal control over financial reporting was effective based on those criteria.

~~Net loss available to the Company represents the net loss not attributable to non~~-~~controlling~~39- ~~interests. As a result of the increase in our net loss during 2012 compared to 2011, the net loss available to the Company increased to $1.8 million in 2012 from $0.6 million in 2011.~~

~~LIQUIDITY~~Changes ~~AND~~in ~~CAPITAL~~internal ~~RESOURCES~~control over financial reporting

~~The Company’s~~There ~~principal~~have ~~source~~been ofno ~~cash~~changes toin ~~meet~~our ~~its~~internal ~~operating~~control ~~requirements~~over ~~has~~financial ~~been~~reporting ~~from~~(as ~~the~~defined ~~results~~in ofRule ~~operations~~15(d)-15(e) ~~from~~of the ~~Company’s~~Exchange ~~hotels.~~Act) Atduring ~~December 31,~~the ~~2014,~~most werecent ~~expected~~fiscal quarter that ~~the~~have ~~operating~~materially ~~cash~~affected, ~~flows~~or ~~would~~are bereasonably ~~sufficient~~likely to ~~fund~~materially ~~the continuing operations of the Company~~affect, ~~including required interest obligations and other reserves required by the terms of~~ our ~~debt~~internal ~~agreements.~~control Asover afinancial ~~result of the sale of the Portfolio and the receipt of the Preferred Equity, the Company’s principal source of cash flow is expected to be distributions on the Preferred Equity~~reporting.

AsITEM ~~discussed previously, during the year ended December 31, 2014, the Company accrued $24~~9B.25 ~~million~~OTHER ~~related to a legal settlement agreement. The Company anticipates funding the settlement with cash on hand or, if necessary, liquidity from Whitehall.~~ INFORMATION

~~-50-~~None.

~~Table~~PART ofIII ~~Contents~~

~~Periodically,~~ITEM ~~certain~~10. ~~hotels may undergo renovations as a result of decisions to upgrade portions of the hotels~~DIRECTORS, ~~such~~ asEXECUTIVE ~~guestrooms,~~OFFICERS ~~meeting~~AND ~~space~~CORPORATE and restaurants, in order to better compete with other hotels in our markets or to meet the franchisor’s brand standards. The Company anticipates that funding for these renovations would be obtained from cash on hand and/or cash generated from operating the hotels. GOVERNANCE

~~Operating~~We ~~activities~~operate under the direction of our board of directors, which is responsible for the overall management and control of our affairs. Because our directors take a critical role in guiding our strategic direction and overseeing our management, they must demonstrate broad-based business and professional skills and experiences. Based on the experiences and qualifications described below, we believe our directors have the appropriate mix of experiences, qualifications, attributes and skills required of our board members in the context of the current needs of our Company.

~~Net~~Our ~~cash~~executive ~~flows~~officers ~~from operating activities were $22.0 million, $62.5 million, $63.7 million~~ and ~~$56.3 million~~directors ~~for~~are ~~the~~(ages ~~years~~as ~~ended~~of December 31, ~~2014,~~ 2013,): 2012 and 2011, respectively. The decrease in cash flows from operating activities in 2014 from 2013 was primarily due to the deconsolidation of the 106 Senior Mezz hotels and the payment of accrued interest on notes payable. The slight decrease in cash flows from operating activities in 2013 from 2012 was primarily due to an increase in the cash paid for interest under our notes payable during 2013. The increase in cash flows from operating activities in 2012 from 2011 was primarily due to increased operating performance at our hotels.

Investment activities

~~Net~~On ~~cash~~October 15, ~~flow~~2014, ~~from~~Dan ~~investing~~Smith, ~~activities~~who ~~was~~had ~~$20.2 million~~been ~~for~~a ~~the~~director ~~year~~and ~~ended~~officer ~~December 31,~~from ~~2014,~~2010 ~~which~~until ~~consisted~~his ofresignation, aresigned ~~decrease~~from inour board ~~restricted~~of ~~cash~~directors, ~~of $30.1~~as ~~million~~well ~~and~~as ~~proceeds~~his ~~from~~offices ~~property~~of ~~casualty~~vice ~~insurance~~president ofand $1secretary.4 ~~million,~~Greg ~~partially~~Fay ~~offset~~replaced ~~by $11~~Mr.6 Smith ~~million~~as ofthe ~~capital~~Secretary ~~additions~~of tothe ~~hotels~~Company.

~~Net cash~~On ~~flow from investing activities was $35.8~~April ~~million for the year ended December 31~~1, ~~2013~~2015, ~~which~~Mark ~~consisted~~Ricketts, ofwho ~~net~~had ~~proceeds~~been ofa ~~$70.1~~director ~~million from the sale of four hotels~~ and ~~proceeds~~officer from ~~property~~2010 ~~casualty~~until ~~insurance~~his ~~of $2.1 million~~resignation, ~~partially offset~~resigned byfrom ~~$23.7 million~~our board of ~~capital additions to hotels~~directors, anas ~~increase~~well inas ~~restricted~~his ~~cash~~office of ~~$11.5~~vice ~~million and $1~~president.1 ~~million paid for initial franchise fees at certain hotels.~~

~~Net~~Todd ~~cash~~Giannoble flow used in investing activities was $36.7 million for the year ended December 31, 2012, which consisted of $46.4 million of capital additions to hotels, partially offset by a decrease in restricted cash of $6.6 million, net proceeds of $2.3 million from the sale of one hotel and proceeds from property casualty insurance of $0.7 million.

~~Financing~~Mr. Giannoble ~~activities~~joined our board of directors in February of 2008 and has served as our Chief Executive Officer and President since February of 2008. In addition to serving on the board, Mr. Giannoble is a Managing Director with RMD and serves as President of the hotel platform that provides asset management services to the Whitehall Street Real Estate Limited Partnerships. RMD oversees 280 hotels with a combined total of 30,000 rooms.

~~Net~~Prior ~~cash~~to ~~flow~~his ~~used~~employment inwith ~~financing activities~~RMD, ~~was $42~~Mr.1 ~~million~~Giannoble ~~for~~served ~~the~~as ~~year~~a ~~ended~~Vice ~~December 31,~~President ~~2014,~~and ~~which~~Associate ~~primarily~~for ~~consisted~~GS. ~~$959~~Prior to GS, Mr.6 ~~million~~Giannoble ofheld ~~principal~~various ~~payments~~positions within onBristol ~~the~~Hotels ~~Company’s~~and ~~notes~~Resorts ~~payable,~~which ~~the~~was ~~payment~~a ofhotel ~~deferred~~ownership ~~financing~~and ~~costs~~management ofcompany ~~$21.0~~with ~~million,~~more ~~cash received~~than in120 ~~connection~~hotels ofthroughout the ~~exercise~~U.S. ofand ~~the~~Canada. ~~Purchase~~Mr. Giannoble ~~Option~~was previously on the Board of ~~$38.9~~Directors ~~million~~for ~~partially~~Strategic ~~offset~~Hotel byCapital anand ~~advance~~has ~~from~~more ~~affiliate~~than 20 years of $1experience in the hospitality and banking industries.7 Mr. ~~million~~Giannoble ~~and~~currently serves on the ~~issuance~~Courtyard ofFranchise ~~notes~~Advisory ~~payable~~Committee ofas ~~$976.0~~well ~~million~~as on the Hyatt Place Franchise Advisory Committee.

~~-51-~~Mr. Giannoble received a B.A. (with Distinction) from Cornell University’s Hotel School and a degree (with Honors) from the Culinary Institute of America.

~~Table~~Greg ofFay ~~Contents~~

~~Net~~Mr. Fay ~~cash~~joined ~~flow~~our ~~used~~board of directors in ~~financing~~February ~~activities~~of ~~was~~2008 ~~$98.9 million~~and ~~for~~has ~~the~~served ~~year~~as ~~ended~~our ~~December 31~~Chief Financial Officer since November of 2007, ~~2013~~as our Treasurer since September of 2012 and our Secretary since October 2014. In addition to serving on the board, Mr. Fay is a Vice President ~~which~~with ~~primarily~~RMD, ~~consisted~~and serves as Chief Financial Officer of ~~$96~~the hotel platform.2 ~~million~~Prior ofto ~~principal~~joining ~~payments~~RMD, onMr. Fay was the ~~Company’s~~Chief ~~notes~~Financial ~~payable~~Officer of Builder Financial Corp., and ~~defeasance~~prior ~~premiums~~to that he was Chief Financial Officer of $2The Rendina Companies.6 ~~million~~Prior to joining The Rendina Companies, Mr. Fay was the Chief Accounting and Administrative Officer

~~Net~~-40- ~~cash flow used in financing activities was $25.7 million for the year ended December 31, 2012, which primarily consisted of $25.6 million of principal payments on the Company’s notes payable.~~

~~CONTRACTUAL~~ of ~~OBLIGATIONS~~Innkeepers ~~AND~~USA ~~OFF~~Trust, ~~BALANCE~~a ~~SHEET~~public ~~ARRANGEMENTS~~hotel REIT, for seven years. For nearly 12 years prior to joining Innkeepers, Mr. Fay held various positions in the audit practice of Coopers & Lybrand, LLP, and was a member of the firm’s Hospitality and Real Estate practice for the Southwestern United States. He is a summa cum laude graduate of the University of South Alabama with a B.S. in Accounting.

WeBrian ~~historically~~Nordahl have had obligations and commitments to make future payments under debt and operating lease contracts. The following table details these obligations as of December 31, 2014, assuming extension options will not be exercised (in thousands):

	Payments Due by Period
	< 1 Year		2-3 Years		4-5 Years		> 5 Years		Total
Long-term debt obligations	$	55,266	$	99,381	$	—	$	50,000	$	204,647
Estimated interest obligations (1)		10,076		8,663		3,110		31,878		53,727
Operating lease obligations		—		—		—		—		—
	$	65,342	$	108,044	$	3,110	$	81,878	$	258,374

Mr. Nordahl joined our board of directors in April of 2010. In addition to serving on the board, Mr. Nordahl is a Vice President with RMD where he is responsible for leading both asset and debt acquisition opportunities, as well as other real estate activities. He has over 25 years of experience in the hospitality real estate and finance fields. Prior to joining RMD, Mr. Nordahl served as Vice President of Acquisitions for Sage Hospitality Resources, as a Principal with the private equity firm Watermark Capital Partners and as a Principal with Deloitte Consulting where he also served as the National Leader of the Hospitality Consulting Practice. He began his hospitality career in operations with Westin Hotels & Resorts. Mr. Nordahl holds a B.S. in Hospitality Management from Florida International University.

Section 16(1a) ~~Respective~~beneficial ~~LIBOR~~ownership ~~rate~~reporting ascompliance ~~of December 31, 2014 was used in estimating future interest obligations for floating rate debt.~~

~~Historically,~~Section 16(a) ~~under~~of ~~our~~the ~~franchise~~Securities ~~agreements,~~Exchange weAct ~~were~~is ~~periodically~~not ~~required~~applicable to ~~make~~our ~~capital~~directors, ~~improvements~~officers inand ~~order~~beneficial toowners ~~maintain~~of ~~the~~more ~~hotels~~than in10% ~~accordance~~of ~~with the~~any ~~franchisor’s~~class ~~brand~~of ~~standards.~~equity securities ~~Additionally,~~since ~~under~~the ~~certain~~Company ~~covenants~~has ~~under~~no ~~agreements~~class ~~governing~~of ~~our~~equity ~~indebtedness,~~securities weregistered ~~are~~pursuant ~~generally obligated~~ to ~~fund~~Section 12 4%of ~~(5%~~the ~~for~~Exchange ~~our~~Act ~~Marriott~~and ~~branded~~is ~~hotels)~~not ~~of total hotel revenues to~~ a ~~separate~~closed-end ~~room renovation~~investment ~~account~~company ~~for~~registered ~~ongoing~~under ~~replacement~~the orInvestment ~~refurbishment~~Company ~~of furniture, fixtures and equipment at our hotels~~Act.

WeCode also maintained certain contractual agreements with property managers and franchisors that required us to pay fees in conjunction with operating our hotels. Generally, the amounts payable under these agreements were dependent upon the operating results of ~~our~~ethics ~~hotels. Fees paid to property managers generally include base~~

~~-52-~~We have not adopted a Code of Ethics that applies to our executive officers, including our principal executive, financial and accounting officers. We do not believe the adoption of a code of ethics at this time would provide any meaningful additional protection to the Company because each of our directors and executive officers are subject to the GS code of ethics through their current employer, RMD, that is applicable to all employees of RMD, and we do not have any employees.

~~Table~~Audit ofcommittee ~~Contents~~and audit committee financial expert

~~management~~There ~~fees,~~is ~~incentive~~no ~~management~~separately-designated ~~fees~~standing ~~and~~audit ~~accounting~~committee ~~fees~~as our board of directors acts as the Company’s audit committee. ~~Fees~~Our ~~paid~~board toof ~~franchisors~~directors ~~generally~~does not ~~include~~have ~~royalty~~an ~~fees,~~independent ~~marketing~~“financial ~~fees,~~expert” ~~frequent~~because ~~guest~~it ~~program~~believes ~~fees~~the ~~and~~Company’s ~~reservation~~management ~~fees~~has sufficient financial expertise. ~~The following~~In ~~table~~addition, our stock is not listed on a ~~historic~~national ~~detail~~exchange ofand ~~these~~the ~~fees~~Company ~~(in~~is ~~thousands):~~not subject to the special corporate governance requirements of any such exchange.

	Year Ended December 31,
	2014		2013		2012		2011		2010
Management related fees	$	4,591	$	11,180	$	10,811	$	10,840	$	11,093
Franchisor related fees		18,023		44,089		39,640		37,886		35,152
	$	22,614	$	55,269	$	50,451	$	48,726	$	46,245

ITEM 11.

EXECUTIVE COMPENSATION

~~During~~We ~~2014,~~do ~~we did~~ not ~~maintain~~currently have any ~~off-balance~~employees ~~sheet arrangements~~ and do not ~~currently~~expect ~~anticipate~~to have any ~~such arrangements~~employees. Services necessary for our business are provided by individuals who are employees of RMD pursuant to an asset management agreement between Grace I and RMD.

~~INFLATION~~None of our directors or executive officers receives direct compensation from us. Our directors and executive officers are employees of RMD and paid a salary and bonus by RMD. No portion of their salary or bonus is allocated to us.

~~Operators~~RMD ofis ~~hotels~~paid a monthly fee by us for its asset management services. For the years ended December 31, in2014 ~~general~~and 2013, ~~possess the~~RMD ~~ability~~earned toasset ~~adjust~~management ~~room~~fees ~~rates~~of ~~daily~~$3.1 tomillion ~~reflect~~and ~~the~~$7.3 ~~effects~~million, of ~~inflation~~which $0.0 ~~However~~million and $3.6 million were deferred, ~~competitive~~respectively. ~~pressures~~Because ~~may~~Grace ~~limit~~I effectively has no operations of its own, Grace I allocated substantially all of the ~~ability~~asset management fees to us for 2014, 2013 and 2012. See Note 3 of the ~~companies~~consolidated ~~which~~financial ~~manage~~statements ~~our~~located ~~hotels~~in to“Item ~~raise~~8. ~~room~~Financial ~~rates~~Statements and Supplementary Data” for further information.

~~SEASONALITY~~The Company does not have a standing compensation committee or a committee performing similar functions, since the Company does not have any employees and does not compensate our directors and executive officers. Accordingly, we do not have a compensation committee report.

~~Our~~As ~~operations~~our ~~historically~~executive ~~have~~officers ~~been~~do not ~~seasonal~~receive incompensation ~~nature,~~directly ~~generally~~from ~~reflecting~~us ~~higher~~for ~~RevPAR~~services ~~during~~rendered ~~the~~to ~~second~~us, and ~~third~~we ~~quarters.~~do ~~This~~not ~~seasonality~~intend ~~can~~to bepay ~~expected~~any compensation directly to ~~cause~~our ~~fluctuations~~executive inofficers, we do not have, and our ~~quarterly~~board ~~operating~~of ~~results~~directors has not considered, a compensation policy or program for our executive officers.

~~CRITICAL~~-41- ~~ACCOUNTING POLICIES~~

~~Our~~ITEM ~~accounting policies are fully described in Note 2 of the Notes to Consolidated Financial Statements included in “Item 8~~12. ~~Financial~~SECURITY ~~Statements~~OWNERSHIP ~~and~~OF ~~Supplementary~~CERTAIN ~~Data”.~~BENEFICIAL WeOWNERS ~~believe~~AND ~~that~~MANAGEMENT ~~the~~AND ~~following~~RELATED ~~discussion~~STOCKHOLDER addresses our most critical accounting policies, representing those policies considered most vital to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments. MATTERS

~~Investments~~Equity incompensation ~~real~~plan ~~estate~~information

~~Real~~The ~~estate~~Company ~~investments~~does ~~are~~not ~~carried~~currently athave ~~depreciated~~any ~~cost~~equity ~~net~~compensation ~~of reduction for impairment~~plans. Expenditures for ordinary repairs and maintenance are expensed as incurred. Significant renovations and improvements, which improve or extend the useful life of the assets, are capitalized. Full stock replacements of china, glass, silver, uniforms and linen are capitalized and incidental purchases are expensed as incurred.

~~-53-~~Security of certain beneficial owners

~~Table~~The following table sets forth information as of ~~Contents~~June 12, 2015 regarding the beneficial ownership of our common stock, Series B preferred stock and Series C preferred stock by each person known by us to own 5% or more of the outstanding shares of our common stock, Series B preferred stock and Series C preferred stock, respectively, each of our directors, each of our executive officers, and our directors and executive officers as a group.

~~Depreciation~~Unless isotherwise ~~calculated~~indicated ~~using~~below, ~~the~~each ~~straight-line~~person ~~method~~or ~~over~~entity ~~the~~has ~~estimated~~an ~~useful~~address ~~lives~~in care of ~~the~~our ~~respective~~principal executive ~~assets~~offices asat ~~follows:~~6011 ~~buildings~~Connection ~~and improvements over 7.5 to 39 years; land improvements over 15 years; and furniture~~Drive, ~~fixtures and equipment~~Irving, ~~including~~Texas ~~china, glass, silver, uniforms and linen, over 3 to 7 years~~75039.

Assets are classified as held for sale if a disposal plan is in place, actions to achieve the sale have been initiated, a sale is probable and it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Sales of the Company’s investments in real estate take a significant amount of time to consummate and many changes in the terms and timing are typical in the process. Accordingly, management does not classify assets as held for sale until a contract is pending, closing is scheduled and the probability of significant changes in terms or timing is insignificant. We evaluate assets held for sale for impairment each reporting period and record them at the lower of their carrying amounts or fair value less costs to sell.


Name of Beneficial Owner	Amount and Nature of Beneficial Ownership of Common Stock		Percentage of Class			Amount and Nature of Beneficial Ownership of Series B Preferred Stock		Percentage of Class			Amount and Nature of Beneficial Ownership of Series C Preferred Stock		Percentage of Class
W2007 Grace I, LLC ⁽¹⁾		100		100	%		—		—			—		—
PFD Holdings, LLC ⁽¹⁾		—		—			1,746,005		50.6	%		1,704,730		71.0	%
Todd Giannoble		—		—			—		—			—		—
Greg Fay		—		—			—		—			—		—
Brian Nordahl		—		—			—		—			—		—
Directors and executive officers as a group (3 persons)		—		—			—		—			—		—

~~Fair~~(1) ~~value~~Each ~~measurements~~ of W2007 Grace I, LLC and PFD Holdings, LLC is controlled by Whitehall, which, in turn, is controlled by affiliates of GS Group, the parent entity of GS. The address for Grace I, LLC and PFD Holdings, LLC is c/o Whitehall Parallel Global Real Estate Limited Partnership 2007, 200 West Street, New York, NY 10282.

~~Fair~~ITEM ~~value measurements are market-based measurements, not entity-specific measurements~~13. ~~Fair~~CERTAIN ~~value~~RELATIONSHIPS ~~measurement~~AND ~~assumptions~~RELATED ~~are~~TRANSACTIONS ~~classified~~AND ~~under~~DIRECTOR a hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and management’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). INDEPENDENCE

InPolicies ~~instances~~and ~~where~~procedures ~~the~~for ~~determination~~transactions ofwith ~~the~~related ~~fair~~persons value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Management’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

~~Fair~~We ~~value~~do ~~measurements~~not ofcurrently ~~financial~~have ~~and~~written ~~nonfinancial~~formal ~~assets~~policies and ~~liabilities~~procedures ~~are~~for ~~based~~the onreview, ~~(1)~~approval or ratification of transactions with related persons, as defined by Item 404 of Regulation S-K of the ~~assumptions~~Exchange Act. Under that ~~market~~definition, ~~participants would~~transactions ~~use~~with related persons are transactions in ~~pricing~~which we were or are a participant and the ~~asset~~amount involved exceeds $120,000 and in which any related person had or ~~liability~~will have a direct or indirect material interest. Related parties include any executive officers, ifdirectors, ~~available~~director nominees, beneficial owners of more than 5% of our voting securities, immediate family members of any of the foregoing persons, and any firm, corporation or ~~(2) management’s~~other ~~assumptions~~entity in which any of ~~market~~the ~~participant~~foregoing ~~assumptions~~persons is employed and in which such person has 10% or greater beneficial ownership interest.

~~Certain~~Transactions ~~assets and~~with ~~liabilities~~related ~~are~~persons not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when recording impairment on long-lived assets). Management reviews its investments for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The assumptions used both in estimating fair value through a discounted cash flow model and the undiscounted cash flow analysis are inherently judgmental and reflect current and projected trends in revenue per available room, operating expenses, capitalization rates, discount rates, and the estimated holding periods

~~-54-~~Asset management agreement with RMD

~~Table~~The asset management agreement between Grace I and RMD is effective through December 31, 2019. Either party may terminate the agreement with 30 days written notice without cause or the payment of ~~Contents~~a fee. GS, the ultimate parent of RMD, is an affiliate of the Company.

RMD is paid ~~for~~a monthly fee by the ~~applicable~~Company ~~hotels~~for its asset management services. IfPursuant anto ~~indicator~~the ofModification ~~potential~~Agreement ~~impairment~~discussed ~~exists,~~in Note 7 to the ~~hotel~~consolidated isfinancial ~~tested~~statements ~~for~~included ~~impairment~~in ~~for~~“Item ~~financial~~8. ~~accounting~~Financial ~~purposes~~Statements byand ~~comparing~~Supplementary ~~its~~Data,” ~~carrying~~the asset ~~value~~management fee was limited to ~~the~~$6,600,000 ~~estimated future~~in ~~undiscounted~~2011 ~~cash~~with ~~flows.~~5% ~~The~~increases ~~amount~~in ofsubsequent years thereafter until the ~~impairment~~GE isMortgage ~~calculated~~has asbeen ~~the~~paid ~~amount~~in byfull. ~~which~~The ~~the~~payment ~~carrying~~of ~~value~~50% of the ~~hotel~~fee ~~exceeds~~is ~~its~~deferred ~~fair~~until ~~value.~~the Company reaches a quarterly

~~NON~~-~~GAAP~~42- ~~FINANCIAL MEASURES~~

~~The~~ minimum ~~following~~debt ~~non-GAAP~~yield of 13% or until the GE Mortgage has been paid in full. During periods where the Company has met such minimum yield, the asset management fee payment is limited to then current ~~presentations~~amounts, not to include previously deferred amounts. In connection with the refinancing of ~~EBITDA~~the GE Mortgage as discussed in Note 7 to the consolidated financial statements included in “Item 8. Financial Statements and ~~Adjusted~~Supplementary ~~EBITDA~~Data,” the ~~are~~restriction ~~made~~on the payment of asset management fees terminated. In April 2014, the Company paid $4,650,000 in accrued asset management fees to ~~help~~RMD and RMD forgave $6,708,000 in ~~evaluating~~accrued asset management fees. This forgiveness was recorded as an increase in equity as the indebtedness was forgiven by RMD, an affiliate of the Company’s. ~~operating~~For ~~performance~~the years ended December 31, 2014, 2013, 2012 and 2011, RMD earned asset management fees of $3,073,000, $7,276,000, $6,951,000 and $6,539,000, of which $0, $3,638,000, $3,465,000 and $3,300,000 were deferred, respectively. Deferred asset management fees included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets as of December 31, 2014, 2013 and 2012 are $0, $10,403,000 and $6,765,000, respectively. Since Grace I effectively has no operations of its own, Grace I allocated substantially all of the asset management fees to the Company for the years ended December 31, 2014, 2013, 2012 and 2011.

~~EBITDA~~RMD is ~~defined~~entitled asto ~~net~~receive ~~income (loss) before~~a ~~interest~~disposition ~~expense~~fee ~~and~~equal ~~interest~~to ~~income, income taxes, and depreciation and amortization~~0.50% ~~The~~of ~~Company~~the ~~adjusts~~adjusted ~~EBITDA~~proceeds toof ~~exclude impairment charges~~$5,000,000 ~~gains~~ or ~~losses~~more onand ~~sales~~0.75% of ~~investments~~the inadjusted ~~real~~proceeds ~~estate and gains or losses on~~under ~~extinguishment~~$5,000,000 ofreceived ~~debt~~by ~~because~~ the Company ~~believes~~in ~~these~~connection ~~charges~~with ~~are not indicative of~~ the ~~performance~~sale of ~~the~~any ~~underlying~~asset ~~investments~~owned inby ~~real~~the ~~estate~~Company. ~~The~~As ~~Company presents EBITDA and Adjusted EBITDA because it believes they provide an indicator~~ of ~~the~~ ~~Company’s~~December 31, ~~ability~~2014, to2013 ~~meet its future debt payments~~ and ~~working capital requirements~~2012, asaccrued ~~well~~disposition asfees anwere ~~overall~~$361,000, ~~evaluation~~$384,000 ~~of the Company’s financial condition. EBITDA~~ and ~~Adjusted~~$23,000, ~~EBITDA~~respectively, asof ~~calculated~~which ~~by the Company~~$361,000 ~~may~~were incurred ~~not~~in beconnection ~~comparable to~~with ~~EBITDA~~the ~~and~~sale ~~Adjusted~~of ~~EBITDA~~four ~~reported~~hotels byduring ~~other~~the ~~companies~~year ~~that~~ended doDecember 31, ~~not~~2013. ~~define~~In ~~such~~connection ~~terms~~with ~~exactly~~the asexercise of the ~~Company~~Purchase ~~defines~~Option ~~them.~~on ~~EBITDA~~April 11, ~~and~~2014, ~~Adjusted~~$23,000 ~~EBITDA~~of ~~should~~accrued ~~not~~disposition befees ~~considered~~were astransferred ~~alternative~~to ~~measures~~WNT ofwhich ~~the~~were related ~~Company’s~~to ~~net~~hotels ~~loss~~sold asby ansubsidiaries ~~indicator~~ of ~~operating~~Senior ~~performance~~Mezz orin ~~GAAP~~2008. ~~cash~~There ~~flows~~were ~~from~~no ~~operating~~other ~~activities~~disposition asfees aearned ~~measure~~by ~~of liquidity~~RMD.

~~The~~In ~~following~~addition ~~table~~to ~~reconciles~~the ~~net~~$5,063,000 ~~loss~~ payable to ~~EBITDA~~WNT ~~and Adjusted~~transferred ~~EBITDA~~to (the Company in ~~thousands)~~connection ~~(unaudited):~~with the exercise of the Purchase Option, the Company had a $1.7 million payable to WNT as of December 31, 2014.

	Year Ended December 31,
	2014			2013			2012			2011
Net loss	$	(31,664	)	$	(71,613	)	$	(136,235	)	$	(49,500	)
Interest income		(76	)		(82	)		(87	)		(101	)
Interest expense		31,325			82,856			84,435			84,512
Interest expense, discontinued operations		—			1,578			1,508			2,949
Depreciation and amortization		33,308			83,292			85,298			78,983
Depreciation and amortization, discontinued operations		—			3,212			4,520			3,994
EBITDA		32,893			99,243			39,439			120,837
Equity in loss from Senior Mezz		1,429			—			—			—
Contingent loss on litigation settlement		24,250			—			—			—
Net gain on extinguishment of debt		(13,199	)		—			—			—
Net (gain) loss on extinguishment of debt, discontinued operations		—			2,647			—			(7,488	)
Impairment charges		9,036			27,656			85,684			4,483
Impairment charges, discontinued operations		—			—			1,031			—
Net gain on sale of real estate		(221	)		—			—			—
Net (gain) loss on sale of real estate, discontinued operations		—			5,890			(254	)		357
Adjusted EBITDA	$	54,188		$	135,436		$	125,900		$	118,189

As additional compensation, RMD was entitled under the prior agreement to receive an incentive fee of 20% of any distributable cash after all members of Grace I achieved an internal rate of return on their investment of at least 15%, but less than 20%; an incentive fee of 25% of any distributable cash after all members achieved an internal rate of return of 20%, but less than 25%; and an incentive fee of 30% of any distributable cash after all members achieved an internal rate of return of 25%. The A&R AMA removed the provision for the payment of any incentive fees. For the years ended December 31, 2014, 2013, 2012 and 2011, no incentive fees were earned by RMD.

~~-55-~~Relationships with Pillar Hotels and Resorts

~~Table~~On September 15, 2011, Pillar Hotels and Resorts, L.P. (Pillar) and its subsidiaries were sold to Capstone Management, LLC, an affiliate of ~~Contents~~InterMountain Management, LLC (InterMountain Management; Pillar Sale). Prior to this sale, Pillar was an affiliate of the Company.

~~ITEM~~As 7Aof December 31, 2014, the Company engaged Pillar as the property manager for 3 hotels and Senior Mezz engaged Pillar as the property manager for 21 hotels. ~~QUANTITATIVE~~The ~~AND~~property ~~QUALITATIVE~~management ~~DISCLOSURE~~agreements ~~ABOUT~~(the ~~MARKET~~PMAs) ~~RISK~~terminate between June 2018 and February 2019. The PMAs will automatically renew for an additional one year term unless the Company or Pillar elects not to renew the agreement. The Company may terminate the PMAs with 30 days written notice without cause or the payment of a fee.

~~Market~~The ~~risk~~Company ~~includes~~pays ~~risks~~Pillar ~~that~~a ~~arise~~monthly ~~from changes~~hotel inmanagement ~~interest~~fee ~~rates,~~generally ~~equity~~equal ~~prices~~to ~~and~~2% per ~~other~~annum ~~market~~of ~~changes~~gross ~~that~~revenues ~~affect~~for ~~market~~each ~~sensitive~~hotel ~~instruments~~managed. ~~Our~~For ~~primary~~the ~~market~~14 ~~risk~~Hyatt ~~exposure~~Place hotels ~~was~~managed toby ~~changes~~Pillar infor ~~interest~~Senior ~~rates~~Mezz, onthe ~~our~~monthly ~~variable~~hotel ~~rate~~management ~~debt~~fees are subordinated to a priority return to the Company. AsFor ofthe years ended December 31, 2014, we2013, ~~had approximately~~2012 ~~$50~~and ~~million~~2011, ofthe ~~total~~Company ~~variable~~incurred ~~rate~~base ~~debt~~management ~~outstanding~~fees ~~(or 24%~~ of ~~total~~$299,000, $759,000, ~~indebtedness). If~~$705,000 ~~market~~and ~~rates~~$668,000 ofand ~~interest~~incentive onfees ~~our~~of ~~variable~~$11,000, ~~rate~~$113,000, ~~debt~~$153,000 ~~outstanding~~and as$147,000, ~~of December 31~~respectively, ~~2014~~which ~~were~~are toincluded ~~increase~~in byproperty ~~1.00%~~tax, orground ~~100 basis points~~lease, ~~interest~~ ~~expense~~insurance ~~would~~and ~~decrease~~property ~~future~~management ~~earnings~~fees and ~~cash~~income ~~flows~~(loss) byfrom ~~approximately~~discontinued ~~$0.5~~operations ~~million~~in the ~~annually.~~accompanying Asconsolidated astatements ~~result~~ of ~~the~~operations ~~sale~~and ofcomprehensive loss. Of the ~~Portfolio~~$815,000 ~~and~~total ~~the~~hotel ~~associated~~management ~~defeasing~~fee ~~and~~incurred ~~repayment~~for ofthe ~~debt~~year ended December 31, we2011, no$489,000 ~~longer~~was ~~have~~earned ~~any~~by ~~variable~~Pillar ~~rate~~prior ~~debt~~to ~~outstanding~~the Pillar Sale.

~~Our~~The ~~interest~~Company ~~rate~~pays ~~risk~~Pillar ~~objectives~~a ~~are~~fixed tomonthly ~~limit~~accounting ~~the~~fee. ~~impact~~The ofaccounting ~~interest~~fee ~~rate~~was ~~fluctuations~~$130,000, on$368,000, ~~earnings~~$371,000 and ~~cash~~$360,000 ~~flows~~for ~~and~~the toyears ~~lower~~ended ~~our overall borrowing~~December 31, ~~costs.~~2014, To2013, ~~achieve~~2012 ~~these~~and ~~objectives~~2011, werespectively, ~~have~~and ~~historically~~is ~~managed~~included ~~our exposure to fluctuations~~ in ~~market~~non-departmental ~~interest~~direct ~~rates~~hotel ~~through~~expenses ~~the~~and ~~use~~income of(loss) ~~fixed~~from ~~rate~~discontinued ~~debt~~operations ~~instruments~~in to the ~~extent~~accompanying ~~that~~consolidated ~~reasonably~~statements ~~favorable rates are obtainable. Historically, we entered into interest rate caps to mitigate our interest rate risk on a portion~~ of ~~our~~operations ~~variable~~and ~~rate~~comprehensive ~~debt~~loss. ~~We do not enter into derivative or interest rate transactions for speculative purposes.~~

-5643-

~~Table~~The Company also pays Pillar a monthly capital oversight fee generally equal to its costs incurred related to procurement activities surrounding the Company’s capital expenditures. The capital oversight fee was $384,000, $727,000, $1,624,000 and $1,222,000 for the years ended December 31, 2014, 2013, 2012 and 2011, respectively. Of the $1,222,000 capital oversight fee incurred in 2011, $900,000 is included in asset management fees and income (loss) from discontinued operations in the accompanying consolidated statements of ~~Contents~~operations and comprehensive loss. The 2014, 2013, 2012 and the remaining 2011 capital oversight fees were capitalized to investments in real estate in the accompanying consolidated balance sheets as they represent fees incurred after the Pillar Sale.

~~ITEM~~In 2011, in accordance with the Secondment Agreement, Pillar seconded the employees of AH 2007 Management to operate the hotels of the Company as well as the hotels of affiliates of the Company. Prior to the Pillar Sale, AH 2007 Management was a subsidiary of the Company. Pillar reimbursed AH 2007 Management for salaries, bonuses and any other compensation or benefit payable to the seconded employees. The Company reimbursed Pillar for such costs related to employees at the Company’s hotels, which are included in income (loss) from discontinued operations in the accompanying consolidated statements of operations and comprehensive loss. In connection with the Pillar Sale, the net assets of AH 2007 Management were acquired by InterMountain Management. See Note 12 to the accompanying consolidated financial statements located in “Item 8. ~~FINANCIAL~~Financial ~~STATEMENTS~~Statements ~~AND~~and ~~SUPPLEMENTARY~~Supplementary Data” ~~DATA~~for additional disclosure.

~~See~~As ~~our~~a ~~Consolidated~~result ~~Financial~~of ~~Statements~~the ~~and~~Pillar ~~the~~Sale, ~~Notes thereto~~RMD ~~beginning~~is atentitled ~~page~~to Fan earn-1out ~~included~~fee infor ~~Item 15,~~a ~~which~~portion isof ~~incorporated~~Pillar’s ~~herein~~annual ~~by reference~~cash flows.

~~ITEM~~GE 9.Mortgage ~~CHANGES~~loan INagreement ~~AND~~and ~~DISAGREEMENTS~~Purchase ~~WITH~~Option ~~ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES~~

~~None~~In October 2007, the Company entered into the GE Mortgage, a loan agreement pursuant to which the Company issued a $1,800,000,000 note to GSMC. Under its rights within the GE Mortgage, GSMC componentized the loan in February 2008 for purposes of marketing and selling the individual components of the loan. In connection with the componentization, the Company paid a fee of $9,850,000 to GSMC. As described in “Item 1. Business,” GSMC is an affiliate of Whitehall. After the componentization, the GE Mortgage was composed of a mortgage loan (the Mortgage Loan) and seven mezzanine loans (each a Mezzanine Loan).

~~ITEM~~In ~~9A.~~June ~~CONTROLS~~2009, ~~AND~~the ~~PROCEDURES~~Company entered into a series of recapitalization transactions as follows:

~~Evaluation~~• Whitehall funded $175,000,000 of ~~disclosure~~its ~~controls~~$350,000,000 payment guaranty which reduced the outstanding balance under the Mortgage Loan. The Company recorded this as a deemed contribution and ~~procedures~~a corresponding reduction of its outstanding indebtedness. As of September 2009, Whitehall satisfied its conditions to fully extinguish the payment guaranty.

~~Under~~• ~~the~~The ~~supervision~~borrower ~~and~~under ~~with~~ the ~~participation~~First ofMezzanine ~~our Chief Executive Officer and Chief Financial Officer~~Loan, ~~our~~a ~~management~~wholly ~~has~~owned ~~evaluated~~subsidiary ~~the effectiveness~~ of ~~the~~ ~~design and operation of our disclosure controls and procedures (as defined in Rule 15d-15(e) under~~ the ~~Securities Exchange Act of 1934~~Company, asmade ~~amended~~a ~~(the~~proportionate ~~Exchange~~and ~~Act)),~~voluntary asprepayment of ~~December 31~~$15, ~~2014 (Evaluation Date). Based upon that evaluation~~231,000 ~~our management, including our Chief Executive Officer and Chief Financial Officer, concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective~~ to ~~ensure~~reduce ~~that information required to be disclosed in~~ the ~~reports~~ ~~that~~outstanding webalance ~~file or submit~~ under the ~~Exchange~~First ~~Act~~Mezzanine ~~is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures~~Loan.

~~Management~~• GSMC cancelled $544,841,000 of indebtedness outstanding under the Second, Third, Fourth, Fifth, Sixth and Seventh Mezzanine Loans, resulting in an increase in shareholders’s ~~report~~equity of $260,254,000 on ~~internal~~the ~~control~~forgiveness ~~over~~of ~~financial~~debt. ~~reporting~~The forgiveness of debt was recorded as an increase in shareholders’ equity as the indebtedness was forgiven by GSMC, an affiliate of the Company.

~~Management~~• isAn ~~responsible~~affiliate ~~for~~of ~~establishing~~GSMC ~~and~~was ~~maintaining~~granted ~~adequate~~the ~~internal~~Purchase ~~control~~Option. ~~over~~The ~~financial~~Purchase ~~reporting~~Option asis ~~defined~~not ineffective ~~Rule 15d-15(f)~~or ~~under~~exercisable ~~the~~until ~~Exchange~~both ~~Act.~~the ~~The~~Mortgage ~~Company’s~~Loan ~~internal~~and ~~control~~the ~~over~~First ~~financial~~Mezzanine ~~reporting~~Loan ishave ~~designed~~been topaid ~~provide~~in ~~reasonable~~full. ~~assurance~~Whitehall asand ~~to the reliability of the Company~~

Todd Giannoble

Chief Executive Officer, President, Director

Chief Financial Officer, Treasurer, Secretary, Director

Brian Nordahl

Vice President, Director

Filing Compare · W2007 Grace Acquisition I Inc